As filed with the Securities and Exchange Commission on December 29, 1995
File Nos.
33-01212
811-4450
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933( )
Pre-Effective Amendment No. ( )
Post-Effective Amendment No. 14 (X)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 15 (X)
FRANKLIN TEMPLETON GLOBAL TRUST
(Exact Name of Registrant as Specified in Charter)
777 MARINERS ISLAND BLVD., SAN MATEO, CA 94404
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (415) 312-2000
Harmon E. Burns, 777 Mariners Island Blvd., San Mateo, CA 94404
(Name and Address of Agent for Service of Process)
Approximate Date of Proposed Public Offering:
It is proposed that this filing will become effective
(check appropriate box)
____ immediately upon filing pursuant to paragraph (b)
____ on (date) pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)
x on March 1, 1996 pursuant to paragraph (a) of Rule 485
75 days after filing pursuant to paragraph (a) (ii)
on (date) pursuant to paragraph (a)(ii) of rule 495
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Declaration Pursuant to Rule 24f-2. The issuer has registered an indefinite
number or amount of securities under the Securities Act of 1933 pursuant to
Section 24f-2 under the Investment Company Act of 1940. The Rule 24f-2
Notice for the issuer's most recent fiscal year was filed on December 22,
1995.
CROSS REFERENCE SHEET
FORM N-1A
Part A: Information Required in Prospectus
FRANKLIN TEMPLETON GLOBAL CURRENCY FUND
FRANKLIN TEMPLETON HARD CURRENCY FUND
FRANKLIN TEMPLETON HIGH INCOME CURRENCY FUND
N-1A
Item No. Item Location In Registration Statement
1. Cover Page Cover Page
2. Synopsis Expense Table
3. Condensed Financial "Financial Highlights - How Have
Information the Funds Performed?"; "How Do the
Funds Measure Performance"
4. General Description "What Is the Franklin Templeton
Global Trust?"; "How Do the Funds
Invest Their Assets?"; "General
Information"
5. Management of the Fund "Who Manages the Funds?"
5A. Management's Discussion of Contained in Registrant's Annual
Fund Performance Report to Shareholders
6. Capital Stock and Other "What Distributions Might I Receive
Securities from the Funds?"; "General
Information"; "How Taxation Affects
You and the Funds"
7. Purchase of Securities "How Do I Buy Shares?"; "What
Being Offered Programs and Privileges Are
Available to Me as a Shareholder?";
"What If My Investment Outlook
Changes? - Exchange Privilege";
"How are the Funds' Shares Valued?"
8. Redemption or Repurchase "What If My Investment Outlook
Changes? - Exchange Privilege";
"How Do I Sell Shares?"; How Do I
Get More Information About My
Investment?"; "Telephone
Transactions"
9. Pending Legal Proceedings Not Applicable
CROSS REFERENCE SHEET
FORM N-1A
Part A: Information Required in Prospectus
FRANKLIN TEMPLETON GERMAN GOVERNMENT BOND FUND
N-1A Location in Registration
Item No. Item Statement
1. Cover Page Cover Page
2. Synopsis "Expense Table"
3. Condensed Financial "Financial Highlights - How Has the
Information Fund Performed?"; "Performance"
4. General Description "What Is the Franklin Templeton
Global Trust?"; "How Does the Fund
Invest Its Assets?"; "General
Information"
5. Management of the Fund "Who Manages the Fund?"
5A. Management's Discussion of Contained in Registrant's Annual
Fund Performance Report to Shareholders
6. Capital Stock and Other "What Distributions Might I Receive
Securities from the Fund?"; "General
Information"; "How Taxation
Affects You and the Fund"
7. Purchase of Securities "How Do I Buy Shares?"; "What
Being Offered Programs and Privileges Are
Available to Me as a Shareholder?";
"What If My Investment Outlook
Changes? - Exchange Privilege";
"How are Fund Shares Valued?"
8. Redemption or Repurchase "What If My Investment Outlook
Changes? - Exchange Privilege";
"How Do I Sell Shares?"; How Do I
Get More Information About My
Investment?"; "Telephone
Transactions"
9. Pending Legal Proceedings Not Applicable
CROSS REFERENCE SHEET
FORM N-1A
Part B: Information Required in
Statement of Additional Information
FRANKLIN TEMPLETON GLOBAL CURRENCY FUND
FRANKLIN TEMPLETON HARD CURRENCY FUND
FRANKLIN TEMPLETON HIGH INCOME CURRENCY FUND
N-1A Location in Registration
Item No. Item Statement
10. Cover Page Cover Page
11. Table of Contents Contents
12. General Information and Cover Page; see the Prospectus
History "What Is the Franklin Templeton
Global Trust"; "General
Information"
13. Investment Objectives and "How Do the Funds Invest Their
Policies Assets?" (See also the Prospectus
" How Do the Funds Invest Their
Assets?")
14. Management of the Fund "Officers and Trustees";
"Investment Advisory and Other
Services"
15. Control Persons and "Officers and Trustees";
Principal Holders of "Investment Advisory and Other
Securities Services"
16. Investment Advisory and "Investment Advisory and Other
Other Services Services" (See also the Prospectus
"Who Manages the Funds?")
17. Brokerage Allocation "How Do the Funds Purchase
Securities for Their Portfolios?"
18. Capital Stock and Other See "General Information" and "What
Securities is the Franklin Templeton Global
Trust" in the Prospectus
19. Purchase, Redemption and "How Do I Buy and Sell Shares?"
Pricing of Securities (See also the Prospectus "How Do I
Buy Shares?", "How Do I Sell
Shares?", "How Are the Funds'
Shares Valued?")
20. Tax Status "Additional Information Regarding
Taxation"
21. Underwriters "The Funds' Underwriter"
22. Calculation of "General Information"
Performance Data
23. Financial Statements Financial Statements
CROSS REFERENCE SHEET
FORM N-1A
Part B: Information Required in
Statement of Additional Information
FRANKLIN TEMPLETON GERMAN GOVERNMENT BOND FUND
Statement of Additional Information
N-1A Location in Registration
Item No. Item Statement
10. Cover Page Cover Page
11. Table of Contents Contents
12. General Information and Cover Page; see the Prospectus
History "What Is the Franklin Templeton
Global Trust?"; "General
Information"
13. Investment Objectives and "How Does the Fund Invest Its
Policies Assets?" (See also the Prospectus
"How Does the Fund Invest Its
Assets?")
14. Management of the Fund "Officers and Trustees";
"Investment Advisory and Other
Services"
15. Control Persons and "Officers and Trustees";
Principal Holders of "Investment Advisory and Other
Securities Services"
16. Investment Advisory and "Investment Advisory and Other
Other Services Services" (See also the Prospectus
"Who Manages the Fund?")
17. Brokerage Allocation "How Does the Fund Purchase
Securities for Its Portfolios?"
18. Capital Stock and Other See "General Information" and "What
Securities Is the Franklin Templeton Global
Trust" in the Prospectus
19. Purchase, Redemption and "How Do I Buy and Sell Shares?"
Pricing of Securities (See also the Prospectus "How Do I
Buy Shares?", "How Do I Sell
Shares?", "How Are the Fund's
Shares Valued?")
20. Tax Status "Additional Information Regarding
Taxation"
21. Underwriters "The Fund's Underwriter"
22. Calculation of "General Information"
Performance Data
23. Financial Statements Financial Statements
FRANKLIN TEMPLETON
INTERNATIONAL
CURRENCY FUNDS
FRANKLIN TEMPLETON GLOBAL CURRENCY FUND
FRANKLIN TEMPLETON HARD CURRENCY FUND
FRANKLIN TEMPLETON HIGH INCOME CURRENCY FUND
PROSPECTUS MARCH 1, 1996
777 MARINERS ISLAND BLVD., P.O. BOX 7777
SAN MATEO, CA 94403-7777 1-800/DIAL BEN
This Prospectus relates to the Franklin Templeton Global Currency Fund ("Global
Currency Fund"), the Franklin Templeton Hard Currency Fund (the "Hard Currency
Fund"), and the Franklin Templeton High Income Currency Fund (the "High Income
Fund") (individually or collectively the "Fund," "Funds" or the "Currency
Funds"), each a separate non-diversified series of the Franklin Templeton Global
Trust (the "Trust"), formerly known as the Huntington Funds, an open-end
management investment company consisting of four separate series. The Trust and
its series are also referred to in this document and from time to time in other
communications as the Franklin Templeton International Currency Funds. Investors
should not consider any of the Currency Funds a money market fund.
The Global Currency Fund invests in high-quality money market instruments
denominated in three or more of the world's Major Currencies (as defined below
under "What Is the Franklin Templeton Global Trust?"), with the objective of
maximizing total return.
The Hard Currency Fund invests in high-quality money market instruments (and
forward contracts) denominated in foreign Major Currencies which historically
have experienced low rates of inflation and which, in the view of the Trust's
Advisers, are pursuing economic policies conducive to continued low rates of
inflation in the future and currency appreciation versus the U.S. dollar over
the long-term, with the objective of protection against depreciation of the U.S.
dollar relative to other currencies. The Hard Currency Fund endeavors, to the
maximum extent practicable, to maintain foreign currency (non-U.S. dollar)
exposure with respect to 100% of its net assets at all times.
The High Income Fund invests primarily in high-quality money market instruments
denominated in three or more of the ten highest yielding Major Currencies, with
the objective of high current income at a level significantly above that
available on U.S. dollar money market funds. Consistent with this objective, the
High Income Fund may invest up to 25% of its total assets in instruments
denominated in Non-Major Currencies (as defined below under "What Is the Frankin
Templeton Global Trust?").
Each of the Funds may invest without limitation in U.S. dollar-denominated money
market instruments in combination with forward currency contracts for the
purpose of obtaining an investment result that is substantially equivalent to a
direct investment in a foreign currency-denominated instrument. (See "Management
Policies - Other Investment Policies of the Funds - Currency Exchange
Transactions and Forward Contracts.")
This Prospectus is intended to set forth in a clear and concise manner
information about the Funds that you should know before investing. After reading
the Prospectus, you should retain it for future reference; it contains
information about the purchase and sale of shares and other items which you will
find useful to have.
A Statement of Additional Information ("SAI") concerning the Funds, dated March
1, 1996, as may be amended from time to time, provides a further discussion of
certain areas in this Prospectus and other matters which may be of interest to
you. It has been filed with the Securities and Exchange Commission ("SEC") and
is incorporated herein by reference. A copy is available without charge from the
Trust or the Trust's principal underwriter, Franklin/Templeton Distributors,
Inc. ("Distributors"), at the address or telephone number shown above.
SHARES OF THE FUNDS 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. SHARES OF THE FUNDS INVOLVE INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
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.
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 UNDERWRITER.
CONTENTS PAGE
Expense Table
Financial Highlights - How Have the Funds Performed?
What Is the Franklin Templeton Global Trust?
How Do the Funds Invest Their Assets?
What Are the Funds' Potential Risks?
Who Manages the Funds?
What Distributions Might I Receive from the Funds?
How Taxation Affects You and the Funds
How Do I Buy Shares?
What Programs and Privileges Are Available to Me as a Shareholder?
What If My Investment Outlook Changes? - Exchange Privilege
How Do I Sell Shares?
Telephone Transactions
How Are the Funds' Shares Valued?
How Do I Get More Information About My Investment?
How Do the Funds Measure Performance?
General Information
Registering Your Account
Important Notice Regarding
Taxpayer IRS Certifications
EXPENSE TABLE
The purpose of this table is to assist you in understanding the various costs
and expenses that you will bear directly or indirectly in connection with an
investment in the Fund. These figures are based on the aggregate operating
expenses of the Funds for the fiscal year ended October 31, 1995.
GLOBAL HARD HIGH
CURRENCY CURRENCY INCOME
FUND FUND FUND
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on
Purchases
(as a percentage of offering price) 3.00% 3.00% 3.00%
Deferred Sales Charge* NONE NONE NONE
Exchange Fee (per transaction)** $5.00 $5.00 $5.00
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net
assets)
Management Fees 0.65% 0.65% 0.45%***
Rule 12b-1 Fees+ 0.23% 0.35% 0.27%
Other Expenses
Reports to Shareholders 0.03% 0.04% 0.20%
Shareholder Services Costs 0.04% 0.05% 0.07%
Other 0.04% 0.06% 0.26$
Total Other Expenses 0.11% 0.15% 0.53%
----- ----- -----
Total Fund Operating Expenses 0.99% 1.15% 1.25%***
===== ===== ========
*Investments of $1 million or more are not subject to a front-end sales
charge; however, a contingent deferred sales charge of 1% is generally
imposed on certain redemptions within a "contingency period" of 12 months of
the calendar month of such investments. See "How Do I Sell Shares? -
Contingent Deferred Sales Charge."
**$5.00 fee imposed only on Timing Accounts as described under "What If My
Investment Outlook Changes? - Exchange Privilege." All other exchanges are
processed without a fee.
***The investment manager has agreed in advance to waive a portion of its
management fees and to make certain payments to reduce expenses of the Fund.
Absent the reductions by the investment manager, management fees and total
operating expenses for the High Income Currency Fund would have been 0.65% and
1.45%, respectively. After October 31, 1996, the investment manager may
discontinue this arrangement for any Fund.
+Consistent with 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.
You should be aware that the above table is not intended to reflect in precise
detail the fees and expenses associated with an investment in the Fund. Rather
the table has been provided only to assist you in gaining a more complete
understanding of fees, charges and expenses. For a more detailed discussion of
these matters, you should refer to the appropriate sections of this Prospectus.
EXAMPLE
As required by SEC regulations, the following example illustrates the expenses,
including the initial 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.
GLOBAL HARD HIGH
CURRENCY CURRENCY INCOME
FUND FUND FUND
1 Year $40 $41 $42
3 Years 61 65 68
5 years 83 91 97
10 Years 148 166 177
THIS EXAMPLE IS BASED ON THE AGGREGATE ANNUAL OPERATING EXPENSES OF EACH FUND,
BEFORE FEE WAIVERS AND EXPENSE REDUCTIONS, 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 each Fund and only
indirectly by you as a result of your investment in such Fund. In addition,
federal securities regulations require the example to assume an annual return of
5%, but a Fund's actual return may be more or less than 5%.
FINANCIAL HIGHLIGHTS - HOW HAVE THE FUNDS PERFORMED?
Set forth below is a table containing the financial highlights for a share of
each Fund for the fiscal year ended October 31, 1995, the six month period ended
October 31, 1994 and each of the indicated fiscal periods ended April 30. The
information for the fiscal year ended October 31, 1995, the six month period
ended October 31, 1994, and the fiscal year ended April 30, 1994 has been
audited by Coopers & Lybrand L.L.P., independent auditors, whose audit report
appears in the Annual Report to Shareholders dated October 31, 1995. Fiscal
years of the Funds, prior to April 30, 1994, were audited by other independent
auditors. See also "Reports to Shareholders" under "General Information" in this
Prospectus.
<TABLE>
<CAPTION>
Per Share Operating Performance+ Ratios/Supplemental Data
Distri- Distri-Distri- Ratio of Net
Net Asset Net Net butions butionsbutions Net Asset Net Assets Ratio of Investment
Year Value at Invest-Realized & Total From From Net From From Total Value at End Expenses Income to Portfolio
Ended Beginning ment Unrealized Investment InvestmentCapitalReturn of Distri- at End Total of Year to Average Average Turnover
April 30of Year Income Gain(Loss)Operations Income Gains Capital butions of YearReturn++(in000's)Net Assets**Net Assets Rate
Franklin Templeton Global Currency Fund
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
19871 $12.50 $ .46 $1.29 $1.75 $ (.39) --- --- $ (.39) $13.86 16.94% $23,837 2.10%* 3.88%* 71.01%*
1988 13.86 .52 1.10 1.62 (.57) (.15) --- (.72) 14.76 12.12 138,609 2.00 3.70 ---
1989 14.76 .85 (.54) .31 (.89) (.47) --- (1.36) 13.71 1.97 112,009 2.10 6.10 ---
1990 13.71 .97 .07 1.04 (.99) (.10) --- (1.09) 13.66 7.96 71,615 2.09 7.16 ---
1991 13.66 1.07 .57 1.64 (1.07) --- --- (1.07) 14.23 12.21 72,186 1.82 7.36 ---
1992 14.23 .80 (.22) .58 (.80) --- --- (.80) 14.01 4.29 63,589 1.82 5.77 ---
1993 14.01 .67 1.01 1.68 (.69) (1.04) --- (1.73) 13.96 13.28 62,355 1.67 4.64 10.39
19943 13.96 .57 (.11) .46 (.57) --- --- (.57) 13.85 3.41 51,539 1.41 2.78 37.16
19944 13.85 0.25 0.32 0.57 (0.28) --- --- (0.28) 14.14 4.14 56,098 1.04* 3.55* 50.82*
19955 14.14 1.29 (0.49) 0.80 (1.27) --- --- (1.27) 13.67 6.05 59,942 0.99 5.29 46.05
Franklin Templeton Hard Currency Fund
19902 12.50 .42 .69 1.11 (.35) (.08) --- (.43) 13.18 8.88 26,280 1.65* 6.21* ---
1991 13.18 .92 .64 1.56 (.95) (.96) --- (1.91) 12.83 11.04 33,599 1.66 6.46 ---
1992 12.83 .77 .28 1.05 (.76) --- --- (.76) 13.12 8.40 31,757 1.86 5.85 ---
1993 13.12 .71 1.20 1.91 (.69) (1.34) --- (2.03) 13.00 17.11 49,569 1.75 5.23 4.88
19943 13.00 .50 (.05) .45 (.13) --- (.37) (.50) 12.95 3.62 35,739 1.47 3.83 ---
19944 12.95 0.26 0.99 1.26 (0.25) --- --- (0.25) 13.95 9.74 61,228 1.05* 3.80* 55.91*
1995 13.95 1.84 (1.02) 0.82 (1.68) --- --- (1.68) 13.09 6.68 132,089 1.15 4.68 15.72
Franklin Templeton High Income Currency Fund
19902,3 12.50 .73 .24 .97 (.62) (.01) --- (.63) 12.84 7.82 11,808 1.73* 11.01* ---
19913 12.84 1.34 .43 1.77 (1.38) (.31) --- (1.69) 12.92 14.09 52,364 1.59 9.85 ---
19923 12.92 1.09 (.03) 1.06 (1.08) --- --- (1.08) 12.90 8.51 46,575 1.83 8.38 ---
1993 12.90 .90 (.40) .50 (.94) (.33) --- (1.27) 12.13 4.49 32,341 1.81 6.86 ---
1994 12.13 .59 (.85) (.26) - --- (.59) (.59) 11.28 -2.03 16,706 1.59 4.80 ---
19944 11.28 0.31 0.31 0.62 (0.31) --- --- (0.31) 11.59 5.60 16,878 1.04* 5.44* 1,588.38*
19955 11.59 1.47 (0.51) 0.96 (0.99) --- --- (0.99) 11.56 8.90 10,902 1.25 5.56 129.50
</TABLE>
1For the period June 27, 1986 (inception) to April 30, 1987.
2For the period November 17, 1989 (effective date of registration) to April 30,
1990.
3On November 12, 1993, the investment adviser changed to Franklin Advisers, Inc.
4For the six months ended October 31, 1994.
5For the year ended October 31, 1995.
+Selected data for a share of beneficial interest outstanding throughout the
period indicated.
++Total return measures the change in value of an investment over the periods
indicated. It does not include the maximum 3.0% initial sales charge and assumes
reinvestment of dividends and capital gains at net asset value.
*Annualized
**During the periods indicated, the investment manager reduced its management
fees and reimbursed other expenses incurred by the Funds in the Trust. Had such
action not been taken, the ratios of expenses to average net assets would have
been as follows:
RATIO OF EXPENSES TO
AVERAGE NET ASSETS
Franklin Templeton Global Currency Fund
1994 1.61%
19944 1.12*
Franklin Templeton Hard Currency Fund
1994 1.71
19944 1.28*
Franklin Templeton High Income Currency Fund
19902 2.04
1994 1.82
19944 1.45*
19955 1.45
WHAT IS THE FRANKLIN TEMPLETON GLOBAL TRUST?
The Trust is a non-diversified, open-end management investment company commonly
called a "mutual fund." The Trust was organized as a Massachusetts business
trust on November 6, 1985, and registered with the SEC under the Investment
Company Act of 1940, as amended (the "1940 Act").
The Board of Trustees of the Trust (the "Board") may determine, at a future
date, to offer shares of the Funds in one or more "classes" to permit the Funds
to take advantage of alternative methods of selling the Funds' shares. "Classes"
of shares represent proportionate interests in the same portfolio of investment
securities but with different rights, privileges and attributes, as determined
by the trustees. Certain funds in the Franklin Templeton Funds, as that term is
defined under "How Do I Buy Shares?," currently offer their shares in two
classes, designated "Class I" and "Class II." Because the Funds' sales charge
structure and plan of distribution are similar to those of Class I shares,
shares of the Funds may be considered Class I shares for redemption, exchange
and other purposes.
Shares of the Funds may be purchased (minimum investment of $100 initially and
$25 thereafter) at the current public offering price, which is equal to each
Fund's net asset value (see "Valuation of Each Fund's Shares") plus a sales
charge based upon a variable percentage (ranging from 3.00% to zero) depending
upon the amount invested. (See "How to Buy Shares of a Fund.")
Subject to specific Fund restrictions as described more fully below, the Funds
may invest in money market instruments denominated in the following currencies
(the "Major Currencies"): Australian dollar, Belgian franc, British pound
sterling, Canadian dollar, Danish krone, Netherlands guilder, European Currency
Unit ("ECU"), French franc, German mark, Italian lira, Japanese yen, New Zealand
dollar, Spanish peseta, Swedish krona, Swiss franc and U.S. dollar. The
currencies of various countries may be added to or deleted from the foregoing
list of Major Currencies when, in the opinion of the Trust's Advisers, world
social, economic, financial or political conditions so warrant. The Currency
Funds will revise the Prospectus to reflect any such change. Subject to further
restrictions described more fully below, the High Income Fund may also invest in
money market instruments denominated in currencies other than the Major
Currencies that are freely convertible into one or more of the Major Currencies
(the "Non-Major Currencies").
THE INTERNATIONAL MONEY MARKET
The international money market, including spot and forward currency exchange
transactions, is among the largest and most liquid financial markets in the
world. Various estimates place the market's average turnover at approximately $1
trillion per day. Originally created to facilitate trade between countries, the
international money market has become a major conduit of world capital flows. It
is estimated that capital-related transactions now account for over 90% of all
volume in the international money market.
International money market instruments, like their U.S. counterparts, are
short-term, high-quality debt obligations issued by governments, banks,
corporations and supranational organizations. Because of their high quality and
short maturities or frequent interest rate adjustments (one-year maximum
effective maturity), international money market instruments enable investors to
minimize credit risk and interest rate risk to principal and are considered to
be among the most conservative of international investments.
Like the returns on all non-U.S. dollar denominated investments, international
money market returns, when expressed in U.S. dollars, are significantly affected
by changes in exchange rates between the U.S. dollar and the currencies in which
such instruments are denominated. Interest income represents the other primary
component of the total return derived from international money market
instruments.
INTERNATIONAL MONEY MARKET INVESTING
Investors may consider international money market investing for a variety of
purposes.
GLOBAL DIVERSIFICATION. One of the primary reasons for adding international
securities to a portfolio of U.S. securities is to achieve broader portfolio
diversification. Such diversification can reduce the overall volatility of
portfolio returns to the extent that returns on the international securities
are independent of returns on the U.S. portfolio component.
Returns on international money market instruments historically have exhibited a
low degree of correlation with returns on U.S. stocks and bonds and may,
therefore, offer U.S. dollar-based investors a conservative means for achieving
effective global diversification.
PROTECTION OF GLOBAL PURCHASING POWER. Currency exchange rate fluctuations can
have a significant effect on the global purchasing power of investments
denominated in a single currency. For example, depreciation of the U.S. dollar
relative to other currencies generally increases the cost to U.S. consumers of
most imported goods and many domestically produced goods, as well as the cost of
traveling outside the U.S.
In this situation, non-U.S. dollar denominated money market instruments may
provide a degree of global purchasing power protection since dollar depreciation
will tend to enhance the U.S. dollar return on such instruments.
Potential for Higher Current Yields and Higher Total Returns. Investors may
consider international money market instruments for the potentially higher
current yields and/or potentially higher total returns than those that may be
available on comparable U.S. dollar-denominated instruments. An investor
contemplating general depreciation of the U.S. dollar relative to other
currencies may, for example, invest in non-U.S. dollar denominated instruments
in an attempt to participate in currency gains that are expected to result.
Alternatively, an investor expecting general exchange rate stability might
invest in higher yielding international money market instruments in order to
seek to earn a higher rate of interest than may be available on comparable U.S.
dollar denominated instruments.
In either case, the realized total return on international money market
instruments may be higher or lower than that realized on comparable U.S.
dollar denominated instruments.
SELECTING THE APPROPRIATE FUND
Each Fund offers a degree of global diversification, as well as the opportunity
for protecting global purchasing power and achieving higher total returns than
may be available on U.S. money market funds. Selecting the appropriate Fund
depends on the particular priorities of each investor.
The Global Currency Fund employs the most flexible investment strategy of the
Funds and is designed for investors seeking the greatest degree of active
management among the Major Currencies. This Fund invests in money market
instruments denominated in any combination of three or more Major Currencies,
including the U.S. dollar, with the objective of maximizing total return. The
Trust's Advisers may, therefore, vary their emphasis between currency
appreciation and interest income from time to time. The Fund's ability to
achieve its objective may be limited by its restrictive universe of investments
as well as the high quality of such investments. In addition, during periods of
actual or anticipated appreciation of the U.S. dollar relative to other
currencies, the Trust's Advisers may invest a substantial portion of this Fund's
assets in U.S. dollar-denominated instruments. For temporary defensive purposes,
all of this Fund's assets may be so invested.
The Hard Currency Fund invests in high-quality money market instruments (and
forward contracts) denominated in foreign Major Currencies which historically
have experienced low rates of inflation and which, in the view of the Trust's
Advisers, are pursuing economic policies conducive to continued low rates of
inflation in the future and currency appreciation versus the U.S. dollar over
the long-term.
The High Income Fund invests in Major and Non-Major Currencies. Under normal
market conditions, this Fund invests at least 65% of its total assets in money
market instruments denominated in three or more of the ten highest yielding
Major Currencies (excluding the ECU) and the U.S. dollar (whether or not the
U.S. dollar is one of those ten highest yielding Major Currencies). Under normal
market conditions, this Fund may not (i) invest more than 25% of its total
assets in instruments denominated in any one Major Currency, other than the U.S.
dollar, (ii) invest more than 5% of its total assets in instruments denominated
in any one Non-Major Currency, or (iii) invest more than 25% of its total assets
in instruments denominated in Non-Major Currencies. Notwithstanding the above
restrictions, this Fund may temporarily invest its assets without percentage
limitation in instruments denominated in the U.S. dollar for purposes of
preservation of capital or for defensive purposes. This Fund is designed for
investors seeking high current income at a level significantly above that
available on U.S. dollar money market funds. Because the Trust's Advisers
emphasize interest income rather than currency appreciation, investors in this
Fund should expect income to constitute the primary component of total return in
the long run.
Each Fund seeks to minimize credit risk and interest rate risk to principal by
investing only in high quality money market instruments and by maintaining a
weighted average portfolio maturity of 120 days or less.
HOW DO THE FUNDS INVEST THEIR ASSETS?
The investment objective of each Fund is a fundamental policy of that Fund and
may not be changed without the approval of a majority of the Fund's outstanding
voting securities. There can be no assurance that the investment objective of
any Fund will be achieved.
GLOBAL CURRENCY FUND
The investment objective of the Global Currency Fund is to maximize the
investor's total return through a combination of interest income and changes in
the Fund's net asset value due to changes in currency exchange rates. The Fund
seeks to achieve its objective by investing in interest-earning money market
instruments denominated in three or more Major Currencies. Under normal market
conditions, at least 65% of the Fund's total assets will be invested in
instruments denominated in three or more Major Currencies, including the U.S.
dollar.
HARD CURRENCY FUND
The investment objective of the Hard Currency Fund is to protect against
depreciation of the U.S. dollar relative to other currencies. The Fund seeks to
achieve its objective by investing in high-quality money market instruments (and
forward contracts) denominated in foreign Major Currencies which historically
have experienced low rates of inflation and which, in the view of the Trust's
Advisers, are pursuing economic policies conducive to continued low rates of
inflation in the future and currency appreciation versus the U.S. dollar over
the long-term. Such currencies are often referred to as "hard currencies" and
such economic policies are often referred to as "sound money" policies.
The Hard Currency Fund endeavors, to the maximum extent practicable, to maintain
foreign currency (non-U.S. dollar) exposure with respect to 100% of its net
assets at all times. As described below under "Management Policies," this Fund
may invest without limitation in U.S. dollar-denominated money market
instruments in combination with forward contracts (calling for the future
acquisition of foreign currencies in exchange for U.S. dollars) for the purpose
of obtaining an investment result that is substantially equivalent to a direct
investment in a foreign currency-denominated instrument.
Under normal market conditions, this Fund will not maintain exposure to a single
foreign currency in excess of 50% of its total assets. For temporary defensive
purposes, however, this Fund may invest without limitation in Swiss
franc-denominated instruments.
The Trust's Advisers actively manage the Hard Currency Fund and will allocate
the Fund's investments based on current social, economic, financial and
political developments which, in the opinion of the Trust's Advisers, may affect
the value of such currencies.
HIGH INCOME CURRENCY FUND
The investment objective of the High Income Fund is to achieve high current
income at a level significantly above that available on U.S. dollar money market
funds. Subject to this investment objective, a secondary consideration of the
Fund is preservation of capital. This Fund seeks to achieve its objective by
investing in interest-bearing money market instruments denominated in Major and
Non-Major Currencies. Under normal market conditions, at least 65% of this
Fund's total assets will be invested in instruments denominated in three or more
of the ten highest yielding Major Currencies (see below) (excluding the ECU) and
the U.S. dollar (whether or not the U.S. dollar is one of those ten highest
yielding Major Currencies). Under normal market conditions, this Fund may not
(i) invest more than 25% of its total assets in instruments denominated in any
one Major Currency, other than the U.S. dollar, (ii) invest more than 5% of its
total assets in instruments denominated in any one Non-Major Currency, or (iii)
invest more than 25% of its total assets in instruments denominated in Non-Major
Currencies. In addition, this Fund may at anytime temporarily invest its assets
without percentage limitation in instruments denominated in U.S. dollars for
purposes of preservation of capital or for defensive purposes.
The yield of each of the Major Currencies is determined quarterly from data
published by DATASTREAM, THE WALL STREET JOURNAL, THE FINANCIAL TIMES, SALOMON
BROTHERS INTERNATIONAL BOND AND MONEY MARKET PERFORMANCE and other independent
bona fide publications which, in the opinion of the Trust's Advisers, routinely
publish reliable yield data on instruments denominated in the Major Currencies.
Subject to the restrictions described above, the Fund's investments may be
denominated in any of the Major Currencies. The yield on a Major Currency is
defined as the yield for the prior calendar quarter on the highest quality
three-month Euro-time deposits denominated in that Major Currency. The Trust's
Advisers will obtain yield measures as soon as practicable following the end of
each calendar quarter.
The ten highest yielding Major Currencies and their respective average yields
for each year from 1995 through 1989 are listed below:
<TABLE>
<CAPTION>
1995* 1994 1993 1992 1991 1990 1989
----- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Sweden** 8.81% 7.64% 8.62% 11.96% -- -- --
Italy 10.29% 8.48% 10.22% 13.86% 11.83% 11.98% 12.41%
Spain 9.37% 8.04% 11.77% 13.21% 12.60% -- --
Denmark 6.22% 6.21% 10.89% 11.12% 9.78% 10.96% 9.65%
France 6.60% 5.79% 8.44% 10.22% 9.55% 10.24% 9.33%
United Kingdom 6.69% 5.50% 5.92% 9.60% 11.50% 14.76% 13.88%
Germany - 5.29% 7.21% 9.42% 9.21% -- --
Belgium - 5.65% 8.12% 9.32% 9.32% 9.69% 8.51%
Netherlands - -- 6.81% 9.31% 9.25% 8.59% 7.29%
Switzerland - -- -- 7.82% -- 8.89% --
Australia** 7.76% -- -- -- 9.84% 13.71% 16.59%
New Zealand 9.04% 6.41% 6.14% -- 9.49% 13.17% 12.64%
Canada** 7.08% 5.35% -- -- -- 12.54% 11.79%
United States 5.99% -- -- -- -- -- 9.21%
*Average for January - November.
**Domestic interbank rates.
</TABLE>
Source: Datastream - 3 month Eurodeposit rates
GENERAL
Each Fund will attempt to maintain a weighted average effective maturity of 120
days or less and will acquire only money market instruments that have an
effective maturity, at the time of purchase, of one year or less. These
securities include floating or variable rate obligations which may have actual
maturities of over one year but that have interest rates which adjust at
periodic intervals. The effective maturity of each floating or variable rate
obligation within each Fund's portfolio will be based upon such periodic
adjustments. Because each of the Funds invest primarily in short-term securities
which are excluded from the calculation of portfolio turnover rate, the
portfolio turnover rate for each Fund is usually minimal. (See "Financial
Highlights.")
MANAGEMENT POLICIES:
ISSUER, INVESTMENT QUALITY, MATURITY AND
HEDGING CONSIDERATIONS
The issuers of money market instruments in which the Funds may invest may
include governments of, and financial institutions, corporations or other
entities located in or organized under the laws of, any country. The Funds may
also invest in money market securities issued by supranational organizations
such as: The World Bank, which was chartered to finance development projects in
member countries; the European Economic Community, which is a twelve-nation
organization engaged in cooperative economic activities; the European Coal and
Steel Community, which is an economic union of various European nations' steel
and coal industries; and the Asian Development Bank, which is an international
development bank established to lend funds, promote investment and provide
technical assistance to member nations in the Asian and Pacific regions.
The Funds invest only in instruments which are considered by the Trust's
Advisers to be of high quality, comparable to those (1) rated AAA or AA (A-1 for
commercial paper) by Standard & Poor's Corporation ("S&P") or Aaa or Aa (P-1 for
commercial paper) by Moody's Investors Service ("Moody's"); or (2) issued by
companies having an outstanding unsecured debt issue currently rated within the
above rating categories by S&P or Moody's. Each Fund's investments will be
reviewed by the Trust's Board at least quarterly.
To hedge (protect) against currency exchange rate fluctuations that might
adversely affect the value of a portfolio position, each Fund may enter into
forward contracts for the future acquisition or delivery of foreign currencies.
To hedge against such fluctuations between the date of purchase or sale and the
settlement date of a transaction, the Funds may enter into such forward
contracts without limitation. Also, the Funds may, solely for hedging purposes,
enter into futures contracts for the purchase or sale of currencies or purchase
options on such futures contracts or on currencies. These hedging techniques are
described more fully under "Fund Securities and Practices."
FUND SECURITIES AND PRACTICES
MONEY MARKET INSTRUMENTS. Money market instruments include short-term U.S.
government securities (discussed below), bank certificates of deposit, time
deposits, bankers' acceptances, commercial paper, floating and variable rate
notes, repurchase agreements secured by U.S. government securities, and
short-term liquid instruments issued by foreign governments and supranational
organizations.
