Registration No. 2-60067
As filed with the Securities and Exchange Commission on April 28,
1995
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No. ___
Post-Effective Amendment No. 26 X
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 27
(Check appropriate box or boxes)
TEMPLETON FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
700 Central Avenue, P.O. Box 33030, St. Petersburg, Florida
33733-8030
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (813) 823-
8712
Jeffrey L. Steele, Esq. Thomas M. Mistele, Esq.
Dechert Price & Rhoads Templeton Global Investors, Inc.
1500 K Street, N.W. 500 East Broward Blvd.
Washington, D.C. 20005 Fort Lauderdale, Florida 33394
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check
appropriate box)
____ immediately upon filing pursuant to paragraph (b)
X on May 1, 1995 pursuant to paragraph (b)
____ 60 days after filing pursuant to paragraph (a)
____ on (date) pursuant to paragraph (a) of
Rule 485
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
*Registrant has elected to register an indefinite number of
Shares of its Common Stock, $1.00 par value per Share, pursuant
to Rule 24f-2 under the Investment Company Act of 1940.
Registrant filed its most recent Notice pursuant to Rule 24f-2 on
October 31, 1994.
TEMPLETON FUNDS, INC.
CROSS-REFERENCE SHEET
Item No. Caption
Part A - Foreign Fund
1 Cover Page
2 Expense Table
3 Financial Highlights
4 General Description;
Investment Techniques
5 Management of the Fund
5A See Annual Report to
Shareholders
6 General Information
7 How to Buy Shares of the Fund
8 How to Sell Shares of the Fund
9 Not Applicable
Part A - World Fund
1 Cover Page
2 Expense Table
3 Financial Highlights
4 General Description;
Investment Techniques
5 Management of the Fund
5A See Annual Report to
Shareholders
6 General Information
7 How to Buy Shares of the Fund
8 How to Sell Shares of the Fund
9 Not Applicable
Part B
10 Cover Page
11 Table of Contents
12 General Information and
History
13 Investment Objectives and
Policies
14 Management of the Company
15 Principal Shareholders
16 Investment Management and
Other Services
17 Brokerage Allocation
18 Description of Shares
19 Purchase, Redemption and
Pricing of Shares
20 Tax Status
21 Principal Underwriter
22 Performance Information
23 Financial Statements
<PAGE>
TEMPLETON SUPPLEMENT DATED MAY 1, 1995
WORLD FUND PROSPECTUS -- JANUARY 1, 1995
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INTRODUCTION As of May 1, 1995, the Templeton World Fund (the "Fund")
offers two classes of shares to its investors: Templeton World
Fund -- Class I ("Class I") and Templeton World Fund -- Class
II ("Class II"). Investors can choose between Class I shares,
which generally bear a higher front-end sales charge and lower
ongoing Rule 12b-1 distribution fees ("Rule 12b-1 fees"), and
Class II shares, which generally have a lower front-end sales
charge and higher ongoing Rule 12b-1 fees. Investors should
consider the differences between the two classes, including
the impact of sales charges and distribution fees, in choosing
the more suitable class given their anticipated investment
amount and time horizon. The date of the Prospectus for the
Fund is hereby amended to be May 1, 1995.
- -------------------------------------------------------------------------------
THIS All investment objectives and policies described in the
SUPPLEMENT Prospectus apply equally to both classes of shares in the new
MUST BE READ multiclass structure. Further, all operational procedures
IN CONJUNCTION apply equally to both classes, unless otherwise specified in
WITH THE the following discussion. See "Deciding Which Class to
PROSPECTUS Purchase" below.
FOR THIS
FUND
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MULTICLASS The Fund has two classes of shares available for investment:
FUND Class I and Class II. All Fund shares outstanding before the
STRUCTURE implementation of the multiclass structure have been
redesignated as Class I shares, and will retain their previous
rights and privileges. See the Prospectus for more details
about Class I shares. Class II shares are explained in detail
in the following discussion. Except as described below, shares
of both classes represent identical interests in the Fund's
investment portfolio.
- -------------------------------------------------------------------------------
THE NEW APPLICATION FORM INCLUDED WITH THIS SUPPLEMENT MUST BE USED FOR
ALL PURCHASES. DO NOT USE THE APPLICATION FORM INCLUDED IN THE PROSPECTUS.
May 1, 1995 TL102 STKRB 05/95
<PAGE>
EXPENSE TABLE
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a Shareholder will bear directly or indirectly
in connection with an investment in the Fund. The figures are estimates of the
Fund's expenses for the current fiscal year, restated to reflect current sales
charges and 12b-1 fees for each class.
<TABLE>
<CAPTION>
CLASS I CLASS II
------- --------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a percentage
of offering price)....................................... 5.75% 1.00%/1/
Deferred Sales Charge..................................... None/2/ 1.00%/3/
Exchange Fee (per transaction)............................ $5.00/4/ $5.00/4/
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees........................................... 0.62% 0.62%
Rule 12b-1 Fees/5/........................................ 0.18% 1.00%
Other Expenses (audit, legal, business management,
transfer agent and custodian)............................ 0.24% 0.24%
Total Fund Operating Expenses............................. 1.04% 1.86%/1/
</TABLE>
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/1/Although Class II has a lower front-end sales charge than Class I, over time
the higher Rule 12b-1 fee for Class II may cause Shareholders to pay more for
Class II shares than for Class I shares. Given the maximum front-end sales
charge and the rate of Rule 12b-1 fees of each class, it is estimated that
this will take less than six years for Shareholders who maintain total shares
valued at less than $50,000 in the Franklin Templeton Funds. Shareholders
with larger investments in the Franklin Templeton Funds will reach the cross-
over point more quickly.
/2/Class I investments of $1 million or more are not subject to a front-end
sales charge; however, a contingent deferred sales charge of 1%, which has
not been reflected in the Example below, is generally imposed on certain
redemptions within a "contingency period" of 12 months of the calendar month
following such investments. See "How to Sell Shares of the Fund --Contingent
Deferred Sales Charge."
/3/Class II shares redeemed within a "contingency period" of 18 months of the
calendar month following such investments are subject to a 1% contingent
deferred sales charge. See "How to Sell Shares of the Fund -- Contingent
Deferred Sales Charge."
/4/$5.00 fee imposed only on Timing Accounts as described under "Exchange
Privilege" in the Prospectus. All other exchanges are processed without a
fee.
/5/Annual Rule 12b-1 fees may not exceed 0.25% of the Fund's average net assets
attributable to Class I shares and 1.00% of the Fund's average net assets
attributable to Class II shares. Consistent with the National Association of
Securities Dealers, Inc.'s rules, it is possible that the combination of
front-end sales charges and Rule 12b-1 fees could cause long-term
Shareholders to pay more than the economic equivalent of the maximum front-
end sales charges permitted under those same rules.
Investors should be aware that the above table is not intended to reflect in
precise detail the fees and expenses associated with an individual's own
investment in the Fund. Rather the table has been provided only to assist
investors in gaining a more complete understanding of fees, charges and
expenses. For a more detailed discussion of these matters, investors should
refer to the appropriate sections of the Prospectus and this Supplement.
EXAMPLE
As required by SEC regulations, the following example illustrates the
expenses, including the maximum front-end sales charge and applicable
contingent deferred sales charge, that apply to a $1,000 investment in the
Fund over various time periods assuming (1) a 5% annual rate of return and (2)
redemption at the end of each time period.
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
Class I............................... $68 $89 $112 $177
Class II.............................. $39 $68 $110 $226
</TABLE>
This example is based on the estimated annual operating expenses, including
fees set by contract, shown above and should not be considered a
representation of past or future expenses, which may be more or less than
those shown. The operating expenses are
2
<PAGE>
borne by the Fund and only indirectly by Shareholders as a result of their
investment in the Fund. (See "Management of the Fund" in the Prospectus for a
description of the Fund's expenses.) In addition, federal securities
regulations require the example to assume an annual return of 5%, but the
Fund's actual return may be more or less than 5%.
DECIDING WHICH CLASS TO PURCHASE. Investors should carefully evaluate their
anticipated investment amount and time horizon prior to determining which
class of shares to purchase. Generally, an investor who expects to invest less
than $50,000 in the Franklin Templeton Funds and who expects to make
substantial redemptions within approximately six years or less of investment
should consider purchasing Class II shares. However, the higher annual Rule
12b-1 fees on Class II shares will result in slightly higher operating
expenses and lower income dividends for Class II shares, which will accumulate
over time to outweigh the difference in initial sales charges. For this
reason, Class I shares may be more attractive to long-term investors even if
no sales charge reductions are available to them.
Investors who qualify to purchase Class I shares at reduced sales charges
definitely should consider purchasing Class I shares, especially if they
intend to hold their shares for six years or more. Investors who qualify to
purchase Class I shares at reduced sales charges but who intend to hold their
shares less than six years should evaluate whether it is more economical to
purchase Class I shares through a Letter of Intent or under Cumulative
Quantity Discount or other means rather than purchasing Class II shares.
Investors investing $1 million or more in a single payment and other investors
who qualify to purchase Class I shares at net asset value will be precluded
from purchasing Class II shares. See "How to Buy Shares of the Fund" in the
Prospectus.
Each class represents the same interest in the investment portfolio of the
Fund and has the same rights, except that each class has a different sales
charge, bears the separate expenses of its Rule 12b-1 distribution plan, and
has exclusive voting rights with respect to such plan. The two classes also
have separate exchange privileges.
ALTERNATIVE PURCHASE ARRANGEMENTS. The difference between Class I and Class
II shares lies primarily in their front-end and contingent deferred sales
charges and Rule 12b-1 fees as described below.
A separate Plan of Distribution has been approved and adopted for each class
("Class I Plan" and "Class II Plan," respectively) pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended (the "1940 Act"). The
Rule 12b-1 fees charged to each class will be based solely on the distribution
and servicing fees attributable to that particular class. Any portion of fees
remaining from either plan after distribution to securities dealers up to the
maximum amount permitted under each Plan may be used by the class to reimburse
Franklin Templeton Distributors, Inc. ("FTD") for routine ongoing promotion
and distribution expenses incurred with respect to such class. See "Plan of
Distribution" in the Prospectus for a description of such expenses.
CLASS I. Class I shares are generally subject to a variable sales charge
upon purchase and not subject to any sales charge upon redemption. Class I
shares are subject to Rule 12b-1 fees of up to an annual maximum of 0.25% of
average daily net assets of such shares. With this multiclass structure, Class
I shares have higher front-end sales charges than Class II shares and
comparatively lower Rule 12b-1 fees.
Plan of Distribution. Under the Class I Plan, the Fund will reimburse FTD or
other securities dealers for expenses incurred in the promotion, servicing,
and distribution of Class I Fund shares. (See "Plan of Distribution" in the
Prospectus and "Distribution Plan" in the Statement of Additional Information
("SAI")).
Quantity Discounts and Purchases At Net Asset Value. Class I shares may be
purchased at a reduced front-end sales charge or at net asset value if certain
conditions are met. See "How to Buy Shares of the Fund."
Contingent Deferred Sales Charge. In most circumstances, a contingent
deferred sales charge will not be assessed against redemptions of Class I
shares. A contingent deferred sales charge will be imposed on Class I shares
only if shares valued at $1 million
3
<PAGE>
or more are purchased without a sales charge and are subsequently redeemed
within 12 months of the calendar month following their purchase. See
"Contingent Deferred Sales Charge" under "How to Sell Shares of the Fund" in
this Supplement.
CLASS II. The current public offering price of Class II shares is equal to
the net asset value, plus a front-end sales charge of 1% of the amount
invested. Class II shares are also subject to a contingent deferred sales
charge of 1.0% if shares are redeemed within 18 months of the calendar month
following purchase. In addition, Class II shares are subject to Rule 12b-1
fees of up to a maximum of 1.0% of average daily net assets of such shares.
Class II shares have lower front-end sales charges than Class I shares and
comparatively higher Rule 12b-1 fees.
Purchases of Class II shares are limited to amounts below $1 million. Any
purchases of $1 million or more will automatically be invested in Class I
shares, since that is more beneficial to investors. Such purchases, however,
may be subject to a contingent deferred sales charge. Investors may exceed $1
million in Class II shares by cumulative purchases over a period of time.
Investors who intend to make investments exceeding $1 million, however, should
consider purchasing Class I shares through a Letter of Intent instead of
purchasing Class II shares. See "How to Buy Shares of the Fund" in the
Prospectus for more information.
Plan of Distribution. Class II's operating expenses will generally be higher
than Class I's under the Class II Plan. During the first year following a
purchase of Class II shares, FTD will keep a portion of the Plan fees
attributable to those shares to partially recoup fees FTD pays to securities
dealers. FTD, or its affiliates, may pay, from its own resources, a commission
of up to 1% of the amount invested to securities dealers who initiate and are
responsible for purchases of Class II shares.
Contingent Deferred Sales Charge. Unless a waiver applies, a contingent
deferred sales charge will be imposed on Class II shares redeemed within 18
months of their purchase. See "Contingent Deferred Sales Charges" under "How
to Sell Shares of the Fund" in this Supplement.
MANAGEMENT OF THE FUND
The Board of Directors has carefully reviewed the multiclass structure to
ensure that no material conflict exists between the two classes of shares.
Although the Board does not expect to encounter material conflicts in the
future, the Board will continue to monitor the Fund and will take appropriate
action to resolve such conflicts if any should later arise.
In developing the multiclass structure, the Fund has retained the authority
to establish additional classes of shares. It is the Fund's present intention
to offer only two classes of shares, but new classes may be offered in the
future.
For more information regarding the responsibilities of the Board and the
management of the Fund, please see "Management of the Fund" in the Prospectus.
CLASS II PLAN OF DISTRIBUTION. Under the Class II Plan, the maximum amount
which the Fund is permitted to pay to FTD or others for distribution and
related expenses is 0.75% per annum of Class II shares' average daily net
assets, payable quarterly. All expenses of distribution, marketing and related
services over that amount will be borne by FTD or others who have incurred
them without reimbursement by the Fund. In addition, the Class II Plan
provides for an additional payment by the Fund of up to 0.25% per annum of
Class II shares' average daily net assets as a servicing fee, payable
quarterly. This fee will be used to pay securities dealers or others for,
among other things, assisting in establishing and maintaining customer
accounts and records; assisting with purchase and redemption requests;
receiving and answering correspondence; monitoring dividend payments from the
Fund on behalf of their customers, or similar activities related to furnishing
personal services and/or maintaining Shareholder accounts.
4
<PAGE>
The Class II Plan also covers any payments to or by the Fund, the Investment
Manager, FTD, or other parties on behalf of the Fund, the Investment Manager
or FTD, to the extent such payments are deemed to be for the financing of any
activity primarily intended to result in the sale of Class II shares issued by
the Fund within the context of Rule 12b-1. The payments under the Plan are
included in the maximum operating expenses which may be borne by Class II of
the Fund.
During the first year after the purchase of Class II shares, FTD will keep a
portion of the Plan fees assessed on Class II shares to partially recoup fees
FTD pays to securities dealers.
See the "Plan of Distribution" discussion in the "Management of the Fund"
section in the Prospectus and in the SAI for more information about both Class
I and Class II Plans.
DIVIDENDS AND DISTRIBUTIONS
According to the requirements of the Internal Revenue Code of 1986, as
amended (the "Code"), dividends and capital gains will be calculated and
distributed in the same manner for Class I and Class II shares. The per share
amount of any income dividends will generally differ only to the extent that
each class is subject to different Rule 12b-1 fees.
Unless otherwise requested, income dividends and capital gain distributions,
if any, will be automatically reinvested in the Shareholder's account in the
form of additional shares, valued at the closing net asset value (without a
front-end sales charge) on the ex-dividend date. Dividend and capital gain
distributions are only eligible for reinvestment at net asset value in the
same class of Shares of the Fund or the same class of another of the Franklin
Templeton Funds. See "Dividends and Distributions" in the Prospectus and the
SAI for more information.
HOW TO BUY SHARES OF THE FUND
The following discussion supplements the one included in the Prospectus
under "How to Buy Shares of the Fund."
THE APPLICATION FORM INCLUDED WITH THIS SUPPLEMENT MUST ACCOMPANY ANY PURCHASE
OF SHARES.
DO NOT USE THE APPLICATION INCLUDED IN THE PROSPECTUS.
OFFERING PRICE. Shares of both classes of the Fund are offered at their
respective public Offering Prices, which are determined by adding the net
asset value per share plus a front-end sales charge, next computed (1) after
the Shareholder's securities dealer receives the order which is promptly
transmitted to the Fund, or (2) after receipt of an order by mail from the
Shareholder directly in proper form (which generally means a completed
Shareholder Application accompanied by a negotiable check).
CLASS I. The sales charge for Class I shares is a variable percentage of the
Offering Price depending upon the amount of the sale. A description of the
method of calculating net asset value per share is included under the caption
"Net Asset Value" in the Prospectus.
5
<PAGE>
Set forth below is a table of total front-end sales charges or underwriting
commissions and dealer concessions for Class I shares:
<TABLE>
<CAPTION>
TOTAL SALES CHARGE
--------------------------------------------
AS A PERCENTAGE OF AS A PERCENTAGE OF NET PORTION OF TOTAL
AMOUNT OF SALE OFFERING PRICE OF THE ASSET VALUE OF THE OFFERING PRICE
AT OFFERING PRICE SHARES PURCHASED SHARES PURCHASED RETAINED BY DEALERS/1,3/
- ----------------- --------------------- ---------------------- --------------------------
<S> <C> <C> <C>
Less than $50,000....... 5.75% 6.10% 5.00%
$50,000 but less than
$100,000............... 4.50% 4.71% 3.75%
$100,000 but less than
$250,000............... 3.50% 3.63% 2.80%
$250,000 but less than
$500,000............... 2.50% 2.56% 2.00%
$500,000 but less than
$1,000,000............. 2.00% 2.04% 1.60%
$1,000,000 or more...... none none (see below)/2/
</TABLE>
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/1/Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages set forth above.
/2/The following commissions will be paid by FTD, out of its own resources, to
securities dealers who initiate and are responsible for purchases of $1
million or more: 1.00% on sales of $1 million but less than $2 million, plus
0.80% on sales of $2 million but less than $3 million, plus 0.50% on sales of
$3 million but less than $50 million, plus 0.25% on sales of $50 million but
less than $100 million, plus 0.15% on sales of $100 million or more. Dealer
concession breakpoints are reset every 12 months for purposes of additional
purchases.
/3/At the discretion of FTD, all sales charges may at times be allowed to the
securities dealer. If 90% or more of the sales commission is allowed, such
securities dealer may be deemed to be an underwriter as that term is defined
in the Securities Act of 1933, as amended.
No front-end sales charge applies on investments of $1 million or more, but
a contingent deferred sales charge of 1% is imposed on certain redemptions of
all or a portion of investments of $1 million or more within the contingency
period. See "How to Sell Shares of the Fund -- Contingent Deferred Sales
Charge," in this Supplement.
The size of a transaction which determines the applicable sales charge on
the purchase of Class I shares is determined by adding the amount of the
Shareholder's current purchase plus the cost or current value (whichever is
higher) of a Shareholder's existing investment in one or more of the funds in
the Franklin Group of Funds(R) and the Templeton Family of Funds. Included for
these aggregation purposes are (a) the mutual funds in the Franklin Group of
Funds except Franklin Valuemark Funds and Franklin Government Securities Trust
(the "Franklin Funds"), (b) other investment products underwritten by FTD or
its affiliates (although certain investments may not have the same schedule of
sales charges and/or may not be subject to reduction) and (c) the U.S.
registered mutual funds in the Templeton Family of Funds except Templeton
Capital Accumulator Fund, Inc., Templeton Variable Annuity Fund, and Templeton
Variable Products Series Fund (the "Templeton Funds"). (Franklin Funds and
Templeton Funds are collectively referred to as the "Franklin Templeton
Funds.") Sales charge reductions based upon aggregate holdings of (a), (b) and
(c) above ("Franklin Templeton Investments") may be effective only after
notification to FTD that the investment qualifies for a discount.
Other Payments to Securities Dealers. FTD, or one of its affiliates, may
make payments, out of its own resources, of up to 1% of the amount purchased
to securities dealers who initiate and are responsible for purchases made at
net asset value by certain designated retirement plans (excluding IRA and IRA
rollovers), certain non-designated plans, certain trust companies and trust
departments of banks and certain retirement plans of organizations with
collective retirement plan assets of $10 million or more. See definitions
under "Purchases at Net Asset Value," and as set forth in the SAI.
6
<PAGE>
CLASS II. Unlike Class I shares, the front-end sales charges and dealer
concessions for Class II shares do not vary depending on the amount of
purchase. See table below:
<TABLE>
<CAPTION>
TOTAL SALES CHARGE
--------------------------------------------
AS A PERCENTAGE OF AS A PERCENTAGE OF NET PORTION OF THE TOTAL
AMOUNT OF SALE OFFERING PRICE OF THE ASSET VALUE OF THE OFFERING PRICE
AT OFFERING PRICE SHARES PURCHASED SHARES PURCHASED RETAINED BY DEALERS*
- ----------------- --------------------- ---------------------- --------------------
<S> <C> <C> <C>
any amount (less than $1
million)............... 1.00% 1.01% 1.00%
</TABLE>
- -------
* FTD, or one of its affiliates, may make additional payments to the
securities dealer, from its own resources, of up to 1% of the amount
invested. During the first year following a purchase of Class II shares, FTD
will keep a portion of the Rule 12b-1 fees assessed to those shares to
partially recoup fees FTD pays to securities dealers.
Class II shares redeemed within 18 months of their purchase will be assessed
a contingent deferred sales charge of 1.0% on the lesser of the then-current
net asset value or the net asset value of such shares at the time of purchase,
unless such charge is waived as described under "How to Sell Shares of the
Fund -- Contingent Deferred Sales Charge."
The following section, which supersedes that included in the Prospectus,
describes the categories of investors who may purchase Class I shares of the
Fund at net asset value and when Class I and Class II shares may be purchased
at net asset value. The sections in the Prospectus titled "Cumulative Quantity
Discount" and "Group Purchases" only apply to Class I shares. Although sales
charges on Class II shares may not be reduced by a Letter of Intent or
Cumulative Quantity Discount as described under "Cumulative Quantity
Discount," the value of Class II shares owned by an investor may be included
in determining the appropriate sales charges for Class I shares.
PURCHASES AT NET ASSET VALUE. Class I shares may be purchased without the
imposition of either a front-end sales charge ("net asset value") or a
contingent deferred sales charge by (1) officers, trustees, directors and
full-time employees of the Fund, any of the Franklin Templeton Funds, or of
the Investment Manager or its affiliates, and by their spouses and family
members, including any subsequent payments by such parties after cessation of
employment; (2) companies exchanging Shares with or selling assets pursuant to
a merger, acquisition or exchange offer; (3) insurance company separate
accounts for pension plan contracts; (4) accounts managed by the Investment
Manager or its affiliates; (5) shareholders of Templeton Institutional Funds,
Inc. reinvesting redemption proceeds from that fund under an employee benefit
plan qualified under Section 401 of the Internal Revenue Code of 1986, as
amended, in shares of the Fund; (6) certain unit investment trusts and unit
holders of such trusts reinvesting their distributions from the trusts in the
Fund;(7) registered securities dealers and their affiliates, for their
investment account only; and (8) registered personnel and employees of
securities dealers and by their spouses and family members, in accordance with
the internal policies and procedures of the employing securities dealer.
For either Class I or Class II, the same class of shares of the Fund may be
purchased at net asset value by persons who have redeemed, within the previous
120 days, their shares of the Fund or another of the Franklin Templeton Funds
which were purchased with a front-end sales charge or assessed a contingent
deferred sales charge on redemption. If a different class of shares is
purchased, the full front-end sales charge must be paid at the time of
purchase of the new shares. An investor may reinvest an amount not exceeding
the redemption proceeds. While credit will be given for any contingent
deferred sales charge paid on the shares redeemed and subsequently
repurchased, a new contingency period will begin. Shares of the Fund redeemed
in connection with an exchange into another fund (see "Exchange Privilege")
are not considered "redeemed" for this privilege. In order to exercise this
privilege, a written order for the purchase of Shares of the Fund must be
received by the Fund or Franklin Templeton Investor Services, Inc. (the
"Transfer Agent") within 120 days after the redemption. The 120 days, however,
do not begin to run on redemption proceeds placed immediately after redemption
in a Franklin Bank Certificate of Deposit ("CD") until the CD (including any
rollover) matures. Reinvestment at net asset value may also be handled by a
securities dealer or other financial institution, who may charge the
Shareholder a fee for this service. The redemption is a taxable transaction
but reinvestment without a sales charge may affect the amount of gain or loss
recognized and the tax basis of the shares reinvested. If there has been a
loss on the redemption, the loss may be disallowed if a
7
<PAGE>
reinvestment in the same fund is made within a 30-day period. Information
regarding the possible tax consequences of such a reinvestment is included in
the tax section of the Prospectus and the SAI.
For either Class I or Class II, the same class of shares of the Fund or of
another of the Franklin Templeton Funds may be purchased at net asset value
and without a contingent deferred sales charge by persons who have received
dividends and capital gain distributions in cash from investments in that
class of shares of the Fund within 120 days of the payment date of such
distribution. To exercise this privilege, a written request to reinvest the
distribution must accompany the purchase order. Additional information may be
obtained from Account Services at 1-800-393-3001. See "General Information --
Dividends and Distributions."
Class I shares may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by investors who have, within
the past 60 days, redeemed an investment in a mutual fund which is not part of
the Franklin Templeton Funds and which charged the investor a contingent
deferred sales charge upon redemption and which has investment objectives
similar to those of the Fund.
Class I shares may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by broker-dealers who have
entered into a supplemental agreement with FTD, or by registered investment
advisors affiliated with such broker-dealers, on behalf of their clients who
are participating in a comprehensive fee program (sometimes known as a wrap
fee program).
Class I shares may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by anyone who has taken a
distribution from an existing retirement plan already invested in the Franklin
Templeton Funds (including former participants of the Franklin Templeton
Profit Sharing 401(k) plan), to the extent of such distribution. In order to
exercise this privilege a written order for the purchase of shares of the Fund
must be received by Franklin Templeton Trust Company, the Fund or the Transfer
Agent, within 120 days after the plan distribution.
Class I shares may also be purchased at net asset value and without the
imposition of a contingent deferred sales charge by any state, county, or
city, or any instrumentality, department, authority or agency thereof which
has determined that the Fund is a legally permissible investment and which is
prohibited by applicable investment laws from paying a sales charge or
commission in connection with the purchase of shares of any registered
management investment company ("an eligible governmental authority"). SUCH
INVESTORS SHOULD CONSULT THEIR OWN LEGAL ADVISORS TO DETERMINE WHETHER AND TO
WHAT EXTENT THE SHARES OF THE FUND CONSTITUTE LEGAL INVESTMENTS FOR THEM.
Municipal investors considering investment of proceeds of bond offerings into
the Fund should consult with expert counsel to determine the effect, if any,
of various payments made by the Fund or its Investment Manager on arbitrage
rebate calculations. If an investment by an eligible governmental authority at
net asset value is made through a securities dealer who has executed a dealer
agreement with FTD, FTD or one of its affiliates may make a payment, out of
its own resources, to such securities dealer in an amount not to exceed 0.25%
of the amount invested. Contact Franklin Templeton Institutional Services for
additional information.
DESCRIPTION OF SPECIAL NET ASSET VALUE PURCHASES. Class I shares may also be
purchased at net asset value and without the imposition of a contingent
deferred sales charge by certain designated retirement plans, including profit
sharing, pension, 401(k) and simplified employee pension plans ("designated
plans"), subject to minimum requirements with respect to number of employees
or amount of purchase, which may be established by FTD. Currently those
criteria require that the employer establishing the plan have 200 or more
employees or that the amount invested or to be invested during the subsequent
13-month period in the Fund or in any of the Franklin Templeton Investments
totals at least $1,000,000. Employee benefit plans not designated above or
qualified under Section 401 of the Code ("non-designated plans") may be
afforded the same privilege if they meet the above requirements as well as the
uniform criteria for qualified groups previously described under "Group
Purchases" which enable FTD to realize economies of scale in its sales efforts
and sales related expenses.
8
<PAGE>
Class I shares may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by trust companies and bank
trust departments for funds over which they exercise exclusive discretionary
investment authority and which are held in a fiduciary, agency, advisory,
custodial or similar capacity. Such purchases are subject to minimum
requirements with respect to amount of purchase, which may be established by
FTD. Currently, those criteria require that the amount invested or to be
invested during the subsequent 13-month period in this Fund or any of the
Franklin Templeton Investments must total at least $1,000,000. Orders for such
accounts will be accepted by mail accompanied by a check or by telephone or
other means of electronic data transfer directly from the bank or trust
company, with payment by federal funds received by the close of business on
the next business day following such order.
Class I shares may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by trustees or other
fiduciaries purchasing securities for certain retirement plans of
organizations with collective retirement plan assets of $10 million or more,
without regard to where such assets are currently invested.
For a complete understanding of how to buy shares of the Fund, this
Supplement must be read in conjunction with the Prospectus. Refer to the SAI
for further information regarding net asset value purchases of Class I shares.
PURCHASING CLASS I AND CLASS II SHARES. When placing purchase orders,
investors should clearly indicate which class of shares they intend to
purchase. A purchase order that fails to specify a class will automatically be
invested in Class I shares. Purchases of $1 million or more in a single
payment will be invested in Class I shares. There are no conversion features
attached to either class of shares.
Investors who qualify to purchase Class I shares at net asset value should
purchase Class I rather than Class II shares. See the section "Purchases at
Net Asset Value" and "Description of Special Net Asset Value Purchases" above
for a discussion of when shares may be purchased at net asset value.
OTHER PROGRAMS AND PRIVILEGES AVAILABLE TO FUND SHAREHOLDERS
With the exception of Systematic Withdrawal Plans, all programs and
privileges detailed in the Prospectus will remain in effect for the new
multiclass structure.
Systematic Withdrawal Plans. Subject to the requirements outlined in the
Prospectus, a Shareholder may establish a Systematic Withdrawal Plan for his
or her account. With respect to Class I shares, the contingent deferred sales
charge is waived for redemptions through a Systematic Withdrawal Plan set up
prior to February 1, 1995. With respect to Systematic Withdrawal Plans set up
on or after February 1, 1995, the applicable contingent deferred sales charge
is waived for Class I and Class II share redemptions of up to 1% monthly of an
account's net asset value (12% annually, 6% semi-annually, 3% quarterly). For
example, if a Class I account maintained an annual balance of $1,000,000, only
$120,000 could be withdrawn through a once-yearly Systematic Withdrawal Plan
free of charge; any amount over that $120,000 would be assessed a 1% (or
applicable) contingent deferred sales charge. Likewise, if a Class II account
maintained an annual balance of $10,000, only $1,200 could be withdrawn
through a once-yearly Systematic Withdrawal Plan free of charge.
EXCHANGE PRIVILEGE
Shareholders are entitled to exchange their shares for shares of the same
class of other Franklin Templeton Funds which are eligible for sale in the
Shareholder's state of residence and in conformity with such fund's stated
eligibility requirements and investment
9
<PAGE>
minimums. Some funds, however, may not offer Class II shares. Class I shares
may be exchanged for Class I shares of any Franklin Templeton Funds. Class II
shares may be exchanged for Class II shares of any Franklin Templeton Funds.
No exchanges between different classes of shares will be allowed. A contingent
deferred sales charge will not be imposed on exchanges. If, however, the
exchanged shares were subject to a contingent deferred sales charge in the
original fund purchased and shares are subsequently redeemed within 12 months
(Class I shares) or 18 months (Class II shares) of the calendar month of the
original purchase date, a contingent deferred sales charge will be imposed.
Investors should review the Prospectus of the fund they wish to exchange from
and the fund they wish to exchange into for all specific requirements or
limitations on exercising the exchange privilege, for example, minimum holding
periods or applicable sales charges.
EXCHANGES OF CLASS I SHARES. The contingency period of Class I shares will
be tolled (or stopped) for the period such shares are exchanged into and held
in a Franklin or Templeton money market fund. If a Class I account has shares
subject to a contingent deferred sales charge, Class I shares will be
exchanged into the new account on a "first-in, first-out" basis. See also "How
to Sell Shares of the Fund -- Contingent Deferred Sales Charge."
EXCHANGES OF CLASS II SHARES. When an account is composed of Class II shares
subject to the contingent deferred sales charge, and shares that are not, the
shares will be transferred proportionately into the new fund. Shares received
from reinvestment of dividends and capital gains are referred to as "free
shares," shares which were originally subject to a contingent deferred sales
charge but to which the contingent deferred sales charge no longer applies are
called "matured shares," and shares still subject to the contingent deferred
sales charge are referred to as "CDSC liable shares." CDSC liable shares held
for different periods of time are considered different types of CDSC liable
shares. For instance, if a Shareholder has $1,000 in free shares, $2,000 in
matured shares, and $3,000 in CDSC liable shares, and the Shareholder
exchanges $3,000 into a new fund, $500 will be exchanged from free shares,
$1,000 from matured shares, and $1,500 from CDSC liable shares. Similarly, if
CDSC liable shares have been purchased at different periods, a proportionate
amount will be taken from shares held for each period. If, for example, a
Shareholder holds $1,000 in shares bought 3 months ago, $1,000 bought 6 months
ago, and $1,000 bought 9 months ago, and the Shareholder exchanges $1,500 into
a new fund, $500 from each of these shares will be deemed exchanged into the
new fund.
The only money market fund exchange option available to Class II
Shareholders is the Franklin Templeton Money Fund II ("Money Fund II"), a
series of the Franklin Templeton Money Fund Trust. No drafts (checks) may be
written on Money Fund II accounts, nor may Shareholders purchase shares of
Money Fund II directly. Class II shares exchanged for shares of Money Fund II
will continue to age and a contingent deferred sales charge will be assessed
if CDSC liable shares are redeemed. No other money market funds are available
for Class II Shareholders for exchange purposes. Class I shares may be
exchanged for shares of any of the money market funds in the Franklin
Templeton Funds except Money Fund II. Draft writing privileges and direct
purchases are allowed on these other money market funds as described in their
respective Prospectuses.
To the extent shares are exchanged proportionately, as opposed to another
method, such as first-in first-out, or free-shares followed by CDSC liable
shares, the exchanged shares may, in some instances, be CDSC liable even
though a redemption of such shares, as discussed elsewhere herein, may no
longer be subject to a CDSC. The proportional method is believed by management
to more closely meet and reflect the expectations of Class II Shareholders in
the event shares are redeemed during the contingency period. For federal
income tax purposes, the cost basis of shares redeemed or exchanged is
determined under the Code without regard to the method of transferring shares
chosen by the Fund for purposes of exchanging or redeeming shares.
TRANSFERS. Transfers between identically registered accounts in the same
fund and class are treated as non-monetary and non-taxable events, and are not
subject to a contingent deferred sales charge. The transferred shares will
continue to age from the date of original purchase. Like exchanges, CLASS II
shares will be moved proportionately from each type of shares in the original
account.
10
<PAGE>
CONVERSION RIGHTS. It is not presently anticipated that Class II shares will
be converted to Class I shares. A Shareholder may, however, sell his Class II
shares and use the proceeds to purchase Class I shares, subject to all
applicable sales charges.
See "Exchange Privilege" in the Prospectus for more information.
HOW TO SELL SHARES OF THE FUND
For a discussion regarding the sale of either class of Fund shares, refer to
the section in the Prospectus titled "How to Sell Shares of the Fund." In
addition, the charges described in this Supplement will also apply to the sale
of all Fund shares.
CONTINGENT DEFERRED SALES CHARGE. Class I. In order to recover commissions
paid to securities dealers on investments of $1 million or more, a contingent
deferred sales charge of 1% applies to redemptions of those investments within
the contingency period of 12 months of the calendar month following their
purchase. The charge is 1% of the lesser of the then-current net asset value
of the shares redeemed (exclusive of reinvested dividends and capital gain
distributions) or the net asset value of such shares at the time of purchase,
and is retained by FTD. The contingent deferred sales charge is waived in
certain instances. See below and "Purchases at Net Asset Value" under "How To
Buy Shares of the Fund."
Class II. Class II shares redeemed within the contingency period of 18
months of the calendar month following their purchase will be assessed a
contingent deferred sales charge, unless one of the exceptions described below
applies. The charge is 1% of the lesser of the then-current net asset value of
the shares redeemed (exclusive of reinvested dividends and capital gain
distributions) or the net asset value of such shares at the time of purchase,
and is retained by FTD. The contingent deferred sales charge is waived in
certain instances. See below.
Class I and Class II. In determining if a contingent deferred sales charge
applies, shares not subject to a contingent deferred sales charge are deemed
to be redeemed first, in the following order: (i) shares representing amounts
attributable to capital appreciation of those shares held less than the
contingency period (12 months in the case of Class I shares and 18 months in
the case of Class II shares); (ii) shares purchased with reinvested dividends
and capital gain distributions; and (iii) other shares held longer than the
contingency period; and followed by any shares held less than the contingency
period, on a "first in, first out" basis. For tax purposes, a contingent
deferred sales charge is treated as either a reduction in redemption proceeds
or an adjustment to the cost basis of the shares redeemed.
The contingent deferred sales charge on each class of shares is waived, as
applicable, for: exchanges; any account fees; distributions to participants or
beneficiaries in Franklin Templeton Trust Company individual retirement plan
accounts due to death, disability or attainment of age 59 1/2; tax-free
returns of excess contributions from employee benefit plans; distributions
from employee benefit plans, including those due to plan termination or plan
transfer; redemptions through a Systematic Withdrawal Plan set up for shares
prior to February 1, 1995, and for Systematic Withdrawal Plans set up
thereafter, redemptions of up to 1% monthly of an account's net asset value
(3% quarterly, 6% semiannually or 12% annually); redemptions initiated by the
Fund due to a Shareholder's account falling below the minimum specified
account size; and redemptions following the death of the Shareholder.
All investments made during a calendar month, regardless of when during the
month the investment occurred, will age one month on the last day of that
month and each subsequent month.
Requests for redemptions for a specified dollar amount, unless otherwise
specified, will result in additional shares being redeemed to cover any
applicable contingent deferred sales charge, while requests for redemption of
a specific number of shares will result in the applicable contingent deferred
sales charge being deducted from the total dollar amount redeemed.
11
<PAGE>
NET ASSET VALUE
The following sentence replaces the first sentence of the first paragraph in
this section; the subsequent paragraph is added to the end of this section.
The net asset value per share of each class of the Fund is determined as of
the scheduled close of trading of the New York Stock Exchange ("Exchange")
(generally 4:00 p.m., New York time) each day that the Exchange is open for
trading.
Each of the Fund's classes will bear, pro-rata, all of the common expenses
of the Fund. The net asset value of all outstanding shares of each class of
the Fund will be computed on a pro-rata basis for each outstanding share based
on the proportionate participation in the Fund represented by the value of
shares of such classes, except that the Class I and Class II shares will bear
the Rule 12b-1 expenses payable under their respective plans. Due to the
specific distribution expenses and other costs that will be allocable to each
class, the dividends paid to each class of the Fund may vary.
TEMPLETON STAR SERVICE
Replace the Section captioned "How to Buy Shares of the Fund -- Templeton
STAR Service" with the following language:
From a touch tone phone, Templeton and Franklin Shareholders may access an
automated system (day or night) which offers the following features.
By calling the Templeton STAR Service, Shareholders may obtain current price
and yield information specific to a Templeton fund, regardless of class, or
Franklin Class II shares; obtain account information, request duplicate
confirmation or year-end statements and money fund checks, if applicable.
By calling the Franklin TeleFACTS system, Class I shareholders may obtain
current price, yield or other performance information specific to a Franklin
fund; process an exchange into an identically registered Franklin account;
obtain account information and request duplicate confirmation or year-end
statements, money fund checks, if applicable, and deposit slips.
Share prices and account information specific to Templeton Class I or II
shares and Franklin Class II shares may also be accessed on TeleFACTS by
Franklin Class I and Class II shareholders.
The STAR Service is accessible by calling 1-800-654-0123. The TeleFACTS
system is accessible by calling 1-800-247-1753. Templeton Class I and Class II
share codes for the Fund, which will be needed to access system information,
are 102 and 202, respectively. The system's automated operator will prompt the
caller with easy to follow step-by-step instructions from the main menu. Other
features may be added in the future.
PERFORMANCE (CLASS II)
Because Class II shares were not offered prior to May 1, 1995, no
performance data is available for these shares. After a sufficient period of
time has passed, Class II performance data as described in the "Performance"
section of the Prospectus will be available.
12
<PAGE>
GENERAL INFORMATION
With the exception of Voting Rights, all rights and privileges detailed
under the discussion of "General Information" will remain in effect as
described in the Prospectus for the new multiclass structure. For a complete
discussion of these rights and privileges, see "General Information" in the
Prospectus.
VOTING RIGHTS. Shares of each class represent proportionate interests in the
assets of the Fund and have the same voting and other rights and preferences
as the other class of the Fund for matters that affect the Fund as a whole.
For matters that only affect a certain class of the Fund's shares, however,
only Shareholders of that class will be entitled to vote. Therefore, each
class of shares will vote separately on matters (1) affecting only that class,
(2) expressly required to be voted on separately by state law, or (3) required
to be voted on separately by the 1940 Act or the rules adopted thereunder. For
instance, if a change to the Rule 12b-1 plan relating to Class I shares
requires Shareholder approval, only Shareholders of Class I may vote on
changes to the Rule 12b-1 plan affecting that class. Similarly, if a change to
the Rule 12b-1 plan relating to Class II shares requires Shareholder approval,
only Shareholders of Class II may vote on the change to such plan. On the
other hand, if there is a proposed change to the investment objective of the
Fund, this affects all Shareholders, regardless of which class of shares they
hold, and therefore, each share has the same voting rights. For more
information regarding voting rights, see the "Voting Rights" discussion in the
Prospectus under the heading "General Information."
13
<PAGE>
TEMPLETON
WORLD FUND PROSPECTUS -- JANUARY 1, 1995
- --------------------------------------------------------------------------------
INVESTMENT Templeton World Fund (the "Fund") seeks long-term capital
OBJECTIVE growth through a flexible policy of investing in stocks and
AND POLICIES debt obligations of companies and governments of any nation.
The Fund is a series of Templeton Funds, Inc.
- --------------------------------------------------------------------------------
PURCHASE OF Please complete and return the Shareholder Application. If you
SHARES need assistance in completing this form, please call our
Account Services Department. The Fund's Shares may be purchased
at a price equal to their net asset value plus a sales charge
not exceeding 5.75% of the offering price. The minimum initial
investment is $100 ($25 minimum for subsequent investments).
- --------------------------------------------------------------------------------
PROSPECTUS This Prospectus sets forth concisely information about the Fund
INFORMATION that a prospective investor ought to know before investing.
Investors are advised to read and retain this Prospectus for
future reference. A Statement of Additional Information ("SAI")
dated January 1, 1995, has been filed with the Securities and
Exchange Commission and is incorporated in its entirety by
reference in and made a part of this Prospectus. This SAI is
available without charge upon request to Franklin Templeton
Distributors, Inc., 700 Central Avenue, St. Petersburg, Florida
33701-3628 or by calling the Account Services Department.
- --------------------------------------------------------------------------------
ACCOUNT SERVICES DEPARTMENT -- 1-800-354-9191 OR 813-823-8712
- --------------------------------------------------------------------------------
TEMPLETON "STAR" SERVICE (24 hours, seven days a week access to current prices,
shareholder account balances/values, last transaction and duplicate account
statements) -- 1-800-654-0123
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
EXPENSE TABLE......... 2
FINANCIAL HIGHLIGHTS.. 3
GENERAL DESCRIPTION... 3
Investment Objective
and Policies......... 3
INVESTMENT TECHNIQUES. 4
Repurchase Agreements. 4
Options on Indices.... 4
Stock Index Futures
Contracts............ 4
Loans of Portfolio
Securities........... 4
Depositary Receipts... 5
RISK FACTORS.......... 5
HOW TO BUY SHARES OF
THE FUND............. 6
Net Asset Value....... 7
Offering Price........ 7
Cumulative Quantity
Discount............. 8
Letter of Intent...... 8
Group Purchases....... 9
Net Asset Value
Purchases............ 9
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Automatic Investment
Plan................. 10
Institutional
Accounts............. 10
Account Statements.... 10
Templeton STAR
Service.............. 11
Retirement Plans...... 11
EXCHANGE PRIVILEGE.... 11
Exchanges by Timing
Accounts............. 11
HOW TO SELL SHARES OF
THE FUND............. 12
Reinstatement
Privilege............ 14
Contingent Deferred
Sales Charge......... 14
Systematic Withdrawal
Plan................. 14
Redemptions by
Telephone............ 15
TELEPHONE
TRANSACTIONS......... 15
Verification
Procedures........... 15
Restricted Accounts... 15
General............... 16
MANAGEMENT OF THE
FUND................. 16
Investment Manager.... 16
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Business Manager...... 17
Transfer Agent........ 17
Custodian............. 17
Plan of Distribution.. 17
Expenses.............. 17
Brokerage Commissions. 17
GENERAL INFORMATION... 17
Description of
Shares/Share
Certificates......... 17
Meetings of
Shareholders......... 17
Dividends and
Distributions........ 17
Federal Tax
Information.......... 18
Inquiries............. 18
Performance
Information.......... 18
Statements and
Reports.............. 18
WITHHOLDING
INFORMATION.......... 19
CORPORATE RESOLUTION.. 20
AUTHORIZATION
AGREEMENT............ 21
THE FRANKLIN TEMPLETON
GROUP................ 22
</TABLE>
- --------------------------------------------------------------------------------
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK; FURTHER, SUCH SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>
EXPENSE TABLE
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of Offering
Price)................................................................ 5.75%
Deferred Sales Charge.................................................. None*
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees........................................................ 0.62%
12b-1 Fees............................................................. 0.18%**
Other Expenses (audit, legal, business management, transfer agent and
custodian)............................................................ 0.24%
Total Fund Operating Expenses.......................................... 1.04%
</TABLE>
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment, assuming (1) 5% annual
return and (2) redemption at the end of
each time period: $68 $89 $112 $177
</TABLE>
- -------
* Investments of $1 million or more are not subject to an initial sales
charge; however, a contingent deferred sales charge of 1% is imposed in the
event of certain redemption transactions within one year following such
investments. See "How To Sell Shares Of The Fund--Contingent Deferred Sales
Charge."
** These expenses may not exceed 0.25% of the Fund's average net assets
annually. (See '"Management of the Fund--Plan of Distribution.") After a
substantial period, these expenses, together with the initial sales charge,
may total more than the maximum sales expense that would have been
permissible if imposed entirely as an initial sales charge.
The information in the table above is an estimate based on the Fund's
expenses as of the end of the most recent fiscal year. The table is provided
for purposes of assisting current and prospective Shareholders in
understanding the various costs and expenses that an investor in the Fund will
bear, directly or indirectly. The information in the table does not reflect
the charge of up to $15 per transaction if a Shareholder requests that
redemption proceeds be sent by express mail or wired to a commercial bank
account or an administrative service fee of $5.00 per exchange for market
timing or allocation service accounts. THE 5% ANNUAL RETURN AND ANNUAL
EXPENSES SHOULD NOT BE CONSIDERED A REPRESENTATION OF ACTUAL OR EXPECTED FUND
PERFORMANCE OR EXPENSES, BOTH OF WHICH MAY VARY. For a more detailed
discussion of the Fund's fees and expenses, see "Management of the Fund."
2
<PAGE>
FINANCIAL HIGHLIGHTS
The following table of selected financial information has been audited by
McGladrey & Pullen, independent certified public accountants, for the years
indicated in their report which is incorporated by reference and which appears
in the Fund's 1994 Annual Report to Shareholders. This statement should be
read in conjunction with the other financial statements and notes thereto
included in the Fund's 1994 Annual Report to Shareholders, which contains
further information about the Fund's performance, and which is available to
shareholders upon request and without charge.
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
PER SHARE OPERATING PERFORMANCE -------------------------------------------------------------------------------------------------
(For a share outstanding throughout
the period) 1994 1993 1992 1991 1990 1989 1988 1987
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period....................... $ 15.94 $ 14.42 $ 15.05 $ 14.70 $ 17.30 $ 14.43 $ 19.05 $ 16.59
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income........ 0.26 0.30 0.41 0.46 0.53 0.54 0.47
Net realized and unrealized
gain (loss).................. 2.50 2.81 0.67 1.16 (2.04) 3.31 (2.53) 3.78
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total from investment
operations................... 2.76 3.11 1.08 1.62 (1.51) 3.85 (2.06) 4.18
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Less distributions...........
Dividends from net investment
income....................... (0.26) (0.38) (0.42) (0.52) (0.56) (0.38) (0.61) (0.44)
Distributions from net
realized gains.. (1.38) (1.21) (1.29) (0.75) (0.53) (0.60) (1.95) (1.28)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total distributions........... (1.64) (1.59) (1.71) (1.27) (1.09) (0.98) (2.56) (1.72)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Change in net asset value for
the year..................... 1.12 1.52 (0.63) 0.35 (2.60) 2.87 (4.62) 2.46
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end
of period..................... $ 17.06 $ 15.94 $ 14.42 $ 15.05 $ 14.70 $ 17.30 $ 14.43 $ 19.05
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN+ 18.87% 24.71% 8.13% 12.95% (9.39)% 28.30% (8.79)% 28.54%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000). $5,421,691 $4,621,124 $4,046,706 $4,129,635 $4,072,639 $4,728,104 $3,844,126 $4,478,488
Ratio to average net
assets of:
Expenses..................... 1.04% 1.02% 0.86% 0.72% 0.69% 0.69% 0.68% 0.67%
Net investment income........ 1.67% 2.13% 2.76% 3.23% 3.28% 3.54% 3.06% 2.48%
Portfolio turnover rate...... 30.77% 25.86% 26.60% 22.90% 19.90% 15.56% 20.45% 23.37%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
PER SHARE OPERATING PERFORMANCE ----------------------
(For a share outstanding throughout
the period) 1986 1985
- ----------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of
period....................... $ 13.52 $ 12.68
- ----------------------------------------------------------
Income from investment operations
Net investment income........ 0.43 0.43
Net realized and unrealized
gain (loss).................. 3.60 1.77
--------- ----------
Total from investment
operations................... 4.03 2.20
--------- ----------
Less distributions...........
Dividends from net investment
income....................... (0.43) (0.36)
Distributions from net
realized gains.. (0.53) (1.00)
--------- ----------
Total distributions........... (0.96) (1.36)
--------- ----------
Change in net asset value for
the year..................... 3.07 0.84
- ----------------------------------------------------------
Net asset value, end
of period..................... 16.59 $ 13.52
- ----------------------------------------------------------
TOTAL RETURN+ 32.17% 19.55%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000). $3,324,915 $2,289,641
Ratio to average net
assets of:
Expenses..................... 0.67% 0.71%
Net investment income........ 3.15% 3.84%
Portfolio turnover rate...... 28.23% 15.70%
- ----------------------------------------------------------
</TABLE>
+ Does not reflect sales charges.
* Not annualized.
GENERAL DESCRIPTION
Templeton Funds, Inc. (the "Company") was incorporated under the laws of
Maryland on August 15, 1977 and is registered under the Investment Company Act
of 1940 (the "1940 Act") as an open-end diversified investment company. It has
two series of Shares, each of which is a separate mutual fund: Templeton World
Fund and Templeton Foreign Fund. A prospectus for Templeton Foreign Fund is
available upon request and without charge from the Principal Underwriter.
INVESTMENT OBJECTIVE AND POLICIES. The Fund's investment objective is long-
term capital growth, which it seeks to achieve through a flexible policy of
investing in stocks and debt obligations of companies and governments of any
nation. Any income realized will be incidental.
Although the Fund generally invests in common stock, it may also invest in
preferred stocks and certain debt securities, rated or unrated, such as
convertible bonds and bonds selling at a discount. Under normal market
conditions, the Fund will invest at least 65% of its total assets in issuers
domiciled in at least three different nations (one of which may be the United
States). Whenever, in the judgment of the Investment Manager, market or
economic conditions warrant, the Fund may, for temporary defensive purposes,
invest without limit in U.S. Government securities, bank time deposits in the
currency of any major nation and commercial paper meeting the quality ratings
set forth under "Investment Objective and Policies" in the SAI, and purchase
from banks or broker-dealers Canadian or U.S. Government securities with a
simultaneous agreement by the seller to repurchase them within no more than
seven days at the original purchase price plus accrued interest.
3
<PAGE>
The Fund may invest no more than 5% of its total assets in securities issued
by any one company or government, exclusive of U.S. Government securities.
Although the Fund may invest up to 25% of its assets in a single industry, it
has no present intention of doing so. The Fund may not invest more than 5% of
its assets in warrants (exclusive of warrants acquired in units or attached to
securities) nor more than 10% of its assets in securities with a limited
trading market. The Investment Objective and Policies described above, as well
as most of the Investment Restrictions described in the SAI, cannot be changed
without Shareholder approval. The Fund invests for long-term growth of capital
and does not intend to place emphasis upon short-term trading profits.
Accordingly, the Fund expects to have a portfolio turnover rate of less than
50%.
The Fund may also purchase and sell stock index futures contracts up to an
aggregate amount not exceeding 20% of its total assets. In addition, in order
to increase its return or to hedge all or a portion of its portfolio
investments, the Fund may purchase and sell put and call options on securities
indices. These investment techniques are described below and under the heading
"Investment Objective and Policies" in the SAI.
INVESTMENT TECHNIQUES
REPURCHASE AGREEMENTS. When the Fund acquires a security from a U.S. bank or
a registered broker-dealer, it may simultaneously enter into a repurchase
agreement, wherein the seller agrees to repurchase the security at a specified
time and price. The repurchase price is in excess of the purchase price by an
amount which reflects an agreed-upon rate of return, which is not tied to the
coupon rate of the underlying security. Under the 1940 Act, repurchase
agreements are considered to be loans collateralized by the underlying
security and therefore will be fully collateralized. However, if the seller
should default on its obligation to repurchase the underlying security, the
Fund may experience delay or difficulty in exercising its rights to realize
upon the security and might incur a loss if the value of the security
declines, as well as costs in liquidating the security.
OPTIONS ON INDICES. The Fund may purchase and write (i.e., sell) put and
call options on securities indices that are traded on United States and
foreign exchanges or in the over-the-counter markets. An option on a
securities index permits the purchaser of the option, in return for the
premium paid, the right to receive from the seller cash equal to the
difference between the closing price of the index and the exercise price of
the option. The Fund may write a put or call option only if the option is
"covered." This means that so long as the Fund is obligated as the writer of
an option, it will maintain with its custodian cash or cash equivalents equal
to the contract value (in the case of call options) or exercise price (in the
case of put options). The Fund will not purchase put or call options if the
aggregate premium paid for such options would exceed 5% of its total assets.
STOCK INDEX FUTURES CONTRACTS. For hedging purposes only, the Fund may
purchase and sell stock index futures contracts up to an aggregate amount not
exceeding 20% of its total assets. A stock index futures contract is a
bilateral agreement under which two parties agree to take or make delivery of
an amount of cash based on the difference between the value of a stock index
at the beginning and at the end of the contract period. When the Fund enters
into a stock index futures contract, it must make an initial deposit, known as
"initial margin," as a partial guarantee of its performance under the
contract. As the value of the stock index fluctuates, either party to the
contract is required to make additional margin deposits, known as "variation
margin," to cover any additional obligation it may have under the contract. In
addition, when the Fund enters into a futures contract, it will segregate
assets or "cover" its position in accordance with the 1940 Act. See
"Investment Objective and Policies -- Stock Index Futures Contracts" in the
SAI. The Fund may not at any time commit more than 5% of its total assets to
initial margin deposits on futures contracts.
LOANS OF PORTFOLIO SECURITIES. The Fund may lend to banks and broker-dealers
portfolio securities with an aggregate market value of up to one-third of its
total assets. Such loans must be secured by collateral (consisting of any
combination of cash, U.S. Government securities or irrevocable letters of
credit) in an amount at least equal (on a daily marked-to-market basis) to the
current market value of the securities loaned. The Fund may terminate the
loans at any time and obtain the return of the securities loaned within five
business days. The Fund will continue to receive any interest or dividends
paid on the loaned securities and will continue to retain any voting rights
with respect to the securities.
4
<PAGE>
DEPOSITARY RECEIPTS. The Fund may purchase sponsored or unsponsored American
Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs") and Global
Depositary Receipts ("GDRs") (collectively, "Depositary Receipts"). ADRs are
Depositary Receipts typically used by a U.S. bank or trust company which
evidence ownership of underlying securities issued by a foreign corporation.
EDRs and GDRs are typically issued by foreign banks or trust companies,
although they also may be issued by U.S. banks or trust companies, and
evidence ownership of underlying securities issued by either a foreign or a
United States corporation. Generally, Depositary Receipts in registered form
are designed for use in the U.S. securities market and Depositary Receipts in
bearer form are designed for use in securities markets outside the United
States. Depositary Receipts may not necessarily be denominated in the same
currency as the underlying securities into which they may be converted.
Depositary Receipts may be issued pursuant to sponsored or unsponsored
programs. In sponsored programs, an issuer has made arrangements to have its
securities traded in the form of Depositary Receipts. In unsponsored programs,
the issuer may not be directly involved in the creation of the program.
Although regulatory requirements with respect to sponsored and unsponsored
programs are generally similar, in some cases it may be easier to obtain
financial information from an issuer that has participated in the creation of
a sponsored program. Accordingly, there may be less information available
regarding issuers of securities underlying unsponsored programs and there may
not be a correlation between such information and the market value of the
Depositary Receipts. Depositary Receipts also involve the risks of other
investments in foreign securities, as discussed below. For purposes of the
Fund's investment policies, the Fund's investments in Depositary Receipts will
be deemed to be investments in the underlying securities.
RISK FACTORS
Shareholders should understand that all investments involve risk and there
can be no guarantee against loss resulting from an investment in the Fund, nor
can there be any assurance that the Fund's investment objective will be
attained. As with any investment in securities, the value of, and income from,
an investment in the Fund can decrease as well as increase, depending on a
variety of factors which may affect the values and income generated by the
Fund's portfolio securities, including general economic conditions and market
factors. In addition to the factors which affect the value of individual
securities, a Shareholder may anticipate that the value of the Shares of the
Fund will fluctuate with movements in the broader equity and bond markets, as
well. A decline in the stock market of any country in which the Fund is
invested may also be reflected in declines in the price of the Shares of the
Fund. Changes in currency valuations will also affect the price of the Shares
of the Fund. History reflects both decreases and increases in worldwide stock
markets and currency valuations, and these may reoccur unpredictably in the
future. Additionally, investment decisions made by the Investment Manager will
not always be profitable or prove to have been correct. The Fund is not
intended as a complete investment program.
Successful use of stock index futures contracts and options on securities
indices by the Fund is subject to certain special risk considerations. A
liquid stock index option or futures market may not be available when the Fund
seeks to offset adverse market movements. In addition, there may be an
imperfect correlation between movements in the securities included in the
index and movements in the securities in the Fund's portfolio. Successful use
of stock index futures contracts and options on securities indices is further
dependent on the Investment Manager's ability to predict correctly movements
in the direction of the stock markets and no assurance can be given that its
judgment in this respect will be correct. Risks in the purchase and sale of
stock index futures and options are further referred to in the SAI.
The Fund has the right to purchase securities in any foreign country,
developed or underdeveloped. Investors should consider carefully the
substantial risks involved in investing in securities issued by companies and
governments of foreign nations, which are in addition to the usual risks
inherent in domestic investments. There is the possibility of expropriation,
nationalization or confiscatory taxation, taxation of income earned in foreign
nations or other taxes imposed with respect to investments in foreign nations,
foreign exchange controls (which may include suspension of the ability to
transfer currency from a given country), default in foreign government
securities, political or social instability or diplomatic developments which
could affect investments in securities of issuers in foreign
5
<PAGE>
nations. Some countries may withhold portions of interest and dividends at the
source. In addition, in many countries there is less publicly available
information about issuers than is available in reports about companies in the
United States. Foreign companies are not generally subject to uniform
accounting, auditing and financial reporting standards, and auditing practices
and requirements may not be comparable to those applicable to United States
companies. Further, the Fund may encounter difficulties or be unable to pursue
legal remedies and obtain judgments in foreign courts. Commission rates in
foreign countries, which are sometimes fixed rather than subject to
negotiation as in the United States, are likely to be higher. Foreign
securities markets also have different clearance and settlement procedures,
and in certain markets there have been times when settlements have been unable
to keep pace with the volume of securities transactions, making it difficult
to conduct such transactions. Delays in settlement could result in temporary
periods when assets of the Fund are uninvested and no return is earned
thereon. The inability of the Fund to make intended security purchases due to
settlement problems could cause the Fund to miss attractive investment
opportunities. Inability to dispose of portfolio securities due to settlement
problems could result either in losses to the Fund due to subsequent declines
in value of the portfolio security or, if the Fund has entered into a contract
to sell the security, could result in possible liability to the purchaser. In
many foreign countries, there is less government supervision and regulation of
business and industry practices, stock exchanges, brokers and listed companies
than in the United States. The foreign securities markets of many of the
countries in which the Fund may invest may also be smaller, less liquid, and
subject to greater price volatility than those in the United States. The Fund
may invest in Eastern European countries, which involves special risks that
are described under "Risk Factors" in the SAI.
The Fund is authorized to invest in medium quality or high risk, lower
quality debt securities that are rated between BBB and as low as CCC by
Standard & Poor's Corporation ("S&P") and between Baa and as low as Caa by
Moody's Investors Service, Inc. ("Moody's") or, if unrated, are of equivalent
investment quality as determined by the Investment Manager. As an operating
policy, which may be changed by the Board of Directors without Shareholder
approval, the Fund will not invest more than 5% of its total assets in debt
securities rated BBB or lower by S&P or Baa or lower by Moody's. The Board may
consider a change in this operating policy if, in its judgment, economic
conditions change such that a higher level of investment in high risk, lower
quality debt securities would be consistent with the interests of the Fund and
its Shareholders. High risk, lower quality debt securities, commonly referred
to as "junk bonds," are regarded, on balance, as predominantly speculative
with respect to the issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligation and may be in default. Unrated
debt securities are not necessarily of lower quality than rated securities but
they may not be attractive to as many buyers. Regardless of rating levels, all
debt securities considered for purchase (whether rated or unrated) will be
carefully analyzed by the Investment Manager to insure, to the extent
possible, that the planned investment is sound. The Fund may, from time to
time, purchase defaulted debt securities if, in the opinion of the Investment
Manager, the issuer may resume interest payments in the near future. The Fund
will not invest more than 10% of its total assets in defaulted debt
securities, which may be illiquid.
The Fund usually effects currency exchange transaction on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign exchange market.
However, some price spread on currency exchange (to cover service charges)
will be incurred when the Fund converts assets from one currency to another.
There are further risk considerations, including possible losses through the
holding of securities in domestic and foreign custodial banks and
depositories, described in the SAI.
HOW TO BUY SHARES OF THE FUND
Shares of the Fund may be purchased at the Offering Price through any broker
which has a dealer agreement with Franklin Templeton Distributors, Inc.
("FTD"), the Principal Underwriter of the Shares of the Fund, or directly from
FTD upon receipt by FTD of a completed Shareholder Application and check. The
minimum initial purchase order is $100 (other than in monthly investment
plans, such as sponsored payroll deduction, automatic investment, split-
funding or comparable plans, which require a minimum of $25), with subsequent
investments of $25 or more.
6
<PAGE>
NET ASSET VALUE. The net asset value of the Shares of the Fund is computed
as of the close of trading on each day the New York Stock Exchange is open for
trading, by dividing the value of the Fund's securities plus any cash and
other assets (including accrued interest and dividends receivable) less all
liabilities (including accrued expenses) by the number of shares outstanding,
adjusted to the nearest whole cent. A security listed or traded on a
recognized stock exchange or NASDAQ is valued at its last sale price on the
principal exchange on which the security is traded. The value of a foreign
security is determined in its national currency as of the close of trading on
the foreign exchange on which it is traded or as of the close of trading on
the New York Stock Exchange, if that is earlier, and that value is then
converted into its U.S. dollar equivalent at the foreign exchange rate in
effect at noon, New York time, on the day the value of the foreign security is
determined. If no sale is reported at that time, the mean between the current
bid and asked price is used. Occasionally, events which affect the values of
such securities and such exchange rates may occur between the times at which
they are determined and the close of the New York Stock Exchange, and will
therefore not be reflected in the computation of the Fund's net asset value.
If events materially affecting the value of such securities occur during such
period, then these securities will be valued at fair value as determined by
the management and approved in good faith by the Board of Directors. All other
securities for which over-the-counter market quotations are readily available
are valued at the mean between the current bid and asked price. Securities for
which market quotations are not readily available and other assets are valued
at fair value as determined by the management and approved in good faith by
the Board of Directors.
OFFERING PRICE. The price to the public on purchases of Shares made at one
time by a single purchaser, by an individual, his or her spouse and their
children under the age of 21, or by a single trust or fiduciary account other
than an employee benefit plan, is the net asset value per Share plus a sales
charge not exceeding 5.75% of the Offering Price (equivalent to 6.10% of the
net asset value), which is reduced on larger sales as shown below.
<TABLE>
<CAPTION>
TOTAL SALES CHARGE
--------------------------------------------
AS A PERCENTAGE OF AS A PERCENTAGE OF NET PORTION OF TOTAL
AMOUNT OF SINGLE SALE OFFERING PRICE OF THE ASSET VALUE OF THE OFFERING PRICE
AT OFFERING PRICE SHARES PURCHASED SHARES PURCHASED RETAINED BY DEALERS
--------------------- --------------------- ---------------------- -------------------
<S> <C> <C> <C>
Less than $50,000....... 5.75% 6.10% 5.00%
$50,000 but less than
$100,000............... 4.50% 4.71% 3.75%
$100,000 but less than
$250,000............... 3.50% 3.63% 2.80%
$250,000 but less than
$500,000............... 2.50% 2.56% 2.00%
$500,000 but less than
$1,000,000............. 2.00% 2.04% 1.60%
$1,000,000 or more...... none none (see below)*
</TABLE>
- -------
* The following commissions will be paid by FTD to dealers who initiate and
are responsible for purchases of $1 million or more or for purchases made at
net asset value by certain retirement plans of organizations with collective
retirement plan assets of $10 million or more: 1.00% on sales of up to $2
million, plus 0.80% on sales of $2 million to $3 million, plus 0.50% on sales
of $3 million to $50 million, plus 0.25% on sales of $50 million to $100
million, plus 0.15% on sales in excess of $100 million.
No initial sales charge applies on investments of $1 million or more, but a
contingent deferred sales charge of 1% is imposed on certain redemptions
within one year of the purchase. See "How to Sell Shares of the Fund --
Contingent Deferred Sales Charge."
A sales charge of 4% of the Offering Price (4.17% of the net asset value) is
applicable to all purchases of Shares made for any qualified or non-qualified
employee benefit plan which is a Shareholder in the Fund on or before February
1, 1995. Of the 4% sales charge applicable to such purchases, 3.20% of the
Offering Price will be retained by dealers.
At the discretion of FTD, the entire sales commission may at times be
reallowed to dealers. During periods when 90% or more of the sales commission
is reallowed, such dealers may be deemed to be underwriters as that term is
defined in the Securities Act of 1933. FTD or its affiliates, at their
expense, may also provide additional compensation to dealers in connection
with sales of Shares of
7
<PAGE>
the Fund and other funds in the Franklin Group of Funds (R) and the Templeton
Family of Funds (collectively, the "Franklin Templeton Group"). Compensation
may include financial assistance to dealers in connection with conferences,
sales or training programs for their employees, seminars for the public,
advertising, sales campaigns and/or shareholder services and programs
regarding one or more funds in the Franklin Templeton Group and other dealer-
sponsored programs or events. In some instances, this compensation may be made
available only to certain dealers whose representatives have sold or are
expected to sell significant amounts of such Shares. Compensation may include
payment for travel expenses, including lodging, incurred in connection with
trips taken by invited registered representatives and members of their
families to locations within or outside of the U.S. for meetings or seminars
of a business nature. Dealers may not use sales of the Fund's Shares to
qualify for this compensation to the extent such may be prohibited by the laws
of any state or any self-regulatory agency, such as the National Association
of Securities Dealers, Inc. In addition, FTD or its affiliates may make
ongoing payments to brokerage firms, financial institutions (including banks)
and others to facilitate the administration and servicing of shareholder
accounts. None of the aforementioned additional compensation is paid for by
the Fund or its Shareholders.
A continuing trail fee will be paid to qualifying dealers at the annual rate
of 0.15% of the average daily net asset value of the Fund Shares purchased
prior to January 1, 1993, and 0.25% of the average daily net asset value of
the Fund Shares purchased after January 1, 1993, for Fund Shares registered in
the name of that broker-dealer as nominee or held in a Shareholder account
that designates that broker-dealer as dealer of record. This fee is paid in
order to promote selling efforts and to compensate dealers for providing
certain services, including processing purchase and redemption transactions,
establishing Shareholder accounts and providing certain information and
assistance with respect to the Fund.
As to telephone orders placed with FTD by dealers, the dealer must receive
the investor's order before the close of the New York Stock Exchange and
transmit it to FTD by 5:00 p.m., New York time, for the investor to receive
that day's Offering Price. Payment for such orders must be by check in U.S.
currency and must be promptly submitted to FTD. Orders mailed to FTD by
dealers or individual investors are effected at the Offering Price next
computed after the purchase order accompanied by payment has been received by
FTD. Such payment must be by check in U.S. currency drawn on a commercial bank
in the U.S. and, if over $100,000, may not be deemed to have been received
until the proceeds have been collected unless the check is certified or issued
by such bank. Any subscription may be rejected by FTD or by the Fund.
The Fund may impose a $10 charge against a Shareholder account in the event
that a check or draft submitted for the purchase of Fund Shares is returned
unpaid to the Fund.
Investors should promptly check the confirmation advice that is mailed after
each purchase (or redemption) in order to insure that it has been accurately
recorded in the investor's account.
CUMULATIVE QUANTITY DISCOUNT. The schedule of reduced sales charges also may
be applied to qualifying sales on a cumulative basis. For this purpose, the
dollar amount of the sale is added to the higher of (1) the value (calculated
at the applicable Offering Price) or (2) the purchase price, of any other
Shares of the Fund and/or other funds in the Franklin Templeton Group owned at
that time by the purchaser, his or her spouse, and their children under age
21. In addition, the aggregate investments of a trustee or other fiduciary
account (for an account under exclusive investment authority) may be
considered in determining whether a reduced sales charge is available, even
though there may be a number of beneficiaries of the account. For example, if
the investor held Shares valued at $40,000 (or, if valued at less than
$40,000, had been purchased for $40,000) and purchased an additional $20,000
of the Fund's Shares, the sales charge for the $20,000 purchase would be at
the rate of 4.50%. It is FTD's policy to give investors the best sales charge
rate possible; however, there can be no assurance that an investor will
receive the appropriate discount unless, at the time of placing the purchase
order, the investor or the dealer makes a request for the discount and gives
FTD sufficient information to determine whether the purchase will qualify for
the discount. On telephone orders from dealers for the purchase of Shares to
be registered in "street name," FTD will accept the dealer's instructions with
respect to the applicable sales charge rate to be applied. The cumulative
quantity discount may be amended or terminated at any time.
LETTER OF INTENT. Investors may also reduce sales charges on all investments
by means of a Letter of Intent ("LOI") which expresses the investor's
intention to invest a certain amount within a 13-month period in Shares of the
Fund or any other fund in the Franklin Templeton Group. See the Shareholder
Application. The minimum initial investment under an LOI is 5% of the total
LOI amount. Shares
8
<PAGE>
purchased with the first 5% of such amount will be held in escrow to secure
payment of the higher sales charge applicable to the Shares actually purchased
if the full amount indicated is not purchased, and such escrowed Shares will
be involuntarily redeemed to pay the additional sales charge, if necessary. A
purchase not originally made pursuant to an LOI may be included under a
subsequent LOI executed within 90 days of the purchase. Any redemptions made
by the Shareholder during the 13-month period will be subtracted from the
amount of the purchases for purposes of determining whether the terms of the
LOI have been completed. For a further description of the Letter of Intent,
see "Purchase, Redemption and Pricing of Shares--Letter of Intent" in the SAI.
GROUP PURCHASES. An individual who is a member of a qualified group may also
purchase Shares of the Fund at the reduced sales charge applicable to the
group as a whole. The sales charge is based upon the aggregate dollar value of
Shares previously purchased and still owned by the group, plus the amount of
the current purchase. For example, if members of the group had previously
invested and still held $80,000 of Fund Shares and now were investing $25,000,
the sales charge would be 3.50%. Information concerning the current sales
charge applicable to a group may be obtained by contacting FTD.
A "qualified group" is one which (i) has been in existence for more than six
months, (ii) has a purpose other than acquiring Fund Shares at a discount, and
(iii) satisfies uniform criteria which enable FTD to realize economies of
scale in its costs of distributing Shares. A qualified group must have more
than 10 members, must be available to arrange for group meetings between
representatives of the Fund or FTD and the members, must agree to include
sales and other materials related to the Fund in its publications and mailings
to members at reduced or no cost to FTD, and must seek to arrange for payroll
deduction or other bulk transmission of investments to the Fund.
If an investor selects a payroll deduction plan, subsequent investments will
be automatic and will continue until such time as the investor notifies the
Fund and the investor's employer to discontinue further investments. Due to
the varying procedures to prepare, process and forward the payroll deduction
information to the Fund, there may be a delay between the time of the payroll
deduction and the time the money reaches the Fund. The investment in the Fund
will be made at the Offering Price per Share determined on the day that both
the check and payroll deduction data are received in required form by the
Fund.
NET ASSET VALUE PURCHASES. Shares of the Fund may be purchased at net asset
value without imposition of a sales charge by the following persons: (i)
trustees or other fiduciaries purchasing securities for certain retirement
plans with assets of $10 million or more; (ii) directors, trustees and
officers of the investment companies sponsored by Templeton Worldwide, Inc.
and its affiliates (the "Templeton Group"), directors, officers and employees
(current or retired) in the Templeton Group (and their families) and
retirement plans established by the Templeton Group for employees; (iii)
companies exchanging shares with or selling assets to the Fund pursuant to a
merger, acquisition or exchange offer; (iv) registered securities dealers and
their affiliates, for their investment account only, and registered personnel
and employees of securities dealers and their spouses and family members in
accordance with the internal policies and procedures of the employing
securities dealer; (v) insurance company separate accounts for pension plan
contracts; (vi) accounts managed by the Templeton Group; (vii) shareholders of
Templeton Institutional Funds, Inc. reinvesting redemption proceeds from that
fund under an employee benefit plan qualified under Section 401 of the
Internal Revenue Code of 1986, as amended (the "Code") in Shares of the Fund;
(viii) certain unit investment trusts and unit holders of such trusts
reinvesting their distributions from the trusts in the Fund; and (ix)
employees (and their families) of financial institutions which have, directly
or through affiliates, signed an agreement with FTD.
Shares of the Fund may be purchased at net asset value by investment
advisers and/or affiliated broker-dealers who have entered into a supplemental
agreement with FTD, on behalf of their clients who are participating in a
comprehensive fee program (also known as a wrap fee program). Contact Franklin
Templeton Institutional Services for additional information.
Shares of the Fund may also be purchased at net asset value by employee
benefit plans qualified under Section 401 of the Code including salary
reduction plans qualified under Section 401(k) of the Code, subject to minimum
requirements with respect to number of employees or amount of purchase, which
may be established by FTD. Currently, those criteria require that the employer
establishing the plan have 500 or more employees or that the amount invested
or to be invested during the subsequent 13-month period in the Fund or any
other funds in the Franklin Templeton Group must total at least $1 million.
Employee benefit plans not qualified under Section 401 of the Code may be
afforded the same privilege if they meet the above requirements as well as the
uniform criteria for qualified groups
9
<PAGE>
described above under "Group Purchases" which enable FTD to realize economies
of scale in its sales efforts and sales-related expenses. If investments by
employee benefit plans at net asset value are made through a dealer who has
executed a dealer agreement with FTD, FTD or one of its affiliates may make a
payment, out of their own resources, to such dealer in an amount not to exceed
0.25% of the amount invested. Contact Franklin Templeton Institutional
Services for additional information.
Shares of the Fund may also be purchased at net asset value by anyone who
has taken a distribution from an existing retirement plan already invested in
any other fund(s) in the Franklin Templeton Group. In order to exercise this
privilege, a written order for the purchase of Shares of the Fund must be
received by Franklin Templeton Trust Company, the Fund, or Franklin Templeton
Investor Services, Inc. (the "Transfer Agent") within 120 days after the plan
distribution. To obtain a free Prospectus for any fund in the Franklin
Templeton Group, please call toll free at 1-800-DIAL BEN (1-800-342-5236).
Shares of the Fund may be purchased at net asset value by trust companies
and bank trust departments for funds over which they exercise exclusive
discretionary investment authority and which are held in a fiduciary, agency,
advisory, custodial or similar capacity. Such purchases are subject to minimum
requirements with respect to amount of purchase, which may be established by
FTD. Currently, those criteria require that the amount invested or to be
invested during the subsequent 13-month period in the Fund or any other funds
in the Franklin Templeton Group must total at least $1 million. Orders for
such accounts will be accepted by mail accompanied by a check, or by telephone
or other means of electronic data transfer directly from the bank or trust
company, with payment by federal funds received by the close of business on
the next business day following such order. If an investment by a trust
company or bank trust department at net asset value is made through a dealer
who has executed a dealer agreement with FTD, FTD or one of its affiliates may
make payment, out of their own resources, to such dealer in an amount not to
exceed 0.25% of the amount invested. Contact Franklin Templeton Institutional
Services for additional information.
Shares of the Fund may also be purchased at net asset value by an investor
who has, within the past 60 days, redeemed an investment in an unaffiliated
mutual fund which charged the investor a contingent deferred sales charge upon
redemption, and which has investment objectives similar to those of the Fund.
Shares of the Fund may also be purchased at net asset value by any state,
county or city, or any instrumentality, department, authority or agency
thereof, which has determined that the Fund is a legally permissible
investment and which is prohibited by applicable investment laws from paying a
sales charge or commission in connection with the purchase of shares of any
registered management investment company (an "eligible governmental
authority"). Such investors should consult their own legal advisers to
determine whether and to what extent the Shares of the Fund constitute legal
investments for them. Municipal investors considering investment of proceeds
of bond offerings into the Fund should consult with expert counsel to
determine the effect, if any, of various payments made by the Fund or its
investment manager on arbitrage rebate calculations. If an investment by an
eligible governmental authority at net asset value is made through a dealer
who has executed a dealer agreement with FTD, FTD or one of its affiliates may
make a payment, out of their own resources, to such dealer in an amount not to
exceed 0.25% of the amount invested. Contact Franklin Templeton Institutional
Services for additional information.
AUTOMATIC INVESTMENT PLAN. Investors may accumulate Fund Shares regularly
each month by means of automatic debits to their checking accounts ($25
minimum). Forms for this purpose are in the Shareholder Application in this
Prospectus. Such a plan is voluntary and may be discontinued by written notice
to FTD, which must be received 10 days prior to the collection date, or by FTD
upon written notice to the investor at least 30 days prior to the collection
date.
INSTITUTIONAL ACCOUNTS. Institutional investors will likely be required to
complete an institutional account application. There may also be additional
methods of opening accounts, purchasing, redeeming or exchanging Shares of the
Fund available for institutional accounts. To obtain an institutional account
application or additional information regarding institutional accounts,
contact Franklin Templeton Institutional Services at 1-800-321-8563.
ACCOUNT STATEMENTS. Shareholder accounts are opened in accordance with the
Shareholder's registration instructions. Transactions in the account, such as
additional investments and dividend reinvestments, will be reflected on
regular confirmation statements from the Transfer Agent.
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TEMPLETON STAR SERVICE. Shareholders may check the current prices of Shares,
account balances/values, a description of the last transaction and duplicate
account statements, 24 hours a day, 365 days a year, with Templeton STAR
Service by calling 1-800-654-0123 from a touch-tone telephone. A fund code
(the Fund's code is 102) and the Shareholder's account number are necessary
for accessing information (other than Share prices) from Templeton STAR
Service.
RETIREMENT PLANS. Shares of the Fund may be purchased through various
retirement plans including the following plans for which Franklin Templeton
Trust Company or its affiliate acts as trustee or custodian: IRAs, Simplified
Employee Pensions, 403(b) plans, qualified plans for corporations, self-
employed individuals and partnerships, and 401(k) plans. For further
information about any of the plans, agreements, applications and annual fees,
contact Franklin Templeton Distributors, Inc. To determine which retirement
plan is appropriate, an investor should contact his or her tax adviser.
EXCHANGE PRIVILEGE
A Shareholder may exchange Shares into other funds in the Franklin Templeton
Group (except Templeton American Trust, Inc., Templeton Capital Accumulator
Fund, Inc., Templeton Variable Annuity Fund, Templeton Variable Products
Series Fund and Franklin Valuemark II). However, until February 1, 1995,
Shares purchased at net asset value and subject to a contingent deferred sales
charge (see "How to Sell Shares of the Fund--Contingent Deferred Sales
Charge") are not eligible for exchange between the Templeton Family of Funds
and the Franklin Group of Funds (R) (this restriction does not apply to
exchanges within an employee benefit plan).
Exchange purchases are subject to the minimum investment requirements of the
fund purchased and no sales charge generally applies. However, exchanges of
shares from the Franklin Templeton Money Funds are subject to applicable sales
charges on the funds being purchased, unless the Franklin Templeton Money Fund
shares were acquired by an exchange from a fund having a sales charge, or by
reinvestment of dividends or capital gains distributions. Exchanges of shares
of a fund which were purchased with a lower sales charge to a fund which has a
higher sales charge will be charged the difference, unless the shares were
held in the original fund for at least six months prior to executing the
exchange. All exchanges are permitted only after at least 15 days have elapsed
from the date of the purchase of the Shares to be exchanged.
A Shareholder may exchange Shares by writing to the Transfer Agent (see "How
to Sell Shares of the Fund"), by contacting his or her investment dealer or--
if the Shareholder Application indicates that the Shareholder has not declined
the option--by telephoning 1-800-354-9191. Telephone exchange instructions
must be received by FTD by 4:00 p.m., New York time. Telephonic exchanges can
involve only Shares in non-certificated form. Shares held in certificate form
are not eligible, but may be returned and qualify for these services. All
accounts involved in a telephonic exchange must have the same registration and
dividend option as the account from which the Shares are being exchanged. The
Fund and the Transfer Agent will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. Please refer to "Telephone
Transactions--Verification Procedures." Forms for declining the telephone
exchange privilege and prospectuses of the other funds in the Franklin
Templeton Group may be obtained from FTD. Exchange redemptions and purchases
are processed simultaneously at the share prices next determined after the
exchange order is received. (See "How to Buy Shares of the Fund--Offering
Price.") A gain or loss for tax purposes generally will be realized upon the
exchange, depending on the tax basis of the Shares redeemed.
This exchange privilege is available only in states where shares of the fund
being acquired may legally be sold and may be modified, limited or terminated
at any time by the Fund upon sixty (60) days' written notice. A Shareholder
who wishes to make an exchange should first obtain and review a current
prospectus of the fund into which he or she wishes to exchange. Broker-dealers
who process exchange orders on behalf of their customers may charge a fee for
their services. Such fee may be avoided by making requests for exchange
directly to the Transfer Agent.
The equivalent of an exchange involving retirement accounts (including IRAs)
between the Templeton Family of Funds and the Franklin Group of Funds (R)
requires the completion of additional documentation before it can be effected.
Call 1-800-354-9191 for further information and forms.
EXCHANGES BY TIMING ACCOUNTS. In the case of market timing or allocation
services ("Timing Accounts"), FTD will deduct an administrative service fee of
$5.00 per exchange. Timing Accounts generally include accounts administered so
as to redeem or purchase
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shares based upon certain predetermined market indicators. In accordance with
the terms of their respective prospectuses, certain funds in the Franklin
Templeton Group do not accept or may place differing limitations than those
described below on exchanges by Timing Accounts.
The Fund reserves the right to temporarily or permanently terminate the
exchange privilege or reject any specific purchase order for any Timing
Account or any person whose transactions seem to follow a timing pattern who:
(i) makes an exchange request out of the Fund within two weeks of an earlier
exchange request out of the Fund, (ii) makes more than two exchanges out of
the Fund per calendar quarter, or (iii) exchanges shares equal in value to at
least $5 million, or more than 1% of the Fund's net assets. Accounts under
common ownership or control, including accounts administered so as to redeem
or purchase shares based upon certain predetermined market indicators, will be
aggregated for purposes of the exchange limits.
In addition, the Fund reserves the right to refuse the purchase side of
exchange requests by any Timing Account, person, or group if, in the
Investment Manager's judgment, the Fund would be unable to invest effectively
in accordance with its investment objectives and policies, or would otherwise
potentially be adversely affected. A Shareholder's exchanges into the Fund may
be restricted or refused if the Fund receives or anticipates simultaneous
orders affecting significant portions of the Fund's assets. In particular, a
pattern of exchanges that coincides with a "market timing" strategy may be
disruptive to the Fund and therefore may be refused.
Finally, as indicated above, the Fund and FTD reserve the right to refuse
any order for the purchase of Shares.
HOW TO SELL SHARES OF THE FUND
Shares will be redeemed, without charge, on request of the Shareholder in
"Proper Order" to the Transfer Agent. "PROPER ORDER" MEANS THAT THE REQUEST TO
REDEEM MUST MEET ALL THE FOLLOWING REQUIREMENTS:
1. Except as provided below under "Redemptions by Telephone," it must be in
writing, signed by the Shareholder(s) exactly in the manner as the Shares are
registered, and must specify either the number of Shares, or the dollar amount
of Shares, to be redeemed and sent to Franklin Templeton Investor Services,
Inc., P.O. Box 33030, St. Petersburg, Florida 33733-8030;
2. The signature(s) of the redeeming Shareholder(s) must be guaranteed by an
"eligible guarantor," including (1) national or state banks, savings
associations, savings and loan associations, trust companies, savings banks,
industrial loan companies and credit unions; (2) national securities
exchanges, registered securities associations and clearing agencies; (3)
securities broker-dealers which are members of a national securities exchange
or a clearing agency or which have minimum net capital of $100,000; or (4)
institutions that participate in the Securities Transfer Agent Medallion
Program ("STAMP") or other recognized signature medallion program. A notarized
signature will not be sufficient for the request to be in Proper Order. If the
Shares are registered in more than one name, the signature of each of the
redeeming Shareholders must be guaranteed. A signature guarantee is not
required for redemptions of $50,000 or less, requested by and payable to all
Shareholders of record, to be sent to the address of record for that account.
However, the Fund reserves the right to require signature guarantees on all
redemptions. A signature guarantee is required in connection with any written
request for transfer of Shares. Also, a signature guarantee is required if the
Fund or the Transfer Agent believes that a signature guarantee would protect
against potential claims based on the transfer instructions, including, for
example, when (a) the current address of one or more joint owners of an
account cannot be confirmed, (b) multiple owners have a dispute or give
inconsistent instructions to the Fund, (c) the Fund has been notified of an
adverse claim, (d) the instructions received by the Fund are given by an
agent, not the actual registered owner, (e) the Fund determines that joint
owners who are married to each other are separated or may be the subject of
divorce proceedings, or (f) the authority of a representative of a
corporation, partnership, association, or other entity has not been
established to the satisfaction of the Fund;
3. Any outstanding certificates must accompany the request together with a
stock power signed by the Shareholder(s), with signature(s) guaranteed as
described in Item 2 above;
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4. Liquidation requests of corporate, partnership, trust and custodianship
accounts, and accounts under court jurisdiction, require the following
documentation to be in proper form:
. Corporation--(i) Signature guaranteed letter of instruction from the
authorized officer(s) of the corporation, and (ii) a corporate
resolution in a form satisfactory to the Transfer Agent;
. Partnership--(i) Signature guaranteed letter of instruction from a
general partner and, if necessary, (ii) pertinent pages from the
partnership agreement identifying the general partners or other
documentation in a form satisfactory to the Transfer Agent;
. Trust--(i) Signature guaranteed letter of instruction from the
trustee(s), and (ii) a copy of the pertinent pages of the trust document
listing the trustee(s) or a certificate of incumbency if the trustee(s)
are not listed on the account registration;
. Custodial (other than a retirement account)--Signature guaranteed
letter of instruction from the custodian;
. Accounts under court jurisdiction--Check court documents and the
applicable state law since these accounts have varying requirements,
depending upon the state of residence; and
5. Redemption of Shares held in a retirement plan for which Franklin
Templeton Trust Company or its affiliate acts as trustee or custodian must
conform to the distribution requirements of the plan and the Fund's redemption
requirements above. Distributions from such plans are subject to additional
requirements under the Code, and certain documents (available from the
Transfer Agent) must be completed before the distribution may be made. For
example, distributions from retirement plans are subject to withholding
requirements under the Code, and the IRS Form W-4P (available from the
Transfer Agent) may be required to be submitted to the Transfer Agent with the
distribution request, or the distribution will be delayed. Franklin Templeton
Investor Services, Inc. and its affiliates assume no responsibility to
determine whether a distribution satisfies the conditions of applicable tax
laws and will not be responsible for any penalties assessed.
To avoid delay in redemption or transfer, Shareholders having questions
about these requirements should contact the Account Services Department by
calling 1-800-354-9191 or 813-823-8712.
The redemption price will be the net asset value of the Shares next computed
after the redemption request in Proper Order is received by the Transfer
Agent. Payment of the redemption price ordinarily will be made by check (or by
wire at the sole discretion of the Transfer Agent if wire transfer is
requested including name and address of the bank and the Shareholder's account
number to which payment of the redemption proceeds is to be wired) within
seven days after receipt of the redemption request in Proper Order. However,
if Shares have been purchased by check, the Fund will make redemption proceeds
available when a Shareholder's check received for the Shares purchased has
been cleared for payment by the Shareholder's bank, which, depending upon the
location of the Shareholder's bank, could take up to fifteen days or more. The
check will be mailed by first-class mail to the Shareholder's registered
address (or as otherwise directed). Remittance by wire (to a commercial bank
account in the same name(s) as the Shares are registered) or express mail, if
requested, are subject to a handling charge of up to $15, which will be
deducted from the redemption proceeds.
The Fund, through FTD, also repurchases Shares (whether in certificate or
book-entry form) through securities dealers. The Fund normally will accept
orders to repurchase such Shares by wire or telephone from dealers for their
customers at the net asset value next computed after the dealer has received
the Shareholder's request for repurchase, if the dealer received such request
before closing time of the New York Stock Exchange on that day. Dealers have
the responsibility of submitting such repurchase requests by calling not later
than 5:00 p.m., New York time, on such day in order to obtain that day's
applicable redemption price. Repurchase of Shares is for the convenience of
Shareholders and does not involve a charge by the Fund; however, securities
dealers may impose a charge on the Shareholder for transmitting the notice of
repurchase to the Fund. The Fund reserves the right to reject any order for
repurchase, which right of rejection might adversely affect Shareholders
seeking redemption through the repurchase procedure. Ordinarily, payment will
be made to the securities dealer within seven days after receipt of a
repurchase order and Share certificate (if any) in "Proper Order" as set forth
above. The Fund will also accept, from member firms of the New York Stock
Exchange, orders to repurchase Shares for
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which no certificates have been issued by wire or telephone without a
redemption request signed by the Shareholder, provided the member firm
indemnifies the Fund and FTD from any liability resulting from the absence of
the Shareholder's signature. Forms for such indemnity agreement can be
obtained from FTD.
The Fund may involuntarily redeem an investor's Shares if the net asset
value of such Shares is less than $100, provided that involuntary redemptions
will not result from fluctuations in the value of an investor's Shares. In
addition, the Fund may involuntarily redeem the Shares of any investor who has
failed to provide the Fund with a certified taxpayer identification number or
such other tax-related certifications as the Fund may require. A notice of
redemption, sent by first-class mail to the investor's address of record, will
fix a date not less than 30 days after the mailing date and Shares will be
redeemed at net asset value at the close of business on that date, unless
sufficient additional Shares are purchased to bring the aggregate account
value up to $100 or more, or unless a certified taxpayer identification number
(or such other information as the Fund has requested) has been provided, as
the case may be. A check for the redemption proceeds will be mailed to the
investor at the address of record.
REINSTATEMENT PRIVILEGE. A former Shareholder of any eligible fund in the
Franklin Templeton Group may reinvest proceeds from a redemption or a dividend
or capital gains distribution, without a sales charge, in any other eligible
Templeton Fund by sending a written request and a check to the Transfer Agent
within 120 days after the date of the redemption or distribution. Reinvestment
will be at the next calculated net asset value after receipt. However, if a
Shareholder's original investment was in a Fund with a lower sales charge, or
no sales charge, the Shareholder must pay the difference. Credit will be given
for any contingent deferred sales charge paid on the Shares redeemed. The
amount of gain or loss resulting from a redemption may be affected by exercise
of the reinstatement privilege if the Shares redeemed were held for 90 days or
less, or if a Shareholder reinvests in the same fund within 30 days.
CONTINGENT DEFERRED SALES CHARGE. In order to recover commissions paid to
dealers on qualified investments of $1 million or more, or for purchases made
by certain retirement plans of organizations with collective retirement plan
assets of $10 million or more, a contingent deferred sales charge of 1%
applies to certain redemptions by those investors within the first year after
investing. The charge is 1% of the lesser of the value of the Shares redeemed
(exclusive of reinvested dividends and capital gains distributions) or the
total cost of such Shares, and is retained by FTD. In determining if a charge
applies and the amount of any such charge, the first Shares redeemed are those
purchased with reinvested dividends and capital gains distributions, followed
by others held the longest. The contingent deferred sales charge is waived for
exchanges (except if Shares acquired by exchange were then redeemed within 12
months of the initial purchase); for distributions to participants in
qualified retirement plans due to death, disability or attainment of age 59
1/2; for tax-free returns of excess contributions to employee benefit plans;
for distributions from employee benefit plans; and for redemptions through the
Systematic Withdrawal Plan.
SYSTEMATIC WITHDRAWAL PLAN. A Shareholder may establish a Systematic
Withdrawal Plan ("Plan") and receive periodic payments from the account
provided that the net asset value of the Shares held by the Shareholder is at
least $5,000. There are no service charges for establishing or maintaining a
Plan. The minimum amount which the Shareholder may withdraw is $50 per
withdrawal transaction although this is merely the minimum amount allowed
under the Plan and should not be mistaken for a recommended amount. The Plan
may be established on a monthly, quarterly, semi-annual or annual basis. If
the Shareholder establishes a Plan, any capital gain distributions and income
dividends paid by the Fund to the Shareholder's account must be reinvested for
the Shareholder's account in additional Shares at net asset value. Payments
are then made from the liquidation of Shares at net asset value on the day of
the liquidation (which is generally on or about the 25th of the month) to meet
the specified withdrawals. Payments are generally received three to five days
after the date of liquidation. By completing the "Special Payment Instructions
for Distributions" section of the Shareholder Application included with this
Prospectus, a Shareholder may direct the selected withdrawals to another fund
in the Franklin Templeton Group, to another person, or directly to a checking
account. Liquidation of Shares may reduce or possibly exhaust the Shares in
the Shareholder's account, to the extent withdrawals exceed Shares earned
through dividends and distributions, particularly in the event of a market
decline. If the withdrawal amount exceeds the total Plan balance, the account
will be closed and the remaining balance will be sent to the Shareholder. As
with other redemptions, a liquidation to make a withdrawal payment is a sale
for Federal income tax
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purposes. Because the amount withdrawn under the Plan may be more than the
Shareholder's actual yield or income, part of such a Plan payment may be a
return of the Shareholder's investment.
Maintaining a Plan concurrently with purchases of additional Shares of the
Fund would be disadvantageous because of the sales charge on the additional
purchases. The Shareholder should ordinarily not make additional investments
of less than $5,000 or three times the annual withdrawals under the Plan
during the time such a Plan is in effect. A Plan may be terminated on written
notice by the Shareholder or the Fund, and it will terminate automatically if
all Shares are liquidated or withdrawn from the account, or upon the Fund's
receipt of notification of the death or incapacity of the Shareholder.
Shareholders may change the amount (but not below $50) and schedule of
withdrawal payments or suspend one such payment by giving written notice to
the Transfer Agent at least seven business days prior to the end of the month
preceding a scheduled payment. Share certificates may not be issued while a
Plan is in effect.
REDEMPTIONS BY TELEPHONE. Shareholders who file a Telephone Redemption
Authorization Agreement (the "Agreement") (a copy of which is included in this
Prospectus) may redeem Shares of the Fund by telephone, subject to the
Restricted Account exception noted under "Telephone Transactions--Restricted
Accounts." The Fund and the Transfer Agent will employ reasonable procedures
to confirm that instructions given by telephone are genuine. Shareholders,
however, bear the risk of loss in certain cases as described under "Telephone
Transactions--Verification Procedures."
For Shareholder accounts with a completed Agreement on file, redemptions of
uncertificated Shares or Shares which have previously been deposited with the
Fund or the Transfer Agent may be made for up to $50,000 per day per Fund
account. Telephone redemption requests received before 4:00 p.m., New York
time, on any business day will be processed that same day. The redemption
check will be sent within seven days, made payable to all the registered
owners on the account, and will be sent only to the address of record.
Redemption requests by telephone will not be accepted within 30 days following
an address change by telephone. In that case, a Shareholder should follow the
other redemption procedures set forth in this Prospectus. Institutional
accounts which wish to execute redemptions in excess of $50,000 must complete
an Institutional Telephone Privileges Agreement which is available from
Franklin Templeton Institutional Services by telephoning 1-800-321-8563.
TELEPHONE TRANSACTIONS
Shareholders of the Fund and their dealer of record, if any, may be able to
execute various transactions by calling the Transfer Agent at 1-800-354-9191.
All Shareholders will be able to: (i) effect a change in address, (ii) change
a dividend option (see "Restricted Accounts" below), (iii) transfer Fund
Shares in one account to another identically registered account in the Fund,
and (iv) exchange Fund Shares by telephone as described in this Prospectus. In
addition, Shareholders who complete and file an Agreement as described under
"How to Sell Shares of the Fund--Redemption by Telephone" will be able to
redeem Shares of the Fund.
VERIFICATION PROCEDURES. The Fund and the Transfer Agent will employ
reasonable procedures to confirm that instructions communicated by telephone
are genuine. These will include: recording all telephone calls requesting
account activity by telephone, requiring that the caller provide certain
personal and/or account information requested by the telephone service agent
at the time of the call for the purpose of establishing the caller's
identification, and sending a confirmation statement on redemptions to the
address of record each time account activity is initiated by telephone. So
long as the Fund and the Transfer Agent follow instructions communicated by
telephone which were reasonably believed to be genuine at the time of their
receipt, neither they nor their affiliates will be liable for any loss to the
Shareholder caused by an unauthorized transaction. Shareholders are, of
course, under no obligation to apply for or accept telephone transaction
privileges. In any instance where the Fund or the Transfer Agent is not
reasonably satisfied that instructions received by telephone are genuine, the
requested transaction will not be executed, and neither the Fund, the Transfer
Agent, nor their affiliates will be liable for any losses which may occur
because of a delay in implementing a transaction.
RESTRICTED ACCOUNTS. Telephone redemptions and dividend option changes may
not be accepted on Franklin Templeton Trust Company ("FTTC") or Templeton
Funds Trust Company ("TFTC") retirement accounts. To assure compliance with
all applicable regulations, special forms are required for any distribution,
redemption, or dividend payment. Although the telephone exchange privilege is
extended to these retirement accounts, a Franklin Templeton Transfer
Authorization Form must be on file in order to transfer
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retirement plan assets between the Franklin Group of Funds(R) and the
Templeton Family of Funds within the same plan type. Changes to dividend
options for these accounts must also be made in writing.
To obtain further information regarding distribution or transfer procedures,
including any required forms, FTTC retirement account shareholders may call 1-
800-527-2020 (toll free), and TFTC retirement account shareholders may call 1-
800-354-9191 (press "2") (also toll free).
GENERAL. During periods of drastic economic or market changes, it is
possible that the telephone transaction privileges will be difficult to
execute because of heavy telephone volume. In such situations, Shareholders
may wish to contact their dealer for assistance, or to send written
instructions to the Fund as detailed elsewhere in this Prospectus.
Neither the Fund nor the Transfer Agent will be liable for any losses
resulting from the inability of a Shareholder to execute a telephone
transaction.
The telephone transaction privilege may be modified or discontinued by the
Fund at any time upon 60 days' written notice to Shareholders.
MANAGEMENT OF THE FUND
The Company is managed by its Board of Directors and all powers of the
Company are exercised by or under authority of the Board. Information relating
to the Directors and Executive Officers is set forth under the heading
"Management of the Company" in the SAI.
INVESTMENT MANAGER. The Investment Manager of the Fund is Templeton,
Galbraith & Hansberger Ltd., Nassau, Bahamas. The Investment Manager manages
the investment and reinvestment of the Fund's assets. The Investment Manager
is an indirect wholly owned subsidiary of Franklin Resources, Inc.
("Franklin"). Through its subsidiaries, Franklin is engaged in various aspects
of the financial services industry. The Investment Manager and its affiliates
serve as advisers for a wide variety of public investment mutual funds and
private clients in many nations. The Templeton organization has been investing
globally over the past 52 years and, with its affiliates, provides investment
management and advisory services to a worldwide client base, including over
4.3 million mutual fund shareholders, foundations, endowments, employee
benefit plans and individuals. The Investment Manager and its affiliates have
approximately 4,100 employees in the United States, Australia, Scotland,
Germany, Hong Kong, Luxembourg, Bahamas, Singapore, Canada and Russia.
The Investment Manager uses a disciplined, long-term approach to value
oriented global and international investing. It has an extensive global
network of investment research sources. Securities are selected for the Fund's
portfolio on the basis of fundamental company-by-company analysis. Many
different selection methods are used for different funds and clients and these
methods are changed and improved by the Investment Manager's research on
superior selection methods.
The Investment Manager does not furnish any other services or facilities for
the Fund, although such expenses are paid by some investment advisers of other
investment companies. As compensation for its services, the Fund pays the
Investment Manager a fee which, during the most recent fiscal year,
represented 0.62% of its average daily net assets.
Currently, the lead portfolio manager for the Fund is Mark G. Holowesko. Mr.
Holowesko joined the Templeton organization in 1985, and is responsible for
coordinating equity research worldwide for the Investment Manager. Prior to
joining the Templeton organization, Mr. Holowesko worked with Roy West Trust
Corporation (Bahamas) Limited as an investment administrator. His duties at
Roy West included managing trust and individual accounts, as well as research
of worldwide equity markets. Dorian B. Foyil and Sean Farrington also exercise
significant portfolio management responsibilities with respect to the Fund.
Mr. Foyil is Vice President of the Investment Manager and head of the
Investment Manager's research technology group. Prior to joining the Templeton
organization, Mr. Foyil was a research analyst for four years with UBS
Phillips & Drew in London, England. Mr. Farrington is a member of the
Investment Manager's research technology group responsible for the maintenance
of the internal research database. Further information concerning the
Investment Manager is included under the heading "Investment Management and
Other Services" in the SAI.
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BUSINESS MANAGER. Templeton Global Investors, Inc. provides certain
administrative facilities and services for the Fund, including payment of
salaries of officers, preparation and maintenance of books and records,
preparation of tax returns and financial reports, monitoring compliance with
regulatory requirements and monitoring tax-deferred retirement plans. For its
services, the Business Manager receives a fee equivalent on an annual basis to
0.15% of the combined average daily net assets of the Funds included in the
Company (the Fund and Templeton Foreign Fund), reduced to 0.135% of such
combined net assets in excess of $200 million, to 0.10% of such assets in
excess of $700 million, and to 0.075% of such assets in excess of $1,200
million.
TRANSFER AGENT. Franklin Templeton Investor Services, Inc. serves as
transfer agent and dividend disbursing agent for the Fund.
CUSTODIAN. The Chase Manhattan Bank, N.A. serves as custodian of the Fund's
assets.
PLAN OF DISTRIBUTION. The Fund has a plan of distribution or "12b-1 Plan"
under which it may reimburse FTD for its costs and expenses for activities
primarily intended to result in the sale of Fund Shares. Expenditures by the
Fund under the plan may not exceed 0.25% annually of the Fund's average daily
net assets. Under the plan, costs and expenses not reimbursed in any one given
month (including costs and expenses not reimbursed because they exceeded the
limit of 0.25% per annum of the Fund's average daily net assets) may be
reimbursed in subsequent months or years, subject to applicable law. FTD has
informed the Fund that it had no unreimbursed expenses under the Plan at
August 31, 1994.
EXPENSES. For the fiscal year ended August 31, 1994, expenses amounted to
1.04% of the average daily net assets of the Fund.
BROKERAGE COMMISSIONS. The Fund's brokerage policies are described under the
heading "Brokerage Allocation" in the SAI. The Fund's brokerage policies
provide that the receipt of research services from a broker and the sale of
Shares by a broker are factors which may be taken into account in allocating
securities transactions, so long as the prices and execution provided by the
broker equal the best available within the scope of the Fund's brokerage
policies.
GENERAL INFORMATION
DESCRIPTION OF SHARES/SHARE CERTIFICATES. The Company's authorized capital
consists of 1,350,000,000 Common Shares of $1 par value per Share, of which
600,000,000 Shares are classified as Fund Shares, and 750,000,000 Shares are
classified as Templeton Foreign Fund Shares. The Board of Directors may, at
its discretion, classify and allocate Shares to additional Funds within the
Company without further action by the Shareholders. Each Share outstanding
entitles the holder to one vote.
The Fund will not ordinarily issue certificates for Shares purchased. Share
certificates representing whole (not fractional) Shares are issued only upon
the specific request of the Shareholder made in writing to the Transfer Agent.
No charge is made for the issuance of one certificate for all or some of the
Shares purchased in a single order.
MEETINGS OF SHAREHOLDERS. The Company is not required to hold annual
meetings of Shareholders and may elect not to do so. The Company will call a
special meeting of Shareholders when requested to do so by Shareholders
holding at least 10% of the Company's outstanding Shares. In addition, the
Company is required to assist Shareholder communications in connection with
the calling of Shareholder meetings to consider removal of a Director or
Directors.
DIVIDENDS AND DISTRIBUTIONS. Dividends and capital gain distributions (if
any) are usually paid in October and (if necessary) in December representing
all or substantially all of the Fund's net investment income and any net
realized capital gains. Income dividends and capital gain distributions paid
by the Fund, other than on those Shares whose owners keep them registered in
the name of a broker-dealer, are automatically reinvested in whole or
fractional Shares of the Fund at net asset value as of the ex-dividend date,
unless a Shareholder makes a written or telephonic request for payments in
cash. The processing date for the reinvestment of dividends may vary from
month to month, and does not affect the amount or value of the Shares
acquired. Income dividends and capital gain distributions will be paid in cash
on Shares during the time that their owners keep them registered in the name
of a broker-dealer, unless the broker-dealer has made arrangements with the
Transfer Agent for reinvestment.
17
<PAGE>
Prior to purchasing Shares of the Fund, the impact of dividends or capital
gain distributions which have been declared but not yet paid should be
carefully considered. Any dividend or capital gain distribution paid shortly
after a purchase by a Shareholder prior to the record date will have the
effect of reducing the per Share net asset value of the Shares by the amount
of the dividend or distribution. All or a portion of such dividend or
distribution, although in effect a return of capital, generally will be
subject to tax.
Checks are forwarded by first-class mail to the address of record. The
proceeds of any such checks which are not accepted by the addressee and
returned to the Fund will be reinvested for the Shareholder's account in whole
or fractional Shares at net asset value next computed after the check has been
received by the Transfer Agent. Subsequent distributions automatically will be
reinvested at net asset value as of the ex-dividend date in additional whole
or fractional Shares.
FEDERAL TAX INFORMATION. The Fund intends to elect to be treated and to
qualify each year as a regulated investment company under Subchapter M of the
Code. See the SAI for a summary of the requirements that must be satisfied to
so qualify. A regulated investment company generally is not subject to Federal
income tax on income and gains distributed in a timely manner to its
shareholders. The Fund intends to distribute to Shareholders substantially all
of its net investment income and realized capital gains, which generally will
be taxable income or capital gains in their hands. Distributions declared in
October, November or December to Shareholders of record on a date in such
month and paid during the following January will be treated as having been
received by Shareholders on December 31 in the year such distributions were
declared. The Fund will inform Shareholders each year of the amount and nature
of such income or gains. A more detailed description of tax consequences to
Shareholders is contained in the SAI under the heading "Tax Status."