GOVERNMENT SECURITIES. Securities issued by the U.S. government include a
variety of U.S. Treasury securities, which differ in their interest rates,
maturities and dates of issuance. Some obligations issued or guaranteed by U.S.
government agencies and instrumentalities, such as Treasury bills with
maturities up to one year, are supported by the full faith and credit of the
U.S. government; others, such as those of the Federal Home Loan Banks, by the
right of the issuer to borrow from the U.S. Treasury; others, such as those
issued by the Farmers Home Administration, by discretionary authority of the
U.S. government to purchase certain obligations of the agency or
instrumentality; and others, such as those issued by the Federal Farm Credit
Banks, only by the credit of the instrumentality. While the U.S. government
provides financial support to such U.S. government-sponsored agencies or
instrumentalities, no assurance can be given that it will always do so, since it
is not so obligated by law. Each Fund will invest in such securities only when
the Trust's Advisers are satisfied that the credit risk with respect to the
issuer is minimal.
Securities issued by the governments of foreign countries may include direct
obligations and obligations guaranteed by the governments of the foreign
countries. These obligations may have fixed, floating or variable rates of
interest.
CONCENTRATION IN FINANCIAL SERVICES OBLIGATIONS
Under normal market conditions, each Fund will have at least 25% of its assets
invested in companies engaged in the financial services industry, including
banks (U.S. and non-U.S. banks and their branches), savings and loan
associations, insurance companies, and their holding companies, provided such
companies have total assets in excess of U.S. $1 billion (or the equivalent
thereof expressed in a foreign currency). These investments may include bank
obligations, such as certificates of deposit, time deposits and bankers'
acceptances. During periods when the Trust's Advisers determine that a Fund
should be in a temporary defensive position, such Fund may have less than 25% of
its assets concentrated in the financial services industry.
Concentration may result in increased exposure to the specific risks (e.g.,
credit risk and interest rate risk) pertaining to the financial services
industry and may subject each Fund to greater risk and price fluctuation due to
the more limited number of industries or issuers potentially represented in a
Fund. In addition, each Fund may have its assets concentrated in instruments of
foreign financial institutions and foreign branches of U.S. banks which are not
subject to the supervision and regulation of U.S. state and federal banking
agencies and other U.S. supervisory authorities.
OTHER TYPES OF SECURITIES THE FUNDS MAY PURCHASE
NON-U.S. SECURITIES. Investing in non-U.S. money market instruments and other
securities of non-U.S. issuers involves considerations and possible risks and
opportunities not typically associated with investing in U.S. securities. Such
investments may be favorably or unfavorably affected by changes in interest
rates, currency exchange rates and exchange control regulations, and costs may
be incurred in connection with conversions between various currencies. In
addition, investments in countries other than the U.S. could be affected by
other factors generally not thought by the Trust's Advisers to be present in the
U.S., including less liquid and efficient securities markets, greater price
volatility, less publicly available information, the possibility of normal
foreign withholding taxes or heavier taxation, political or social instability,
limitations on the removal of funds or other assets of a Fund, expropriation of
assets, adverse diplomatic developments, higher transaction and custody costs,
delays attendant in settlement procedures, and difficulties in enforcing
contractual obligations.
CURRENCY FUTURES TRANSACTIONS. Each Fund may enter into futures contracts and
purchase options on such contracts in order to hedge against changes in currency
exchange rates. A futures contract on currency is an agreement to buy or sell
currency at a specified price during a designated month. A Fund does not make
payment or deliver currency on entering into a futures contract. Instead, it
makes a margin deposit, which is adjusted to reflect changes in the value of the
contract and which continues until the contract is terminated.
A Fund sells currency futures contracts in order to offset a possible decline in
the value of the currency in which its securities are denominated. When a
futures contract is sold by a Fund, the value of the contract will tend to rise
when the value of such currency (and the hedged securities) declines and to fall
when the value of such currency (and the hedged securities) increases. A Fund
purchases currency futures contracts in order to fix a favorable currency
exchange rate for securities denominated in that currency which a Fund intends
to purchase. If a futures contract is purchased by a Fund, the value of the
contract will tend to change with changes in the value of such currency and
securities.
Each Fund may also purchase put and call options on currency futures contracts
for hedging purposes. A put option purchased by a Fund would give it the right
to assume a position as the seller of a futures contract. A call option
purchased by a Fund would give it the right to assume a position as the buyer of
a futures contract. A Fund is required to pay a premium for a put or call option
on a futures contract, but is not required to take any actions under the
contract. If the option cannot be profitably exercised before it expires, a
Fund's loss will be limited to the amount of the premium and any transaction
costs.
Each Fund may enter into closing purchase or sale transactions in order to
terminate a futures contract. A Fund may close out an option which it has
purchased by selling an offsetting option of the same series. There is no
guarantee that such closing transactions can be effected. The Funds' ability to
enter into closing transactions depends on the development and maintenance of a
liquid market, which may not be available at all times.
Although these futures and options transactions are intended to enable the Funds
to manage currency exchange risks, unanticipated changes in currency exchange
rates could result in poorer performance than if they had not entered into these
transactions. Even if the Trust's Advisers correctly predict currency exchange
rate movements, a hedge could be unsuccessful if changes in the value of a
Fund's futures position do not correspond to changes in the value of the
currency in which its investments are denominated. This lack of correlation
between a Fund's futures and currency positions may be caused by differences
between the futures and currency markets.
The Trust's Advisers will attempt to minimize these risks through careful
selection and monitoring of each Fund's futures and options positions. The
ability to predict the direction of currency exchange rates involves skills
different from those used in selecting securities.
The Funds will not use futures transactions for speculation. A Fund may not
purchase or sell futures contracts or options on futures, except for closing
purchase or sale transactions, if immediately thereafter the sum of margin
deposits on a Fund's outstanding futures positions and premiums paid for
outstanding options on futures would exceed 5% of the market value of a Fund's
total assets. These transactions involve brokerage costs, require margin
deposits and, in the case of contracts obligating a Fund to purchase securities,
require a Fund to segregate assets to cover such contracts.
These transactions also involve risks to the Funds of the possible loss of
margin deposits or collateral in the event of bankruptcy of a broker with whom a
Fund has an open position in a futures or options contract. A Fund's ability to
enter into certain futures, forward contracts and options is also limited by the
requirements of the Code for qualification of a Fund as a regulated investment
company. These securities may also require the application of complex and
special tax rules and elections which may affect the amount, timing and
character of distributions to shareholders. These investments and transactions
are discussed further in the SAI.
A Fund's investments in options, futures contracts and forward contracts may
give rise to taxable income, gain or loss, and may be subject to special tax
treatment under certain mark-to-market and straddle rules, the effect of which
may be to accelerate income to a Fund, defer Fund losses, cause adjustments in
the holding periods of Fund securities, convert capital gains and losses into
ordinary income and losses, convert long-term capital gains into short-term
capital gains, and convert short-term capital losses into long-term capital
losses. These rules could, therefore, affect the amount, timing and character of
distributions to shareholders. Certain elections may be available to a Fund to
mitigate some of the unfavorable consequences of the provisions described in
this paragraph. These investments and transactions are discussed in the SAI.
CURRENCY OPTIONS TRANSACTIONS. Each Fund may, for hedging purposes, purchase put
and call options on any currency in which a Fund's investments are denominated.
Each Fund is also authorized to enter into closing sale transactions in order to
realize gains or minimize losses on currency options purchased by a Fund.
A Fund would normally purchase currency call options to fix a favorable currency
exchange rate for securities denominated in that currency which a Fund intends
to acquire. The purchase of a call option would entitle a Fund, in return for
the premium paid, to purchase specified currency at a specified price, upon
exercise of the option, during the option period. A Fund would ordinarily
realize a gain if, during the option period, the value of such currency exceeds
the sum of the exercise price, the premium paid and transaction cost; otherwise,
a Fund would realize a loss on the purchase of the call option.
A Fund would normally purchase currency put options to hedge against a decline
in the value of the currency in which its securities are denominated. The
purchase of a put option would entitle a Fund, in exchange for the premium paid,
to sell specified currency at a specified price, upon exercise of the option,
during the option period. Gains and losses on the purchase of such put options
would tend to be offset by countervailing changes in the value of the underlying
currency and the hedged securities. A Fund would ordinarily realize a gain if,
during the option period, the value of the underlying currency decreases below
the exercise price sufficiently to cover the premium and transaction costs;
otherwise a Fund would realize a loss on the purchase of the put option.
If a Fund is unable to effect a closing sale transaction with respect to options
it has purchased, it would have to exercise the options in order to realize any
profit and may incur transaction costs upon the purchase or sale of underlying
currencies.
Options on currencies are traded on exchanges and in the over-the-counter market
and will be purchased only when the Trust's Advisers believe a liquid secondary
market exists for such options, although there can be no assurances that a
liquid secondary market will exist for a particular option at any specific time.
In general, over-the-counter options differ from exchange-traded options in that
they are two-party contracts with price and terms negotiated between buyer and
seller, and such options are endorsed and/or guaranteed by third parties (such
as a member of the Exchange). A Fund will purchase over-the-counter options only
from dealers and institutions which the Trust's Advisers believe present a
minimal credit risk.
The purchase of currency options is a highly specialized activity which involves
investment techniques and risks different from those associated with ordinary
portfolio securities transactions. A Fund pays brokerage commissions or spreads
in connection with its options and any related currency transactions.
Transactions in options and futures are generally considered "derivative
securities."
OTHER INVESTMENT POLICIES OF THE FUNDS
Except as otherwise noted, each Fund may engage, without limit, in the following
investment transactions:
REPURCHASE TRANSACTIONS. Each Fund may engage in repurchase transactions, in
which a Fund purchases a U.S. government security subject to resale to a bank or
dealer at an agreed-upon price and date. The period of these repurchase
agreements will usually be short, from overnight to one week, and at no time
will a Fund invest in repurchase agreements for more than one year. The
securities which are subject to repurchase agreements may, however, have
maturity dates in excess of one year from the effective date of the repurchase
agreements. The transaction requires the collateralization of the seller's
obligation by the transfer of securities with an initial market value, including
accrued interest, equal to at least 102% of the dollar amount invested by a Fund
in each agreement, with the value of the underlying security marked to market
daily to maintain coverage of at least 100%. A default by the seller might cause
a Fund to experience a loss or delay in the liquidation of the collateral
securing the repurchase agreement. A Fund might also incur disposition costs in
liquidating the collateral. The Funds, however, intend to enter into repurchase
agreements only with financial institutions such as broker-dealers and banks
which are deemed creditworthy by the Funds' investment manager. A repurchase
agreement is deemed to be a loan by a Fund under the 1940 Act. The U.S.
government security subject to resale (the collateral) will be held on behalf of
a Fund by a custodian approved by the Trust's Board and will be held pursuant to
a written agreement. A Fund may not enter into a repurchase agreement with more
than seven days duration if, as a result, more than 10% of the market value of a
Fund's total assets would be invested, together with other investments deemed to
be illiquid, in such repurchase agreement.
LOANS OF PORTFOLIO SECURITIES. Consistent with procedures approved by the Board
of Trustees and subject to the following conditions, the Funds may lend their
portfolio securities to qualified securities dealers or other institutional
investors, provided that such loans do not exceed 30% of the value of a Fund's
total assets at the time of the most recent loan. The borrower must deposit with
a Fund's custodian, collateral with an initial market value of at least 102% of
the initial market value of the securities loaned, including any accrued
interest, with the value of the collateral and loaned securities
marked-to-market daily to maintain collateral coverage of at least 100%. Such
collateral shall consist of cash, securities issued by the U.S. Government, its
agencies or instrumentalities, or irrevocable letters of credit. The lending of
securities is a common practice in the securities industry. The Funds engage in
security loan arrangements with the primary objective of increasing a Fund's
income either through investing the cash collateral in short-term interest
bearing obligations or by receiving a loan premium from the borrower. Under the
securities loan agreement, a Fund continues to be entitled to all dividends or
interest on any loaned securities. As with any extension of credit, there are
risks of delay in recovery and loss of rights in the collateral should the
borrower of the security fail financially.
CURRENCY EXCHANGE TRANSACTIONS AND FORWARD CONTRACTS. The Funds may use forward
contracts in conjunction with money market instruments (including U.S. dollar
denominated instruments) for the purpose of obtaining an investment result that
is substantially equivalent to a direct investment in a foreign currency
denominated instrument. The Funds may also engage in currency transactions to
hedge (protect) against uncertainty in the level of future currency exchange
rates. Hedging transactions will be limited to either specific transactions (for
example, in respect of settlement of securities purchased or sold by the Funds)
or portfolio positions (for example, in respect of security positions already
held by the Funds). The Hard Currency Fund, however, endeavors, to the maximum
extent practicable, to maintain foreign currency (non-U.S. dollar) exposure with
respect to 100% of its net assets at all times and, therefore, any portfolio
position hedging activities of such Fund are expected to be consistent with this
policy. The Global Currency and High Income Funds may hedge up to 100% of their
portfolio positions and each of the Funds may engage in currency exchange
transactions without limitation for hedging purposes in respect of specific
transactions, such as the settlement of securities purchased or sold by the
Funds.
The Funds conduct currency exchange transactions either on a spot (i.e., cash)
basis at the rate prevailing in the currency market, or through entering into
forward contracts to purchase or sell currencies. A forward currency contract
involves an obligation to purchase or sell a specific currency at a future date,
which may be any fixed number of days from the date of the contract agreed upon
by the parties, at a price set at the time of the contract. These contracts are
entered into in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. When used for hedging,
such contracts tend to minimize the risk of loss due to a change in the value of
the subject currency; they also tend to limit any potential currency gain which
might result and do not protect against fluctuations in the value of the
underlying security or position.
ILLIQUID SECURITIES. It is the policy of the Funds that illiquid securities
(securities that cannot be disposed of within seven days in the normal course of
business at approximately the amount at which a Fund has valued the securities)
may not constitute, at the time of purchase, more than 10% of the value of the
total net assets of each Fund.
PORTFOLIO TURNOVER
The Funds anticipate that their annual portfolio turnover rate generally will
not exceed 100% but this rate should not be construed as a limiting factor in
the operation of a Fund's portfolio.
Only long-term securities are considered when calculating the portfolio turnover
rate. Although the High Income Fund generally does not invest in long-term
securities, its few transactions involving such securities resulted in a higher
portfolio turnover ratio for the fiscal year ended October 31, 1995 than might
otherwise be expected. The high portfolio turnover for the High Income Fund for
the six-month period ended October 31, 1994 was due to the timing of long-term
security purchases throughout the year and the required annualization of the
calculation. Had the Fund's transactions in long-term securities taken place
earlier in the year or had the calculation not been annualized, the portfolio
turnover ratio would have been significantly lower. High portfolio turnover may
increase transaction costs which must be paid by a Fund.
CERTAIN FUNDAMENTAL POLICIES
The following are fundamental policies of each Fund which cannot be changed, as
to any of the Funds described in this Prospectus, without approval by a majority
of the outstanding voting securities of such Fund.
Each Fund may not: (1) borrow money, except from banks for temporary or
emergency purposes in amounts not exceeding 331/3% of the value of its total
assets, or pledge, hypothecate, or mortgage more than 331/3% of the value of its
total assets in connection with any such borrowings (no additional investments
may be made while any such borrowings exceed 5% of the Fund's total assets; a
Fund may incur interest charges in connection with such borrowings); (2) in the
aggregate, invest more than 10% of its net assets in restricted securities,
repurchase agreements maturing in more than seven days, options which are traded
in the over-the-counter market and the investments hedged by such options, or
securities which are not readily marketable; (3) invest less than 25% of its
assets in the securities of companies engaged in the financial services industry
or more than 25% of its assets in the securities of issuers in any other
industry; (4) lend more than 30% of its total assets, except to the extent that
entering into repurchase agreements or purchasing debt securities may be
considered to be a loan; and (5) invest more than 5% of its total assets in
securities of issuers (including predecessors) with less than three years'
continuous operations. Restrictions (3) and (5) do not apply to investments in
U.S. government securities.
The Funds are subject to a number of additional investment restrictions, some of
which may be changed only with the approval of shareholders, which limit their
activities to some extent. For a list of these restrictions and more information
concerning the policies discussed herein, please see "How Do the Funds Invest
Their Assets?" and "Investment Restrictions" in the SAI.
HOW YOU PARTICIPATE IN THE
RESULTS OF THE FUNDS' ACTIVITIES
The assets of the Funds are invested in portfolio securities. If the securities
owned by the Funds increase in value, either because their price appreciates in
local currency terms or because the currency in which they are denominated
appreciated relative to the U.S. dollar, the value of the shares of the Funds
which the shareholder owns will generally increase. Conversely, if the
securities owned by the Funds decrease in value, the value of the your shares
will generally decrease. In this way, you participate in changes in the value of
the securities owned by the Funds.
Under normal market conditions, each of the Funds invests at least a significant
portion of its assets in instruments denominated in foreign currencies.
Therefore, your gains or losses on shares of a Fund will in large part be based
on changes in the net asset value of such shares, expressed in U.S. dollars,
attributable to fluctuations in the exchange rates between the U.S. dollar and
the foreign currencies in which such instruments are denominated. Unlike a U.S.
dollar money market fund, which seeks to maintain a stable net asset value, the
net asset value of the shares of each of the Funds will fluctuate. In addition,
total return on each of the Funds may be higher or lower than the total return
on a U.S. dollar money market fund. Investors, therefore, should not consider
any of the Funds to be a substitute for a U.S. dollar money market fund.
WHAT ARE THE FUNDS' POTENTIAL RISKS?
An investment in shares of a Fund may not be appropriate for all investors and
should not be considered a complete investment program. You should take into
account your investment objectives as well as your other investments when
considering the purchase of shares of any of the Funds. The value of the
investments held by each Fund and, therefore, each of their respective net asset
values, generally will vary inversely with changes in prevailing interest rates,
although this variance will depend upon the effective maturities of the
instruments held. Each of the Funds intend to invest exclusively in short-term
money market instruments to minimize this effect.
Because the Hard Currency Fund invests in instruments denominated in Major
Currencies issued by countries which have recently experienced, and which are
expected to continue to experience, relatively low inflation, it is likely that
the instruments in which this Fund invests may pay interest rates that are lower
than instruments denominated in other Major Currencies, including the U.S.
dollar. Due to the economic strength of the countries which issue the currencies
in which such instruments are denominated, or other factors, however, the Major
Currencies in which this Fund's instruments are denominated may appreciate
relative to other Major Currencies, including the U.S. dollar. If such currency
appreciation more than offsets any negative interest-rate differential, this
Fund could provide a higher total return to investors than similar investments
denominated in other Major Currencies, including the U.S. dollar.
Because the High Income Fund invests primarily in instruments denominated in the
Major Currencies that have the highest yield, there is a significant possibility
that the countries represented by such high-yield Major Currencies may have
recently experienced or may be expected to experience relatively high rates of
inflation, which may cause such Major Currencies to depreciate relative to other
Major Currencies, including the U.S. dollar. It is possible, however, that the
higher yields of the instruments in which this Fund invests will more than
offset any such depreciation, in which case this Fund could provide a higher
total return to investors than similar investments denominated in other Major
Currencies, including the U.S. dollar.
The price of the shares of each of the Funds, expressed in U.S. dollar terms,
will fluctuate and, unlike a money market fund, the Funds do not seek to
maintain a stable net asset value. In addition, the total return on each of the
Funds may be higher or lower than the total return on a U.S. dollar money market
fund. INVESTORS, THEREFORE, SHOULD NOT CONSIDER ANY OF THE FUNDS TO BE A
SUBSTITUTE FOR A U.S. DOLLAR MONEY MARKET FUND.
The value of the investments held by each Fund is calculated in U.S. dollars on
each day that the New York Stock Exchange (the "Exchange") is open for business.
As a result, to the extent that each such Fund's assets are invested in
instruments denominated in currencies other than the U.S. dollar and such
currencies appreciate relative to the U.S. dollar, that Fund's net asset value
per share as expressed in U.S. dollars (and, therefore, the value of a
shareholder's investment in that Fund as expressed in U.S. dollars) should
increase. If the U.S. dollar appreciates relative to such other currencies, the
converse should occur, except to the extent that losses are offset by net
investment income generated by the money market instruments in which that
particular Fund invests.
The currency-related gains and losses experienced by each Fund will be based on
changes in the value of portfolio securities attributable to currency
fluctuations only in relation to the original purchase price of such securities
as stated in U.S. dollars. An individual shareholder's gains or losses on shares
of a Fund will be based on changes attributable to fluctuations in the net asset
value of such shares, expressed in U.S. dollars, in relation to the original
U.S. dollar purchase price of such shares. The relative amount of appreciation
or depreciation in a Fund's assets also will be affected by changes in the value
of the securities that are unrelated to changes in currency exchange rates.
Interest rates paid on instruments denominated in foreign currencies may be
higher or lower than those paid on comparable U.S. dollar instruments.
Consequently, the Funds may have a higher or lower yield than a portfolio which
invests strictly in U.S. dollar-denominated instruments.
Although the Funds are non-diversified series of the Trust under the 1940 Act,
no such Fund will invest more than 5% of its total assets in the securities of a
single foreign bank. This limitation does not apply to other issuers. As
non-diversified Funds, there is no restriction under the 1940 Act on the
percentage of assets that may be invested at any time in the securities of any
one issuer. Each Fund, however, intends to comply with the diversification
requirements applicable to regulated investment companies under the Internal
Revenue Code of 1986, as amended (the "Code"). As of the last day of each fiscal
quarter, each Fund intends that its investments in securities of any one issuer
(other than the U.S. government) will be limited to 25% of its total assets, and
that, with respect to at least 50% of its total assets, no Fund may have
invested more than 5% of its total assets in the securities of any one issuer or
hold more than 10% of the outstanding voting securities of any one issuer. To
the extent the Funds are not fully diversified under the 1940 Act, they may be
more susceptible to adverse economic, political or regulatory developments
affecting a single issuer than would be the case if they were more broadly
diversified.
WHO MANAGES THE FUNDS?
The Board has the primary responsibility for the overall management of the Trust
and for electing the officers of the Trust who are responsible for administering
its day-to-day operations.
Franklin Advisers, Inc. ("Advisers" or "Manager") serves as the Trust's
investment manager. Advisers is a wholly-owned subsidiary of Franklin Resources,
Inc. ("Resources"), a publicly owned holding company, the principal shareholders
of which are Charles B. Johnson and Rupert H. Johnson, Jr., who own
approximately 20% and 16%, respectively, of Resources' outstanding shares.
Resources is engaged in various aspects of the financial services industry
through its various subsidiaries (the "Franklin Templeton Group"). The Manager
acts as investment manager or administrator to 34 U.S. registered investment
companies (117 separate series) with aggregate assets of over $78 billion.
Templeton Investment Counsel, Inc. ("TICI" or the "Subadviser") serves as the
subadviser for the Funds under a contract with the Manager (together, the
"Trust's Advisers"). TICI is an indirect subsidiary of Templeton Worldwide,
Inc., which is a direct, wholly-owned subsidiary of Resources. Templeton
Worldwide, Inc., operating through its subsidiaries, is a major investment
management organization with approximately $50.9 billion of assets currently
under management and a long history of global investing.
The team responsible for the day-to-day management of the Currency Funds'
portfolios is: Mr. Thomas Dickson since 1995 and Mr. Neil S. Devlin since
1993.
Thomas J. Dickson
Portfolio Manager
Templeton Investment Counsel, Inc.
Mr. Dickson received his Bachelor of Science degree in managerial economics
from the University of California at Davis. Mr. Dickson joined Franklin in
1992 and Templeton in 1994.
Neil S. Devlin
Executive Vice President
and Portfolio Manager
Templeton Investment Counsel, Inc.
Mr. Devlin is a Chartered Financial Analyst and holds a Bachelor of Arts
degree in economics and philosophy from Brandeis University. Mr. Devlin
joined Templeton in 1987.
Donald P. Gould, Portfolio Manager of Advisers, is founder and president of the
Trust. Mr. Gould is responsible for carrying out the Manager's supervision of
the implementation of portfolio investment policies. Mr. Gould holds a Master of
Business Administration degree from the Harvard Business School and a Bachelor
of Arts degree in economics from Pomona College. He joined Franklin Templeton in
November 1993 upon its acquisition of certain assets of Huntington Advisers,
Inc. He has been in the securities industry since 1981.
Pursuant to the management agreement and the subadvisory agreement, the Trust's
Advisers supervise and implement each Fund's investment activities and provide
certain administrative services and facilities which are necessary to conduct
the Funds' business. The Advisers perform similar services for other funds and
there may be times when the actions taken with respect to the Funds' portfolio
will differ from those taken by the Advisers on behalf of other funds. Neither
the Advisers (including its affiliates) nor their officers, directors or
employees nor the officers and trustees of the Trust are prohibited from
investing in securities held by the Funds or other funds which are managed or
administered by the Advisers to the extent such transactions comply with the
Trust's Code of Ethics. Please see "Investment Advisory and Other Services" and
"General Information" in the SAI for further information on securities
transactions and a summary of the Trust's Code of Ethics.
Pursuant to the subadvisory agreement between the Manager and TICI, and subject
to the overall policies, control, direction and review of the Board and to the
instructions and supervision of the Manager, TICI will provide day-to-day
portfolio management for the Funds.
Each Fund is responsible for its own operating expenses, including, but not
limited to, the Manager's fee; taxes, if any; custodian, legal and auditing
fees; fees and expenses of trustees who are not members of, affiliated with, or
interested persons of the Trust's Advisers; salaries of any personnel not
affiliated with the Trust's Advisers; insurance premiums; trade association
dues; expenses of obtaining quotations for calculating the value of each Fund's
net assets; and printing and other expenses which are not expressly assumed by
the Manager.
The Manager has elected to reduce the fees payable under the management
agreement and to assume responsibility for making payments, if necessary, to
offset certain operating expenses otherwise payable by the Funds so that total
ordinary operating expenses do not exceed 1.25% of each Fund's average net
assets. This arrangement is in effect until October 31, 1996, and then may be
continued or terminated by the Manager at any time.
During the fiscal year ended October 31, 1995, management fees for the High
Income Currency Fund, before any advance waiver, totaled 0.65% of the average
net assets of the Fund. Total operating expenses, including management fees
before any advance waiver, totaled 1.45% of the average net assets of the Fund.
Pursuant to an agreement by Advisers to waive its fees, the High Income Currency
Fund paid management fees totaling 0.45% of the average net assets of the Fund
and operating expenses totaling 1.25%.
Among the responsibilities of the Manager under the management agreement is the
selection of brokers and dealers through whom transactions in the Funds'
portfolio securities will be effected. The Manager tries to obtain the best
execution on all such transactions. If it is felt that more than one broker is
able to provide the best execution, the Manager will consider the furnishing of
quotations and of other market services, research, statistical and other data
for the Manager and its affiliates, as well as the sale of shares of the Fund,
as factors in selecting a broker. Further information is included under "How Do
the Funds Purchase Securities For Their Portfolio?" in the SAI.
Shareholder accounting and many of the clerical functions for the Funds are
performed by Franklin/Templeton Investor Services, Inc. ("Investor Services" or
"Shareholder Services Agent"), in its capacity as transfer agent and
dividend-paying agent. Investor Services is a wholly-owned subsidiary of
Resources.
PLAN OF DISTRIBUTION
A plan of distribution has been approved and adopted for each Fund pursuant to
Each Fund has adopted a distribution plan (the "Plan" or "Plans"), pursuant to
Rule 12b-1 under the 1940 Act. Under the Plans, the Funds may reimburse
Distributors or others for all expenses incurred by Distributors or others in
the promotion and distribution of a Fund's shares. 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 Distributors' 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 a Fund, Distributors or its affiliates.
The maximum amount which each Fund may pay to Distributors or others for such
distribution expenses is 0.45% per annum of the average daily net assets of each
Fund, payable on a quarterly basis. All expenses of distribution and marketing
in excess of 0.45% per annum will be borne by Distributors, or others who have
incurred them, without reimbursement from the Funds.
The Plans also cover any payments to or by the Funds, Distributors, or other
parties on behalf of the Funds or Distributors, 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 a 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 each Fund.
WHAT DISTRIBUTIONS MIGHT I RECEIVE FROM THE FUNDS?
You may receive two types of distributions from the Funds:
1. INCOME DIVIDENDS. The Funds receive income generally in the form of
dividends, interest and other income derived from their investments. This
income, less the expenses incurred in the Funds' operations, is their net
investment income from which income dividends may be distributed. Thus, the
amount of dividends paid per share may vary with each distribution.
2. CAPITAL GAIN DISTRIBUTIONS. The Funds may derive capital gains or losses in
connection with sales or other dispositions of their portfolio securities.
Distributions by the Funds derived from net short-term and net long-term capital
gains (after taking into account any net capital loss carryovers) may generally
be made once a year in December to reflect any net short-term and net long-term
capital gains realized by the Funds as of October 31 of the current fiscal year
and any undistributed capital gains from the prior fiscal year. These
distributions, when made, will generally be fully taxable to shareholders. The
Funds may make more than one distribution derived from net short-term and net
long-term capital gains in any year or adjust the timing of these distributions
for operational or other reasons.
DISTRIBUTION DATE
Although subject to change by the Board without prior notice to, or approval by,
shareholders, the Funds' current policy is to declare income dividends monthly
for shareholders of record on the first business day preceding the 15th of the
month, payable on or about the last business day of that month. The amount of
income dividend payments by the Funds is dependent upon the amount of net income
each Fund receives from its portfolio holdings, is not guaranteed and is subject
to the discretion of the Board. Fund shares are quoted ex-dividend on the first
business day following the record date. THE FUNDS DO NOT PAY "INTEREST" OR
GUARANTEE ANY FIXED RATE OF RETURN ON AN INVESTMENT IN THEIR SHARES.
In order to be entitled to a dividend, you must have acquired Fund shares prior
to the close of business on the record date. If you are considering purchasing
Fund shares shortly before the record date of a distribution, you should be
aware that because the value of a Fund's shares is based directly on the amount
of its net assets, rather than on the principle of supply and demand, any
distribution of income or capital gain will result in a decrease in the value of
a Fund's shares equal to the amount of the distribution. While a dividend or
capital gain distribution received shortly after purchasing shares represents,
in effect, a return of a portion of your investment, it may be taxable as
dividend income or capital gain.
DISTRIBUTION OPTIONS
You may choose to receive your distributions from each Fund in any of these
ways:
1 PURCHASE ADDITIONAL SHARES OF A FUND - You may purchase additional shares
of a Fund (without a sales charge or imposition of a contingent deferred sales
charge) by reinvesting capital gain distributions, or both dividend and capital
gain distributions. This is a convenient way to accumulate additional shares and
maintain or increase your earnings base.
2 PURCHASE SHARES OF OTHER FRANKLIN TEMPLETON FUNDS - You may direct your
distributions to purchase the same class of shares of another Franklin Templeton
Fund (without a sales charge or imposition of a contingent deferred sales
charge). Many shareholders find this a convenient way to diversify their
investments.
3 RECEIVE DISTRIBUTIONS IN CASH - You may choose to receive dividends, or
both dividend and capital gain distributions in cash. You may have the money
sent directly to you, to another person, or to a checking account. If you choose
to send the money to a checking account, please see "Electronic Fund Transfers"
under "What Programs and Privileges Are Available to Me as a Shareholder?"
TO SELECT ONE OF THESE OPTIONS, PLEASE COMPLETE SECTIONS 6 AND 7 OF THE
SHAREHOLDER APPLICATION INCLUDED WITH THIS PROSPECTUS OR TELL YOUR INVESTMENT
REPRESENTATIVE WHICH OPTION YOU PREFER. IF NO OPTION IS SELECTED, DIVIDEND AND
CAPITAL GAIN DISTRIBUTIONS WILL BE AUTOMATICALLY REINVESTED IN THE ORIGINAL
FUND. You may change the distribution option selected at any time by notifying
the respective Fund by mail or by telephone. Please allow at least seven days
prior to the record date for the Fund to process the new option.
HOW TAXATION AFFECTS YOU AND THE FUNDS
The following discussion reflects some of the tax considerations that affect
mutual funds and their shareholders. For additional information on tax matters
relating to the Funds and their shareholders, see "Additional Information
Regarding Taxation" in the SAI.
Each Fund of the Trust is treated as a separate entity for federal income tax
purposes. Each of the Funds intends to continue to qualify for treatment as a
regulated investment company under Subchapter M of the Code. By distributing all
of its income and meeting certain other requirements relating to the sources of
its income and diversification of its assets, a Fund will not be liable for
federal income or excise taxes.
Regular income dividends (which are generally distributed monthly) will be
determined from each Fund's net investment income, excluding any realized net
foreign currency gains and losses. Under U.S. Treasury regulations, net realized
foreign currency gains and losses are required to be reported as ordinary income
or loss to each Fund. Therefore, if in the course of a fiscal year, a Fund
realizes net foreign currency losses, that Fund may be required to reclassify
all or a portion of its income dividend distributions made during such fiscal
year as a return-of-capital for federal income tax purposes. Net foreign
currency gains, if any, will generally be distributed as a supplemental income
dividend once each year in December to reflect any net foreign currency gain
realized by a Fund as of October 31 for the current fiscal year, and may also
reflect any undistributed foreign currency gains for the prior fiscal year.
Shareholders will be informed of the tax status of all distributions shortly
after the close of each calendar year.
For federal income tax purposes, any income dividends which the shareholder
receives from a Fund, as well as any distributions derived from the excess of
net short-term capital gain over net long-term capital loss, are treated as
ordinary income whether the shareholder has elected to receive them in cash or
in additional shares.
Distributions derived from the excess of net long-term capital gain over net
short-term capital loss are treated as long-term capital gain regardless of the
length of time the shareholder has owned Fund shares and regardless of whether
such distributions are received in cash or in additional shares.
Pursuant to the Code, certain distributions which are declared in October,
November or December but which, for operational reasons, may not be paid to the
shareholder until the following January, will be treated for tax purposes as if
paid by a Fund and received by the shareholder on December 31 of the calendar
year in which they are declared.
Redemptions and exchanges of a Fund's shares are taxable events on which a
shareholder may realize a gain or a loss. Any loss incurred on sale or exchange
of each Fund's shares, held for six months or less, will be treated as a
long-term capital loss to the extent of capital gain dividends received with
respect to such shares.
Shareholders who are not U.S. persons for purposes of federal income taxation
should consult with their financial or tax advisors regarding the applicability
of U.S. withholding or other taxes on distributions received by them from the
Funds and the application of foreign tax laws to these distributions.
Shareholders should consult their tax advisors with respect to the applicability
of state and local intangible property or income taxes to their shares in the
Funds and to distributions and redemption proceeds received from the Funds.
HOW DO I BUY SHARES?
You may buy shares to open a Fund account with as little as $100 and make
additional investments at any time with as little as $25. If you are purchasing
shares through a retirement plan established by the Franklin Templeton Group,
these minimums may be waived. To open your account, contact your investment
representative or complete and sign the enclosed Shareholder Application and
return it to a Fund with your check.
PURCHASE PRICE OF FUND SHARES
You may buy shares at the public offering price. The public offering price is
equal to the net asset value plus the 3.0% sales charge, unless you qualify to
purchase shares at a discount or without a sales charge as discussed below. The
offering price will be calculated to two decimal places using standard rounding
criteria.
QUANTITY DISCOUNTS IN SALES CHARGES
The sales charge you pay when you buy shares may be reduced based upon the size
of your purchase, as shown in the table below.