The Fund may be required to withhold Federal income tax at the rate of 31%
of all taxable distributions (including redemptions) paid to Shareholders who
fail to provide the Fund with their correct taxpayer identification number or
to make required certifications or where the Fund or the Shareholder has been
notified by the Internal Revenue Service that the Shareholder is subject to
backup withholding. Corporate Shareholders and certain other Shareholders
specified in the Code are exempt from backup withholding. Backup withholding
is not an additional tax. Any amounts withheld may be credited against the
Shareholder's Federal income tax liability.
INQUIRIES. Shareholders' inquiries will be answered promptly. They should be
addressed to Franklin Templeton Investor Services, Inc., 700 Central Avenue,
P.O. Box 33030, St. Petersburg, Florida 33733-8030 -- telephone 1-800-354-9191
or 813-923-8712. Transcripts of Shareholder accounts less than three years old
are provided on request without charge; requests for transcripts going back
more than three years from the date the request is received by the Transfer
Agent are subject to a fee of up to $15 per account.
PERFORMANCE INFORMATION. The Fund may include its total return in
advertisements or reports to Shareholders or prospective investors. Quotations
of average annual total return will be expressed in terms of the average
annual compounded rate of return on a hypothetical investment in the Fund over
a period of 1, 5 and 10 years (or up to the life of the Fund), will reflect
the deduction of the maximum initial sales charge and deduction of a
proportional share of Fund expenses (on an annual basis), and will assume that
all dividends and distributions are reinvested when paid. Total return may be
expressed in terms of the cumulative value of an investment in the Fund at the
end of a defined period of time. For a description of the methods used to
determine total return for the Fund, see the SAI.
STATEMENTS AND REPORTS. The Fund's fiscal year ends on August 31. Annual
reports (containing financial statements audited by independent auditors and
additional information regarding the Fund's performance) and semi-annual
reports (containing unaudited financial statements) are sent to Shareholders
each year. Additional copies may be obtained, without charge, upon request to
the Account Services Department. The Fund also sends to each Shareholder a
confirmation statement after every transaction that affects the Shareholder's
account and a year-end historical confirmation statement.
18
<PAGE>
INSTRUCTIONS AND IMPORTANT NOTICE
SUBSTITUTE W-9 INSTRUCTIONS INFORMATION
GENERAL. Backup withholding is not an additional tax. Rather, the tax
liability of persons subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the IRS.
OBTAINING A NUMBER. If you do not have a Social Security Number/Taxpayer
Identification Number, you must obtain Form SS-5 or Form SS-4 from your local
Social Security or IRS office and apply for one. If you have checked the
"Awaiting TIN" box and signed the certification, withholding will apply to
payments relating to your account unless you provide a certified TIN within 60
days.
WHAT SSN/TIN TO GIVE. Please refer to the following guidelines:
<TABLE>
<CAPTION>
ACCOUNT TYPE GIVE SSN OF ACCOUNT TYPE GIVE TAXPAYER ID # OF
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
. Individual Individual . Trust, Estate, or Trust, Estate, or
Pension Plan Trust Pension Plan Trust
- -----------------------------------------------------------------------------------
. Joint Actual owner of . Corporation, Corporation,
Individual account, or if Partnership, or other Partnership, or other
combined funds, the organization organization
first-named
individual
- -----------------------------------------------------------------------------------
. Unif. Minor . Broker nominee Broker nominee
Gift/Transfer
to Minor
- -----------------------------------------------------------------------------------
. Sole Owner of business
Proprietor
- -----------------------------------------------------------------------------------
. Legal Ward, Minor, or
Guardian Incompetent
- -----------------------------------------------------------------------------------
</TABLE>
EXEMPT RECIPIENTS. Please provide your TIN and check the "Exempt Recipient"
box if you are an exempt recipient. Exempt recipients generally include:
A corporation A real estate investment trust
A financial institution A common trust fund operated by a bank
under section 584(a)
An organization exempt from tax An entity registered at all times
under section 501(a), or an under the Investment Company
individual retirement plan Act of 1940
A registered dealer in securities or
commodities registered in the U.S.
or a U.S. possession
IRS PENALTIES. If you do not supply us with your SSN/TIN, you will be subject
to an IRS $50 penalty unless your failure is due to reasonable cause and not
willful neglect. If you fail to report certain income on your Federal income
tax return, you will be treated as negligent and subject to an IRS 20% penalty
on any underpayment of tax attributable to such negligence, unless there was
reasonable cause for the resulting underpayment and you acted in good faith.
If you falsify information on this form or make any other false statement
resulting in no backup withholding on an account which should be subject to
backup withholding, you may be subject to an IRS $500 penalty and certain
criminal penalties including fines and imprisonment.
SUBSTITUTE W-8 INSTRUCTIONS INFORMATION
EXEMPT FOREIGN PERSON. Check the "Exempt Foreign Person" box if you qualify as
a non-resident alien or foreign entity that is not subject to certain U.S.
information return reporting or to backup withholding rules. Dividends paid to
your account may be subject to withholding of up to 30%. Generally, you are an
"Exempt Foreign Person" if you are not (1) a citizen or resident of the U.S.,
or (2) a U.S. corporation, partnership, estate, or trust. In the case of an
individual, an "Exempt Foreign Person" is one who has been physically present
in the U.S. for less than 31 days during the current calendar year. An
individual who is physically present in the U.S. for at least 31 days during
the current calendar year will still be treated as an "Exempt Foreign Person,"
provided that the total number of days physically present in the current
calendar year and the two preceding calendar years does not equal or exceed
183 days (counting all of the days in the current calendar year, only one-
third of the days in the first preceding calendar year and only one-sixth of
the days in the second preceding calendar year). In addition, lawful permanent
residents or green card holders may not be treated as "Exempt Foreign
Persons." If you are an individual or an entity, you must not now be, or at
this time expect to be, engaged in a U.S. trade or business with respect to
which any gain derived from transactions effected by the Fund/Payer during the
calendar year is effectively connected to the U.S.
PERMANENT ADDRESS. The Shareholder Application must contain your permanent
address if you are an "Exempt Foreign Person." If you are an individual,
provide your permanent address. If you are a partnership or corporation,
provide the address of your principal office. If you are an estate or trust,
provide the address of your permanent residence or the principal office of any
fiduciary.
NOTICE OF CHANGE IN STATUS. If you become a U.S. citizen or resident after you
have provided certification of your foreign status, or if you cease to be an
"Exempt Foreign Person," you must notify the Fund/Payer within 30 days of your
change in status. Reporting will then begin on the account(s) listed, and
backup withholding may also begin unless you certify to the Fund/Payer that
(1) the tax payer identification number you have given is correct, and (2) the
Internal Revenue Service has not notified you that you are subject to backup
withholding because you failed to report certain interest or dividend income.
You may use Form W-9, "Payer's Request for Taxpayer Identification Number and
Certification," to make these certifications. If an account is no longer
active, you do not have to notify a Fund/Payer or broker of your change in
status unless you also have another account with the same Fund/Payer that is
still active. If you receive interest from more than one Fund/Payer or have
dealings with more than one broker or barter exchange, file a certificate with
each. If you have more than one account with the same Fund/Payer, the
Fund/Payer may require you to file a separate certificate for each account.
WHEN TO FILE. File these certifications with the Fund before a payment is made
to you, unless you have already done this in either of the two preceding
calendar years. Only certifications that are in proper order will be treated
as having been filed with the Fund.
HOW OFTEN YOU MUST FILE. This certificate generally remains in effect for
three calendar years. A Fund/Payer or broker, however, may require that a new
certificate be filed each time a payment is made. On joint accounts for which
each joint owner is a foreign person, each must provide a certification of
foreign status.
1/94
19
<PAGE>
FOR CORPORATE SHAREHOLDERS--FORM OF RESOLUTION
It will be necessary for corporate shareholders to provide a certified copy of
a resolution or other certificate of authority to authorize the purchase as
well as sale (redemption) of shares and withdrawals by checks or drafts. You
may use the following form of resolution or you may prefer to use your own. It
is understood that the Fund, Franklin Templeton Distributors, Inc., Franklin
Templeton Investor Services, Inc., the custodian bank and their affiliates may
rely upon these authorizations until revoked or amended by written notice
delivered by registered or certified mail to the Fund.
CERTIFIED COPY OF RESOLUTION (Corporation or Association)
The undersigned hereby certifies and affirms that he/she is the duly elected
- --------------------------- of ---------------------------------- a
TITLE CORPORATE NAME
- --------------------------- organized under the laws of the State of ----------
TYPE OF ORGANIZATION STATE
and that the following is a true and correct copy of a resolution adopted by
the Board of Directors at a meeting duly called and held on
------------------
DATE
RESOLVED, that the of this
-------------------------------------------------
OFFICERS' TITLES
Corporation or Association are authorized to open an account in the name of
the Corporation or Association with one or more of the Franklin Group of
Funds (R) or Templeton Family of Funds (collectively, the "Funds") and to
deposit such funds of this Corporation or Association in this account as
they deem necessary or desirable; that the persons authorized below may
endorse checks and other instruments for deposit to said account or
accounts; and
FURTHER RESOLVED, that any of the following officers are
----------------
NUMBER
authorized to sign any share assignment on behalf of this Corporation or
Association and to take any other actions as may be necessary to sell or
redeem its shares in the Funds or to sign checks or drafts withdrawing funds
from the account; and
FURTHER RESOLVED, that this Corporation or Association shall hold harmless,
indemnify, and defend the Funds, their custodian bank, Franklin Templeton
Distributors, Inc., Franklin Templeton Investor Services, Inc., and their
affiliates, from any claim, loss or liability resulting in whole or in
part, directly or indirectly, from their reliance from time to time upon
any certifications by the secretary or any assistant secretary of this
Corporation or Association as to the names of the individuals occupying
such offices and their acting in reliance upon these resolutions until
actual receipt by them of a certified copy of a resolution of the Board of
Directors of the Corporation or Association modifying or revoking any or
all such resolutions.
The undersigned further certifies that the below named persons, whose
signatures appear opposite their names and office titles, are duly elected
officers of the Corporation or Association. (Attach additional list if
necessary)
- -------------------------------------- ---------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- ---------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- ---------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- ---------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- ---------------------------------------
NAME OF CORPORATION OR ASSOCIATION DATE
Certified from minutes
--------------------------------------------------------
NAME AND TITLE
CORPORATE SEAL (if appropriate)
20
<PAGE>
THE FRANKLIN TEMPLETON TELEPHONE REDEMPTION AUTHORIZATION AGREEMENT
You may use Franklin Templeton's telephone redemption privilege to redeem
uncertificated Franklin Templeton Fund shares for up to $50,000 (or your
Shareholder account balance, whichever is less) per day, per fund account in
accordance with the terms of the Fund's Prospectus.
The telephone redemption privilege is available only to Shareholders who
specifically request it. If you would like to add this redemption privilege to
the other telephone transaction privileges automatically available to Franklin
Templeton Fund shareholders, please sign and return this authorization to
Franklin Templeton Investor Services, Inc. ("Services"), transfer agent and
shareholder servicing agent for the Franklin Templeton Funds.
SHAREHOLDER AUTHORIZATION: I/We request the telephone redemption privilege
under the terms described below and in the prospectus for each investment
company in the Franklin Templeton Group of Funds (a "Franklin Templeton Fund"
or a "Fund"), now opened or opened at a later date, holding shares registered
as follows:
- ------------------------------------- ---------------------------------------
PRINT NAME(S) AS SHOWN IN YOUR ACCOUNT REGISTRATION ("SHAREHOLDER")
- ------------------------------------- ---------------------------------------
ACCOUNT NUMBER(S)
I/We authorize each Fund and Services to honor and act upon telephone requests
given as provided in this agreement to redeem shares from any
Shareholder account:
- ------------------------------------- ---------------------------------------
SIGNATURE(S) AND DATE
- ------------------------------------- ---------------------------------------
PRINT NAME(S) (AND TITLE/CAPACITY, IF APPLICABLE)
VERIFICATION PROCEDURES: I/We understand and agree that: (1) each Fund and
Services will employ reasonable procedures to confirm that redemption
instructions communicated by telephone are genuine and that if these
confirmation procedures are not followed, the Fund or Services may be liable
for any losses due to unauthorized or fraudulent telephone instructions; (2)
the confirmation procedures will include the recording of telephone calls
requesting redemptions, requiring that the caller provide certain personal
and/or account information requested by the telephone service agent at the
time of the call for the purpose of establishing the caller's identification,
and the sending of confirmation statements to the address of record each time
a redemption is initiated by telephone; and (3) so long as the Fund and
Services follow the confirmation procedures in acting on instructions
communicated by telephone which were reasonably believed to be genuine at the
time of receipt, neither they, nor their parent or affiliates, will be liable
for any loss, damages or expenses caused by an unauthorized or fraudulent
redemption request.
JOINTLY OWNED/CO-TRUSTEE ACCOUNTS: Each of us signing this agreement as either
joint owners or co-trustees authorizes each Fund and Services to honor
telephone redemption requests given by ANY ONE of the signers, or our
investment representative of record, if any, ACTING ALONE.
APPOINTMENT OF ATTORNEY-IN-FACT: In order to issue telephone redemption
requests acting alone, each of us individually makes the following
appointment: I hereby appoint the other joint owner(s)/co-trustee(s) as my
agent(s) (attorney[s]-in-fact) with full power and authority to individually
act for me in any lawful way with respect to the issuance of instructions to a
Fund or Services in accordance with the telephone redemption privilege we have
requested by signing this agreement. This appointment shall not be affected by
my subsequent disability or incompetency and shall remain in effect until it
is revoked by either written notice from any one of us delivered to a Fund or
Services by registered mail, return receipt requested or by a Fund or Services
upon receipt of any information that causes a Fund or Services to believe in
good faith that there is or that there may be a dispute among any of us with
respect to the Franklin Templeton Fund account(s) covered by this agreement.
Each of us agrees to notify the Fund or Services immediately upon the death of
any of the signers.
CORPORATE/PARTNERSHIP/TRUST/RETIREMENT ACCOUNTS: The Shareholder and each of
us signing this agreement on behalf of the Shareholder represent and warrant
to each Franklin Templeton Fund and Services that the Shareholder has the
authority to enter into this agreement and that each of us is duly authorized
to execute this agreement on behalf of the Shareholder. The Shareholder agrees
that its election of the telephone redemption privilege means that a Fund or
Services may honor a telephone redemption request given by ANY
officer/partner/member/administrator/or agent of the Shareholder ACTING ALONE.
RESTRICTED ACCOUNTS: Telephone redemptions may not be accepted on Franklin
Templeton Trust Company or Templeton Funds Trust Company retirement accounts.
PLEASE RETURN THIS FORM TO:
Franklin Templeton Investor Services, Inc., Attn.: Telephone Redemptions
Dept., 700 Central Avenue, St. Petersburg, Florida 33701-3628.
21
<PAGE>
THE FRANKLIN TEMPLETON GROUP
To receive a free brochure and prospectus, which contain more complete
information, including charges and expenses on each of the funds listed below,
call Franklin Fund Information, toll free, at 1-800-DIAL BEN (1-800-342-5236)
or Templeton Fund Information at 1-800-292-9293. Please read the prospectus
carefully before you invest or send money.
FUNDS SEEKING
TEMPLETON GROWTH AND Franklin FUNDS SEEKING
FAMILY OF INCOME Louisiana Tax- HIGH CURRENT
FUNDS Free Income INCOME AND
Fund STABILITY OF
PRINCIPAL
Franklin Franklin
Franklin Balance Sheet Maryland Tax- Franklin
Templeton Investment Free Income Adjustable
Japan Fund Fund Fund Rate
Franklin Franklin Securities
Templeton Convertible Missouri Tax- Fund
American Trust Securities Free Income Franklin
Fund Fund Adjustable
Templeton U.S.
Americas Government
Government Franklin Franklin New Securities
Securities Income Fund Jersey Tax- Fund
Fund Free Income Franklin
Franklin Fund Short-
Equity Income Franklin New Intermediate
Templeton Fund York Tax-Free U.S.
Developing Franklin Income Fund Government
Markets Trust Utilities Fund Securities
Fund
FUNDS SEEKING Franklin North
Templeton HIGH CURRENT Carolina Tax-
Foreign Fund INCOME Free Income
Fund
FUND SEEKING
HIGH AFTER-TAX
Templeton INCOME FOR
Global CORPORATIONS
Infrastructure Franklin
Fund Franklin's AGE Franklin Corporate
High Income Fund Oregon Tax- Qualified
Franklin Free Income Dividend Fund
Templeton Investment Fund
Global Grade Income Franklin
Opportunities Fund Pennsylvania
Trust Tax-Free
Income Fund
MONEY MARKET
FUNDS SEEKING
SAFETY OF
Templeton PRINCIPAL AND
Global Rising INCOME
Dividends Fund Franklin
Premier Return Franklin
Templeton Fund Puerto Rico
Growth Fund Franklin U.S. Tax-Free
Government Income Fund Franklin Money
Securities Fund
Fund
Templeton
Income Fund Franklin
Federal Money
Fund
FUNDS SEEKING
TAX-FREE Franklin Texas
Templeton INCOME Tax-Free Franklin Tax-
Money Fund Income Fund Exempt Money
Franklin Fund
Virginia Tax- Franklin
Free Income California
Templeton Real Fund Tax-Exempt
Estate Money Fund
Securities Franklin
Fund Federal Tax- Franklin
Free Income Washington Franklin New
Templeton Fund Municipal Bond York Tax-
Smaller Fund Exempt Money
Companies Franklin High Fund
Growth Fund Yield Tax-Free
Income Fund
FUNDS SEEKING
TAX-FREE IFT Franklin
Templeton INCOME THROUGH U.S. Treasury
World Fund INSURED Money Market
PORTFOLIOS Portfolio
FRANKLIN GROUP Franklin
OF FUNDS (R) California
High Yield
Municipal Fund
FUNDS FOR NON-
U.S. INVESTORS
Franklin
FRANKLIN Alabama Tax- Franklin FRANKLIN
GLOBAL/ Free Income Insured Tax- PARTNERS
INTERNATIONAL Fund Free Income FUNDS (R)
FUNDS Franklin Fund
Arizona Tax- Franklin
Free Income Arizona Franklin Tax-
Franklin Fund Insured Tax- Advantaged
Global Health Free Income High Yield
Care Fund Fund Securities
Franklin Fund
Franklin California Franklin
Global Tax-Free California Franklin Tax-
Government Income Fund Insured Tax- Advantaged
Income Fund Free Income International
Franklin Fund Bond Fund
Franklin Colorado Tax- Franklin
Global Free Income Florida
Utilities Fund Fund Insured Tax-
Free Income
Franklin Fund Franklin Tax-
International Advantaged
Equity Fund Franklin U.S.
Connecticut Government
Franklin Tax-Free Franklin Securities
Pacific Growth Income Fund Massachusetts Fund
Fund Insured Tax-
Free Income
Fund
FUNDS SEEKING Franklin
CAPITAL GROWTH Florida Tax- Franklin
Free Income Michigan
Franklin Fund Insured Tax-
California Free Income
Growth Fund Franklin Fund
Georgia Tax-
Franklin Free Income Franklin
DynaTech Fund Fund Minnesota
Insured Tax-
Franklin Free Income
Equity Fund Franklin Fund
Hawaii Franklin New
Franklin Gold Municipal Bond York Insured
Fund Fund Tax-Free
Income Fund
Franklin Franklin
Growth Fund Indiana Tax- Franklin Ohio
Free Income Insured Tax-
Franklin Fund Free Income
Rising Fund
Dividends Fund
Franklin Small Franklin Kentucky
Cap Growth Tax-Free Income
Fund Fund
22
<PAGE>
NOTES
----
23
<PAGE>
- -------------------------
TEMPLETON WORLD
FUND
PRINCIPAL UNDERWRITER:
Franklin Templeton
Distributors, Inc.
700 Central Avenue
St. Petersburg,
Florida 33701-3628
Account Services
1-800-354-9191
Sales Information
1-800-292-9293
Institutional Services
1-800-321-8563
This Prospectus is not
an offering of the
securities herein
described in any state
in which the offering
is not authorized. No
sales representative,
dealer, or other
person is authorized
to give any
information or make
any representations
other than those
contained in this
Prospectus. Further
information may be
obtained from the
Principal Underwriter.
- -------------------------
TL02 P 1/95
[RECYCLING LOGO]
TEMPLETON
WORLD
FUND
Prospectus
January 1, 1995
[LOGO OF FRANKLIN TEMPLETON]
<PAGE>
[LOGO OF TEMPLETON APPEARS HERE]
Mail to: Franklin Templeton Distributors, Inc.
P.O. Box 33031 St. Petersburg, Florida 33733-8031
(800) 393-3001
Please do not use this form for any Retirement Plan for which Templeton Funds
Trust Company or its affiliate serves as custodian or trustee or any of the
following Templeton Funds: Templeton American Trust: Templeton Money Fund;
Templeton Institutional Funds or Templeton Capital Accumulator Fund. Please
request separate Applications and/or Prospectuses.
================================================================================
SHAREHOLDER APPLICATION OR REVISION [_] Please check the box if this is a
revision and see Section 8
================================================================================
<TABLE>
<S> <C> <C>
Date ___________________ [_] Real Estate Securities Fund $______ [_] Global Opportunities Trust $______
[_] Growth Fund $_______ [_] Smaller Companies Growth Fund ______ [_] Americas Government Securities Fund ______
[_] World Fund _________ [_] Income Fund ______ [_] Japan Fund ______
[_] Foreign Fund _______ [_] Global Infrastructure Fund ______ [_] Other ______
[_] Global Rising Dividends Fund ______ [_] Developing Markets Trust ______
</TABLE>
================================================================================
1 ACCOUNT REGISTRATION (PLEASE PRINT)
================================================================================
[_] INDIVIDUAL OR JOINT ACCOUNT
__________________________________________________________ _____-_______-______
First Name Middle Initial Last Name Social Security
Number (SSN)
__________________________________________________________ _____-_______-______
Joint Owner(s) (Joint ownership means "Joint Tenants Social Security
With Rights of Survivorship" unless otherwise specified) Number (SSN)
================================================================================
[_] GIFT/TRANSFER TO A MINOR
__________________ As Custodian For ____________________________________________
Minor's Name (one only)
_____________________ Uniform Gifts/Transfers to Minors Act _____-______-_______
State of Residence Minor's Social
Security Number
Please Note: Custodian's Signature, not Minor's, is required in Section 4.
================================================================================
[_] TRUST, CORPORATION, PARTNERSHIP, OR OTHER ENTITY
______________________________________________________________-_________________
Name Taxpayer Identification Number (TIN)
________________________________________________________________________________
Name of Beneficiary (if to be included Date of Trust Document (must be
in the Registration) completed for registration)
________________________________________________________________________________
Name of Each Trustee (if to be included in the Registration)
================================================================================
2 ADDRESS
================================================================================
__________________________________________________ Daytime Phone (___)_________
Street Address Area Code
____________________________________________-_____ Evening Phone (___)_________
City State Zip Code Area Code
I am a Citizen of: [_] U.S. [_] _____________________________
Country of Residence
================================================================================
3 INITIAL INVESTMENT ($100 minimum initial investment)
================================================================================
Check(s) enclosed for $____________ (Payable to Franklin Templeton Distributors,
Inc. or the Fund(s) indicated above.)
================================================================================
4 SIGNATURE AND TAX CERTIFICATIONS (All registered owners must sign
application)
================================================================================
The Fund reserves the right to refuse to open an account without either a
certified Taxpayer Identification Number ("TIN") or a certification of foreign
status. Failure to provide tax certifications in this section may result in
backup withholding on payments relating to your account and/or in your inability
to qualify for treaty withholding rates.
I am(We are) not subject to backup withholding because I(we) have not been
notified by the IRS that I am(we are) subject to backup withholding as a result
of a failure to report all interest or dividends or because the IRS has notified
me(us) that I am(we are) no longer subject to backup withholding. (If you are
currently subject to backup withholding as a result of a failure to report all
interest or dividends, please cross out the preceding statement.)
[_] The number shown above is my(our) correct TIN, or that of the Minor named in
Section 1.
[_] Awaiting TIN. I am(We are) waiting for a number to be issued to me(us).
I(We) understand that if I(we) do not provide a TIN to the Fund within 60
days, the Fund is required to commence 31% backup withholding until I(we)
provide a certified TIN.
[_] Exempt Recipient. Individuals cannot be exempt. Check this box only after
reading the instructions to see whether you qualify as an exempt recipient.
(You should still provide a TIN.)
[_] Exempt Foreign Person. Check this box only if the following statement
applies: "I am(we are) neither a citizen nor a resident of the United
States. I(we) certify to the best of my(our) knowledge and belief, I(we)
qualify as an exempt foreign person and/or entity as described in the
instructions."
Permanent address for tax purposes:
________________________________________________________________________________
Street Address City State Country Postal Code
PLEASE NOTE: The IRS only allows one TIN to be listed on an account. On joint
accounts, it is preferred that the primary account owner (or person listed first
on the account) list his/her number as requested above.
CERTIFICATION - Under the penalties of perjury, I(we) certify that (1) the
information provided on this application is true, correct and complete, (2)
I(we) have read the prospectus(es) for the Fund(s) in which I am(we are)
investing and agree to the terms thereof, and (3) I am(we are) of legal age or
an emancipated minor. I(we) acknowledge that Shares of the Fund(s) are not
insured or guaranteed by any agency or institution and that an investment in the
Shares involves risks, including the possible loss of principal.
X_____________________________________ X________________________________________
Signature Signature
X_____________________________________ X________________________________________
Signature Signature
Please make a photocopy of this application for your records.
================================================================================
5 BROKER/DEALER USE ONLY (PLEASE PRINT)
================================================================================
+ +
+ We hereby submit this application for the purchase of shares of the Fund +
+ indicated above in accordance with the terms of our selling agreement with +
+ Franklin Templeton Distributors, Inc. ("FTD"), and with the Prospectus for +
+ the Fund. We agree to notify FTD of any purchases made under a Letter of +
+ Intent or Cumulative Quantity Discount. +
+ +------------------------------+ +
+ +Templeton Dealer Number + +
+ + + +
+ +------------------------------+ +
+ +
+ +--------------------------------------------------------------------------+ +
+ + WIRE ORDER ONLY: The attached check for $_____ should be applied against + +
+ + Wire Order + +
+ + + +
+ + Confirmation Number ______________ Dated ___________ For ________ Shares + +
+ +--------------------------------------------------------------------------+ +
+ +
+ Securities Dealer Name _____________________________________________________ +
+ +
+ Main Office Address _____________ Main Office Telephone Number(___)_________ +
+ +
+ Branch Number _____ Representative Number _____ Representative Name ________ +
+ +
+ Branch Address _______________________ Branch Telephone Number(___)_________ +
+ +
+ Authorized Signature, Securities Dealer _______________ Title ______________ +
+==============================================================================+
+ +
+ ACCEPTED: Franklin Templeton Distributors, Inc. By ____________ Date _______ +
+==============================================================================+
Please see reverse side for Shareholder Account Privileges:
<TABLE>
<S> <C> <C> <C>
[X] Distribution Options [X] Special Instructions for Distributions [X] Telephone Exchange Service [X] Letter of Intent
[X] Systematic Withdrawal Plan [X] Automatic Investment Plan [X] Cumulative Quantity Discount
</TABLE>
This application must be preceded or accompanied by a prospectus for the Fund(s)
being purchased.
<PAGE>
================================================================================
6. DISTRIBUTION OPTIONS (Check one)
================================================================================
Check one - if no box is checked, all dividends and capital gains will be
reinvested in additional shares of the Fund.
[_] Reinvest all dividends and capital gains.
[_] Pay capital gains in cash and reinvest dividends.
[_] Pay all dividends in cash and reinvest capital gains.
[_] Pay all dividends and capital gains in cash.
================================================================================
7. OPTIONAL SHAREHOLDER PRIVILEGES
================================================================================
A. SPECIAL PAYMENT INSTRUCTIONS FOR DISTRIBUTIONS (Check one box)
[_] Pay Distributions, as noted in Section 6, to another Franklin or Templeton
Fund.
Fund Name ____________________________ Existing Account Number ____________
[_] Send my Distributions to the person, named below, instead of as registered
in Section 1.
Name ___________________________ Street Address ___________________________
City ___________________________ State _________________ Zip Code _________
================================================================================
B. SYSTEMATIC WITHDRAWAL PLAN
Please withdraw from my Franklin Templeton account $_______($50 minimum)
[_] Monthly [_] Quarterly [_] Semi-Annually or [_] Annually as set forth in
the Prospectus, starting in __________________(Month).
Send the proceeds to: [_] Address of Record OR [_] the Franklin Templeton
Fund or person specified in Section 7(A) - Special Payment Instructions for
Distributions.
================================================================================
C. TELEPHONE TRANSACTIONS
Telephone Exchange Privilege: If the Fund does not receive specific
instructions from the shareholder, either in writing or by telephone, the
Telephone Exchange Privilege (see the prospectus) is automatically extended
to each account. The shareholder should understand, however, that the Fund
and Franklin Templeton Investor Services, Inc. ("FTI") or Templeton Funds
Trust Company and their agents will not be liable for any loss, injury,
damage or expense as a result of acting upon instructions communicated by
telephone reasonably believed to be genuine. The shareholder agrees to hold
the Fund and its agents harmless from any loss, claims, or liability arising
from its or their compliance with such instructions. The shareholder
understands that this option is subject to the terms and conditions set
forth in the prospectus of the fund to be acquired.
[_] No, I do NOT wish to participate in the Telephone Exchange Privilege or
authorize the Fund or its agents, including FTI or Templeton Funds Trust
Company, to act upon instructions received by telephone to exchange shares
for shares of any other account(s) within the Franklin Templeton Group of
Funds.
Telephone Redemption Privilege: This is available to shareholders who
specifically request it and who complete the Franklin Templeton Telephone
Redemption Authorization Agreement in the back of the Fund's prospectus.
================================================================================
D. AUTOMATIC INVESTMENT PLAN
Important: Attach an unassigned, voided check (for Checking Accounts) or a
Savings Account deposit slip here, and complete the information below.
I(We) would like to establish an Automatic Investment Plan (the "Plan") as
described in the Prospectus. I(We) agree to reimburse FTI and/or FTD for any
expenses or losses that they may incur in connection with my(our) Plan,
including any caused by my(our) bank's failure to act in accordance with
my(our) request. If my(our) bank makes any erroneous payment or fails to
make a payment after shares are purchased on my(our) behalf, any such
purchase may be cancelled and I(we) hereby authorize redemptions and/or
deductions from my(our) account for that purpose.
Debit my(our) bank account monthly for $______($25 minimum) on or about
the [_] 1st [_] 5th [_] 15th or [_] 20th day starting _____________ (month),
to be invested in (name of Fund)__________________________ Account Number
(if known)_____________________
================================================================================
E. INSTRUCTIONS TO BANK - AUTOMATIC INVESTMENT PLAN AUTHORIZATION
To: __________________________________ __________________________________
Name of Your Bank ABA Number
_______________________________ __________________ ___________ ___________
Street Address City State Zip Code
I(we) authorize you to charge my(our) Checking/Savings Account and to make
payment to FTD, upon instructions from FTD. I(We) agree that in making
payment for such charges your rights shall be the same as if each were a
charge made and signed personally by me(us). This authority shall remain in
effect until you receive written notice from me(us) changing its terms or
revoking it. Until you actually receive such notice, I(we) agree that you
shall be fully protected in paying any charges under this authority. I(we)
further agree that if any such charge is not made, whether with or with out
cause and whether intentionally or inadvertently, you shall be under no
liability whatsoever.
X_____________________________________________________ ___________________
Signature(s) EXACTLY as shown on your bank records Date
________________________________________________ _________________________
Print Name(s) Account Number
_______________________________ __________________ ___________ ___________
Your Street Address City State Zip Code
================================================================================
F. LETTER OF INTENT (LOI)
[_] I(We) agree to the terms of the LOI and provisions for reservations of
shares and grant FTD the security interest set forth in the Prospectus.
Although I am (we are) not obligated to do so, it is my(our) intention to
invest over a 13 month period in shares of one or more Franklin or Templeton
Funds (including all Money Market Funds in the Franklin Templeton Group) an
aggregate amount at least equal to that which is checked below:
[_] $50,000-99,999 (except for Income Fund)
[_] $100,000-249,999
[_] $250,000-499,999
[_] $500,000-999,999
[_] $1,000,000 or more
Purchases made within the last 90 days will be included as part of your LOI.
Please write in your Account Number(s) ___________ ___________ __________
================================================================================
G. CUMULATIVE QUANTITY DISCOUNT
Shares may be purchased at the Offering Price applicable to the dollar
amount of the sale added to the higher of (1) the value (calculated at the
applicable Offering Price) or (2) the purchase price, of any other Shares of
the Fund and/or other Funds in the Franklin Templeton Group owned at that
time by the purchaser, his or her spouse, and their children under age 21,
including all Money Market Funds in the Franklin Templeton Group as stated
in the Prospectus. In order for this Cumulative Quantity Discount to be made
available, the Shareholder or his or her Securities Dealer must notify FTI
or FTD of the total holdings in the Franklin Templeton Group each time an
order is placed.
[_] I(We) own shares of more than one Fund in the Franklin Templeton Group and
qualify for the Cumulative Quantity Discount described above and in the
Prospectus.
My(Our) other Account Number(s) are ____________ ____________ ____________
================================================================================
8. ACCOUNT REVISION (If Applicable)
If you are using this application to revise your Account Registration, or
wish to have Distributions sent to an address other than the address on your
existing Account's Registration, a Signature Guarantee is required.
Signatures of all registered owners must be guaranteed by an "eligible
guarantor" as defined in the "How to Sell Shares of the Fund" section in the
Fund's Prospectus. A Notary Public is not an acceptable guarantor.
X__________________________________________ ______________________________
Signature(s) of Registered Account Owners Account Number(s)
X__________________________________________ ______________________________
X__________________________________________
X__________________________________________ ______________________________
Signature Guarantee Stamp
NOTE: For any change in registration, please send us any outstanding
Certificates by Registered Mail.
================================================================================
<PAGE>
TEMPLETON PROSPECTUS -- MAY 1, 1995
FOREIGN FUND
- -------------------------------------------------------------------------------
INVESTMENT Templeton Foreign Fund (the "Fund") seeks long-term capital
OBJECTIVE growth through a flexible policy of investing in stocks and
AND POLICIES debt obligations of companies and governments outside the
United States. The Fund is a series of Templeton Funds, Inc.
- -------------------------------------------------------------------------------
PURCHASE OF Please complete and return the Shareholder Application. If you
SHARES need assistance in completing this form, please call our
Account Services Department. The Fund offers two classes to
its investors: Templeton Foreign Fund--Class I ("Class I") and
Templeton Foreign Fund--Class II ("Class II"). Investors can
choose between Class I Shares, which generally bear a higher
front-end sales charge and lower ongoing Rule 12b-1
distribution fees ("Rule 12b-1 fees"), and Class II Shares,
which generally have a lower front-end sales charge and higher
ongoing Rule 12b-1 fees. Investors should consider the
differences between the two classes, including the impact of
sales charges and distribution fees, in choosing the more
suitable class given their anticipated investment amount and
time horizon. See "How to Buy Shares of the Fund--Alternative
Purchase Arrangements." The minimum initial investment is $100
($25 minimum for subsequent investments).
- -------------------------------------------------------------------------------
PROSPECTUS This Prospectus sets forth concisely information about the
INFORMATION Fund that a prospective investor ought to know before
investing. Investors are advised to read and retain this
Prospectus for future reference. A Statement of Additional
Information ("SAI") dated May 1, 1995, has been filed with the
Securities and Exchange Commission ("SEC") and is incorporated
in its entirety by reference in and made a part of this
Prospectus. This SAI is available without charge upon request
to Franklin Templeton Distributors, Inc., P.O. Box 33030, St.
Petersburg, Florida 33733-8030 or by calling the Fund
Information Department.
- -------------------------------------------------------------------------------
FUND INFORMATION DEPARTMENT -- 1-800-292-9293
- -------------------------------------------------------------------------------
TEMPLETON "STAR" SERVICE (24 hours, seven days a week access to current
prices, shareholder account balances/values, last transaction and duplicate
account statements) -- 1-800-654-0123
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
EXPENSE TABLE......... 2
FINANCIAL HIGHLIGHTS . 3
GENERAL DESCRIPTION... 3
Investment Objective
and Policies......... 4
RISK FACTORS.......... 4
HOW TO BUY SHARES OF
THE FUND............. 6
Alternative Purchase
Agreements........... 6
Deciding Which Class
to Purchase.......... 6
Offering Price........ 7
Class I............... 7
Cumulative Quantity
Discount............. 8
Letter of Intent...... 8
Group Purchases....... 9
Class II.............. 9
Net Asset Value
Purchases
(Both Classes)....... 9
Description of Special
Net Asset Value
Purchases............ 11
Additional Dealer
Compensation
(Both Classes)....... 11
Purchasing Class I and
Class II Shares...... 12
Automatic Investment
Plan................. 12
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Institutional
Accounts............. 12
Account Statements.... 13
Templeton STAR
Service.............. 13
Retirement Plans...... 13
Net Asset Value....... 13
EXCHANGE PRIVILEGE.... 14
Exchanges of Class I
Shares............... 15
Exchanges of Class II
Shares............... 15
Transfers............. 15
Conversion Rights..... 15
Exchanges by Timing
Accounts............. 15
HOW TO SELL SHARES OF
THE FUND............. 16
Reinstatement
Privilege............ 18
Systematic Withdrawal
Plan................. 18
Redemptions by
Telephone............ 19
Contingent Deferred
Sales Charge......... 19
TELEPHONE
TRANSACTIONS......... 20
Verification
Procedures........... 20
Restricted Accounts... 20
General............... 21
MANAGEMENT OF THE
FUND................. 21
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Investment Manager.... 21
Business Manager...... 22
Transfer Agent........ 22
Custodian............. 22
Plans of Distribution. 22
Expenses.............. 23
Brokerage Commissions. 23
GENERAL INFORMATION... 23
Description of
Shares/Share
Certificates......... 23
Voting Rights......... 23
Meetings of
Shareholders......... 23
Dividends and
Distributions........ 24
Federal Tax
Information.......... 24
Inquiries............. 24
Performance
Information.......... 24
Statements and
Reports.............. 25
WITHHOLDING
INFORMATION.......... 26
CORPORATE RESOLUTION.. 27
AUTHORIZATION
AGREEMENT............ 28
THE FRANKLIN TEMPLETON
GROUP................ 29
</TABLE>
- -------------------------------------------------------------------------------
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK; FURTHER, SUCH SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>
EXPENSE TABLE
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a Shareholder will bear directly or indirectly
in connection with an investment in the Fund. The figures are estimates of the
Fund's expenses for the current fiscal year, restated to reflect current sales
charges and Rule 12b-1 fees for each class.
<TABLE>
<CAPTION>
CLASS I CLASS II
------- --------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a percentage
of Offering Price)....................................... 5.75% 1.00%/1/
Deferred Sales Charge..................................... None/2/ 1.00%/3/
Exchange Fee (per transaction)............................ $5.00/4/ $5.00/4/
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE
NET ASSETS)
Management Fees........................................... 0.63% 0.63%
12b-1 Fees/5/............................................. 0.24% 1.00%
Other Expenses (audit, legal, business management,
transfer agent and custodian)............................ 0.27% 0.27%
Total Fund Operating Expenses............................. 1.14% 1.90%
</TABLE>
- -------
/1/ Although Class II has a lower front-end sales charge than Class I, over time
the higher Rule 12b-1 fee for Class II may cause Shareholders to pay more
for Class II Shares than for Class I Shares. Given the maximum front-end
sales charge and the rate of Rule 12b-1 fees for each class, it is estimated
that this would take less than six years for Shareholders who maintain total
Shares valued at less than $50,000 in the Franklin Templeton Funds.
Shareholders with larger investments in the Franklin Templeton Funds will
reach the cross-over point more quickly.
/2/ Class I investments of $1 million or more are not subject to a front-end
sales charge; however, a contingent deferred sales charge of 1%, which has
not been reflected in the Example below, is generally imposed on certain
redemptions within a "contingency period" of 12 months of the calendar month
following such investments. See "How to Sell Shares of the Fund--Contingent
Deferred Sales Charge."
/3/ Class II Shares redeemed within a "contingency period" of 18 months of the
calendar month following such investments are subject to a 1% contingent
deferred sales charge. See "How to Sell Shares of the Fund--Contingent
Deferred Sales Charge."
/4/ $5.00 fee imposed only on Timing Accounts as described under "Exchange
Privilege." All other exchanges are processed without a fee.
/5/ Annual Rule 12b-1 fees may not exceed 0.25% of the Fund's average net assets
attributable to Class I Shares and 1.00% of the Fund's average net assets
attributable to Class II Shares. Consistent with the National Association of
Securities Dealers, Inc.'s rules, it is possible that the combination of
front-end sales charges and Rule 12b-1 fees could cause long-term
Shareholders to pay more than the economic equivalent of the maximum front-
end sales charges permitted under those same rules.
Investors should be aware that the above table is not intended to reflect in
precise detail the fees and expenses associated with an individual's own
investment in the Fund. Rather, the table has been provided only to assist
investors in gaining a more complete understanding of fees, charges and
expenses. For a more detailed discussion of these matters, investors should
refer to the appropriate sections of this Prospectus.
EXAMPLE
As required by SEC regulations, the following example illustrates the
expenses, including the maximum front-end sales charge and applicable
contingent deferred sales charge, that apply to a $1,000 investment in the
Fund over various time periods assuming (1) a 5% annual rate of return and (2)
redemption at the end of each time period.
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
Class I......................... $68 $92 $117 $188
Class II........................ $39 $69 $112 $230
</TABLE>
THIS EXAMPLE IS BASED ON THE ESTIMATED ANNUAL OPERATING EXPENSES, INCLUDING
FEES SET BY CONTRACT, SHOWN ABOVE AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES, WHICH MAY BE MORE OR LESS THAN
THOSE SHOWN. The operating expenses are borne by the Fund and only indirectly
by Shareholders as a result of their investment in the Fund. (See "Management
of the Fund" for a description of the Fund's expenses.) In addition, federal
securities regulations require the example to assume an annual return of 5%,
but the Fund's actual return may be more or less than 5%.
2
<PAGE>
FINANCIAL HIGHLIGHTS
The following table of selected financial information has been audited by
McGladrey & Pullen, LLP, independent certified public accountants, for the
years indicated in their report which is incorporated by reference and which
appears in the Fund's 1994 Annual Report to Shareholders. This statement
should be read in conjunction with the other financial statements and notes
thereto included in the Fund's 1994 Annual Report to Shareholders, which
contains further information about the Fund's performance, and which is
available to shareholders upon request and without charge. Information
regarding Class II Shares will be included in this table after they have been
offered to the public for a reasonable period of time.
<TABLE>
<CAPTION>
PER SHARE OPERATING YEAR ENDED AUGUST 31,
PERFORMANCE* ----------------------------------------------------------------------------------------------------------
(For a Share
outstanding
throughout the period) 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 8.74 $ 7.92 $ 7.91 $ 8.19 $ 7.60 $ 6.37 $ 7.73 $ 5.34 $ 4.10 $ 3.64
- -----------------------------------------------------------------------------------------------------------------------------------
Income from
investment operations
Net investment income .14 .14 .20 .25 .25 .22 .21 .16 .12 .11
Net realized and
unrealized gain
(loss) 1.39 1.21 .43 .03 .92 1.60 (.97) 2.71 1.25 .46
---------- ---------- ---------- ---------- -------- -------- -------- -------- -------- -------
Total from investment
operations 1.53 1.35 .63 .28 1.17 1.82 (.76) 2.87 1.37 .57
---------- ---------- ---------- ---------- -------- -------- -------- -------- -------- -------
Less distributions
Dividends from net
investment income (.13) (.19) (.23) (.26) (.25) (.21) (.19) (.13) (.12) (.08)
Distributions from
net realized gains (.13) (.34) (.39) (.30) (.33) (.38) (.41) (.35) (.01) (.03)
---------- ---------- ---------- ---------- -------- -------- -------- -------- -------- -------
Total distributions (.26) (.53) (.62) (.56) (.58) (.59) .60 (.48) (.13) (.11)
---------- ---------- ---------- ---------- -------- -------- -------- -------- -------- -------
Change in net asset
value for the period 1.27 .82 .01 (.28) .59 1.23 (1.36) 2.39 1.24 .46
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end
of period $ 10.01 $ 8.74 $ 7.92 $ 7.91 $ 8.19 $ 7.60 $ 6.37 $ 7.73 $ 5.34 $ 4.10
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN+ 17.94% 18.65% 8.52% 4.17% 16.35% 30.99% (8.78)% 59.23% 34.39% 16.39%
RATIOS/SUPPLEMENTAL
DATA
Net assets, end of
year (000) $5,014,438 $2,667,771 $1,672,161 $1,211,525 $932,995 $438,571 $292,679 $319,649 $185,752 $94,143
Ratio to average net
assets of:
Expenses 1.14% 1.12% 0.94% 0.80% 0.77% 0.81% 0.81% 0.77% 0.79% 0.90%
Net investment in-
come 1.84% 2.11% 2.92% 3.59% 3.95% 3.65% 3.29% 2.89% 2.99% 3.32%
Portfolio turnover
rate 36.75% 21.29% 22.00% 19.24% 11.49% 16.62% 20.37% 14.49% 20.97% 3.81%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+Does not reflect sales charges.
* Per share amounts for years ended prior to August 31, 1994 have been
restated to reflect a 3-for-1 stock split effective February 25, 1994.
GENERAL DESCRIPTION
Templeton Funds, Inc. (the "Company") was incorporated under the laws of
Maryland on August 15, 1977 and is registered under the Investment Company Act
of 1940 (the "1940 Act") as an open-end diversified investment company. It has
two series of Shares, each of which is a separate mutual fund: Templeton
Foreign Fund and Templeton World Fund. A prospectus for Templeton World Fund
is available upon request and without charge from the Principal Underwriter.
The Fund has two classes of Common Shares of $1 par value per Share: Templeton
Foreign Fund--Class I and Templeton Foreign Fund--Class II. All Fund Shares
outstanding before May 1, 1995 have been redesignated as Class I Shares, and
will retain their previous rights and privileges, except for legally required
modifications to Shareholder voting procedures, as discussed in "General
Information--Voting Rights."
Shares of the Fund may be purchased (minimum investment of $100 initially
and $25 thereafter) at the current Public Offering Price. The current public
Offering Price of the Class I Shares is equal to the net asset value (see "How
to Buy Shares of the Fund--Net Asset Value"), plus a variable sales charge not
exceeding 5.75% of the Offering Price depending upon the amount invested. The
current public Offering Price of the Class II Shares is equal to the net asset
value, plus a sales charge of 1.0% of the amount invested. (See "How to Buy
Shares of the Fund.")
3
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES. The Fund's investment objective is long-
term capital growth, which it seeks to achieve through a flexible policy of
investing in stocks and debt obligations of companies and governments outside
the United States. Any income realized will be incidental.
Although the Fund generally invests in common stock, it may also invest in
preferred stocks and certain debt securities, rated or unrated, such as
convertible bonds and bonds selling at a discount. Whenever, in the judgment
of the Investment Manager, market or economic conditions warrant, the Fund
may, for temporary defensive purposes, invest without limit in U.S. Government
securities, bank time deposits in the currency of any major nation and
commercial paper meeting the quality ratings set forth under "Investment
Objective and Policies" in the SAI, and purchase from banks or broker-dealers
Canadian or U.S. Government securities with a simultaneous agreement by the
seller to repurchase them within no more than seven days at the original
purchase price plus accrued interest.
The Fund may purchase sponsored or unsponsored American Depositary Receipts
("ADRs"), European Depositary Receipts ("EDRs") and Global Depositary Receipts
("GDRs") (collectively, "Depositary Receipts"). The Fund may invest no more
than 5% of its total assets in securities issued by any one company or
government, exclusive of U.S. Government securities. Although the Fund may
invest up to 25% of its assets in a single industry, it has no present
intention of doing so. The Fund may not invest more than 5% of its assets in
warrants (exclusive of warrants acquired in units or attached to securities)
nor more than 10% of its assets in securities with a limited trading market.
The Investment Objective and Policies described above, as well as most of the
Investment Restrictions described in the SAI, cannot be changed without
Shareholder approval. The Fund invests for long-term growth of capital and
does not intend to place emphasis upon short-term trading profits.
Accordingly, the Fund expects to have a portfolio turnover rate of less than
50%.
RISK FACTORS
Shareholders should understand that all investments involve risk and there
can be no guarantee against loss resulting from an investment in the Fund, nor
can there be any assurance that the Fund's investment objective will be
attained. As with any investment in securities, the value of, and income from,
an investment in the Fund can decrease as well as increase, depending on a
variety of factors which may affect the values and income generated by the
Fund's portfolio securities, including general economic conditions and market
factors. In addition to the factors which affect the value of individual
securities, a Shareholder may anticipate that the value of the Shares of the
Fund will fluctuate with movements in the broader equity and bond markets. A
decline in the stock market of any country in which the Fund is invested may
also be reflected in declines in the price of the Shares of the Fund. Changes
in currency valuations will also affect the price of the Shares of the Fund.
History reflects both decreases and increases in worldwide stock markets and
currency valuations, and these may reoccur unpredictably in the future.
Additionally, investment decisions made by the Investment Manager will not
always be profitable or prove to have been correct. The Fund is not intended
as a complete investment program.
The Fund has the right to purchase securities in any foreign country,
developed or developing. Investors should consider carefully the substantial
risks involved in investing in securities issued by companies and governments
of foreign nations, which are in addition to the usual risks inherent in
domestic investments. There is the possibility of expropriation,
nationalization or confiscatory taxation, taxation of income earned in foreign
nations or other taxes imposed with respect to investments in foreign nations,
foreign exchange controls (which may include suspension of the ability to
transfer currency from a given country), foreign investment controls on daily
stock market movements, default in foreign government securities, political or
social instability or diplomatic developments which could affect investments
in securities of issuers in foreign nations. Some countries may withhold
portions of interest and dividends at the source. In addition, in many
countries there is less publicly available information about issuers than is
available in reports about companies in the United States. Foreign companies
are not generally subject to uniform accounting, auditing and financial
reporting standards, and auditing practices and requirements may not be
comparable to those applicable to United States companies. The Fund may
encounter difficulties or be unable to pursue legal remedies and obtain
judgments in foreign courts. Further, the Fund may encounter difficulties or
be unable to vote proxies, exercise shareholder rights, pursue legal remedies,
and obtain judgments in
4
<PAGE>
foreign courts. Commission rates in foreign countries, which are sometimes
fixed rather than subject to negotiations as in the United States, are likely
to be higher. Foreign securities markets also have different clearance and
settlement procedures, and in certain markets there have been times when
settlements have been unable to keep pace with the volume of securities
transactions, making it difficult to conduct such transactions. Delays in
settlement could result in temporary periods when assets of the Fund are
uninvested and no return is earned thereon. The inability of the Fund to make
intended security purchases due to settlement problems could cause the Fund to
miss attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result either in losses to the
Fund due to subsequent declines in value of the portfolio security or, if the
Fund has entered into a contract to sell the security, could result in
possible liability to the purchaser. In many foreign countries, there is less
government supervision and regulation of business and industry practices,
stock exchanges, brokers and listed companies than in the United States. There
is an increased risk, therefore, of uninsured loss due to lost, stolen, or
counterfeit stock certificates. In addition, the foreign securities markets of
many of the countries in which the Fund may invest may also be smaller, less
liquid, and subject to greater price volatility than those in the United
States. The Fund may invest in Eastern European countries, which involves
special risks that are described under "Risk Factors" in the SAI.
Prior governmental approval of foreign investments may be required under
certain circumstances in some developing countries, and the extent of foreign
investment in domestic companies may be subject to limitation in other
developing countries. Foreign ownership limitations also may be imposed by the
charters of individual companies in developing countries to prevent, among
other concerns, violation of foreign investment limitations.
Repatriation of investment income, capital and proceeds of sales by foreign
investors may require governmental registration and/or approval in some
developing countries. The Fund could be adversely affected by delays in or a
refusal to grant any required governmental registration or approval for such
repatriation.
Further, the economies of developing countries generally are heavily
dependent upon international trade and, accordingly, have been and may
continue to be adversely affected by trade barriers, exchange controls,
managed adjustments in relative currency values and other protectionist
measures imposed or negotiated by the countries with which they trade. These
economies also have been and may continue to be adversely affected by economic
conditions in the countries with which they trade.
Depositary Receipts may not necessarily be denominated in the same currency
as the underlying securities into which they may be converted. In addition,
the issuers of the securities underlying unsponsored Depositary Receipts are
not obligated to disclose material information in the United States and,
therefore, there may be less information available regarding such issuers and
there may not be a correlation between such information and the market value
of the Depositary Receipts. Depositary Receipts also involve the risks of
other investments in foreign securities, as discussed above.
The Fund is authorized to invest in medium quality or high-risk, lower
quality debt securities that are rated between BBB and as low as CCC by
Standard & Poor's Corporation ("S&P") and between Baa and as low as Caa by
Moody's Investors Service, Inc. ("Moody's") or, if unrated, are of equivalent
investment quality as determined by the Investment Manager. As an operating
policy, which may be changed by the Board of Directors without Shareholder
approval, the Fund will not invest more than 5% of its total assets in debt
securities rated lower than BBB by S&P or Baa by Moody's. The Board may
consider a change in this operating policy if, in its judgment, economic
conditions change such that a higher level of investment in high-risk, lower
quality debt securities would be consistent with the interests of the Fund and
its Shareholders. High-risk, lower quality debt securities, commonly referred
to as "junk bonds," are regarded, on balance, as predominantly speculative
with respect to the issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligation and may be in default. Unrated
debt securities are not necessarily of lower quality than rated securities but
they may not be attractive to as many buyers. Regardless of rating levels, all
debt securities considered for purchase (whether rated or unrated) will be
carefully analyzed by the Investment Manager to insure, to the extent
possible, that the planned investment is sound. The Fund may, from time to
time, purchase defaulted debt securities if, in the opinion of the Investment
Manager, the issuer may resume interest payments in the near future. The Fund
will not invest more than 10% of its total assets in defaulted debt
securities, which may be illiquid.
5
<PAGE>
The Fund usually effects currency exchange transactions on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign exchange market.
However, some price spread on currency exchange (to cover service charges)
will be incurred when the Fund converts assets from one currency to another.
There are further risk considerations, including possible losses through the
holding of securities in domestic and foreign custodial banks and
depositories, described in the SAI.
HOW TO BUY SHARES OF THE FUND
Shares of the Fund may be purchased at the Offering Price through any broker
which has a dealer agreement with Franklin Templeton Distributors, Inc.
("FTD"), the Principal Underwriter of the Shares of the Fund, or directly from
FTD upon receipt by FTD of a completed Shareholder Application and check. The
minimum initial investment is $100, and subsequent investments must be $25 or
more. These minimums may be waived when the Shares are being purchased through
retirement plans providing for regular periodic investments, as described
below under "Retirement Plans."
ALTERNATIVE PURCHASE ARRANGEMENTS. The difference between Class I and Class
II Shares lies primarily in their front-end and contingent deferred sales
charges and Rule 12b-1 fees as described below.
Class I. All Fund Shares outstanding before the implementation of the
multiclass structure have been redesignated as Class I Shares, and will retain
their previous rights and privileges. Class I Shares are generally subject to
a variable sales charge upon purchase and not subject to any sales charge upon
redemption. Class I Shares are subject to Rule 12b-1 fees of up to an annual
maximum of 0.25% of average daily net assets of such Shares. With this
multiclass structure, Class I Shares have higher front-end sales charges than
Class II Shares and comparatively lower Rule 12b-1 fees. Class I Shares may be
purchased at reduced front-end sales charges, or at net asset value if certain
conditions are met. In most circumstances, contingent deferred sales charges
will not be assessed against redemptions of Class I Shares. See "Management of
the Fund" and "How to Sell Shares of the Fund" for more information.
Class II. The current public Offering Price of Class II Shares is equal to
the net asset value, plus a front-end sales charge of 1.0% of the amount
invested. Class II Shares are also subject to a contingent deferred sales
charge of 1.0% if Shares are redeemed within 18 months of the calendar month
following purchase. In addition, Class II Shares are subject to Rule 12b-1
fees of up to a maximum of 1.0% of average daily net assets of such Shares.
Class II Shares have lower front-end sales charges than Class I Shares and
comparatively higher Rule 12b-1 fees. See "How to Sell Shares of the Fund--
Contingent Deferred Sales Charge."
Purchases of Class II Shares are limited to purchases below $1 million. Any
purchases of $1 million or more will automatically be invested in Class I
Shares, since that is more beneficial to investors. Such purchases, however,
may be subject to a contingent deferred sales charge. Investors may exceed $1
million in Class II Shares by cumulative purchases over a period of time.
Investors who intend to make investments exceeding $1 million, however, should
consider purchasing Class I Shares through a Letter of Intent instead of
purchasing Class II Shares.
DECIDING WHICH CLASS TO PURCHASE. Investors should carefully evaluate their
anticipated investment amount and time horizon prior to determining which
class of Shares to purchase. Generally, an investor who expects to invest less
than $50,000 in the Franklin Templeton Funds and who expects to make
substantial redemptions within approximately six years or less of investment
should consider purchasing Class II Shares. However, the higher annual Rule
12b-1 fees on the Class II Shares will result in slightly higher operating
expenses and lower income dividends for Class II Shares, which will accumulate
over time to outweigh the difference in front-end sales charges. For this
reason, Class I Shares may be more attractive to long-term investors even if
no sales charge reductions are available to them.
Investors who qualify to purchase Class I Shares at reduced sales charges
definitely should consider purchasing Class I Shares, especially if they
intend to hold their Shares approximately six years or more. Investors who
qualify to purchase Class I Shares at reduced
6
<PAGE>
sales charges but who intend to hold their Shares less than approximately six
years should evaluate whether it is more economical to purchase Class I Shares
through a Letter of Intent or under Cumulative Quantity Discount rather than
purchasing Class II Shares. INVESTORS INVESTING $1 MILLION OR MORE IN A SINGLE
PAYMENT AND OTHER INVESTORS WHO QUALIFY TO PURCHASE CLASS I SHARES AT NET
ASSET VALUE WILL BE PRECLUDED FROM PURCHASING CLASS II SHARES.
Each class represents the same interest in the investment portfolio of the
Fund and has the same rights, except that each class has a different sales
charge, bears the separate expenses of its Rule 12b-1 distribution plan, and
has exclusive voting rights with respect to such plan. The two classes also
have separate exchange privileges.
In determining which Shares are more appropriate for a Shareholder's
investment objectives and income needs, a Shareholder should also consider
that the higher Rule 12b-1 fees for Class II will generally result in lower
dividends and consequently lower yields for Class II Shares as compared to
Class I Shares.
OFFERING PRICE. Shares of both classes of the Fund are offered at their
respective public Offering Prices, which are determined by adding the net
asset value per share plus a front-end sales charge, next computed (i) after
the Shareholder's securities dealer receives the order which is promptly
transmitted to the Fund or (ii) after receipt of an order by mail from the
Shareholder directly in proper form (which generally means a completed
Shareholder Application accompanied by negotiable check).
CLASS I. The sales charge for Class I Shares is a variable percentage of the
Offering Price depending upon the amount of the sale. A description of the
method of calculating net asset value per share is included under the caption
"Net Asset Value" below.
The price to the public on purchases of Class I Shares made by a single
purchaser, by an individual, his or her spouse and their children under the
age of 21, or by a single trust or fiduciary account other than an employee
benefit plan holding Shares of the Fund on or before February 1, 1995, is the
net asset value per Share plus a sales charge not exceeding 5.75% of the
Offering Price (equivalent to 6.10% of the net asset value), which is reduced
on larger sales as shown below.
<TABLE>
<CAPTION>
TOTAL SALES CHARGE
--------------------------------------------
AS A PERCENTAGE OF AS A PERCENTAGE OF NET PORTION OF TOTAL
AMOUNT OF SALE OFFERING PRICE OF THE ASSET VALUE OF THE OFFERING PRICE
AT OFFERING PRICE SHARES PURCHASED SHARES PURCHASED RETAINED BY DEALERS/1/,/3/
- ----------------- --------------------- ---------------------- --------------------------
<S> <C> <C> <C>
Less than $50,000............................. 5.75% 6.10% 5.00%
$50,000 but less than $100,000................ 4.50% 4.71% 3.75%
$100,000 but less than $250,000............... 3.50% 3.63% 2.80%
$250,000 but less than $500,000............... 2.50% 2.56% 2.00%
$500,000 but less than $1,000,000............. 2.00% 2.04% 1.60%
$1,000,000 or more............................ none none (see below)/2/
</TABLE>
- -------
/1/ Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages set forth above.
/2/ The following commissions will be paid by FTD, from its own resources, to
securities dealers who initiate and are responsible for purchases of $1
million or more; 1% on sales of $1 million but less than $2 million, plus
0.80% on sales of $2 million but less than $3 million, plus 0.50% on sales
of $3 million but less than $50 million, plus 0.25% on sales of $50 million
but less than $100 million, plus 0.15% on sales of $100 million or more.
Dealer concession breakpoints are reset every 12 months for purposes for
additional purchases.
/3/ At the discretion of FTD, all sales charges may at times be reallowed to the
securities dealer. If 90% or more of the sales commission is allowed, such
securities dealer may be deemed to be an underwriter as that term is defined
in the Securities Act of 1933.
7
<PAGE>
No front-end sales charge applies on investments of $1 million or more, but
a contingent deferred sales charge of 1% is imposed on certain redemptions of
all or a portion of investments of $1 million or more within 12 months of the
calendar month following such investments ("contingency period"). See "How to
Sell Shares of the Fund--Contingent Deferred Sales Charge."
The size of a transaction which determines the applicable sales charge on
the purchase of Class I Shares is determined by adding the amount of the
Shareholder's current purchase plus the cost or current value (whichever is
higher) of a Shareholder's existing investment in one or more of the funds in
the Franklin Group of Funds (R) and the Templeton Family of Funds. Included
for these aggregation purposes are (a) the mutual funds in the Franklin Group
of Funds except Franklin Valuemark Funds and Franklin Government Securities
Trust (the "Franklin Funds"); (b) other investment products underwritten by
FTD or its affiliates (although certain investments may not have the same
schedule of sales charges and/or may not be subject to reduction); and (c) the
U.S.-registered mutual funds in the Templeton Family of Funds except Templeton
Capital Accumulator Fund, Inc., Templeton Variable Annuity Fund, and Templeton
Variable Products Series Fund (the "Templeton Funds"). (Franklin Funds and
Templeton Funds are collectively referred to as the "Franklin Templeton
Funds.") Sales charge reductions based upon aggregate holdings of (a), (b) and
(c) above ("Franklin Templeton Investments") may be effective only after
notification to FTD that the investment qualifies for a discount.
Other Payments to Securities Dealers. FTD, or one of its affiliates, may
make payments, from its own resources, of up to 1% of the amount purchased, to
securities dealers who initiate and are responsible for purchases made at net
asset value by certain designated retirement plans (as defined below)
(excluding IRA and IRA rollovers), certain non-designated plans (as defined
below), certain trust companies and trust departments of banks and certain
retirement plans of organizations with collective retirement plan assets of
$10 million or more. See definitions under "Description of Special Net Asset
Value Purchases" below and as set forth in the SAI.
A sales charge of 4% of the Offering Price (4.17% of the net asset value) is
applicable to all purchases of Shares made for any qualified or non-qualified
employee benefit plan which is a Shareholder in the Fund on or before February
1, 1995. Of the 4% sales charge applicable to such purchases, 3.20% of the
Offering Price will be retained by dealers.
CUMULATIVE QUANTITY DISCOUNT. The schedule of reduced sales charges also may
be applied to qualifying sales of Class I Shares on a cumulative basis. For
this purpose, the dollar amount of the sale is added to the higher of (i) the
value (calculated at the applicable Offering Price) or (ii) the purchase
price, of Franklin Templeton Investments. The cumulative quantity discount
applies to Franklin Templeton Investments owned at the time of purchase by the
purchaser, his or her spouse, and their children under age 21. In addition,
the aggregate investments of a trustee or other fiduciary account (for an
account under exclusive investment authority) may be considered in determining
whether a reduced sales charge is available, even though there may be a number
of beneficiaries of the account. For example, if the investor held Class I
Shares valued at $40,000 (or, if valued at less than $40,000, had been
purchased for $40,000) and purchased an additional $20,000 of the Fund's Class
I Shares, the sales charge for the $20,000 purchase would be at the rate of
4.50%. It is FTD's policy to give investors the best sales charge rate
possible; however, there can be no assurance than an investor will receive the
appropriate discount unless, at the time of placing the purchase order, the
investor or the dealer makes a request for the discount and gives FTD
sufficient information to determine whether the purchase will qualify for the
discount. On telephone orders from dealers for the purchase of Class I Shares
to be registered in "street name," FTD will accept the dealer's instructions
with respect to the applicable sales charge rate to be applied. The cumulative
quantity discount may be amended or terminated at any time.
LETTER OF INTENT. Investors may also reduce sales charges on all investments
in Class I Shares by means of a Letter of Intent ("LOI") which expresses the
investor's intention to invest a certain amount within a 13-month period in
Class I Shares of the Fund or any other Franklin Templeton Fund. See the
Shareholder Application. Except for certain employee benefit plans, the
minimum initial investment under an LOI is 5% of the total LOI amount. Except
for Shares purchased by certain employee benefit plans, Shares purchased with
the first 5% of such amount will be held in escrow to secure payment of the
higher sales charge applicable to the Shares actually purchased if the full
amount indicated is not purchased, and such escrowed Shares will be
involuntarily redeemed to pay the additional sales charge, if necessary. A
purchase not originally made pursuant to an LOI may be included under a
subsequent
8
<PAGE>
LOI executed within 90 days of the purchase. Any redemptions made by
Shareholders, other than by certain employee benefit plans, during the 13-
month period will be subtracted from the amount of the purchases for purposes
of determining whether the terms of the LOI have been completed. For a further
description of the LOI, see "Purchase, Redemption and Pricing of Shares --
Letter of Intent" in the SAI.
GROUP PURCHASES. An individual who is a member of a qualified group may also
purchase Class I Shares of the Fund at the reduced sales charge applicable to
the group as a whole. The sales charge is based upon the aggregate dollar
value of Class I Shares previously purchased and still owned by the group,
plus the amount of the current purchase. For example, if members of the group
had previously invested and still held $80,000 of Class I Shares and now were
investing $25,000, the sales charge would be 3.50%. Information concerning the
current sales charge applicable to a group may be obtained by contacting FTD.
A "qualified group" is one which (i) has been in existence for more than six
months, (ii) has a purpose other than acquiring Fund Shares at a discount, and
(iii) satisfies uniform criteria which enable FTD to realize economies of
scale in its costs of distributing Shares. A qualified group must have more
than 10 members, must be available to arrange for group meetings between
representatives of the Fund or FTD and the members, must agree to include
sales and other materials related to the Fund in its publications and mailings
to members at reduced or no cost to FTD, and must seek to arrange for payroll
deduction or other bulk transmission of investments to the Fund.
If an investor selects a payroll deduction plan, subsequent investments will
be automatic and will continue until such time as the investor notifies the
Fund and the investor's employer to discontinue further investments. Due to
the varying procedures to prepare, process and forward the payroll deduction
information to the Fund, there may be a delay between the time of the payroll
deduction and the time the money reaches the Fund. The investment in the Fund
will be made at the Offering Price per Share determined on the day that both
the check and payroll deduction data are received in required form by the
Fund.
CLASS II. Unlike Class I Shares, the front-end sales charges and dealer
concessions for Class II Shares do not vary depending on the amount of
purchase. The total sales charges or underwriting commissions and dealer
concessions for Class II Shares are set forth below.
<TABLE>
<CAPTION>
TOTAL SALES CHARGE
--------------------------------------------
AS A PERCENTAGE OF AS A PERCENTAGE OF PORTION OF TOTAL
AMOUNT OF SALE OFFERING PRICE OF THE NET ASSET VALUE OF THE OFFERING PRICE
AT OFFERING PRICE SHARES PURCHASED SHARES PURCHASED RETAINED BY DEALERS*
- ----------------- --------------------- ---------------------- --------------------
<S> <C> <C> <C>
any amount (less than $1
million)............... 1.00% 1.01% 1.00%
</TABLE>
- -------
* FTD, or one of its affiliates, may make additional payments to securities
dealers, from its own resources, of up to 1.0% of the amount invested.
During the first year following a purchase of Class II Shares, FTD will keep
a portion of the Rule 12b-1 fees assessed on those Shares to partially
recoup fees FTD pays to securities dealers.
Class II Shares redeemed within 18 months of their purchase will be assessed
a contingent deferred sales charge of 1.0% on the lesser of the then-current
net asset value or the net asset value of such Shares at the time of purchase,
unless such charge is waived as described under "How To Sell Shares of the
Fund--Contingent Deferred Sales Charge."
NET ASSET VALUE PURCHASES (BOTH CLASSES). Class I Shares may be purchased
without the imposition of a front-end sales charge ("net asset value") or a
contingent deferred sales charge by (i) officers, trustees, directors, and
full-time employees of the Fund, any of the Franklin Templeton Funds, or of
the Franklin Templeton Group, and their spouses and family members, including
any subsequent payments made by such parties after cessation of employment;
(ii) companies exchanging Shares with or selling assets pursuant to a merger,
acquisition or exchange offer; (iii) insurance company separate accounts for
pension plan contracts; (iv) accounts managed by
9
<PAGE>
the Franklin Templeton Group; (v) shareholders of Templeton Institutional
Funds, Inc. reinvesting redemption proceeds from that fund under an employee
benefit plan qualified under Section 401 of the Internal Revenue Code of 1986,
as amended (the "Code"), in Shares of the Fund; (vi) certain unit investment
trusts and unit holders of such trusts reinvesting their distributions from
the trusts in the Fund; (vii) registered securities dealers and their
affiliates, for their investment account only; and (viii) registered personnel
and employees of securities dealers, and their spouses and family members, in
accordance with the internal policies and procedures of the employing
securities dealer.
For either Class I or Class II, the same class of Shares of the Fund may be
purchased at net asset value by persons who have redeemed, within the previous
120 days, their Shares of the Fund or another of the Franklin Templeton Funds
which were purchased with a front-end sales charge or assessed a contingent
deferred sales charge on redemption. If a different class of Shares is
purchased, the full front-end sales charge must be paid at the time of
purchase of the new Shares. An investor may reinvest an amount not exceeding
the redemption proceeds. While credit will be given for any contingent
deferred sales charge paid on the Shares redeemed and subsequently
repurchased, a new contingency period will begin. Shares of the Fund redeemed
in connection with an exchange into another fund (see "Exchange Privilege")
are not considered "redeemed" for this privilege. In order to exercise this
privilege, a written order for the purchase of Shares of the Fund must be
received by the Fund or the Fund's Transfer Agent within 120 days after the
redemption. The 120 days, however, do not begin to run on redemption proceeds
placed immediately after redemption in a Franklin Bank Certificate of Deposit
("CD") until the CD (including any rollover) matures. Reinvestment at net
asset value may also be handled by a securities dealer or other financial
institution, who may charge the Shareholder a fee for this service. The
redemption is a taxable transaction but reinvestment without a sales charge
may affect the amount of gain or loss recognized and the tax basis of the
Shares reinvested. If there has been a loss on the redemption, the loss may be
disallowed if a reinvestment in the same fund is made within a 30-day period.
Information regarding the possible tax consequences of such a reinvestment is
included under "General Information--Federal Tax Information" of this
Prospectus and in the SAI.
For either Class I or Class II, the same class of Shares of the Fund or of
another of the Franklin Templeton Funds may be purchased at net asset value
and without a contingent deferred sales charge by persons who have received
dividends and capital gain distributions in cash from investments in that
class of Shares of the Fund within 120 days of the payment date of such
distribution. To exercise this privilege, a written request to reinvest the
distribution must accompany the purchase order. Additional information may be
obtained from Account Services at 1-800-393-3001. See "General Information--
Dividends and Distributions."
Class I Shares may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by investors who have, within
the past 60 days, redeemed an investment in a mutual fund which is not part of
the Franklin Templeton Funds and which charged the investor a contingent
deferred sales charge upon redemption, and which has investment objectives
similar to those of the Fund.
Class I Shares may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by broker-dealers who have
entered into a supplemental agreement with FTD, or by registered investment
advisers affiliated with such broker-dealers, on behalf of their clients who
are participating in a comprehensive fee program (also known as a wrap fee
program).
Class I Shares may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by anyone who has taken a
distribution from an existing retirement plan already invested in the Franklin
Templeton Funds (including former participants of the Franklin Templeton
Profit Sharing 401(k) plan), to the extent of such distribution. In order to
exercise this privilege, a written order for the purchase of Shares of the
Fund must be received by Franklin Templeton Trust Company ("FTTC"), the Fund,
or Franklin Templeton Investor Services, Inc. (the "Transfer Agent") within
120 days after the plan distribution.
Class I Shares may also be purchased at net asset value and without the
imposition of a contingent deferred sales charge by any state, county or city,
or any instrumentality, department, authority or agency thereof which has
determined that the Fund is a legally
10
<PAGE>
permissible investment and which is prohibited by applicable investment laws
from paying a sales charge or commission in connection with the purchase of
shares of any registered management investment company (an "eligible
governmental authority"). SUCH INVESTORS SHOULD CONSULT THEIR OWN LEGAL
ADVISERS TO DETERMINE WHETHER AND TO WHAT EXTENT THE SHARES OF THE FUND
CONSTITUTE LEGAL INVESTMENTS FOR THEM. Municipal investors considering
investment of proceeds of bond offerings into the Fund should consult with
expert counsel to determine the effect, if any, of various payments made by
the Fund or its investment manager on arbitrage rebate calculations. If an
investment by an eligible governmental authority at net asset value is made
through a securities dealer who has executed a dealer agreement with FTD, FTD
or one of its affiliates may make a payment, out of its own resources, to such
securities dealer in an amount not to exceed 0.25% of the amount invested.
Contact Franklin Templeton Institutional Services for additional information.
DESCRIPTION OF SPECIAL NET ASSET VALUE PURCHASES. Class I Shares may also be
purchased at net asset value and without the imposition of a contingent
deferred sales charge by certain designated retirement plans, including
profit-sharing, pension, 401(k) and simplified employee pension plans
("designated plans"), subject to minimum requirements with respect to number
of employees or amount of purchase, which may be established by FTD.
Currently, those criteria require that the employer establishing the plan have
200 or more employees or that the amount invested or to be invested during the
subsequent 13-month period in the Fund or in any of the Franklin Templeton
Investments totals at least $1 million. Employee benefit plans not designated
above or qualified under Section 401 of the Code ("non-designated plans") may
be afforded the same privilege if they meet the above requirements as well as
the uniform criteria for qualified groups previously described under "Group
Purchases," which enable FTD to realize economies of scale in its sales
efforts and sales-related expenses.
Class I Shares may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by trust companies and bank
trust departments for funds over which they exercise exclusive discretionary
investment authority and which are held in a fiduciary, agency, advisory,
custodial or similar capacity. Such purchases are subject to minimum
requirements with respect to amount of purchase, which may be established by
FTD. Currently, those criteria require that the amount invested or to be
invested during the subsequent 13-month period in the Fund or any of the
Franklin Templeton Investments must total at least $1 million. Orders for such
accounts will be accepted by mail accompanied by a check, or by telephone or
other means of electronic data transfer directly from the bank or trust
company, with payment by federal funds received by the close of business on
the next business day following such order.
Class I Shares may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by trustees or other
fiduciaries purchasing securities for certain retirement plans of
organizations with collective retirement plan assets of $10 million or more,
without regard to where such assets are currently invested.
Refer to the SAI for further information regarding net asset value purchases
of Class I Shares.
ADDITIONAL DEALER COMPENSATION (BOTH CLASSES). FTD, or one of its
affiliates, from its own resources, may also provide additional compensation
to securities dealers in connection with sales of shares of the Franklin
Templeton Funds. Compensation may include financial assistance to securities
dealers in connection with conferences, sales or training programs for their
employees, seminars for the public, advertising, sales campaigns and/or
shareholder services and programs regarding one or more of the Franklin
Templeton Funds and other dealer-sponsored programs or events. In some
instances, this compensation may be made available only to certain securities
dealers whose representatives have sold or are expected to sell significant
amounts of shares of the Franklin Templeton Funds. Compensation may include
payment for travel expenses, including lodging, incurred in connection with
trips taken by invited registered representatives and members of their
families to locations within or outside of the United States for meetings or
seminars of a business nature. Securities dealers may not use sales of the
Fund's Shares to qualify for this compensation to the extent such may be
prohibited by the laws of any state or any self-regulatory agency, such as the
National Association of Securities Dealers, Inc. In addition, FTD or its
affiliates may make ongoing payments to brokerage firms, financial
institutions (including banks) and others to
11
<PAGE>
facilitate the administration and servicing of shareholder accounts. None of
the aforementioned additional compensation is paid for by the Fund or its
Shareholders.
Ongoing payments will be made to qualifying dealers at the annual rate of
0.25% of the average daily net asset value of Class I Shares, and 1.00% of the
average daily net asset value of Class II Shares, registered in the name of
that broker-dealer as nominee or held in a Shareholder account that designates
that broker-dealer as dealer of record. These payments are made in order to
promote selling efforts and to compensate dealers for providing certain
services, including processing purchase and redemption transactions,
establishing Shareholder accounts and providing certain information and
assistance with respect to the Fund. For purchases on or after February 1,
1995 of Class I Shares that are subject to a contingent deferred sales charge,
the dealer will receive ongoing payments beginning in the thirteenth month
after the date of purchase. For all purchases of Class II Shares that are
subject to a contingent deferred sales charge, the dealer will receive
payments representing a service fee (0.25% of average daily net asset value of
the Shares) beginning in the first month after the date of the purchase, and
will receive payments representing compensation for distribution (0.75% of
average daily net asset value of the Shares) beginning in the thirteenth month
after the date of the purchase.
PURCHASING CLASS I AND CLASS II SHARES. When placing purchase orders,
investors should clearly indicate which class of Shares they intend to
purchase. A purchase order that fails to specify a class will automatically be
invested in Class I Shares. Purchases of $1 million or more in a single
payment will be invested in Class I Shares. There are no conversion features
attached to either class of Shares.
Investors who qualify to purchase Class I Shares at net asset value should
purchase Class I rather than Class II Shares. See the section "Net Asset Value
Purchases (Both Classes)" and "Description of Special Net Asset Value
Purchases" above for a discussion of when Shares may be purchased at net asset
value.
As to telephone orders placed with FTD by dealers, the dealer must receive
the investor's order before the close of the New York Stock Exchange ("NYSE")
and transmit it to FTD by 5:00 p.m., New York time, for the investor to
receive that day's Offering Price. Payment for such orders must be by check in
U.S. currency and must be promptly submitted to FTD. Orders mailed to FTD by
dealers or individual investors are effected at the net asset value of the
Fund's Shares next computed after the purchase order accompanied by payment
has been received by FTD. Such payment must be by check in U.S. currency drawn
on a commercial bank in the U.S. and, if over $100,000, may not be deemed to
have been received until the proceeds have been collected unless the check is
certified or issued by such bank. Any subscription may be rejected by FTD or
by the Fund.
The Fund may impose a $10 charge against a Shareholder account in the event
that a check or draft submitted for the purchase of Fund Shares is returned
unpaid to the Fund.
Investors should promptly check the confirmation advice that is mailed after
each purchase (or redemption) in order to insure that it has been accurately
recorded in the investor's account.
AUTOMATIC INVESTMENT PLAN. Investors may accumulate Fund Shares regularly
each month by means of automatic debits to their checking accounts ($25
minimum). Forms for this purpose are in the Shareholder Application in this
Prospectus. Such a plan is voluntary and may be discontinued by written notice
to FTD, which must be received 10 days prior to the collection date, or by FTD
upon written notice to the investor at least 30 days prior to the collection
date.
INSTITUTIONAL ACCOUNTS. Institutional investors will likely be required to
complete an institutional account application. There may also be additional
methods of opening accounts, purchasing, redeeming or exchanging Shares of the
Fund available for institutional accounts. To obtain an institutional account
application or additional information regarding institutional accounts,
contact Franklin Templeton Institutional Services at 1-800-321-8563.
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ACCOUNT STATEMENTS. Shareholder accounts are opened in accordance with the
Shareholder's registration instructions. Transactions in the account, such as
additional investments and dividend reinvestments, will be reflected on
regular confirmation statements from the Transfer Agent.
TEMPLETON STAR SERVICE. From a touch tone phone, Templeton and Franklin
Shareholders may access an automated system (day or night) which offers the
following features.
By calling the Templeton STAR Service, Shareholders may obtain current price
and yield information specific to a Templeton Fund, regardless of class, or
Franklin Class II shares; obtain account information; and request duplicate
confirmation or year-end statements and money fund checks, if applicable.
By calling the Franklin TeleFACTS system, Class I Shareholders may obtain
current price, yield or other performance information specific to a Franklin
Fund; process an exchange into an identically registered Franklin account;
obtain account information; and request duplicate confirmation or year-end
statements, money fund checks, if applicable, and deposit slips.
Share prices and account information specific to Templeton Class I or II
shares and Franklin Class II shares may also be accessed on TeleFACTS by
Franklin Class I and Class II shareholders.
The Templeton STAR Service is accessible by calling 1-800-654-0123. The
TeleFACTS system is accessible by calling 1-800-247-1753. Templeton Class I
and Class II Share codes for the Fund, which will be needed to access system
information, are 104 and 204, respectively. The system's automated operator
will prompt the caller with easy to follow step-by-step instructions from the
main menu. Other features may be added in the future.
RETIREMENT PLANS. Shares of the Fund may be purchased through various
retirement plans including the following plans for which FTTC or its affiliate
acts as trustee or custodian: IRAs, Simplified Employee Pensions, 403(b)
plans, qualified plans for corporations, self-employed individuals and
partnerships, and 401(k) plans. For further information about any of the
plans, agreements, applications and annual fees, contact Franklin Templeton
Distributors, Inc. To determine which retirement plan is appropriate, an
investor should contact his or her tax adviser.
NET ASSET VALUE. The net asset value per Share of each class of the Fund is
determined as of the scheduled closing time of the NYSE (generally 4:00 p.m.
New York time) each day that the NYSE is open for trading, by dividing the
value of the Fund's securities plus any cash and other assets (including
accrued interest and dividends receivable) less all liabilities (including
accrued expenses) by the number of Shares outstanding, adjusted to the nearest
whole cent. A security listed or traded on a recognized stock exchange or
NASDAQ is valued at its last sale price on the principal exchange on which the
security is traded. The value of a foreign security is determined in its
national currency as of the close of trading on the foreign exchange on which
it is traded or as of the scheduled closing time of the NYSE (generally 4:00
p.m., New York time), if that is earlier, and that value is then converted
into its U.S. dollar equivalent at the foreign exchange rate in effect at
noon, New York time, on the day the value of the foreign security is
determined. If no sale is reported at that time, the mean between the current
bid and asked price is used. Occasionally, events which affect the values of
such securities and such exchange rates may occur between the times at which
they are determined and the close of the NYSE, and will therefore not be
reflected in the computation of the Fund's net asset value. If events
materially affecting the value of such securities occur during such period,
then these securities will be valued at fair value as determined by the
management and approved in good faith by the Board of Directors. All other
securities for which over-the-counter market quotations are readily available
are valued at the mean between the current bid and asked price. Securities for
which market quotations are not readily available and other assets are valued
at fair value as determined by the management and approved in good faith by
the Board of Directors.
Each of the Fund's classes will bear, pro-rata, all of the common expenses
of the Fund. The net asset value of all outstanding Shares of each class of
the Fund will be computed on a pro-rata basis for each outstanding Share based
on the proportionate
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participation in the Fund represented by the value of Shares of such classes,
except that the Class I and Class II Shares will bear the Rule 12b-1 expenses
payable under their respective plans. Due to the specific distribution
expenses and other costs that will be allocable to each class, the dividends
paid to each class of the Fund may vary.
EXCHANGE PRIVILEGE
A Shareholder may exchange Shares for the same class of shares of other
Franklin Templeton Funds which are eligible for sale in the Shareholder's
state of residence and in conformity with such fund's stated eligibility
requirements and investment minimums. Some funds, however, may not offer Class
II shares. Class I Shares may be exchanged for Class I shares of any Franklin
Templeton Funds. Class II Shares may be exchanged for Class II shares of any
Franklin Templeton Funds. No exchanges between different classes of shares
will be allowed. A contingent deferred sales charge will not be imposed on
exchanges. If the exchanged Shares were subject to a contingent deferred sales
charge in the original fund purchased, and Shares are subsequently redeemed
within 12 months (Class I Shares) or 18 months (Class II Shares) of the
calendar month of the original purchase date, a contingent deferred sales
charge will be imposed. The period will be tolled (or stopped) for the period
Class I Shares are exchanged into and held in a Franklin or Templeton money
market fund. See also "How to Sell Shares of the Fund--Contingent Deferred
Sales Charge."
Exchange purchases are subject to the minimum investment requirements of the
fund purchased and no sales charge generally applies. Exchanges of the same
class of shares are made on the basis of the net asset values of the class
involved, except as set forth below. Exchanges of shares of a class which were
originally purchased without a sales charge will be charged a sales charge in
accordance with the terms of the prospectus of the fund and the class of
shares being purchased, unless the original investment on which no sales
charge was paid was transferred in from a fund on which the investor paid a
sales charge. Exchanges of shares from the Franklin Templeton Money Funds are
subject to applicable sales charges on the funds being purchased, unless the
Franklin Templeton Money Fund shares were acquired by an exchange from a fund
having a sales charge, or by reinvestment of dividends or capital gain
distributions. Exchanges of Class I Shares of the Fund which were purchased
with a lower sales charge to a fund which has a higher sales charge will be
charged the difference, unless the shares were held in the original fund for
at least six months prior to executing the exchange. All exchanges are
permitted only after at least 15 days have elapsed from the date of the
purchase of the Shares to be exchanged.
A Shareholder may exchange Shares by writing to the Transfer Agent (see "How
to Sell Shares of the Fund"), by contacting his or her investment dealer or--
if the Shareholder Application indicates that the Shareholder has not declined
the option--by telephoning 1-800-393-3001. Telephone exchange instructions
must be received by FTD by the scheduled closing time of the NYSE (generally
4:00 p.m., New York time). Telephonic exchanges can involve only Shares in
non-certificated form. Shares held in certificate form are not eligible, but
may be returned and qualify for these services. All accounts involved in a
telephonic exchange must have the same registration and dividend option as the
account from which the Shares are being exchanged. The Fund and the Transfer
Agent will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. Please refer to "Telephone
Transactions--Verification Procedures." Forms for declining the telephone
exchange privilege and prospectuses of the other funds in the Franklin
Templeton Group may be obtained from FTD. Exchange redemptions and purchases
are processed simultaneously at the share prices next determined after the
exchange order is received. (See "How to Buy Shares of the Fund--Offering
Price.") A gain or loss for tax purposes generally will be realized upon the
exchange, depending on the tax basis of the Shares redeemed.
This exchange privilege is available only in states where shares of the fund
being acquired may legally be sold and may be modified, limited or terminated
at any time by the Fund upon 60 days' written notice. A Shareholder who wishes
to make an exchange should first obtain and review a current prospectus of the
fund into which he or she wishes to exchange. Broker-dealers who process
exchange orders on behalf of their customers may charge a fee for their
services. Such fee may be avoided by making requests for exchange directly to
the Transfer Agent.
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EXCHANGES OF CLASS I SHARES. The contingency period of Class I Shares will
be tolled (or stopped) for the period such Shares are exchanged into and held
in a Franklin or Templeton money market fund. If a Class I account has Shares
subject to a contingent deferred sales charge, Class I Shares will be
exchanged into the new account on a "first-in, first-out" basis. See also "How
to Sell Shares of the Fund--Contingent Deferred Sales Charge."
EXCHANGES OF CLASS II SHARES. When an account is composed of Class II Shares
subject to the contingent deferred sales charge, and Shares that are not, the
Shares will be transferred proportionately into the new fund. Shares received
from reinvestment of dividends and capital gains are referred to as "free
Shares," Shares which were originally subject to a contingent deferred sales
charge but to which the contingent deferred sales charge no longer applies are
called "matured Shares," and Shares still subject to the contingent deferred
sales charge are referred to as "CDSC liable Shares." CDSC liable Shares held
for different periods of time are considered different types of CDSC liable
Shares. For instance, if a Shareholder has $1,000 in free Shares, $2,000 in
matured Shares, and $3,000 in CDSC liable Shares, and the Shareholder
exchanges $3,000 into a new fund, $500 will be exchanged from free Shares,
$1,000 from matured Shares, and $1,500 from CDSC liable Shares. Similarly, if
CDSC liable Shares have been purchased at different periods, a proportionate
amount will be taken from Shares held for each period. If, for example, the
Shareholder holds $1,000 in Shares bought three months ago, $1,000 bought six
months ago, and $1,000 bought nine months ago, and the Shareholder exchanges
$1,500 into a new fund, $500 from each of these Shares will be exchanged into
the new fund.
The only money market fund exchange option available to Class II
Shareholders is the Franklin Templeton Money Fund II ("Money Fund II"), a
series of the Franklin Templeton Money Fund Trust. No drafts (checks) may be
written on Money Fund II accounts, nor may Shareholders purchase shares of
Money Fund II directly. Class II Shares exchanged for shares of Money Fund II
will continue to age and a contingent deferred sales charge will be assessed
if CDSC liable Shares are redeemed. No other money market funds are available
for Class II Shareholders for exchange purposes. Class I Shares may be
exchanged for shares of any of the money market funds in the Franklin
Templeton Funds except Money Fund II. Draft writing privileges and direct
purchases are allowed on these money market funds as described in their
respective prospectuses.
To the extent Shares are exchanged proportionately, as opposed to another
method, such as "first-in, first-out," or free Shares followed by CDSC liable
Shares, the exchanged Shares may, in some instances, be CDSC liable even
though a redemption of such Shares, as discussed elsewhere herein, may no
longer be subject to a CDSC. The proportional method is believed by management
to more closely meet and reflect the expectations of Class II Shareholders in
the event Shares are redeemed during the contingency period. For federal
income tax purposes, the cost basis of Shares redeemed or exchanged is
determined under the Code without regard to the method of transferring Shares
chosen by the Fund for purposes of exchanging or redeeming Shares.
TRANSFERS. Transfers between accounts in the same fund and class are treated
as non-monetary and non-taxable events, and are not subject to a contingent
deferred sales charge. The transferred Shares will continue to age from the
date of original purchase. Like exchanges, Class I Shares will be moved
proportionately from each type of Share in the original account.
CONVERSION RIGHTS. It is not presently anticipated that Class II Shares will
be converted to Class I Shares. A Shareholder may, however, sell Class II
Shares and use the proceeds to purchase Class I Shares, subject to all
applicable sales charges.
EXCHANGES BY TIMING ACCOUNTS. In the case of market timing or allocation
services ("Timing Accounts"), FTD will deduct an administrative service fee of
$5.00 per exchange. Timing Accounts generally include accounts administered so
as to redeem or purchase Shares based upon certain predetermined market
indicators. In accordance with the terms of their respective prospectuses,
certain funds in the Franklin Templeton Group do not accept or may place
differing limitations than those described below on exchanges by Timing
Accounts.
The Fund reserves the right to temporarily or permanently terminate the
exchange privilege or reject any specific purchase order for any Timing
Account or any person whose transactions seem to follow a timing pattern who:
(i) makes an exchange request out of
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the Fund within two weeks of an earlier exchange request out of the Fund, (ii)
makes more than two exchanges out of the Fund per calendar quarter, or (iii)
exchanges Shares equal in value to at least $5 million, or more than 1% of the
Fund's net assets. Accounts under common ownership or control, including
accounts administered so as to redeem or purchase Shares based upon certain
predetermined market indicators, will be aggregated for purposes of the
exchange limits.
In addition, the Fund reserves the right to refuse the purchase side of
exchange requests by any Timing Account, person, or group if, in the
Investment Manager's judgment, the Fund would be unable to invest effectively
in accordance with its investment objective and policies, or would otherwise
potentially be adversely affected. A Shareholder's exchanges into the Fund may
be restricted or refused if the Fund receives or anticipates simultaneous
orders affecting significant portions of the Fund's assets. In particular, a
pattern of exchanges that coincides with a "market timing" strategy may be
disruptive to the Fund and therefore may be refused.
Finally, as indicated above, the Fund and FTD reserve the right to refuse
any order for the purchase of Shares.
HOW TO SELL SHARES OF THE FUND
Shares will be redeemed, without charge, on request of the Shareholder in
"Proper Order" to the Transfer Agent. "PROPER ORDER" MEANS THAT THE REQUEST TO
REDEEM MUST MEET ALL THE FOLLOWING REQUIREMENTS:
1. Except as provided below under "Redemptions by Telephone," it must be in
writing, signed by the Shareholder(s) exactly in the manner as the Shares are
registered, and must specify either the number of Shares, or the dollar amount
of Shares, to be redeemed and sent to Franklin Templeton Investor Services,
Inc., P.O. Box 33030, St. Petersburg, Florida 33733-8030;
2. The signature(s) of the redeeming Shareholder(s) must be guaranteed by an
"eligible guarantor," including (1) national or state banks, savings
associations, savings and loan associations, trust companies, savings banks,
industrial loan companies and credit unions; (2) national securities
exchanges, registered securities associations and clearing agencies; (3)
securities broker-dealers which are members of a national securities exchange
or a clearing agency or which have minimum net capital of $100,000; or (4)
institutions that participate in the Securities Transfer Agent Medallion
Program ("STAMP") or other recognized signature medallion program. A notarized
signature will not be sufficient for the request to be in Proper Order. If the
Shares are registered in more than one name, the signature of each redeeming
Shareholder must be guaranteed. A signature guarantee is not required for
redemptions of $50,000 or less, requested by and payable to all Shareholders
of record, to be sent to the address of record for that account. However, the
Fund reserves the right to require signature guarantees on all redemptions. A
signature guarantee is required in connection with any written request for
transfer of Shares. Also, a signature guarantee is required if the Fund or the
Transfer Agent believes that a signature guarantee would protect against
potential claims based on the transfer instructions, including, for example,
when (a) the current address of one or more joint owners of an account cannot
be confirmed; (b) multiple owners have a dispute or give inconsistent
instructions to the Fund; (c) the Fund has been notified of an adverse claim;
(d) the instructions received by the Fund are given by an agent, not the
actual registered owner; (e) the Fund determines that joint owners who are
married to each other are separated or may be the subject of divorce
proceedings; or (f) the authority of a representative of a corporation,
partnership, association, or other entity has not been established to the
satisfaction of the Fund;
3. Any outstanding certificates must accompany the request together with a
stock power signed by the Shareholder(s), with signature(s) guaranteed as
described in Item 2 above;
4. Liquidation requests of corporate, partnership, trust and custodianship
accounts, and accounts under court jurisdiction, require the following
documentation to be in proper form:
. Corporation--(i) Signature guaranteed letter of instruction from the
authorized officer(s) of the corporation, and (ii) a corporate
resolution in a form satisfactory to the Transfer Agent;
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. Partnership--(i) Signature guaranteed letter of instruction from a
general partner and, if necessary, (ii) pertinent pages from the
partnership agreement identifying the general partners or other
documentation in a form satisfactory to the Transfer Agent;
. Trust--(i) Signature guaranteed letter of instruction from the
trustee(s), and (ii) a copy of the pertinent pages of the trust
document listing the trustee(s) or a certificate of incumbency if the
trustee(s) are not listed on the account registration;
. Custodial (other than a retirement account) --Signature guaranteed
letter of instruction from the custodian;
. Accounts under court jurisdiction--Check court documents and the
applicable state law since these accounts have varying requirements,
depending upon the state of residence; and
5. Redemption of Shares held in a retirement plan for which FTTC or its
affiliate acts as trustee or custodian must conform to the distribution
requirements of the plan and the Fund's redemption requirements above.
Distributions from such plans are subject to additional requirements under the
Code, and certain documents (available from the Transfer Agent) must be
completed before the distribution may be made. For example, distributions from
retirement plans are subject to withholding requirements under the Code, and
the IRS Form W-4P (available from the Transfer Agent) may be required to be
submitted to the Transfer Agent with the distribution request, or the
distribution will be delayed. Franklin Templeton Investor Services, Inc. and
its affiliates assume no responsibility to determine whether a distribution
satisfies the conditions of applicable tax laws and will not be responsible
for any penalties assessed.
To avoid delay in redemption or transfer, Shareholders having questions
about these requirements should contact the Account Services Department by
calling 1-800-393-3001 or 813-823-8712.
The redemption price will be the net asset value of the Shares next computed
after the redemption request in Proper Order is received by the Transfer
Agent. Payment of the redemption price ordinarily will be made by check (or by
wire at the sole discretion of the Transfer Agent if wire transfer is
requested including name and address of the bank and the Shareholder's account
number to which payment of the redemption proceeds is to be wired) within
seven days after receipt of the redemption request in Proper Order. However,
if Shares have been purchased by check, the Fund will make redemption proceeds
available when a Shareholder's check received for the Shares purchased has
been cleared for payment by the Shareholder's bank, which, depending upon the
location of the Shareholder's bank, could take up to 15 days or more. The
check will be mailed by first-class mail to the Shareholder's registered
address (or as otherwise directed). Remittance by wire (to a commercial bank
account in the same name(s) as the Shares are registered) or express mail, if
requested, are subject to a handling charge of up to $15, which will be
deducted from the redemption proceeds.
The Fund, through FTD, also repurchases Shares (whether in certificate or
book-entry form) through securities dealers. The Fund normally will accept
orders to repurchase such Shares by wire or telephone from dealers for their
customers at the net asset value next computed after the dealer has received
the Shareholder's request for repurchase, if the dealer received such request
before closing time of the NYSE on that day. Dealers have the responsibility
of submitting such repurchase requests by calling not later than 5:00 p.m.,
New York time, on such day in order to obtain that day's applicable redemption
price. Repurchase of Shares is for the convenience of Shareholders and does
not involve a charge by the Fund; however, securities dealers may impose a
charge on the Shareholder for transmitting the notice of repurchase to the
Fund. The Fund reserves the right to reject any order for repurchase, which
right of rejection might adversely affect Shareholders seeking redemption
through the repurchase procedure. Ordinarily payment will be made to the
securities dealer within seven days after receipt of a repurchase order and
Share certificate (if any) in "Proper Order" as set forth above. The Fund will
also accept, from member firms of the NYSE, orders to repurchase Shares for
which no certificates have been issued by wire or telephone without a
redemption request signed by the Shareholder, provided the member firm
indemnifies the Fund and FTD from any liability resulting from the absence of
the Shareholder's signature. Forms for such indemnity agreement can be
obtained from FTD.
The Fund may involuntarily redeem an investor's Shares if the net asset
value of such Shares is less than $100, provided that involuntary redemptions
will not result from fluctuations in the value of an investor's Shares. In
addition, the Fund may involuntarily redeem the Shares of any investor who has
failed to provide the Fund with a certified taxpayer identification number or
such other tax-
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related certifications as the Fund may require. A notice of redemption, sent
by first-class mail to the investor's address of record, will fix a date not
less than 30 days after the mailing date, and Shares will be redeemed at net
asset value at the close of business on that date, unless sufficient
additional Shares are purchased to bring the aggregate account value up to
$100 or more, or unless a certified taxpayer identification number (or such
other information as the Fund has requested) has been provided, as the case
may be. A check for the redemption proceeds will be mailed to the investor at
the address of record.
REINSTATEMENT PRIVILEGE. Shares of the Fund may be purchased at net asset
value with the proceeds from (i) a redemption of Shares of any fund in the
Franklin Templeton Group (except Templeton Capital Accumulator Fund, Inc.,
Templeton Variable Annuity Fund, Templeton Variable Products Series Fund,
Franklin Valuemark Funds and Franklin Government Securities Trust) which were
purchased with an initial sales charge or assessed a contingent deferred sales
charge on redemption, or (ii) a dividend or distribution paid by any fund in
the Franklin Templeton Group, within 120 days after the date of the redemption
or dividend or distribution. However, if a Shareholder's original investment
was in Class I shares of a fund with a lower sales charge, or no sales charge,
the Shareholder must pay the difference. While credit will be given for any
contingent deferred sales charge paid on the Shares redeemed, a new
contingency period will begin. Shares of the Fund redeemed in connection with
an exchange into another fund (see "Exchange Privilege") are not considered
"redeemed" for this privilege. In order to exercise this privilege, a written
order for the purchase of Shares of the Fund must be received by the Fund or
the Fund's Transfer Agent within 120 days after the redemption. The 120 days,
however, do not begin to run on redemption proceeds placed immediately after
redemption in a CD until the CD (including any rollover) matures. The amount
of gain or loss resulting from a redemption may be affected by exercise of the
reinstatement privilege if the Shares redeemed were held for 90 days or less,
or if a Shareholder reinvests in the same fund within 30 days. Reinvestment
will be at the next calculated net asset value after receipt.
SYSTEMATIC WITHDRAWAL PLAN. A Shareholder may establish a Systematic
Withdrawal Plan ("Plan") and receive periodic payments from the account
provided that the net asset value of the Shares held by the Shareholder is at
least $5,000. There are no service charges for establishing or maintaining a
Plan. The minimum amount which the Shareholder may withdraw is $50 per
withdrawal transaction although this is merely the minimum amount allowed
under the Plan and should not be mistaken for a recommended amount. The Plan
may be established on a monthly, quarterly, semiannual or annual basis. If the
Shareholder establishes a Plan, any capital gain distributions and income
dividends paid by the Fund to the Shareholder's account must be reinvested for
the Shareholder's account in additional Shares at net asset value. Payments
are then made from the liquidation of Shares at net asset value on the day of
the liquidation (which is generally on or about the 25th of the month) to meet
the specified withdrawals. Payments are generally received three to five days
after the date of liquidation. By completing the "Special Payment Instructions
for Distributions" section of the Shareholder Application included with this
Prospectus, a Shareholder may direct the selected withdrawals to another of
the Franklin Templeton Funds, to another person, or directly to a checking
account. Liquidation of Shares may reduce or possibly exhaust the Shares in
the Shareholder's account, to the extent withdrawals exceed Shares earned
through dividends and distributions, particularly in the event of a market
decline. If the withdrawal amount exceeds the total Plan balance, the account
will be closed and the remaining balance will be sent to the Shareholder. As
with other redemptions, a liquidation to make a withdrawal payment is a sale
for federal income tax purposes. Because the amount withdrawn under the Plan
may be more than the Shareholder's actual yield or income, part of such a Plan
payment may be a return of the Shareholder's investment.
Maintaining a Plan concurrently with purchases of additional Shares of the
Fund would be disadvantageous because of the sales charge on the additional
purchases. Also, redemptions of Class I Shares and Class II Shares may be
subject to a contingent deferred sales charge if the Shares are redeemed
within 12 months (Class I Shares) or 18 months (Class II Shares) of the
calendar month of the original purchase date. The Shareholder should
ordinarily not make additional investments of less than $5,000 or three times
the annual withdrawals under the Plan during the time such a Plan is in
effect.
With respect to Class I Shares, the contingent deferred sales charge is
waived for redemptions through a Systematic Withdrawal Plan set up prior to
February 1, 1995. With respect to Systematic Withdrawal Plans set up on or
after February 1, 1995, the applicable
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contingent deferred sales charge is waived for Class I and Class II Share
redemptions of up to 1% monthly of an account's net asset value (12% annually,
6% semiannually, 3% quarterly). For example, if a Class I account maintained
an annual balance of $1,000,000, only $120,000 could be withdrawn through a
once-yearly Systematic Withdrawal Plan free of charge; any amount over that
$120,000 would be assessed a 1% (or applicable) contingent deferred sales
charge. Likewise, if a Class II account maintained an annual balance of
$10,000, only $1,200 could be withdrawn through a once-yearly Systematic
Withdrawal Plan free of charge.
A Plan may be terminated on written notice by the Shareholder or the Fund,
and it will terminate automatically if all Shares are liquidated or withdrawn
from the account, or upon the Fund's receipt of notification of the death or
incapacity of the Shareholder. Shareholders may change the amount (but not
below $50) and schedule of withdrawal payments or suspend one such payment by
giving written notice to the Transfer Agent at least seven business days prior
to the end of the month preceding a scheduled payment. Share certificates may
not be issued while a Plan is in effect.
REDEMPTIONS BY TELEPHONE. Shareholders who file a Telephone Redemption
Authorization Agreement (the "Agreement") (a copy of which is included in this
Prospectus) may redeem Shares of the Fund by telephone, subject to the
Restricted Account exception noted under "Telephone Transactions -- Restricted
Accounts." The Fund and the Transfer Agent will employ reasonable procedures
to confirm that instructions given by telephone are genuine. Shareholders,
however, bear the risk of loss in certain cases as described under "Telephone
Transactions -- Verification Procedures."
For Shareholder accounts with a completed Agreement on file, redemptions of
uncertificated Shares or Shares which have previously been deposited with the
Fund or the Transfer Agent may be made for up to $50,000 per day per Fund
account. Telephone redemption requests received before the scheduled closing
time of the NYSE (generally 4:00 p.m., New York time), on any business day
will be processed that same day. The redemption check will be sent within
seven days, made payable to all the registered owners on the account, and will
be sent only to the address of record. Redemption requests by telephone will
not be accepted within 30 days following an address change by telephone. In
that case, a Shareholder should follow the other redemption procedures set
forth in this Prospectus. Institutional accounts which wish to execute
redemptions in excess of $50,000 must complete an Institutional Telephone
Privileges Agreement which is available from Franklin Templeton Institutional
Services by telephoning 1-800-321-8563.
CONTINGENT DEFERRED SALES CHARGE. Class I. In order to recover commissions
paid to securities dealers on investments of $1 million or more, a contingent
deferred sales charge of 1% applies to redemptions of those investments within
the contingency period of 12 months following the calendar month of their
purchase. The charge is 1% of the lesser of the net asset value of the Shares
redeemed (exclusive of reinvested dividends and capital gain distributions) or
the net asset value of such Shares at the time of purchase, and is retained by
FTD. The contingent deferred sales charge is waived in certain instances. See
"How to Buy Shares of the Fund -- Net Asset Value Purchases (Both Classes)."
Class II. Class II Shares redeemed within the contingency period of 18
months of the calendar month following their purchase will be assessed a
contingent deferred sales charge, unless one of the exceptions described below
applies. The charge is 1% of the lesser of the net asset value of the Shares
redeemed (exclusive of reinvested dividends and capital gain distributions) or
the net asset value at the time of purchase of such Shares, and is retained by
FTD. The contingent deferred sales charge is waived in certain instances. See
below.
Class I and Class II. In determining if a contingent deferred sales charge
applies, Shares not subject to a contingent deferred sales charge are deemed
to be redeemed first, in the following order: (i) Shares representing amounts
attributable to capital appreciation of those Shares held less than the
contingency period (12 months in the case of Class I Shares and 18 months in
the case of Class II Shares); (ii) Shares purchased with reinvested dividends
and capital gain distributions; and (iii) other Shares held longer than the
contingency period, and followed by any Shares held less than the contingency
period, on a "first in, first out" basis. For tax purposes, a contingent
deferred sales charge is treated as either a reduction in redemption proceeds
or an adjustment to the cost basis of the Shares redeemed.
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<PAGE>
The contingent deferred sales charge on each class of Shares is waived, as
applicable, for: exchanges; any account fees; distributions to participants or
beneficiaries in FTTC individual retirement plan accounts due to death,
disability or attainment of age 59 1/2; tax-free returns of excess
contributions from employee benefit plans; distributions from employee benefit
plans, including those due to plan termination or plan transfer; redemptions
through a Systematic Withdrawal Plan set up for Shares prior to February 1,
1995 and, for Systematic Withdrawal Plans set up thereafter, redemptions of up
to 1% monthly of an account's net asset value (3% quarterly, 6% semiannually
or 12% annually); redemptions initiated by the Fund due to a Shareholder's
account falling below the minimum specified account size; and redemptions
following the death of the Shareholder.