TOTAL SALES CHARGE
DEALER
AS A CONCESSION
AS A PERCENTAGE AS A
PERCENTAGE OF NET PERCENTAGE
SIZE OF TRANSACTION OF OFFERING AMOUNT OF OFFERING
AT OFFERING PRICE PRICE INVESTED PRICE*
----------------- ----- -------- ------
Less than $50,000 3.00% 3.09% 2.60%
$50,000 but less than
$100,000 2.50% 2.56% 2.25%
$100,000 but less than
$250,000 2.00% 2.04% 1.85%
$250,000 but less than
$500,000 1.50% 1.52% 1.40%
$500,000 but less than
$750,000 1.00% 1.01% 1.00%
$750,000 but less than
$1,000,000 0.75% 0.76% 0.75%
$1,000,000 or more none none (see below)**
*Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages indicated. Distributors may at times allow
the entire sales charge to the securities dealer. A securities dealer who
receives 90% or more of the sales commission may be deemed an underwriter under
the Securities Act of 1933, as amended.
**A contingent deferred sales charge of 1% may be imposed on certain
redemptions of all or a part of an investment of $1 million or more. See "How
Do I Sell Shares? - Contingent Deferred Sales Charge."
***Please see "General - Other Payments to Securities Dealers" below for a
discussion of commissions Distributors may pay to securities dealers out of its
own resources.
RIGHTS OF ACCUMULATION. To determine if you may pay a reduced sales charge, you
may add the cost or current value, whichever is higher, of your Class I and
Class II shares in other Franklin Templeton Funds, as well as those of your
spouse, children under the age of 21 and grandchildren under the age of 21, to
the amount of your current purchase. To receive the reduction, you or your
investment representative must notify Distributors that your investment
qualifies for a discount.
LETTER OF INTENT. You may purchase shares at a reduced sales charge by
completing the Letter of Intent section of the Shareholder Application. A Letter
of Intent is a commitment by you to invest a specified dollar amount during a 13
month period. The amount you agree to invest determines the sales charge you
pay. You or your investment representative must inform us that the Letter is in
effect each time you purchase shares.
BY COMPLETING THE LETTER OF INTENT SECTION OF THE SHAREHOLDER APPLICATION, YOU
ACKNOWLEDGE AND AGREE TO THE FOLLOWING:
You authorize Distributors to reserve five percent (5%) of the amount of the
total intended purchase in Fund shares registered in your name.
You grant Distributors a security interest in these shares and appoint
Distributors as attorney-in-fact with full power of substitution to redeem
any or all of these reserved shares to pay any unpaid sales charge if you do
not fulfill the terms of the Letter.
We will include the reserved shares in the total shares you own as reflected
on your periodic statements.
You will receive dividend and capital gain distributions on the reserved
shares; we will pay or reinvest these distributions as you direct.
Although you may exchange your shares, you may not liquidate reserved shares
until you complete the Letter or pay the higher sales charge.
Our policy of reserving shares does not apply to certain benefit plans
described under "Purchases at Net Asset Value."
If you would like more information about the Letter of Intent privilege, please
see "How Do I Buy and Sell Shares? - Letter of Intent" in the SAI or call our
Shareholder Services Department.
GROUP PURCHASES. If you are a member of a qualified group, you may purchase Fund
shares at the reduced sales charge applicable to the group as a whole. The sales
charge is based on the combined dollar value of the group members' existing
investments, plus the amount of the current purchase. For example, if group
members previously invested and still hold $80,000 of Fund shares and invest
$25,000, the sales charge will be 2.0%.
We define a qualified group as 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 Distributors to realize
economies of scale in its costs of distributing shares.
In addition, a qualified group must have more than 10 members, and be available
to arrange for meetings between our representatives and group members. It must
also agree to include sales and other materials related to the Franklin
Templeton Funds in publications and mailings to its members at reduced or no
cost to Distributors, and arrange for payroll deduction or other bulk
transmission of investments to the respective Fund.
If you select a payroll deduction plan, your investments will continue
automatically until you notify the respective Fund and your employer to
discontinue further investments. Due to the varying procedures used by employers
to handle payroll deductions, there may be a delay between the time of the
payroll deduction and the time the money reaches a Fund. We invest your purchase
at the applicable offering price per share determined on the day that the
respective Fund receives both the check and the payroll deduction data in
required form.
PURCHASES AT NET ASSET VALUE
You may invest money from the following sources in shares of a Fund without
paying front-end or contingent deferred sales charges:
(i) a distribution that you have received from a Franklin Templeton Fund if it
is returned within 365 days of its payment date. When you return the
distribution, please include a written request to reinvest the money at net
asset value. You may reinvest Class II distributions in either Class I or Class
II shares, but Class I distributions may only be invested in Class I shares
under this privilege. For more information, see "Distribution Options" under
"What Distributions Might I Receive From the Funds?" or call Shareholder
Services at 1-800/632-2301;
(ii) a redemption from a mutual fund with investment objectives similar to those
of a Fund, if (a) your investment in that fund was subject to either a front-end
or contingent deferred sales charge at the time of purchase, (b) the fund is not
part of the Franklin Templeton Funds, and (c) your redemption occurred within
the past 60 days;
(iii) a distribution from an existing retirement plan already invested in the
Franklin Templeton Funds (including the Franklin Templeton Profit Sharing 401(k)
plan), up to the total amount of the distribution. When you return the
distribution, please include a written request to reinvest the money at net
asset value. The distribution must be returned to a Fund within 365 days of the
distribution date; or
(iv) a redemption from Templeton Institutional Funds, Inc., if you then reinvest
the redemption proceeds under an employee benefit plan qualified under Section
401 of the Code, in shares of a Fund.
You may also reinvest the proceeds from a redemption of any of the Franklin
Templeton Funds at net asset value. To do so, you must (a) have paid a sales
charge on the purchase or sale of the original shares, (b) reinvest the
redemption money in the same class of shares, and (c) request the reinvestment
of the money in writing to a Fund within 365 days of the redemption date. You
may reinvest up to the total amount of the redemption proceeds under this
privilege. 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. While you will
receive credit for any contingent deferred sales charge paid on the shares
redeemed, a new contingency period will begin. Shares that were no longer
subject to a contingent deferred sales charge will be reinvested at net asset
value and will not be subject to a new contingent deferred sales charge. Shares
exchanged into other Franklin Templeton Funds are not considered "redeemed" for
this privilege (see "What If My Investment Outlook Changes? - Exchange
Privilege").
If you immediately reinvested your redemption proceeds in a Franklin Bank
Certificate of Deposit ("CD") but you would like to reinvest them back into the
Franklin Templeton Funds as described above, you will have 365 days from the
date the CD (including any rollover) matures to do so.
If your securities dealer or another financial institution reinvests your money
in a Fund at net asset value for you, that person or institution may charge you
a fee for this service.
A redemption is a taxable transaction, but reinvestment without a sales charge
may affect the amount of gain or loss you recognize and the tax basis of the
shares reinvested. If you have a loss on the redemption, the loss may be
disallowed if you reinvest in the same fund within a 30-day period. If you would
like more information regarding the possible tax consequences of such a
reinvestment, please see the tax section of this Prospectus and the SAI.
Certain categories of investors also qualify to purchase shares of a Fund at net
asset value regardless of the source of the investment proceeds. If you are or
your account is included in one of the categories below, none of the shares of
the Fund or Funds you purchase will be subject to front-end or contingent
deferred sales charges:
(i) companies exchanging shares or selling assets pursuant to a merger,
acquisition or exchange offer;
(ii) accounts managed by the Franklin Templeton Group;
(iii) certain unit investment trusts and unit holders of such trusts reinvesting
distributions from the trusts in a Fund;
(iv) registered securities dealers and their affiliates, for their
investment accounts only;
(v) current employees of securities dealers and their affiliates and their
family members, in accordance with the internal policies and procedures of the
employing securities dealer and affiliate;
(vi) broker-dealers who have entered into a supplemental agreement with
Distributors, or 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);
(vii) any state, county, or city, or any instrumentality, department, authority
or agency thereof which has determined that a 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").
IF YOU ARE SUCH AN INVESTOR, PLEASE CONSULT YOUR OWN LEGAL ADVISORS TO DETERMINE
WHETHER AND TO WHAT EXTENT THE SHARES OF EACH FUND CONSTITUTE LEGAL INVESTMENTS.
Municipal investors considering investment of proceeds of bond offerings into a
Fund should consult with expert counsel to determine the effect, if any, of
various payments made by that Fund or its investment manager on arbitrage rebate
calculations. If you are a securities dealer who has executed a dealer agreement
with Distributors and, through your services, an eligible governmental authority
invests in a Fund at net asset value, Distributors or one of its affiliates may
make a payment, out of its own resources, to you in an amount not to exceed
0.25% of the amount invested. Please contact the Franklin Templeton
Institutional Services Department for additional information;
(viii) officers, trustees, directors and full-time employees of the Franklin
Templeton Funds, or of the Franklin Templeton Group, and their family members.
Although you may pay sales charges on investments in accounts opened after your
association with us has ended, you may continue to invest in accounts opened
while you were with us without paying sales charges;
(ix) trust companies and bank trust departments that exercise exclusive
discretionary investment authority over funds held in a fiduciary, agency,
advisory, custodial or similar capacity and agree to invest at least $1 million
in Franklin Templeton Funds over a 13-month period. We will accept orders for
such accounts 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;
(x) insurance company separate accounts investing for pension plan contracts;
(xi) 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; or
(xii) Designated Retirement Plans. Non-Designated Retirement Plans may also
qualify to purchase shares of a Fund if they meet the requirements described
under "Group Purchases," above.
If you would like more information, please see "How Do I Buy and Sell Shares?"
in the SAI.
HOW DO I BUY SHARES IN CONNECTION WITH TAX-DEFERRED RETIREMENT PLANS?
Your individual or employer-sponsored tax-deferred retirement plans may invest
in a Fund. You may use the Funds for an existing retirement plan, or, because
Trust Company can serve as custodian or trustee for retirement plans, you may
ask Trust Company to provide the plan documents and serve as custodian or
trustee. A plan document must be adopted in order for a retirement plan to be in
existence.
Brochures for Trust Company plans contain important information regarding
eligibility, contribution and deferral limits and distribution requirements.
Please note that you must use an application other than the one contained in
this Prospectus to establish a retirement plan account with Trust Company. To
obtain a retirement plan brochure or application, please call 1-800/DIAL BEN
(1-800/342-5236). Trust Company is an affiliate of Distributors.
Please see "How Do I Sell Shares?" for information regarding redemptions from
retirement plan accounts. You must complete specific forms in order to receive
distributions from Trust Company retirement plans.
Individuals and plan sponsors should consult with legal, tax or benefits and
pension plan consultants before choosing a retirement plan. In addition, if you
are a retirement plan investor, you should consider consulting your investment
representatives or advisors about investment decisions within your plans.
GENERAL
The Funds continuously offer their shares through securities dealers who have an
agreement with Distributors. The Funds and Distributors may refuse any order for
the purchase of shares.
Securities laws of states in which the Funds offers their shares may differ from
federal law. Banks and financial institutions that sell shares of the Funds may
be required to register as securities dealers pursuant to state law.
OTHER PAYMENTS TO SECURITIES DEALERS. Distributors will pay the following
commissions, out of its own resources, to securities dealers who initiate and
are responsible for purchases of $1 million or more: 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 breakpoints are reset every 12 months for
purposes of additional purchases.
Distributors or one of its affiliates may also pay up to 1% of the amount
purchased to securities dealers who initiate and are responsible for purchases
made at net asset value by any of the entities described in paragraphs (ix),(xi)
or (xii) under "Purchases at Net Asset Value" above and up to 0.75% of the
amount purchased to securities dealers who initiate and are responsible for
purchases made at net asset value by Non-Designated Retirement Plans. Please see
"How Do I Buy and Sell Shares?" in the SAI for the breakpoints applicable to
these purchases.
Either Distributors or one of its affiliates, out of its own resources, may also
provide additional compensation to securities dealers in connection with the
sale of shares of the Franklin Templeton Funds. In some cases, this compensation
may be available only to securities dealers whose representatives have sold or
are expected to sell significant amounts of shares of the Franklin Templeton
Funds. Compensation may include financial assistance and payments made in
connection with conferences, sales or training programs for employees of the
securities dealer, seminars for the public, advertising, sales campaigns and/or
shareholder services, programs regarding one or more of the Franklin Templeton
Funds and other programs or events sponsored by securities dealers, and payment
for travel expenses of invited registered representatives and their families,
including lodging, in connection with business meetings or seminars located
within or outside the United States. Securities dealers may not use sales of the
Funds' shares to qualify for this compensation if prohibited by the laws of any
state or self-regulatory agency, such as the National Association of Securities
Dealers, Inc. None of this compensation is paid for by the Funds or their
shareholders.
For additional information about shares of the Funds, please see "How Do I
Buy and Sell Shares?" in the SAI. The SAI also includes a listing of the
officers and trustees of the Trust who are affiliated with Distributors. See
"Officers and Trustees."
WHAT PROGRAMS AND PRIVILEGES ARE AVAILABLE TO ME AS A SHAREHOLDER?
CERTAIN OF THE PROGRAMS AND PRIVILEGES DESCRIBED IN THIS SECTION MAY NOT BE
AVAILABLE DIRECTLY FROM THE FUNDS IF YOUR SHARES ARE HELD, OF RECORD, BY A
FINANCIAL INSTITUTION OR IN A "STREET NAME" ACCOUNT OR NETWORKED ACCOUNT THROUGH
THE NATIONAL SECURITIES CLEARING CORPORATION ("NSCC") (SEE "REGISTERING YOUR
ACCOUNT" IN THIS PROSPECTUS).
SHARE CERTIFICATES
Shares from an initial investment, as well as subsequent investments, including
the reinvestment of dividends and capital gain distributions, are generally
credited to an account in your name on the books of a Fund, without the issuance
of a share certificate. Maintaining shares in uncertificated form (also known as
"plan balance") minimizes the risk of loss or theft of a share certificate. A
lost, stolen or destroyed certificate cannot be replaced without obtaining a
sufficient indemnity bond. The cost of such a bond, which is generally borne by
you, can be 2% or more of the value of the lost, stolen or destroyed
certificate. A certificate will be issued if requested by you or your securities
dealer.
CONFIRMATIONS
A confirmation statement will be sent to you quarterly to reflect the dividends
reinvested during that period and after each other transaction which affects
your account. This statement will also show the total number of shares you own,
including the number of shares in "plan balance" for your account.
AUTOMATIC INVESTMENT PLAN
The Automatic Investment Plan offers a convenient way to invest in the Funds.
Under the plan, you can arrange to have money transferred automatically from
your checking account to a Fund each month to purchase additional shares. If you
are interested in this program, please refer to the Automatic Investment Plan
Application at the back of this Prospectus for the requirements of the program
or contact your investment representative. Of course, the market value of a
Fund's shares may fluctuate and a systematic investment plan such as this will
not assure a profit or protect against a loss. You may terminate the program at
any time by notifying Investor Services by mail or by phone.
SYSTEMATIC WITHDRAWAL PLAN
The Systematic Withdrawal Plan allows you to receive regular payments from your
account on a monthly, quarterly, semiannual or annual basis. To establish a
Systematic Withdrawal Plan, the value of your account must be at least $5,000
and the minimum payment amount for each withdrawal must be at least $50. Please
keep in mind that $50 is merely the minimum amount and is not a recommended
amount. For retirement plans subject to mandatory distribution requirements, the
$50 minimum will not apply.
If you would like to establish a Systematic Withdrawal Plan, please complete the
Systematic Withdrawal Plan section of the Shareholder Application included with
this Prospectus and indicate how you would like to receive your payments. You
may choose to receive your payments in any of the following ways:
1. PURCHASE SHARES OF OTHER FRANKLIN TEMPLETON FUNDS - You may direct your
payments to purchase the same class of shares of another Franklin Templeton
Fund.
2. RECEIVE PAYMENTS IN CASH - You may choose to receive your payments in cash.
You may have the money sent directly to you, to another person, or to a checking
account. If you choose to have the money sent to a checking account, please see
"Electronic Fund Transfers" below.
There are no service charges for establishing or maintaining a Systematic
Withdrawal Plan. Once your plan is established, any distributions paid by that
Fund will be automatically reinvested in your account. Payments under the plan
will be made from the redemption of an equivalent amount of shares in your
account, generally on the first business day of the month in which a payment is
scheduled. You will generally receive your payments within three to five days
after the shares are redeemed.
Redeeming shares through a Systematic Withdrawal Plan may reduce or exhaust the
shares in your account if payments exceed distributions received from that Fund.
This is especially likely to occur if there is a market decline. If a withdrawal
amount exceeds the value of your account, your account will be closed and the
remaining balance in your account will be sent to you. Redemptions under a
Systematic Withdrawal Plan are considered a sale for federal income tax
purposes. Because the amount withdrawn under the plan may be more than your
actual yield or income, part of the payment may be a return of your investment.
While a Systematic Withdrawal Plan is in effect, no share certificates will be
issued. You should ordinarily not make additional investments in a Fund of less
than $5,000 or three times the amount of annual withdrawals under the plan
because of the sales charge on additional purchases. Shares redeemed under the
plan may also be subject to a contingent deferred sales charge. Please see
"Contingent Deferred Sales Charge" under "How Do I Sell Shares?"
You may terminate a Systematic Withdrawal Plan, change the amount and schedule
of withdrawal payments, or suspend a payment by notifying Investor Services in
writing at least seven business days prior to the end of the month preceding a
scheduled payment. A Fund may also terminate a Systematic Withdrawal Plan by
notifying you in writing and will automatically terminate a Systematic
Withdrawal Plan if all shares in your account are withdrawn or if a Fund
receives notification of the shareholder's death or incapacity.
ELECTRONIC FUND TRANSFERS
You may choose to have distributions from a Fund or payments under a Systematic
Withdrawal Plan sent directly to a checking account. If the checking account is
maintained at a bank that is a member of the Automated Clearing House, the
payments may be made automatically by electronic funds transfer. If you choose
this option, please allow at least fifteen days for initial processing. Any
payments made during that time will be sent to the address of record on your
account.
INSTITUTIONAL ACCOUNTS
There may be additional methods of purchasing, redeeming or exchanging shares
of a Fund available to institutional accounts. For further information,
contact the Franklin Templeton Institutional Services Department at
1-800/321-8563.
WHAT IF MY INVESTMENT OUTLOOK CHANGES? - EXCHANGE PRIVILEGE
The Franklin Templeton Funds consist of a number of mutual funds with various
investment objectives and policies. The shares of most of these funds are
offered to the public with a sales charge. If your investment objective or
outlook for the securities markets changes, a Fund's shares may be exchanged for
the same class of shares of other Franklin Templeton Funds which are eligible
for sale in your state of residence and in conformity with such fund's stated
eligibility requirements and investment minimums.
No exchanges between different classes of shares will be allowed. Shareholders
may choose to redeem shares of a Fund and purchase Class II shares of another
Franklin Templeton Fund but such purchase will be subject to that fund's Class
II front-end and contingent deferred sales charges. Although there are no
exchanges between different classes of shares, Class II shareholders of a
Franklin Templeton Fund may elect to direct their dividends and capital gain
distributions to a Fund at net asset value.
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 the
contingency period, a contingent deferred sales charge will be imposed.
Before making an exchange, you should review the prospectus of the fund you wish
to exchange from and the fund you wish to exchange into for all specific
requirements or limitations on exercising the exchange privilege, for example,
limitations on a fund's sale of its shares, minimum holding periods for
exchanges at net asset value, or applicable sales charges.
You may exchange shares in any of the following ways:
BY MAIL
Send written instructions signed by all account owners and accompanied by any
outstanding share certificates properly endorsed. The transaction will be
effective upon receipt of the written instructions together with any outstanding
share certificates.
BY TELEPHONE
YOU OR YOUR INVESTMENT REPRESENTATIVE OF RECORD, IF ANY, MAY EXCHANGE SHARES OF
THE FUNDS BY CALLING INVESTOR SERVICES AT 1-800/632-2301 OR THE AUTOMATED
FRANKLIN TELEFACTS(R) SYSTEM (DAY OR NIGHT) AT 1-800/247-1753. IF YOU DO NOT
WISH THIS PRIVILEGE EXTENDED TO A PARTICULAR ACCOUNT, YOU SHOULD NOTIFY THAT
FUND OR INVESTOR SERVICES.
The telephone exchange privilege allows you to effect exchanges from each Fund
into an identically registered account of the same class of shares in one of the
other available Franklin Templeton Funds. The telephone exchange privilege is
available only for uncertificated shares or those which have previously been
deposited in your account. The Funds and Investor Services will employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine. Please see "Telephone Transactions - Verification Procedures."
During periods of drastic economic or market changes, it is possible that the
telephone exchange privilege may be difficult to implement and the TeleFACTS
option may not be available. In this event, you should follow the other exchange
procedures discussed in this section, including the procedures for processing
exchanges through securities dealers.
THROUGH SECURITIES DEALERS
As is the case with all purchases and redemptions of a Fund's shares, Investor
Services will accept exchange orders from securities dealers who execute a
dealer or similar agreement with Distributors. See also "By Telephone" above.
Such a dealer-ordered exchange will be effective only for uncertificated shares
on deposit in your account or for which certificates have previously been
deposited. A securities dealer may charge a fee for handling an exchange.
ADDITIONAL INFORMATION REGARDING EXCHANGES
Exchanges are made on the basis of the net asset values of the funds involved,
except as set forth below. Exchanges of shares of a Fund which were purchased
without a sales charge will be charged a sales charge in accordance with the
terms of the prospectus of the fund being purchased, unless the originial
investment in the Franklin Templeton Funds was made pursuant to the privilege
permitting purchases at net asset value, as discussed under "How Do I Buy
Shares?" 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 a Fund for at least six months prior to executing
the exchange.
The contingency period during which a contingent deferred sales charge may be
assessed will be tolled (or stopped) for the period shares are exchanged into
and held in a Franklin or Templeton money market fund. If your account has
shares subject to a contingent deferred sales charge, shares will be exchanged
into the new account on a "first-in, first-out" basis. See "How Do I Sell
Shares? - Contingent Deferred Sales Charge" for a discussion of investments
subject to a contingent deferred sales charge.
If you request the exchange of the total value of your account, declared but
unpaid income dividends and capital gain distributions will be transferred to
the fund being exchanged into and will be invested at net asset value. Because
the exchange is considered a redemption and purchase of shares, you may realize
a gain or loss for federal income tax purposes. Backup withholding and
information reporting may also apply. Information regarding the possible tax
consequences of such an exchange is included in the tax section in this
Prospectus and under "Additional Information Regarding Taxation" in the SAI.
If a substantial portion of a Fund's shareholders should, within a short period,
elect to redeem their shares of the Fund pursuant to the exchange privilege, the
Fund might have to liquidate portfolio securities it might otherwise hold and
incur the additional costs related to such transactions. On the other hand,
increased use of the exchange privilege may result in periodic large inflows of
money. If this should occur, it is the general policy of each Fund to initially
invest this money in short-term, interest-bearing money market instruments,
unless it is felt that attractive investment opportunities consistent with the
Fund's investment objectives exist immediately. Subsequently, this money will be
withdrawn from such short-term money market instruments and invested in
portfolio securities in as orderly a manner as is possible when attractive
investment opportunities arise.
The exchange privilege may be modified or discontinued by each Fund at any time
upon 60 days' written notice to shareholders.
RETIREMENT PLAN ACCOUNTS
Franklin Templeton IRA and 403(b) retirement plan accounts may exchange
shares directly. Certain restrictions may apply, however, to other types of
retirement plans. See "Restricted Accounts" under "Telephone Transactions."
TIMING ACCOUNTS
Accounts which are administered by allocation or market timing services to
exchange shares based on predetermined market indicators ("Timing Accounts")
will be charged a $5.00 administrative service fee per each such exchange.
All other exchanges are without charge.
RESTRICTIONS ON EXCHANGES
In accordance with the terms of their respective prospectuses, certain funds do
not accept or may place differing limitations than those below on exchanges by
Timing Accounts.
Each 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 a Fund within two weeks of an earlier exchange
request out of the Fund, or (ii) makes more than two exchanges out of a Fund per
calendar quarter, or (iii) exchanges shares equal in value to at least $5
million, or more than 1% of a 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.
Each Fund also reserves the right to refuse the purchase side of an exchange
request by any Timing Account, person, or group if, in the Manager's judgment,
that Fund would be unable to invest effectively in accordance with its
investment objectives and policies, or would otherwise potentially be adversely
affected. Your purchase exchanges may be restricted or refused if a Fund
receives or anticipates simultaneous orders affecting significant portions of a
Fund's assets. In particular, a pattern of exchanges that coincide with a
"market timing" strategy may be disruptive to a Fund and therefore may be
refused.
The Funds and Distributors also, as indicated under "How Do I Buy Shares?"
reserve the right to refuse any order for the purchase of shares.
HOW DO I SELL SHARES?
You may liquidate your shares and receive from a Fund the value of the shares.
You may redeem shares in any of the following ways:
BY MAIL
Send a written request, signed by all registered owners, to Investor Services at
the address shown on the back cover of this Prospectus and any share
certificates which have been issued for the shares being redeemed, properly
endorsed and in order for transfer. You will then receive from such Fund the
value of the shares based upon the net asset value per share (less a contingent
deferred sales charge, if applicable) next computed after the written request in
proper form is received by Investor Services. Redemption requests received after
the time at which the net asset value is calculated will receive the price
calculated on the following business day. The net asset value per share
Shareholders are requested to provide a telephone number(s) where they may be
reached during business hours, or in the evening if preferred. Investor
Services' ability to contact a shareholder promptly when necessary will speed
the processing of the redemption.
TO BE CONSIDERED IN PROPER FORM, SIGNATURE(S) MUST BE GUARANTEED IF THE
REDEMPTION REQUEST INVOLVES ANY OF THE FOLLOWING:
(1) the proceeds of the redemption are over $50,000;
(2) the proceeds (in any amount) are to be paid to someone other than the
registered owners of the account;
(3) the proceeds (in any amount) are to be sent to any address other than the
address of record, preauthorized bank account or brokerage firm account;
(4) share certificates, if the redemption proceeds are in excess of $50,000;
or
(5) a Fund or Investor Services 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 a Fund, (c) a Fund has been
notified of an adverse claim, (d) the instructions received by a Fund are
given by an agent, not the actual registered owner, (e) a 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 a Fund.
Signatures must be guaranteed by an "eligible guarantor institution" as defined
under Rule 17Ad-15 under the Securities Exchange Act of 1934. Generally,
eligible guarantor institutions include (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 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 guarantee medallion program. A notarized signature will not be
sufficient for the request to be in proper form.
Where shares to be redeemed are represented by share certificates, the request
for redemption must be accompanied by the share certificate and a share
assignment form signed by the registered owners exactly as the account is
registered, with the signatures guaranteed as referenced above. You are advised,
for your protection, to send the share certificate and assignment form in
separate envelopes if they are being mailed in for redemption.
Liquidation requests of corporate, partnership, trust and custodianship
accounts, and accounts under court jurisdiction require the following
documentation to be in proper form:
Corporation - (1) Signature guaranteed letter of instruction from the authorized
officers of the corporation, and (2) a corporate resolution.
Partnership - (1) Signature guaranteed letter of instruction from a general
partner and (2) pertinent pages from the partnership agreement identifying the
general partners or a certification for a partnership agreement.
Trust - (1) Signature guaranteed letter of instruction from the trustees and (2)
a copy of the pertinent pages of the trust document listing the trustees or a
Certification for Trust if the trustees 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.
Payment for redeemed shares will be sent to you within seven days after receipt
of the request in proper form.
BY TELEPHONE
If you complete the Franklin Templeton Telephone Redemption Authorization
Agreement (the "Agreement"), included with this Prospectus, you may redeem
shares of a Fund by telephone, subject to the Restricted Account exception noted
under "Telephone Transactions - Restricted Accounts." You may obtain additional
information about telephone redemptions by writing to the Funds or Investor
Services at the address shown on the cover or by calling 1-800/632-2301. THE
FUNDS AND INVESTOR SERVICES WILL EMPLOY REASONABLE PROCEDURES TO CONFIRM THAT
INSTRUCTIONS GIVEN BY TELEPHONE ARE GENUINE. YOU, HOWEVER, BEAR THE RISK OF LOSS
IN CERTAIN CASES AS DESCRIBED UNDER "TELEPHONE TRANSACTIONS - VERIFICATION
PROCEDURES."
If your account has a completed Agreement on file, redemptions of uncertificated
shares or shares which have previously been deposited with a Fund or Investor
Services may be made for up to $50,000 per day per Fund account. Telephone
redemption requests received before the scheduled close of the Exchange
(generally 1:00 p.m. Pacific 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, you should follow the other
redemption procedures set forth in this Prospectus. Institutional accounts
(certain corporations, bank trust departments, qualified retirement plans and
government entities which qualify to purchase shares at net asset value pursuant
to the terms of this Prospectus) that wish to execute redemptions in excess of
$50,000 must complete an Institutional Telephone Privileges Agreement which is
available from the Franklin Templeton Institutional Services Department by
calling 1-800/321-8563.
THROUGH SECURITIES DEALERS
Each Fund will accept redemption orders from securities dealers who have entered
into an agreement with Distributors. This is known as a repurchase. The only
difference between a normal redemption and a repurchase is that if you redeem
shares through a dealer, the redemption price will be the net asset value next
calculated after your dealer receives the order which is promptly transmitted to
a Fund, rather than on the day a Fund receives your written request in proper
form. The documents described under "By Mail" above, as well as a signed letter
of instruction, are required regardless of whether you redeem shares directly or
submit such shares to a securities dealer for repurchase. Your letter should
reference a Fund, the account number, the fact that the repurchase was ordered
by a dealer and the dealer's name. Details of the dealer-ordered trade, such as
trade date, confirmation number, and the amount of shares or dollars, will help
speed processing of the redemption. The seven-day period within which the
proceeds of your redemption will be sent will begin when a Fund receives all
documents required to complete ("settle") the repurchase in proper form. The
redemption proceeds will not earn dividends or interest during the time between
receipt of the dealer's repurchase order and the date the redemption is
processed upon receipt of all documents necessary to settle the repurchase.
Thus, it is in your best interest to have the required documentation completed
and forwarded to a Fund as soon as possible. Your dealer may charge a fee for
handling the order. See "How Do I Buy and Sell Shares?" in the SAI for more
information on the redemption of shares.
CONTINGENT DEFERRED SALES CHARGE
In order to recover commissions paid to securities dealers, all or a portion of
investments of $1 million or more redeemed within the contingency period of 12
months of the calendar month of such investment 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 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 Distributors. The
contingent deferred sales charge is waived in certain instances.
In determining whether 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) a calculated number of shares representing amounts
attributable to capital appreciation on shares held less than the contingency
period; (ii) shares purchased with reinvested dividends and capital gain
distributions; and (iii) other shares held longer than the contingency period.
Shares subject to a contingent deferred sales charge will then be redeemed 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 is waived, as applicable, for: exchanges;
any account fees; distributions from an individual retirement plan account due
to death or disability or upon periodic distributions based on life expectancy;
tax-free returns of excess contributions from employee benefit plans;
distributions from employee benefit plans, including those due to termination or
plan transfer; redemptions initiated by a Fund due to an account falling below
the minimum specified account size; redemptions following the death of the
shareholder or beneficial owner; and 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). For example, if an
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% contingent deferred sales
charge.
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.
Unless otherwise specified, requests for redemptions of a SPECIFIED DOLLAR
amount 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.
ADDITIONAL INFORMATION REGARDING REDEMPTIONS
Each Fund may delay the mailing of the redemption check, or a portion thereof,
until the clearance of the check used to purchase Fund shares, which may take up
to 15 days or more. Although the use of a certified or cashier's check will
generally reduce this delay, shares purchased with these checks will also be
held pending clearance. Shares purchased by federal funds wire are available for
immediate redemption.
The right of redemption may be suspended or the date of payment postponed if the
Exchange is closed (other than customary closing) or upon the determination of
the SEC that trading on the Exchange is restricted or an emergency exists, or if
the SEC permits it, by order, for the protection of shareholders. Of course, the
amount received may be more or less than the amount you invested, depending on
fluctuations in the market value of securities owned by a Fund.
RETIREMENT ACCOUNTS
Retirement plan account liquidations require the completion of certain
additional forms to ensure compliance with IRS regulations. To liquidate a
retirement plan account, you or your securities dealer may call Franklin's
Retirement Plans Department to obtain the necessary forms.
Tax penalties will generally apply to any distribution from such plans to a
participant under age 59 1/2, unless the distribution meets one of the
exceptions set forth in the Code.
OTHER INFORMATION
Distribution or redemption checks sent to you do not earn interest or any other
income during the time such checks remain uncashed and neither the Funds or
their affiliates will be liable for any loss caused by your failure to cash such
checks.
"Cash" payments to or from a Fund may be made by check, draft or wire. The Trust
has no facility to receive or pay out cash in the form of currency.
For any information required about a proposed liquidation, a shareholder may
call Franklin's Shareholder Services Department or the securities dealer may
call Franklin's Dealer Services Department.
TELEPHONE TRANSACTIONS
By calling Investor Services at 1-800/632-2301, you or your investment
representative of record, if any, may be able to execute various telephone
transactions, including to: (i) effect a change in address, (ii) change a
dividend option (see "Restricted Accounts" below), (iii) transfer a Fund's
shares in one account to another identically registered account in that Fund,
(iv) request the issuance of certificates (to be sent to the address of record
only) and (v) exchange a Fund's shares as described in this Prospectus by
telephone. In addition, if you complete and file an Agreement as described under
"How Do I Sell Shares? - By Telephone" you will be able to redeem shares of a
Fund.
VERIFICATION PROCEDURES
Each Fund and Investor Services 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 by sending a confirmation
statement on redemptions to the address of record each time account activity is
initiated by telephone. So long as the Funds and Investor Services 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 you caused by an unauthorized transaction. The Funds and
Investor Services may be liable for any losses due to unauthorized or fraudulent
instructions in the event such reasonable procedures are not followed. You are,
of course, under no obligation to apply for or accept telephone transaction
privileges. In any instance where the Funds or Investor Services is not
reasonably satisfied that instructions received by telephone are genuine, the
requested transaction will not be executed, and neither a Fund nor Investor
Services 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 retirement accounts. To assure compliance with all applicable
regulations, special forms are required for any redemption, distribution or
dividend payment changes. While the telephone exchange privilege is extended to
Franklin Templeton IRA and 403(b) retirement accounts, certain restrictions may
apply to other types of retirement plans.
To obtain further information regarding distribution or transfer procedures,
including any required forms, retirement account shareholders may call to speak
to a Retirement Plan Specialist at 1-800/527-2020.
GENERAL
During periods of drastic economic or market changes, it is possible that the
telephone transaction privilege will be difficult to execute because of heavy
telephone volume. In such situations, you may wish to contact your investment
representative for assistance, or to send written instructions to a Fund as
detailed elsewhere in this Prospectus.
Neither the Funds nor Investor Services will be liable for any losses resulting
from your inability to execute a telephone transaction.
HOW ARE THE FUNDS' SHARES VALUED?
The net asset value per share of each Fund is determined as of the scheduled
close of the Exchange (generally 1:00 p.m. Pacific time) each day that the
Exchange is open for trading. Many newspapers carry daily quotations of the
prior trading day's closing "bid" (net asset value) and "ask" (offering price,
which includes the maximum front-end sales charge of each Fund).
The net asset value per share of each Fund is determined by deducting the
aggregate gross value of all liabilities from the aggregate gross value of all
assets, and then dividing the difference by the number of shares outstanding.