All investments made during a calendar month, regardless of when during the
month the investment occurred, will age one month on the last day of that
month and each subsequent month.
Requests for redemptions for a SPECIFIED DOLLAR amount, unless otherwise
specified, will result in additional Shares being redeemed to cover any
applicable contingent deferred sales charge, while requests for redemption of
a SPECIFIC NUMBER of Shares will result in the applicable contingent deferred
sales charge being deducted from the total dollar amount redeemed.
TELEPHONE TRANSACTIONS
Shareholders of the Fund and their dealer of record, if any, may be able to
execute various transactions by calling the Transfer Agent at 1-800-393-3001.
All Shareholders will be able to: (i) effect a change in address, (ii) change
a dividend option (see "Restricted Accounts" below), (iii) transfer Fund
Shares in one account to another identically registered account in the Fund,
and (iv) exchange Fund Shares by telephone as described in this Prospectus. In
addition, Shareholders who complete and file an Agreement as described under
"How to Sell Shares of the Fund--Redemptions by Telephone" will be able to
redeem Shares of the Fund.
VERIFICATION PROCEDURES. The Fund and the Transfer Agent will employ
reasonable procedures to confirm that instructions communicated by telephone
are genuine. These will include: recording all telephone calls requesting
account activity by telephone, requiring that the caller provide certain
personal and/or account information requested by the telephone service agent
at the time of the call for the purpose of establishing the caller's
identification, and sending a confirmation statement on redemptions to the
address of record each time account activity is initiated by telephone. So
long as the Fund and the Transfer Agent follow instructions communicated by
telephone which were reasonably believed to be genuine at the time of their
receipt, neither they nor their affiliates will be liable for any loss to the
Shareholder caused by an unauthorized transaction. The Fund and the Transfer
Agent may be liable for any losses due to unathorized or fraudulent
instructions in the event such reasonable procedures are not followed.
Shareholders are, of course, under no obligation to apply for or accept
telephone transaction privileges. In any instance where the Fund or the
Transfer Agent is not reasonably satisfied that instructions received by
telephone are genuine, the requested transaction will not be executed and
neither the Fund, the Transfer Agent, nor their affiliates will be liable for
any losses which may occur because of a delay in implementing a transaction.
RESTRICTED ACCOUNTS. Telephone redemptions and dividend option changes may
not be accepted on FTTC retirement accounts. To assure compliance with all
applicable regulations, special forms are required for any distribution,
redemption, or dividend payment. Although the telephone exchange privilege is
extended to these retirement accounts, a Franklin Templeton Transfer
Authorization Form must be on file in order to transfer retirement plan assets
between the Franklin Group of Funds (R) and the Templeton Family of Funds
within the same plan type. Changes to dividend options for these accounts must
also be made in writing.
To obtain further information regarding distribution or transfer procedures,
including any required forms, FTTC retirement account shareholders may call
toll free 1-800-527-2020 or 1-800-354-9191 (press "2").
20
<PAGE>
GENERAL. During periods of drastic economic or market changes, it is
possible that the telephone transaction privileges will be difficult to
execute because of heavy telephone volume. In such situations, Shareholders
may wish to contact their dealer for assistance, or to send written
instructions to the Fund as detailed elsewhere in this Prospectus.
Neither the Fund nor the Transfer Agent will be liable for any losses
resulting from the inability of a Shareholder to execute a telephone
transaction.
The telephone transaction privilege may be modified or discontinued by the
Fund at any time upon 60 days' written notice to Shareholders.
MANAGEMENT OF THE FUND
The Company is managed by its Board of Directors and all powers of the
Company are exercised by or under authority of the Board. Information relating
to the Directors and Executive Officers is set forth under the heading
"Management of the Company" in the SAI.
The Board has carefully reviewed the multiclass structure to ensure that no
material conflict exists between the two classes of Shares. Although the Board
does not expect to encounter material conflicts in the future, the Board will
continue to monitor the Fund and will take appropriate action to resolve such
conflicts if any should later arise.
In developing the multiclass structure, the Fund has retained the authority
to establish additional classes of Shares. It is the Fund's present intention
to offer only two classes of Shares, but new classes may be offered in the
future.
INVESTMENT MANAGER. The Investment Manager of the Fund is Templeton,
Galbraith & Hansberger Ltd., Nassau, Bahamas. The Investment Manager manages
the investment and reinvestment of the Fund's assets. The Investment Manager
is an indirect wholly owned subsidiary of Franklin Resources, Inc.
("Franklin"). Through its subsidiaries, Franklin is engaged in various aspects
of the financial services industry. The Investment Manager and its affiliates
serve as advisers for a wide variety of public investment mutual funds and
private clients in many nations. The Templeton organization has been investing
globally over the past 52 years and, with its affiliates, provides investment
management and advisory services to a worldwide client base, including over
4.3 million mutual fund shareholders, foundations, endowments, employee
benefit plans and individuals. The Investment Manager and its affiliates have
approximately 4,100 employees in the United States, Australia, Scotland,
Germany, Hong Kong, Luxembourg, Bahamas, Singapore, Canada and Russia.
The Investment Manager uses a disciplined, long-term approach to value-
oriented global and international investing. It has an extensive global
network of investment research sources. Securities are selected for the Fund's
portfolio on the basis of fundamental company-by-company analysis. Many
different selection methods are used for different funds and clients and these
methods are changed and improved by the Investment Manager's research on
superior selection methods.
The Investment Manager does not furnish any other services or facilities for
the Fund, although such expenses are paid by some investment advisers of other
investment companies. As compensation for its services, the Fund pays the
Investment Manager a fee which, during the most recent fiscal year,
represented 0.63% of its average daily net assets.
Currently, the lead portfolio manager for the Fund is Mark G. Holowesko. Mr.
Holowesko joined the Templeton organization in 1985, and is responsible for
coordinating equity research worldwide for the Investment Manager. Prior to
joining the Templeton organization, Mr. Holowesko worked with Roy West Trust
Corporation (Bahamas) Limited as an investment administrator. His duties at
Roy West included managing trust and individual accounts, as well as
conducting research of worldwide equity markets. Jeffrey A. Everett and Sean
21
<PAGE>
Farrington exercise secondary portfolio management responsibilities with
respect to the Fund. Mr. Everett joined the Templeton organization in 1989 and
is Vice President, Portfolio Management/Research, of the Investment Manager.
Prior to joining the Templeton organization, Mr. Everett was an investment
officer at First Pennsylvania Investment Research, a division of First
Pennsylvania Corporation, where he analyzed equity and convertible securities.
Mr. Everett was also responsible for coordinating research for Centre Square
Investment Group, the pension management subsidiary of First Pennsylvania
Corporation. Mr. Farrington is a member of the Investment Manager's research
technology group responsible for the maintenance of the internal research
database. Further information concerning the Investment Manager is included
under the heading "Investment Management and Other Services" in the SAI.
BUSINESS MANAGER. Templeton Global Investors, Inc. provides certain
administrative facilities and services for the Fund, including payment of
salaries of officers, preparation and maintenance of books and records,
preparation of tax returns and financial reports, monitoring compliance with
regulatory requirements and monitoring tax-deferred retirement plans. For its
services, the Business Manager receives a fee equivalent on an annual basis to
0.15% of the combined average daily net assets of the Funds included in the
Company (the Fund and Templeton World Fund), reduced to 0.135% of such
combined net assets in excess of $200 million, to 0.10% of such assets in
excess of $700 million, and to 0.075% of such assets in excess of $1,200
million.
TRANSFER AGENT. Franklin Templeton Investor Services, Inc. serves as
transfer agent and dividend disbursing agent for the Fund.
CUSTODIAN. The Chase Manhattan Bank, N.A. serves as custodian of the Fund's
assets.
PLANS OF DISTRIBUTION. A separate Plan of Distribution has been approved and
adopted for each class ("Class I Plan" and "Class II Plan," respectively, or
"Plans") pursuant to Rule 12b-1 under the 1940 Act. The Rule 12b-1 fees
charged to each class will be based solely on the distribution and servicing
fees attributable to that particular class. Any portion of fees remaining from
either Plan after distribution to securities dealers up to the maximum amount
permitted under each Plan may be used by the class to reimburse FTD for
routine ongoing promotion and distribution expenses incurred with respect to
such class. Such expenses may include, but are not limited to, the printing of
prospectuses and reports used for sales purposes, expenses of preparing and
distributing sales literature and related expenses, advertisements, and other
distribution-related expenses, including a prorated portion of FTD's overhead
expenses attributable to the distribution of Fund Shares, as well as any
distribution or service fees paid to securities dealers or their firms or
others who have executed a servicing agreement with the Fund, FTD or its
affiliates.
The maximum amount which the Fund may pay to FTD or others under the Class I
Plan for such distribution expenses is 0.25% per annum of Class I's average
daily net assets, payable on a quarterly basis. All expenses of distribution
and marketing in excess of 0.25% per annum will be borne by FTD, or others who
have incurred them, without reimbursement from the Fund. Under the Class I
Plan, costs and expenses not reimbursed in any one given quarter (including
costs and expenses not reimbursed because they exceed the applicable limit
under the Plan) may be reimbursed in subsequent quarters or years, subject to
applicable law. FTD has informed the Fund that the costs and expenses of Class
I Shares that may be reimbursable in future quarters or years were $345,405
(0.69% of its net assets) at August 31, 1994.
Under the Class II Plan, the maximum amount which the Fund is permitted to
pay to FTD or others for distribution expenses and related expenses is 0.75%
per annum of Class II's average daily net assets, payable quarterly. All
expenses of distribution, marketing and related services over that amount will
be borne by FTD, or others who have incurred them, without reimbursement by
the Fund. In addition, the Class II Plan provides for an additional payment by
the Fund of up to 0.25% per annum of Class II's average daily net assets as a
servicing fee, payable quarterly. This fee will be used to pay securities
dealers or other for, among other things, assisting in establishing and
maintaining customer accounts and records; assisting with purchase and
redemption requests; receiving and answering correspondence; monitoring
dividend payments from the Fund on behalf of the customers; or similar
activities related to furnishing personal services and/or maintaining
Shareholder accounts.
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<PAGE>
During the first year after the purchase of Class II Shares, FTD will keep a
portion of the Plan fees assessed on Class II Shares to partially recoup fees
FTD pays to securities dealers. FTD, or its affiliates, may pay, from its own
resources, a commission of up to 1% of the amount invested to securities
dealers who initiate and are responsible for purchases of Class II Shares.
Both Plans also cover any payments to or by the Fund, the Investment
Manager, FTD, or other parties on behalf of the Fund, the Investment Manager
or FTD, to the extent such payments are deemed to be for the financing of any
activity primarily intended to result in the sale of Shares issued by the Fund
within the context of Rule 12b-1. The payments under the Plans are included in
the maximum operating expenses which may be borne by each class of the Fund.
For more information including a discussion of the Board's policies with
regard to the amount of each Plan's fees, please see the SAI.
EXPENSES. For the fiscal year ended August 31, 1994, expenses borne by Class
I Shares of the Fund amounted to 1.14% of the average net assets of such
class.
BROKERAGE COMMISSIONS. The Fund's brokerage policies are described under the
heading "Brokerage Allocation" in the SAI. The Fund's brokerage policies
provide that the receipt of research services from a broker and the sale of
Shares by a broker are factors which may be taken into account in allocating
securities transactions, so long as the prices and execution provided by the
broker equal the best available within the scope of the Fund's brokerage
policies.
GENERAL INFORMATION
DESCRIPTION OF SHARES/SHARE CERTIFICATES. The Company's authorized capital
consists of 1,800,000,000 Common Shares of $1 par value per Share, of which
1,000,000,000 Shares are classified as Fund Shares and 800,000,000 Shares are
classified as Templeton World Fund Shares. The Board of Directors may, in its
discretion, classify and allocate Shares to additional funds within the
Company without further action by the Shareholders. Each Share outstanding
entities the holder to one vote.
The Fund will not ordinarily issue certificates for Shares purchased. Share
certificates representing whole (not fractional) Shares are issued only upon
the specific request of the Shareholder made in writing to the Transfer Agent.
No charge is made for the issuance of one certificate for all or some of the
Shares purchased in a single order.
VOTING RIGHTS. Shares of each class represent proportionate interests in the
assets of the Fund and have the same voting and other rights and preferences
as the other class of the Fund for matters that affect the Fund as a whole.
For matters that only affect a certain class of the Fund's Shares, however,
only Shareholders of that class will be entitled to vote. Therefore, each
class of Shares will vote separately on matters (1) affecting only that class,
(2) expressly required to be voted on separately by state law, or (3) required
to be voted on separately by the 1940 Act or the rules adopted thereunder. For
instance, if a change to the Rule 12b-1 plan relating to Class I Shares
requires Shareholder approval, only Shareholders of Class I may vote on
changes to the Rule 12b-1 plan affecting that class. Similarly, if a change to
the Rule 12b-1 plan relating to Class II Shares requires Shareholder approval,
only Shareholders of Class II may vote on the change to such plan. On the
other hand, if there is a proposed change to the investment objective of the
Fund, this affects all Shareholders, regardless of which class of Shares they
hold, and therefore, each Share has the same voting rights.
MEETINGS OF SHAREHOLDERS. The Company is not required to hold annual
meetings of Shareholders and may elect not to do so. The Company will call a
special meeting of Shareholders when requested to do so by Shareholders
holding at least 10% of the Company's outstanding Shares. In addition, the
Company is required to assist Shareholder communications in connection with
the calling of Shareholder meetings to consider removal of a Director or
Directors.
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<PAGE>
DIVIDENDS AND DISTRIBUTIONS. The Fund intends to pay a dividend at least
annually representing substantially all of its net investment income and any
net realized capital gains. According to the requirements of the Code,
dividends and capital gains will be calculated and distributed in the same
manner for Class I and Class II Shares. The per share amount of any income
dividends will generally differ only to the extent that each class is subject
to different Rule 12b-1 fees. Unless otherwise requested, income dividends and
capital gain distributions paid by the Fund, other than on those Shares whose
owners keep them registered in the name of a broker-dealer, are automatically
reinvested on the payable date in whole or fractional Shares at net asset
value as of the ex-dividend date, unless a Shareholder makes a written or
telephonic request for payments in cash. Dividend and capital gain
distributions are only eligible for reinvestment at net asset value in the
same class of Shares of the Fund or the same class of another of the Franklin
Templeton Funds. The processing date for the reinvestment of dividends may
vary from month to month, and does not affect the amount or value of the
Shares acquired. Income dividends and capital gain distributions will be paid
in cash on Shares during the time that their owners keep them registered in
the name of a broker-dealer, unless the broker-dealer has made arrangements
with the Transfer Agent for reinvestment.
Prior to purchasing Shares of the Fund, the impact of dividends or capital
gain distributions which have been declared but not yet paid should be
carefully considered. Any dividend or capital gain distribution paid shortly
after a purchase by a Shareholder prior to the record date will have the
effect of reducing the per Share net asset value of the Shares by the amount
of the dividend or distribution. All or a portion of such dividend or
distribution, although in effect a return of capital, generally will be
subject to tax.
Checks are forwarded by first-class mail to the address of record. The
proceeds of any such checks which are not accepted by the addressee and
returned to the Fund will be reinvested in the Shareholder's account in whole
or fractional Shares at net asset value next computed after the check has been
received by the Transfer Agent. Subsequent distributions automatically will be
reinvested at net asset value as of the ex-dividend date in additional whole
or fractional Shares.
FEDERAL TAX INFORMATION. The Fund intends to elect to be treated and to
qualify each year as a regulated investment company under Subchapter M of the
Code. See the SAI for a summary of the requirements that must be satisfied to
so qualify. A regulated investment company generally is not subject to Federal
income tax on income and gains distributed in a timely manner to its
shareholders. The Fund intends to distribute to Shareholders substantially all
of its net investment income and realized capital gains, which generally will
be taxable income or capital gains in their hands. Distributions declared in
October, November or December to Shareholders of record on a date in such
month and paid during the following January will be treated as having been
received by Shareholders on December 31 in the year such distributions were
declared. The Fund will inform Shareholders each year of the amount and nature
of such income or gains. A more detailed description of tax consequences to
Shareholders is contained in the SAI under the heading "Tax Status."
The Fund may be required to withhold federal income tax at the rate of 31%
of all taxable distributions (including redemptions) paid to Shareholders who
fail to provide the Fund with their correct taxpayer identification number or
to make required certifications or where the Fund or the Shareholder has been
notified by the Internal Revenue Service that the Shareholder is subject to
backup withholding. Corporate Shareholders and certain other Shareholders
specified in the Code are exempt from backup withholding. Backup withholding
is not an additional tax. Any amounts withheld may be credited against the
Shareholder's Federal income tax liability.
INQUIRIES. Shareholders' inquiries will be answered promptly. They should be
addressed to Franklin Templeton Investor Services, Inc., P.O. Box 33030, St.
Petersburg, Florida 33733-8030--telephone 1-800-393-3001 or 813-823-8712.
Transcripts of Shareholder accounts less than the three-years old are provided
on request without charge; requests for transcripts going back more than three
years from the date the request is received by the Transfer Agent are subject
to a fee of up to $15 per account.
PERFORMANCE INFORMATION. The Fund may include its total return in
advertisements or reports to Shareholders or prospective investors. Quotations
of average annual total return will be expressed in terms of the average
annual compounded rate of return on a
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<PAGE>
hypothetical investment in the Fund over a period of 1, 5 and 10 years (or up
to the life of the Fund), will reflect the deduction of the maximum initial
sales charge and deduction of a proportional share of Fund expenses (on an
annual basis), and will assume that all dividends and distributions are
reinvested when paid. Total return may be expressed in terms of the cumulative
value of an investment in the Fund at the end of a defined period of time. For
a description of the methods used to determine total return for the Fund, see
the SAI.
Because Class II Shares were not offered prior to May 1, 1995, no
performance data is available for these Shares. After a sufficient period of
time has passed, Class II performance data will be available.
STATEMENTS AND REPORTS. The Fund's fiscal year ends on August 31. Annual
reports (containing financial statements audited by independent auditors and
additional information regarding the Fund's performance) and semiannual
reports (containing unaudited financial statements) are sent to Shareholders
each year. Additional copies may be obtained, without charge, upon request to
the Account Services Department. The Fund also sends to each Shareholder a
confirmation statement after every transaction that affects the Shareholder's
account and a year-end historical confirmation statement.
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<PAGE>
INSTRUCTIONS AND IMPORTANT NOTICE
SUBSTITUTE W-9 INSTRUCTIONS INFORMATION
GENERAL. Backup withholding is not an additional tax. Rather, the tax
liability of persons subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the Internal Revenue Service ("IRS").
OBTAINING A NUMBER. If you do not have a Social Security Number/Taxpayer
Identification Number ("SSN/TIN"), you must obtain Form SS-5 or Form SS-4 from
your local Social Security or IRS office and apply for one. If you have
checked the "Awaiting TIN" box and signed the certification, withholding will
apply to payments relating to your account unless you provide a certified TIN
within 60 days.
WHAT SSN/TIN TO GIVE. Please refer to the following guidelines:
<TABLE>
<CAPTION>
ACCOUNT TYPE GIVE SSN OF ACCOUNT TYPE GIVE TAXPAYER ID # OF
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
. Individual Individual . Trust, Estate, or Trust, Estate, or
Pension Plan Trust Pension Plan Trust
- -----------------------------------------------------------------------------------
. Joint Actual owner of . Corporation, Corporation,
Individual account, or if Partnership, or other Partnership, or other
combined funds, the organization organization
first-named
individual
- -----------------------------------------------------------------------------------
. Unif. Minor . Broker nominee Broker nominee
Gift/Transfer
to Minor
- -----------------------------------------------------------------------------------
. Sole Owner of business
Proprietor
- -----------------------------------------------------------------------------------
. Legal Ward, Minor, or
Guardian Incompetent
- -----------------------------------------------------------------------------------
</TABLE>
EXEMPT RECIPIENTS. Please provide your TIN and check the "Exempt Recipient"
box if you are an exempt recipient. Exempt recipients generally include:
A corporation A real estate investment trust
A common trust fund operated by a bank
A financial institution under section 584(a)
An entity registered at all times
An organization exempt from tax under the Investment Company Act of
under section 501(a), or an 1940
individual retirement plan
A registered dealer in securities or
commodities registered in the U.S.
or a U.S. possession
IRS PENALTIES. If you do not supply us with your SSN/TIN, you will be subject
to an IRS $50 penalty unless your failure is due to reasonable cause and not
willful neglect. If you fail to report certain income on your Federal income
tax return, you will be treated as negligent and subject to an IRS 20% penalty
on any underpayment of tax attributable to such negligence, unless there was
reasonable cause for the resulting underpayment and you acted in good faith.
If you falsify information on this form or make any other false statement
resulting in no backup withholding on an account which should be subject to
backup withholding, you may be subject to an IRS $500 penalty and certain
criminal penalties including fines and imprisonment.
SUBSTITUTE W-8 INSTRUCTIONS INFORMATION
EXEMPT FOREIGN PERSON. Check the "Exempt Foreign Person" box if you qualify as
a non-resident alien or foreign entity that is not subject to certain U.S.
information return reporting or to backup withholding rules. Dividends paid to
your account may be subject to withholding of up to 30%. Generally, you are an
"Exempt Foreign Person" if you are not (1) a citizen or resident of the U.S.,
or (2) a U.S. corporation, partnership, estate, or trust. In the case of an
individual, an "Exempt Foreign Person" is one who has been physically present
in the U.S. for less than 31 days during the current calendar year. An
individual who is physically present in the U.S. for at least 31 days during
the current calendar year will still be treated as an "Exempt Foreign Person,"
provided that the total number of days physically present in the current
calendar year and the two preceding calendar years does not equal or exceed
183 days (counting all of the days in the current calendar year, only one-
third of the days in the first preceding calendar year and only one-sixth of
the days in the second preceding calendar year). In addition, lawful permanent
residents or green card holders may not be treated as "Exempt Foreign
Persons." If you are an individual or an entity, you must not now be, or at
this time expect to be, engaged in a U.S. trade or business with respect to
which any gain derived from transactions effected by the Fund/Payer during the
calendar year is effectively connected to the U.S.
PERMANENT ADDRESS. The Shareholder Application must contain your permanent
address if you are an "Exempt Foreign Person." If you are an individual,
provide your permanent address. If you are a partnership or corporation,
provide the address of your principal office. If you are an estate or trust,
provide the address of your permanent residence or the principal office of any
fiduciary.
NOTICE OF CHANGE IN STATUS. If you become a U.S. citizen or resident after you
have provided certification of your foreign status, or if you cease to be an
"Exempt Foreign Person," you must notify the Fund/Payer within 30 days of your
change in status. Reporting will then begin on the account(s) listed, and
backup withholding may also begin unless you certify to the Fund/Payer that
(1) the tax payer identification number you have given is correct, and (2) the
IRS has not notified you that you are subject to backup withholding because
you failed to report certain interest or dividend income. You may use Form W-
9, "Payer's Request for Taxpayer Identification Number and Certification," to
make these certifications. If an account is no longer active, you do not have
to notify a Fund/Payer or broker of your change in status unless you also have
another account with the same Fund/Payer that is still active. If you receive
interest from more than one Fund/Payer or have dealings with more than one
broker or barter exchange, file a certificate with each. If you have more than
one account with the same Fund/Payer, the Fund/Payer may require you to file a
separate certificate for each account.
WHEN TO FILE. File these certifications with the Fund before a payment is made
to you, unless you have already done this in either of the two preceding
calendar years. Only certifications that are in proper order will be treated
as having been filed with the Fund.
HOW OFTEN YOU MUST FILE. This certificate generally remains in effect for
three calendar years. A Fund/Payer or broker, however, may require that a new
certificate be filed each time a payment is made. On joint accounts for which
each joint owner is a foreign person, each must provide a certification of
foreign status.
1/94
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<PAGE>
FOR CORPORATE SHAREHOLDERS--FORM OF RESOLUTION
It will be necessary for corporate shareholders to provide a certified copy of
a resolution or other certificate of authority to authorize the purchase as
well as sale (redemption) of shares and withdrawals by checks or drafts. You
may use the following form of resolution or you may prefer to use your own. It
is understood that the Fund, Franklin Templeton Distributors, Inc., Franklin
Templeton Investor Services, Inc., the custodian bank and their affiliates may
rely upon these authorizations until revoked or amended by written notice
delivered by registered or certified mail to the Fund.
CERTIFIED COPY OF RESOLUTION (Corporation or Association)
The undersigned hereby certifies and affirms that he/she is the duly
elected _______________________________ of ____________________________________
TITLE CORPORATE NAME
a ______________________________ organized under the laws of the State of _____
TYPE OF ORGANIZATION STATE
and that the following is a true and correct copy of a resolution adopted by
the Board of Directors at a meeting duly called and held on ___________________
DATE
RESOLVED, that the _________________________________________________ of this
OFFICERS' TITLES
Corporation or Association are authorized to open an account in the name of
the Corporation or Association with one or more of the Franklin Group of
Funds (R) or Templeton Family of Funds (collectively, the "Funds") and to
deposit such funds of this Corporation or Association in this account as
they deem necessary or desirable; that the persons authorized below may
endorse checks and other instruments for deposit to said account or
accounts; and
FURTHER RESOLVED,that any of the following ____________________ officers are
NUMBER
authorized to sign any share assignment on behalf of this Corporation or
Association and to take any other actions as may be necessary to sell or
redeem its shares in the Funds or to sign checks or drafts withdrawing funds
from the account; and
FURTHER RESOLVED, that this Corporation or Association shall hold harmless,
indemnify, and defend the Funds, their custodian bank, Franklin Templeton
Distributors, Inc., Franklin Templeton Investor Services, Inc., and their
affiliates, from any claim, loss or liability resulting in whole or in
part, directly or indirectly, from their reliance from time to time upon
any certifications by the secretary or any assistant secretary of this
Corporation or Association as to the names of the individuals occupying
such offices and their acting in reliance upon these resolutions until
actual receipt by them of a certified copy of a resolution of the Board of
Directors of the Corporation or Association modifying or revoking any or
all such resolutions.
The undersigned further certifies that the below named persons, whose
signatures appear opposite their names and office titles, are duly elected
officers of the Corporation or Association. (Attach additional list if
necessary.)
- -------------------------------------- ---------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- ---------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- ---------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- ---------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- ---------------------------------------
NAME OF CORPORATION OR ASSOCIATION DATE
Certified from minutes ________________________________________________________
NAME AND TITLE
CORPORATE SEAL (if appropriate)
27
<PAGE>
THE FRANKLIN TEMPLETON TELEPHONE REDEMPTION AUTHORIZATION AGREEMENT
You may use Franklin Templeton's telephone redemption privilege to redeem
uncertificated Franklin Templeton Fund shares for up to $50,000 (or your
Shareholder account balance, whichever is less) per day, per fund account in
accordance with the terms of the Fund's Prospectus.
The telephone redemption privilege is available only to Shareholders who
specifically request it. If you would like to add this redemption privilege to
the other telephone transaction privileges automatically available to Franklin
Templeton Fund shareholders, please sign and return this authorization to
Franklin Templeton Investor Services, Inc. ("Services"), transfer agent and
shareholder servicing agent for the Franklin Templeton Funds.
SHAREHOLDER AUTHORIZATION: I/We request the telephone redemption privilege
under the terms described below and in the prospectus for each investment
company in the Franklin Templeton Group of Funds (a "Franklin Templeton Fund"
or a "Fund"), now opened or opened at a later date, holding shares registered
as follows:
- ------------------------------------- ---------------------------------------
PRINT NAME(S) AS SHOWN IN YOUR ACCOUNT REGISTRATION ("SHAREHOLDER")
- ------------------------------------- ---------------------------------------
ACCOUNT NUMBER(S)
I/We authorize each Fund and Services to honor and act upon telephone requests
given as provided in this agreement to redeem shares from any
Shareholder account:
- ------------------------------------- ---------------------------------------
SIGNATURE(S) AND DATE
- ------------------------------------- ---------------------------------------
PRINT NAME(S) (AND TITLE/CAPACITY, IF APPLICABLE)
VERIFICATION PROCEDURES: I/We understand and agree that: (1) each Fund and
Services will employ reasonable procedures to confirm that redemption
instructions communicated by telephone are genuine and that if these
confirmation procedures are not followed, the Fund or Services may be liable
for any losses due to unauthorized or fraudulent telephone instructions; (2)
the confirmation procedures will include the recording of telephone calls
requesting redemptions, requiring that the caller provide certain personal
and/or account information requested by the telephone service agent at the
time of the call for the purpose of establishing the caller's identification,
and the sending of confirmation statements to the address of record each time
a redemption is initiated by telephone; and (3) so long as the Fund and
Services follow the confirmation procedures in acting on instructions
communicated by telephone which were reasonably believed to be genuine at the
time of receipt, neither they, nor their parent or affiliates, will be liable
for any loss, damages or expenses caused by an unauthorized or fraudulent
redemption request.
JOINTLY OWNED/CO-TRUSTEE ACCOUNTS: Each of us signing this agreement as either
joint owners or co-trustees authorizes each Fund and Services to honor
telephone redemption requests given by ANY ONE of the signers, or our
investment representative of record, if any, ACTING ALONE.
APPOINTMENT OF ATTORNEY-IN-FACT: In order to issue telephone redemption
requests acting alone, each of us individually makes the following
appointment: I hereby appoint the other joint owner(s)/co-trustee(s) as my
agent(s) (attorney[s]-in-fact) with full power and authority to individually
act for me in any lawful way with respect to the issuance of instructions to a
Fund or Services in accordance with the telephone redemption privilege we have
requested by signing this agreement. This appointment shall not be affected by
my subsequent disability or incompetency and shall remain in effect until it
is revoked by either written notice from any one of us delivered to a Fund or
Services by registered mail, return receipt requested or by a Fund or Services
upon receipt of any information that causes a Fund or Services to believe in
good faith that there is or that there may be a dispute among any of us with
respect to the Franklin Templeton Fund account(s) covered by this agreement.
Each of us agrees to notify the Fund or Services immediately upon the death of
any of the signers.
CORPORATE/PARTNERSHIP/TRUST/RETIREMENT ACCOUNTS: The Shareholder and each of
us signing this agreement on behalf of the Shareholder represent and warrant
to each Franklin Templeton Fund and Services that the Shareholder has the
authority to enter into this agreement and that each of us is duly authorized
to execute this agreement on behalf of the Shareholder. The Shareholder agrees
that its election of the telephone redemption privilege means that a Fund or
Services may honor a telephone redemption request given by ANY
officer/partner/member/administrator/or agent of the Shareholder ACTING ALONE.
RESTRICTED ACCOUNTS: Telephone redemptions may not be accepted on Franklin
Templeton Trust Company retirement accounts.
PLEASE RETURN THIS FORM TO:
Franklin Templeton Investor Services, Inc., Attn.: Telephone Redemptions
Dept., 700 Central Avenue, St. Petersburg, Florida 33701-3628.
28
<PAGE>
The Franklin Templeton Group
Literature Request -- Call today for a free descriptive brochure and
prospectus on any of the funds listed below. The prospectus contains more
complete information, including fees, charges and expenses, and should be read
carefully before investing or sending money.
TEMPLETON FUNDS
American Trust
American Government Securities Fund
Developing Markets Trust
Foreign Fund
Global Infrastructure Fund
Global Opportunities Trust
Global Rising Dividends Fund
Growth Fund
Income Fund
Japan Fund
Money Fund
Real Estate Securities Fund
Smaller Companies Growth Fund
World Fund
FRANKLIN FUNDS
SEEKING TAX-FREE INCOME
Federal Intermediate Term
Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund***
Puerto Rico Tax-Free Income Fund
FRANKLIN STATE-SPECIFIC FUNDS
SEEKING TAX-FREE INCOME
Alabama
Arizona*
Arkansas**
California*
Colorado
Connecticut
Florida*
Georgia
Hawaii**
Indiana
Kentucky
Louisiana
Maryland
Massachusetts***
Michigan***
Minnesota***
Missouri
New Jersey
New York*
North Carolina
Ohio***
Oregon
Pennsylvania
Tennessee**
Texas
Virginia
Washington**
FRANKLIN FUNDS
SEEKING CAPITAL GROWTH
California Growth Fund
DynaTech Fund
Equity Fund
Global Health Care Fund
Gold Fund
Growth Fund
International Equity Fund
Pacific Growth Fund
Real Estate Securities Fund
Small Cap Growth Fund
FRANKLIN FUNDS SEEKING
GROWTH AND INCOME
Balance Sheet Investment Fund
Convertible Securities Fund
Equity Income Fund
Global Utilities Fund
Income Fund
Premier Return Fund
Rising Dividends Fund
Strategic Income Fund
Utilities Fund
FRANKLIN FUNDS SEEKING
HIGH CURRENT INCOME
AGE High Income Fund
German Government Bond Fund
Global Government Income Fund
Investment Grade Income Fund
U.S. Government Securities Fund
FRANKLIN FUNDS SEEKING HIGH CURRENT
INCOME AND STABILITY OF PRINCIPAL
Adjustable Rate Securities Fund
Adjustable U.S. Government Securities Fund
Short-Intermediate U.S. Government Securities Fund
FRANKLIN FUNDS FOR NON-U.S. INVESTORS
Tax-Advantaged High Yield Securities Fund
Tax-Advantaged International Bond Fund
Tax-Advantaged U.S. Government Securities Fund
FRANKLIN TEMPLETON INTERNATIONAL
CURRENCY FUNDS
Global Currency Fund
Hard Currency Fund
High Income Currency Fund
FRANKLIN MONEY MARKET FUNDS
California Tax-Exempt Money Fund
Federal Money Fund
IFT U.S. Treasury Money Market Portfolio
Money Fund
New York Tax-Exempt Money Fund
Tax-Exempt Money Fund
FRANKLIN FUND FOR CORPORATIONS
Corporate Qualified Dividend Fund
FRANKLIN TEMPLETON VARIABLE ANNUITIES
Franklin Valuemark
Franklin Templeton Valuemark Income
Plus (an intermediate annuity)
Toll-free 1-800/DIAL BEN (1-800/342-5236)
* Two or more fund options available: Long-term portfolio, intermediate-term
portfolio, a portfolio of municipal securities, and a high yield portfolio
(CA).
** The fund may invest up to 100% of its assets in bonds that pay interest
subject to the federal alternative minimum tax.
*** Portfolio of insured municipal securities.
29
<PAGE>
NOTES
-----
30
<PAGE>
NOTES
-----
31
<PAGE>
- --------------------------
TEMPLETON FOREIGN
FUND
PRINCIPAL UNDERWRITER:
Franklin Templeton
Distributors, Inc.
700 Central Avenue
St. Petersburg,
Florida 33701-3628
Account Services
1-800-393-3001
Fund Information
1-800-292-9293
Institutional Services
1-800-321-8563
This Prospectus is not
an offering of the
securities herein
described in any state
in which the offering
is not authorized. No
sales representative,
dealer, or other person
is authorized to give
any information or make
any representations
other than those
contained in this
Prospectus. Further
information may be
obtained from the
Principal Underwriter.
- --------------------------
[RECYCLED LOGO APPEARS HERE]
TL04 P 5/95
TEMPLETON
FOREIGN
FUND
Prospectus
May 1, 1995
[LOGO OF FRANKLIN TEMPLETON APPEARS HERE]
<PAGE>
[LOGO OF FRANKLIN TEMPLETON APPEARS HERE]
Mail to: FRANKLIN TEMPLETON DISTRIBUTORS, INC.
P.O. Box 33031 St. Petersburg, Florida 33733-8031 (800) 393-3001
Please do not use this form for any Retirement Plan for which Franklin Templeton
Trust Company or its affiliate serves as custodian or trustee, or for any of the
following Templeton Funds: Templeton Money Fund, Templeton Institutional Funds
or Templeton Capital Accumulator Fund. Please request separate Applications
and/or Prospectuses.
- --------------------------------------------------------------------------------
SHAREHOLDER APPLICATION OR REVISION
[_] Please check the box if this is a revision and see Section 8
- --------------------------------------------------------------------------------
Please check Class I or Class II, if applicable, next to your Fund selection.
Class I and Class II shares have different sales charges and operating expenses,
among other differences, as described in each Fund's prospectus.
Date __________________
<TABLE>
<CAPTION>
CLASS CLASS
I II I II
<S> <C> <C> <C>
[_] [_] AMERICAN TRUST $______ [_] [_] GLOBAL INFRASTRUCTURE FUND $______
[_] AMERICAS GOVERNMENT SECURITIES FUND ______ [_] [_] GLOBAL OPPORTUNITIES TRUST ______
[_] [_] DEVELOPING MARKETS TRUST ______ [_] [_] GLOBAL RISING DIVIDENDS FUND ______
[_] [_] FOREIGN FUND ______ [_] [_] GROWTH FUND ______
<CAPTION>
CLASS CLASS
I II I II
<S> <C> <C> <C>
[_] [_] INCOME FUND $______ [_] [_] WORLD FUND $______
[_] JAPAN FUND ______ [_] [_] OTHER: ______
[_] [_] REAL ESTATE SECURITIES FUND ______ ____________________
[_] [_] SMALLER COMPANIES GROWTH FUND ______
</TABLE>
- --------------------------------------------------------------------------------
1 ACCOUNT REGISTRATION (PLEASE PRINT)
- --------------------------------------------------------------------------------
[_] INDIVIDUAL OR JOINT ACCOUNT
__________________________________________________ ________-________-__________
First Name Middle Initial Last Name Social Security Number (SSN)
__________________________________________________ ________-________-__________
Joint Owner(s) (Joint ownership means "Joint Social Security Number (SSN)
Tenants With Rights of Survivorship unless
otherwise specified) All owners must sign Section 4.
- --------------------------------------------------------------------------------
[_] GIFT/TRANSFER TO A MINOR
_______________________________ As Custodian For________________________________
Name of Custodian (one only) Minor's Name (one only)
_____________Uniform Gifts/Transfers to Minors Act________-________-____________
State of Residence Minor's Social Security Number
Please Note: Custodian's Signature, not Minor's, is required in Section 4.
- --------------------------------------------------------------------------------
[_] TRUST, CORPORATION, PARTNERSHIP, RETIREMENT PLAN, OR OTHER ENTITY
__________________________________________ ____________-_______________________
Name Taxpayer Identification Number (TIN)
___________________________________________ ___________________________________
Name of Beneficiary (if to be included in Date of Trust Document (must be
the Registration) completed for registration)
________________________________________________________________________________
Name of Each Trustee (if to be included in the Registration)
- --------------------------------------------------------------------------------
2 ADDRESS
- --------------------------------------------------------------------------------
___________________________________________ Daytime Phone (___)________________
Street Address Area Code
____________________________________-______ Evening Phone (___)________________
City State Zip Code Area Code
I am a Citizen of: [_] U.S. [_]______________________________
Country of Residence
- --------------------------------------------------------------------------------
3 INITIAL INVESTMENT ($100 minimum initial investment)
- --------------------------------------------------------------------------------
Check(s) enclosed for $___________________ . (Payable to Franklin Templeton
Distributors, Inc. or the Fund(s)
indicated above.)
- --------------------------------------------------------------------------------
4 SIGNATURE AND TAX CERTIFICATIONS
(All registered owners must sign application)
- --------------------------------------------------------------------------------
The Fund reserves the right to refuse to open an account without either a
certified Taxpayer Identification Number ("TIN") or a certification of foreign
status. Failure to provide tax certifications in this section may result in
backup withholding on payments relating to your account and/or in your inability
to qualify for treaty withholding rates.
I am(We are) not subject to backup withholding because I(we) have not been
notified by the IRS that I am(we are) subject to backup withholding as a result
of a failure to report all interest or dividends or because the IRS has notified
me(us) that I am(we are) no longer subject to backup withholding. (If you are
currently subject to backup withholding as a result of a failure to report all
interest or dividends, please cross out the preceding statement.)
[_] The number shown above is my(our) correct TIN, or that of the Minor named in
Section 1.
[_] AWAITING TIN. I am(We are) waiting for a number to be issued to me(us).
I(We) understand that if I(we) do not provide a TIN to the Fund within 60
days, the Fund is required to commence 31% backup withholding until I(we)
provide a certified TIN.
[_] EXEMPT RECIPIENT. Individuals cannot be exempt. Check this box only after
reading the instructions to see whether you qualify as an exempt recipient.
(You should still provide a TIN.)
[_] EXEMPT FOREIGN PERSON. Check this box only if the following statement
applies: "I am(we are) neither a citizen nor a resident of the United
States. I(we) certify to the best of my(our) knowledge and belief, I(we)
qualify as an exempt foreign person and/or entity as described in the
instructions."
Permanent address for tax purposes:
________________________________________________________________________________
Street Address City State Country Personal Code
PLEASE NOTE: The IRS only allows one TIN to be listed on an account. On joint
accounts, it is preferred that the primary account owner (or person listed first
on the account) list his/her number as requested above.
CERTIFICATION - Under the penalties of perjury, I(we) certify that (1) the
information provided on this application is true, correct and complete, (2)
I(we) have read the prospectus(es) for the Fund(s) in which I am(we are)
investing and agree to the terms thereof, and (3) I am(we are) of legal age or
an emancipated minor. I (we) acknowledge that Shares of the Fund(s) are not
insured or guaranteed by any agency or institution and that an investment in the
Shares involves risks, including the possible loss of principal.
X X
- ---------------------------------------- ---------------------------------------
Signature Signature
X X
- ---------------------------------------- ---------------------------------------
Signature Signature
Please make a photocopy of this application for your records.
- --------------------------------------------------------------------------------
5 BROKER/DEALER USE ONLY (PLEASE PRINT)
- --------------------------------------------------------------------------------
-----------------------
We hereby submit this application for the purchase of Templeton Dealer Number
shares of the Fund indicated above in accordance with
the terms of our selling agreement with Franklin -----------------------
Templeton Distributors, Inc. ("FTD"), and with the
Prospectus for the Fund. We agree to notify FTD of any
Purchases of Class I shares which may be eligible for
reduced or eliminated sales charges.
-----------------------------------------------------------------------------
WIRE ORDER ONLY: The attached check for $_______ should be applied against
Wire Order
Confirmation Number ___________ Dated___________ For__________ Shares
-----------------------------------------------------------------------------
Securities Dealer Name__________________________________________________________
Main Office Address________________ Main Office Telephone Number (___)__________
Branch Number________ Representative Number ________ Representative Name________
Branch Address_________________________ Branch Telephone Number (___)___________
Authorized Signature, Securities Dealer______________________ Title_____________
- --------------------------------------------------------------------------------
ACCEPTED: Franklin Templeton Distributors, Inc. By___________ Date______________
- --------------------------------------------------------------------------------
Please see reverse side for Shareholder Account Privileges:
[_] Distribution Options [_] Special Instructions for Distributions
[_] Systematic Withdrawal Plan [_] Automatic Investment Plan
[_] Telephone Exchange Service [_] Letter of Intent
[_] Cumulative Quantity Discount
This application must be preceded or accompanied by a prospectus for
the Fund(s) being purchased.
<PAGE>
- --------------------------------------------------------------------------------
6 DISTRIBUTION OPTIONS (Check one)
- --------------------------------------------------------------------------------
Check one - if no box is checked, all dividends and capital gains will be
reinvested in additional shares of the Fund.
[_] Reinvest all dividends [_] Pay all dividends in cash
and capital gains. and reinvest capital gains.
[_] Pay capital gains in cash [_] Pay all dividends and
and reinvest dividends. capital gains in cash.
- --------------------------------------------------------------------------------
7 OPTIONAL SHAREHOLDER PRIVILEGES
- --------------------------------------------------------------------------------
A. SPECIAL PAYMENT INSTRUCTIONS FOR DISTRIBUTIONS (Check one box)
[_] Pay Distributions, as noted in Section 6, to another Franklin or Templeton
Fund.
Fund Name______________________ Existing Account Number___________________
[_] Send my Distributions to the person, named below, instead of as registered
in Section 1.
Name___________________________ Street Address____________________________
City___________________________ State____________________Zip Code_________
- --------------------------------------------------------------------------------
B. SYSTEMATIC WITHDRAWAL PLAN
Please withdraw from my Franklin Templeton account $_____($50 minimum)
[_]Monthly [_]Quarterly [_]Semi-Annually or [_]Annually as set forth in the
Prospectus, starting in ______________(Month). The net asset value of the
shares held must be at least $5,000 at the time the plan is established.
Additional restrictions may apply to Class II or other shares subject to
contingent deferred sales charge, as described in the prospectus. Send the
proceeds to: [_]Address of Record OR [_]the Franklin Templeton Fund or person
specified in Section 7(A) - Special Payment Instructions for Distributions.
- --------------------------------------------------------------------------------
C. TELEPHONE TRANSACTIONS
TELEPHONE EXCHANGE PRIVILEGE: If the Fund does not receive specific
instructions from the shareholder, either in writing or by telephone, the
Telephone Exchange Privilege (see the prospectus) is automatically extended
to each account. The shareholder should understand, however, that the Fund
and Franklin Templeton Investor Services, Inc. ("FTI") or Templeton Funds
Trust Company and their agents will not be liable for any loss, injury,
damage or expense as a result of acting upon instructions communicated by
telephone reasonably believed to be genuine. The shareholder agrees to hold
the Fund and its agents harmless from any loss, claims, or liability arising
from its or their compliance with such instructions. The shareholder
understands that this option is subject to the terms and conditions set forth
in the prospectus of the fund to be acquired.
[_]No, I do NOT wish to participate in the Telephone Exchange Privilege or
authorize the Fund or its agents, including FTI or Templeton Funds Trust
Company, to act upon instructions received by telephone to exchange shares
for shares of any other account(s) within the Franklin Templeton Group of
Funds.
Telephone Redemption Privilege: This is available to shareholders who
specifically request it and who complete the Franklin Templeton Telephone
Redemption Authorization Agreement in the back of the Fund's prospectus.
- --------------------------------------------------------------------------------
D. AUTOMATIC INVESTMENT PLAN
IMPORTANT: ATTACH AN UNSIGNED, VOIDED CHECK (FOR CHECKING ACCOUNTS) OR A
SAVINGS ACCOUNT DEPOSIT SLIP HERE, AND COMPLETE THE INFORMATION BELOW. I(We)
would like to establish an Automatic Investment Plan (the"Plan") as described
in the Prospectus. I(We) agree to reimburse FTI and/or FTD for any expenses
or losses that they may incur in connection with my(our) plan, including any
caused by my(our) bank's failure to act in accordance with my(our) request.
If my(our) bank makes any erroneous payment or fails to make a payment after
shares are purchased on my(our) behalf, any such purchase may be cancelled
and I(we) hereby authorize redemptions and/or deductions from my(our) account
for that purpose.
Debit my(our) bank account monthly for $__________($25 minimum) on or about
the [_]1st [_]5th [_]15th or [_]20th day starting_______(month), to be
invested in (name of Fund)___________________Account Number (if known)_______
- --------------------------------------------------------------------------------
E. INSTRUCTIONS TO BANK - AUTOMATIC INVESTMENT PLAN AUTHORIZATION
To:__________________________________ ______________________________________
Name of Your Bank ABA Number
___________________________ _________________ ____________ ______________
Street Address City State Zip Code
I(We) authorize you to charge my(our) Checking/Savings Account and to make
payment to FTD, upon instructions from FTD. I(We) agree that in making payment
for such charges your rights shall be the same as if each were a charge made and
signed personally by me(us). This authority shall remain in effect until you
receive written notice from me(us) changing its terms or revoking it. Until you
actually receive such notice, I(we) agree that you shall be fully protected in
paying any charge under this authority. I(we) further agree that if any such
charge is not made, whether with or without cause and whether intentionally or
inadvertently, you shall be under no liability whatsoever.
X_________________________________________________ ___________________________
Signature(s) EXACTLY as shown on your bank records Date
______________________________________ _______________________________________
Print Name(s) Account Number
______________________________ _________________ ____________ ______________
Street Address City State Zip Code
- --------------------------------------------------------------------------------
F. LETTER OF INTENT (LOI) -- APPLICABLE TO CLASS I SHARES ONLY
[_]I(We) agree to the terms of the LOI and provisions for reservations of
Shares and grant FTD the security interest set forth in the Prospectus.
Although I am(we are) not obligated to do so, it is my(our) intention to
invest over a 13 month period in shares of one or more Franklin or Templeton
Funds (including all Money Market Funds in the Franklin Templeton Group) an
aggregate amount at least equal to that which is checked below:
<TABLE>
<S> <C> <C> <C> <C>
[_]$50,000-99,999 (except for Income Fund) [_]$100,000-249,999 [_]$250,000-499,999 [_]$500,000-999,999 [_]$1,000,0000 or more
</TABLE>
Purchases made within the last 90 days will be included as part of your LOI.
Please write in your Account Number(s)____________ ____________ ____________
- --------------------------------------------------------------------------------
G. CUMULATIVE QUANTITY DISCOUNT -- APPLICABLE TO CLASS I SHARES ONLY
Shares may be purchased at the Offering Price applicable to the dollar amount
of the sale added to the higher of (1) the value (calculated at the
applicable Offering Price) or (2) the purchase price, of any other Shares of
the Fund and/or other Funds in the Franklin Templeton Group owned at that
time by the purchaser, his or her spouse, and their children under age 21,
including all Money Market Funds in the Franklin Templeton Group as stated in
the Prospectus. in order for this Cumulative Quantity Discount to be made
available, the Shareholder or his or her Securities Dealer must notify FTI or
FTD of the total holdings in the Franklin Templeton Group each time an order
is placed.
[_]I(We) own shares of more than one Fund in the Franklin Templeton Group and
qualify for the Cumulative Quantity Discount described above and in the
Prospectus.
My(Our) other Account Number(s) are ___________ ___________ _______________
- --------------------------------------------------------------------------------
8 ACCOUNT REVISION (If Applicable)
- --------------------------------------------------------------------------------
If you are using this application to revise your Account Registration, or wish
to have Distributions sent to an address other than the address on your existing
Account's Registration, a Signature Guarantee is required. Signatures of all
registered owners must be guaranteed by an "eligible guarantor" as defined in
the "How to Sell Shares of the Fund" section in the Fund's Prospectus. A Notary
Public is not an acceptable guarantor.
X________________________________________ ____________________________________
Signature(s) of Registered Account Owners Account Number(s)
X________________________________________ ____________________________________
X________________________________________
X________________________________________ ____________________________________
Signature Guarantee Stamp
NOTE: For any change in registration, please send us any outstanding
Certificates by Registered Mail.
- --------------------------------------------------------------------------------
TLGOF APP 05/95
<PAGE>
TEMPLETON FUNDS, INC.
THIS STATEMENT OF ADDITIONAL INFORMATION DATED
MAY 1, 1995 IS NOT A PROSPECTUS. IT SHOULD BE
READ IN CONJUNCTION WITH THE PROSPECTUS OF
TEMPLETON WORLD FUND DATED MAY 1, 1995,
AND THE PROSPECTUS OF TEMPLETON FOREIGN FUND
DATED MAY 1, 1995, WHICH MAY BE OBTAINED WITHOUT
CHARGE UPON REQUEST TO THE PRINCIPAL UNDERWRITER,
FRANKLIN TEMPLETON DISTRIBUTORS, INC.,
700 CENTRAL AVENUE, P.O. BOX 33030
ST. PETERSBURG, FLORIDA 33733-8030
TOLL FREE TELEPHONE: (800) 237-0738
TABLE OF CONTENTS
General Information and History -The Investment Manager
Investment Objectives and Policies -Business Manager
-Investment Policies -Custodian and Transfer
-Repurchase Agreements Agent
-Loans of Portfolio Securities -Legal Counsel
-Debt Securities -Independent Accountants
-Stock Index Futures Contracts -Reports to Shareholders
-Stock Index Options Brokerage Allocation
-Investment Restrictions Purchase, Redemption and
-Risk Factors Pricing of Shares
-Trading Policies -Ownership and Authority
-Personal Securities Transactions Disputes
Management of the Company -Tax Deferred Retirement
Director Compensation Plans
Principal Shareholders -Letter of Intent
Investment Management and Other -Special Net Asset Value
Services Purchases
-Investment Management Tax Status
Agreements Principal Underwriter
-Management Fees Description of Shares
Performance Information
Financial Statements
GENERAL INFORMATION AND HISTORY
After incorporating under the laws of Maryland as Templeton
World Fund, Inc. and registering under the Investment Company Act
of 1940 (the "1940 Act"), the Company commenced business as an
investment company on January 17, 1978. On October 1, 1982 the
Company's name was changed to Templeton Funds, Inc. (the
"Company") and it became a series investment company with two
separate classes of Shares constituting, respectively, Templeton
World Fund ("World Fund") and Templeton Foreign Fund ("Foreign
Fund") (collectively, the "Funds"). As such, the holder of the
Shares issued for one Fund has an interest only in the portfolio,
assets and liabilities of that Fund.
INVESTMENT OBJECTIVES AND POLICIES
Investment Policies. The investment objective and policies
of each Fund are described in each Fund's Prospectus under the
heading "General Description--Investment Objective and Policies."
Each Fund may invest for defensive purposes in commercial paper
which, at the date of investment, must be rated A-1 by Standard &
Poor's Corporation ("S&P") or Prime-1 by Moody's Investors
Service, Inc. ("Moody's") or, if not rated, be issued by a
company which at the date of investment has an outstanding debt
issue rated AAA or AA by S&P or Aaa or Aa by Moody's.
Repurchase Agreements. Repurchase agreements are contracts
under which the buyer of a security simultaneously commits to
resell the security to the seller at an agreed-upon price and
date. Under a repurchase agreement, the seller is required to
maintain the value of the securities subject to the repurchase
agreement at not less than their repurchase price. Templeton,
Galbraith & Hansberger Ltd. (the "Investment Manager") will
monitor the value of such securities daily to determine that the
value equals or exceeds the repurchase price. Repurchase
agreements may involve risks in the event of default or
insolvency of the seller, including possible delays or
restrictions upon a Fund's ability to dispose of the underlying
securities. A Fund will enter into repurchase agreements only
with parties who meet creditworthiness standards approved by the
Board of Directors, i.e., banks or broker-dealers which have been
determined by the Investment Manager to present no serious risk
of becoming involved in bankruptcy proceedings within the time
frame contemplated by the repurchase transaction.