Assets in each Fund's portfolio are valued as described under "How Are the
Funds's Shares Valued?" in the SAI.
HOW DO I GET MORE INFORMATION ABOUT MY INVESTMENT?
Any questions or communications regarding your account should be directed to
Investor Services at the address shown on the back cover of this Prospectus.
From a touch-tone phone, you may access an automated system (day or night) which
offers the following features.
By calling the automated Franklin TeleFACTS(R) system at 1-800/247-1753, you may
obtain account information, current price and, if available, yield or other
performance information specific to each Fund In addition, you may process an
exchanged within the same class into an identically registered Franklin account
and request duplicate confirmation or year-end statements and deposit slips. The
Funds' codes, which will be needed to access system information are 211 for the
Global Currency Fund, 213 for the High Income Fund, and 212 for the Hard
Currency Fund. The system's automated operator will prompt you with easy to
follow step-by-step instructions from the main menu. Other features may be added
in the future.
To assist you and securities dealers wishing to speak directly with a
representative, the following list of Franklin departments, telephone numbers
and hours of operation is provided. The same numbers may be used when calling
from a rotary phone:
HOURS OF OPERATION
(MONDAY THROUGH
DEPARTMENT NAME TELEPHONE NO. FRIDAY)
Shareholder Services 1-800/632-2301 5:30a.m. to 5:00p.m.
Dealer Services 1-800/524-4040 5:30a.m. to 5:00p.m.
Fund Information 1-800/DIAL BEN 5:30a.m. to 8:00p.m.
8:30a.m. to 5:00p.m.
(Saturday)
Retirement Plans 1-800/527-0637 5:30a.m. to 5:00p.m.
TDD (hearing impaired) 1-800/851-0637 5:30a.m. to 5:00p.m.
In order to ensure that the highest quality of service is being provided,
telephone calls placed to or by representatives in Franklin's service
departments may be accessed, recorded and monitored. These calls can be
determined by the presence of a regular beeping tone.
HOW DO THE FUNDS MEASURE PERFORMANCE?
Advertisements, sales literature and communications to you may contain several
measures of each Fund's performance, including current yield, various
expressions of total return and current distribution rate. They may also
occasionally cite statistics to reflect a Fund's volatility or risk.
Average annual total return figures as prescribed by the SEC represent the
average annual percentage change in value of $1,000 invested at the maximum
public offering price (offering price includes sales charge) for one-, five- and
ten-year periods, or portion thereof, to the extent applicable, through the end
of the most recent calendar quarter, assuming reinvestment of all distributions.
A Fund may also furnish total return quotations for other periods, or based on
investments at various sales charge levels or at net asset value. For such
purposes, total return equals the total of all income and capital gain paid to
shareholders, assuming reinvestment of all distributions, plus (or minus) the
change in the value of the original investment, expressed as a percentage of the
purchase price.
Current yield reflects the income per share earned by each Fund's portfolio
investments. It is calculated by dividing a Fund's net investment income per
share during a recent 30-day period by the maximum public offering price on the
last day of that period and annualizing the result.
Current yield for each Fund, which is calculated according to a formula
prescribed by the SEC (see "General Information" in the SAI) is not indicative
of the dividends or distributions which were or will be paid to a Fund's
shareholders. Dividends or distributions paid to shareholders are reflected in
the current distribution rate, which may be quoted to you. The current
distribution rate is computed by dividing the total amount of dividends per
share paid by a Fund during the past 12 months by a current maximum offering
price. Under certain circumstances, such as when there has been a change in the
amount of dividend payout, or a fundamental change in investment policies, it
might be appropriate to annualize the dividends paid during the period such
policies were in effect, rather than using the dividends during the past 12
months. The current distribution rate differs from the current yield computation
because it may include distributions to shareholders from sources other than
dividends and interest, such as premium income from option writing and
short-term capital gain, and is calculated over a different period of time.
In each case, performance figures are based upon past performance, reflect all
recurring charges against Fund income and will assume the payment of the maximum
sales charge on the purchase of shares. When there has been a change in the
sales charge structure, the historical performance figures will be restated to
reflect the new rate. The investment results of a Fund, like all other
investment companies, will fluctuate over time; thus, performance figures should
not be considered to represent what an investment may earn in the future or what
a Fund's total return, current yield, or distribution rate may be in any future
period.
GENERAL INFORMATION
REPORTS TO SHAREHOLDERS
Each Fund's fiscal year ends October 31. Annual Reports containing audited
financial statements of the Trust, including the auditors' report, and
Semi-Annual Reports containing unaudited financial statements are automatically
sent to shareholders. To reduce the volume of mail sent to each household, as
well as to reduce a Fund's expenses, Investor Services will attempt to identify
related shareholders within a household and send only one copy of the report.
Additional copies may be obtained, without charge, upon request to the Trust at
the telephone number or address set forth on the cover page of this Prospectus.
Additional information on Fund performance is included in the Trust's Annual
Report to Shareholders and under "General Information" in the SAI.
ORGANIZATION AND VOTING RIGHTS
The Trust was organized as a Massachusetts business trust on November 6, 1985.
The Trust's authorized capital stock consists of shares of common stock of $.01
par value. All shares have one vote, and, when issued, are fully paid and
non-assessable. All shares have equal voting, participation and liquidation
rights, but have no subscription, preemptive or conversion rights. The Trust
reserves the right to issue additional classes of shares.
Shares of each series of the Trust vote separately as to issues affecting that
fund, or the Trust, unless otherwise permitted by the 1940 Act. Voting rights
are noncumulative, so that in any election of trustees, the holders of more than
50% of the shares voting can elect all of the trustees, if they choose to do so,
and in such event the holders of the remaining shaes voting will not be able to
elect any person or persons to the Board.
The Trust does not intend to hold annual shareholder meetings. The Trust may,
however, hold a special shareholders meeting of a series for such purposes as
changing fundamental investment restrictions, approving a new management
agreement or any other matters which are required to be acted on by shareholders
under the 1940 Act. A meeting may also be called by the trustees in their
discretion or by shareholders holding of a series holding at least ten percent
of the outstanding shares of the Trust. Shareholders will receive assistance in
communicating with other shareholders in connection with the election or removal
of trustees, such as that provided in Section 16(c) of the 1940 Act.
The Board of Trustees may from time to time establish other series of the Trust,
the assets and liabilities of which will be separate and distinct from any other
fund of the Trust.
REDEMPTIONS BY THE FUNDS
Each Fund reserves the right to redeem your shares, at net asset value, if your
account has a value of less than $50, but only where the value of your account
has been reduced by the prior voluntary redemption of shares and has been
inactive (except for the reinvestment of distributions) for a period of at least
six months, provided you are given advance notice. For more information, see
"How Do I Buy and Sell Shares?" in the SAI.
REGISTERING YOUR ACCOUNT
An account registration should reflect your intentions as to ownership. Where
there are two co-owners on the account, the account will be registered as "Owner
1" and "Owner 2"; the "or" designation is not used except for money market fund
accounts. If co-owners wish to have the ability to redeem or convert on the
signature of only one owner, a limited power of attorney may be used.
Accounts should not be registered in the name of a minor, either as sole or
co-owner of the account. Transfer or redemption for such an account may require
court action to obtain release of the funds until the minor reaches the legal
age of majority. The account should be registered in the name of one "Adult" as
custodian for the benefit of the "Minor" under the Uniform Transfer or Gifts to
Minors Act.
A trust designation such as "trustee" or "in trust for" should only be used if
the account is being established pursuant to a legal, valid trust document. Use
of such a designation in the absence of a legal trust document may cause
difficulties and require court action for transfer or redemption of the funds.
Shares, whether in certificate form or not, registered as joint tenants or "Jt
Ten" shall mean "as joint tenants with rights of survivorship" and not "as
tenants in common."
Except as indicated, you may transfer an account in a Fund carried in "street"
or "nominee" name by your securities dealer to a comparably registered Fund
account maintained by another securities dealer. Both the delivering and
receiving securities dealers must have executed dealer agreements on file with
Distributors. Unless a dealer agreement has been executed and is on file with
Distributors, a Fund will not process the transfer and will so inform your
delivering securities dealer. To effect the transfer, you should instruct the
securities dealer to transfer the account to a receiving securities dealer and
sign any documents required by the securities dealers to evidence consent to the
transfer. Under current procedures, the account transfer may be processed by the
delivering securities dealer and a Fund after a Fund receives authorization in
proper form from your delivering securities dealer. Account transfers may be
effected electronically through the services of the NSCC.
The Funds may conclusively accept instructions from you or your nominee listed
in publicly available nominee lists, regardless of whether the account was
initially registered in the name of or by you, your nominee, or both. If a
securities dealer or other representative is of record on your account, you will
be deemed to have authorized the use of electronic instructions on the account,
including, without limitation, those initiated through the services of the NSCC,
to have adopted as instruction and signature any such electronic instructions
received by a Fund and Investor Services, and to have authorized them to execute
the instructions without further inquiry. At the present time, such services
which are available include the NSCC's "Networking," "Fund/SERV," and "ACATS"
systems.
Any questions regarding an intended registration should be answered by the
securities dealer handling the investment, or by calling Franklin's Fund
Information Department.
IMPORTANT NOTICE REGARDING
TAXPAYER IRS CERTIFICATIONS
Pursuant to the Code and U.S. Treasury regulations, the Funds may be required to
report to the IRS any taxable dividend, capital gain distribution, or other
reportable payment (including share redemption proceeds) and withhold 31% of any
such payments made to individuals and other non-exempt shareholders who have not
provided a correct taxpayer identification number ("TIN") and made certain
required certifications that appear in the Shareholder Application. You may also
be subject to backup withholding if the IRS or a securities dealer notifies a
Fund that the number furnished by you is incorrect or that you are subject to
backup withholding for previous under-reporting of interest or dividend income.
The Funds reserve the right to (1) refuse to open an account for any person
failing to provide a TIN along with the required certifications and (2) close an
account by redeeming its shares in full at the then-current net asset value upon
receipt of notice from the IRS that the TIN certified as correct by you is in
fact incorrect or upon the failure of a shareholder who has completed an
"awaiting TIN" certification to provide a Fund with a certified TIN within 60
days after opening the account.
FRANKLIN TEMPLETON
GERMAN GOVERNMENT
BOND FUND
PROSPECTUS MARCH 1, 1996
777 MARINERS ISLAND BLVD., P.O. BOX 7777
SAN MATEO, CA 94403-7777 1-800/DIAL BEN
This Prospectus pertains to the Franklin Templeton German Government Bond Fund
(the "Fund"), a non-diversified series of Franklin Templeton Global Trust (the
"Trust"), formerly known as the Huntington Funds, an open-end management
investment company consisting of four separate series. The Fund's investment
objective is to seek, over the long term, total return through investment in a
managed portfolio of German government bonds. Total return consists of a
combination of interest income, capital appreciation and currency gains.
The Fund may invest in domestic and foreign securities as described under "How
does the Fund Invest Its Assets?"
This Prospectus is intended to set forth in a clear and concise manner
information about the Fund that a prospective investor should know before
investing. After reading the Prospectus, you should retain it for future
reference; it contains information about the purchase and sale of shares and
other items which you will find useful to have.
A Statement of Additional Information ("SAI") concerning the Fund, dated March
1, 1996, as may be amended from time to time, provides a further discussion of
certain areas in this Prospectus and other matters which may be of interest to
you. It has been filed with the Securities and Exchange Commission ("SEC") and
is incorporated herein by reference. A copy is available without charge from the
Fund or the Fund's principal underwriter, Franklin/Templeton Distributors, Inc.
("Distributors"), at the address or telephone number shown above.
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.
SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
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.
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 UNDERWRITER.
CONTENTS PAGE
Expense Table
Financial Highlights - How Has the Fund Performed?
What is the Franklin Templeton Global Trust?
How Does the Fund Invest Its Assets?
What are the Fund's Potential Risks
Who Manages the Fund?
What Distributions Might I Receive from the Fund?
How Taxation Affects You and the Fund
How Do I Buy Shares?
What Programs and Privileges Are Available to Me as a Shareholder?
What If My Investment Outlook Changes? - Exchange Privilege
How Do I Sell Shares
Telephone Transactions
How are Fund Shares Valued?
How Do I Get More Information
About My Investment?
How Does the Fund Measure Performance?
General Information
Registering you Account
Important Notice Regarding
Taxpayer IRS Certifications
EXPENSE TABLE
The purpose of this table is to assist you in understanding the various costs
and expenses that you will bear directly or indirectly in connection with an
investment in the Fund. These figures are based on the aggregate operating
expenses of the Fund for the fiscal year ended October 31, 1995.
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on
Purchases (as a percentage of offering
price) 3.00%
Reinvested Dividends NONE
Deferred Sales Charge NONE+
Exchange Fee (per transaction) $5.00++
+Investments of $1 million or more are not subject to a front-end sales
charge; however, a contingent deferred sales charge of 1% is generally
imposed on certain redemptions within a "contingency period" of 12 months of
the calendar month of such investments. See "How Do I Sell Shares? --
Contingent Deferred Sales Charge."
++$5.00 fee imposed only on Timing Accounts as described under "What If My
Investment Outlook Changes? - Exchange Privilege." All other exchanges are
processed without a fee.
ANNUAL FUND OPERATING EXPENSES
Management Fees 0.51%*
Rule 12b-1 Fees** 0.19%**
Other Expenses:
Reports to Shareholders 0.16%
Shareholder servicing costs 0.06%
OTHER 0.33%
Total Other Expenses 0.55%
Total Fund Operating Expenses 1.25%**,*
*The investment manager has agreed in advance to waive a portion of its
management fees and to make certain payments to reduce expenses of the Fund.
Absent the fee waiver by the investment manager, the Fund would have paid
management fees and total operating expenses of 0.55% and 1.29%, respectively,
of the average net assets of the Fund.
**The maximum amount of Rule 12b-1 fees allowed pursuant to the Fund's
distribution plan is 0.25%. See "Who Manages the Fund? - Plan of Distribution."
Consistent with 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.
You should be aware that the above table is not intended to reflect in precise
detail the fees and expenses associated with an investment in the Fund. Rather,
the table has been provided only to assist you in gaining a more complete
understanding of fees, charges and expenses. For a more detailed discussion of
these matters, you 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, 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.
1 YEAR* 3 YEARS 5 YEARS 10 YEARS
$42 $68 $97 $177
*Assumes that a contingent deferred sales charge will not apply.
THIS EXAMPLE IS BASED ON THE AGGREGATE ANNUAL OPERATING EXPENSES, BEFORE FEE
WAIVERS AND EXPENSE REDUCTION, 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 you
as a result of your investment in the Fund. 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%.
FINANCIAL HIGHLIGHTS - HOW HAS THE FUND PERFORMED?
Set forth below is a table containing the financial highlights for a share of
the Fund. The information for the fiscal year ended October 31, 1995, the six
month period ended October 31, 1994 and the fiscal year ended April 30, 1994 has
been audited by Coopers & Lybrand L.L.P., independent auditors, whose audit
report appears in the financial statements Fund's Annual Report to Shareholders
dated October 31, 1995. The previous fiscal year of the Fund was audited by
other independent auditors whose opinions are not included herein. See "Report
to Shareholders" under "General Information."
<TABLE>
<CAPTION>
Per Share Operating Performance+ Ratios/Supplemental Data
____________________________________________________________ __________________________
Distri- Distri- Distri- Ratio of Net
Net Asset Net Net butions butions butions Net Asset Net Assets Ratio of Investment
Year Value at Invest-Realized & Total From From Net From From Total Value at End Expenses Income toPortfolio
Ended Beginning ment Unrealized Investment InvestmentCapital Return of Distri-at End Total of Year toAverage Average Turnover
April 30of Year Income Gain(Loss) Operations Income Gains Capital butionsof YearReturn++(in 000's)Net Assets**NetAssets Rate
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
19931 $12.50 $.27 $ .56 $ .83 $(.25) $ - $ - $(.25) $13.08 6.15% $10,738 .87%* 6.06%* 190.89%*
1994 13.08 .78 (.72) .06 (.39) (.06) (.40) (.85) 12.29 .64 13,341 1.00 4.74 185.66
19942 12.29 .41 .92 1.33 (.36) - - (.36) 13.26 10.92 13,236 1.04* 6.37* 301.60*
19953 13.26 1.53 0.71 2.24 (1.19) - - (1.19) 14.31 18.28 24,113 1.25 5.17 67.77
1For the period December 31, 1992 (effective date of registration) to April 30, 1993.
2Six month period ended October 31, 1994.
3For the year ended October 31, 1995.
+Selected data for a share of beneficial interest outstanding throughout the period.
++Total return measures the change in value of an investment over the periods indicated. It does not include the maximum 3.0%
front-end sales charge and assumes reinvestment of dividends and capital gains at net asset value.
*Annualized
**During the periods indicated, the investment manager reduced its management fees and reimbursed other expenses incurred by the
Fund. Had such action not been taken, the ratios of expenses to average net assets would have been as follows:
Ratio of
Expenses
to Average
Net Assets
1993 1.73%
1994 1.83
1994 2 1.77
1995 3 1.29
2 Six month period ended October 31, 1994.
3 For the year ended October 31, 1995.
</TABLE>
WHAT IS THE FRANKLIN TEMPLETON GLOBAL TRUST?
The Trust, organized as a Massachusetts business trust on November 6, 1985, is
an open-end, management investment company, known as a mutual fund, and has
registered with the SEC under the Investment Company Act of 1940, as amended
(the "1940 Act"). The Fund, a non-diversified series of the Trust, is managed by
Franklin Advisers, Inc. (the "Manager" or "Adviser"). Templeton Investment
Counsel, Inc. ("TICI" or the "Subadviser") serves as the subadviser under a
contract with the Manager (together, the "Fund's Advisers"). TICI is an indirect
subsidiary of Templeton Worldwide, Inc., which is a direct, wholly-owned
subsidiary of Franklin Resources, Inc.
("Resources"). (See "Management of the Fund.")
The Board of Trustees of the Trust (the "Board") may determine, at a future
date, to offer shares of the Fund in one or more "classes" to permit the Fund to
take advantage of alternative methods of selling Fund shares. "Classes" of
shares represent proportionate interests in the same portfolio of investment
securities but with different rights, privileges and attributes, as determined
by the trustees. Certain funds in the Franklin Templeton Funds, as that term is
defined under "How Do I Buy Shares?," currently offer their shares in two
classes, designated "Class I" and "Class II." Because the Fund's sales charge
structure and plan of distribution are similar to those of Class I shares,
shares of the Fund may be considered Class I shares for redemption, exchange and
other purposes.
You may purchase shares of the Fund (minimum investment of $100 initially and
$25 thereafter) at the current public offering price. The current public
offering price of the Fund is equal to the net asset value (see "How Are Fund
Shares Valued?" in this prospectus and the SAI), plus a variable sales charge
not exceeding 3.00% of the offering price depending upon the amount invested.
Please see "How Do I Buy Shares?"
HOW DOES THE FUND INVEST ITS ASSETS?
The Fund's investment objective is to seek, over the long-term, total return
through investment in a managed portfolio of German government bonds.
- - The Fund is designed for United States ("U.S.") investors who wish to invest
in German government bonds for the purpose of seeking one or more of the
following potential benefits:
- - Higher current yields than may be available on U.S. government bonds
- - Capital appreciation resulting from a decline in German interest rates and a
corresponding increase in German government bond prices
- - Currency gains from an increase in the value of the German mark relative to
the U.S. dollar
- - Safety of principal due to the high credit quality of German government
bonds
- - Portfolio diversification outside of the U.S. through German currency and
interest rate exposure
- - Protection of global purchasing power in the event of higher U.S. inflation
rates and/or depreciation of the U.S. dollar relative to the German mark
The Fund's investment objective is a fundamental policy of the Fund and may not
be changed without shareholder approval. There can be no assurance that the
objective will be achieved or that any of the potential benefits listed above
will be realized. In addition, there are significant risk considerations
relevant to an investment in the Fund, as described below.
HOW DOES THE FUND INVEST ITS ASSETS?
The Fund invests between 65% and 100% of its total assets in debt obligations
issued or guaranteed by the Federal Republic of Germany, its agencies,
instrumentalities and political subdivisions ("German government obligations").
The German government obligations in which the Fund invests are denominated in
the German mark and are rated at time of purchase triple A by a U.S. nationally
recognized rating service, such as Standard & Poor's Corporation ("S&P") or
Moody's Investors Service ("Moody's"), or, if unrated, are considered by the
Fund's Advisers to be of a quality comparable to triple A rated instruments. See
"Investing in German Government Obligations."
Consistent with its investment objective, the Fund may also invest up to 35% of
its total assets in (i) German mark-denominated bonds and other debt instruments
issued by sovereign governments other than the Federal Republic of Germany and
by supranational organizations (such as the World Bank) which are rated at time
of purchase triple A by a U.S. nationally recognized rating service, such as S&P
or Moody's, or which, if unrated, are considered by the Fund's Advisers to be of
a quality comparable to triple A rated instruments (ii) German domestic fixed
income securities know as Offentliche Pfandbriefe which are rated at time of
purchase triple A by a U.S. nationally recognized rating service, or which, if
unrated, are considered by the Fund's Advisers to be of a quality comparable to
triple A rated instruments; and (iii) cash and money market instruments
denominated in the German mark which are rated at time of purchase A-1+ by S&P
and/or P-1 by Moody's, or which, if unrated, are considered by the Fund's
Advisers to be of comparable high quality.
Under normal market conditions, the Fund may have up to 5% of its total assets
invested in U.S. dollar denominated cash and money market instruments, such as
U.S. Treasury bills, to provide extra liquidity for meeting shareholder
redemptions and exchanges.
While the Fund does not anticipate that it will have less than 75% of its total
assets invested in German government obligations under normal market conditions,
the Fund reserves the right to reduce its investment in German government
obligations to 65% of its total assets (with a corresponding increase in the
amount it invests in other German mark-denominated securities and cash) if such
investment allocation is deemed to be in the Fund's best interest by the Fund's
Advisers. It is also possible that the Fund may occasionally hold significant
cash or cash equivalents denominated in German marks until suitable investment
positions are available. Investors should understand that in order to preserve
its favorable tax status, the Fund may regularly hold 25% or less of its assets
in obligations issued or guaranteed by the Federal Republic of Germany even
while holding 65% or more of its total assets in German government obligations
(as defined above). In addition, as a temporary measure, the Fund may also
reduce its investment in German government obligations and/or increase its
investment in U.S. government and agency securities from time to time to
preserve its favorable tax status.
The rate of exchange between the U.S. dollar and the German mark fluctuates. As
a result, the Fund generally will experience gains and losses attributable to
those fluctuations. The Fund does not generally position hedge or otherwise
attempt to limit its exposure to German mark currency risk and, therefore, is
designed for investors who are prepared to accept the risk of currency
fluctuations.
Changes in German market interest rates will affect the market value of the
Fund. When German market interest rates rise, the market value of the Fund's
securities generally will decline. Conversely, when German market interest rates
decline, the market value of the Fund's securities generally will rise. The
Fund's Advisers will actively manage the Fund's portfolio maturity structure in
an attempt to achieve positive returns for the Fund over time from changes in
interest rates. See "Risks of Investing in the Fund."
It is anticipated that under normal market conditions, the Fund's weighted
average portfolio maturity will be at least five years. For temporary, defensive
purposes, however, the Fund's weighted average portfolio maturity may be less
than five years.
The Fund's Advisers invest the Fund's assets on the basis of a number of
factors, including, (i) the current level of interest rates on German government
obligations of various maturities and (ii) its view of future movements of those
interest rates. In determining the Fund's maturity structure, the Fund's
Advisers consider many factors pertaining to the German economy, including the
current stage of the economic cycle, government fiscal and monetary policy,
inflation expectations, the relationship of interest rates of varying
maturities, (i.e., the slope of the yield curve), currency market outlook, and
economic growth prospects within Germany and around the world.
Any policy or technique that is described in this Prospectus or in the Fund's
SAI, unless identified as a fundamental policy requiring shareholder approval to
change, may be changed by the Board without shareholder approval.
The Fund is subject to a number of additional investment restrictions, some of
which may be changed only with the approval of shareholders, which limit its
activities to some extent. For a list of these restrictions and more information
concerning the policies discussed herein, please see "How Does the Fund Invest
Its Assets?" and "Investment Restrictions" in the SAI.
INVESTING IN GERMAN GOVERNMENT OBLIGATIONS
German government obligations generally are considered by rating agencies to be
among the highest credit quality debt instruments worldwide.
In addition, the Bundesbank (the German central bank) generally is viewed as
among the most disciplined and ardent central banks in the world in its policies
of fighting domestic inflation and protecting the international value of the
German mark.
The German bond market is the third largest in the world and currently also one
of the fastest growing. The fall of the Berlin Wall in 1989 and the subsequent
reunification of what were previously East Germany and West Germany in 1990 have
significantly increased German public sector financing requirements and caused
substantial recent growth of the German government bond market.
According to Merrill Lynch, the face amount of German mark-denominated bonds
outstanding as of December 31, 1994, was approximately 4.02 trillion marks (U.S.
$2.68 trillion). Of this total, German government and agency bonds accounted for
1.276 trillion marks (U.S. $851 billion), or about 32% of the total market.
Liquidity in the German government bond market is considered by the Fund's
Advisers to be very high.
The table below shows publicly issued German bonds outstanding, by issuer
type, as of December 31, 1994. U.S. bond market statistics are also provided
for comparison purposes.
COMPARATIVE BOND MARKET STATISTICS
(in U.S. $billions)
ISSUER TYPE GERMANY U.S.
Central government $ 718.9 $2,392.2
Central government 132.2 2,176.0
agency & government
guaranteed
State and local 424.6 921.0
Corporates 957.2 2,246.5
Other, foreign, international
and Euros 449.5 856.1
Total $2,682.4 $8,591.8
Source: Merrill Lynch
Certain German government obligations are issued or otherwise guaranteed by the
Federal Republic of Germany. These obligations carry the explicit full faith and
credit backing of the German government and include direct obligations of the
government (Bunds), as well as certain government agency issues, such as the
German Unity Fund (Fonds Deutsche Einheit), established to help pay for the
reconstruction of former East Germany's economy, and the Treuhandanstalt,
established to facilitate the privatization of assets of former East Germany.
Other German government obligations are guaranteed by their issuing agency,
instrumentality or political subdivision, but do not carry the explicit full
faith and credit guarantee of the German government. The Fund will invest only
in such obligations which the Fund's Advisers consider to be of credit quality
substantially equivalent to direct obligations of the German government. Issuers
presently satisfying this criterion include the German Federal Railways
(Bundesbahn), the German Post Office (Bundespost), the Kreditanstalt fur
Wiederaufbau ("KFW"), as well as certain of the 16 separate federal states
(Lander) of which Germany is comprised.
FORWARDS, FUTURES AND OPTION CONTRACTS
The Fund may use forward foreign currency exchange contracts ("forwards"),
futures contracts ("futures"), option contracts on futures and over-the-counter
options (collectively, "options") in the management of its investment portfolio.
A forward is individually negotiated and privately traded by currency traders
(usually large commercial banks) and their customers. There are generally no
deposit requirements, and the contracts are traded at a net price without
commission. A forward involves an obligation to exchange one specific currency
for another specific currency (e.g., an obligation to exchange U.S. dollars for
German marks) at an agreed-upon rate of exchange at a future date, which may be
any fixed number of days from the date of the contract. The market for forwards
involving the exchange of U.S. dollars and German marks is highly liquid.
A bond (or currency) future is an agreement to buy or sell a specified quantity
of such bonds (or currency) at an agreed-upon price on a specified date. Upon
entering into a future, the Fund makes a margin deposit, which is adjusted to
reflect changes in the value of the contract and which continues until the
contract is terminated. Futures are transacted through established futures
exchanges.
An option gives the holder (buyer) of the option the right, but not the
obligation, to buy from (in the case of a call option) or sell to (in the case
of a put option) the seller of the option a specified amount of a particular
security or currency (such as German government obligations or German marks), or
a specified number of futures on such security or currency, on a specified date
in the future at a specified price. The option buyer pays the option seller a
negotiated premium upon the establishment of the contract. Options on futures
are transacted through established exchanges. Options on German government
obligations and on German marks are transacted over-the-counter directly between
the buyer and seller. The staff of the SEC has taken the position that purchased
over-the-counter options and the assets used as "cover" for written
over-the-counter options are illiquid securities. However, the Fund may treat
the securities it uses as cover for written over-the-counter options as liquid
provided that the Fund follows certain procedures. The Fund may sell
over-the-counter options only to qualified dealers who agree that the Fund may
repurchase any over-the-counter options it writes for a maximum price to be
calculated by a predetermined formula. In such cases, the option would be
considered illiquid only to the extent that the maximum repurchase price under
the formula exceeds the intrinsic value of the option.
When the Fund agrees to buy or sell a security denominated in the German mark,
it may enter into forwards in order to "lock in" the U.S. dollar price of the
security. By entering into a forward calling for the receipt or delivery, for a
fixed amount of U.S. dollars, of the amount of German marks involved in the
underlying security transactions, the Fund will be able to protect itself
against a change in the relationship between the U.S. dollar and the German mark
during the period between the date the security is purchased or sold and the
date on which payment is made or received.
For investment purposes, the Fund may use forwards, futures and options to
establish Fund exposure to the German mark, and futures and options to establish
Fund exposure to German government obligations, in a fast and cost-effective
way. This may be necessary either when the Fund has a substantial U.S. dollar
account receivable for Fund shares sold or when the Fund's Advisers require
extra time to invest cash balances in German mark-denominated securities. In
each of these cases, the Fund's use of forwards, futures and options is
temporary and for the purpose of maintaining the Fund's intended ongoing
exposure to the German mark and to German government obligations.
The Fund may from time to time also use forwards calling for the future purchase
of German marks, in conjunction with U.S. dollar-denominated cash or money
market instruments, for the purpose of obtaining an investment result that is
substantially equivalent to a direct investment in a German mark-denominated
money market instrument.
Although permitted to do so, the Fund does not currently intend to enter into
currency futures contracts or options on currency futures.
As indicated earlier, the Fund may, under extraordinary circumstances and for
temporary, defensive purposes only, employ forwards, futures and options for
hedging the Fund's German bond and currency exposure.
The use of forwards, futures and options by the Fund involves investment risks
to which the Fund would not be subject absent its use of such instruments. The
risks inherent in the use of forwards, futures and options include: (1)
dependence on the ability of the Fund's Advisers correctly to predict movements
in the direction of interest rates, securities prices and currency rates; (2)
imperfect correlation between the price of options and futures and in the prices
of the securities or the currencies underlying the options and futures; (3) that
the skills needed to use these instruments are different from those needed to
select portfolio securities; (4) the possible absence of a liquid secondary
market for any particular instrument at any particular time; (5) the possible
loss by the Fund of margin deposits or collateral in the event of bankruptcy of
a broker with whom the Fund has an open position in a future or an option; and
(6) the possible need to defer closing out certain hedged positions to avoid
adverse tax consequences. The Fund's ability to enter into certain futures and
options is also limited by the requirements of the Internal Revenue Code of
1986, as amended (the "Code") for qualification of the Fund as a regulated
investment company. These securities may also require the application of complex
and special tax rules and elections which may affect the amount, timing and
character of distributions to shareholders. These investments and transactions
are discussed further in the tax section included in this Prospectus and in the
SAI.
WHEN-ISSUED AND FIRM COMMITMENT AGREEMENTS
The Fund may invest up to 25% of its assets in securities on a "when-issued" or
"firm commitment" basis, for payment and delivery at a later date. Under these
arrangements, the securities' prices and yields are fixed on the date of the
commitment, but payment and delivery are scheduled for a future time.
At the time of settlement (normally within 30 to 60 days after the day of the
agreement or purchase), the market value of the security may be more or less
than its purchase or sale price and the Fund, as purchaser, assumes the risk of
any decline in value of the security beginning on the date of the agreement or
purchase. There is also a risk that the party with whom the Fund enters into
such transaction may default. Failure of the other party to perform its part of
the commitment could result in a loss of income to the Fund. The Fund will make
commitments to purchase or sell only securities which are eligible for inclusion
in its portfolio.
While the Fund normally enters into these transactions with the intention of
actually receiving or delivering the securities, it may sell the securities
before the settlement date or enter into a new commitment to extend the delivery
date further into the future if the Fund's Advisers consider it advisable as a
matter of investment strategy.
Between the time of purchase and settlement, no payment is made and no interest
on securities purchased for future delivery is received by the Fund. If the
assets of the Fund were held in cash pending the settlement of a transaction,
the Fund would earn no income. The Fund, however, intends to be fully invested
to the extent practicable.
When the Fund enters into a when-issued purchase or a firm commitment to
purchase securities, the Fund will maintain, in a segregated account with its
custodian, cash or high-grade marketable securities having an aggregate value
equal to the amount of such purchase commitments until payment is made. These
procedures are designed to help insure that the Fund maintains sufficient assets
at all times to cover its obligations under when-issued purchases and firm
commitments.
PORTFOLIO TURNOVER
For the fiscal year ended October 31, 1995, the period ended October 31, 1994
(annualized as a result of a change in fiscal year end from April to October)
and for the fiscal year ended April 30, 1994 the portfolio turnover rates were
67.77%, 302% and 186%, respectively. Turnover rates in excess of 100% often
result in higher portfolio brokerage, execution and transaction costs, which
will be borne by the Fund. The higher the portfolio turnover rate, the greater
the likelihood that capital gains or losses and foreign exchange gains or losses
may be realized by the Fund, which would affect taxable distributions paid to
the shareholders. (See "How Taxation Affects You and the Fund" below and
"Additional Information Regarding Taxation" in the SAI.) Because transaction
costs are normally higher for non-U.S. bonds than for U.S. bonds, the higher
anticipated portfolio turnover rate may also have a larger negative impact on
Fund returns than would be the case with a mutual fund investing primarily in
U.S. bonds.
OTHER PORTFOLIO SECURITIES AND PRACTICES
Although permitted to do so, the Fund does not currently intend to enter into
repurchase agreements or lend its portfolio securities. The Fund will not borrow
money, except from banks for temporary or emergency purposes in amounts not
exceeding 33 1/3% of the total value of its assets (no additional investments
may be made while any such borrowings exceed 5% of the Fund's total assets). The
Fund may invest in German domestic fixed income securities known as Offentliche
Pfandbriefe which are rated at time of purchase triple A by a U.S. nationally
recognized rating service, or which, if unrated, are considered by the Fund's
Advisers to be of a quality comparable to triple A rated instruments. The
securities are issued by specialized mortgage banks that are privately owned and
are colleralized by loans to German government entities. The Fund may invest in
time deposits of commercial banks having short-term deposit ratings of A-1+ (by
S&P) and/or P-1 (by Moody's), but will limit its investment in such time
deposits maturing in more than seven days as described in the Fund's SAI. The
Fund will not otherwise invest in illiquid securities.
WHAT ARE THE FUNDS POTENTIAL RISKS?
The primary risk factors associated with investment in German government
obligations arise in connection with market fluctuations in the level of German
interest rates and in the exchange rate between the U.S. dollar and the German
mark. At any given point in time, the impact of interest rate and currency
exchange rate changes on the Fund's share price may be reinforcing or
offsetting. These risks are described in more detail below.
The yield and total return of the Fund may be higher or lower than the yield and
total return of a fund investing in U.S. dollar-denominated bonds of comparable
maturity and quality. In addition, investors should recognize that due to
periodic interest rate and exchange rate volatility, the Fund's share price is
likely to experience significant volatility from time to time, and this
volatility may be greater than would be experienced by a comparable U.S.
dollar-denominated bond fund.