Loans of Portfolio Securities. World Fund may lend to banks
and broker-dealers portfolio securities with an aggregate market
value of up to one-third of its total assets. Such loans must be
secured by collateral (consisting of any combination of cash,
U.S. Government securities or irrevocable letters of credit) in
an amount at least equal (on a daily marked-to-market basis) to
the current market value of the securities loaned. World Fund
retains all or a portion of the interest received on investment
of the cash collateral or receives a fee from the borrower.
World Fund may terminate the loans at any time and obtain the
return of the securities loaned within five business days. World
Fund will continue to receive any interest or dividends paid on
the loaned securities and will continue to have voting rights
with respect to the securities. However, as with other
extensions of credit, there are risks of delay in recovery or
even loss of rights in collateral should the borrower fail.
Debt Securities. The Funds may invest in debt securities
which are rated at least Caa by Moody's or CCC by S&P or deemed
to be of comparable quality by the Investment Manager. As an
operating policy, neither Fund will invest more than 5% of its
assets in debt securities rated lower than Baa by Moody's or BBB
by S&P. The market value of debt securities generally varies in
response to changes in interest rates and the financial condition
of each issuer. During periods of declining interest rates, the
value of debt securities generally increases. Conversely, during
periods of rising interest rates, the value of such securities
generally declines. These changes in market value will be
reflected in a Fund's net asset value.
Although they may offer higher yields than do higher rated
securities, low rated and unrated debt securities generally
involve greater volatility of price and risk of principal and
income, including the possibility of default by, or bankruptcy
of, the issuers of the securities. In addition, the markets in
which low rated and unrated debt securities are traded are more
limited than those in which higher rated securities are traded.
The existence of limited markets for particular securities may
diminish a Fund's ability to sell the securities at fair value
either to meet redemption requests or to respond to a specific
economic event such as a deterioration in the creditworthiness of
the issuer. Reduced secondary market liquidity for certain low
rated or unrated debt securities may also make it more difficult
for each Fund to obtain accurate market quotations for the
purposes of valuing the Fund's portfolio. Market quotations are
generally available on many low rated or unrated securities only
from a limited number of dealers and may not necessarily
represent firm bids of such dealers or prices for actual sales.
Adverse publicity and investor perceptions, whether or not
based on fundamental analysis, may decrease the values and
liquidity of low rated debt securities, especially in a thinly
traded market. Analysis of the creditworthiness of issuers of
low rated debt securities may be more complex than for issuers of
higher rated securities, and the ability of a Fund to achieve its
investment objective may, to the extent of investment in low
rated debt securities, be more dependent upon such
creditworthiness analysis than would be the case if a Fund were
investing in higher rated securities.
Low rated debt securities may be more susceptible to real or
perceived adverse economic and competitive industry conditions
than investment grade securities. The prices of low rated debt
securities have been found to be less sensitive to interest rate
changes than higher rated investments, but more sensitive to
adverse economic downturns or individual corporate developments.
A projection of an economic downturn or of a period of rising
interest rates, for example, could cause a decline in low rated
debt securities prices because the advent of a recession could
lessen the ability of a highly leveraged company to make
principal and interest payments on its debt securities. If the
issuer of low rated debt securities defaults, a Fund may incur
additional expenses to seek recovery.
A Fund may accrue and report interest on high yield bonds
structured as zero coupon bonds or pay-in-kind securities as
income even though it receives no cash interest until the
security's maturity or payment date. In order to qualify for
beneficial tax treatment afforded regulated investment companies,
a Fund must distribute substantially all of its net income to
Shareholders (see "Tax Status"). Thus, a Fund may have to
dispose of its portfolio securities under disadvantageous
circumstances to generate cash in order to satisfy the
distribution requirement.
Recent legislation, which requires federally-insured savings
and loan associations to divest their investments in low rated
debt securities, may have a material adverse effect on the Funds'
net asset values and investment practices.
Stock Index Futures Contracts. World Fund's investment
policies permit it to buy and sell stock index futures contracts
with respect to any stock index traded on a recognized stock
exchange or board of trade, to an aggregate amount not exceeding
20% of World Fund's total assets as of the time when such
contracts are entered into. Successful use of stock index
futures is subject to the Investment Manager's ability to predict
correctly movements in the direction of the stock markets. No
assurance can be given that the Investment Manager's judgment in
this respect will be correct.
A stock index futures contract is a contract to buy or sell
units of a stock index at a specified future date at a price
agreed upon when the contract is made. The value of a unit is
the current value of the stock index. For example, the Standard
& Poor's 500 Stock Index (the "S&P 500 Index") is composed of 500
selected common stocks, most of which are listed on the New York
Stock Exchange. The S&P 500 Index assigns relative weightings to
the value of one share of each of these 500 common stocks
included in the Index, and the Index fluctuates with changes in
the market values of the shares of those common stocks. In the
case of the S&P 500 Index, contracts are to buy or sell 500
units. Thus, if the value of the S&P 500 Index were $150, one
contract would be worth $75,000 (500 units x $150). The stock
index futures contract specifies that no delivery of the actual
stocks making up the Index will take place. Instead, settlement
in cash must occur upon the termination of the contract, with the
settlement being the difference between the contract price and
the actual level of the stock index at the expiration of the
contract. For example, if World Fund enters into a futures
contract to buy 500 units of the S&P 500 Index at a specified
future date at a contract price of $150 and the S&P 500 Index is
at $154 on that future date, World Fund will gain $2,000 (500
units x gain of $4). If World Fund enters into a futures
contract to sell 500 units of the stock index at a specified
future date at a contract price of $150 and the S&P 500 Index is
at $154 on that future date, World Fund will lose $2,000 (500
units x loss of $4).
During or in anticipation of a period of market
appreciation, World Fund may enter into a "long hedge" of common
stock which it proposes to add to its portfolio by purchasing
stock index futures for the purpose of reducing the effective
purchase price of such common stock. To the extent that the
securities which World Fund proposes to buy change in value in
correlation with the stock index contracted for, the purchase of
futures contracts on that index would result in gains to World
Fund which could be offset against rising prices of such common
stock.
During or in anticipation of a period of market decline,
World Fund may "hedge" common stock in its portfolio by selling
stock index futures for the purpose of limiting the exposure of
its portfolio to such decline. To the extent that World Fund's
portfolio of securities changes in value in correlation with a
given stock index, the sale of futures contracts on that index
could substantially reduce the risk to the portfolio of a market
decline and, by so doing, provide an alternative to the
liquidation of securities positions in the portfolio with
resultant transaction costs.
Parties to an index futures contract must make initial
margin deposits to secure performance of the contract, which
currently range from 1 % to 5% of the contract amount. Initial
margin requirements are determined by the respective exchanges on
which the futures contracts are traded. There also are
requirements to make variation margin deposits as the value of
the futures contract fluctuates.
At the time World Fund purchases a stock index futures
contract, an amount of cash, U.S. Government securities, or other
highly liquid debt securities equal to the market value of the
contract will be deposited in a segregated account with World
Fund's Custodian. When selling a stock index futures contract,
World Fund will maintain with its Custodian liquid assets that,
when added to the amounts deposited with a futures commission
merchant or broker as margin, are equal to the market value of
the instruments underlying the contract. Alternatively, World
Fund may "cover" its position by owning a portfolio with a
volatility substantially similar to that of the index on which
the futures contract is based, or holding a call option
permitting World Fund to purchase the same futures contract at a
price no higher than the price of the contract written by World
Fund (or at a higher price if the difference is maintained in
liquid assets with World Fund's Custodian).
Stock Index Options. World Fund may purchase and sell put
and call options on securities indices in standardized contracts
traded on national securities exchanges, boards of trade, or
similar entities, or quoted on NASDAQ. An option on a securities
index is a contract that gives the purchaser of the option, in
return for the premium paid, the right to receive from the writer
of the option, cash equal to the difference between the closing
price of the index and the exercise price of the option,
expressed in dollars, times a specified multiplier for the index
option. (An index is designed to reflect specified facets of a
particular financial or securities market, a specific group of
financial instruments or securities, or certain economic
indicators.)
World Fund may write call options and put options only if
they are "covered." A call option on an index is covered if
World Fund maintains with its custodian cash or cash equivalents
equal to the contract value. A call option is also covered if
World Fund holds a call on the same index as the call written
where the exercise price of the call held is (i) equal to or less
than the exercise price of the call written, or (ii) greater than
the exercise price of the call written, provided the difference
is maintained by World Fund in cash or cash equivalents in a
segregated account with its Custodian. A put option is also
covered if World Fund holds a put on the same index as the put
written where the exercise price of the put held is (i) equal to
or greater than the exercise price of the put written, or (ii)
less than the exercise price of the put written, provided the
difference is maintained by World Fund in cash or cash
equivalents in a segregated account with its Custodian.
If an option written by World Fund expires, World Fund will
realize a capital gain equal to the premium received at the time
the option was written. If an option purchased by World Fund
expires unexercised, World Fund will realize a capital loss equal
to the premium paid.
Prior to the earlier of exercise or expiration, an option
may be closed out by an offsetting purchase or sale of an option
of the same series (type, exchange, index, exercise price, and
expiration). There can be no assurance, however, that a closing
purchase or sale transaction can be effected when World Fund
desires.
Investment Restrictions. Each of the Funds has imposed upon
itself certain investment restrictions which, together with its
investment objective and policies, are fundamental policies
except as otherwise indicated. No changes in either Fund's
investment objective and policies or investment restrictions
(except those which are not fundamental policies) can be made
without the approval of that Fund's Shareholders. For this
purpose, the provisions of the 1940 Act require, with respect to
either Fund, the affirmative vote of the lesser of either (1) 67%
or more of the Shares of a Fund present at a Shareholders'
meeting at which more than 50% of the outstanding Shares of such
Fund are present or represented by proxy or (2) more than 50% of
the outstanding Shares of a Fund.
In accordance with these restrictions, neither of the Funds
will:
1. Invest in real estate or mortgages on real estate
(although each Fund may invest in marketable securities
secured by real estate or interests therein or issued
by companies or investment trusts which invest in real
estate or interests therein); invest in other open-end
investment companies; invest in interests (other than
debentures or equity stock interests) in oil, gas or
other mineral exploration or development programs; or
purchase or sell commodity contracts except that World
Fund may purchase or sell stock index futures
contracts.
2. Purchase or retain securities of any company in which
Directors or officers of the Company or of its
Investment Manager, individually owning more than of
1% of the securities of such company, in the aggregate
own more than 5% of the securities of such company.
3. Purchase more than 10% of any class of securities of
any one company, including more than 10% of its
outstanding voting securities, or invest in any company
for the purpose of exercising control or management.
4. Act as an underwriter; issue senior securities;
purchase on margin or sell short; write, buy or sell
puts, calls, straddles or spreads (but World Fund may
make margin payments in connection with, and purchase
and sell, stock index futures contracts and options on
securities indices).
5. Loan money apart from the purchase of a portion of an
issue of publicly distributed bonds, debentures, notes
and other evidences of indebtedness, although the Funds
may buy from a bank or broker-dealer United States and
Canadian government obligations with a simultaneous
agreement by the seller to repurchase them within no
more than seven days at the original purchase price
plus accrued interest.
6. Borrow money for any purpose other than redeeming its
Shares or purchasing its Shares for cancellation, and
then only as a temporary measure up to an amount not
exceeding 5% of the value of its total assets; or
pledge, mortgage or hypothecate its assets for any
purpose other than to secure such borrowings, and then
only up to such extent not exceeding 10% of the value
of its total assets as the Company's Board of Directors
may by resolution approve. As an operating policy
approved by the Board of Directors of the Company,
neither Fund will pledge, mortgage or hypothecate its
assets to the extent that at any time the percentage of
pledged assets plus the sales commission will exceed
10% of the Offering Price of the Shares of a Fund.
(For purposes of this restriction, collateral
arrangements by World Fund with respect to margin for a
stock index futures contract are not deemed to be a
pledge of assets.)
7. Invest more than 5% of the value of a Fund's total
assets in securities of issuers which have been in
continuous operation less than three years.
8. Invest more than 5% of a Fund's total assets in
warrants, whether or not listed on the New York or
American Stock Exchange, including no more than 2% of
its total assets which may be invested in warrants that
are not listed on those exchanges. Warrants acquired
by a Fund in units or attached to securities are not
included in this restriction. This restriction does
not apply to options on securities indices.
9. Invest more than 15% of a Fund's total assets in
securities of foreign issuers which are not listed on a
recognized United States or foreign securities
exchange, including no more than 10% of its total
assets (including warrants) which may be invested in
securities with a limited trading market. A Fund's
position in the latter type of securities may be of
such size as to affect adversely their liquidity and
marketability and a Fund may not be able to dispose of
its holdings in these securities at the current market
price.
10. Invest more than 25% of a Fund's total assets in a
single industry.
11. Invest in "letter stocks" or securities on which there
are any sales restrictions under a purchase agreement.
12. Participate on a joint or a joint and several basis in
any trading account in securities. (See "Investment
Objectives and Policies--Trading Policies" as to
transactions in the same securities for World Fund,
Foreign Fund, and/or other mutual funds with the same
or affiliated advisers.)
Whenever any investment policy or investment restriction
states a maximum percentage of either Fund's assets which may be
invested in any security or other property, it is intended that
such maximum percentage limitation be determined immediately
after and as a result of that Fund's acquisition of such security
or property. The value of a Fund's assets is calculated as
described in its Prospectus under the heading "How to Buy Shares
of the Fund." Nothing in the investment policy or investment
restrictions (except restrictions 9 and 10) shall be deemed to
prohibit either Fund from purchasing securities pursuant to
subscription rights distributed to either Fund by any issuer of
securities held at the time in its portfolio (as long as such
purchase is not contrary to either Fund's status as a diversified
investment company under the 1940 Act).
Risk Factors. Each Fund has an unlimited right to purchase
securities in any foreign country, developed or underdeveloped,
if they are listed on a stock exchange, as well as a limited
right to purchase such securities if they are unlisted.
Investors should consider carefully the substantial risks
involved in securities of companies and governments of foreign
nations, which are in addition to the usual risks inherent in
domestic investments.
There may be less publicly available information about
foreign companies comparable to the reports and ratings published
about companies in the United States. Foreign companies are not
generally subject to uniform accounting, auditing and financial
reporting standards, and auditing practices and requirements may
not be comparable to those applicable to United States companies.
A Fund, therefore, may encounter difficulty in obtaining market
quotations for purposes of valuing its portfolio and calculating
its net asset value. Foreign markets have substantially less
volume than the New York Stock Exchange and securities of some
foreign companies are less liquid and more volatile than
securities of comparable United States companies. Although
neither Fund may invest more than 15% of its total assets in
unlisted foreign securities, including not more than 10% of its
total assets in securities with a limited trading market, in the
opinion of management such securities with a limited trading
market do not present a significant liquidity problem.
Commission rates in foreign countries, which are generally fixed
rather than subject to negotiation as in the United States, are
likely to be higher. In many foreign countries there is less
government supervision and regulation of stock exchanges, brokers
and listed companies than in the United States.
Investments in companies domiciled in developing countries
may be subject to potentially higher risks than investments in
developed countries. These risks include (i) less social,
political and economic stability; (ii) the small current size of
the markets for such securities and the currently low or
nonexistent volume of trading, which result in a lack of
liquidity and in greater price volatility; (iii) certain national
policies which may restrict a Fund's investment opportunities,
including restrictions on investment in issuers or industries
deemed sensitive to national interests; (iv) foreign taxation;
(v) the absence of developed legal structures governing private
or foreign investment or allowing for judicial redress for injury
to private property; (vi) the absence, until recently in certain
Eastern European countries, of a capital market structure or
market-oriented economy; and (vii) the possibility that recent
favorable economic developments in Eastern Europe may be slowed
or reversed by unanticipated political or social events in such
countries.
In addition, many countries in which a Fund may invest have
experienced substantial, and in some periods extremely high,
rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had any may continue to have
negative effects on the economies and securities markets of
certain countries. Moreover, the economies of some developing
countries may differ favorably or unfavorably from the United
States economy in such respects as growth of gross domestic
product, rate of inflation, currency depreciation, capital
reinvestment, resource self-sufficiency and balance of payments
position.
Investments in Eastern European countries may involve risks
of nationalization, expropriation and confiscatory taxation. The
Communist governments of a number of Eastern European countries
expropriated large amounts of private property in the past, in
many cases without adequate compensation, and there can be no
assurance that such expropriation will not occur in the future.
In the event of such expropriation, a Fund could lose a
substantial portion of any investments it has made in the
affected countries. Further, no accounting standards exist in
Eastern European countries. Finally, even though certain Eastern
European currencies may be convertible into United States
dollars, the conversion rates may be artificial to the actual
market values and may be adverse to a Fund's Shareholders.
Each Fund endeavors to buy and sell foreign currencies on as
favorable a basis as practicable. Some price spread in currency
exchange (to cover service charges) will be incurred,
particularly when a Fund changes investments from one country to
another or when proceeds of the sale of Shares in U.S. dollars
are used for the purchase of securities in foreign countries.
Also, some countries may adopt policies which would prevent a
Fund from transferring cash out of the country or withhold
portions of interest and dividends at the source. There is the
possibility of cessation of trading on national exchanges,
expropriation, nationalization or confiscatory taxation,
withholding and other foreign taxes on income or other amounts,
foreign exchange controls (which may include suspension of the
ability to transfer currency from a given country), default in
foreign government securities, political or social instability,
or diplomatic developments which could affect investments in
securities of issuers in foreign nations.
Either Fund may be affected either unfavorably or favorably
by fluctuations in the relative rates of exchange between the
currencies of different nations, by exchange control regulations
and by indigenous economic and political developments. Some
countries in which a Fund may invest may also have fixed or
managed currencies that are not free-floating against the U.S.
dollar. Further, certain currencies may not be internationally
traded. Certain of these currencies have experienced a steady
devaluation relative to the U.S. dollar. Any devaluations in the
currencies in which a Fund's portfolio securities are denominated
may have a detrimental impact on that Fund. Through the flexible
policy of the Funds, the Investment Manager endeavors to avoid
unfavorable consequences and to take advantage of favorable
developments in particular nations where from time to time it
places the investments of either Fund.
The exercise of this flexible policy may include decisions
to purchase securities with substantial risk characteristics and
other decisions such as changing the emphasis on investments from
one nation to another and from one type of security to another.
Some of these decisions may later prove profitable and others may
not. No assurance can be given that profits, if any, will exceed
losses.
The Directors consider at least annually the likelihood of
the imposition by any foreign government of exchange control
restrictions which would affect the liquidity of either Fund's
assets maintained with custodians in foreign countries, as well
as the degree of risk from political acts of foreign governments
to which such assets may be exposed. They also consider the
degree of risk involved through the holding of portfolio
securities in domestic and foreign securities depositories (see
"Investment Management and Other Services--Custodian and Transfer
Agent"). However, in the absence of willful misfeasance, bad
faith or gross negligence on the part of the Investment Manager,
any losses resulting from the holding of either Fund's portfolio
securities in foreign countries and/or with securities
depositories will be at the risk of the Shareholders. No
assurance can be given that the Directors' appraisal of the risks
will always be correct or that such exchange control restrictions
or political acts of foreign governments might not occur.
There are additional risks involved in stock index futures
transactions. These risks relate to World Fund's ability to
reduce or eliminate its futures positions, which will depend upon
the liquidity of the secondary markets for such futures. World
Fund intends to purchase or sell futures only on exchanges or
boards of trade where there appears to be an active secondary
market, but there is no assurance that a liquid secondary market
will exist for any particular contract at any particular time.
Use of stock index futures for hedging may involve risks because
of imperfect correlations between movements in the prices of the
stock index futures on the one hand and movements in the prices
of the securities being hedged or of the underlying stock index
on the other. Successful use of stock index futures by World
Fund for hedging purposes also depends upon the Investment
Manager's ability to predict correctly movements in the direction
of the market, as to which no assurance can be given.
There are several risks associated with transactions in
options on securities indices. For example, there are
significant differences between the securities and options
markets that could result in an imperfect correlation between
these markets, causing a given transaction not to achieve its
objectives. A decision as to whether, when and how to use
options involves the exercise of skill and judgment, and even a
well-conceived transaction may be unsuccessful to some degree
because of market behavior or unexpected events. There can be no
assurance that a liquid market will exist when World Fund seeks
to close out an option position. If World Fund were unable to
close out an option that it had purchased on a securities index,
it would have to exercise the option in order to realize any
profit or the option may expire worthless. If trading were
suspended in an option purchased by World Fund, it would not be
able to close out the option. If restrictions on exercise were
imposed, World Fund might be unable to exercise an option it has
purchased. Except to the extent that a call option on an index
written by World Fund is covered by an option on the same index
purchased by World Fund, movements in the index may result in a
loss to World Fund; however, such losses may be mitigated by
changes in the value of World Fund's securities during the period
the option was outstanding.
Trading Policies. The Investment Manager and its affiliated
companies serve as investment adviser to other investment
companies and private clients. Accordingly, the respective
portfolios of these funds and clients may contain many or some of
the same securities. When any two or more of these funds or
clients are engaged simultaneously in the purchase or sale of the
same security, the transactions are placed for execution in a
manner designed to be equitable to each party. The larger size
of the transaction may affect the price of the security and/or
the quantity which may be bought or sold for each party. If the
transaction is large enough, brokerage commissions in certain
countries may be negotiated below those otherwise chargeable.
Sale or purchase of securities, without payment of brokerage
commissions, fees (except customary transfer fees) or other
remuneration in connection therewith, may be effected between any
of these funds, or between funds and private clients, under
procedures adopted pursuant to Rule 17a-7 under the 1940 Act.
Personal Securities Transactions. Access persons of the
Franklin Templeton Group, as defined in SEC Rule 17(j) under the
1940 Act, who are employees of Franklin Resources, Inc. or their
subsidiaries, are permitted to engage in personal securities
transactions subject to the following general restrictions and
procedures: (1) The trade must receive advance clearance from a
Compliance Officer and must be completed within 24 hours after
this clearance; (2) Copies of all brokerage confirmations must be
sent to the Compliance Officer and within 10 days after the end
of each calendar quarter, a report of all securities transactions
must be provided to the Compliance Officer; (3) In addition to
items (1) and (2), access persons involved in preparing and
making investment decisions must file annual reports of their
securities holdings each January and also inform the Compliance
Officer (or other designated personnel) if they own a security
that is being considered for a fund or other client transaction
or if they are recommending a security in which they have an
ownership interest for purchase or sale by a fund or other
client.
MANAGEMENT OF THE COMPANY
The name, address, principal occupation during the past five
years and other information with respect to each of the Directors
and Executive Officers of the Company are as follows:
Name, Address and Principal Occupation
Offices with Company During Past Five Years
F. BRUCE CLARKE Retired; former credit advisor,
19 Vista View Blvd. National Bank of Canada; a
Thornhill, Ontario director or trustee of other
Director Templeton Funds.
JOHN G. BENNETT, JR. A director or trustee of other
3 Radnor Corporate Center Templeton Funds; founder, chairman
Suite 150 of the board, and president of the
100 Matsonford Road Foundation for New Era
Radnor, Pennsylvania Philanthropy; president and
Director chairman of the boards of the
Evelyn M. Bennett Memorial
Foundation and NEP International
Trust; chairman of the board and
chief executive officer of The
Bennett Group International, LTD;
chairman of the boards of Human
Service Systems, Inc. and Multi-
Media Communicators, Inc.; a
director or trustee of many
national and international
organizations, universities, and
grant-making foundations serving
in various executive board
capacities; member of the Public
Policy Committee of the
Advertising Council.
FRED R. MILLSAPS A director or trustee of other
2665 NE 37th Drive Templeton Funds; manager of
Fort Lauderdale, Florida personal investments (1978-
Director present); chairman and chief
executive officer of Landmark
Banking Corporation (1969-1978);
financial vice president of
Florida Power and Light (1965-
1969); vice president of Federal
Reserve Bank of Atlanta (1958-
1965); director of various
business and nonprofit
organizations.
BETTY P. KRAHMER A director or trustee of other
2201 Kentmere Parkway Templeton Funds; director or
Wilmington, Delaware trustee of various civic
Director associations; former economic
analyst, U.S. Government.
HASSO-G VON DIERGARDT-NAGLO Farmer; president of Clairhaven
R.R. 3 Investments, Ltd. and other
Stouffville, Ontario private investment companies; a
Director director or trustee of other
Templeton Funds.
ANDREW H. HINES, JR. Consultant, Triangle Consulting
150 2nd Avenue N. Group; chairman of the board and
St. Petersburg, Florida chief executive officer of Florida
Director Progress Corporation (1982-
February 1990) and director of
various of its subsidiaries;
chairman and director of Precise
Power Corporation; Executive-in-
Residence of Eckerd College (1991-
present); director of Checkers
Drive-In Restaurants, Inc.; a
director or trustee of other
Templeton Funds.
RUPERT H. JOHNSON, JR.* Executive vice president and
777 Mariners Island Blvd. director of Franklin Resources,
San Mateo, California Inc.; president and director,
Director Franklin Advisers, Inc.; executive
vice president and director,
Franklin Templeton Distributors,
Inc.; director, Franklin
Administrative Services, Inc.;
director or trustee of other
Templeton Funds; and officer
and/or director, trustee or
managing general partner, as the
case may be, of most other
subsidiaries of Franklin, and of
most of the investment companies
in the Franklin Group of Funds.
HARRIS J. ASHTON Chairman of the board, president
Metro Center, 1 Station and chief executive officer of
Place General Host Corporation (nursery
Stamford, Connecticut and craft centers); director of
Director RBC Holdings Inc. (a bank holding
company) and Bar-S Foods; director
or trustee of other Templeton
Funds; and director, trustee or
managing general partner, as the
case may be, for most of the
investment companies in the
Franklin Group of Funds.
S. JOSEPH FORTUNATO Member of the law firm of Pitney,
200 Campus Drive Hardin, Kipp & Szuch; director of
Florham Park, New Jersey General Host Corporation; director
Director or trustee of other Templeton
Funds; and director, trustee or
managing general partner, as the
case may be, for most of the
investment companies in the
Franklin Group of Funds.
GORDON S. MACKLIN Chairman of White River
8212 Burning Tree Road Corporation (information
Bethesda, Maryland services); director of Infovest
Director Corporation, Fund America
Enterprise Holdings, Inc., Martin
Marietta Corporation, MCI
Communications Corporation and
Medimmune, Inc.; director or
trustee of other Templeton Funds;
director, trustee, or managing
general partner, as the case may
be, of most of the investment
companies in the Franklin Group of
Funds; formerly: chairman,
Hambrecht and Quist Group;
director, H&Q Healthcare
Investors; and president, National
Association of Securities Dealers,
Inc.
NICHOLAS F. BRADY* A director or trustee of other
The Bullitt House Templeton Funds; chairman of
102 East Dover Street Templeton Emerging Markets
Easton, Maryland Investment Trust PLC; chairman and
Director president of Darby Advisors, Inc.
(an investment firm) since
January, 1993; director of the H.
J. Heinz Company, Capital
Cities/ABC, Inc. and the
Christiana Companies; Secretary of
the United States Department of
the Treasury from 1988 to January,
1993; chairman of the board of
Dillon, Read & Co. Inc.
(investment banking) prior
thereto.
MARK G. HOLOWESKO President and director of
Lyford Cay Templeton, Galbraith & Hansberger
Nassau, Bahamas Ltd.; director of global equity
President research for Templeton Worldwide,
Inc.; president or vice president
of the Templeton Funds; investment
administrator with Roy West Trust
Corporation (Bahamas) Limited
(1984-1985).
CHARLES B. JOHNSON President, chief executive
777 Mariners Island Blvd. officer, and director of Franklin
San Mateo, California Resources, Inc.; chairman of the
Vice President board, Franklin Templeton
Distributors, Inc.; chairman of
the board and director, Franklin
Advisers, Inc.; director, Franklin
Administrative Services, Inc. and
General Host Corporation; director
of Templeton Global Investors,
Inc.; director or trustee of other
Templeton Funds; and officer and
director, trustee or managing
general partner, as the case may
be, of most other subsidiaries of
Franklin and of most of the
investment companies in the
Franklin Group of Funds.
MARTIN L. FLANAGAN Senior vice president, treasurer
777 Mariners Island Blvd. and chief financial officer of
San Mateo, California Franklin Resources, Inc.;
Vice President director, executive vice
president, and chief operating
officer of Templeton Investment
Counsel, Inc. and Templeton Global
Investors, Inc.; president or vice
president of the Templeton Funds;
accountant, Arthur Andersen &
Company (1982-1983); member of the
International Society of Financial
Analysts and the American
Institute of Certified Public
Accountants.
THOMAS M. MISTELE Senior vice president of Templeton
700 Central Avenue Global Investors, Inc.; vice
St. Petersburg, Florida president of Franklin Templeton
Secretary Distributors, Inc.; secretary of
the Templeton Funds; attorney,
Dechert Price & Rhoads (1985-1988)
and Freehill, Hollingdale & Page
(1988); judicial clerk, U.S.
District Court (Eastern District
of Virginia) (1984-1985).
JOHN R. KAY Vice president of the Templeton
500 East Broward Blvd. Funds; vice president and
Fort Lauderdale, Florida treasurer of Templeton Global
Vice President Investors, Inc. and Templeton
Worldwide, Inc.; assistant vice
president of Franklin Templeton
Distributors, Inc.; formerly, vice
president and controller of the
Keystone Group, Inc.
JAMES R. BAIO Certified public accountant;
500 East Broward Blvd. treasurer of the Templeton Funds;
Fort Lauderdale, Florida senior vice president of Templeton
Treasurer Worldwide, Inc., Templeton Global
Investors, Inc., and Templeton
Funds Trust Company; formerly,
senior tax manager of Ernst &
Young (certified public
accountants) (1977-1989).
JACK L. COLLINS Assistant treasurer of the
700 Central Avenue Templeton Funds; assistant vice
St. Petersburg, Florida president of Franklin Templeton
Assistant Treasurer Investor Services, Inc.; former
partner of Grant Thornton,
independent public accountants.
JEFFREY L. STEELE Partner, Dechert Price & Rhoads.
1500 K Street, N.W.
Washington, D.C.
Assistant Secretary
____________________
* Messrs. Templeton, Johnson and Brady are "interested
persons" of the Company as that term is defined in the 1940
Act. Mr. Brady and Franklin Resources, Inc. are limited
partners of Darby Overseas Partners, L.P. ("Darby
Overseas"). Mr. Brady established Darby Overseas in
February, 1994, and is Chairman and a shareholder of the
corporate general partner of Darby Overseas. In addition,
Darby Overseas and Templeton, Galbraith & Hansberger, Ltd.
are limited partners of Darby Emerging Markets Fund, L.P.
Messrs. Clarke, von Diergardt, Millsaps, Hines, Bennett,
Ashton, Macklin and Fortunato and Mrs. Krahmer are not
"interested persons" of the Company.
There are no family relationships between any of the
Directors.
DIRECTOR COMPENSATION
All of the Company's officers and Directors also hold
positions with other investment companies in the Franklin
Templeton Group. No compensation is paid by the Company to any
officer or Director who is an officer, trustee or employee of the
Investment Manager or its affiliates. Each Templeton Fund pays
its independent directors and trustees and Mr. Brady an annual
retainer and/or fees for attendance at Board and Committee
meetings, the amount of which is based on the level of assets in
each fund. Accordingly, based upon the assets of the Company as
of December 31, 1994, the Company will pay the independent
Directors and Mr. Brady an annual retainer of $_________ and a
fee of $________ per meeting attended of the Board and its
Committees. The independent Directors and Mr. Brady are
reimbursed for any expenses incurred in attending meetings, paid
pro rata by each Franklin Templeton fund in which they serve. No
pension or retirement benefits are accrued as part of Trust
expenses.
The following table shows the total compensation paid to the
Directors by the Company and by all investment companies in the
Franklin Templeton Group for the fiscal year ended December 31,
1994:
Number of
Franklin Total
Aggregate Templeton Fund Compensation
Compensation Boards on from All Funds
from the Which Director in Franklin
Name of Director Fund Serves Templeton Group
Harris J. Ashton $ 54 $319,925
John G. Bennett, Jr. 23 105,625
Nicholas F. Brady 23 86,125
F. Bruce Clarke
S. Joseph Fortunato 56 336,065
Andrew H. Hines, Jr. 23 106,125
Betty P. Krahmer 19 75,275
Gordon S. Macklin 51 303,685
Fred R. Millsaps 23 106,125
Hasso G. von
Diergardt-Naglo
PRINCIPAL SHAREHOLDERS
As of __________, 1995, there were ___________ World Fund
Shares outstanding, of which _________ Shares (or ____% of the
total outstanding World Fund Shares) were owned beneficially by
all the Directors and officers of the Company as a group. As of
__________, 1995, no person owned of record or, to the knowledge
of management, owned beneficially, __% or more of the outstanding
World Fund Shares. As of __________, 1995, there were
___________ Foreign Fund Shares outstanding, of which ______
Shares (or ____% of the total outstanding Foreign Fund Shares)
were owned beneficially by all the Directors and officers of the
Company as a group. As of __________, 1995, to the knowledge of
management, no person owned beneficially __% or more of the
outstanding Foreign Fund Shares, except Merrill Lynch, Pierce,
Fenner & Smith, Inc., 4800 Deer Lake Drive East, P.O. Box 45286,
Jacksonville, Florida 32232-5286 owned __________ Shares
(representing ___% of the outstanding Shares).
INVESTMENT MANAGEMENT AND OTHER SERVICES
Investment Management Agreements. The Investment Manager of
each Fund is Templeton, Galbraith & Hansberger Ltd., a Bahamian
corporation with offices in Nassau, Bahamas. On October 30,
1992, the Investment Manager assumed the investment management
duties of Templeton, Galbraith & Hansberger Ltd. ("Old TGH"), a
Cayman Islands corporation, with respect to the Funds in
connection with the merger of the business of Old TGH with that
of Franklin Resources, Inc. ("Franklin"). The Investment
Management Agreements between the Investment Manager and the
Company on behalf of World Fund and Foreign Fund, dated October
30, 1992, were approved by the Shareholders of each Fund on
October 30, 1992, and were last approved by the Board of
Directors, including approval by a majority of the Directors who
were not parties to the Investment Management Agreements or
interested persons of any such party, at a meeting on December 6,
1994 and will continue through December 31, 1995.
The Investment Management Agreements will continue from year
to year thereafter, subject to approval annually by the Board of
Directors or by vote of a majority of the outstanding Shares of
each Fund (as defined in the 1940 Act) and also, in either event,
with the approval of a majority of those Directors who are not
parties to the Agreements or interested persons of any such party
in person at a meeting called for the purpose of voting on such
approval.
Each Investment Management Agreement requires the Investment
Manager to manage the investment and reinvestment of each Fund's
assets. The Investment Manager is not required to furnish any
personnel, overhead items or facilities for the Funds, including
daily pricing or trading desk facilities, although such expenses
are paid by investment advisers of some other investment
companies. These expenses have been and may continue to be borne
by the Funds.
Each Investment Management Agreement provides that the
Investment Manager will select brokers and dealers for execution
of each Fund's portfolio transactions consistent with the
Company's brokerage policies (see "Brokerage Allocation").
Although the services provided by broker-dealers in accordance
with the brokerage policies incidentally may help reduce the
expenses of or otherwise benefit the Investment Manager and other
investment advisory clients of the Investment Manager and of its
affiliates, as well as the Funds, the value of such services is
indeterminable and the Investment Manager's fee is not reduced by
any offset arrangement by reason thereof.
The Investment Manager renders its services to the Funds
from outside the United States. When the Investment Manager
determines to buy or sell the same securities for a Fund that the
Investment Manager or one or more of its affiliates has selected
for one or more of its other clients or for clients of its
affiliates, the orders for all such securities transactions are
placed for execution by methods determined by the Investment
Manager, with approval by the Company's Board of Directors, to be
impartial and fair, in order to seek good results for all parties
(see "Investment Objectives and Policies--Trading Policies").
Records of securities transactions of persons who know when
orders are placed by a Fund are available for inspection at least
four times annually by the Compliance Officer of the Company so
that the non-interested Directors (as defined in the 1940 Act)
can be satisfied that the procedures are generally fair and
equitable for all parties.
Each Investment Management Agreement further provides that
the Investment Manager shall have no liability to the Company, a
Fund or any Shareholder of a Fund for any error of judgment,
mistake of law, or any loss arising out of any investment or
other act or omission in the performance by the Investment
Manager of its duties under the Agreement or for any loss or
damage resulting from the imposition by any government of
exchange control restrictions which might affect the liquidity of
a Fund's assets, or from acts or omissions of custodians or
securities depositories, or from any wars or political acts of
any foreign governments to which such assets might be exposed,
except for any liability, loss or damage resulting from willful
misfeasance, bad faith or gross negligence on the Investment
Manager's part or reckless disregard of its duties under the
Investment Management Agreement. Each Investment Management
Agreement will terminate automatically in the event of its
assignment, and may be terminated by the Company on behalf of a
Fund at any time without payment of any penalty on 60 days'
written notice, with the approval of a majority of the Directors
of the Company in office at the time or by vote of a majority of
the outstanding Shares of a Fund (as defined by the 1940 Act).
Management Fees. For its services, each Fund pays the
Investment Manager a monthly fee equal on an annual basis to
0.75% of the average daily net assets of the Fund up to the first
$200,000,000, reduced to a fee of 0.675% of such average daily
net assets in excess of $200,000,000 up to $1,300,000,000, and
further reduced to a fee of 0.60% of such average daily net
assets in excess of $1,300,000,000. Each class of Shares pays a
portion of the fee, determined by the proportion of the Fund that
it represents. During the fiscal years ended August 31, 1994,
1993 and 1992, the Investment Manager (and, prior to October 30,
1992, Old TGH, the Fund's previous investment manager) received
fees from World Fund of $31,051,062, $25,931,668, and
$23,260,890, respectively, and from Foreign Fund of $23,889,119,
$12,676,159, and $8,710,263, respectively, pursuant to the
Agreement and Agreements in effect prior to October 30, 1992.
The amount of such fee would be reduced by the amount by
which a Fund's annual expenses for all purposes (including the
investment management fee) except taxes, brokerage fees and
commissions, and extraordinary expenses such as litigation,
exceed any applicable state regulations. The strictest rule
currently applicable to a Fund is 2.5% of the first $30,000,000
of net assets, 2.0% of the next $70,000,000 of net assets and
1.5% of the remainder.
The Investment Manager. The Investment Manager is an
indirect wholly owned subsidiary of Franklin, a publicly traded
company whose shares are listed on the New York Stock Exchange.
Charles B. Johnson (an officer of the Fund) and Rupert H.
Johnson, Jr. (a director of the Fund) are principal shareholders
of Franklin and own, respectively, approximately 20% and 16% of
its outstanding shares. Messrs. Charles B. Johnson and Rupert H.
Johnson, Jr. are brothers.
Business Manager. Templeton Global Investors, Inc. performs
certain administrative functions for the Company including:
- providing office space, telephone, office equipment and
supplies for the Company;
- paying all compensation of the Company's officers;
- authorizing expenditures and approving bills for
payment on behalf of the Company;
- supervising preparation of annual and semiannual
reports to Shareholders, notices of dividends, capital
gain distributions and tax credits, and attending to
correspondence and other communications with individual
Shareholders;
- daily pricing of each Fund's investment portfolio and
preparing and supervising publication of daily
quotations of the bid and asked prices of each Fund's
Shares, earnings reports and other financial data;
- monitoring relationships with organizations serving the
Company, including the custodian and printers;
- providing trading desk facilities to the Company;
- supervising compliance by the Company and each Fund
with recordkeeping requirements under the 1940 Act and
regulations thereunder, and with state regulatory
requirements; maintaining books and records for the
Company and each Fund (other than those maintained by
the Custodian and Transfer Agent); and preparing and
filing tax reports other than the Funds' income tax
returns;
- monitoring the qualifications of the Templeton Tax
Deferred Retirement Plans offered by the Company; and
- providing executive, clerical and secretarial help
needed to carry out these responsibilities.
For its services, the Business Manager receives a monthly
fee equal on an annual basis to 0.15% of the first $200,000,000
of the Company's aggregate average daily net assets (i.e., total
of World Fund and Foreign Fund), reduced to 0.135% annually of
the Company's aggregate net assets in excess of $200,000,000,
further reduced to 0.1% annually of such net assets in excess of
$700,000,000, and further reduced to a fee of 0.075% annually of
such net assets in excess of $1,200,000,000. The fee is
allocated between World Fund and Foreign Fund according to their
respective average daily net assets. Each class of Shares pays a
portion of the fee, determined by the proportion of the Fund that
it represents. Since the Business Manager's fee covers services
often provided by investment advisers to other funds, each Fund's
combined expenses for advisory and administrative services may be
higher than those of other investment companies. During the
fiscal years ended August 31, 1994, 1993, and 1992, the Business
Manager (and, prior to April 1, 1993, Templeton Funds Management,
Inc., the previous business manager) received business management
fees of $7,161,271, $5,119,730, and $4,767,286, respectively.
The Business Manager is relieved of liability to the Company
for any act or omission in the course of its performance under
the Business Management Agreement in the absence of willful
misfeasance, bad faith or gross negligence. The Business
Management Agreement may be terminated by the Company at any time
on 60 days' written notice without payment of penalty, provided
that such termination by the Company shall be directed or
approved by vote of a majority of the Directors of the Company in
office at the time or by vote of a majority of the outstanding
voting securities of the Company (as defined by the 1940 Act),
and shall terminate automatically and immediately in the event of
its assignment.
Templeton Global Investors, Inc. is an indirect wholly owned
subsidiary of Franklin.
Custodian and Transfer Agent. The Chase Manhattan Bank,
N.A. serves as Custodian of the Funds' assets, which are
maintained at the Custodian's principal office, MetroTech Center,
Brooklyn, New York 11245, and at the offices of its branches and
agencies throughout the world. The Custodian has entered into
agreements with foreign sub-custodians approved by the Directors
pursuant to Rule 17f-5 under the 1940 Act. The Custodian, its
branches and sub-custodians generally do not hold certificates
for the securities in their custody, but instead have book
records with domestic and foreign securities depositories, which
in turn have book records with the transfer agents of the issuers
of the securities. Compensation for the services of the
Custodian is based on a schedule of charges agreed on from time
to time.
Franklin Templeton Investor Services, Inc. serves as the
Company's Transfer Agent. Services performed by the Transfer
Agent include processing purchase, transfer and redemption
orders, making dividend payments, capital gain distributions and
reinvestments, and handling all routine communications with
Shareholders. The Transfer Agent receives from the Company an
annual fee of $13.74 per Shareholder account plus out-of-pocket
expenses, such fee to be adjusted each year to reflect changes in
the Department of Labor Consumer Price Index.
Legal Counsel. Dechert Price & Rhoads, 1500 K Street, N.W.,
Washington, D.C. 20005, is legal counsel for the Company.
Independent Accountants. The firm of McGladrey & Pullen,
555 Fifth Avenue, New York, New York 10017, serves as independent
accountants for the Company. Its audit services comprise
examination of the Funds' financial statements and review of the
Funds' filings with the Securities and Exchange Commission and
the Internal Revenue Service.
Reports to Shareholders. The Company's fiscal year ends on
August 31. Shareholders will be provided at least semiannually
with reports showing the portfolio of each Fund and other
information, including an annual report with financial statements
audited by the independent accountants.
BROKERAGE ALLOCATION
The Investment Management Agreements provide that the
Investment Manager is responsible for selecting members of
securities exchanges, brokers and dealers (such members, brokers
and dealers being hereinafter referred to as "brokers") for the
execution of the Company's portfolio transactions and, when
applicable, the negotiation of commissions in connection
therewith. All decisions and placements are made in accordance
with the following principles:
1. Purchase and sale orders will usually be placed with
brokers who are selected by the Investment Manager as
able to achieve "best execution" of such orders. "Best
execution" means prompt and reliable execution at the
most favorable securities price, taking into account
the other provisions hereinafter set forth. The
determination of what may constitute best execution and
price in the execution of a securities transaction by a
broker involves a number of considerations, including
without limitation, the overall direct net economic
result to a Fund (involving both price paid or received
and any commissions and other costs paid), the
efficiency with which the transaction is effected, the
ability to effect the transaction at all where a large
block is involved, availability of the broker to stand
ready to execute possibly difficult transactions in the
future, and the financial strength and stability of the
broker. Such considerations are judgmental and are
weighed by the Investment Manager in determining the
overall reasonableness of brokerage commissions.
2. In selecting brokers for portfolio transactions, the
Investment Manager takes into account its past
experience as to brokers qualified to achieve "best
execution," including brokers who specialize in any
foreign securities held by a Fund.
3. The Investment Manager is authorized to allocate
brokerage business to brokers who have provided
brokerage and research services, as such services are
defined in Section 28(e) of the Securities Exchange Act
of 1934 (the "1934 Act"), for the Company and/or other
accounts, if any, for which the Investment Manager
exercises investment discretion (as defined in Section
3(a)(35) of the 1934 Act) and, as to transactions as to
which fixed minimum commission rates are not
applicable, to cause a Fund to pay a commission for
effecting a securities transaction in excess of the
amount another broker would have charged for effecting
that transaction, if the Investment Manager determines
in good faith that such amount of commission is
reasonable in relation to the value of the brokerage
and research services provided by such broker, viewed
in terms of either that particular transaction or the
Investment Manager's overall responsibilities with
respect to the Company and the other accounts, if any,
as to which it exercises investment discretion. In
reaching such determination, the Investment Manager is
not required to place or attempt to place a specific
dollar value on the research or execution services of a
broker or on the portion of any commission reflecting
either of said services. In demonstrating that such
determinations were made in good faith, the Investment
Manager shall be prepared to show that all commissions
were allocated and paid for purposes contemplated by
the Company's brokerage policy; that commissions were
paid only for products or services which provide lawful
and appropriate assistance to the Investment Manager in
the performance of its investment decision-making
responsibilities; and that the commissions paid were
within a reasonable range. The determination that
commissions were within a reasonable range shall be
based on any available information as to the level of
commissions known to be charged by other brokers on
comparable transactions, but there shall be taken into
account the Company's policies that (i) obtaining a low
commission is deemed secondary to obtaining a favorable
securities price, since it is recognized that usually
it is more beneficial to a Fund to obtain a favorable
price than to pay the lowest commission; and (ii) the
quality, comprehensiveness and frequency of research
studies which are provided for the Company and the
Investment Manager are useful to the Investment Manager
in performing its advisory services under its
Investment Management Agreements with the Company.
Research services provided by brokers to the Investment
Manager are considered to be in addition to, and not in
lieu of, services required to be performed by the
Investment Manager under its Investment Management
Agreements. Research furnished by brokers through whom
the Company effects securities transactions may be used
by the Investment Manager for any of its accounts, and
not all such research may be used by the Investment
Manager for the Company. When execution of portfolio
transactions is allocated to brokers trading on
exchanges with fixed brokerage commission rates,
account may be taken of various services provided by
the broker, including quotations outside the United
States for daily pricing of foreign securities held in
a Fund's portfolio.
4. Purchases and sales of portfolio securities within the
United States other than on a securities exchange shall
be executed with primary market makers acting as
principal except where, in the judgment of the
Investment Manager, better prices and execution may be
obtained on a commission basis or from other sources.
5. Sales of the Funds' Shares (which shall be deemed to
include also shares of other investment companies
registered under the 1940 Act which have either the
same investment adviser or an investment adviser
affiliated with the Funds' Investment Manager) made by
a broker are one factor among others to be taken into
account in deciding to allocate portfolio transactions
(including agency transactions, principal transactions,
purchases in underwritings or tenders in response to
tender offers) for the account of a Fund to that
broker; provided that the broker shall furnish "best
execution" as defined in paragraph 1 above, and that
such allocation shall be within the scope of a Funds
policies as stated above; and provided further, that in
every allocation made to a broker in which the sale of
Shares is taken into account there shall be no increase
in the amount of the commissions or other compensation
paid to such broker beyond a reasonable commission or
other compensation determined, as set forth in
paragraph 3 above, on the basis of best execution alone
or best execution plus research services, without
taking account of or placing any value upon such sale
of Shares.
Insofar as known to management, no Director or officer of
the Company, nor the Investment Manager or the Principal
Underwriter or any person affiliated with any of them, has any
material direct or indirect interest in any broker employed by or
on behalf of the Company for either World Fund or Foreign Fund.
Franklin Templeton Distributors, Inc., the Principal Underwriter
for the Company, is a registered broker-dealer but has never
executed any purchase or sale transactions for either Fund's
portfolio or participated in commissions on any such
transactions, and has no intention of doing so in the future.
The total brokerage commissions on World Fund's portfolio
transactions during the fiscal years ended August 31, 1994, 1993,
and 1992 (not including any spreads or concessions on principal
transactions) were $6,895,789, $4,751,804, and $4,070,608. The
total brokerage commissions on Foreign Fund's portfolio
transactions during the fiscal years ended August 31, 1994, 1993,
and 1992 (not including any spreads or concessions on principal
transactions) were $7,329,697, $3,185,372, and $2,445,188. All
portfolio transactions are allocated to broker-dealers only when
their prices and execution, in the good faith judgment of the
Investment Manager, are equal to the best available within the
scope of the Company's policies. There is no fixed method used
in determining which broker-dealers receive which order or how
many orders.
PURCHASE, REDEMPTION AND PRICING OF SHARES
The Prospectuses describe the manner in which the Funds'
Shares may be purchased and redeemed. See "How to Buy Shares of
the Fund" and "How to Sell Shares of the Fund."
Net asset value is determined separately for each Fund. Net
asset value per Share is determined as of the scheduled closing
of the New York Stock Exchange (generally 4:00 p.m., New York
time) every Monday through Friday (exclusive of national business
holidays). The Company's offices will be closed, and net asset
value will not be calculated, on those days on which the New York
Stock Exchange is closed, which currently are: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
Trading in securities on European and Far Eastern securities
exchanges and over-the-counter markets is normally completed well
before the close of business in New York on each day on which the
New York Stock Exchange is open. Trading of European or Far
Eastern securities generally, or in a particular country or
countries, may not take place on every New York business day.
Furthermore, trading takes place in various foreign markets on
days which are not business days in New York and on which a
Fund's net asset value is not calculated. Each Fund calculates
net asset value per Share, and therefore effects sales,
redemptions and repurchases of its Shares, as of the close of the
New York Stock Exchange once on each day on which that Exchange
is open. Such calculation does not take place contemporaneously
with the determination of the prices of many of the portfolio
securities used in such calculation and if events occur which
materially affect the value of those foreign securities, they
will be valued at fair market value as determined by the
management and approved in good faith by the Board of Directors.
The Board of Directors may establish procedures under which
a Fund may suspend the determination of net asset value for the
whole or any part of any period during which (1) the New York
Stock Exchange is closed other than for customary weekend and
holiday closings, (2) trading on the New York Stock Exchange is
restricted, (3) an emergency exists as a result of which disposal
of securities owned by either Fund is not reasonably practicable
or it is not reasonably practicable for either Fund fairly to
determine the value of its net assets, or (4) for such other
period as the Securities and Exchange Commission may by order
permit for the protection of the holders of either Fund's Shares.
Ownership and Authority Disputes. In the event of disputes
involving multiple claims of ownership or authority to control a
shareholder's account, each Fund has the right (but has no
obligation) to: (a) freeze the account and require the written
agreement of all persons deemed by the Fund to have a potential
property interest in the account, prior to executing instructions
regarding the account; or (b) interplead disputed funds or
accounts with a court of competent jurisdiction. Moreover, the
Funds may surrender ownership of all or a portion of an account
to the Internal Revenue Service in response to a Notice of Levy.
In addition to the special purchase plans described in the
Prospectuses, other special purchase plans also are available:
Tax Deferred Retirement Plans. Each Fund offers its
Shareholders the opportunity to participate in the following
types of retirement plans:
- For individuals whether or not covered by other
qualified plans;
- For simplified employee pensions;
- For employees of tax-exempt organizations; and
- For corporations, self-employed individuals and
partnerships.
Capital gains and income received by the foregoing plans
generally are exempt from taxation until distribution from the
plans. Investors considering participation in any such plan
should review specific tax laws relating thereto and should
consult their attorneys or tax advisers with respect to the
establishment and maintenance of any such plan. Additional
information, including the fees and charges with respect to all
of these plans, is available upon request to the Principal
Underwriter. No distribution under a retirement plan will be
made until Franklin Templeton Trust Company receives the
participant's election on IRS Form W-4P (available on request
from Franklin Templeton Trust Company) and such other
documentation as it deems necessary, as to whether or not U.S.
income tax is to be withheld from such distribution.
Individual Retirement Account (IRA). All individuals
(whether or not covered by qualified private or governmental
retirement plans) may purchase Shares of either Fund pursuant to
an Individual Retirement Account. However, contributions to an
IRA by an individual who is covered by a qualified private or
governmental plan may not be tax-deductible depending on the
individual's income. Custodial services for Individual
Retirement Accounts are available through Franklin Templeton
Trust Company. Disclosure statements summarizing certain aspects
of Individual Retirement Accounts are furnished to all persons
investing in such accounts, in accordance with Internal Revenue
Service regulations.
Simplified Employee Pensions (SEP-IRA). For employers who
wish to establish a simplified form of employee retirement
program investing in Shares of either Fund, there are available
Simplified Employee Pensions invested in IRA Plans. Details and
materials relating to these Plans will be furnished upon request
to the Principal Underwriter.
Retirement Plan for Employees of Tax-Exempt Organizations
(403(b)). Employees of public school systems and certain types
of charitable organizations may enter into a deferred
compensation arrangement for the purchase of Shares of either
Fund without being taxed currently on the investment.
Contributions which are made by the employer through salary
reduction are excludable from the gross income of the employee.
Such deferred compensation plans, which are intended to qualify
under Section 403(b) of the Internal Revenue Code, are available
through the Principal Underwriter. Custodian services are
provided by Franklin Templeton Trust Company.
Qualified Plan for Corporations, Self-Employed Individuals
and Partnerships. For employers who wish to purchase Shares of
either Fund in conjunction with employee retirement plans, there
is a prototype master plan which has been approved by the
Internal Revenue Service. A "Section 401(k) plan" is also
available. Franklin Templeton Trust Company furnishes custodial
services for these plans. For further details, including
custodian fees and plan administration services, see the master
plan and related material which is available from the Principal
Underwriter.
Letter of Intent. Purchasers who intend to invest $50,000
or more in Class I Shares of the Funds or any other fund in the
Franklin Templeton Group (except Templeton Capital Accumulator
Fund, Inc., Templeton Variable Annuity Fund, Templeton Variable
Products Series Fund, Franklin Valuemark Funds and Franklin
Government Securities Trust) within 13 months (whether in one
lump sum or in installments, the first of which may not be less
than 5% of the total intended amount and each subsequent
installment not less than $25 unless the investor is a qualifying
employee benefit plan (the "Benefit Plan"), including automatic
investment and payroll deduction plans), and to beneficially hold
the total amount of such Class I Shares fully paid for and
outstanding simultaneously for at least one full business day
before the expiration of that period, should execute a Letter of
Intent ("LOI") on the form provided in the Shareholder
Application in the Prospectus. Payment for not less than 5% of
the total intended amount must accompany the executed LOI unless
the investor is a Benefit Plan. Except for purchases of Shares
by a Benefit Plan, those Class I Shares purchased with the first
5% of the intended amount stated in the LOI will be held as
"Escrowed Shares" for as long as the LOI remains unfulfilled.
Although the Escrowed Shares are registered in the investor's
name, his full ownership of them is conditional upon fulfillment
of the LOI. No Escrowed Shares can be redeemed by the investor
for any purpose until the LOI is fulfilled or terminated. If the
LOI is terminated for any reason other than fulfillment, the
Transfer Agent will redeem that portion of the Escrowed Shares
required and apply the proceeds to pay any adjustment that may be
appropriate to the sales commission on all Class I Shares
(including the Escrowed Shares) already purchased under the LOI
and apply any unused balance to the investor's account. The LOI
is not a binding obligation to purchase any amount of Shares, but
its execution will result in the purchaser paying a lower sales
charge at the appropriate quantity purchase level. A purchase
not originally made pursuant to an LOI may be included under a
subsequent LOI executed within 90 days of such purchase. In this
case, an adjustment will be made at the end of 13 months from the
effective date of the LOI at the net asset value per Share then
in effect, unless the investor makes an earlier written request
to the Principal Underwriter upon fulfilling the purchase of
Shares under the LOI. In addition, the aggregate value of any
Shares, including Class II Shares, purchased prior to the 90-day
period referred to above may be applied to purchases under a
current LOI in fulfilling the total intended purchases under the
LOI. However, no adjustment of sales charges previously paid on
purchases prior to the 90-day period will be made.
If an LOI is executed on behalf of a benefit plan (such
plans are described under "How to Buy Shares of the Fund--Net
Asset Value Purchases" in the Prospectus), the level and any
reduction in sales charge for these employee benefit plans will
be based on actual plan participation and the projected
investments in the Franklin Templeton Group (except Templeton
Capital Accumulator Fund, Inc., Templeton Variable Annuity Fund,
Templeton Variable Products Series Fund, Franklin Valuemark Funds
and Franklin Government Securities Trust) under the LOI. Benefit
Plans are not subject to the requirement to reserve 5% of the
total intended purchase, or to any penalty as a result of the
early termination of a plan, nor are Benefit Plans entitled to
receive retroactive adjustments in price for investments made
before executing LOIs.
Special Net Asset Value Purchases. As discussed in the
Prospectus under "How to Buy Shares of the Fund - Description of
Special Net Asset Value Purchases," certain categories of
investors may purchase Class I Shares of a Fund net asset value
(without a front-end or contingent deferred sales charge). FTD
or one of its affiliates may make payments, out of its own
resources, to securities dealers who initiate and are responsible
for such purchases, as indicated below. FTD may make these
payments in the form of contingent advance payments, which may
require reimbursement from the securities dealers with respect to
certain redemptions made within 12 months of the calendar month
following purchase, as well as other conditions, all of which may
be imposed by an agreement between FTD, or its affiliates, and
the securities dealer.
The following amounts will be paid by FTD or one of its
affiliates, out of its own resources, to securities dealers who
initiate and are responsible for (i) purchases of most equity and
fixed-income Franklin Templeton Funds made at net asset value by
certain designated retirement plans (excluding IRA and IRA
rollovers): 1.00% on sales of $1 million but less than $2 millon,
plus 0.80% on sales of $2 million but less than $3 million, plus
0.50% on sales of $3 million but less than $50 million, plus
0.25% on sales of $50 million but less than $100 million, plus
0.15% on sales of $100 million or more; and (ii) purchases of
most fixed-income Franklin Templeton Funds made at net asset
value by non-designated retirement plans: 0.75% on sales of $1
million but less than $2 million, plus 0.60% on sales of $2
million but less than $3 million, plus 0.50% on sales of $3
million but less than $50 million, plus 0.25% on sales of $50
million but less than $100 million, plus 0.15% on sales of $100
million or more. These payment breakpoints are reset every 12
months for purposes of additional purchases. With respect to
purchases made at net asset value by certain trust companies and
trust departments of banks and certain retirement plans of
organizations with collective retirement plan assets of $10
million or more, FTD, or one of its affiliates, out of its own
resources, may pay up to 1% of the amount invested.
TAX STATUS
Each of the Funds intends normally to pay a dividend at
least once annually representing substantially all of its net
investment income (which includes, among other items, dividends
and interest) and to distribute at least annually any realized
capital gains. By so doing and meeting certain diversification
of assets and other requirements of the Internal Revenue Code of
1986, as amended (the "Code"), each Fund intends to qualify
annually as a regulated investment company under the Code. The
status of the Funds as regulated investment companies does not
involve government supervision of management or of their
investment practices or policies. As a regulated investment
company, a Fund generally will be relieved of liability for U.S.
Federal income tax on that portion of its net investment income
and net realized capital gains which it distributes to its
Shareholders. Amounts not distributed on a timely basis in
accordance with a calendar year distribution requirement also are
subject to a nondeductible 4% excise tax. To prevent application
of the excise tax, each Fund intends to make distributions in
accordance with the calendar year distribution requirement.
Dividends of net investment income and net short-term
capital gains are taxable to Shareholders as ordinary income.
Distributions of net investment income may be eligible for the
corporate dividends-received deduction to the extent attributable
to a Fund's qualifying dividend income. However, the alternative
minimum tax applicable to corporations may reduce the benefit of
the dividends-received deduction. Distributions of net capital
gains (the excess of net long-term capital gains over net short-
term capital losses) designated by a Fund as capital gain
dividends are taxable to Shareholders as long-term capital gains,
regardless of the length of time the Fund's Shares have been held
by a Shareholder, and are not eligible for the dividends-received
deduction. All dividends and distributions are taxable to
Shareholders, whether or not reinvested in Shares of a Fund.
Shareholders will be notified annually as to the Federal tax
status of dividends and distributions they receive and any tax
withheld thereon.
Distributions by a Fund reduce the net asset value of the
Fund Shares. Should a distribution reduce the net asset value
below a Shareholder's cost basis, the distribution nevertheless
would be taxable to the Shareholder as ordinary income or capital
gain as described above, even though, from an investment
standpoint, it may constitute a partial return of capital. In
particular, investors should be careful to consider the tax
implication of buying Shares just prior to a distribution by a
Fund. The price of Shares purchased at that time includes the
amount of the forthcoming distribution, but the distribution will
generally be taxable to them.
Certain of the debt securities acquired by the Funds may be
treated as debt securities that were originally issued at a
discount. Original issue discount can generally be defined as
the difference between the price at which a security was issued
and its stated redemption price at maturity. Although no cash
income is actually received by the Funds, original issue discount
on a taxable debt security earned in a given year generally is
treated for Federal income tax purposes as interest and,
therefore, such income would be subject to the distribution
requirements of the Code.
Some of the debt securities may be purchased by the Funds at
a discount which exceeds the original issue discount on such debt
securities, if any. This additional discount represents market
discount for Federal income tax purposes. The gain realized on
the disposition of any taxable debt security having market
discount will be treated as ordinary income to the extent it does
not exceed the accrued market discount on such debt security.
Generally, market discount accrues on a daily basis for each day
the debt security is held by a Fund at a constant rate over the
time remaining to the debt security's maturity or, at the
election of a Fund, at a constant yield to maturity which takes
into account the semi-annual compounding of interest.
A Fund may invest in stocks of foreign companies that are
classified under the Code as passive foreign investment companies
("PFICs"). In general, a foreign company is classified as a PFIC
if at least one-half of its assets constitute investment-type
assets or 75% or more of its gross income is investment-type
income. Under the PFIC rules, an "excess distribution" received
with respect to PFIC stock is treated as having been realized
ratably over the period during which a Fund held the PFIC stock.
A Fund itself will be subject to tax on the portion, if any, of
the excess distribution that is allocated to that Fund's holding
period in prior taxable years (and an interest factor will be
added to the tax, as if the tax had actually been payable in such
prior taxable years) even though the Fund distributes the
corresponding income to Shareholders. Excess distributions
include any gain from the sale of PFIC stock as well as certain
distributions from a PFIC. All excess distributions are taxable
as ordinary income.
A Fund may be able to elect alternative tax treatment with
respect to PFIC stock. Under an election that currently may be
available, a Fund generally would be required to include in its
gross income its share of the earnings of a PFIC on a current
basis, regardless of whether any distributions are received from
the PFIC. If this election is made, the special rules, discussed
above, relating to the taxation of excess distributions, would
not apply. In addition, another election may be available that
would involve marking to market the Funds' PFIC shares at the end
of each taxable year (and on certain other dates prescribed in
the Code), with the result that unrealized gains are treated as
though they were realized. If this election were made, tax at
the fund level under the PFIC rules would generally be
eliminated, but the Funds could, in limited circumstances, incur
nondeductible interest charges. Each Fund's intention to qualify
annually as a regulated investment company may limit its
elections with respect to PFIC shares.
Because the application of the PFIC rules may affect, among
other things, the character of gains, the amount of gain or loss
and the timing of the recognition of income with respect to PFIC
stock, as well as subject a Fund itself to tax on certain income
from PFIC stock, the amount that must be distributed to Share-
holders, and which will be taxed to Shareholders as ordinary
income or long-term capital gain, may be increased or decreased
substantially as compared to a fund that did not invest in PFIC
stock.
Income received by a Fund from sources within foreign
countries may be subject to withholding and other income or
similar taxes imposed by such countries. If more than 50% of the
value of a Fund's total assets at the close of its taxable year
consists of securities of foreign corporations, that Fund will be
eligible and intends to elect to "pass through" to the Fund's
Shareholders the amount of foreign taxes paid by that Fund.
Pursuant to this election, a Shareholder will be required to
include in gross income (in addition to taxable dividends
actually received) his pro rata share of the foreign taxes paid
by a Fund, and will be entitled either to deduct (as an itemized
deduction) his pro rata share of foreign income and similar taxes
in computing his taxable income or to use it as a foreign tax
credit against his U.S. Federal income tax liability, subject to
limitations. No deduction for foreign taxes may be claimed by a
Shareholder who does not itemize deductions, but such a
Shareholder may be eligible to claim the foreign tax credit (see
below). Each Shareholder will be notified within 60 days after
the close of the Funds' taxable year whether the foreign taxes
paid by a Fund will "pass through" for that year.
Generally, a credit for foreign taxes is subject to the
limitation that it may not exceed the Shareholder's U.S. tax
attributable to his foreign source taxable income. For this
purpose, if the pass-through election is made, the source of a
Fund's income flows through to its Shareholders. With respect to
a Fund, gains from the sale of securities will be treated as
derived from U.S. sources and certain currency fluctuation gains,
including fluctuation gains from foreign currency denominated
debt securities, receivables and payables, will be treated as
ordinary income derived from U.S. sources. The limitation on the
foreign tax credit is applied separately to foreign source
passive income (as defined for purposes of the foreign tax
credit), including the foreign source passive income passed
through by a Fund. Shareholders may be unable to claim a credit
for the full amount of their proportionate share of the foreign
taxes paid by a Fund. Foreign taxes may not be deducted in
computing alternative minimum taxable income and the foreign tax
credit can be used to offset only 90% of the alternative minimum
tax (as computed under the Code for purposes of this limitation)
imposed on corporations and individuals. If a Fund is not
eligible to make the election to "pass through" to its
Shareholders its foreign taxes, the foreign income taxes it pays
generally will reduce investment company taxable income and the
distributions by a Fund will be treated as United States source
income.
Certain options and futures contracts in which World Fund
may invest are "section 1256 contracts." Gains or losses on
section 1256 contracts generally are considered 60% long-term and
40% short-term capital gains or losses ("60/40"); however,
foreign currency gains or losses (as discussed below) arising
from certain section 1256 contracts may be treated as ordinary
income or loss. Also, section 1256 contracts held by World Fund
at the end of each taxable year (and on certain other dates as
prescribed under the Code) are "marked-to-market" with the result
that unrealized gains or losses are treated as though they were
realized.
Generally, the hedging transactions undertaken by World Fund
may result in "straddles" for U.S. Federal income tax purposes.
The straddle rules may affect the character of gains (or losses)
realized by World Fund. In addition, losses realized by World
Fund on positions that are part of the straddle may be deferred
under the straddle rules, rather than being taken into account in
calculating the taxable income for the taxable year in which the
losses are realized. Because only a few regulations implementing
the straddle rules have been promulgated, the tax consequences to
World Fund of hedging transactions are not entirely clear. The
hedging transactions may increase the amount of short-term
capital gain realized by World Fund which is taxed as ordinary
income when distributed to Shareholders.
World Fund may make one or more of the elections available
under the Code which are applicable to straddles. If World Fund
makes any of the elections, the amount, character, and timing of
the recognition of gains or losses from the affected straddle
positions will be determined under rules that vary according to
the election(s) made. The rules applicable under certain of the
elections may operate to accelerate the recognition of gains or
losses from the affected straddle positions.
Because application of the straddle rules may affect the
character of gains or losses, defer losses and/or accelerate the
recognition of gains or losses from the affected straddle
positions, the amount which must be distributed to Shareholders
and which will be taxed to Shareholders as ordinary income or
long-term capital gain may be increased or decreased as compared
to a fund that did not engage in such hedging transactions.
Requirements relating to the World Fund's tax status as a
regulated investment company may limit the extent to which World
Fund will be able to engage in transactions in options and
futures contracts.
Under the Code, gains or losses attributable to fluctuations
in foreign currency exchange rates which occur between the time a
Fund accrues income or other receivables or accrues expenses or
other liabilities denominated in a foreign currency and the time
a Fund actually collects such receivables or pays such
liabilities generally are treated as ordinary income or ordinary
loss. Similarly, on disposition of debt securities denominated
in a foreign currency and on disposition of certain futures
contracts and options, gains or losses attributable to
fluctuations in the value of foreign currency between the date of
acquisition of the security or contract and the date of
disposition also are treated as ordinary gain or loss. These
gains and losses, referred to under the Code as "section 988"
gains and losses, may increase or decrease the amount of a Fund's
net investment income to be distributed to its Shareholders as
ordinary income. For example, fluctuations in exchange rates may
increase the amount of income that a Fund must distribute in
order to qualify for treatment as a regulated investment company
and to prevent application of an excise tax on undistributed
income. Alternatively, fluctuations in exchange rates may
decrease or eliminate income available for distribution. If
section 988 losses exceed other net investment income during a
taxable year, a Fund would not be able to make ordinary dividend
distributions, or distributions made before the losses were
realized would be recharacterized as return of capital to
Shareholders for Federal income tax purposes, rather than as an
ordinary dividend, reducing each Shareholder's basis in his Fund
Shares.
Upon the sale or exchange of his Shares, a Shareholder will
realize a taxable gain or loss depending upon his basis in the
Shares. Such gain or loss will be treated as capital gain or
loss if the Shares are capital assets in the Shareholder's hands,
and generally will be long-term if the Shareholder's holding
period for the Shares is more than one year and generally
otherwise will be short-term. Any loss realized on a sale or
exchange will be disallowed to the extent that the Shares
disposed of are replaced (including replacement through the
reinvesting of dividends and capital gain distributions in a
Fund) within a period of 61 days beginning 30 days before and
ending 30 days after the disposition of the Shares. In such a
case, the basis of the Shares acquired will be adjusted to
reflect the disallowed loss. Any loss realized by a Shareholder
on the sale of a Fund's Shares held by the Shareholder for six
months or less will be treated for Federal income tax purposes as
a long-term capital loss to the extent of any distributions of
long-term capital gains received by the Shareholder with respect
to such Shares.
In some cases, Shareholders will not be permitted to take
sales charges into account for purposes of determining the amount
of gain or loss realized on the disposition of their Shares.
This prohibition generally applies where (1) the Shareholder
incurs a sales charge in acquiring the stock of a regulated
investment company, (2) the stock is disposed of before the 91st
day after the date on which it was acquired, and (3) the
Shareholder subsequently acquires shares of the same or another
regulated investment company and the otherwise applicable sales
charge is reduced or eliminated under a "reinvestment right"
received upon the initial purchase of shares of stock. In that
case, the gain or loss recognized will be determined by excluding
from the tax basis of the Shares exchanged all or a portion of
the sales charge incurred in acquiring those Shares. This
exclusion applies to the extent that the otherwise applicable
sales charge with respect to the newly acquired Shares is reduced
as a result of having incurred a sales charge initially. Sales
charges affected by this rule are treated as if they were
incurred with respect to the stock acquired under the
reinvestment right. This provision may be applied to successive
acquisitions of stock.
Each Fund generally will be required to withhold Federal
income tax at a rate of 31% ("backup withholding") from dividends
paid, capital gain distributions, and redemption proceeds to
Shareholders if (1) the Shareholder fails to furnish a Fund with
the Shareholder's correct taxpayer identification number or
social security number and to make such certifications as a Fund
may require, (2) the Internal Revenue Service notifies the
Shareholder or a Fund that the Shareholder has failed to report
properly certain interest and dividend income to the Internal
Revenue Service and to respond to notices to that effect, or (3)
when required to do so, the Shareholder fails to certify that he
is not subject to backup withholding. Any amounts withheld may
be credited against the Shareholder's Federal income tax
liability.
Ordinary dividends and taxable capital gain distributions
declared in October, November, or December with a record date in
such month and paid during the following January will be treated
as having been paid by a Fund and received by Shareholders on
December 31 of the calendar year in which declared, rather than
the calendar year in which the dividends are actually received.
Distributions also may be subject to state, local and
foreign taxes. U.S. tax rules applicable to foreign investors
may differ significantly from those outlined above. Shareholders
are advised to consult their own tax advisers for details with
respect to the particular tax consequences to them of an
investment in either Fund.
PRINCIPAL UNDERWRITER
Franklin Templeton Distributors, Inc. ("FTD" or the
"Principal Underwriter"), P.O. Box 33030, St. Petersburg, Florida
33733-8030, toll free telephone (800) 237-0738, is the Principal
Underwriter of each Fund's Shares. FTD is a wholly owned
subsidiary of Franklin.
The Company, pursuant to Rule 12b-1 under the 1940 Act, has
adopted a Distribution Plan with respect to each class of shares
("Plans") on behalf of each Fund. Under the Plans adopted with
respect to Class I Shares, a Fund may reimburse the Principal
Underwriter or others quarterly (subject to a limit of 0.25% per
annum of each Fund's average daily net assets attributable to
Class I Shares) for costs and expenses incurred by FTD or others
in connection with any activity which is primarily intended to
result in the sale of a Fund's Shares. Under the Plans adopted
with respect to Class II Shares, each Fund may reimburse FTD or
others quarterly (subject to a limit of 1.00% per annum of each
Fund's average daily assets attributable to Class II Shares of
which up to 0.25% of such net assets may be paid to dealers for
personal service and/or maintenance of Shareholder accounts) for
costs and expenses incurred by FTD or others in connection with
any activity which is primarily intended to result in the sale of
the Fund's Shares. Payments to FTD or others could be for
various types of activities, including (1) payments to broker-
dealers who provide certain services of value to each Fund's
Shareholders (sometimes referred to as a "trail fee"); (2)
reimbursement of expenses relating to selling and servicing
efforts or of organizing and conducting sales seminars; (3)
payments to employees or agents of the Principal Underwriter who
engage in or support distribution of Shares; (4) payments of the
costs of preparing, printing and distributing Prospectuses and
reports to prospective investors and of printing and advertising
expenses; (5) payment of dealer commissions and wholesaler
compensation in connection with sales of a Fund's Shares
exceeding $1 million (on which the Company imposes no initial
sales charge) and interest or carrying charges in connection
therewith; and (6) such other similar services as the Company's
Board of Directors determines to be reasonably calculated to
result in the sale of Shares. Under the Plans, the costs and
expenses not reimbursed in any one given quarter (including costs
and expenses not reimbursed because they exceed the percentage
limit applicable to either class of Shares) may be reimbursed in
subsequent quarters or years.
During the fiscal year ended August 31, 1994, FTD incurred
costs and expenses of $9,002,860 in connection with distribution
of Class I Shares of World Fund and $9,561,351 in connection with
the distribution of Class I Shares of Foreign Fund. During the
same period, the Company made reimbursements pursuant to the
Plans in the amount of $9,002,860 on behalf of Class I Shares of
World Fund and $9,215,946 on behalf of Class I Shares of Foreign
Fund. As indicated above, unreimbursed expenses, which amount to
$345,405 for Class I Shares of Foreign Fund, may be reimbursed by
the Company during the fiscal year ending August 31, 1995 or in
subsequent years. In the event that either Plan is terminated,
the Company will not be liable to FTD for any unreimbursed
expenses that had been carried forward from previous months or
years. During the fiscal year ended August 31, 1994, FTD spent,
with respect to World Fund, the following amounts on:
compensation to dealers, $7,628,837; sales promotion, $157,063;
printing, $149,210; advertising, $1,025,787; and wholesale costs
and expenses, $41,963; and, with respect to Foreign Fund, the
following amounts on: compensation to dealers, $7,155,215; sales
promotion, $133,278; printing, $420,157; advertising, $1,496,754;
and wholesale costs and expenses, $355,947.
The Underwriting Agreement provides that the Principal
Underwriter will use its best efforts to maintain a broad and
continuous distribution of each Fund's Shares among bona fide
investors and may sign selling contracts with responsible
dealers, as well as sell to individual investors. The Shares are
sold only at the Offering Price in effect at the time of sale,
and each Fund receives not less than the full net asset value of
the Shares sold. The discount between the Offering Price and the
net asset value may be retained by the Principal Underwriter or
it may reallow all or any part of such discount to dealers. In
the three fiscal years ended August 31, 1994, 1993, and 1992, FTD
(and, prior to June 1, 1993, Templeton Funds Distributor, Inc.)
retained of such discount $1,931,397, $1,208,991, and $1,371,030,
respectively, or approximately 17.97%, 19.87%, and 16.46% of the
gross sales commissions for those years with respect to World
Fund, and retained $9,452,983, $3,975,783, and $2,883,923,
respectively, or approximately 15.79%, 15.81%, and 17.5% of the
gross sales commissions for those years with respect to Foreign
Fund. The Principal Underwriter in all cases buys Shares from a
Fund acting as principal for its own account. Dealers generally
act as principal for their own account in buying Shares from the
Principal Underwriter. No agency relationship exists between any
dealer and a Fund or the Principal Underwriter.
The Underwriting Agreement provides that the Company shall
pay the costs and expenses incident to registering and qualifying
each Fund's Shares for sale under the Securities Act of 1933 and
under the applicable Blue Sky laws of the jurisdictions in which
the Principal Underwriter desires to distribute such Shares, and
for preparing, printing and distributing reports to Shareholders.
The Principal Underwriter pays the cost of printing additional
copies of Prospectuses and reports to Shareholders used for
selling purposes. (The Company pays costs of preparation, set-up
and initial supply of the Funds' Prospectuses for existing
Shareholders.)
The Underwriting Agreement is subject to renewal from year
to year in accordance with the provisions of the 1940 Act and
terminates automatically in the event of its assignment. The
Underwriting Agreement may be terminated without penalty by
either party upon 60 days' written notice to the other, provided
termination by the Company shall be approved by the Board of
Directors or a majority (as defined in the 1940 Act) of the
Shareholders. The Principal Underwriter is relieved of liability
for any act or omission in the course of its performance of the
Underwriting Agreement, in the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of its
obligations.
FTD is the principal underwriter for the other Templeton
Funds.
DESCRIPTION OF SHARES
The Shares of each Fund have the same preferences,
conversion and other rights, voting powers, restrictions and
limitations as to dividends, qualifications and terms and
conditions of redemption, except as follows: all consideration
received from the sale of Shares of either Fund, together with
all income, earnings, profits and proceeds thereof, belongs to
that Fund and is charged with liabilities in respect of that Fund
and of that Fund's part of general liabilities of the Company in
the proportion that the total net assets of the Fund bear to the
total net assets of both Funds. The net asset value of a Share
of either Fund is based on the assets belonging to that Fund less
the liabilities charged to that Fund, and dividends are paid on
Shares of either Fund only out of lawfully available assets
belonging to that Fund. In the event of liquidation or
dissolution of the Company, the Shareholders of each Fund will be
entitled, out of assets of the Company available for
distribution, to the assets belonging to that particular Fund.
The Shares have non-cumulative voting rights so that the
holders of a plurality of the Shares voting for the election of
Directors at a meeting at which 50% of the outstanding Shares are
present can elect all the Directors and in such event, the
holders of the remaining Shares voting for the election of
Directors will not be able to elect any person or persons to the
Board of Directors.
PERFORMANCE INFORMATION
Each Fund may, from time to time, include its total return
in advertisements or reports to Shareholders or prospective
investors. Quotations of average annual total return for each
Fund will be expressed in terms of the average annual compounded
rate of return for periods in excess of one year or the total
return for periods less than one year of a hypothetical
investment in the Fund over periods of one, five, or ten years
(up to the life of the Fund) calculated pursuant to the following
formula: P(1 + T)n = ERV (where P = a hypothetical initial
payment of $1,000, T = the average annual total return for
periods of one year or more or the total return for periods of
less than one year, n = the number of years, and ERV = the ending
redeemable value of a hypothetical $1,000 payment made at the
beginning of the period). All total return figures reflect the
deduction of the maximum initial sales charge and deduction of a
proportional share of a Fund's expenses on an annual basis, and
assume that all dividends and distributions are reinvested when
paid. World Fund's average annual total return for the one-,
five- and ten-year periods ended August 31, 1994 was 12.05%,
9.10% and 13.90%, respectively. Foreign Fund's average annual
total return for the one-, five- and ten-year periods ended
August 31, 1994, was 11.19%, 11.65% and 17.84%, respectively.
Performance information for each Fund may be compared, in
reports and promotional literature, to: (i) the Standard & Poor's
500 Stock Index, Dow Jones Industrial Average, or other unmanaged
indices so that investors may compare each Fund's results with
those of a group of unmanaged securities widely regarded by
investors as representative of the securities market in general;
(ii) other groups of mutual funds tracked by Lipper Analytical
Services, Inc., a widely used independent research firm which
ranks mutual funds by overall performance, investment objectives
and assets, or tracked by other services, companies,
publications, or persons who rank mutual funds on overall
performance or other criteria; and (iii) the Consumer Price Index
(measure for inflation) to assess the real rate of return from an
investment in a Fund. Unmanaged indices may assume the
reinvestment of dividends but generally do not reflect deductions
for administrative and management costs and expenses.
Performance information for each Fund reflects only the
performance of a hypothetical investment in each Fund during the
particular time period on which the calculations are based.
Performance information should be considered in light of each
Fund's investment objective and policies, characteristics and
quality of the portfolio and the market conditions during the
given time period, and should not be considered as a
representation of what may be achieved in the future.
From time to time, each Fund and the Investment Manager may
also refer to the following information:
(1) The Investment Manager's and its affiliates' market share of
international equities managed in mutual funds prepared or
published by Strategic Insight or a similar statistical
organization.
(2) The performance of U.S. equity and debt markets relative to
foreign markets prepared or published by Morgan Stanley
Capital International or a similar financial organization.
(3) The capitalization of U.S. and foreign stock markets as
prepared or published by the International Finance Corp.,
Morgan Stanley Capital International or a similar financial
organization.
(4) The geographic distribution of the Fund's portfolio.
(5) The gross national product and populations, including age
characteristics, of various countries as published by
various statistical organizations.
(6) To assist investors in understanding the different returns
and risk characteristics of various investments, the Fund
may show historical returns of various investments and
published indices (e.g., Ibbotson Associates, Inc. Charts
and Morgan Stanley EAFE - Index).
(7) The major industries located in various jurisdictions as
published by the Morgan Stanley Index.
(8) Rankings by DALBAR Surveys, Inc. with respect to mutual fund
shareholder services.
(9) Allegorical stories illustrating the importance of
persistent long-term investing.
(10) The Fund's portfolio turnover rate and its ranking relative
to industry standards as published by Lipper Analytical
Services, Inc. or Morningstar, Inc.
(11) A description of the Templeton organization's investment
management philosophy and approach, including its worldwide
search for undervalued or "bargain" securities and its
diversification by industry, nation and type of stocks or
other securities.
(12) Quotations from the Templeton organization's founder, Sir
John Templeton,* advocating the virtues of diversification
and long-term investing, including the following:
_______________
* Sir John Templeton is not involved in investment decisions,
which are made by each Fund's Investment Manager.
- "Never follow the crowd. Superior performance is
possible only if you invest differently from the
crowd."
- "Diversify by company, by industry and by
country."
- "Always maintain a long-term perspective."
- "Invest for maximum total real return."
- "Invest - don't trade or speculate."
- "Remain flexible and open-minded about types of
investment."
- "Buy low."
- "When buying stocks, search for bargains among
quality stocks."
- "Buy value, not market trends or the economic
outlook."
- "Diversify. In stocks and bonds, as in much else,
there is safety in numbers."
- "Do your homework or hire wise experts to help
you."
- "Aggressively monitor your investments."
- "Don't panic."
- "Learn from your mistakes."
- "Outperforming the market is a difficult task."
- "An investor who has all the answers doesn't even
understand all the questions."
- "There's no free lunch."
- And now the last principle: Do not be fearful or
negative too often."
In addition, each Fund and the Investment Manager may also
refer to the number of Shareholders in the Fund or the aggregate
number of shareholders in the Franklin Templeton Group or the
dollar amount of fund and private account assets under management
in advertising materials.
FINANCIAL STATEMENTS
The financial statements contained in the 1994 Annual
Reports to Shareholders of Templeton World Fund and Templeton
Foreign Fund are incorporated herein by reference.
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements: Incorporated by reference from
the 1994 Annual Reports to Shareholders of Templeton
World Fund and Templeton Foreign Fund:
Independent Auditors' Report
Investment Portfolios as of August 31, 1994
Statements of Assets and Liabilities as of August 31,
1994
Statements of Operations for the year ended August
31, 1994
Statements of Changes in Net Assets for the years ended
August 31, 1994 and 1993
Notes to Financial Statements
(b) Exhibits
(1) (A) Amended and Restated Articles of
Incorporation dated January 26, 1989
(B) Articles Supplementary dated October 24,
1990*
(C) Articles Supplementary dated October 16,
1993*
(D) Articles Supplementary dated February 22,
1994*
(E) Articles Supplementary dated January 6, 1995
(F) Articles Supplementary dated April 13, 1995
(G) Articles of Amendment dated April 17, 1995
(2) (A) By-laws*
(B) Amendments to the By-laws dated
January 18, 1979 of Articles 6.1, 6.5 and
7.1*
(C) Amendments to Articles 1.1 and 6.5 of By-
laws*
_______________
* Previously filed with Registration Statement No. 2-60067 and
incorporated by reference herein.
(3) Not Applicable
(4) (A) Specimen stock certificate for Templeton
World Fund*
(B) Specimen stock certificate for Templeton
Foreign Fund*
(5) (A) Amended and Restated Investment Management
Agreement -- Templeton World Fund
(B) Amended and Restated Investment Management
Agreement -- Templeton Foreign Fund
(6) (A) Distribution Agreement*
(B) Form of Dealer Agreement*
(7) Not Applicable
(8) (A) Custody Agreement dated June 1, 1984 on
behalf of Templeton World Fund with The Chase
Manhattan Bank, N.A.*
(B) Custody Agreement dated June 1, 1984 on
behalf of Templeton Foreign Fund with The
Chase Manhattan Bank, N.A.*
(9) (A) Business Management Agreement*
(B) Form of Transfer Agent Agreement*
(C) Form of Sub-Transfer Agent Services
Agreement*
(D) Form of Sub-Accounting Services Agreement*
(E) Copy of License Agreement dated October 14,
1977 among Registrant, Templeton Growth Fund,
Ltd., Templeton Investment Counsel Limited
and John M. Templeton, individually, granting
Registrant right to use name "Templeton."*
(F) Form of Sub-Transfer Agent Agreement between
Fidelity Investments Institutional Operations
Company and Templeton Funds Trust Company*
(10) Opinion and consent of counsel (filed with
Rule 24f-2 Notice)
(11) Consent of Independent Public Accountants
(12) Not Applicable
(13) (A) Not Applicable
(13) (B) Investment Letter
(14) Retirement plans*
(15) (A)(1) Distribution Plan -- Templeton World
Fund Class I Shares
(2) Distribution Plan -- Templeton World
Fund Class II Shares
(B)(1) Distribution Plan -- Templeton Foreign
Fund Class I Shares
(2) Distribution Plan -- Templeton Foreign
Fund Class II Shares
(16) Schedule showing computation of performance
quotations provided in response to Item 22*
(18) Form of Multiclass Plan
(27) Financial Data Schedule
Item 25. Persons Controlled by or Under Common Control with
Registrant
None.
Item 26. Number of Record Holders
Title of Class Number of Record Holders
Templeton World Fund 279,846 as of January 31, 1995
Class of Common Shares
of Templeton Funds, Inc.
Templeton Foreign Fund 298,928 as of January 31, 1995
Class of Common Shares
of Templeton Funds, Inc.
Item 27. Indemnification
All officers, directors, employees and agents of the
Registrant are to be indemnified to the fullest extent
permitted by law for any liabilities of any nature
whatsoever incurred in connection with the affairs of
the Registrant, except in cases where willful
misfeasance, bad faith, gross negligence or reckless
disregard of duties to the Registrant are established.
See Article 5.1 of the By-Laws of the Registrant, filed
as Exhibit 2 to the Registration Statement, which is
incorporated herein by reference, for a more complete
description of matters relating to indemnification.
Item 28. Business and Other Connections of Investment Adviser
The business and other connections of Registrant's
investment manager, Templeton, Galbraith & Hansberger
Ltd., are described in Parts A and B.
For information relating to the investment manager's
officers and directors, reference is made to Form ADV
filed under the Investment Advisers Act of 1940 by
Templeton, Galbraith & Hansberger Ltd.
Item 29. Principal Underwriters
(a) Franklin Templeton Distributors, Inc. also acts as
principal underwriter of shares of Templeton
Growth Fund, Inc., Templeton Funds, Inc.,
Templeton Smaller Companies Growth Fund, Inc.,
Templeton Income Trust, Templeton Real Estate
Securities Fund, Templeton Capital Accumulator
Fund, Inc., Templeton Developing Markets Trust,
Templeton American Trust, Inc., Templeton
Institutional Funds, Inc., Templeton Global
Opportunities Trust, Templeton Variable Products
Series Fund, Templeton Global Investment Trust,
Templeton Variable Annuity Fund, AGE High Income
Fund, Inc., Franklin Balance Sheet Investment
Fund, Franklin California Tax Free Income Fund,
Inc., Franklin California Tax Free Trust, Franklin
Custodian Funds, Inc., Franklin Equity Fund,
Franklin Federal Money Fund, Franklin Federal Tax-
Free Income Fund, Franklin Gold Fund, Franklin
International Trust, Franklin Investors Securities
Trust, Franklin Managed Trust, Franklin Money
Fund, Franklin Municipal Securities Trust,
Franklin New York Tax-Free Income Fund, Franklin
New York Tax-Free Trust, Franklin Premier Return
Fund, Franklin Real Estate Securities Fund,
Franklin Strategic Series, Franklin Tax-Advantaged
High Yield Securities Fund, Franklin Tax-
Advantaged International Bond Fund, Franklin Tax-
Advantaged U.S. Government Securities Fund,
Franklin Tax Exempt Money Fund, Franklin Tax-Free
Trust, Franklin Templeton Japan Fund, and
Institutional Fiduciary Trust.
(b) The directors and officers of FTD, located at 700
Central Avenue, St. Petersburg, Florida
33733-9926, are as follows:
Positions and Positions ands
Offices with Offices with
Name Underwriter Registrant
Charles B. Johnson Chairman of the Board Vice President
and Director
Gregory E. Johnson President None
Rupert H. Johnson, Jr. Executive Vice President Director
and Director
Harmon E. Burns Executive Vice President None
and Director
Edward V. McVey Senior Vice President None
Kenneth V. Domingues Senior Vice President None
Martin L. Flanagan Senior Vice President Vice President
and Treasurer
William J. Lippman Senior Vice President None
Richard C. Stoker Senior Vice President None
Charles E. Johnson Senior Vice President None
Deborah R. Gatzek Senior Vice President None
and Assistant Secretary
Peter Black Vice President None
James K. Blinn Vice President None
Bernie Buckley Vice President None
Joel Burns Vice President None
Debra Carter Vice President None
Richard O. Conboy Vice President None
Joe Cronin Vice President None
James F. Duryea Vice President None
James A. Escobedo Vice President None
Loretta Fry Vice President None
Robert N. Geppner Vice President None
John Gould Vice President None
Sheppard G. Griswold Vice President None
Mike Hackett Vice President None
Brad N. Hanson Vice President None
Carolyn L. Hennion Vice President None
Andrew Jennings Vice President None
Peter Jones Vice President None
Philip J. Kearns Vice President None
John Leach Vice President None
Ken Leder Vice President None
Jack Lemein Vice President None
John R. McGee Vice President None
Thomas M. Mistele Vice President Secretary
Harry G. Mumford Vice President None
Mike Nardone Vice President None
Thomas H. O'Connor Vice President None
Vivian J. Palmieri Vice President None
Roger Pearson Vice President None
Richard S. Petrell Vice President None
John Phillips Vice President None
Darrell Plocher Vice President None
Dennis Shannon Vice President None
Robert E. Silvani Vice President None
Kent P. Strazza Vice President None
Susan K. Tallarico Vice President None
Leslie M. Kratter Secretary None
(c) Not applicable (information on unaffiliated
underwriters).
tem 30. Location of Accounts and Records ______
The accounts, books and other documents required to be
maintained by Registrant pursuant to Rule 31a-1(a) of
the Investment Company Act of 1940 are in the
possession of Templeton Global Investors, Inc., 500
East Broward Blvd., Fort Lauderdale, Florida 33394.
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
(a) Not Applicable.
(b) Not Applicable.
(c) Registrant undertakes to furnish to each person to
whom a Prospectus for World Fund or Foreign Fund
is provided a copy of such Fund's latest Annual
Report, upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933 and the Investment Company Act of 1940, the Registrant
certifies that it meets all the requirements for effectiveness of
the Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Post-Effective
Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in
Washington, D.C., on the 26th day of April, 1995.
Templeton Funds, Inc.
By:___________________________
Mark G. Holowesko*
President
*By: /s/ Jeffrey L. Steele
Jeffrey L. Steele
as attorney-in-fact**
Pursuant to the requirements of the Securities Act of
1933, this Post-Effective Amendment to the Registration Statement
has been signed below by the following persons in the capacities
and on the dates indicated:
Signature Title Date
_________________________ President April 26, 1995
Mark G. Holowesko* (Chief Executive
Officer)
_________________________ Director April 26, 1995
Hasso-G von Diergardt-Naglo*
_________________________ Director April 26, 1995
Betty P. Krahmer*
_________________________ Director April 26, 1995
F. Bruce Clarke*
_________________________ Director April 26, 1995
Fred R. Millsaps*
_________________________ Director April 26, 1995
John G. Bennett, Jr.*
_________________________ Director April 26, 1995
Rupert H. Johnson, Jr.*
_________________________ Director April 26, 1995
Harris J. Ashton*
_________________________ Director April 26, 1995
S. Joseph Fortunato*
_________________________ Director April 26, 1995
Andrew H. Hines, Jr.*
_________________________ Director April 26, 1995
Gordon S. Macklin*
_________________________ Director April 26, 1995
Nicholas F. Brady*
_________________________ Treasurer April 26, 1995
James R. Baio* (Chief Financial
and Accounting Officer)
*By:/s/ Jeffrey L. Steele
Jeffrey L. Steele
as attorney-in-fact**
** Powers of Attorney are filed with Post-Effective Amendment
No. 21 to this Registration Statement on August 19, 1992,
Post-Effective Amendment No. 23 to this Registration
Statement on November 2, 1993, Post-Effective Amendment No.
24 to this Registration Statement on December 23, 1993, and
Post-Effective Amendment No. 25 to this Registration
Statement on December 30, 1994.
<PAGE>
EXHIBIT LIST
Exhibit Number Name of Exhibit
(1)(E) Articles Supplementary
(1)(F) Articles Supplementary
(1)(G) Articles of Amendment
(5)(A) Amended and Restated Investment
Management Agreement -- Templeton
World Fund
(5)(B) Amended and Restated Investment
Management Agreement -- Templeton
Foreign Fund
(11) Consent of Independent Public
Accountants
(13)(B) Investment Letter
(15)(A)(1) Distribution Plan -- Templeton
World Fund Class I Shares
(15)(A)(2) Distribution Plan -- Templeton
World Fund Class II Shares
(15)(B)(1) Distribution Plan -- Templeton
Foreign Fund Class I Shares
(15)(B)(2) Distribution Plan -- Templeton
Foreign Fund Class II Shares
(18) Form of Multiclass Plan
(27) Financial Data Schedule
McGLADREY & PULLEN, LLP
Certified Public Accountants and Consultants
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use of our report dated September
27, 1994, on the financial statements of Templeton World Fund and
Foreign Fund, series of Templeton Funds, Inc., referred to
therein, which appears in the 1994 Annual Reports to Shareholders
and which are incorporated herein by reference, in Post-Effective
Amendment No. 26 to the Registration Statement on Form N-1A, File
No. 2-60067 as filed with the Securities and Exchange Commission.
We also consent to the reference to our firm in the
Statement of Additional Information under the caption
"Independent Accountants" and in the Prospectus under the caption
"Financial Highlights."
McGladrey & Pullen, LLP
New York, New York
April 26, 1995
TEMPLETON FUNDS, INC.
ARTICLES OF AMENDMENT
CHANGING NAMES OF SERIES
PURSUANT TO MGCL SECTION 2-605(B)
Templeton Funds, Inc., a Maryland corporation, having its
principal office in Baltimore City, Maryland (hereinafter called
the "Corporation"), hereby certifies to the State Department of
Assessments and Taxation of Maryland that:
FIRST: The Charter of the Corporation is hereby amended to
provide as follows:
(A) The name and designation of the "Templeton World
Fund" series of capital stock of the Corporation is hereby
changed to be "Templeton World Fund Class I" series of capital
stock of the Corporation.
(B) The name and designation of the "Templeton Foreign
Fund" series of capital stock of the Corporation is hereby
changed to be "Templeton Foreign Fund Class I" series of capital
stock of the Corporation.
SECOND: The amendment does not change the outstanding
capital stock of the corporation or the aggregate par value
thereof.
THIRD: The foregoing amendment to the Charter of the
Corporation has been approved by the Board of Directors and is
limited to a change expressly permitted by Section 2-605 of the
Maryland General Corporation Law.
FOURTH: The Corporation is registered as an open-end
company under the Investment Company Act of 1940.
IN WITNESS WHEREOF, the Corporation has caused these
presents to be signed in its name on its behalf by its Vice
President and witnessed by its Assistant Secretary on this 17th
day of April, 1995.
TEMPLETON FUNDS, INC.
By:__________________________
John R. Kay
Vice President
ATTEST:
______________________
Jeffrey L. Steele
Assistant Secretary
THE UNDERSIGNED, the Vice President of Templeton Funds,
Inc., who executed on behalf of the Corporation the foregoing
Articles of Amendment of which this certificate is made a part,
hereby acknowledges in the name and on behalf of the Corporation
the foregoing Articles of Amendment to be the corporate act of
the Corporation and hereby certifies to the best of his
knowledge, information and belief the matters and facts set forth
herein with respect to the authorization and approval thereof are
true in all material respects under the penalties of perjury.
__________________________
John R. Kay
Vice President
TEMPLETON FUNDS, INC.
ARTICLES SUPPLEMENTARY
TEMPLETON FUNDS, INC., a Maryland corporation registered as
an open-end investment company under the Investment Company Act
of 1940 and having its principal office in the State of Maryland
in Baltimore City, Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of
Assessments and Taxation of Maryland that:
FIRST: The Board of Directors of the Corporation, at a
meeting duly convened and held on October 22, 1994, adopted a
resolution to establish a multiple class distribution system for
each series of capital stock of the Corporation (currently,
Templeton World Fund ("World Fund") and Templeton Foreign Fund
("Foreign Fund")), and in connection therewith, (i) increased the
Corporation's authorized capital stock to two billion, seven
hundred million (2,700,000,000) shares of common stock, par value
$1.00 per share, (ii) changed the designation of the eight
hundred million (800,000,000) shares previously designated as
World Fund Common Stock to "World Fund Class I" shares of Common
Stock and classified four hundred million (400,000,000) shares as
"World Fund Class II" shares of Common Stock, and (iii) changed
the designation of the one billion (1,000,000,000) shares
previously designated as Foreign Fund Common Stock to "Foreign
Fund Class I" shares of Common Stock and classified five hundred
million (500,000,000) shares as "Foreign Fund Class II" shares of
Common Stock.
SECOND: Immediately prior to the effectiveness of the
Articles Supplementary of the Corporation as hereinabove set
forth, the Corporation had the authority to issue one billion,
eight hundred million (1,800,000,000) Common Shares of the par
value of $1.00 per share and having an aggregate par value of one
billion, eight hundred million dollars ($1,800,000,000), of which
eight hundred million (800,000,000) shares were classified as
World Fund Common Stock shares and one billion (1,000,000,000)
shares were classified as Foreign Fund Common Stock shares. As
amended hereby, the Corporation's Articles of Incorporation
authorize the issuance of two billion, seven hundred million
(2,700,000,000) Common Shares of the par value of $1.00 per share
and having an aggregate par value of two billion, seven hundred
million dollars ($2,700,000,000), of which the Board of Directors
has classified eight hundred million (800,000,000) shares as
"World Fund Class I" shares, four hundred million (400,000,000)
shares as "World Fund Class II" shares, one billion
(1,000,000,000) shares as "Foreign Fund Class I" shares, and five
hundred million (500,000,000) shares as "Foreign Fund Class II"
shares.
THIRD: The shares of the Corporation authorized and
classified pursuant to Article First of these Articles
Supplementary have been so authorized and classified by the Board
of Directors under the authority contained in the charter of the
Corporation. The number of Shares of capital stock of the
various classes that the Corporation has authority to issue has
been established by the Board of Directors in accordance with
Section 2-105(c) of the Maryland General Corporation Law. The
Corporation is registered as an open-end, management investment
company under the Investment Company Act of 1940, as amended (the
"1940 Act").
FOURTH: The preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption of the two
classes of shares shall be as set forth in the Corporation's
charter and shall be subject to all provisions of the charter
relating to shares of the Corporation generally, including those
set forth as follows:
(a) The assets of each class of a series shall be invested
in the same investment portfolio of such series of the
Corporation.
(b) The dividends and distributions of investment income
and capital gains with respect to each class of shares
of a series shall be in such amounts as may be declared
from time to time by the Board of Directors, and the
dividends and distributions of each class of shares may
vary from the dividends and distributions of the other
classes of shares of such series to reflect differing
allocations of the expenses of the respective series
among the holders of each class and any resultant
differences between the net asset value per share of
each class, to such extent and for such purposes as the
Board of Directors may deem appropriate. The
allocation of investment income or capital gains and
expenses and liabilities of the series among the
classes shall be determined by the Board of Directors
in a manner it deems appropriate.
(c) Class I shares (including fractional shares) of each
series may be subject to an initial sales charge and
service and/or distribution fee pursuant to the terms
of the issuance of such shares, and the proceeds of the
redemption of Class I shares (including fractional
shares) may be reduced by the amount of any contingent
deferred sales charge payable on such redemption
pursuant to the terms of the issuance of such shares,
as set forth in the Corporation's then-current
registration statement on Form N-1A pursuant to the
Securities Act of 1933 and the 1940 Act (the
"Registration Statement") and determined in accordance
with the applicable provisions of the 1940 Act and the
rules and regulations of the National Association of
Securities Dealers, Inc. (the "NASD").
(d) Class II shares (including fractional shares) of each
series may be subject to an initial sales charge and
service and/or distribution fee pursuant to the terms
of the issuance of such shares, and the proceeds of the
redemption of Class II shares (including fractional
shares) may be reduced by the amount of any contingent
deferred sales charge payable on such redemption
pursuant to the terms of the issuance of such shares,
as set forth in the Registration Statement, and
determined in accordance with the applicable provisions
of the 1940 Act and the rules and regulations of the
NASD.
(e) The holders of Class I and Class II shares, as the case
may be, of each series shall have (i) exclusive voting
rights with respect to provisions of any service plan
or service and distribution plan adopted by the
Corporation pursuant to Rule 12b-1 under the 1940 Act
(a "Plan") applicable to the respective class and (ii)
no voting rights with respect to the provisions of any
Plan applicable to another class of shares or with
regard to any other matter submitted to a vote of
shareholders which does not affect holders of that
respective class of shares.
(f) Class II shares (including fractional shares) of each
series may be subject to automatic conversion into
Class I shares pursuant to the terms of the issuance of
such shares as described in the Registration Statement.
IN WITNESS WHEREOF, Templeton Funds, Inc. has caused these
Articles Supplementary to be signed in its name on its behalf by
its authorized officers who acknowledge that these Articles
Supplementary are the act of the Corporation, that to the best of
their knowledge, information and belief, all matters and facts
set forth herein relating to the authorization and approval of
these Articles Supplementary are true in all material respects
and that this statement is made under the penalties of perjury.
Date: April 13, 1995 TEMPLETON FUNDS, INC.
By: _____________________
John R. Kay
Vice President
ATTEST:______________________
Jeffrey L. Steele
Assistant Secretary
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of the 30th day of October, 1992, and
amended and restated as of the 6th day of December, 1994, between
TEMPLETON FUNDS, INC. (the "Company"), on behalf of the Templeton
World Fund class of the Company's Shares ("World Fund"), and
TEMPLETON, GALBRAITH & HANSBERGER LTD. (the "Investment
Manager").
In consideration of the mutual agreements herein made,
the Company on behalf of World Fund and the Investment Manager
understand and agree as follows:
(1) The Investment Manager agrees, during the life of
this Agreement, to manage the investment and reinvestment of
World Fund's assets consistent with the provisions of the
Company's Articles of Incorporation and the investment policies
adopted and declared by the Company's Board of Directors on
behalf of World Fund. In pursuance of the foregoing, the
Investment Manager shall make all determinations with respect to
the investment of World Fund's assets and the purchase and sale
of its investment securities, and shall take all such steps as
may be necessary to implement those determinations. It is
understood that all acts of the Investment Manager in performing
this Agreement are performed by it outside the United States.
(2) The Investment Manager is not required to furnish
any personnel, overhead items or facilities for the Company or
World Fund, including trading desk facilities or daily pricing of
World Fund's portfolio.
(3) The Investment Manager shall be responsible for
selecting members of securities exchanges, brokers and dealers
(such members, brokers and dealers being hereinafter referred to
as "brokers") for the execution of World Fund's portfolio
transactions consistent with the Company's brokerage policies
and, when applicable, the negotiation of commissions in
connection therewith.
All decisions and placements shall be made in
accordance with the following principles:
A. Purchase and sale orders will usually be
placed with brokers which are selected by the
Investment Manager as able to achieve "best execution"
of such orders. "Best execution" shall mean prompt and
reliable execution at the most favorable security
price, taking into account the other provisions
hereinafter set forth. The determination of what may
constitute best execution and price in the execution of
a securities transaction by a broker involves a number
of considerations, including, without limitation, the
overall direct net economic result to World Fund
(involving both price paid or received and any
commissions and other costs paid), the efficiency with
which the transaction is effected, the ability to
effect the transaction at all where a large block is
involved, availability of the broker to stand ready to
execute possibly difficult transactions in the future,
and the financial strength and stability of the broker.
Such considerations are judgmental and are weighed by
the Investment Manager in determining the overall
reasonableness of brokerage commissions.
B. In selecting brokers for portfolio
transactions, the Investment Manager shall take into
account its past experience as to brokers qualified to
achieve "best execution," including brokers who
specialize in any foreign securities held by World
Fund.
C. The Investment Manager is authorized to
allocate brokerage business to brokers who have
provided brokerage and research services, as such
services are defined in Section 28(e) of the Securities
Exchange Act of 1934 (the "1934 Act"), for World Fund
and/or other accounts, if any, for which the Investment
Manager exercises investment discretion (as defined in
Section 3(a)(35) of the 1934 Act) and, as to
transactions for which fixed minimum commission rates
are not applicable, to cause World Fund to pay a
commission for effecting a securities transaction in
excess of the amount another broker would have charged
for effecting that transaction, if the Investment
Manager determines in good faith that such amount of
commission is reasonable in relation to the value of
the brokerage and research services provided by such
broker, viewed in terms of either that particular
transaction or the Investment Manager's overall
responsibilities with respect to World Fund and the
other accounts, if any, as to which it exercises
investment discretion. In reaching such determination,
the Investment Manager will not be required to place or
attempt to place a specific dollar value on the
research or execution services of a broker or on the
portion of any commission reflecting either of said
services. In demonstrating that such determinations
were made in good faith, the Investment Manager shall
be prepared to show that all commissions were allocated
and paid for purposes contemplated by the Company's
brokerage policy; that the research services provide
lawful and appropriate assistance to the Investment
Manager in the performance of its investment decision-
making responsibilities; and that the commissions paid
were within a reasonable range. Whether commissions
were within a reasonable range shall be based on any
available information as to the level of commission
known to be charged by other brokers on comparable
transactions, but there shall be taken into account the
Company's policies that (i) obtaining a low commission
is deemed secondary to obtaining a favorable securities
price, since it is recognized that usually it is more
beneficial to World Fund to obtain a favorable price
than to pay the lowest commission; and (ii) the
quality, comprehensiveness and frequency of research
studies that are provided for the Investment Manager
are useful to the Investment Manager in performing its
advisory services under this Agreement. Research
services provided by brokers to the Investment Manager
are considered to be in addition to, and not in lieu
of, services required to be performed by the Investment
Manager under this Agreement. Research furnished by
brokers through which World Fund effects securities
transactions may be used by the Investment Manager for
any of its accounts, and not all research may be used
by the Investment Manager for World Fund. When
execution of portfolio transactions is allocated to
brokers trading on exchanges with fixed brokerage
commission rates, account may be taken of various
services provided by the broker.