The Fund is intended to be only one part of your international and global
diversification program, and holding shares of the Fund should not be considered
a complete investment program.
INTEREST RATE RISK
Bond prices move inversely to the direction of changes in interest rates. When
interest rates rise, bond prices generally decline, and when interest rates
decline, bond prices generally rise. For any given change in market interest
rates, bonds having longer maturities generally will experience greater price
movements.
It is anticipated that under normal market conditions, the Fund's weighted
average portfolio maturity will be at least five years and may be as long as ten
years. Therefore, a significant rise in German bond market interest rates can
generally be expected to cause a significant decline in the Fund's net asset
value per share. Conversely, a large decline in German bond market interest
rates can generally be expected to cause the Fund's share price to rise
significantly.
The Fund's Advisers actively manage the average maturity of the Fund's
investments, shortening the Fund's maturity when it is expected that German
interest rates will rise and lengthening the maturity when it is expected that
German interest rates will decline. This active management of the Fund's
maturity structure is intended to improve the long-term performance of the Fund
on a total return basis relative to that of an unmanaged portfolio of German
government obligations. Of course, there can be no assurance that active
management will achieve the desired result.
CURRENCY RISK
The value of German government obligations, when expressed in U.S. dollars,
will fluctuate with changes in the exchange rate between the U.S. dollar and
the German mark. A decline in the mark relative to the dollar will generally
result in a decline in the Fund's share price (which is determined on a U.S.
dollar basis). Conversely, if the mark appreciates relative to the U.S.
dollar (i.e., the U.S. dollar declines), the Fund's share price generally can
be expected to rise.
To give U.S. dollar-based investors the opportunity to achieve more fully the
benefit of German mark currency diversification, the Fund does not engage in
hedging strategies to minimize or eliminate Fund share price fluctuations
arising from changes in the exchange rate between the U.S. dollar and the German
mark. Such hedging strategies could reduce the currency risk of investing in
German government obligations, but would also reduce the potential benefits or
gains that can be achieved.
Because of its investment primarily in German mark-denominated obligations and
its policy of not hedging currency risk, the Fund's share price will likely
exhibit greater day-to-day volatility than a fund which diversifies its currency
risk across multiple currencies and/or regularly hedges its currency risk.
Investors in the Fund should also recognize that even though interest rates on
German government obligations may from time to time exceed the rates on U.S.
dollar-denominated bonds of comparable maturity and quality, a decline in the
German mark relative to the U.S. dollar over any given period could more than
offset any such interest rate advantage, resulting in a negative total return
for the Fund over that period.
In the event of an extraordinary political or world development which, in the
view of the Fund's Advisers, threatens the social or political stability of
Germany or the viability of the German government, the Fund may invest in U.S.
government securities and U.S. dollar-denominated cash equivalents or otherwise
hedge its German bond and currency risk, without limitation, but only for
temporary, defensive purposes.
OTHER RISK FACTORS
Foreign taxes can adversely affect the Fund's performance, though it is
anticipated that the Fund will invest only in debt obligations which are not
subject to foreign tax withholding. For more information on tax issues affecting
the Fund, see "How Taxation Affects You and the Fund" in this Prospectus and
"Additional Information Regarding Taxation" in the SAI.
The Fund is a "non-diversified" fund and, as such, there is no restriction under
the 1940 Act on the percentage of assets that may be invested at any time in the
securities of any one issuer. However, as a non-diversified fund, and as a fund
that concentrates its investments primarily in German government obligations
denominated in German marks, the Fund may be subject to greater risk with
respect to its portfolio securities than a mutual fund that has a broader range
of investments. Although the Fund is "non-diversified" for purposes of the 1940
Act, it nevertheless must meet certain diversification standards to qualify as a
regulated investment company under the Code. If the Fund is unable to meet such
diversification standards, the Fund may be subject to taxation as a corporation.
The diversification standards require the Fund to invest no more than 25% of its
total assets in a single issuer and, with respect to at least 50% of its total
assets, to invest in cash, U.S. Government securities, securities of other
regulated investment companies, and other securities as to which the Fund
invests no more than 5% of its assets in the securities of any one issuer or
holds not more than 10% of the outstanding voting securities of any one issuer.
The Fund's manager and the Fund's investment adviser believe the Fund will be
able to meet these diversification standards following its normal investment
policies. As necessary to satisfy such diversification standards, the Fund may
invest a significant portion of its assets in German government obligations
other than those issued or guaranteed by the Federal Republic of Germany and in
German mark-denominated obligations issued by other sovereign governments and
supranational organizations. To the extent the Fund is not fully diversified, it
may be more susceptible to adverse economic, political or regulatory
developments affecting a single issuer than would be the case if it was more
broadly diversified.
A mutual fund can incur significant transaction costs in its purchases and sales
of foreign securities and currencies. Due to the highly liquid nature of the
German government obligation and foreign exchange markets, however, it is
anticipated that Fund transaction costs will be minimal and will not have a
material impact on the Fund's performance.
The Fund's custody and portfolio accounting expenses may be higher than those
experienced by a fund investing solely in U.S. dollar-denominated bonds.
Investing in non-U.S. securities generally may be subject to certain risk
factors not thought to be present in the U.S. These include expropriation of
foreign-owned assets, confiscatory taxation, exchange controls, political and
social instability, and the difficulty of enforcing obligations in other
countries. See "Investing in Foreign Securities" in the SAI for a more detailed
discussion of those risk factors.
GERMAN ECONOMIC RISK FACTORS
The following information is a brief summary of factors affecting the Fund and
does not purport to be a complete description of such factors. The information
is based primarily upon information derived from public documents relating to
securities offerings of issuers of such German government obligations, from
independent credit reports and historically reliable sources, but has not been
independently verified by the Fund.
The Federal Republic of Germany, which comprises what was formerly the nations
of East Germany and West Germany, is considered by the rating agencies and by
the Fund's Advisers to be among the world's most creditworthy issuers of debt
obligations. Both S&P and Moody's have assigned their highest ratings (AAA/Aaa)
to obligations of the Federal Republic of Germany.
The German mark is considered to be the primary reserve currency of Europe and,
along with the Japanese yen, has increasingly been used as a reserve currency
worldwide, sharing the traditional role of the U.S. dollar. Because of Germany's
strong record of economic growth and responsible fiscal and monetary policy, the
mark has been among the strongest of the world's major currencies in the period
dating back to the return of freely floating exchange rates in the early 1970s.
Of course, there can be no assurance that the German mark will perform or be
regarded in the future as it has in the past.
The Bundesbank (the German central bank) operates largely independently of
Germany's political system and is charged with responsibility for protecting the
international value of the German mark. In response to the high levels of
unification-related public and private expenditures and the inflationary
pressures arising from these expenditures, the Bundesbank has maintained a tight
monetary policy in recent years, resulting in interest rates well above those in
the U.S., Japan and other countries outside Europe. In mid-1992, German interest
rates began to decline as continued tight monetary policy created expectations
of economic slowing. This decline in German rates continued through the end of
1993 as the German economy suffered a significant recession and the Bundesbank
accelerated the easing process. During the first quarter of 1994, German yields
began to rise as signs of economic growth emerged in the German economy.
The unification of East Germany and West Germany and the ensuing efforts to
raise living standards and modernize infrastructure in what was previously East
Germany have been a costly undertaking for Germany. Much of the cost of
unification has been financed through deficit spending, resulting in
significantly increased public-sector borrowing requirements since 1989. The
ongoing high levels of public sector borrowing and spending in Germany resulting
from unification may cause German interest rates and inflation rates to be
higher than would otherwise be the case. This, in turn, may adversely affect the
total returns on German government obligations. Unification has placed great
pressure on the German economy and, although progress has recently been made to
improve German government finances, these pressures may adversely affect
monetary policy as conducted by the Bundesbank as well as the credit quality of
German government obligations.
In addition to unification, the disintegration of the Soviet Union and its
sphere of influence also may have an adverse impact on the German economy. In
particular, Germany may be subject to increased immigration pressures and social
discord. Germany also faces uncertainty with respect to repayment of
government-guaranteed loans made to former eastern bloc countries.
HOW YOU PARTICIPATE
IN THE RESULTS OF THE FUND'S ACTIVITIES
The assets of the Fund are invested in portfolio securities. If the securities
owned by the Fund increase in value, either because their price appreciates in
local currency terms or because the currency in which they are denominated
appreciates relative to the U.S. dollar, the value of the shares of the Fund
which you own will increase. If the securities owned by the Fund decrease in
value, the value of your shares will also decline. In this way, you participate
in any change in the value of the securities owned by the Fund.
Under normal market conditions, the Fund invests a significant portion of its
assets in instruments denominated in German marks. Therefore, an individual
shareholder's gains or losses on shares of the Fund will in large part be based
on changes in the net asset value of such shares, expressed in U.S. dollars,
attributable to fluctuations in the exchange rate between the U.S.
dollar and the German mark.
Changes in Germany's prevailing interest rates will likely affect the value of
the Fund's holdings and thus the value of Fund shares. Increased rates of
interest which frequently accompany higher inflation and/or a growing economy
are likely to have negative effects on the value of Fund shares.
German interest rates and currency valuations have fluctuated unpredictably in
the past and can be expected to do so in the future.
WHO MANAGES THE FUND?
The Board has the primary responsibility for the overall management of the Trust
and for electing the officers of the Trust who are responsible for administering
its day-to-day operations.
Adviser is a wholly-owned subsidiary of Resources, a publicly owned holding
company, the principal shareholders of which are Charles B. Johnson and Rupert
H. Johnson, Jr., who own approximately 20% and 16%, respectively, of Resources'
outstanding shares. Resources is engaged in various aspects of the financial
services industry through its subsidiaries (the "Franklin Templeton Group").
Adviser acts as investment manager or administrator to 34 U.S. registered
investment companies (117 separate series) with aggregate assets of over $79
billion.
TICI, the Subadviser, is an indirect subsidiary of Templeton Worldwide, Inc.,
which, operating through its subsidiaries, is a major investment management
organization with approximately $51 billion of assets currently under management
and a long history of global investing.
Pursuant to the management agreement and the sub-advisory agreement, the Manager
supervises and implements the Fund's investment activities and provides certain
administrative services and facilities which are necessary to conduct the Fund's
business.
Pursuant to the subadvisory agreement between the Manager and TICI, and subject
to the overall policies, control, direction and review of the Board and to the
instructions and supervision of the Manager, TICI will provide day-to-day
portfolio management for the Fund.
The team responsible for the day-to-day management of the Fund's portfolio
is: Tom Latta and Neil S. Devlin since November 1993.
Thomas Latta
Vice President Templeton
Global Bond Managers and
Portfolio Manager of TICI
Mr. Latta attended the University of Missouri and New York University. Mr.
Latta joined Templeton in 1991. Prior to joining Templeton, Mr. Latta worked
as a portfolio manager with Forester and Hairston, a global fixed-income
investment management firm, and prior thereto, he worked for Merrill Lynch as
an investment adviser to a large mid-east central bank and then within the
structured products group.
Neil S. Devlin
Executive Vice President
and Portfolio Manager
Templeton Investment Counsel, Inc.
Mr. Devlin holds a Bachelor of Arts degree in Economics and Philosophy from
Brandeis University. Prior to joining Templeton in 1987, Mr. Devlin was a
portfolio manager and bond analyst with Constitutional Capital Management of
Boston and a bond trader and research analyst for the Bank of New England.
Donald P. Gould
Portfolio Manager
Franklin Advisers, Inc.
Mr. Gould holds a Master of Business Administration degree from the Harward
Business School and a Bachelor of Arts degree in economics from Pomona College.
He is the founder and President of the Franklin Templeton Global Trust, formerly
the Huntington Funds of Pasadena. He joined Franklin Templeton in November 1993
upon its acquisition of certain assets of Huntington Advisers, Inc. He has been
in the securities industry since 1981.
During the fiscal year ended October 31, 1995, management fees before any
advance waiver totaled 0.55% of the average monthly net assets of the Fund.
Total operating expenses, including management fees, before any advance waiver
totaled 1.29% of the average monthly net assets of the Fund. Pursuant to an
agreement by Adviser to waive its fees, the Fund paid management fees totaling
0.51% of the average net assets of the Fund and operating expenses totaling
1.25%.
Among the responsibilities of the Manager under the management agreement is the
selection of brokers and dealers through whom transactions in the Fund's
portfolio securities will be effected. The Manager tries to obtain the best
execution on all such transactions. If it is felt that more than one broker is
able to provide the best execution, the Manager will consider the furnishing of
quotations and of other market services, research, statistical and other data
for the Manager and its affiliates, as well as the sale of shares of the Fund,
as factors in selecting a broker. Further information is included under "How
Does the Fund Purchase Securities For Its Portfolio?" in the SAI.
Shareholder accounting and many of the clerical functions for the Fund are
performed by Franklin/Templeton Investor Services, Inc. ("Investor Services" or
"Shareholder Services Agent"), in its capacity as transfer agent and
dividend-paying agent. Investor Services is a wholly-owned subsidiary of
Resources.
PLAN OF DISTRIBUTION
A plan of distribution has been approved and adopted for the Fund (the "Plan")
pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the Fund may
reimburse Distributors or others for all expenses incurred by Distributors or
others in the promotion and distribution of the Fund's shares. 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 Distributors' 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, Distributors or its affiliates.
The maximum amount which the Fund may reimburse to Distributors or others for
such distribution expenses is 0.25% per annum of the average daily net assets of
the Fund, payable on a quarterly basis. All expenses of distribution in excess
of 0.25% per annum will be borne by Distributors, or others who have incurred
them, without reimbursement from the Fund. The Plan also covers any payments to
or by the Fund, Advisers, Distributors, or other parties on behalf of the Fund,
Advisers or Distributors, 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 Plan
are included in the maximum operating expenses which may be borne by the Fund.
For more information, please see "The Fund's Underwriter" in the SAI.
WHAT DISTRIBUTION MIGHT I RECEIVE FROM THE FUND?
You may receive two types of distributions from the Fund:
1. INCOME DIVIDENDS. The Fund receives income in the form of interest and other
income derived from its investments. This income, less the expenses incurred in
the Fund's operations, is its net investment income from which income dividends
may be distributed. Thus, the amount of dividends paid per share may vary with
each distribution.
2. CAPITAL GAIN DISTRIBUTIONS. The Fund may derive capital gains or losses in
connection with sales or other dispositions of its portfolio securities.
Distributions by the Fund derived from net short-term and net long-term capital
gains (after taking into account any net capital loss carryovers) may generally
be made once a year in December to reflect any net short-term and net long-term
capital gains realized by the Fund as of October 31 of the current fiscal year
and any undistributed net capital gains from the prior fiscal year. These
distributions, when made, will generally be fully taxable to the Fund's
shareholders. The Fund may make more than one distribution derived from net
short-term and net long-term capital gains in any year or adjust the timing of
these distributions for operational or other reasons.
DISTRIBUTION DATE
Although subject to change by the Board without prior notice to or approval by
shareholders, the Fund's current policy is to declare income dividends monthly
for shareholders of record generally on the first business day preceding the
15th of the month, payable on or about the last business day of that month. The
amount of income dividend payments by the Fund is dependent upon the amount of
net income received by the Fund from its portfolio holdings, is not guaranteed
and is subject to the discretion of the Board. Fund shares are quoted
ex-dividend on the first business day following the record date. THE FUND DOES
NOT PAY "INTEREST" OR GUARANTEE ANY FIXED RATE OF RETURN ON AN INVESTMENT IN ITS
SHARES.
In order to be entitled to a dividend, an investor must have acquired Fund
shares prior to the close of business on the record date. An investor
considering purchasing Fund shares shortly before the record date of a
distribution should be aware that because the value of the Fund's shares is
based directly on the amount of its net assets, rather than on the principle of
supply and demand, any distribution of income or capital gain will result in a
decrease in the value of the Fund's shares equal to the amount of the
distribution. While a dividend or capital gain distribution received shortly
after purchasing shares represents, in effect, a return of a portion of your
investment, it may be taxable as dividend income or capital gain.
DIVIDEND REINVESTMENT
Unless otherwise requested, income dividends and capital gain distributions, if
any, will be automatically reinvested in your account in the form of additional
shares, valued at the closing net asset value (without sales charge) on the
dividend reinvestment date. Dividend and capital gain distributions are only
eligible for reinvestment at net asset value in the Fund or Class I shares of
other Franklin Templeton Funds. Shareholders have the right to change their
election with respect to the receipt of distributions by notifying the Fund, but
any such change will be effective only as to distributions for which the record
date is seven or more business days after the Fund has been notified. See the
SAI for more information.
Many of the Fund's shareholders receive their distributions in the form of
additional shares. This is a convenient way to accumulate additional shares and
maintain or increase your earnings base. Of course, any shares so acquired
remain at market risk.
DISTRIBUTIONS IN CASH
You may elect to receive income dividends, or both income dividends and capital
gain distributions, in cash. By completing the "Special Payment Instructions for
Distributions" section of the Shareholder Application included with this
Prospectus, you may direct the selected distributions to another fund in the
Franklin Group of Funds(r) or the Templeton Funds, to another person, or
directly to a checking account. If the bank at which the account is maintained
is a member of the Automated Clearing House, the payments may be made
automatically by electronic funds transfer. If this last option is requested,
you should allow at least 15 days for initial processing. Dividends which may be
paid in the interim will be sent to the address of record. Additional
information regarding automated fund transfers may be obtained from Franklin's
Shareholder Services Department.
HOW TAXATION AFFECTS YOU AND THE FUND
The following discussion reflects some of the tax considerations that affect
mutual funds and their shareholders. For additional information on tax matters
relating to the Fund and its shareholders, see "Additional Information Regarding
Taxation" in the SAI.
The Fund intends to continue to qualify for treatment as a regulated investment
company under Subchapter M of the Code. By distributing all of its income and
meeting certain other requirements relating to the sources of its income and
diversification of its assets, the Fund will not be liable for federal income or
excise taxes.
Regular income dividends (which are generally distributed monthly) will be
determined from the Fund's net investment income, excluding any realized net
foreign currency gains and losses. Under U.S. Treasury regulations, net realized
foreign currency gains and losses are required to be reported as ordinary income
or loss to the Fund. Therefore, if in the course of a fiscal year, the Fund
realizes net foreign currency losses, the Fund may be required to reclassify all
or a portion of its income dividend distributions made during such fiscal year
as a return-of-capital for federal income tax purposes. Net foreign currency
gains, if any, will generally be distributed as a supplemental income dividend
once each year in December to reflect any net foreign currency gain realized by
the Fund as of October 31 for the current fiscal year, and may also reflect any
undistributed foreign currency gains for the prior fiscal year. You will be
informed of the tax status of all distributions shortly after the close of each
calendar year.
For federal income tax purposes, any income dividends which you receive from the
Fund, as well as any distributions derived from the excess of net short-term
capital gain over net long-term capital loss, are treated as ordinary income
whether you have elected to receive them in cash or in additional shares.
Distributions derived from the excess of net long-term capital gain over net
short-term capital loss are treated as long-term capital gain regardless of the
length of time you owned Fund shares and regardless of whether such
distributions are received in cash or in additional shares.
Pursuant to the Code, certain distributions which are declared in October,
November or December but which, for operational reasons, may not be paid to you
until the following January, will be treated for tax purposes as if received by
you on December 31 of the calendar year in which they are declared.
Redemptions and exchanges of Fund shares are taxable events on which you may
realize a gain or loss. Any loss incurred on sale or exchange of the Fund's
shares, held for six months or less, will be treated as a long-term capital loss
to the extent of capital gain dividends received with respect to such shares.
All or a portion of the sales charge incurred in purchasing shares of the Fund
will not be included in the federal tax basis of such shares sold or exchanged
within ninety (90) days of their purchase (for purposes of determining gain or
loss with respect to such shares) if the sales proceeds are reinvested in the
Fund or in another fund in the Franklin Templeton Group (defined under "How Do I
Buy Shares?") and a sales charge which would otherwise apply to the reinvestment
is reduced or eliminated. Any portion of such sales charge excluded from the tax
basis of the shares sold will be added to the tax basis of the shares acquired
in the reinvestment. You should consult with your tax advisors concerning the
tax rules applicable to the redemption or exchange of fund shares.
The Fund's investments in options, futures contracts and forward contracts may
give rise to taxable income, gain or loss and will be subject to special tax
treatment under certain market-to-market and straddle rules, the effect of which
may be to accelerate income to the Fund, defer Fund losses and cause adjustments
in the holding periods of Fund securities. These rules could therefore affect
the amount, timing and character of distributions to shareholders. Certain
elections may be available to the Fund to mitigate some of the unfavorable
consequences of the provisions described in this paragraph. These investments
and transactions are discussed in the SAI.
Foreign exchange gains and losses realized by the Fund in connection with
certain transactions involving foreign currencies, foreign currency payables or
receivables, foreign currency-denominated debt securities, foreign currency
forward contracts, and options or futures contracts on foreign currencies are
subject to special tax rules which may cause such gains and losses to be treated
as ordinary income and losses rather than capital gains and losses and may
affect the amount and timing of the Fund's income or loss from such transactions
and in turn its distributions to shareholders. These rules are discussed in the
SAI.
The Fund will inform you of the source of your dividends and distributions at
the time they are paid and will, promptly after the close of each calendar year,
advise them of the tax status for federal income tax purposes of such dividends
and distributions.
If you are not U.S. persons for purposes of federal income taxation you should
consult with your financial or tax advisors regarding the applicability of U.S.
withholding or other taxes to distributions received by them from the Fund and
the application of foreign tax laws to these distributions.
HOW DO I BUY SHARES?
Shares of the Fund are continuously offered through securities dealers which
execute an agreement with Distributors. The use of the term "securities dealer"
shall include other financial institutions, either directly or through
affiliates, have an agreement with Distributors, to handle customer orders and
accounts with the Fund. Such reference, however, is for convenience only and
does not indicate a legal conclusion of capacity.
The minimum initial investment is $100 and subsequent investments must be $25 or
more. These minimums may be waived when the shares are purchased through
retirement plans established by the Franklin Templeton Group. The Fund and
Distributors reserve the right to refuse any order for the purchase of shares.
The Fund may impose a $10 charge for each returned item against any shareholder
account which, in connection with the purchase of Fund shares, submits a check
or a draft which is returned unpaid to the Fund.
PURCHASE PRICE OF FUND SHARES
Shares of the Fund are offered at the public offering price, which is determined
by adding the net asset value per share plus a front-end sales charge, next
computed (1) after your securities dealer receives the order which is promptly
transmitted to the Fund or (2) after receipt of an order by mail from you
directly in proper form (which generally means a completed Shareholder
Application accompanied by a negotiable check). The sales charge is a variable
percentage of the offering price depending upon the amount of the sale. The
offering price will be calculated to two decimal places using standard rounding
criteria. A description of the method of calculating net asset value per share
is included under "How are Fund Shares Valued?"
Set forth below is a table showing front-end sales charges and dealer
concessions.
TOTAL SALES CHARGE
DEALER
AS A CONCESSION
AS A PERCENTAGE AS A
PERCENTAGE OF NET PERCENTAGE
SIZE OF TRANSACTION OF OFFERING AMOUNT OF OFFERING
AT OFFERING PRICE PRICE INVESTED PRICE
----------------- ----- -------- -----
Less than $50,000 3.00% 3.09% 2.60%
$50,000 but less than $100,000 2.50% 2.56% 2.25%
$100,000 but less than $250,000 2.00% 2.04% 1.85%
$250,000 but less than $500,000 1.50% 1.52% 1.40%
$500,000 but less than $750,000 1.00% 1.00% 1.00%
$1,000,000 or more none none See below**
*Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages indicated. Distributors may at times allow
the entire sales charge to the securities dealer. A securities dealer who
receives 90% or more of the sales commission may be deemed an underwriter under
the Securities Act of 1933, as amended. **A contingent deferred sales charge of
1% may be imposed on certain redemptions of all or a part of an investment of $1
million or more. See "How Do I Sell Shares? - Contingent Deferred Sales Charge."
***Please see "General - Other Payments to Securities Dealers" below for a
discussion of commissions Distributors may pay to securities dealers out of its
own resources.
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 Do I Sell Shares? - Contingent Deferred Sales Charge."
The size of a transaction which determines the applicable sales charge on the
purchase of Fund shares is determined by adding the amount of your current
purchase plus the cost or current value (whichever is higher) of a your existing
investment in one or more of the funds in the Franklin Group of Funds(r) and the
Templeton Group 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 Distributors or its affiliates and (c) the
U.S. registered mutual funds in the Templeton Group 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
Fund(s)". Sales charge reductions based upon aggregate holdings of (a), (b) and
(c) above may be effective only after notification to Distributors that the
investment qualifies for a discount.
OTHER PAYMENTS TO SECURITIES DEALERS. Either Distributors 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 trust companies and trust
departments of banks ,certain designated retirement plans (excluding IRA and IRA
rollovers), and certain retirement plans of organizations with collective
retirement plan assets of $10 million or more, and up to 0.75% of the amount
purchased to securities dealers who initiate and are responsible for purchases
made at net asset value by non-designated retirement plans. See "Description of
Special Net Asset Value Purchases" below and "How Do I Buy and Sell Shares?" in
the SAI.
Either Distributors or one of its affiliates, out of 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 and payments made 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. None of the aforementioned additional compensation is paid for by the Fund
or you.
Additional terms concerning the offering of the Fund's shares are included in
the SAI under "How Do I Buy and Sell Shares?".
Certain officers and trustees of the Trust are also affiliated with
Distributors. A detailed description is included in the SAI.
QUANTITY DISCOUNTS IN SALES CHARGES
Shares may be purchased under a variety of plans which provide for a reduced
sales charge. To be certain to obtain the reduction of the sales charge, you or
your securities dealer should notify Distributors at the time of each purchase
of shares which qualifies for the reduction. In determining whether a purchase
qualifies for a discount, an investment in any of the Franklin Templeton
Investments may be combined with those of your spouse, children under the age of
21 and grandchildren under the age of 21. The value of Class II shares you own
may also be included for this purpose.
In addition, an investment in the Fund may qualify for a reduction in the sales
charge under the following programs:
1. RIGHTS OF ACCUMULATION. The cost or current value (whichever is higher) of
existing investments in the Franklin Templeton Investments may be combined with
the amount of the current purchase in determining the sales charge to be paid.
2. LETTER OF INTENT. You may immediately qualify for a reduced sales charge
on a purchase of shares of the Fund by completing the Letter of Intent section
of the Shareholder Application (the "Letter"). By completing the Letter, you (i)
express an intention to invest during the next 13 months a specified amount
which, if made at one time, would qualify for a reduced sales charge, (ii) grant
to Distributors a security interest in the reserved shares discussed below, and
(iii) irrevocably appoint Distributors as attorney-in-fact with full power of
substitution to surrender for redemption any or all shares for the purpose of
paying any additional sales charge due. You or your dealer must inform Investor
Services or Distributors that this Letter is in effect each time a purchase is
made.
YOU ACKNOWLEDGE AND AGREE TO THE FOLLOWING PROVISIONS BY COMPLETING THE LETTER
OF INTENT SECTION OF THE SHAREHOLDER APPLICATION: Five percent (5%) of the
amount of the total intended purchase will be reserved in shares of the Fund,
registered in the your name, to assure that the full applicable sales charge
will be paid if the intended purchase is not completed. The reserved shares will
be included in the total shares owned as reflected on periodic statements.
Income and capital gain distributions on the reserved shares will be paid as you
have directed. You will not be able to liquidate the reserved shares until the
Letter has been completed or the higher sales charge paid. This policy of
reserving shares does not apply to certain benefit plans described under
"Description of Special Net Asset Value Purchases." For more information, see
"How Do I Buy and Sell Shares" in the SAI.
The value of Class II shares cannot be reduced through these programs, the value
of Class II shares you own may be included in determining a reduced sales charge
to be paid on shares of the Fund pursuant to the Letter of Intent and Rights of
Accumulation programs.
GROUP PURCHASES
If your are a member of a qualified group you may 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 members of 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 2.00%.
Information concerning the current sales charge applicable to a group may be
obtained by contacting Distributors.
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 Distributors to realize economies
of scale in its costs of distributing shares. A qualified group must have more
than 10 members, be available to arrange for group meetings between
representatives of the Fund or Distributors and the members, agree to include
sales and other materials related to the Fund in its publications and mailings
to members at reduced or no cost to Distributors, and seek to arrange for
payroll deduction or other bulk transmission of investments to the Fund.
If you select a payroll deduction plan, subsequent investments will be automatic
and will continue until such time as you notify the Fund and your employer to
discontinue further investments. Due to the varying procedures used 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.
PURCHASES AT NET ASSET VALUE
Shares of the Fund may be purchased without the imposition of 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 Franklin Templeton Group, and by their
spouses and family members, including subsequent investments made by such
parties after cessation of employment; (2) companies exchanging shares or
selling assets pursuant to a merger, acquisition or exchange offer; (3) accounts
managed by the Franklin Templeton Group; (4) certain unit investment trusts and
unit holders of such trusts reinvesting their distributions from the trusts in
the Fund; (5) registered securities dealers and their affiliates, for their
investment account; (6) current employees of securities dealers and their
affiliates and by their family members, in accordance with the internal policies
and procedures of the employing securities dealer and affiliate; (7) insurance
company separate accounts for pension plan contracts; and (8) shareholders of
Templeton Institutional Funds, Inc. reinvesting redemption proceeds from that
fund under an employee benefit plan qualified under Section 401 of the Code, in
shares of the Fund.
Shares of the Fund may be purchased at net asset value by persons who have
redeemed, within the previous 365 days, their shares of the Fund or another of
the Class I 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. Under this privilege, you 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 that were
no longer subject to a contingent deferred sales charge will be reinvested at
net asset value and will not be subject to a new contingent deferred sales
charge. Shares of the Fund redeemed in connection with an exchange into another
fund (see "What if My Investment Outlook Changes? - 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 Shareholder Services Agent within 365 days after the
redemption. The 365 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 you 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 in the tax section of this
Prospectus and under "Additional Information Regarding Taxation" in the SAI.
Shares of the Fund may be purchased at net asset value and without a contingent
deferred sales charge by persons who have received dividends and capital gains
distributions in cash from investments in the Fund or another Franklin Templeton
Fund within 365 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 Shareholder Services
at 1-800/632-2301. See "Distribution Option" under "What Distributions Might I
Receive from the Fund?"
Shares of the Fund 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 was subject to a front-end sales charge
or a contingent deferred sales charge and which has investment objectives
similar to those of the Fund.
Shares of the Fund 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 Distributors, 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).
Shares of the Fund 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 "Trust Company"), the Fund or
Investor Services, within 365 days after the plan distribution.
Shares of the Fund 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 the 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. In connection with investments eligible governmental
authorities at net asset value made through a securities dealer who has executed
a dealer agreement with Distributors, either Distributors 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 the
Franklin Templeton Institutional Services Department for additional information.
DESCRIPTION OF SPECIAL NET ASSET VALUE PURCHASES
Shares of the Fund may 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 Distributors. 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 Distributors to
realize economies of scale in its sales efforts and sales related expenses.
Shares of the Fund 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 the amount to be purchased, which may be
established by Distributors. 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 $1,000,000. 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.
Shares of the Fund 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.
Please see "How Do I Buy and Sell Shares?" in the SAI for further information
regarding net asset value purchases.
PURCHASING WITH GERMAN MARKS
If you have other German mark-denominated assets you may wish to purchase Fund
shares with German marks in order to avoid the cost and inconvenience of first
converting their German marks into U.S. dollars. Investors wishing to purchase
Fund shares with German marks normally must add to an existing Fund account. The
minimum required Fund purchase that may be made in this manner is 10,000 German
marks. New accounts may not be opened in this manner without the prior consent
of Distributors. Investments in the Fund may not be made in currencies other
than the U.S. dollar or the German mark without the prior consent of
Distributors.
Provided that Distributors receives timely notice as described below, Fund
shares will be purchased at the public offering price in U.S. dollars next
determined after the Fund custodian's correspondent bank in Germany receives the
German marks, using the same exchange rate used to convert the value of the
Fund's German mark-denominated assets into U.S. dollars for portfolio valuation
purposes.
The Fund does not charge a fee for receiving investments in this
manner. Your bank, however, may impose wire and other fees.
To invest in the Fund with German marks, please follow the directions below:
1. Notify Distributors by phone at 1-800/632-2301 (or 1-415/312-3400) or by fax
at 1-415/312-4175 by 1:00 p.m., Eastern time, at least two business days
prior to the date on which funds are to be wired, that a purchase will be
made with German marks. Alternatively, Distributors may be notified after
1:00 p.m., Eastern time, at least three business days prior to the date on
which funds are to be wired. The following information must be included in
the notice:
Date of Wire (Value Date)
Amount of Wire (in German marks)
Name of Bank Wiring Funds
Shareholder Name
Shareholder Account
Number Wire Control Number (to be assigned each time)
2. At least two/three business days after notifying Distributors that you
intent to purchase Fund shares with German marks, you should request the
bank to transmit, for value, immediately available funds (German marks) to:
Bank Chase Bank A.G Alexanderstrasse 59 Postfach
90-01-09 6000 Frankfurt/Main 90
Frankfurt-Rodelheim Germany
Account Chase Manhattan Bank, London 623 120 0079
Further Credit for Franklin Templeton German Government Bond
Fund
HOW DO I BUY SHARES IN CONNECTION
WITH TAX-DEFERRED RETIREMENT PLANS
Shares of the Fund may be used for individual or employer-sponsored retirement
plans involving tax-deferred investments. The Fund may be used as an investment
vehicle for an existing retirement plan, or because the Trust Company can serve
as custodian or trustee for retirement plans you may ask the Trust Company to
provide the plan documents and serve as custodian or trustee. A plan document
must be adopted in order for a retirement plan to be in existence. Brochures for
Trust Company plans contain important information regarding eligibility,
contribution and deferral limits and distribution requirements. Please note that
an application other than the one contained in this Prospectus must be used to
establish a retirement plan account with the Trust Company. To obtain a
retirement plan brochure or application, call 1-800/DIAL BEN (1-800/342-5236).
Please see "How Do I Sell Shares?" for specific information regarding
redemptions from retirement plan accounts. Specific forms are required to be
completed for distributions from Trust Company retirement plans.
Individuals and plan sponsors should consult with legal, tax or benefits and
pension plan consultants before choosing a retirement plan. In addition,
retirement plan investors should consider consulting their investment
representatives or advisors concerning investment decisions within their plans.
GENERAL
The Fund continuously offers it shares through securities dealers who have an
agreement with Distributors. The Fund and Distributors may refuse any order for
the purchase of shares.
Securities laws of states in which the Fund's shares are offered for sale may
differ from federal law, and banks and financial institutions selling Fund
shares may be required to register as dealers pursuant to state law.
OTHER PAYMENTS TO SECURITIES DEALERS. Distributors will pay the following
commissions, out of its own resources, to securities dealers who initiate and
are responsible for purchases of $1 million or more: 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. Dealer concession breakpoints are reset every 12
months for purposes of additional purchases.
WHAT PROGRAMS AND PRIVILEGES ARE AVAILABLE TO ME AS A SHAREHOLDER?
CERTAIN OF THE PROGRAMS AND PRIVILEGES DESCRIBED IN THIS SECTION MAY NOT BE
AVAILABLE DIRECTLY FROM THE FUND IF YOUR SHARES ARE HELD, OF RECORD, BY A
FINANCIAL INSTITUTION OR IN A "STREET NAME" ACCOUNT OR NETWORKED ACCOUNT THROUGH
THE NATIONAL SECURITIES CLEARING CORPORATION ("NSCC") (SEE THE SECTION CAPTIONED
"ACCOUNT REGISTRATIONS" IN THIS PROSPECTUS).