D. Purchases and sales of portfolio securities
within the United States other than on a securities
exchange shall be executed with primary market makers
acting as principal, except where, in the judgment of
the Investment Manager, better prices and execution may
be obtained on a commission basis or from other
sources.
E. Sales of World Fund's Shares (which shall be
deemed to include also Shares of other registered
investment companies which have either the same adviser
or an investment adviser affiliated with the Investment
Manager) by a broker are one factor among others to be
taken into account in deciding to allocate portfolio
transactions (including agency transactions, principal
transactions, purchases in underwritings or tenders in
response to tender offers) for the account of World
Fund to that broker; provided that the broker shall
furnish "best execution," as defined in subparagraph A
above, and that such allocation shall be within the
scope of the Company's policies as stated above;
provided further, that in every allocation made to a
broker in which the sale of World Fund's Shares is
taken into account, there shall be no increase in the
amount of the commissions or other compensation paid to
such broker beyond a reasonable commission or other
compensation determined, as set forth in subparagraph C
above, on the basis of best execution alone or best
execution plus research services, without taking
account of or placing any value upon such sale of World
Fund's Shares.
(4) The Company on behalf of World Fund agrees, during
the life of this Agreement, to pay to the Investment Manager as
compensation for such services a monthly fee equal on an annual
basis to 0.75% of the first $200,000,000 of the average daily net
assets of World Fund, reduced to 0.675% of such average net
assets in excess of $200,000,000 up to $1,300,000,000 and further
reduced to 0.60% of such net assets in excess of $1,300,000,000.
Notwithstanding the foregoing, if the total expenses of
World Fund (including the fee to the Investment Manager) in any
fiscal year of World Fund exceed any expense limitation imposed
by applicable state law, the Investment Manager shall reimburse
World Fund for such excess in the manner and to the extent
required by applicable state law. The term "total expenses," as
used in this paragraph, does not include interest, taxes,
litigation expenses, distribution expenses, brokerage commissions
or other costs of acquiring or disposing of any of World Fund's
portfolio securities or any costs or expenses incurred or arising
other than in the ordinary and necessary course of World Fund's
business. When the accrued amount of such expenses exceeds this
limit, the monthly payment of the Investment Manager's fee will
be reduced by the amount of such excess, subject to adjustment
month by month during the balance of the Company's fiscal year if
accrued expenses thereafter fall below the limit.
(5) This Agreement shall become effective on October
30, 1992 and shall continue in effect until
December 31, 1993. If not sooner terminated, this Agreement
shall continue in effect for successive periods of 12 months each
thereafter, provided that each such continuance shall be
specifically approved annually by the vote of a majority of the
Company's Board of Directors who are not parties to this
Agreement or "interested persons" (as defined in Investment
Company Act of 1940 (the "1940 Act")) of any such party, cast in
person at a meeting called for the purpose of voting on such
approval and either the vote of (a) a majority of the outstanding
voting securities of World Fund, as defined in the 1940 Act, or
(b) a majority of the Company's Board of Directors as a whole.
(6) Notwithstanding the foregoing, this Agreement may
be terminated by either party at any time, without the payment of
any penalty, on sixty (60) days' written notice to the other
party, provided that termination by the Company on behalf of
World Fund is approved by vote of a majority of the Company's
Board of Directors in office at the time or by vote of a majority
of the outstanding voting securities of World Fund (as defined by
the 1940 Act).
(7) This Agreement shall automatically and immediately
terminate in the event of its assignment (as defined in the 1940
Act).
(8) In the event this Agreement is terminated and the
Investment Manager no longer acts as Investment Manager to World
Fund, the Investment Manager reserves the right to withdraw from
World Fund the use of the name "Templeton" or any name
misleadingly implying a continuing relationship between World
Fund and the Investment Manager or any of its affiliates.
(9) It is understood that the services of the
Investment Manager are not deemed to be exclusive, and nothing in
this Agreement shall prevent the Investment Manager, or any
affiliate thereof, from providing similar services to other
investment companies and other clients, including clients which
may invest in the same types of securities as World Fund, or, in
providing such services, from using information furnished by
others. When the Investment Manager determines to buy or sell
the same security for World Fund that the Investment Manager or
one or more of its affiliates has selected for clients of its
affiliates, the orders for all such security transactions shall
be placed for execution by methods determined by the Investment
Manager, with approval by the Company's Board of Directors, to be
impartial and fair.
(10) Except as may otherwise be provided by the 1940
Act, neither the Investment Manager nor its officers, directors,
employees or agents shall be subject to any liability for any
error of judgment, mistake of law, or any loss arising out of any
investment or other act or omission in the performance by the
Investment Manager of its duties under the Agreement or for any
loss or damage resulting from the imposition by any government of
exchange control restrictions which might affect the liquidity of
World Fund's assets, or from acts or omissions of custodians, or
securities depositories, or from any war or political act of any
foreign government to which such assets might be exposed, or for
failure, on the part of the custodian or otherwise, timely to
collect payments, except for any liability, loss or damage
resulting from willful misfeasance, bad faith or gross negligence
on the Investment Manager's part or by reason of reckless
disregard of the Investment Manager's duties under this
Agreement. It is hereby understood and acknowledged by the
Company on behalf of World Fund that the value of the investments
made for World Fund may increase as well as decrease and are not
guaranteed by the Investment Manager. It is further understood
and acknowledged by the Company on behalf of World Fund that
investment decisions made on behalf of World Fund by the
Investment Manager are subject to a variety of factors which may
affect the values and income generated by World Fund's portfolio
securities, including general economic conditions, market factors
and currency exchange rates, and that investment decisions made
by the Investment Manager will not always be profitable or prove
to have been correct.
(11) This Agreement shall be construed in accordance
with the laws of the State of Maryland, provided that nothing
herein shall be construed as being inconsistent with applicable
Federal and state securities laws and any rules, regulations and
orders thereunder.
(12) If any provision of this Agreement shall be held
or made invalid by a court decision, statue, rule or otherwise,
the remainder of this Agreement shall not be affected thereby
and, to this extent, the provisions of this Agreement shall be
deemed to be severable.
(13) Nothing herein shall be construed as constituting
the Investment Manager an agent of the Company.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their duly authorized officers
and their respective corporate seals to be hereunto duly affixed
and attested.
TEMPLETON FUNDS, INC.
on behalf of the
Templeton World Fund Class of
Shares
By: ______________________________
John R. Kay
Vice President
TEMPLETON, GALBRAITH &
HANSBERGER LTD.
By: _____________________________
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of the 30th day of October, 1992, and
amended and restated as of the 6th day of December, 1994, between
TEMPLETON FUNDS, INC. (the "Company"), on behalf of the Templeton
Foreign Fund class of the Company's Shares ("Foreign Fund"), and
TEMPLETON, GALBRAITH & HANSBERGER LTD. (the "Investment
Manager").
In consideration of the mutual agreements herein made,
the Company on behalf of Foreign Fund and the Investment Manager
understand and agree as follows:
(1) The Investment Manager agrees, during the life of
this Agreement, to manage the investment and reinvestment of
Foreign Fund's assets consistent with the provisions of the
Company's Articles of Incorporation and the investment policies
adopted and declared by the Company's Board of Directors on
behalf of Foreign Fund. In pursuance of the foregoing, the
Investment Manager shall make all determinations with respect to
the investment of Foreign Fund's assets and the purchase and sale
of its investment securities, and shall take all such steps as
may be necessary to implement those determinations. It is
understood that all acts of the Investment Manager in performing
this Agreement are performed by it outside the United States.
(2) The Investment Manager is not required to furnish
any personnel, overhead items or facilities for the Company or
Foreign Fund, including trading desk facilities or daily pricing
of Foreign Fund's portfolio.
(3) The Investment Manager shall be responsible for
selecting members of securities exchanges, brokers and dealers
(such members, brokers and dealers being hereinafter referred to
as "brokers") for the execution of Foreign Fund's portfolio
transactions consistent with the Company's brokerage policies
and, when applicable, the negotiation of commissions in
connection therewith.
All decisions and placements shall be made in
accordance with the following principles:
A. Purchase and sale orders will usually be
placed with brokers which are selected by the
Investment Manager as able to achieve "best execution"
of such orders. "Best execution" shall mean prompt and
reliable execution at the most favorable security
price, taking into account the other provisions
hereinafter set forth. The determination of what may
constitute best execution and price in the execution of
a securities transaction by a broker involves a number
of considerations, including, without limitation, the
overall direct net economic result to Foreign Fund
(involving both price paid or received and any
commissions and other costs paid), the efficiency with
which the transaction is effected, the ability to
effect the transaction at all where a large block is
involved, availability of the broker to stand ready to
execute possibly difficult transactions in the future,
and the financial strength and stability of the broker.
Such considerations are judgmental and are weighed by
the Investment Manager in determining the overall
reasonableness of brokerage commissions.
B. In selecting brokers for portfolio
transactions, the Investment Manager shall take into
account its past experience as to brokers qualified to
achieve "best execution," including brokers who
specialize in any foreign securities held by Foreign
Fund.
C. The Investment Manager is authorized to
allocate brokerage business to brokers who have
provided brokerage and research services, as such
services are defined in Section 28(e) of the Securities
Exchange Act of 1934 (the "1934 Act"), for Foreign Fund
and/or other accounts, if any, for which the Investment
Manager exercises investment discretion (as defined in
Section 3(a)(35) of the 1934 Act) and, as to
transactions for which fixed minimum commission rates
are not applicable, to cause Foreign Fund to pay a
commission for effecting a securities transaction in
excess of the amount another broker would have charged
for effecting that transaction, if the Investment
Manager determines in good faith that such amount of
commission is reasonable in relation to the value of
the brokerage and research services provided by such
broker, viewed in terms of either that particular
transaction or the Investment Manager's overall
responsibilities with respect to Foreign Fund and the
other accounts, if any, as to which it exercises
investment discretion. In reaching such determination,
the Investment Manager will not be required to place or
attempt to place a specific dollar value on the
research or execution services of a broker or on the
portion of any commission reflecting either of said
services. In demonstrating that such determinations
were made in good faith, the Investment Manager shall
be prepared to show that all commissions were allocated
and paid for purposes contemplated by the Company's
brokerage policy; that the research services provide
lawful and appropriate assistance to the Investment
Manager in the performance of its investment decision-
making responsibilities; and that the commissions paid
were within a reasonable range. Whether commissions
were within a reasonable range shall be based on any
available information as to the level of commission
known to be charged by other brokers on comparable
transactions, but there shall be taken into account the
Company's policies that (i) obtaining a low commission
is deemed secondary to obtaining a favorable securities
price, since it is recognized that usually it is more
beneficial to Foreign Fund to obtain a favorable price
than to pay the lowest commission; and (ii) the
quality, comprehensiveness and frequency of research
studies that are provided for the Investment Manager
are useful to the Investment Manager in performing its
advisory services under this Agreement. Research
services provided by brokers to the Investment Manager
are considered to be in addition to, and not in lieu
of, services required to be performed by the Investment
Manager under this Agreement. Research furnished by
brokers through which Foreign Fund effects securities
transactions may be used by the Investment Manager for
any of its accounts, and not all research may be used
by the Investment Manager for Foreign Fund. When
execution of portfolio transactions is allocated to
brokers trading on exchanges with fixed brokerage
commission rates, account may be taken of various
services provided by the broker.
D. Purchases and sales of portfolio securities
within the United States other than on a securities
exchange shall be executed with primary market makers
acting as principal, except where, in the judgment of
the Investment Manager, better prices and execution may
be obtained on a commission basis or from other
sources.
E. Sales of Foreign Fund's Shares (which shall
be deemed to include also Shares of other registered
investment companies which have either the same adviser
or an investment adviser affiliated with the Investment
Manager) by a broker are one factor among others to be
taken into account in deciding to allocate portfolio
transactions (including agency transactions, principal
transactions, purchases in underwritings or tenders in
response to tender offers) for the account of Foreign
Fund to that broker; provided that the broker shall
furnish "best execution," as defined in subparagraph A
above, and that such allocation shall be within the
scope of the Company's policies as stated above;
provided further, that in every allocation made to a
broker in which the sale of Foreign Fund's Shares is
taken into account, there shall be no increase in the
amount of the commissions or other compensation paid to
such broker beyond a reasonable commission or other
compensation determined, as set forth in subparagraph C
above, on the basis of best execution alone or best
execution plus research services, without taking
account of or placing any value upon such sale of
Foreign Fund's Shares.
(4) The Company on behalf of Foreign Fund agrees,
during the life of this Agreement, to pay to the Investment
Manager as compensation for such services a monthly fee equal on
an annual basis to 0.75% of the first $200,000,000 of the average
daily net assets of Foreign Fund, reduced to 0.675% of such
average net assets in excess of $200,000,000 up to $1,300,000,000
and further reduced to 0.60% of such net assets in excess of
$1,300,000,000.
Notwithstanding the foregoing, if the total expenses of
Foreign Fund (including the fee to the Investment Manager) in any
fiscal year of Foreign Fund exceed any expense limitation imposed
by applicable state law, the Investment Manager shall reimburse
Foreign Fund for such excess in the manner and to the extent
required by applicable state law. The term "total expenses," as
used in this paragraph, does not include interest, taxes,
litigation expenses, distribution expenses, brokerage commissions
or other costs of acquiring or disposing of any of Foreign Fund's
portfolio securities or any costs or expenses incurred or arising
other than in the ordinary and necessary course of Foreign Fund's
business. When the accrued amount of such expenses exceeds this
limit, the monthly payment of the Investment Manager's fee will
be reduced by the amount of such excess, subject to adjustment
month by month during the balance of the Company's fiscal year if
accrued expenses thereafter fall below the limit.
(5) This Agreement shall become effective on October
30, 1992 and shall continue in effect until
December 31, 1993. If not sooner terminated, this Agreement
shall continue in effect for successive periods of 12 months each
thereafter, provided that each such continuance shall be
specifically approved annually by the vote of a majority of the
Company's Board of Directors who are not parties to this
Agreement or "interested persons" (as defined in Investment
Company Act of 1940 (the "1940 Act")) of any such party, cast in
person at a meeting called for the purpose of voting on such
approval and either the vote of (a) a majority of the outstanding
voting securities of Foreign Fund, as defined in the 1940 Act, or
(b) a majority of the Company's Board of Directors as a whole.
(6) Notwithstanding the foregoing, this Agreement may
be terminated by either party at any time, without the payment of
any penalty, on sixty (60) days' written notice to the other
party, provided that termination by the Company on behalf of
Foreign Fund is approved by vote of a majority of the Company's
Board of Directors in office at the time or by vote of a majority
of the outstanding voting securities of Foreign Fund (as defined
by the 1940 Act).
(7) This Agreement shall automatically and immediately
terminate in the event of its assignment (as defined in the 1940
Act).
(8) In the event this Agreement is terminated and the
Investment Manager no longer acts as Investment Manager to
Foreign Fund, the Investment Manager reserves the right to
withdraw from Foreign Fund the use of the name "Templeton" or any
name misleadingly implying a continuing relationship between
Foreign Fund and the Investment Manager or any of its affiliates.
(9) It is understood that the services of the
Investment Manager are not deemed to be exclusive, and nothing in
this Agreement shall prevent the Investment Manager, or any
affiliate thereof, from providing similar services to other
investment companies and other clients, including clients which
may invest in the same types of securities as Foreign Fund, or,
in providing such services, from using information furnished by
others. When the Investment Manager determines to buy or sell
the same security for Foreign Fund that the Investment Manager or
one or more of its affiliates has selected for clients of its
affiliates, the orders for all such security transactions shall
be placed for execution by methods determined by the Investment
Manager, with approval by the Company's Board of Directors, to be
impartial and fair.
(10) Except as may otherwise be provided by the 1940
Act, neither the Investment Manager nor its officers, directors,
employees or agents shall be subject to any liability for any
error of judgment, mistake of law, or any loss arising out of any
investment or other act or omission in the performance by the
Investment Manager of its duties under the Agreement or for any
loss or damage resulting from the imposition by any government of
exchange control restrictions which might affect the liquidity of
Foreign Fund's assets, or from acts or omissions of custodians,
or securities depositories, or from any war or political act of
any foreign government to which such assets might be exposed, or
for failure, on the part of the custodian or otherwise, timely to
collect payments, except for any liability, loss or damage
resulting from willful misfeasance, bad faith or gross negligence
on the Investment Manager's part or by reason of reckless
disregard of the Investment Manager's duties under this
Agreement. It is hereby understood and acknowledged by the
Company on behalf of Foreign Fund that the value of the
investments made for Foreign Fund may increase as well as
decrease and are not guaranteed by the Investment Manager. It is
further understood and acknowledged by the Company on behalf of
Foreign Fund that investment decisions made on behalf of Foreign
Fund by the Investment Manager are subject to a variety of
factors which may affect the values and income generated by
Foreign Fund's portfolio securities, including general economic
conditions, market factors and currency exchange rates, and that
investment decisions made by the Investment Manager will not
always be profitable or prove to have been correct.
(11) This Agreement shall be construed in accordance
with the laws of the State of Maryland, provided that nothing
herein shall be construed as being inconsistent with applicable
Federal and state securities laws and any rules, regulations and
orders thereunder.
(12) If any provision of this Agreement shall be held
or made invalid by a court decision, statue, rule or otherwise,
the remainder of this Agreement shall not be affected thereby
and, to this extent, the provisions of this Agreement shall be
deemed to be severable.
(13) Nothing herein shall be construed as constituting
the Investment Manager an agent of the Company.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their duly authorized officers
and their respective corporate seals to be hereunto duly affixed
and attested.
TEMPLETON FUNDS, INC.
on behalf of the
Templeton Foreign Fund Class of
Shares
By: ______________________________
John R. Kay
Vice President
TEMPLETON, GALBRAITH &
HANSBERGER LTD.
By: _____________________________
DISTRIBUTION PLAN
WHEREAS, Templeton Funds, Inc. (the "Company") is
registered as an open-end diversified management investment
company under the Investment Company Act of 1940 (the "1940
Act"); and
WHEREAS, the Company on behalf of Templeton World Fund
(the "Fund") and Franklin Templeton Distributors, Inc. (the
"Selling Company"), a wholly owned subsidiary of Franklin
Resources, Inc. and a broker-dealer registered under the
Securities Exchange Act of 1934, have entered into a Distribution
Agreement pursuant to which the Selling Company will act as
principal underwriter of the Class I Shares of the Fund for sale
to the public; and
WHEREAS, shares of common stock of the Fund are divided
into classes of shares, one of which is designated Class I; and
WHEREAS, the Board of Directors of the Company has
determined to adopt this Distribution Plan (the "Plan"), in
accordance with the requirements of the 1940 Act and has
determined that there is a reasonable likelihood that the Plan
will benefit the Fund and the holders of Class I Shares.
NOW THEREFORE, the Company on behalf of the Fund hereby
adopts, with respect to its Class I Shares, the Plan on the
following terms and conditions:
1. The Fund will reimburse the Selling Company for
costs and expenses incurred in connection with the distribution
and marketing of the Class I Shares of the Fund. Such
distribution costs and expenses may include: (a) payments to
broker-dealers who provide certain services of value to the
Fund's Class I Shareholders (sometimes referred to as a "trail
fee"); (b) reimbursement of expenses relating to selling and
servicing efforts or of organizing and conducting sales seminars;
(c) payments to employees or agents of the Selling Company who
engage in or support distribution of the Class I Shares; (d)
payment of the costs of preparing, printing and distributing
prospectuses and reports to prospective investors and of printing
and advertising expenses; (e) payment of dealer commissions and
wholesaler compensation in connection with sales of the Fund's
Class I Shares exceeding $1 million (for which the Fund imposes
no sales charge) and interest or carrying charges in connection
therewith; and (f) such other similar services as the Fund's
Board of Directors determines to be reasonably calculated to
result in the sale of Class I Shares.
The Selling Company will be reimbursed for such costs,
expenses or payments on a quarterly basis, subject to a limit of
0.25% per annum of the average daily net assets of the Fund's
Class I Shares. Payments made out of or charged against the
assets of the Class I Shares of the Fund must be in reimbursement
for costs and expenses in connection with any activity which is
primarily intended to result in the sale of the Fund's Class I
Shares. The costs and expenses not reimbursed in any one given
quarter (including costs and expenses not reimbursed because they
exceeded the limit of 0.25% per annum of the average daily net
assets of the Fund's Class I Shares) may be reimbursed in
subsequent quarters or years.
2. The Plan shall not take effect with respect to the
Fund's Class I Shares until it has been approved by a vote of at
least a majority (as defined in the 1940 Act) of the outstanding
voting securities of the Class I Shares of the Fund. With
respect to the submission of the Plan for such a vote, it shall
have been effectively approved with respect to the Fund's Class I
Shares if a majority of the outstanding voting securities of the
Class I Shares of the Fund votes for approval of the Plan.
3. The Plan shall not take effect until it has been
approved, together with any related agreements and supplements,
by votes of a majority of both (a) the Board of Directors of the
Company, and (b) those Directors of the Company who are not
"interested persons" (as defined in the 1940 Act) and have no
direct or indirect financial interest in the operation of the
Plan or any agreements related to it (the "Plan Directors"), cast
in person at a meeting (or meetings) called for the purpose of
voting on the Plan and such related agreements.
4. The Plan shall continue in effect so long as such
continuance is specifically approved at least annually in the
manner provided for approval of the Plan in paragraph 3.
5. Any person authorized to direct the disposition of
monies paid or payable by the Class I Shares of the Fund pursuant
to the Plan or any related agreement shall provide to the
Company's Board of Directors, and the Board shall review, at
least quarterly, a written report of the amounts so expended and
the purposes for which such expenditures were made.
6. Any agreement related to the Plan shall be in
writing and shall provide: (a) that such agreement may be
terminated at any time as to the Fund's Class I Shares, without
payment of any penalty, by vote of a majority of the Plan
Directors or by vote of a majority of the outstanding voting
securities of the Class I Shares of the Fund, on not more than
sixty days' written notice to any other party to the agreement;
and (b) that such agreement shall terminate automatically in the
event of its assignment.
7. The Plan may be terminated at any time, without
payment of any penalty, by vote of a majority of the Plan
Directors, or by vote of a majority of the outstanding Class I
Shares of the Fund.
8. The Plan may be amended at any time by the
Company's Board of Directors, provided that (a) any amendment to
increase materially the costs which the Class I Shares of the
Fund may bear for distribution pursuant to the Plan shall be
effective only upon approval by a vote of a majority of the Class
I Shares of the Fund, and (b) any material amendments of the
terms of the Plan shall become effective only upon approval as
provided in paragraph 3 hereof.
9. While the Plan is in effect, the selection and
nomination of Directors who are not "interested persons" (as
defined in the 1940 Act) of the Fund shall be committed to the
discretion of the Directors who are not interested persons.
10. The Company shall preserve copies of the Plan, any
related agreement and any report made pursuant to paragraph 5
hereof, for a period of not less than six years from the date of
the Plan, such agreement or report, as the case may be, the first
two years of which shall be in an easily accessible place.
IN WITNESS WHEREOF, the Company has executed this
Distribution Plan on this 1st day of May, 1995.
TEMPLETON FUNDS, INC.
on behalf of Templeton World Fund
By:_______________________________
John R. Kay
Vice President
DISTRIBUTION PLAN
WHEREAS, Templeton Funds, Inc. (the "Company") is
registered as an open-end diversified management investment
company under the Investment Company Act of 1940 (the "1940
Act"); and
WHEREAS, the Company on behalf of Templeton World Fund
(the "Fund") and Franklin Templeton Distributors, Inc. (the
"Selling Company"), a wholly owned subsidiary of Franklin
Resources, Inc. and a broker-dealer registered under the
Securities Exchange Act of 1934, have entered into a Distribution
Agreement pursuant to which the Selling Company will act as
principal underwriter of the Class II Shares of the Fund for sale
to the public; and
WHEREAS, shares of common stock of the Fund are divided
into classes of shares, one of which is designated Class II; and
WHEREAS, the Board of Directors of the Company has
determined to adopt this Distribution Plan (the "Plan"), in
accordance with the requirements of the 1940 Act and has
determined that there is a reasonable likelihood that the Plan
will benefit the Fund and the holders of Class II Shares.
NOW THEREFORE, the Company on behalf of the Fund hereby
adopts, with respect to its Class II Shares, the Plan on the
following terms and conditions:
1. The Fund will reimburse the Selling Company for
costs and expenses incurred in connection with the distribution
and marketing of the Class II Shares of the Fund. Such
distribution costs and expenses may include: (a) payments to
broker-dealers who provide certain services of value to the
Fund's Class II Shareholders (sometimes referred to as a "trail
fee"); (b) reimbursement of expenses relating to selling and
servicing efforts or of organizing and conducting sales seminars;
(c) payments to employees or agents of the Selling Company who
engage in or support distribution of the Class II Shares; (d)
payment of the costs of preparing, printing and distributing
prospectuses and reports to prospective investors and of printing
and advertising expenses; (e) payment of dealer commissions and
wholesaler compensation in connection with sales of the Fund's
Class II Shares and interest or carrying charges in connection
therewith; and (f) such other similar services as the Fund's
Board of Directors determines to be reasonably calculated to
result in the sale of Class II Shares.
The Selling Company will be reimbursed for such costs,
expenses or payments on a quarterly basis, subject to a limit of
1.00% per annum of the average daily net assets of the Fund's
Class II Shares (of which up to 0.25% of such net assets may be
paid to dealers for personal service and/or the maintenance of
Class II Shareholder accounts (the "Service Fee")) and subject to
any applicable restriction imposed by rules of the National
Association of Securities Dealers, Inc. Payments made out of or
charged against the assets of the Class II Shares of the Fund
must be in reimbursement for costs and expenses in connection
with any activity which is primarily intended to result in the
sale of the Fund's Class II Shares or account maintenance and
personal service to Shareholders.
2. The Plan shall not take effect with respect to the
Fund's Class II Shares until it has been approved by a vote of at
least a majority (as defined in the 1940 Act) of the outstanding
voting securities of the Class II Shares of the Fund. With
respect to the submission of the Plan for such a vote, it shall
have been effectively approved with respect to the Fund's Class
II Shares if a majority of the outstanding voting securities of
the Class II Shares of the Fund votes for approval of the Plan.
3. The Plan shall not take effect until it has been
approved, together with any related agreements and supplements,
by votes of a majority of both (a) the Board of Directors of the
Company, and (b) those Directors of the Company who are not
"interested persons" (as defined in the 1940 Act) and have no
direct or indirect financial interest in the operation of the
Plan or any agreements related to it (the "Plan Directors"), cast
in person at a meeting (or meetings) called for the purpose of
voting on the Plan and such related agreements.
4. The Plan shall continue in effect so long as such
continuance is specifically approved at least annually in the
manner provided for approval of the Plan in paragraph 3.
5. Any person authorized to direct the disposition of
monies paid or payable by the Class II Shares of the Fund
pursuant to the Plan or any related agreement shall provide to
the Company's Board of Directors, and the Board shall review, at
least quarterly, a written report of the amounts so expended and
the purposes for which such expenditures were made.
6. Any agreement related to the Plan shall be in
writing and shall provide: (a) that such agreement may be
terminated at any time as to the Fund's Class II Shares, without
payment of any penalty, by vote of a majority of the Plan
Directors or by vote of a majority of the outstanding voting
securities of the Class II Shares of the Fund, on not more than
sixty days' written notice to any other party to the agreement;
and (b) that such agreement shall terminate automatically in the
event of its assignment.
7. The Plan may be terminated at any time, without
payment of any penalty, by vote of a majority of the Plan
Directors, or by vote of a majority of the outstanding Class II
Shares of the Fund.
8. The Plan may be amended at any time by the
Company's Board of Directors, provided that (a) any amendment to
increase materially the costs which the Class II Shares of the
Fund may bear for distribution pursuant to the Plan shall be
effective only upon approval by a vote of a majority of the Class
II Shares of the Fund, and (b) any material amendments of the
terms of the Plan shall become effective only upon approval as
provided in paragraph 3 hereof.
9. While the Plan is in effect, the selection and
nomination of Directors who are not "interested persons" (as
defined in the 1940 Act) of the Fund shall be committed to the
discretion of the Directors who are not interested persons.
10. The Company shall preserve copies of the Plan, any
related agreement and any report made pursuant to paragraph 5
hereof, for a period of not less than six years from the date of
the Plan, such agreement or report, as the case may be, the first
two years of which shall be in an easily accessible place.
IN WITNESS WHEREOF, the Company has executed this
Distribution Plan on this 1st day of May, 1995.
TEMPLETON FUNDS, INC.
on behalf of Templeton World Fund
By:_______________________________
John R. Kay
Vice President
DISTRIBUTION PLAN
WHEREAS, Templeton Funds, Inc. (the "Company") is
registered as an open-end diversified management investment
company under the Investment Company Act of 1940 (the "1940
Act"); and
WHEREAS, the Company on behalf of Templeton Foreign
Fund (the "Fund") and Franklin Templeton Distributors, Inc. (the
"Selling Company"), a wholly owned subsidiary of Franklin
Resources, Inc. and a broker-dealer registered under the
Securities Exchange Act of 1934, have entered into a Distribution
Agreement pursuant to which the Selling Company will act as
principal underwriter of the Class I Shares of the Fund for sale
to the public; and
WHEREAS, shares of common stock of the Fund are divided
into classes of shares, one of which is designated Class I; and
WHEREAS, the Board of Directors of the Company has
determined to adopt this Distribution Plan (the "Plan"), in
accordance with the requirements of the 1940 Act and has
determined that there is a reasonable likelihood that the Plan
will benefit the Fund and the holders of Class I Shares.
NOW THEREFORE, the Company on behalf of the Fund hereby
adopts, with respect to its Class I Shares, the Plan on the
following terms and conditions:
1. The Fund will reimburse the Selling Company for
costs and expenses incurred in connection with the distribution
and marketing of the Class I Shares of the Fund. Such
distribution costs and expenses may include: (a) payments to
broker-dealers who provide certain services of value to the
Fund's Class I Shareholders (sometimes referred to as a "trail
fee"); (b) reimbursement of expenses relating to selling and
servicing efforts or of organizing and conducting sales seminars;
(c) payments to employees or agents of the Selling Company who
engage in or support distribution of the Class I Shares; (d)
payment of the costs of preparing, printing and distributing
prospectuses and reports to prospective investors and of printing
and advertising expenses; (e) payment of dealer commissions and
wholesaler compensation in connection with sales of the Fund's
Class I Shares exceeding $1 million (for which the Fund imposes
no sales charge) and interest or carrying charges in connection
therewith; and (f) such other similar services as the Fund's
Board of Directors determines to be reasonably calculated to
result in the sale of Class I Shares.
The Selling Company will be reimbursed for such costs,
expenses or payments on a quarterly basis, subject to a limit of
0.25% per annum of the average daily net assets of the Fund's
Class I Shares. Payments made out of or charged against the
assets of the Class I Shares of the Fund must be in reimbursement
for costs and expenses in connection with any activity which is
primarily intended to result in the sale of the Fund's Class I
Shares. The costs and expenses not reimbursed in any one given
quarter (including costs and expenses not reimbursed because they
exceeded the limit of 0.25% per annum of the average daily net
assets of the Fund's Class I Shares) may be reimbursed in
subsequent quarters or years.
2. The Plan shall not take effect with respect to the
Fund's Class I Shares until it has been approved by a vote of at
least a majority (as defined in the 1940 Act) of the outstanding
voting securities of the Class I Shares of the Fund. With
respect to the submission of the Plan for such a vote, it shall
have been effectively approved with respect to the Fund's Class I
Shares if a majority of the outstanding voting securities of the
Class I Shares of the Fund votes for approval of the Plan.
3. The Plan shall not take effect until it has been
approved, together with any related agreements and supplements,
by votes of a majority of both (a) the Board of Directors of the
Company, and (b) those Directors of the Company who are not
"interested persons" (as defined in the 1940 Act) and have no
direct or indirect financial interest in the operation of the
Plan or any agreements related to it (the "Plan Directors"), cast
in person at a meeting (or meetings) called for the purpose of
voting on the Plan and such related agreements.
4. The Plan shall continue in effect so long as such
continuance is specifically approved at least annually in the
manner provided for approval of the Plan in paragraph 3.
5. Any person authorized to direct the disposition of
monies paid or payable by the Class I Shares of the Fund pursuant
to the Plan or any related agreement shall provide to the
Company's Board of Directors, and the Board shall review, at
least quarterly, a written report of the amounts so expended and
the purposes for which such expenditures were made.
6. Any agreement related to the Plan shall be in
writing and shall provide: (a) that such agreement may be
terminated at any time as to the Fund's Class I Shares, without
payment of any penalty, by vote of a majority of the Plan
Directors or by vote of a majority of the outstanding voting
securities of the Class I Shares of the Fund, on not more than
sixty days' written notice to any other party to the agreement;
and (b) that such agreement shall terminate automatically in the
event of its assignment.
7. The Plan may be terminated at any time, without
payment of any penalty, by vote of a majority of the Plan
Directors, or by vote of a majority of the outstanding Class I
Shares of the Fund.
8. The Plan may be amended at any time by the
Company's Board of Directors, provided that (a) any amendment to
increase materially the costs which the Class I Shares of the
Fund may bear for distribution pursuant to the Plan shall be
effective only upon approval by a vote of a majority of the Class
I Shares of the Fund, and (b) any material amendments of the
terms of the Plan shall become effective only upon approval as
provided in paragraph 3 hereof.
9. While the Plan is in effect, the selection and
nomination of Directors who are not "interested persons" (as
defined in the 1940 Act) of the Fund shall be committed to the
discretion of the Directors who are not interested persons.
10. The Company shall preserve copies of the Plan, any
related agreement and any report made pursuant to paragraph 5
hereof, for a period of not less than six years from the date of
the Plan, such agreement or report, as the case may be, the first
two years of which shall be in an easily accessible place.
IN WITNESS WHEREOF, the Company has executed this
Distribution Plan on this 1st day of May, 1995.
TEMPLETON FUNDS, INC.
on behalf of Templeton Foreign Fund
By:_______________________________
John R. Kay
Vice President
DISTRIBUTION PLAN
WHEREAS, Templeton Funds, Inc. (the "Company") is
registered as an open-end diversified management investment
company under the Investment Company Act of 1940 (the "1940
Act"); and
WHEREAS, the Company on behalf of Templeton Foreign
Fund (the "Fund") and Franklin Templeton Distributors, Inc. (the
"Selling Company"), a wholly owned subsidiary of Franklin
Resources, Inc. and a broker-dealer registered under the
Securities Exchange Act of 1934, have entered into a Distribution
Agreement pursuant to which the Selling Company will act as
principal underwriter of the Class II Shares of the Fund for sale
to the public; and
WHEREAS, shares of common stock of the Fund are divided
into classes of shares, one of which is designated Class II; and
WHEREAS, the Board of Directors of the Company has
determined to adopt this Distribution Plan (the "Plan"), in
accordance with the requirements of the 1940 Act and has
determined that there is a reasonable likelihood that the Plan
will benefit the Fund and the holders of Class II Shares.
NOW THEREFORE, the Company on behalf of the Fund hereby
adopts, with respect to its Class II Shares, the Plan on the
following terms and conditions:
1. The Fund will reimburse the Selling Company for
costs and expenses incurred in connection with the distribution
and marketing of the Class II Shares of the Fund. Such
distribution costs and expenses may include: (a) payments to
broker-dealers who provide certain services of value to the
Fund's Class II Shareholders (sometimes referred to as a "trail
fee"); (b) reimbursement of expenses relating to selling and
servicing efforts or of organizing and conducting sales seminars;
(c) payments to employees or agents of the Selling Company who
engage in or support distribution of the Class II Shares; (d)
payment of the costs of preparing, printing and distributing
prospectuses and reports to prospective investors and of printing
and advertising expenses; (e) payment of dealer commissions and
wholesaler compensation in connection with sales of the Fund's
Class II Shares and interest or carrying charges in connection
therewith; and (f) such other similar services as the Fund's
Board of Directors determines to be reasonably calculated to
result in the sale of Class II Shares.
The Selling Company will be reimbursed for such costs,
expenses or payments on a quarterly basis, subject to a limit of
1.00% per annum of the average daily net assets of the Fund's
Class II Shares (of which up to 0.25% of such net assets may be
paid to dealers for personal service and/or the maintenance of
Class II Shareholder accounts (the "Service Fee")) and subject to
any applicable restriction imposed by rules of the National
Association of Securities Dealers, Inc. Payments made out of or
charged against the assets of the Class II Shares of the Fund
must be in reimbursement for costs and expenses in connection
with any activity which is primarily intended to result in the
sale of the Fund's Class II Shares or account maintenance and
personal service to Shareholders.
2. The Plan shall not take effect with respect to the
Fund's Class II Shares until it has been approved by a vote of at
least a majority (as defined in the 1940 Act) of the outstanding
voting securities of the Class II Shares of the Fund. With
respect to the submission of the Plan for such a vote, it shall
have been effectively approved with respect to the Fund's Class
II Shares if a majority of the outstanding voting securities of
the Class II Shares of the Fund votes for approval of the Plan.
3. The Plan shall not take effect until it has been
approved, together with any related agreements and supplements,
by votes of a majority of both (a) the Board of Directors of the
Company, and (b) those Directors of the Company who are not
"interested persons" (as defined in the 1940 Act) and have no
direct or indirect financial interest in the operation of the
Plan or any agreements related to it (the "Plan Directors"), cast
in person at a meeting (or meetings) called for the purpose of
voting on the Plan and such related agreements.
4. The Plan shall continue in effect so long as such
continuance is specifically approved at least annually in the
manner provided for approval of the Plan in paragraph 3.
5. Any person authorized to direct the disposition of
monies paid or payable by the Class II Shares of the Fund
pursuant to the Plan or any related agreement shall provide to
the Company's Board of Directors, and the Board shall review, at
least quarterly, a written report of the amounts so expended and
the purposes for which such expenditures were made.
6. Any agreement related to the Plan shall be in
writing and shall provide: (a) that such agreement may be
terminated at any time as to the Fund's Class II Shares, without
payment of any penalty, by vote of a majority of the Plan
Directors or by vote of a majority of the outstanding voting
securities of the Class II Shares of the Fund, on not more than
sixty days' written notice to any other party to the agreement;
and (b) that such agreement shall terminate automatically in the
event of its assignment.
7. The Plan may be terminated at any time, without
payment of any penalty, by vote of a majority of the Plan
Directors, or by vote of a majority of the outstanding Class II
Shares of the Fund.
8. The Plan may be amended at any time by the
Company's Board of Directors, provided that (a) any amendment to
increase materially the costs which the Class II Shares of the
Fund may bear for distribution pursuant to the Plan shall be
effective only upon approval by a vote of a majority of the Class
II Shares of the Fund, and (b) any material amendments of the
terms of the Plan shall become effective only upon approval as
provided in paragraph 3 hereof.
9. While the Plan is in effect, the selection and
nomination of Directors who are not "interested persons" (as
defined in the 1940 Act) of the Fund shall be committed to the
discretion of the Directors who are not interested persons.
10. The Company shall preserve copies of the Plan, any
related agreement and any report made pursuant to paragraph 5
hereof, for a period of not less than six years from the date of
the Plan, such agreement or report, as the case may be, the first
two years of which shall be in an easily accessible place.
IN WITNESS WHEREOF, the Company has executed this
Distribution Plan on this 1st day of May, 1995.
TEMPLETON FUNDS, INC.
on behalf of Templeton Foreign Fund
By:_______________________________
John R. Kay
Vice President
Templeton World Fund
Multiple Class Plan
This Multiple Class Plan (the "Plan") has been adopted
by a majority of the Board of Directors of Templeton Funds, Inc.
- Templeton World Fund (the "Fund"). The Board has determined
that the Plan is in the best interests of each class and the Fund
as a whole. The Plan sets forth the provisions relating to the
establishment of multiple classes of shares for the Fund.
1. The Fund shall offer two classes of shares, to be known
as Templeton World Fund - Class I and Templeton World Fund -Class
II.
2. Class I shares shall carry a front-end sales charge
ranging from 0% - 5.75%, and Class II shares shall carry a front-
end sales charge of 1.00%.
3. Class I shares shall not be subject to a contingent
deferred sales charge ("CDSC") except in the following limited
circumstances. On investments of $1 million or more, a
contingent deferred sales charge of 1.00% of the lesser of the
then-current net asset value or the original net asset value at
the time of purchase applies to redemptions of those investments
within the contingency period of 12 months from the calendar
month following their purchase. The CDSC is waived in certain
circumstances, as described in the Fund's prospectus.
4. Class II shares redeemed within 18 months of their
purchase shall be assessed a CDSC of 1.00% on the lesser of the
then-current net asset value or the original net asset value at
the time of purchase. The CDSC is waived in certain
circumstances as described in the Fund's prospectus.
5. The Rule 12b-1 Plan associated with Class I shares may
be used to reimburse Franklin Templeton Distributors, Inc. (the
"Distributor") or others for expenses incurred in the promotion
and distribution of the shares of Class I. Such expenses
include, but are not limited to, the printing of the prospectuses
and reports used for sales purposes, expenses of preparing and
distributing sales literature and related expenses,
advertisements, and other distribution-related expenses,
including a prorated portion of the Distributor's overhead
expenses attributable to the distribution of Class I shares, as
well as any distribution or service fees paid to securities
dealers or their firms or others who have executed a servicing
agreement with the Fund for the Class, the Distributor or its
affiliates.
The Rule 12b-1 Plan associated with Class II shares has
two components. The first component is a shareholder servicing
fee, to be paid to broker-dealers, banks, trust companies and
others who will provide personal assistance to shareholders in
servicing their accounts. The second component is an asset-based
sales charge to be retained by the Distributor during the first
year after sale of shares, and, in subsequent years, to be paid
to dealers or retained by the Distributor to be used in the
promotion and distribution of Class II shares, in a manner
similar to that described above for Class I shares.
The Plans shall operate in accordance with the Rules of
Fair Practice of the National Association of Securities Dealers,
Inc., Article III, section 26(d).
6. The only difference in expenses as between Class I and
Class II shares shall relate to differences in the Rule 12b-1
plan expenses of each class, as described in each class' Rule
12b-1 Plan.
7. There shall be no conversion features associated with
the Class I and Class II shares.
8. Shares of Class I of the Fund may only be exchanged for
shares of Class I of any other fund in the Franklin Templeton
Group and may not be exchanged into the Franklin Templeton Money
Fund II of the Franklin Templeton Money Fund Trust. Shares of
Class II of the Fund may only be exchanged for shares of Class II
of any other fund in the Franklin Templeton Group and may also be
exchanged into the Franklin Templeton Money Fund II of the
Franklin Templeton Money Fund Trust.
9. Each Class will vote separately with respect to the
Rule 12b-1 Plan related to that Class.
10. On an ongoing basis, the directors, pursuant to their
fiduciary responsibilities under the 1940 Act and otherwise, will
monitor the Fund for the existence of any material conflicts
between the interests of the two classes of shares. The
directors, including a majority of the independent directors,
shall take such action as is reasonably necessary to eliminate
any such conflict that may develop. Templeton Galbraith &
Hansberger Ltd. and Franklin Templeton Distributors, Inc. shall
be responsible for alerting the Board of any material conflicts
that arise.
11. All material amendments to this Plan must be approved
by a majority of the directors, including a majority of the
directors who are not interested persons of the Fund.
Templeton Foreign Fund
Multiple Class Plan
This Multiple Class Plan (the "Plan") has been adopted
by a majority of the Board of Directors of Templeton Funds, Inc.
- Templeton Foreign Fund (the "Fund"). The Board has determined
that the Plan is in the best interests of each class and the Fund
as a whole. The Plan sets forth the provisions relating to the
establishment of multiple classes of shares for the Fund.
1. The Fund shall offer two classes of shares, to be known
as Templeton Foreign Fund - Class I and Templeton Foreign Fund -
Class II.
2. Class I shares shall carry a front-end sales charge
ranging from 0% - 5.75%, and Class II shares shall carry a front-
end sales charge of 1.00%.
3. Class I shares shall not be subject to a contingent
deferred sales charge ("CDSC") except in the following limited
circumstances. On investments of $1 million or more, a
contingent deferred sales charge of 1.00% of the lesser of the
then-current net asset value or the original net asset value at
the time of purchase applies to redemptions of those investments
within the contingency period of 12 months from the calendar
month following their purchase. The CDSC is waived in certain
circumstances, as described in the Fund's prospectus.
4. Class II shares redeemed within 18 months of their
purchase shall be assessed a CDSC of 1.00% on the lesser of the
then-current net asset value or the original net asset value at
the time of purchase. The CDSC is waived in certain
circumstances as described in the Fund's prospectus.
5. The Rule 12b-1 Plan associated with Class I shares may
be used to reimburse Franklin Templeton Distributors, Inc. (the
"Distributor") or others for expenses incurred in the promotion
and distribution of the shares of Class I. Such expenses
include, but are not limited to, the printing of the prospectuses
and reports used for sales purposes, expenses of preparing and
distributing sales literature and related expenses,
advertisements, and other distribution-related expenses,
including a prorated portion of the Distributor's overhead
expenses attributable to the distribution of Class I shares, as
well as any distribution or service fees paid to securities
dealers or their firms or others who have executed a servicing
agreement with the Fund for the Class, the Distributor or its
affiliates.
The Rule 12b-1 Plan associated with Class II shares has
two components. The first component is a shareholder servicing
fee, to be paid to broker-dealers, banks, trust companies and
others who will provide personal assistance to shareholders in
servicing their accounts. The second component is an asset-based
sales charge to be retained by the Distributor during the first
year after sale of shares, and, in subsequent years, to be paid
to dealers or retained by the Distributor to be used in the
promotion and distribution of Class II shares, in a manner
similar to that described above for Class I shares.
The Plans shall operate in accordance with the Rules of
Fair Practice of the National Association of Securities Dealers,
Inc., Article III, section 26(d).
6. The only difference in expenses as between Class I and
Class II shares shall relate to differences in the Rule 12b-1
plan expenses of each class, as described in each class' Rule
12b-1 Plan.
7. There shall be no conversion features associated with
the Class I and Class II shares.
8. Shares of Class I of the Fund may only be exchanged for
shares of Class I of any other fund in the Franklin Templeton
Group and may not be exchanged into the Franklin Templeton Money
Fund II of the Franklin Templeton Money Fund Trust. Shares of
Class II of the Fund may only be exchanged for shares of Class II
of any other fund in the Franklin Templeton Group and may also be
exchanged into the Franklin Templeton Money Fund II of the
Franklin Templeton Money Fund Trust.
9. Each Class will vote separately with respect to the
Rule 12b-1 Plan related to that Class.
10. On an ongoing basis, the directors, pursuant to their
fiduciary responsibilities under the 1940 Act and otherwise, will
monitor the Fund for the existence of any material conflicts
between the interests of the two classes of shares. The
directors, including a majority of the independent directors,
shall take such action as is reasonably necessary to eliminate
any such conflict that may develop. Templeton Galbraith &
Hansberger Ltd. and Franklin Templeton Distributors, Inc. shall
be responsible for alerting the Board of any material conflicts
that arise.
11. All material amendments to this Plan must be approved
by a majority of the directors of the Fund, including a majority
of the directors who are not interested persons of the Fund.
April 28, 1995
To: All Templeton Funds Listed on Schedule A
700 Central Avenue
St. Petersburg, FL 33701
Gentlemen:
We propose to invest $100.00 in the Class II shares (the "Shares") of each of
the Funds listed on the attached Schedule A (the "Funds"), on the business
day immediately preceding the effective date for each Fund's Class II shares,
at a purchase price per share equivalent to the net asset value per share of
each Fund's Class I shares on the date of purchase. We will purchase the
Shares in a private offering prior to the effectiveness of the post-effective
amendment to the Form N-1A registration statement under which each Fund's Class\
II shares are initially offered, as filed by the Fund under the Securities Act
of 1933. The Shares are being purchased to serve as the seed money for each
Fund's Class II shares prior to the commencement of the public offering of
Class II shares.
In connection with such purchase, we understand that we, the purchaser,
intend to acquire the Shares for our own account as the sole beneficial owner
thereof and have no present intention of redeeming or reselling the Shares so
acquired.
We consent to the filing of this Investment Letter as an exhibit to the Form
N-1A registration statement of each Fund.
Sincerely,
TEMPLETON GLOBAL INVESTORS, INC.
By: /s/ Thomas M. Mistele
------------------------------------
Thomas M. Mistele
Senior Vice Presidemt
Date: April 28, 1995
<PAGE>
ACTION OF SOLE SHAREHOLDER BY WRITTEN CONSENT
The undersigned, being the sole shareholder of the Class II shares of each of
the Templeton Funds listed on the attached Schedule A (the "Funds"), each of
which is a series of the Investment Companies as indicated on Schedule A (the
"Companies"), does hereby take the following actions and does hereby consent
to the following resolution:
RESOLVED: That the Distribution Plans pursuant to Rule 12b-1 (under
the Investment Company Act of 1940), as agreed to and
accepted by Franklin Templeton Distributors, Inc. and each
of the Companies prior to the date below, be and it
hereby is, approved for each Fund.
By execution hereof, the undersigned shareholder waives prior notice of the
foregoing action by written consent.
TEMPLETON GLOBAL INVESTORS, INC.
Dated: April 28, 1995 By: /s/ Thomas M. Mistele
Title: Senior Vice President
<PAGE>
SCHEDULE A
INVESTMENT COMPANY FUND
Templeton Funds, Inc. Templeton World Fund - Class II
Templeton Foreign Fund - Class II
Templeton Smaller Companies Growth Templeton Smaller Companies
Fund, Inc. Growth Fund, Inc. - Class II
Templeton Growth Fund, Inc. Templeton Growth Fund, Inc. - Class II
Templeton Real Estate Securities Templeton Real Estate Securities
Fund Fund - Class II
Templeton Global Opportunities Trust Templeton Global Opportunities Trust -
Class II
Templeton Developing Markets Trust Templeton Developing Markets Trust -
Class II
Templeton Income Trust Templeton Income Fund - Class II
Templeton American Trust, Inc. Templeton American Trust, Inc. - Class I
Templeton Global Investment Trust Templeton Global Rising Dividends Fund -
Class II
Templeton Global Infrastructure Fund -
Class II
Templeton Latin America Fund - Class II
Templeton Greater European Fund - Class II
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
TEMPLETON WORLD FUND FEBRUARY 28, 1995 SEMI-ANNUAL REPORT AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000225930
<NAME> WORLD FUND
<SERIES>
<NUMBER> 1
<NAME> TEMPLETON WORLD FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-END> FEB-28-1995
<INVESTMENTS-AT-COST> 4280032141
<INVESTMENTS-AT-VALUE> 5059346022
<RECEIVABLES> 146869989
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 769671
<TOTAL-ASSETS> 5206985682
<PAYABLE-FOR-SECURITIES> 73648749
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 10091674
<TOTAL-LIABILITIES> 83740423
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4176821785
<SHARES-COMMON-STOCK> 353619074
<SHARES-COMMON-PRIOR> 317781804
<ACCUMULATED-NII-CURRENT> 21920607
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 145188986
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 779313881
<NET-ASSETS> 5123245259
<DIVIDEND-INCOME> 47827046
<INTEREST-INCOME> 13919556
<OTHER-INCOME> 0
<EXPENSES-NET> 27315592
<NET-INVESTMENT-INCOME> 34431010
<REALIZED-GAINS-CURRENT> 186971635
<APPREC-INCREASE-CURRENT> (494080723)
<NET-CHANGE-FROM-OPS> (272678078)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (90201924)
<DISTRIBUTIONS-OF-GAINS> (466541299)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 14831792
<NUMBER-OF-SHARES-REDEEMED> (12981866)
<SHARES-REINVESTED> 33987344
<NET-CHANGE-IN-ASSETS> (298446232)
<ACCUMULATED-NII-PRIOR> 77691521
<ACCUMULATED-GAINS-PRIOR> 424758650
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 15877202
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 27315592
<AVERAGE-NET-ASSETS> 5150654170
<PER-SHARE-NAV-BEGIN> 17.06
<PER-SHARE-NII> .10
<PER-SHARE-GAIN-APPREC> (.93)
<PER-SHARE-DIVIDEND> (.28)
<PER-SHARE-DISTRIBUTIONS> (1.46)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.49
<EXPENSE-RATIO> 1.07
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
TEMPLETON FOREIGN FUND, INC. FEBRUARY 28, 1995 ANNUAL REPORT AND IS
QUALIFIED IN ITS ENTIREY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER>2
<NAME> TEMPLETON FOREIGN FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1994
<PERIOD-END> FEB-28-1995
<INVESTMENTS-AT-COST> 5342473224
<INVESTMENTS-AT-VALUE> 5605234983
<RECEIVABLES> 123705323
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 168313
<TOTAL-ASSETS> 5729108619
<PAYABLE-FOR-SECURITIES> 158453078
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5627174
<TOTAL-LIABILITIES> 164080252
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5269242206
<SHARES-COMMON-STOCK> 6330441543
<SHARES-COMMON-PRIOR> 500863467
<ACCUMULATED-NII-CURRENT> 18952184
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 14072218
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 262761759
<NET-ASSETS> 5565028367
<DIVIDEND-INCOME> 30354925
<INTEREST-INCOME> 43508294
<OTHER-INCOME> 0
<EXPENSES-NET> 29428782
<NET-INVESTMENT-INCOME> 44434437
<REALIZED-GAINS-CURRENT> 45510380
<APPREC-INCREASE-CURRENT> (402044560)
<NET-CHANGE-FROM-OPS> (31209743)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (84334593)
<DISTRIBUTIONS-OF-GAINS> (275006347)
<DISTRIBUTIONS-OTHER> 0
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