SHARE CERTIFICATES
Shares from an initial investment, as well as subsequent investments, including
the reinvestment of dividends and capital gain distributions, are generally
credited to an account in your name on the books of the Fund, without the
issuance of a share certificate. Maintaining shares in uncertificated form (also
known as "plan balance") minimizes the risk of loss or theft of a share
certificate. A lost, stolen or destroyed certificate cannot be replaced without
obtaining a sufficient indemnity bond. The cost of such a bond, which is
generally borne by you, can be 2% or more of the value of the lost, stolen or
destroyed certificate. A certificate will be issued if requested by you or by
your securities dealer.
CONFIRMATIONS
A confirmation statement will be sent to you quarterly to reflect the dividends
reinvested during the period and after each other transaction which affects your
account. This statement will also show the total number of shares you own,
including the number of shares in "plan balance" for your account.
AUTOMATIC INVESTMENT PLAN
The Automatic Investment Plan offers a convenient way to invest in the Fund.
Under the Plan you can arrange to have money transferred automatically from your
checking account to the Fund each month to purchase additional shares. If you
are interested in this program, please refer to the Automatic Investment Plan
Application at the back of this Prospectus for requirements of the program or
contact your investment representative. Of Course, the market value of the
Fund's shares may fluctuate and a systematic investment plan such as this will
not assure a profit or protect against a loss. You may terminate the program at
any time by notifying Investor Services by mail or by phone.
SYSTEMATIC WITHDRAWAL PLAN
The Systematic Withdrawal Plan allows you to receive regular payments from your
account on a monthly, quarterly, semiannual or annual basis. To establish a
Systematic Withdrawal Plan, the value of your account must be at least $5,000
and the minimum payment amount for each withdrawal must be at least $50. Please
keep in mind that $50 is merely the minimum amount and is not a recommended
amount. For retirement plans subject to mandatory distribution requirements, the
$50 minimum will not apply.
If you would like to establish a Systematic Withdrawal Plan, please complete the
Systematic Withdrawal Plan section of the Shareholder Application included with
this Prospectus and indicate how you would like to receive your payments. You
may choose to receive your payments in any of the following ways:
1. PURCHASE SHARES OF OTHER FRANKLIN TEMPLETON FUNDS - You may direct your
payments to purchase the same class of shares of another Franklin Templeton
Fund.
2. RECEIVE PAYMENTS IN CASH - You may choose to receive your payments in cash.
You may have the money sent directly to you, to another person, or to a checking
account. If you choose to have the money sent to a checking account, please see
"Electronic Fund Transfers" below.
There are no service charges for establishing or maintaining a Systematic
Withdrawal Plan. Once your plan is established, any distributions paid by the
Fund will be automatically reinvested in your account. Payments under the plan
will be made from the redemption of an equivalent amount of shares in your
account, generally on the first business day of the month in which a payment is
scheduled. You will generally receive your payments within three to five days
after the shares are redeemed.
Redeeming shares through a Systematic Withdrawal Plan may reduce or exhaust the
shares in your account if payments exceed distributions received from the Fund.
This is especially likely to occur if there is a market decline. If a withdrawal
amount exceeds the value of your account, your account will be closed and the
remaining balance in your account will be sent to you. Redemptions under a
Systematic Withdrawal Plan are considered a sale for federal income tax
purposes. Because the amount withdrawn under the plan may be more than your
actual yield or income, part of the payment may be a return of your investment.
While a Systematic Withdrawal Plan is in effect, no share certificates will be
issued. You should ordinarily not make additional investments in the Fund of
less than $5,000 or three times the amount of annual withdrawals under the plan
because of the sales charge on additional purchases. Shares redeemed under the
plan may also be subject to a contingent deferred sales charge. Please see
"Contingent Deferred Sales Charge" under "How Do I Sell Shares?"
You may terminate a Systematic Withdrawal Plan, change the amount and schedule
of withdrawal payments, or suspend a payment by notifying Investor Services in
writing at least seven business days prior to the end of the month preceding a
scheduled payment. The Fund may also terminate a Systematic Withdrawal Plan by
notifying you in writing and will automatically terminate a Systematic
Withdrawal Plan if all shares in your account are withdrawn or if the Fund
receives notification of the shareholder's death or incapacity.
ELECTRONIC FUND TRANSFERS
You may choose to have distributions from the Fund or payments under a
Systematic Withdrawal Plan sent directly to a checking account. If the checking
account is maintained at a bank that is a member of the Automated Clearing
House, the payments may be made automatically by electronic funds transfer. If
you choose this option, please allow at least fifteen days for initial
processing. Any payments made during that time will be sent to the address of
record on your account.
INSTITUTIONAL ACCOUNTS
There may be additional methods of purchasing, redeeming or exchanging shares
of the Fund available to institutional accounts. For further information,
contact the Franklin Templeton Institutional Services Department at
1-800/321-8563.
WHAT IF MY INVESTMENT OUTLOOK CHANGES? - EXCHANGE PRIVILEGE
The Franklin Templeton Funds consist of a number of mutual funds with various
investment objectives and policies. The shares of most of these mutual funds are
offered to the public with a sales charge. If your investment objective or
outlook for the securities markets changes, Fund shares may be exchanged for the
same class of shares of other Franklin Templeton Funds' which are eligible for
sale in your state of residence and in conformity with such fund's stated
eligibility requirements and investment minimums. No exchanges between different
classes of shares will be allowed. Shareholders may choose to redeem shares of
the Fund and purchase Class II shares of another Franklin Templeton Funds but
such purchase will be subject to that fund's Class II front-end and contingent
deferred sales charges.
Although there are no exchanges between different classes of shares, Class II
shareholders of a Franklin Templeton Fund may elect to direct their dividends
and capital gain distributions to the Fund at net asset value.
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 the
contingency period, a contingent deferred sales charge will be imposed.
Before making an exchange, you should review the prospectus of the fund you wish
to exchange from and the fund you wish to exchange into for all specific
requirements or limitations on exercising the exchange privilege, for example,
limitations on a fund's sale of its shares, minimum holding periods for
exchanges at net asset value, or applicable sales charges.
You may exchange shares in any of the following ways:
BY MAIL
Send written instructions signed by all account owners and accompanied by any
outstanding share certificates properly endorsed. The transaction will be
effective upon receipt of the written instructions together with any
outstanding share certificates.
BY TELEPHONE
YOU OR YOUR INVESTMENT REPRESENTATIVE OF RECORD, IF ANY, MAY EXCHANGE SHARES OF
THE FUND BY TELEPHONE BY CALLING INVESTOR SERVICES AT 1-800/632-2301 OR THE
AUTOMATED FRANKLIN TELEFACTS(R) SYSTEM (DAY OR NIGHT) AT 1-800/247-1753. IF YOU
DO NOT WISH THIS PRIVILEGE EXTENDED TO A PARTICULAR ACCOUNT, YOU SHOULD NOTIFY
THE FUND OR INVESTOR SERVICES.
The telephone exchange privilege allows you to effect exchanges from the Fund
into an identically registered account of the same class of shares in one of the
other available Franklin Templeton Funds. The telephone exchange privilege is
available only for uncertificated shares or those which have previously been
deposited in your account. The Fund and Investor Services will employ reasonable
procedures to confirm that instructions communicated by telephone are genuine.
Please see "Telephone Transactions - Verification Procedures."
During periods of drastic economic or market changes, it is possible that the
telephone exchange privilege may be difficult to implement and the TeleFACTS
option may not be available. In this event, you should follow the other exchange
procedures discussed in this section, including the procedures for processing
exchanges through securities dealers.
EXCHANGES THROUGH SECURITIES DEALERS
As is the case with all purchases and redemptions of the Fund's shares, Investor
Services will accept exchange orders from securities dealers who execute a
dealer or similar agreement with Distributors. See also "By Telephone" above.
Such a dealer-ordered exchange will be effective only for uncertificated shares
on deposit in your account or for which certificates have previously been
deposited. A securities dealer may charge a fee for handling an exchange.
ADDITIONAL INFORMATION REGARDING EXCHANGES
Exchanges are made on the basis of the net asset value of the funds involved,
except as set forth below. Exchanges of shares of the Fund which were purchased
without a sales charge will be charged a sales charge in accordance with the
terms of the prospectus of the fund being purchased, unless the original
investment in the Franklin Templeton Funds was made pursuant to the privilege
permitting purchases at net asset value, as discussed under "How Do I Buy
Shares?" Exchanges of shares of the Fund which were purchased with a lower sales
charge into a fund which has a higher sales charge will be charged the
difference, unless the shares were held in the Fund for at least six months
prior to executing the exchange.
The contingency period during which a contingent deferred sales charge may be
assessed will be tolled (or stopped) for the period shares are exchanged into
and held in a Franklin or Templeton money market fund. If your account has
shares subject to a contingent deferred sales charge, shares will be exchanged
into the new account on a "first-in, first-out" basis. See "How Do I Sell
Shares? - Contingent Deferred Sales Charge" for a discussion of investments
subject to a contingent deferred sales charge.
If you request the exchange of the total value of your account, declared but
unpaid income dividends and capital gain distributions will be transferred to
the fund being exchanged into and will be invested at net asset value. Because
the exchange is considered a redemption and purchase of shares, you may realize
a gain or loss for federal income tax purposes. Backup withholding and
information reporting may also apply. Information regarding the possible tax
consequences of such an exchange is included in the tax section in this
Prospectus and under "Additional Information Regarding Taxation" in the SAI.
If a substantial portion of the Fund's shareholders should, within a short
period, elect to redeem their shares of the Fund pursuant to the exchange
privilege, the Fund might have to liquidate portfolio securities it might
otherwise hold and incur the additional costs related to such transactions. On
the other hand, increased use of the exchange privilege may result in periodic
large inflows of money. If this should occur, it is the general policy of the
Fund to initially invest this money in short-term, interest-bearing money market
instruments, unless it is felt that attractive investment opportunities
consistent with the Fund's investment objectives exist immediately.
Subsequently, this money will be withdrawn from such short-term money market
instruments and invested in portfolio securities in as orderly a manner as is
possible when attractive investment opportunities arise.
The exchange privilege may be modified or discontinued by the Fund at any time
upon 60 days' written notice to shareholders.
RETIREMENT PLAN ACCOUNTS
Franklin Templeton IRA and 403(b) retirement plan accounts may exchange
shares directly. Certain restrictions may apply, however, to other types of
retirement plans. See "Restricted Accounts" under "Telephone Transactions."
TIMING ACCOUNTS
Accounts which are administered by allocation or market timing services to
exchange shares based on predetermined market indicators ("Timing Accounts")
will be charged a $5.00 administrative service fee per each such exchange.
All other exchanges are without charge.
RESTRICTIONS ON EXCHANGES
In accordance with the terms of their respective prospectuses, certain funds do
not accept or may place differing limitations than those 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, or (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.
The Fund also reserves the right to refuse the purchase side of an exchange
request by any Timing Account, person, or group if, in the 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.
Your purchase exchanges 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 coincide with a "market
timing" strategy may be disruptive to the Fund and therefore may be refused.
The Fund and Distributors, as indicated under "How Do I Buy Shares?", reserve
the right to refuse any order for the purchase of shares.
HOW DO I SELL SHARES?
You may liquidate your shares at any time and receive from the Fund the value of
the shares. You may redeem shares in any of the following ways:
BY MAIL
Send a written request, signed by all registered owners, to Investor Services,
at the address shown on the back cover of this Prospectus, and any share
certificates which have been issued for the shares being redeemed, properly
endorsed and in order for transfer. You will then receive from the Fund the
value of the shares redeemed based upon the net asset value per share (less a
contingent deferred sales charge, if applicable) next computed after the written
request in proper form is received by Investor Services. Redemption requests
received after the time at which the net asset value is calculated will receive
the price calculated on the following business day. The net asset value per
share is determined as of the scheduled closed of the New York Stock Exchange
(the "Exchange") (generally 1:00 p.m. Pacific time) each day that the exchange
is open for trading. You are requested to provide a telephone number where you
can be reached during business hours, or in the evening if preferred. Investor
Services' ability to contact you promptly when necessary will speed the
processing of the redemption.
TO BE CONSIDERED IN PROPER FORM, SIGNATURE(S) MUST BE GUARANTEED IF THE
REDEMPTION REQUEST INVOLVES ANY OF THE FOLLOWING:
(1) the proceeds of the redemption are over $50,000;
(2) the proceeds (in any amount) are to be paid to someone other than the
registered owners of the account;
(3) the proceeds (in any amount) are to be sent to any address other than the
address of record, preauthorized bank account or brokerage firm account;
(4) share certificates, if the redemption proceeds are in excess of $50,000;
or
(5) the Fund or Investor Services 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.
Signatures must be guaranteed by an "eligible guarantor institution" as defined
under Rule 17Ad-15 under the Securities Exchange Act of 1934. Generally,
eligible guarantor institutions include (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 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 guarantee medallion program. A notarized signature will not be
sufficient for the request to be in proper form.
Where shares to be redeemed are represented by share certificates, the request
for redemption must be accompanied by the share certificate and a share
assignment form signed by the registered owners exactly as the account is
registered, with the signatures guaranteed as referenced above. You are advised,
for their own protection, to send the share certificate and assignment form in
separate envelopes if they are being mailed in for redemption.
Liquidation requests of corporate, partnership, trust and custodianship
accounts, and accounts under court jurisdiction require the following
documentation to be in proper form:
Corporation - (1) Signature guaranteed letter of instruction from the authorized
officers of the corporation, and (2) a corporate resolution.
Partnership - (1) Signature guaranteed letter of instruction from a general
partner and (2) pertinent pages from the partnership agreement identifying the
general partners or a certification for a partnership agreement.
Trust - (1) Signature guaranteed letter of instruction from the trustees and (2)
a copy of the pertinent pages of the trust document listing the trustees or a
Certification for Trust if the trustees 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.
Payment for redeemed shares will be sent to you within seven days after receipt
of the request in proper form.
BY TELEPHONE
If you complete the Franklin Templeton Telephone Redemption Authorization
Agreement (the "Agreement"), included with this Prospectus, you may redeem
shares of the Fund by telephone, subject to the Restricted Account exception
noted under "Telephone Transactions - Restricted Accounts." You may obtain
additional information by writing to the Fund or Investor Services at the
address shown on the cover or by calling 1-800/632-2301. THE FUND AND INVESTOR
SERVICES WILL EMPLOY REASONABLE PROCEDURES TO CONFIRM THAT INSTRUCTIONS GIVEN BY
TELEPHONE ARE GENUINE. YOU, HOWEVER, BEAR THE RISK OF LOSS IN CERTAIN CASES AS
DESCRIBED UNDER "TELEPHONE TRANSACTIONS - Verification Procedures."
If your account has a completed Agreement on file, redemptions of uncertificated
shares or shares which have previously been deposited with the Fund or Investor
Services may be made for up to $50,000 per day per Fund account. Telephone
redemption requests received before the scheduled close of the Exchange
(generally 1:00 p.m. Pacific 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, you should follow the other
redemption procedures set forth in this Prospectus. Institutional accounts
(certain corporations, bank trust departments, government entities, and
qualified retirement plans which qualify to purchase shares at net asset value
pursuant to the terms of this Prospectus) that wish to execute redemptions in
excess of $50,000 must complete an Institutional Telephone Privileges Agreement,
which is available from the Franklin Templeton Institutional Services Department
by calling 1-800/321-8563.
THROUGH SECURITIES DEALERS
The Fund will accept redemption orders from securities dealers who have entered
into an agreement with Distributors. This is known as a repurchase. The only
difference between a normal redemption and a repurchase is that if you redeem
shares through a dealer, the redemption price will be the net asset value next
calculated after your dealer receives the order which is promptly transmitted to
the Fund, rather than on the day the Fund receives your written request in
proper form. The documents described under " By Mail" above, as well as a signed
letter of instruction, are required regardless of whether the you redeem shares
directly or submits such shares to a securities dealer for repurchase. Your
letter should reference the Fund, the account number, the fact that the
repurchase was ordered by a dealer and the dealer's name. Details of the
dealer-ordered trade, such as trade date, confirmation number, and the amount of
shares or dollars, will help speed processing of the redemption. The seven-day
period within which the proceeds of your redemption will be sent will begin when
the Fund receives all documents required to complete ("settle") the repurchase
in proper form. The redemption proceeds will not earn dividends or interest
during the time between receipt of the dealer's repurchase order and the date
the redemption is processed upon receipt of all documents necessary to settle
the repurchase. Thus, it is in your best interest to have the required
documentation completed and forwarded to the Fund as soon as possible. Your
dealer may charge a fee for handling the order. See "How Do I Buy and Sell
Shares?" in the SAI for more information on the redemption of shares.
CONTINGENT DEFERRED SALES CHARGE
In order to recover commissions paid to securities dealers, all or a portion of
investments of $1 million or more, redeemed within the contingency period of 12
months of the calendar month of such investment 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 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 Distributors. The
contingent deferred sales charge is waived in certain instances.
In determining whether 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) a calculated number of shares representing amounts
attributable to capital appreciation on shares held less than the contingency
period; (ii) shares purchased with reinvested dividends and capital gain
distributions; and (iii) other shares held longer than the contingency period.
Shares subject to a contingent deferred sales charge will then be redeemed 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 is waived, as applicable, for: exchanges;
any account fees; distributions from an individual retirement plan account due
to death or disability or based upon life expectancy; tax-free returns of excess
contributions from employee benefit plans; distributions from employee benefit
plans, including those due to termination or plan transfer; redemptions
initiated by the Fund due to an account falling below the minimum specified
account size; redemptions following the death of the shareholder or beneficial
owner; 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). For example, if an 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% contingent deferred sales charge.
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.
Unless otherwise specified, requests for redemptions of a SPECIFIED DOLLAR
AMOUNT, 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.
RECEIVING REDEMPTION PROCEEDS IN GERMAN MARKS
You may elect to have the proceeds of a redemption of Fund shares paid to them
in German marks. To use this service, shareholders must first complete and
return a Foreign Currency Redemption Authorization Form. To request this form,
please call Distributors at 1-800/632-2301 (or 1-415/312-3400) or fax your
request to 1-415/312-4175. As explained more fully in the instructions
accompanying the form, shareholders must have established a German
mark-denominated bank account before using this service. Redemption proceeds
paid in German marks will be calculated using the net asset value per share and
the U.S. dollar-German mark exchange rate next determined after receipt of the
redemption request in proper form.
To receive redemption proceeds in German marks, you must redeem shares valued at
a minimum of $5,000.
ADDITIONAL INFORMATION REGARDING REDEMPTIONS
The Fund may delay the mailing of the redemption check, or a portion thereof,
until the clearance of the check used to purchase Fund shares, which may take up
to 15 days or more. Although the use of a certified or cashier's check will
generally reduce this delay, shares purchased with these checks will also be
held pending clearance. Shares purchased by federal funds wire are available for
immediate redemption.
The right of redemption may be suspended or the date of payment postponed if the
Exchange is closed (other than customary closing) or upon the determination of
the SEC that trading on the Exchange is restricted or an emergency exists, or if
the SEC permits it, by order, for your protection. Of course, the amount
received may be more or less than the amount invested you invested, depending on
fluctuations in the market value of securities owned by the Fund.
RETIREMENT PLAN ACCOUNTS
Retirement plan account liquidations require the completion of certain
additional forms to ensure compliance with IRS regulations. To liquidate a
retirement plan account, you or your securities dealer may call Franklin's
Retirement Plans Department to obtain the necessary forms.
Tax penalties will generally apply to any distribution from such plans to a
participant under age 59 1/2, unless the distribution meets one of the
exceptions set forth in the Code.
OTHER INFORMATION
Distribution or redemption checks sent to you do not earn interest or any other
income during the time such checks remain uncashed and neither the Fund nor its
affiliates will be liable for any loss caused by your failure to cash such
checks.
"Cash" payments to or from the Fund may be made by check, draft or wire. The
Fund has no facility to receive, or pay out, cash in the form of currency.
For any information required about a proposed liquidation, a you may call
Franklin's Shareholder Services Department. Securities dealers may call
Franklin's Dealer Services Department.
TELEPHONE TRANSACTIONS
By calling Investor Services at 1-800/632-2301, you or your investment
representative of record, if any, may be able to execute various telephone
transactions, including 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, (iv) request
the issuance of certificates, to be sent to the address of record only, and (v)
exchange Fund shares as described in this Prospectus by telephone. In addition,
if you complete and file an Agreement as described under "How Do I Sell Shares?
- - By Telephone" you will be able to redeem shares of the Fund.
VERIFICATION PROCEDURES
The Fund and Investor Services 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 Investor Services 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 you caused by an unauthorized transaction. The Fund and
Investor Services may be liable for any losses due to unauthorized or fraudulent
instructions in the event such reasonable procedures are not followed. You are,
of course, under no obligation to apply for or accept telephone transaction
privileges. In any instance where the Fund or Investor Services is not
reasonably satisfied that instructions received by telephone are genuine, the
requested transaction will not be executed, and neither the Fund nor Investor
Services 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 retirement accounts. To assure compliance with all applicable
regulations, special forms are required for any redemption, distribution or
dividend payment changes. While the telephone exchange privilege is extended to
Franklin Templeton IRA and 403(b) retirement accounts, certain restrictions may
apply to other types of retirement plans.
To obtain further information regarding distribution or transfer procedures,
including any required forms, retirement account you may call to speak to a
Retirement Plan Specialist at 1-800/527-2020.
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, you may wish to contact your investment
representative for assistance, or send written instructions to the Fund as
detailed elsewhere in this Prospectus.
Neither the Fund nor Investor Services will be liable for any losses resulting
from your inability to execute a telephone transaction.
HOW ARE FUND SHARES VALUED?
The net asset value per share of the Fund is determined as of the scheduled
close of the Exchange (generally 1:00 p.m. Pacific time) each day that the
Exchange is open for trading. Many newspapers carry daily quotations of the
prior trading day's closing "bid" (net asset value) and "ask" (offering price,
which includes the maximum front-end sales charge of the Fund).
The net asset value per share of the Fund is determined by deducting the
aggregate gross value of all liabilities from the aggregate gross value of all
assets, and then dividing the difference by the number of shares outstanding.
Assets in the Fund's portfolio are valued as described under "How Are Fund
Shares Valued?" in the SAI.
HOW DO I GET MORE INFORMATION
ABOUT MY INVESTMENT?
Any questions or communications regarding your account should be directed to
Investor Services at the address shown on the back cover of this Prospectus.
From a touch-tone phone, you may access an automated system (day or night) which
offers the following features.
By calling the Franklin TeleFACTS(r) system at 1-800/247-1753, you may obtain
account information, current price and, if available, yield or other performance
information specific to the Fund or any Franklin Templeton Fund. In addition,
you may process an exchange, within the same class, into an identically
registered Franklin account; and request duplicate confirmation or year-end
statements and deposit slips.
The Fund Code, which will be needed to access system information is 210. The
system's automated operator will prompt you with easy to follow step-by-step
instructions from the main menu. Other features may be added in the future.
To assist you and securities dealers wishing to speak directly with a
representative, the following list of Franklin departments, telephone numbers
and hours of operation is provided. The same numbers may be used when calling
from a rotary phone.
HOURS OF OPERATION
(MONDAY THROUGH
DEPARTMENT NAME TELEPHONE NO. FRIDAY)
Shareholder Services 1-800/632-2301 5:30a.m. to 5:00p.m.
Dealer Services 1-800/524-4040 5:30a.m. to 5:00p.m.
Fund Information 1-800/DIAL BEN 5:30a.m. to 8:00p.m.
8:30a.m. to 5:00p.m.
(Saturday)
Retirement Plans 1-800/527-0637 5:30a.m. to 5:00p.m.
TDD (hearing impaired) 1-800/851-0637 5:30a.m. to 5:00p.m.
In order to ensure that the highest quality of service is being provided,
telephone calls placed to or by representatives in Franklin's service
departments may be accessed, recorded and monitored. These calls can be
determined by the presence of a regular beeping tone.
PERFORMANCE
Advertisements, sales literature and communications to you may contain several
measures of the Fund's performance, including current yield, various expressions
of total return, and current distribution rate. They may also occasionally cite
statistics to reflect the Fund's volatility or risk.
Average annual total return figures as prescribed by the SEC represent the
average annual percentage change in value of $1,000 invested at the maximum
public offering price (offering price includes sales charge) for one-, five- and
ten-year periods, or portion thereof, to the extent applicable, through the end
of the most recent calendar quarter, assuming reinvestment of all distributions.
The Fund may also furnish total return quotations for other periods, or based on
investments at various sales charge levels or at net asset value. For such
purposes, total return equals the total of all income and capital gain paid to
you, assuming reinvestment of all distributions, plus (or minus) the change in
the value of the original investment, expressed as a percentage of the purchase
price.
Current yield reflects the income per share earned by the Fund's portfolio
investments. It is calculated by dividing the Fund's net investment income per
share during a recent 30-day period by the maximum public offering price on the
last day of that period and annualizing the result.
Yield, which is calculated according to a formula prescribed by the SEC (see
"General Information" in the SAI), is not indicative of the dividends or
distributions which were or will be paid to you. Dividends or distributions paid
to shareholders of the Fund are reflected in the current distribution rate,
which may be quoted to you. The current distribution rate is computed by
dividing the total amount of dividends per share paid by the Fund during the
past 12 months by a current maximum offering price. Under certain circumstances,
such as when there has been a change in the amount of dividend payout, or a
fundamental change in investment policies, it might be appropriate to annualize
the dividends paid during the period such policies were in effect, rather than
using the dividends during the past 12 months. The current distribution rate
differs from the current yield computation because it may include distributions
to shareholders from sources other than dividends and interest, such as premium
income from option writing and short-term capital gain, and is calculated over a
different period of time.
In each case, performance figures are based upon past performance, reflect all
recurring charges against Fund income and will assume the payment of the maximum
sales charge on the purchase of shares. When there has been a change in the
sales charge structure, the historical performance figures will be restated to
reflect the new rate. The investment results of the Fund, like all other
investment companies, will fluctuate over time; thus, performance figures should
not be considered to represent what an investment may earn in the future or what
the Fund's total return, current yield or distribution may be in any future
period.
GENERAL INFORMATION
REPORTS TO SHAREHOLDERS
The Fund's fiscal year ends October 31. Annual Reports containing audited
financial statements of the Trust, including the auditors' report, and
Semi-Annual Reports containing unaudited financial statements are automatically
sent to shareholders. To reduce the volume of mail sent to one household as well
as to reduce Fund expenses, Investor Services will attempt to identify related
shareholders within each household, and send only one copy of the report.
Additional copies may be obtained, without charge, upon request to the Fund at
the telephone number or address set forth on the cover page of this Prospectus.
Additional information on Fund performance is included in the Trust's Annual
Report to Shareholders and under "General Information" in the SAI.
ORGANIZATION AND VOTING RIGHTS
The Agreement and Declaration of Trust permits the trustees to issue an
unlimited number of full and fractional shares of beneficial interest of $.01
par value, which may be issued in any number of series and classes. Shares
issued will be fully paid and non-assessable and will have no preemptive,
conversion, or sinking rights. Shares of each series have equal and exclusive
rights as to dividends and distributions as declared by such series and the net
assets of such series upon liquidation or dissolution. Additional series or
classes may be added in the future by the Board.
Voting rights are noncumulative, so that in any election of trustees, the
holders of more than 50% of the shares voting can elect all of the trustees, if
they choose to do so, and in such event the holders of the remaining shares
voting will not be able to elect any person or persons to the Board.
The Trust does no intend to hold annual shareholders meetings. The Trust may,
however, hold a special shareholders meeting of a series for such purpose as
changing fundamental investment restrictions, approving new management
agreements or any other matters which are required to be acted on by
shareholders under the 1940 Act. A meeting may also be called by the trustees in
their discretion holding at least ten percent of the shares outstanding shares
of the Trust. Shareholders will receive assistance in communicating with other
shareholders in connection with the election or removal of trustees, such as
that provided in Section 16(c) of the 1940 Act.
REDEMPTIONS BY THE FUND
The Fund reserves the right to redeem your shares, at net asset value, if your
account has a value of less than $50, but only where the value of your account
has been reduced by the prior voluntary redemption of shares and has been
inactive (except for the reinvestment of distributions) for a period of at least
six months, you are given advance notice. For more information, see "How Do I
Buy and Sell Shares?" in the SAI.
ACCOUNT REGISTRATIONS
An account registration should reflect your intentions as to ownership. Where
there are two co-owners on the account, the account will be registered as "Owner
1" AND "Owner 2"; the "or" designation is not used EXCEPT for money market fund
accounts. If co-owners wish to have the ability to redeem or convert on the
signature of only one owner, a limited power of attorney may be used.
Accounts should not be registered in the name of a minor, either as sole or
co-owner of the account. Transfer or redemption for such an account may require
court action to obtain release of the funds until the minor reaches the legal
age of majority. The account should be registered in the name of one "Adult" as
custodian for the benefit of the "Minor" under the Uniform Transfer or Gifts to
Minors Act.
A trust designation such as "trustee" or "in trust for" should only be used if
the account is being established pursuant to a legal, valid trust document. Use
of such a designation in the absence of a legal trust document may cause
difficulties and require court action for transfer or redemption of the funds.
Shares, whether in certificate form or not, registered as joint tenants or "Jt
Ten" shall mean "as joint tenants with rights of survivorship" and not "as
tenants in common."
Except as indicated, you may transfer an account in the
Fund carried in "street" or "nominee" name by your securities dealer to a
comparably registered Fund account maintained by another securities dealer. Both
the delivering and receiving securities dealers must have executed dealer
agreements on file with Distributors. Unless a dealer agreement has been
executed and is on file with Distributors, the Fund will not process the
transfer and will so inform your delivering securities dealer. To effect the
transfer, you should instruct the securities dealer to transfer the account to a
receiving securities dealer and sign any documents required by the securities
dealers to evidence consent to the transfer. Under current procedures, the
account transfer may be processed by the delivering securities dealer and the
Fund after the Fund receives authorization in proper form from your delivering
securities dealer. Account transfers may be effected electronically through the
services of the NSCC.
The Fund may conclusively accept instructions from you or your nominee listed in
publicly available nominee lists, regardless of whether the account was
initially registered in the name of or you, your nominee, or both. If a
securities dealer or other representative is of record on an your account, you
will be deemed to have authorized the use of electronic instructions on the
account, including, without limitation, those initiated through the services of
the NSCC, to have adopted as instruction and signature any such electronic
instructions received by the Fund and the Investor Services, and to have
authorized them to execute the instructions without further inquiry. At the
present time, such services which are available include the NSCC's "Networking,"
"Fund/SERV," and "ACATS" systems.
Any questions regarding an intended registration should be answered by the
securities dealer handling the investment, or by calling Franklin's Fund
Information Department.
IMPORTANT NOTICE REGARDING
TAXPAYER IRS CERTIFICATIONS
Pursuant to the Code and U.S. Treasury regulations, the Fund may be required to
report to the Internal Revenue Service ("IRS") any taxable dividend, capital
gain distribution, or other reportable payment (including share redemption
proceeds) and withhold 31% of any such payments made to individuals and other
non-exempt shareholders who have not provided a correct taxpayer identification
number ("TIN") and made certain required certifications that appear in the
Shareholder Application. You may also be subject to backup withholding if the
IRS or a securities dealer notifies the Fund that the number furnished by you is
incorrect or that you are subject to backup withholding for previous
under-reporting of interest or dividend income.
The Fund reserves the right to (1) refuse to open an account for any person
failing to provide a TIN along with the required certifications and (2) close an
account by redeeming its shares in full at the then-current net asset value upon
receipt of notice from the IRS that the TIN certified as correct by the
shareholder is in fact incorrect or upon the failure of a shareholder who has
completed an "awaiting TIN" certification to provide the Fund with a certified
TIN within 60 days after opening the account.
FRANKLIN TEMPLETON
INTERNATIONAL CURRENCY FUNDS
FRANKLIN TEMPLETON GLOBAL CURRENCY FUND
FRANKLIN TEMPLETON HIGH INCOME CURRENCY FUND
FRANKLIN TEMPLETON HARD CURRENCY FUND
STATEMENT OF
ADDITIONAL INFORMATION
777 MARINERS ISLAND BLVD.,
P.O. BOX 7777
SAN MATEO, CA 94403-7777
1-800/DIAL BEN
MARCH 1, 1996
This Statement of Additional Information pertains only to the Franklin Templeton
Global Currency Fund ("Global Currency Fund"), the Franklin Templeton Hard
Currency Fund (the "Hard Currency Fund") and the Franklin Templeton High Income
Currency Fund (the "High Income Fund") (individually or collectively, the
"Funds"), each a separate non-diversified series of the Franklin Templeton
Global Trust (the "Trust"), formerly known as the Huntington Funds, an open-end
management investment company consisting of four separate series. The Trust was
organized as a Massachusetts business trust on November 6, 1985, and has
registered with the Securities and Exchange Commission ("SEC") as a management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"). Each Fund represents a separate and distinct series of the Trust's
shares of beneficial interest. The Trust and its series are also referred to in
this document and from time to time in other communications as The Franklin
Templeton International Currency Funds. Each series of the Trust in effect
represents a separate fund with its own investment objective and policies, with
various possibilities for income or capital appreciation, and subject to various
market risks. Through the different series, the Trust attempts to satisfy
different investment objectives.
This SAI relates only to the Global Currency Fund, the Hard Currency Fund and
the High Income Currency Fund. The Funds are managed by Franklin Advisers,
Inc. (the "Manager" or "Adviser"). Templeton Investment Counsel, Inc. ("TICI"
or the "Subadviser") serves as the subadviser under a contract with the
Manager (together, the "Trust's Advisers"). TICI is an indirect subsidiary of
Templeton Worldwide, Inc. which is a direct, wholly-owned subsidiary of
Franklin Resources, Inc. (See "Investment Advisory and Other Services.")
The Global Currency Fund invests in high-quality money market instruments
denominated in three or more of the world's Major Currencies (as defined in the
Prospectus under "What Is the Franklin Templeton Global Trust?"), with the
objective of maximizing total return.
The Hard Currency Fund invests in high-quality money market instruments (and
forward contracts) denominated in foreign Major Currencies which historically
have experienced low rates of inflation and which, in the view of the Trust's
Advisers, are pursuing economic policies conducive to continued low rates of
inflation in the future and currency appreciation versus the U.S. dollar over
the long-term, with the objective of protection against depreciation of the U.S.
dollar relative to other currencies. The Hard Currency Fund endeavors, to the
maximum extent practicable, to maintain foreign currency (non-U.S. dollar)
exposure with respect to 100% of its net assets at all times.
The High Income Fund invests primarily in high-quality money market instruments
denominated in three or more of the ten highest yielding Major Currencies, with
the objective of high current income at a level significantly above that
available on U.S. dollar money market funds. Consistent with this objective, the
High Income Fund may invest up to 25% of its total assets in instruments
denominated in Non-Major Currencies (as defined in the Prospectus under "What Is
the Franklin Templeton Global Trust?").
A Prospectus for the Funds, dated March 1, 1996, as may be amended from time to
time, provides the basic information you should know before investing in one of
the Funds and may be obtained without charge from the Trust or the Funds'
principal underwriter, Franklin/Templeton Distributors, Inc. ("Distributors"),
at the address or telephone number shown above.
THIS STATEMENT OF ADDITIONAL INFORMATION ("SAI") IS NOT A PROSPECTUS. IT
CONTAINS INFORMATION IN ADDITION TO AND IN MORE DETAIL THAN SET FORTH IN THE
PROSPECTUS. THIS SAI IS INTENDED TO PROVIDE YOU WITH ADDITIONAL INFORMATION
REGARDING THE ACTIVITIES AND OPERATIONS OF THE FUNDS, AND SHOULD BE READ IN
CONJUNCTION WITH THE FUNDS' PROSPECTUS.
CONTENTS PAGE
How Do the Funds Invest Their Assets?
Investment Restrictions
Officers and Trustees
Investment Advisory and Other Services
E
How Do the Funds Purchase Securities
For Their Portfolios?
How Do I Buy and Sell Shares?
How Are the Funds' Shares Valued?
Additional Information
ERegarding Taxation
The Funds' Underwriter
General Information
HOW DO THE FUNDS INVEST THEIR ASSETS?
The following information supplements and should be read in conjunction with the
sections in the Funds' Prospectus entitled "What Is the Franklin Templeton
Global Trust?" and "Investment Objectives and Policies of the Funds."
FLOATING AND VARIABLE RATE NOTES. Floating and variable rate notes generally are
unsecured obligations issued by financial institutions and other entities. These
obligations typically have a stated maturity in excess of one year. The interest
rate on such notes is based on an identified interest rate index and is adjusted
automatically at specified intervals, generally not less frequently than
semi-annually.
COMMERCIAL PAPER. Commercial paper consists of short-term, unsecured
promissory notes issued to finance short-term credit needs.
CONCENTRATION IN FINANCIAL SERVICES OBLIGATIONS. Under normal market conditions,
each Fund invests at least 25% of its net assets in obligations of companies
engaged in the financial services industry. Such investments include obligations
of the character described below.
CERTIFICATES OF DEPOSIT. Certificates of deposit are certificates representing
the obligation of a bank or a foreign branch of such bank to repay funds
deposited with it for a specified period of time at a stated interest rate.
TIME DEPOSITS. Time deposits are non-negotiable deposits maintained in a
banking institution for a specified period of time at a stated interest rate.
BANKERS' ACCEPTANCES. Bankers' acceptances are credit instruments bearing
interest at a stated interest rate and evidencing the obligation of a bank to
pay a draft drawn on it by a customer. These instruments reflect the obligation
both of the bank and of the drawer to pay the face amount of the instrument upon
maturity.
U.S. BANKS. Commercial banks organized under U.S. federal law are supervised
and examined by the U.S. Comptroller of the Currency and are required to be
members of the U.S. Federal Reserve System and to be insured by the U.S.
Federal Deposit Insurance Corporation (the "FDIC"). U.S. banks organized
under state law are supervised and examined by state banking authorities but
are members of the U.S. Federal Reserve System only if they elect to join.
Most state banks are insured by the FDIC (although such insurance may not be
of material benefit to the Funds depending upon the principal amount of the
certificates of deposit of each bank held by the Funds) and are subject to
U.S. federal examination and to a substantial body of U.S. federal law and
regulation. As a result of U.S. federal and state laws and regulations,
domestic branches of U.S. banks are, among other things, generally required
to maintain specified levels of reserves, and are subject to other
supervision and regulation designed to promote financial soundness.
NON-U.S. BANKS AND NON-U.S. BRANCHES OF U.S. BANKS. Obligations of non-U.S.
branches of U.S. banks and of non-U.S. banks, such as certificates of deposit
and time deposits, may be general obligations of the parent banks in addition
to the issuing branch, or may be limited by the terms of a specific
obligation and governmental regulation. Such obligations are subject to
different risks than are those of domestic U.S. banks or U.S. branches of
non-U.S. banks. These risks include foreign economic and political
developments, foreign governmental restrictions that may adversely affect
payment of principal and interest on the obligations, foreign exchange
controls and foreign withholding and other taxes on interest income. Non-U.S.
branches of U.S. banks are not necessarily subject to the same or similar
regulatory requirements that apply to U.S. banks, such as mandatory reserve
requirements, loan limitations, and accounting, auditing and financial
recordkeeping requirements. In addition, less information may be publicly
available about a non-U.S. branch of a U.S. bank or about a non-U.S. bank
than about a U.S. bank.
Obligations of U.S. branches of non-U.S. banks may be general obligations of the
parent bank in addition to the issuing branch, or may be limited by the terms of
a specific obligation and by U.S. federal and state regulation as well as
governmental action in the country in which the non-U.S. bank has its head
office. A U.S. branch of a non-U.S. bank with assets in excess of $1 billion may
or may not be subject to reserve requirements imposed by the U.S. Federal
Reserve System or by the state in which the branch is located if the branch is
licensed in that state. In addition, a branch licensed by the U.S. Comptroller
of the Currency or a branch licensed by certain states may or may not be
required to: (1) pledge to the regulator, by depositing assets with a designated
bank within the state, an amount of its assets equal to 5% of its total
liabilities; and (2) maintain assets with the state in an amount equal to a
specified percentage of the aggregate amount of liabilities of the foreign bank
payable at or through all of its agencies or branches within the state. The
deposits of branches licensed by states may not necessarily be insured by the
FDIC.
INVESTING IN NON-U.S. SECURITIES. Non-U.S. securities markets generally are
not as developed or efficient as those in the United States. Securities of
some foreign issuers are less liquid and more volatile than securities of
comparable U.S. issuers. Similarly, volume and liquidity in most foreign
securities markets are less than in the United States and, at times,
volatility of prices can be greater than in the United States. In addition,
there may be less publicly available information about a non-U.S. issuer, and
non-U.S. issuers are not generally subject to uniform accounting and
financial reporting standards, practices and requirements comparable to those
applicable to U.S. issuers.
Because foreign securities (e.g., non-U.S. money market instruments) are
purchased with and payable in currencies of foreign countries, the value of
these assets as measured in U.S. dollars will be affected favorably or
unfavorably by changes in currency exchange rates and exchange control
regulations. Currency exchange costs may be incurred when a Fund sells
instruments denominated in one currency and purchases instruments denominated in
another.
Furthermore, some of these securities may be subject to transaction taxes levied
by foreign governments, which would have the effect of increasing the cost of
such investments and which would reduce the realized gain or increase the
realized loss on such securities at the time of sale. Transaction costs and
custodial expenses for a portfolio of non-U.S. securities generally are higher
than for a portfolio of U.S. securities. Interest payments from certain foreign
securities may be subject to foreign withholding taxes on interest income
payable on the securities.
U.S. government policies have, in the past, through taxation and other
restrictions, discouraged certain investments abroad by U.S. investors. While
no such restrictions are currently in effect, they could be reinstituted. In
such event, it may be necessary for a Fund to invest temporarily all or
substantially all of its assets in U.S. money market instruments, or it may
become necessary to liquidate a Fund.
CURRENCY TRANSACTIONS. Generally, the currency exchange transactions of the
Funds are conducted on a spot (i.e., cash) basis at the spot rate prevailing in
the currency exchange market for purchasing or selling currency. However, the
Funds have authority and intend to enter into forward currency contracts as a
hedge against possible variations in the exchange rates between the currencies
in which their investments are denominated and other currencies, including the
U.S. dollar, or in conjunction with money market instruments for the purpose of
obtaining an investment result that is substantially equivalent to a direct
investment in a foreign currency denominated instrument. A forward currency
contract is an agreement to purchase or sell a specified currency at a specified
future date and price set at the time of the contract.
When using forward contracts for hedging purposes, the Funds may enter into
forward contracts with respect to either specific transactions ("transaction
hedging") or portfolio positions ("position hedging"). Transaction hedging is
the purchase or sale of forward contracts with respect to specific receivables
or payables of a Fund generally owing in connection with the purchase and sale
of portfolio securities. Position hedging is the sale of a forward contract on a
particular currency with respect to portfolio security positions denominated or
quoted in such currency. The Funds will not speculate in forward contracts;
however, the Funds will utilize forward contracts in conjunction with money
market instruments in a manner which is unrelated to the Funds' normal hedging
activities as described above (i.e., to obtain an investment result that is
substantially equivalent to a direct investment in a foreign currency
denominated instrument).
If a Fund enters into a position hedging transaction, its custodian bank will
place cash or readily marketable liquid securities in a segregated account of a
Fund in an amount equal to the value of its total assets committed to the
consummation of such forward contract. If the value of the securities placed in
the segregated account declines, additional cash or securities will be placed in
the account so that the value of the account will equal the amount of a Fund's
commitment with respect to such contracts.
A Fund may attempt to hedge up to 100% of its portfolio positions, but will
enter into such transactions only to the extent, if any, deemed appropriate by
the Trust's Advisers. A Fund may not enter into a position hedging forward
contract if, as a result thereof, it would have more than 10% of the value of
its total assets committed to such contracts. A Fund may not enter into a
forward contract with a term of more than one year. A Fund may not engage in
position hedging with respect to the currency of a particular country to an
extent greater than the aggregate market value (at the time the hedging
transaction is entered into) of its portfolio securities denominated in (or
quoted in or currently convertible into or directly related through the use of
forward contracts in conjunction with money market instruments to) that
particular currency.
It may not be possible for a given Fund to hedge against a devaluation that is
so generally anticipated that a Fund is not able to contract to sell the
currency at a price above the devaluation level it anticipates. It is possible
that, under certain circumstances, one or more Funds may have to limit currency
transactions to qualify as a regulated investment company under the Internal
Revenue Code of 1986, as amended (the "Code").
At or before the maturity of a forward contract, a Fund that entered into the
contract may either sell a portfolio security and make delivery of the currency,
or it may retain the security and terminate its contractual obligation to
deliver the currency by purchasing an "offsetting" contract obligating it to
purchase, on the same maturity date, the same amount of the currency.
If a Fund entering into a forward contract retains the portfolio security and
engages in an offsetting transaction, a Fund will incur a gain or loss (as
described below) to the extent that there has been movement in forward contract
prices. If a Fund engages in an offsetting transaction, it may subsequently
enter into a new forward contract to sell the currency. Should forward prices
decline during the period between a Fund's entering into a forward contract for
the sale of a currency and the date it enters into an offsetting contract for
the purchase of the currency, a Fund will realize a gain to the extent that the
price of the currency it has agreed to sell exceeds the price of the currency it
has agreed to purchase. Should forward prices increase, a Fund will suffer a
loss to the extent the price of the currency it has agreed to purchase exceeds
the price of the currency it has agreed to sell.
Transactions in forward contracts by any of the Funds will be limited to the
transactions described above. Of course, no Fund is required to enter into such
contracts, and none will do so unless deemed appropriate by the Trust's
Advisers. Investors should realize that the use of forward contracts does not
eliminate fluctuations in the underlying prices of the securities. Such
contracts simply establish a rate of exchange that a Fund can achieve at some
future point in time. Additionally, although such contracts tend to minimize the
risk of loss due to fluctuations in the value of the hedged currency, at the
same time they tend to limit any potential gain which might result from the
change in the value of such currency.
Because the Funds invest primarily in money market instruments denominated in
non-U.S. currencies, each may hold foreign currencies pending their investment
in such instruments or their conversion into U.S. dollars. Although the Funds
value their assets daily (as described in the Prospectuses) in terms of U.S.
dollars, they do not convert their holdings of foreign currencies into U.S.
dollars on a daily basis. They will do so from time to time, however, and
investors should be aware of the costs of currency conversion. Foreign exchange
dealers do not charge a fee for conversion, but they do realize a profit based
on the difference, which is known as the spread, between the prices at which
they are buying and selling various currencies. Thus, a dealer may offer to sell
a foreign currency to a Fund at one rate, while offering a lesser rate of
exchange should a Fund desire to resell the currency to the dealer.
CURRENCY MOVEMENTS
Exchange rates fluctuate for a number of reasons. Depending on the currency in
question and the point in time, some factors may outweigh others in determining
the course of exchange rate movements.
1. INFLATION. The most fundamental reason exchange rates change is to reflect
changes in currencies' purchasing power. Different countries experience
different inflation rates due to different monetary and fiscal policies,
different product and labor market conditions and a host of other factors.
2. TRADE DEFICITS. Countries with trade deficits tend to experience a
depreciating currency. Often, inflation is the cause of a trade deficit,
making a country's goods more expensive and less competitive and so reducing
demand for its currency.
3. INTEREST RATES. High interest rates tend to boost currency values in the
short run by making such currencies more attractive to investors. However,
since high interest rates are often the result of high inflation, the
opposite is often true in the longer run.
4. BUDGET DEFICITS AND LOW SAVINGS RATES. Countries that run large budget
deficits and save little of their national income tend to suffer a depreciating
currency because they are forced to borrow abroad to finance their deficits.
Payments of interest on this debt can "flood" the currency markets with the
currency of the debtor nation.
Also, budget deficits can indirectly contribute to currency depreciation if a
government chooses to cope with its deficits and debt by means of inflation.
5. POLITICAL FACTORS. Political instability in a country can cause a currency
to depreciate. If the country appears a less desirable place in which to
invest and do business, demand for the currency is likely to fall.
6. GOVERNMENT CONTROL. Through their own buying and selling of currencies, the
world's central banks sometimes manipulate exchange rate movements. In addition,
governments occasionally issue statements to influence people's expectations
about the direction of exchange rates, or they may instigate actual policies
with an exchange rate target as the goal.
INVESTMENT RESTRICTIONS
Each of the Funds has adopted the following restrictions as fundamental
policies, which means that they may not be changed without approval of a
majority of such Fund's shareholders. In order to change any of these
restrictions, the lesser of (i) 67% or more of the voting securities of such
Fund present at a meeting of shareholders if the holders of more than 50% of the
voting securities of the Fund are represented at that meeting or (ii) more than
50% of the outstanding voting securities of such Fund must vote to make the
change.
Each Fund WILL NOT:
1. Purchase common stocks, preferred stocks, warrants or other equity
securities, or purchase municipal bonds or industrial revenue bonds.
2. Borrow money, except from banks for temporary or emergency (not leveraging)
purposes in an amount up to 33 1/3% of the value of that Fund's total assets
(including the amount borrowed) based on the lesser of cost or market, less
liabilities (not including the amount borrowed) at the time the borrowing is
made. While borrowings exceed 5% of a Fund's total assets, the Fund will not
make any additional investments.
3. Pledge, hypothecate, mortgage or otherwise encumber its assets, except in an
amount up to 33 1/3% of the value of its total assets, but only to secure
borrowings for temporary or emergency purposes provided that the deposit or
payment of initial or variation margin in connection with transactions in
options and futures shall not be treated as a pledge of assets hereunder.
4. Sell securities short or purchase securities on margin, provided that the
deposit or payment of initial or variation margin in connection with
transactions in options and futures shall not be treated as the purchase of
securities on margin hereunder.
5. Underwrite the securities of other issuers or invest more than 10% of its
net assets in (a) securities subject to restrictions on disposition under the
Securities Act of 1933 ("restricted securities"), (b) repurchase agreements
providing for settlement in more than seven days, (c) options which are traded
in the over-the-counter market and investments hedged by such options, or (d)
securities which are not readily marketable. No Fund may enter into time
deposits maturing in more than seven days and any Fund's investment in time
deposits with maturities of three days or more may not exceed 10% of the net
assets of such Fund.
6. Purchase or sell real estate, securities of real estate investment trusts,
commodities, or oil and gas interests, except that a Fund may purchase or sell
currencies, may enter into futures contracts on securities, currencies,
securities and other indices or any other financial instruments, and may
purchase and sell options on such futures contracts.
7. Make loans to others except through the purchase of debt obligations
referred to in the Prospectus and the entry into repurchase agreements and
portfolio lending agreements, provided that the value of securities subject to
such lending agreements may not exceed 30% of the value of the Fund's total
assets. Any loans of portfolio securities will be made according to guidelines
established by the Securities and Exchange Commission and the Trust's Board of
Trustees, including maintenance of collateral of the borrower equal at all times
to at least the current market value of the securities loaned.
8. Invest less than 25% of its assets in securities issued by companies
primarily engaged in the financial services industry or invest more than 25% of
its assets in the securities of issuers in any other industry, provided that
there shall be no limitation on the purchase of securities issued or guaranteed
by the U.S. government, its agencies or instrumentalities. Notwithstanding the
foregoing, for temporary defensive purposes, a Fund may invest less than 25% of
its assets in the obligations of companies primarily engaged in the financial
services industry.
9. Have invested as of the last day of any fiscal quarter (or other measuring
period used for purposes of determining compliance with Subchapter M of the
Code) (a) more than 25% of its total assets in the securities of any one issuer,
or (b) with respect to 50% of the Fund's total assets, more than 5% of its total
assets in the obligations of any one issuer, except for cash and cash items and
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities.
10. Invest in companies for the purpose of exercising control.
11. Invest in securities of other investment companies, except as they may be
acquired as part of a merger, consolidation or acquisition of assets.
12. Purchase the securities of any issuer having less than three years'
continuous operations (or any predecessors) if such purchase would cause the
value of the Fund's investments in all such issuers to exceed 5% of the value of
its total assets.
Securities issued by a foreign government, its agencies and instrumentalities,
as well as supra-national organizations are considered as one industry for
concentration purposes.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage resulting from a change in values or assets
will not constitute a violation of that restriction.
PORTFOLIO TURNOVER. The portfolio turnover of the Funds for the fiscal year
ended October 31, 1995, the six-month period ended October 31, 1994 and the
fiscal year ended April 30, 1994, respectively, were 46.05%, 50.82% (annualized)
and 37.16% (Global Currency Fund); 15.72%, 55.91% (annualized) and 0% (Hard
Currency Fund); and 129.50%, 1,588.38% (annualized) and 0% (High Income Fund).
OFFICERS AND TRUSTEES
The Board of Trustees (the "Board") has the responsibility for the overall
management of the Trust and each Fund, including general supervision and review
of each Fund's investment activities. The trustees, in turn, elect the officers
of the Trust who are responsible for administering day-to-day operations of the
Trust. The affiliations of the officers and trustees and their principal
occupations for the past five years are listed below. Trustees who are deemed to
be "interested persons" of the Trust, as defined in the 1940 Act, are indicated
by an asterisk (*).
POSITIONS AND OFFICES PRINCIPAL OCCUPATION
NAME, AGE AND ADDRESS WITH THE TRUST DURING PAST FIVE YEARS
Frank H. Abbott, III (74)
1045 Sansome St.
San Francisco, CA 94111
Trustee
President and Director, Abbott Corporation (an investment company); and
director, trustee or managing general partner, as the case may be, of 31 of the
investment companies in the Franklin Group of Funds.
Harris J. Ashton (63)
General Host Corporation
Metro Center, 1 Station Place
Stamford, CT 06904-2045
Trustee
President, Chief Executive Officer and Chairman of the Board, General Host
Corporation (nursery and craft centers); Director, RBC Holdings, Inc. (a bank
holding company) and Bar-S Foods; and director, trustee or managing general
partner, as the case may be, of 56 of the investment companies in the Franklin
Templeton Group of Funds.
David K. Eiteman (66)
HC2, Box 8076
Frazier Park, CA 93225
Trustee
Since 1959, Professor of Finance in the John E. Anderson Graduate School of
Management, University of California, Los Angeles. From 1988 to June 1993, a
Trustee of the Huntington Investment Trust.
S. Joseph Fortunato (63)
Park Avenue at Morris County
P. O. Box 1945
Morristown, NJ 07962-1945
Trustee
Member of the law firm of Pitney, Hardin, Kipp & Szuch; Director of General Host
Corporation; director, trustee or managing general partner, as the case may be,
of 58 of the investment companies in the Franklin Templeton Group of Funds.
David W. Garbellano (81)
111 New Montgomery St., #402
San Francisco, CA 94105
Trustee
Private Investor; Assistant Secretary/Treasurer and Director, Berkeley Science
Corporation (a venture capital company); and director, trustee or managing
general partner, as the case may be, of 30 of the investment companies in the
Franklin Group of Funds.
*Donald P. Gould (37)
777 Mariners Island Blvd.
San Mateo, CA 94404
President and Trustee
From February 1992 to present, independent consultant to the Trust and from
February 1992 to June 1993, independent consultant to Huntington Investment
Trust. From December 1985 to February 1992, Chairman of the board of the Trust.
From 1988 to June 1993, President and Trustee, from 1988 to February 1992,
Chairman of the Board, Huntington Investment Trust. From October 1985 to
February 1992, President and Director of Huntington Advisers, Inc., a mutual
fund investment adviser, and President of Huntington Investments, Inc., a mutual
fund underwriter.
Gerald R. Healy (54)
5917 Cleveland Street
Morton Grove, IL 60053
Trustee
Since April 1994, a private consultant. From July 1993 to March 1994, Director
of Corporate Management Resources of Alliance Imaging, Inc. From 1989, Executive
Vice President of Capital Health services Corp. Prior to that time, a private
investor. From 1988 to June 1993, a Trustee of the Huntington Investment Trust.
*Charles B. Johnson (63)
777 Mariners Island Blvd.
San Mateo, CA 94404
Chairman of the Board and Trustee
President and Director, Franklin Resources, Inc.; Chairman of the Board and
Director, Franklin Advisers, Inc. and Franklin Templeton Distributors, Inc.;
Director, Franklin/Templeton Investor Services, Inc. and General Host
Corporation; and officer and/or director, trustee or managing general
partner, as the case may be, of most other subsidiaries of Franklin
Resources, Inc. and of 57 of the investment companies in the Franklin
Templeton Group of Funds.
*Rupert H. Johnson, Jr. (55)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President and Trustee
Executive Vice President and Director, Franklin Resources, Inc. and Franklin
Templeton Distributors, Inc.; President and Director, Franklin Advisers, Inc.;
Director, Franklin/Templeton Investor Services, Inc.; and officer and/or
director, trustee or managing general partner, as the case may be, of most other
subsidiaries of Franklin Resources, Inc. and of 43 of the investment companies
in the Franklin Templeton Group of Funds.
David P. Kraus (39)
Bet Tzedek Legal Services
145 South Fairfax Ave., Suite 200
Los Angeles, CA 90036-2166
Trustee
Since 1981, an attorney with various private law firms in Los Angeles. Also,
since October 1995, an attorney with Bet Tzedek Legal Services.
Frank W. T. LaHaye (66)
20833 Stevens Creek Blvd.
Suite 102
Cupertino, CA 95014
Trustee
General Partner, Peregrine Associates and Miller & LaHaye, which are General
Partners of Peregrine Ventures and Peregrine Ventures II (venture capital
firms); Chairman of the Board and Director, Quarterdeck Office Systems, Inc.;
Director, FischerImaging Corporation; and director or trustee, as the case may
be, of 26 of the investment companies in the Franklin Group of Funds.
Gordon S. Macklin (67)
8212 Burning Tree Road
Bethesda, MD 20817
Trustee
Chairman, White River Corporation (information services); Director, Fund
American Enterprises Holdings, Inc., Lockheed Martin Corporation, MCI
Communications Corporation, MedImmune, Inc. (biotechnology), InfoVest
Corporation (information services), and Fusion Systems Corporation (industrial
technology); and director, trustee or managing general partner, as the case may
be, of 53 of the investment companies in the Franklin Templeton Group of Funds;
and formerly held the following positions: Chairman, Hambrecht and Quist Group;
Director, H & Q Healthcare Investors; and President, National Association of
Securities Dealers, Inc.
Harmon E. Burns (51)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President
Executive Vice President, Secretary and Director, Franklin Resources, Inc.;
Executive Vice President and Director, Franklin Templeton Distributors, Inc.;
Executive Vice President, Franklin Advisers, Inc.; Director, Franklin/Templeton
Investor Services, Inc.; officer and/or director, as the case may be, of other
subsidiaries of Franklin Resources, Inc.; and officer and/or director or trustee
of 43 of the investment companies in the Franklin Templeton Group of Funds.
Kenneth V. Domingues (63)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President - Financial Reporting and Accounting Standards
Senior Vice President, Franklin Resources, Inc., Franklin Advisers, Inc., and
Franklin Templeton Distributors, Inc.; officer and/or director, as the case may
be, of other subsidiaries of Franklin Resources, Inc.; and officer and/or
managing general partner, as the case may be, of 37 of the investment companies
in the Franklin Group of Funds.
Martin L. Flanagan (35)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President and Chief Financial Officer
Senior Vice President, Chief Financial Officer and Treasurer, Franklin
Resources, Inc.; Executive Vice President, Templeton Worldwide, Inc.; Senior
Vice President and Treasurer, Franklin Advisers, Inc. and Franklin Templeton
Distributors, Inc.; Senior Vice President, Franklin/Templeton Investor Services,
Inc.; officer of most other subsidiaries of Franklin Resources, Inc.; and
officer of 61 of the investment companies in the Franklin Templeton Group of
Funds.
Deborah R. Gatzek (47)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President and Secretary
Senior Vice President - Legal, Franklin Resources, Inc. and Franklin
Templeton Distributors, Inc.; Vice President, Franklin Advisers, Inc. and
officer of 37 of the investment companies in the Franklin Group of Funds.
Charles E. Johnson (39)
777 Mariners Island Blvd.
San Mateo CA 94404
Vice President
Senior Vice President and Director, Franklin Resources, Inc.; Senior Vice
President, Franklin Templeton Distributors, Inc.; President and Director,
Templeton Worldwide, Inc. and Franklin Institutional Services Corporation;
officer and/or director, as the case may be, of some of the subsidiaries of
Franklin Resources, Inc. and officer and/or director or trustee, as the case may
be, of 26 of the investment companies in the Franklin Templeton Group of Funds.
Diomedes Loo-Tam (57)
777 Mariners Island Blvd.
San Mateo, CA 94404
Treasurer and Principal Accounting Officer
Employee of Franklin Advisers, Inc.; and officer of 37 of the investment
companies in the Franklin Group of Funds.
Edward V. McVey (58)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President
Senior Vice President/National Sales Manager, Franklin Templeton Distributors,
Inc.; and officer of 32 of the investment companies in the Franklin Group of
Funds.
The preceding table indicates those officers and trustees who are also
affiliated persons of Distributors and the investment manager. Trustees not
affiliated with the investment manager ("nonaffiliated trustees") are currently
paid fees of $800 per month plus $800 per meeting attended. As indicated above,
certain of the Trust's nonaffiliated trustees also serve as directors, trustees
or managing general partners of other investment companies in the Franklin Group
of Funds(R) and the Templeton Group of Funds (the "Franklin Templeton Group of
Funds") from which they may receive fees for their services. The following table
indicates the total fees paid to nonaffiliated trustees by the Trust and by
other funds in the Franklin Templeton Group of Funds.
.
NUMBER OF BOARDS IN
THE FRANKLIN
TOTAL FEES RECEIVED TEMPLETON GROUP OF
FROM THE FRANKLIN FUNDS ON WHICH EACH
TOTAL FEES TEMPLETON GROUP OF SERVES***
RECEIVED FROM FUNDS**
NAME FUND*
Frank H. Abbott, III $5,000 $176,870 31
Harris J. Ashton 5,000 318,125 56
David K. Eiteman 3,400 5,000 1
S. Joseph Fortunato 5,000 334,265 58
David Garbellano 5,000 153,300 30
Gerald R. Healy 4,200 5,800 1
David P. Kraus 5,000 6,600 1
Frank W.T. LaHaye 5,000 150,817 26
Gordon S. Macklin 5,000 301,885 53
* For the fiscal year ended October 31.
** For the calendar year ended December 31, 1995.
*** The number of boards is based on the number of registered investment
companies in the Franklin Templeton Group of Funds and does not include the
total number of series or funds within each investment company for which the
trustees are responsible. The Franklin Templeton Group of Funds currently
includes 61 registered investment companies, consisting of approximately 162
U.S. based funds or series.
Nonaffiliated trustees are reimbursed for expenses incurred in connection with
attending board meetings, paid pro rata by each fund in the Franklin Templeton
Group of Funds for which they serve as director, trustee or managing general
partner. No officer or trustee received any other compensation directly from the
Funds. Certain officers or trustees who are shareholders of Franklin Resources,
Inc. ("Resources") may be deemed to receive indirect remuneration by virtue of
their participation, if any, in the fees paid to its subsidiaries.
As of December 7, 1995, the trustees and officers, as a group, owned of record
and beneficially approximately 61 shares of the Global Currency Fund, 280 shares
of the Hard Currency Fund and 73 shares of the High Income Currency Fund, each
amount of which is less than 1% of the total outstanding shares of each Fund.
Many of the Trust's trustees also own shares in various of the other funds in
the Franklin Templeton Group of Funds. Charles B. Johnson and Rupert H. Johnson,
Jr. are brothers and the father and uncle, respectively, of Charles E. Johnson.
From time to time, the number of each Fund's shares held in the "street name"
accounts of various securities dealers for the benefit of their clients or in
centralized securities depositories may exceed 5% of the total shares
outstanding. To the best knowledge of this Trust, no other person holds
beneficially or of record more than 5% of any of these Funds' outstanding
shares.
INVESTMENT ADVISORY AND OTHER SERVICES
The investment manager of the Funds is Franklin Advisers, Inc. ("Advisers" or
"Manager"). Advisers is a wholly-owned subsidiary of Resources, a publicly owned
holding company whose shares are listed on the New York Stock Exchange ( the
"Exchange"). Resources owns several other subsidiaries which are involved in
investment management and shareholder services.
Pursuant to the management agreement, the Manager provides investment research
and portfolio management services, including the selection of securities for
each Fund to purchase, hold or sell and the selection of brokers through whom
each Fund's portfolio transactions are executed. The Manager's activities are
subject to the review and supervision of the Board to whom the Manager renders
periodic reports of each Fund's investment activities. Under the terms of the
management agreement, the Manager provides office space and office furnishings,
facilities and equipment required for managing the business affairs of each
Fund; maintains all internal bookkeeping, clerical, secretarial and
administrative personnel and services; and provides certain telephone and other
mechanical services. The Manager is covered by fidelity insurance on its
officers, directors and employees for the protection of the Trust. Each Fund
bears all of its expenses not assumed by the Manager. Please see the Statement
of Operations in the financial statements included in the Funds' Annual Report
to Shareholders dated October 31, 1995.
The Manager also provides management services to numerous other investment
companies or funds pursuant to management agreements with each fund. The Manager
may give advice and take action with respect to any of the other funds it
manages, or for its own account, which may differ from action taken by the
Manager on behalf of the Funds. Similarly, with respect to the Funds, the
Manager is not obligated to recommend, purchase or sell, or to refrain from
recommending, purchasing or selling any security that the Manager and access
persons, as defined by the 1940 Act, may purchase or sell for its or their own
account or for the accounts of any other fund. Furthermore, the Manager is not
obligated to refrain from investing in securities held by the Funds or other
funds which it manages or administers. Of course, any transactions for the
accounts of the Manager and other access persons will be made in compliance with
the Trust's Code of Ethics.
Pursuant to the management agreement, each Fund is obligated to pay the Manager
a fee computed at the close of business on the first business day of each month
equal to an annual rate of 0.65% of the value of the average daily net assets of
each Fund.
The management agreement specifies that the management fee will be reduced to
the extent necessary to comply with the most stringent limits on the expenses
which may be borne by each Fund as prescribed by any state in which each Fund's
shares are offered for sale. The most stringent current limit requires the
Manager to reduce or eliminate its fee to the extent that aggregate operating
expenses of each Fund (excluding interest, taxes, brokerage commissions and
extraordinary expenses such as litigation cots) would otherwise exceed in any
fiscal year 2.5% of the first $30 million of average net assets of each Fund,
2.0% of the next $70 million of average net assets of each Fund and 1.5% of
average net assets of each Fund in excess of $100 million. Expense reductions
have not been necessary based on state requirements.
The Manager has agreed in advance to waive a portion of its management fees and
make certain payments to reduce expenses. This arrangement may be terminated by
the Manager at any time upon notice to the Board. For the fiscal year ended
October 31, 1995, the Global Currency Fund and the High Currency Fund paid the
Manager their respective contractual management fees, but the High Income Fund
only paid management fees of $57,812 instead of the contractual amount of
$82,819. For the period May 1, 1994 to October 31, 1994, the management fees the
Funds were contractually obligated to pay the Manager were $173,619, $179,397
and $56,657 for the Global Currency Fund, the Hard Currency Fund and the High
Income Fund, respectively, and the management fees actually paid to the Manager
by the Funds for the same period were $6,878, $12,025 and $0, respectively. For
the period November 15, 1993 to April 30, 1994, the management fees the Funds
were contractually obligated to pay the Manager were $165,435, $104,552 and
$55,225, for the Global Currency Fund, the Hard Currency Fund and the High
Income Fund, respectively, and the management fees actually paid to the Manager
by the Funds for the same period were $48,533, $12,229 and $7,093, respectively.
The management agreement is in effect until February 29, 1996. Thereafter, it
may continue in effect for successive annual periods providing such continuance
is specifically approved at least annually by a vote of the Board or by a vote
of the holders of a majority of such Fund's outstanding voting securities, and
in either event by a majority vote of the Trust's trustees who are not parties
to the management agreement or interested persons of any such party (other than
as trustees of the Trust), cast in person at a meeting called for that purpose.
The management agreement may be terminated without penalty at any time by the
Board or by a vote of the holders of a majority of each Fund's outstanding
voting securities, or by the Manager on 60 days' written notice and will
automatically terminate in the event of its assignment, as defined in the 1940
Act.
As stated in the Prospectus, prior to November 12, 1993, Huntington Advisers,
Inc., 251 South Lake Avenue, Suite 600, Pasadena, California 91101, an indirect
wholly-owned subsidiary of Long Beach Bank, served as the Trust's manager; and
Bankers Trust Company, 280 Park Avenue, New York, New York 10015, a wholly-owned
subsidiary of Bankers Trust New York Corporation, served as each Fund's
investment adviser. For the fiscal years ended April 30, 1992 and 1993 and for
the period May 1, 1993 to November 15, 1993 investment advisory fees and
management and administration fees paid by the Funds were as follows:
GLOBAL HIGH HARD
CURRENCY INCOME CURRENCY
FUND FUND FUND
MANAGEMENT AND ADMINISTRATION FEES PAID TO HUNTINGTON ADVISERS
May 1, 1993 to November 15, 1993 $139,768 $ 61,738 $ 93,886
Fiscal Year 1993 254,010 180,302 162,142
Fiscal Year 1992 272,850 211,912 150,626
ADVISORY FEES PAID TO BANKERS TRUST COMPANY
May 1, 1993 to November 15, 1993 $ 85,126 $ 37,844 $ 57,239
Fiscal Year 1993 158,756 112,688 101,339
Fiscal Year 1992 170,531 132,445 94,141
As stated in the Prospectus, Templeton Investment Counsel, Inc., an affiliate of
Templeton Worldwide, Inc. and an indirect wholly-owned subsidiary of Resources
will serve as the subadviser under a contract with the Manager. Pursuant to the
subadvisory agreement between the Manager and TICI, and subject to the overall
policies, control, direction and review of the Board of Trustees and to the
instructions and supervision of the Manager, TICI will provide a continuous
investment program for each Fund, including allocation of each Fund's assets
among the various securities markets of the world and, investment research and
advice with respect to securities and investments and cash equivalents in the
Funds.
Under the subadvisory agreement with the Manager, TICI receives a fee from the
Manager equal to an annual rate of 0.25% of the value of the average daily net
assets of each of the Funds.
Franklin/Templeton Investor Services, Inc. ("Investor Services"), a wholly-owned
subsidiary of Resources, is the shareholder servicing agent for each Fund and
acts as each Fund's transfer agent and dividend-paying agent. Investor Services
is compensated on the basis of a fixed fee per account. Prior to November 12,
1993, Fund/Plan Services, Inc., Two Elm Street, Conshohochken, Pennsylvania
19428, served as the Trust's transfer and dividend-disbursing agent.
Bank of America NT & SA, 555 California Street, 4th Floor, San Francisco,
California 94104, acts as custodian of certain of the securities and other
assets of each Fund. Chase Manhattan Bank, Global Securities Service, Chase
MetroTech Center, Brooklyn, New York 11245, also acts as custodian of certain
securities and other assets of each Fund. Citibank Delaware, One Penn's Way, New
Castle, Delaware 19720, acts as custodian in connection with transfer services
through bank automated clearing houses. The custodians do not participate in
decisions relating to the purchase and sale of portfolio securities. Prior to
November 12, 1993, Bankers Trust Company 280 Park Avenue, New York, New York
10015, served as the Trust's custodian.
Coopers & Lybrand L.L.P., 333 Market Street, San Francisco, California 94105,
are the Trust's independent auditors. During the fiscal year ended October 31,
1995, their auditing services consisted of rendering an opinion on the financial
statements of the Funds included in the Trust's Annual Report dated October 31,
1995. Prior to the fiscal year ended April 30, 1994, the Funds were audited by
other independent auditors.
HOW DO THE FUNDS PURCHASE SECURITIES FOR THEIR PORTFOLIOS?
Under the current management agreement with Adviser, the selection of brokers
and dealers to execute transactions in each Fund's portfolio is made by the
Manager in accordance with criteria set forth in the management agreement and
any directions which the Trust's Board of Trustees may give. Under the
subadvisory agreement Adviser may delegate to TICI the authority to select
securities dealers to execute portfolio transactions for the Funds.
When placing a portfolio transaction, the Trust's Advisers attempt to obtain the
best net price and execution of the transaction. On portfolio transactions done
on a securities exchange, the amount of commission paid by the Funds is
negotiated between the Trust's Advisers and the broker executing the
transaction. The Trust's Advisers seek to obtain the lowest commission rate
available from brokers that are felt to be capable of efficient execution of the
transactions. The determination and evaluation of the reasonableness of the
brokerage commissions paid in connection with portfolio transactions are based
to a large degree on the professional opinions of the persons responsible for
the placement and review of such transactions. These opinions are formed on the
basis of, among other things, the experience of these individuals in the
securities industry and information available to them concerning the level of
commissions being paid by other institutional investors of comparable size. The
Trust's Advisers will ordinarily place orders for the purchase and sale of
over-the-counter securities on a principal rather than agency basis with a
principal market maker unless, in the opinion of the Trust's Advisers, a better
price and execution can otherwise be obtained. Purchases of portfolio securities
from underwriters will include a commission or concession paid by the issuer to
the underwriter, and purchases from dealers will include a spread between the
bid and ask price. Each Fund seeks to obtain prompt execution of orders at the
most favorable net price.
The amount of commission is not the only relevant factor to be considered in the
selection of a broker to execute a trade. If it is felt to be in a Fund's best
interests, the Trust's Advisers may place portfolio transactions with brokers
who provide the types of services described below, even if it means the Funds
will pay a higher commission than if no weight were given to the broker's
furnishing of these services. This will be done only if, in the opinion of the
Trust's Advisers, the amount of any additional commission is reasonable in
relation to the value of the services. Higher commissions will be paid only when
the brokerage and research services received are bona fide and produce a direct
benefit to the Funds or assist the Trust's Advisers in carrying out their
responsibilities to the Funds, or when it is otherwise in the best interest of
the Funds to do so, whether or not such services may also be useful to the
Trust's Advisers in advising other clients.
When it is felt that several brokers are equally able to provide the best net
price and execution, the Trust's Advisers may decide to execute transactions
through brokers who provide quotations and other services to the Funds,
specifically including the quotations necessary to determine the value of each
Fund's net assets, in such amount of total brokerage as may reasonably be
required in light of such services, and through brokers who supply research,
statistical and other data to the Funds and the Trust's Advisers in such amount
of total brokerage as may reasonably be required.
It is not possible to place a dollar value on the special executions or on the
research services received by the Trust's Advisers from dealers effecting
transactions in portfolio securities. The allocation of transactions in order to
obtain additional research services permits the Trust's Advisers to supplement
their own research and analysis activities and to receive the views and
information of individuals and research staff of other securities firms. As long
as it is lawful and appropriate to do so, the Trust's Advisers and their
affiliates may use this research and data in their investment advisory
capacities with other clients. Provided that the Trust's officers are satisfied
that the best execution is obtained, the sale of Fund shares may also be
considered as a factor in the selection of broker-dealers to execute each Fund's
portfolio transactions.
Because Distributors is a member of the National Association of Securities
Dealers, it is sometimes entitled to obtain certain fees when a Fund tenders
portfolio securities pursuant to a tender-offer solicitation. As a means of
recapturing brokerage for the benefit of a Fund, any portfolio securities
tendered by a Fund will be tendered through Distributors if it is legally
permissible to do so. In turn, the next management fee payable to Adviser under
the management agreement will be reduced by the amount of any fees received by
Distributors in cash, less any costs and expenses incurred in connection
therewith.
If purchases or sales of securities of a Fund and one or more other investment
companies or clients supervised by the Trust's Advisers are considered at or
about the same time, transactions in such securities will be allocated among the
several investment companies and clients in a manner deemed equitable to all by
the Trust's Advisers, taking into account the respective sizes of the funds and
the amount of securities to be purchased or sold. It is recognized that in some
cases this procedure could possibly have a detrimental effect on the price or
volume of the security so far as a Fund is concerned. In other cases it is
possible that the ability to participate in volume transactions and to negotiate
lower brokerage commissions will be beneficial to a Fund.
During the fiscal year ended October 31, 1995, the six-month period ended
October 31, 1994 and the fiscal years ended April 30, 1992 and 1993 , the Funds
paid no brokerage commissions. As of October 31, 1995, the Funds did not own
securities of any of their regular broker-dealers.
As of October 31, 1995, the Funds did not own securities of their regular
broker-dealers.
HOW DO I BUY AND SELL SHARES?
All checks, drafts, wires and other payment mediums used for purchasing or
redeeming shares of the Funds must be denominated in U.S. dollars. Each Fund
reserves the right, in its sole discretion, to either (a) reject any order for
the purchase or sale of shares denominated in any other currency, or (b) honor
the transaction or make adjustments to your account for the transaction as of a
date and with a foreign currency exchange factor determined by the drawee bank.
In connection with exchanges, it should be noted that since the proceeds from
the sale of shares of an investment company are generally not available until
the fifth business day following the redemption, the funds into which you are
seeking to exchange reserve the right to delay issuing shares pursuant to an
exchange until said fifth business day. The redemption of shares of a Fund to
complete an exchange will be effected at the close of business on the day the
request for exchange is received in proper form at the net asset value then
effective. Please see "What If My Investment Outlook Changes? - Exchange
Privilege" in the Prospectus.
If, in connection with the purchase of a Fund's shares, you submit a check or a
draft that is returned unpaid to a Fund, that Fund may impose a $10 charge
against your account for each returned item.
Dividend checks returned to a Fund marked "unable to forward" by the postal
service will be deemed to be a request to change your dividend option to
reinvest all distributions and the proceeds will be reinvested in additional
shares at net asset value until new instructions are received.
Each Fund may deduct from your account the costs of its efforts to locate you if
mail is returned as undeliverable or a Fund is otherwise unable to locate you or
verify your current mailing address. These costs may include a percentage of the
account when a search company charges a percentage fee in exchange for its
location services.
Under agreements with certain banks in Taiwan, Republic of China, each Fund's
shares are available to such banks' discretionary trust funds at net asset
value. The banks may charge service fees to their customers who participate in
the discretionary trusts. Pursuant to agreements, a portion of such service fees
may be paid to Distributors or one of its affiliates to help defray expenses of
maintaining a service office in Taiwan, including expenses related to local
literature fulfillment and communication facilities.
Shares of the Funds may be offered to investors in Taiwan through securities
firms known locally as Securities Investment Consulting Enterprises. In
conformity with local business practices in Taiwan, shares of the Funds will be
offered with the following schedule of sales charges:
SALES
SIZE OF PURCHASE IN U.S. DOLLARS CHARGE
Up to $100,000 3%
$100,000 to $1,000,000 2%
Over $1,000,000 1%
PURCHASES AND REDEMPTIONS
THROUGH SECURITIES DEALERS
Orders for the purchase of shares of the Funds received in proper form prior to
the scheduled close of the Exchange (generally 1:00 p.m. Pacific time any
business day that the Exchange is open for trading and promptly transmitted to a
Fund will be based upon the public offering price determined that day. Purchase
orders received by securities dealers or other financial institutions after the
scheduled close of the Exchange will be effected at the applicable Fund's public
offering price on the day it is next calculated. The use of the term "securities
dealer" herein shall include other financial institutions which, either directly
or through affiliates, have an agreement with Distributors to handle customer
orders and accounts with a Fund. Such reference, however, is for convenience
only and does not indicate a legal conclusion of capacity.
Orders for the redemption of shares are effected at net asset value subject to
the same conditions concerning time of receipt in proper form. It is the
securities dealer's responsibility to transmit the order in a timely fashion and
any loss to you resulting from the failure to do so must be settled between you
and the securities dealer.
OTHER PAYMENTS TO SECURITIES DEALERS
As discussed in the Prospectus under "How Do I Buy Shares? - General," either
Distributors or one of its affiliates may make payments, out of its own
resources, to securities dealers who initiate and are responsible for purchases
made at net asset value by certain trust companies and trust departments of
banks, certain designated retirement plans (excluding IRA and IRA rollovers),
certain non-designated plans, and certain retirement plans of organizations with
collective retirement plan assets of $10 million or more, as described below.
Distributors may make these payments in the form of contingent advance payments,
which may be recovered from the securities dealer or set off against other
payments due to the securities dealer in the event shares are redeemed within 12
months of the calendar month of purchase. Other conditions may apply. All terms
and conditions may be imposed by an agreement between Distributors, or one of
its affiliates, and the securities dealer.
Either Distributors or one of its affiliates may pay the following amounts, out
of its own resources, 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): 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;
and (ii) for purchases of most taxable income Franklin Templeton Funds made at
net asset value by certain 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, either Distributors or one of its affiliates, out of its
own resources, may pay up to 1% of the amount invested.
LETTER OF INTENT. You may qualify for a reduced sales charge on the purchase of
shares of a Fund, as described in the Prospectus. At any time within 90 days
after the first investment which you want to qualify for a reduced sales charge,
you may file with a Fund a signed Shareholder Application with the Letter of
Intent ("Letter") section completed. After the Letter is filed, each additional
investment will be entitled to the sales charge applicable to the level of
investment indicated on the Letter. Sales charge reductions based upon purchases
in more than one of the Franklin Templeton Funds will be effective only after
notification to Distributors that the investment qualifies for a discount. Your
holdings in the Franklin Templeton Funds, including Class II shares, acquired
more than 90 days before the Letter is filed, will be counted towards completion
of the Letter but will not be entitled to a retroactive downward adjustment in
the sales charge. Any redemptions you make, unless by a designated retirement
plan, during the 13-month period will be subtracted from the amount of the
purchases for purposes of determining whether the terms of the Letter have been
completed. If the Letter is not completed within the 13-month period, there will
be an upward adjustment of the sales charge, depending upon the amount actually
purchased (less redemptions) during the period. The upward adjustment does not
apply to designated retirement plans. If you execute a Letter prior to a change
in the sales charge structure for a Fund, you will be entitled to complete the
Letter at the lower of the new sales charge structure or the sales charge
structure in effect at the time the Letter was filed.
As mentioned in the Prospectus, five percent (5%) of the amount of the total
intended purchase will be reserved in shares of a Fund registered in your name.
This policy of reserving shares does not apply to a designated retirement plan.
If the total purchases, less redemptions, equal the amount specified under the
Letter, the reserved shares will be deposited to an account in your name or
delivered to you or your order. If the total purchases, less redemptions, exceed
the amount specified under the Letter and is an amount which would qualify for a
further quantity discount, a retroactive price adjustment will be made by
Distributors and the securities dealer through whom purchases were made pursuant
to the Letter (to reflect such further quantity discount) on purchases made
within 90 days before and on those made after filing the Letter. The resulting
difference in offering price will be applied to the purchase of additional
shares at the offering price applicable to a single purchase or the dollar
amount of the total purchases. If the total purchases, less redemptions, are
less than the amount specified under the Letter, you will remit to Distributors
an amount equal to the difference in the dollar amount of sales charge actually
paid and the amount of sales charge that would have applied to the aggregate
purchases if the total of such purchases had been made at a single time. Upon
such remittance the reserved shares held for your account will be deposited to
your account or delivered to you or your order. If within 20 days after written
request such difference in sales charge is not paid, the redemption of an
appropriate number of reserved shares to realize the difference will be made. In
the event of a total redemption of the account prior to fulfillment of the
Letter, the additional sales charge due will be deducted from the proceeds of
the redemption, and the balance will be forwarded to you.
If a Letter is executed on behalf of a designated retirement plan, the level and
any reduction in sales charge for these plans will be based on actual plan
participation and the projected investments in the Franklin Templeton Funds
under the Letter. These 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 these plans entitled to receive retroactive
adjustments in price for investments made before executing the Letter.
REDEMPTIONS IN KIND
Each Fund has committed itself to pay in cash (by check) all requests for
redemption by any shareholder of record, limited in amount, however, during any
90-day period to the lesser of $250,000 or 1% of the value of a Fund's net
assets at the beginning of such period. This commitment is irrevocable without
the prior approval of the Securities and Exchange Commission ("SEC"). In the
case of redemption requests in excess of these amounts, the trustees reserve the
right to make payments in whole or in part in securities or other assets of a
Fund from which the shareholder is redeeming, in case of an emergency, or if the
payment of such a redemption in cash would be detrimental to the existing
shareholders of a Fund. In such circumstances, the securities distributed would
be valued at the price used to compute a Fund's net assets. Should a Fund do so,
you may incur brokerage fees in converting the securities to cash. The Funds do
not intend to redeem illiquid securities in kind. Should it happen, however, you
may not be able to timely recover your investment in a timely manner and you may
also incur brokerage costs in selling the securities.
REDEMPTIONS BY A FUND
Due to the relatively high cost of handling small investments, the Trust
reserves the right to involuntarily redeem your shares at net asset value if
your account has a value of less than one-half of your initial required minimum
investment, but only where the value of your account has been reduced by the
prior voluntary redemption of shares. Until further notice, it is the present
policy of the Trust not to exercise this right if your account has a value of
$50 or more. In any event, before a Fund redeems your shares and sends you the
proceeds, it will notify you that the value of the shares in your account is
less than the minimum amount and allow you 30 days to make an additional
investment in an amount which will increase the value of your account to at
least $100 in that Fund.
REINVESTMENT DATE
Shares acquired through the reinvestment of dividends will be purchased at the
net asset value determined on the business day following the dividend record
date (sometimes known as "ex-dividend date"). 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.
REPORTS TO SHAREHOLDERS
The Trust sends annual and semiannual reports regarding its performance and
portfolio holding to shareholders. If you would like to receive an interim
quarterly report, you may phone Fund Information at 1-88/DIAL BEN.
SPECIAL SERVICES
The Franklin Templeton Institutional Services Department provides specialized
services, including recordkeeping, for institutional investors of the Funds.
The cost of these services is not borne by the Funds.
Investor Services may pay certain financial institutions that maintain omnibus
accounts with the Funds on behalf of numerous beneficial owners for
recordkeeping operations performed with respect to such owners. For each
beneficial owner in the omnibus account, each Fund may reimburse Investor
Services an amount not to exceed the per account fee which a Fund normally pays
Investor Services. These financial institutions may also charge a fee for their
services directly to their clients.
HOW ARE THE FUNDS' SHARES VALUED?
As noted in the Prospectus, each Fund calculates net asset value as of the
scheduled close of the Exchange (generally 1:00 p.m. Pacific time) each day that
the Exchange is open for trading. As of the date of this SAI, each Fund is
informed that the Exchange observes the following holidays: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
For the purpose of determining the aggregate net assets of each Fund, cash and
receivables are valued at their realizable amounts. Interest is recorded as
accrued and dividends are recorded on the ex-dividend date. Portfolio securities
listed on a securities exchange or on the NASDAQ National Market System for
which market quotations are readily available are valued at the last quoted sale
price of the day or, if there is no such reported sale, within the range of the
most recent quoted bid and ask prices. Over-the-counter portfolio securities are
valued within the range of the most recent quoted bid and ask prices. Portfolio
securities which are traded both in the over-the-counter market and on a stock
exchange are valued according to the broadest and most representative market as
determined by the Manager.
Portfolio securities underlying actively traded call options are valued at their
market price as determined above. The current market value of any option held by
a Fund is its last sales price on the relevant exchange prior to the time when
assets are valued. Lacking any sales that day or if the last sales price is
outside the bid and ask prices, the options are valued within the range of the
current closing bid and ask prices if such valuation is believed to fairly
reflect the contract's market value.
Other securities for which market quotations are readily available are valued at
the current market price, which may be obtained from a pricing service, based on
a variety of factors including recent trades, institutional size trading in
similar types of securities (considering yield, risk and maturity) and/or
developments related to specific issues. Securities and other assets for which
market prices are not readily available are valued at fair value as determined
following procedures approved by the Board. With the approval of trustees, the
Funds may utilize a pricing service, bank or securities dealer to perform any of
the above described functions.
Securities denominated in foreign currencies and traded on foreign exchanges or
in foreign markets will be valued in a similar manner and their value will then
be converted into their U.S. dollars equivalent to the foreign exchange rate in
effect at 9:00 a.m. Pacific time or, if no such quotation is available, at the
rate of exchange determined in accordance with policies established in good
faith by the Board. Because the value of securities denominated in foreign
currencies must be translated into U.S. dollars, fluctuations in the value of
such currencies in relation to the U.S. dollar will affect the net asset value
of a Fund's shares even though there has not been a change in the values of such
securities.
Trading in European or Far Eastern currencies generally, or in a particular
country or countries, may not take place on every Exchange business day.
Furthermore, trading takes place in various foreign markets on days that are not
business days for the Exchange and on which a Fund's net asset value is not
calculated. Each Fund calculates net asset value per share, and therefore
effects sales and redemptions of its shares, as of the scheduled close of the
Exchange each day that the Exchange is open for trading. This calculation does
not take place contemporaneously with the determination of the prices of many of
the portfolio securities used in the calculation and, if events occur which
materially affect the values of these foreign securities, they will be valued at
fair value as determined by management and approved in good faith by the Board.
Generally, trading in U.S. government securities and money market instruments is
substantially completed each day at various times prior to the scheduled close
of the Exchange. The value of these securities used in computing the net asset
value of a Fund's shares is determined as of such times. Occasionally, events
affecting the values of such securities may occur between the times at which
they are determined and the scheduled close of the Exchange which will not be
reflected in the computation of a Fund's assets. If such events materially
affecting the values of these securities occur during such period, then the
securities will be valued at their fair value as determined in good faith by the
Board.
ADDITIONAL INFORMATION REGARDING TAXATION
As stated in the Prospectus, each Fund has elected to be treated as a regulated
investment company under Subchapter M of the Code. The trustees reserve the
right not to maintain the qualification of a Fund as a regulated investment
company if they determine such course of action to be beneficial to
shareholders. In such case, a Fund will be subject to federal and possibly state
corporate taxes on its taxable income and gains, and distributions to
shareholders will be taxable to the extent of a Fund's available earnings and
profits.
The Code requires all funds to distribute at least 98% of their taxable ordinary
income earned during the calendar year and at least 98% of their capital gain
net income earned during the twelve month period ending October 31 of each year
(in addition to amounts from the prior year that were neither distributed nor
taxed to a Fund) to shareholders by December 31 of each year in order to avoid
the imposition of a federal excise tax. Under these rules, certain distributions
which are declared in October, November or December but which, for operational
reasons, may not be paid to the shareholder until the following January, will be
treated for tax purposes as if paid by a Fund and received by the shareholder on
December 31 of the calendar year in which they are declared. The Funds intend as
a matter of policy to declare such dividends, if any, in December or January to
avoid the imposition of this tax, but do not guarantee that their distributions
will be sufficient to avoid any or all federal excise taxes.
For corporate shareholders, none of the distributions paid by a Fund for the
six-month period ended October 31, 1994 qualified for the corporate
dividends-received deduction and it is not anticipated that any of the current
year's dividends will qualify.
Redemptions and exchanges of Fund shares are taxable transactions for federal
and state income tax purposes. For most shareholders, gain or loss will be
recognized in an amount equal to the difference between the shareholder's basis
in the shares and the amount received, subject to the rules described below. If
such shares are a capital asset in the hands of the shareholder, gain or loss
will be capital gain or loss and will be long-term for federal income tax
purposes if the shares have been held for more than one year.
All or a portion of the sales charge incurred in purchasing shares of each Fund
will not be included in the federal tax basis of such shares sold or exchanged
within ninety (90) days of their purchase (for purposes of determining gain or
loss with respect to such shares) if the sales proceeds are reinvested in the
Funds or in another fund in the Franklin Group of Funds and the Templeton Group
and a sales charge which would otherwise apply to the reinvestment is reduced or
eliminated. Any portion of such sales charge excluded from the tax basis of the
shares sold will be added to the tax basis of the shares acquired in the
reinvestment. Shareholders should consult with their tax advisors concerning the
tax rules applicable to the redemption or exchange of fund shares.
The Funds will inform their shareholders of the source of their dividends and
distributions at the time they are paid, and will promptly after the close of
each calendar year advise them of the tax status for federal income tax purposes
of such dividends and distributions.
All or a portion of a loss realized upon a redemption of shares will be
disallowed to the extent other shares of a Fund are purchased (through
reinvestment of dividends or otherwise) within 30 days before or after such
redemption. Any loss disallowed under these rules will be added to the tax basis
of the shares purchased.
A Fund's investment in options, futures contracts and forward contracts,
including transactions involving actual or deemed short sales or foreign
exchange gains or losses are subject to many complex and special tax rules. For
example, a Fund's treatment of options on futures contracts, regulated futures
contracts, and certain foreign currency forward contracts and options thereon is
generally governed by Section 1256 of the Code. Absent a tax election to the
contrary, each such Section 1256 position held by a Fund will be
marked-to-market (i.e., treated as if it were sold for fair market value) on the
last business day of a Fund's fiscal year, and all gain or loss associated with
mark-to-market positions at fiscal year end (except certain foreign currency
gain or loss covered by Section 988 of the Code, which is treated as ordinary
income or loss) will generally be treated as 60% long-term capital gain or loss
and 40% short-term capital gain or loss. The effect of Section 1256
mark-to-market rules may be to accelerate income or to convert what otherwise
would have been long-term capital gains into short-term capital gains or
short-term capital losses into long-term capital losses within a Fund. The
acceleration of income on Section 1256 positions may require a Fund to recognize
taxable income without the corresponding receipt of cash. In order to generate
cash to satisfy the distribution requirements of the Code, a Fund may be
required to dispose of portfolio securities that it otherwise would have
continued to hold or to use cash flows from other sources such as the sale of
Fund shares. In these ways, any or all of these rules may affect both the
amount, character and timing of income distributed to shareholders by a Fund.
When a Fund holds an option or contract which substantially diminishes a Fund's
risk of loss with respect to another position of a Fund (as might occur in some
hedging transactions), this combination of positions could be treated as a
"straddle" for tax purposes, resulting in possible deferral of losses,
adjustments in the holding periods of Fund securities and conversion of
short-term capital losses into long-term capital losses. Certain tax elections
exist for mixed straddles (i.e., straddles comprised of at least one Section
1256 position and at least one non-Section 1256 position) which may reduce or
eliminate the operation of these straddle rules.
As a regulated investment company, each Fund is also subject to the requirement
that less than 30% of its annual gross income be derived from the sale or other
disposition of securities and certain other investments held for less than three
months ("short-short income"). This requirement may limit a Fund's ability to
engage in options, straddles, hedging transactions and forward or futures
contracts because these transactions are often consummated in less than three
months, may require the sale of portfolio securities held less than three months
and may, as in the case of short sales of portfolio securities reduce the
holding periods of certain securities within a Fund, resulting in additional
short-short income for a Fund.
The Funds will monitor their transactions in such options and contracts and may
make certain other tax elections in order to mitigate the effect of the above
rules and to prevent disqualification of a Fund as a regulated investment
company under Subchapter M of the Code.
Foreign exchange gains and losses realized by a Fund in connection with certain
transactions involving foreign currencies, foreign currency payables or
receivables, foreign currency-denominated debt securities, foreign currency
forward contracts, and options or futures contracts on foreign currencies are
subject to special tax rules which may cause such gains and losses to be treated
as ordinary income and losses rather than capital gains and losses and may
affect the amount and timing of a Fund's income or loss from such transactions
and in turn its distributions to shareholders.
In order for a Fund to qualify as a regulated investment company, at least 90%
of a Fund's annual gross income must consist of dividends, interest and certain
other types of qualifying income, and no more than 30% of its annual gross
income may be derived from the sale or other disposition of securities or
certain other instruments held for less than three months. Foreign exchange
gains, derived by the Funds with respect to a Fund's business of investing in
stock or securities, or options or futures with respect to such stock or
securities, constitute qualifying income for purposes of the 90% limitation.
Currency speculation or the use of currency forward contracts or other currency
instruments for non-hedging purposes may generate gains deemed to be not
directly related to a Fund's principal business of investing in stock or
securities and related options or futures. Under current law,
non-directly-related gains arising from foreign currency positions or
instruments held for less than three months are treated as derived from the
disposition of securities held less than three months in determining a Fund's
compliance with the 30% limitation. Each Fund will limit its activities
involving foreign exchange gains to the extent necessary to comply with these
requirements.
The Funds may be subject to foreign withholding taxes on income from certain of
its foreign securities. If more than 50% of the total assets of the Funds at the
end of its fiscal year are invested in securities of foreign corporations, the
Funds may elect to pass-through to its shareholders the pro rata share of
foreign taxes paid by the Funds. If this election is made, shareholders will be
(i) required to include in their gross income their pro rata share of foreign
source income (including any foreign taxes paid by the Funds), and (ii) entitled
to either deduct their share of such foreign taxes in computing their taxable
income or to claim a credit for such taxes against their U.S. income tax,
subject to certain limitations under the Code. Shareholders will be informed by
the Funds at the end of each calendar year regarding the availability of any
credits and the amount of foreign source income (including any foreign taxes
paid by a Fund) to be included on their income tax returns.
THE FUNDS' UNDERWRITER
Pursuant to an underwriting agreement dated November 12, 1993, in effect until
February 29, 1996, Distributors acts as principal underwriter in a continuous
public offering for shares of each Fund. Prior to that date, Huntington
Investments, Inc., an indirect wholly-owned subsidiary of Long Beach Bank and an
affiliate of Huntington Advisers, Inc., each Fund's former manager, served as
each Fund's principal underwriter.
The underwriting agreement will continue in effect for successive annual periods
provided that its continuance is specifically approved at least annually by a
vote of the Board, or, as to each Fund, by a vote of the holders of a majority
of such Fund's outstanding voting securities, and in either event by a majority
vote of the Trust's trustees who are not parties to the underwriting agreement
or interested persons of any such party (other than as trustees of the Trust),
cast in person at a meeting called for that purpose. The underwriting agreement
terminates automatically in the event of its assignment and may be terminated by
either party on 90 days' written notice.
Distributors pays the expenses of distribution of each Fund's shares, including
advertising expenses and the costs of printing sales material and prospectuses
used to offer shares to the public. Each Fund pays the expenses of preparing and
printing amendments to its registration statements and prospectuses (other than
those necessitated by the activities of Distributors) and of sending
prospectuses to existing shareholders.
Until April 30, 1994, income dividends were reinvested at the offering price
(which includes the sales charge) and Distributors allowed 50% of the entire
commission to the securities dealer of record, if any, on an account. Starting
with any income dividends paid after April 30, 1994, such reinvestment is at net
asset value.
In connection with the offering of the Funds' shares, aggregate underwriting
commissions for the fiscal year ended October 31, 1995, the six-month period
ended October 31, 1994 and the fiscal years ended April 30, 1994 and 1993 were
$1,765,383, $461,923, $280,011, and $495,391, respectively. After allowances to
dealers, Distributors retained $199,595 for the fiscal year ended October 31,
1995, $5,455 for the six-month period ended October 31, 1994 and $10,779 for the
period from November 15, 1993 to April 30, 1994. After allowances to dealers,
Huntington Investments, Inc., retained $22,148, $58,393 and $96,086, for the
period May 1, 1993 to November 15, 1993 and the fiscal years ended April 30,
1993 and 1992, respectively. Distributors may be entitled to reimbursement under
each Fund's Distribution Plan, as discussed below. Huntington Investment, Inc.
and Distributors received no other compensation from the Funds for acting as
underwriter.
DISTRIBUTION PLAN
Each of the Funds has adopted a Distribution Plan pursuant to Rule 12b-1 under
the 1940 Act (the "Plan") whereby each Fund may pay up to a maximum of 0.45% per
annum of its average daily net assets, payable quarterly, for expenses incurred
in the promotion and distribution of its shares.
Pursuant to the Plan, Distributors or others will be entitled to be reimbursed
each quarter (up to the maximum stated above) for actual expenses incurred in
the distribution and promotion of each Fund's shares, including, but 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 Distributors' 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 a
Fund, Distributors or their affiliates.
In addition to the payments to which Distributors or others are entitled under
the Plan, the Plan also provides that to the extent a Fund, the Manager or
Distributors or other parties on behalf of a Fund, the Manager or Distributors,
make payments that are deemed to be payments for the financing of any activity
primarily intended to result in the sale of shares of a Fund within the context
of Rule 12b-1 under the 1940 Act, then such payments shall be deemed to have
been made pursuant to the Plan.
In no event shall the aggregate asset-based sales charges which include payments
made under the Plan, plus any other payments deemed to be made pursuant to the
Plan, exceed the amount permitted to be paid pursuant to the Rules of Fair
Practice of the National Association of Securities Dealers, Inc., Article III,
Section 26(d)4.
The terms and provisions of the Plan relating to required reports, term, and
approval are consistent with Rule 12b-1. The Plan does not permit unreimbursed
expenses incurred in a particular year to be carried over to or reimbursed in
subsequent years.
To the extent fees are for distribution or marketing functions, as distinguished
from administrative servicing or agency transactions, certain banks will not be
entitled to participate in the Plan as a result of applicable federal law
prohibiting certain banks from engaging in the distribution of mutual fund
shares. Such banking institutions, however, are permitted to receive fees under
the Plan for administrative servicing or for agency transactions. If you are a
customer of a bank that is prohibited from providing such services, you would be
permitted to remain a shareholder of a Fund, and alternate means for continuing
the servicing would be sought. In such an event, changes in the services
provided might occur and you might no longer be able to avail yourself of any
automatic investment or other services then being provided by the bank. It is
not expected that you would suffer any adverse financial consequences as a
result of any of these changes.
The Board has determined that a consistent cash flow resulting from the sale of
new shares is necessary and appropriate to meet redemptions and to take
advantage of buying opportunities of portfolio securities without having to make
unwarranted liquidations of other portfolio securities. The Board, therefore,
felt that it would benefit each Fund to have monies available for the direct
distribution activities of Distributors or others in promoting the sale of its
shares. The Board, including the non-interested trustees, concluded that, in the
exercise of their reasonable business judgment and in light of their fiduciary
duties, there is a reasonable likelihood that the Plan will benefit each Fund
and its shareholders.
The Plan has been approved in accordance with the provisions of Rule 12b-1. The
Plan is effective through February 29, 1996, and renewable annually by a vote of
the Board, including a majority vote of the trustees who are non-interested
persons of the Trust and who have no direct or indirect financial interest in
the operation of the Plan, cast in person at a meeting called for that purpose.
It is also required that the selection and nomination of such trustees be done
by the non-interested trustees.
The Plan and any related agreement may be terminated at any time, without any
penalty, by vote of a majority of the non-interested trustees on not more than
60 days' written notice, by Distributors on not more than 60 days' written
notice, by any act that constitutes an assignment of the management agreement
with the Manager or the Underwriting Agreement with Distributors, or by vote of
a majority of the Funds' outstanding shares. Distributors or any dealer or other
firm may also terminate their respective distribution or service agreement at
any time upon written notice.
The Plan and any related agreements may not be amended to increase materially
the amount to be spent for distribution expenses without approval by a majority
of the Funds' outstanding shares, and all material amendments to the Plan or any
related agreements shall be approved by a vote of the non-interested trustees,
cast in person at a meeting called for the purpose of voting on any such
amendment.
Distributors is required to report in writing to the Board at least quarterly on
the amounts and purpose of any payment made under the Plan and any related
agreements, as well as to furnish the Board with such other information as may
reasonably be requested in order to enable the Board to make an informed
determination of whether the Plan should be continued.
For the fiscal year ended October 31, 1995, the total amount paid by each Fund,
pursuant to the Plan was $132,583 (Global Currency Fund), $349,101 (Hard
Currency Fund), and $34,722 (High Income Fund), all of which was paid to
underwriters.
GENERAL INFORMATION
PERFORMANCE
As noted in the Prospectus, each Fund may from time to time quote various
performance figures to illustrate a Fund's past performance. The Funds may
occasionally cite statistics to reflect their volatility or risk.
Performance quotations by investment companies are subject to rules adopted by
the SEC. These rules require the use of standardized performance quotations or,
alternatively, that every non-standardized performance quotation furnished by a
Fund be accompanied by certain standardized performance information computed as
required by the SEC. Current yield and average annual compounded total return
quotations used by the Funds are based on the standardized methods of computing
performance mandated by the SEC. An explanation of those and other methods used
by each Fund to compute or express performance follows.
TOTAL RETURN
The average annual total return is determined by finding the average annual
compounded rates of return over one-, five- and ten-year periods, or fractional
portion thereof, that would equate an initial hypothetical $1,000 investment to
its ending redeemable value. The calculation assumes the maximum front-end sales
charge is deducted from the initial $1,000 purchase order, and income dividends
and capital gains are reinvested at net asset value. The quotation assumes the
account was completely redeemed at the end of each one-, five- and ten-year
period and the deduction of all applicable charges and fees. If a change is made
on the sales charge structure, historical performance information will be
restated to reflect the maximum front-end sales charge currently in effect.
In considering the quotations of total return by each Fund, investors should
remember that the maximum sales charge reflected in each quotation is a one time
fee (charged on all direct purchases), which will have its greatest impact
during the early stages of your investment in a Fund. This charge will affect
actual performance less the longer you retain your investment in a Fund. The
average annual compounded rates of return for each Fund for the indicated
periods ended on October 31 were as follows:
ONE-YEAR FIVE-YEAR
PERIOD PERIOD
ENDING ENDING FROM
FUND NAME (10/31/95) (10/31/95) INCEPTION
Global Currency 2.85% 5.52% 8.09%
Fund (6-27-86)
Hard Currency 3.51% 7.06 10.43%
Fund (11-17-89)
High Income 5.72% 4.40 7.33%
Fund (11-17-89)
These figures were calculated according to the SEC formula:
n
P(1+T) = ERV
where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the one-, five- or ten-year periods at the end of the one-,
five- or ten-year periods (or fractional portion thereof)
As discussed in the Prospectus, each Fund may quote total rates of return in
addition to its average annual total return. These quotations are computed in
the same manner as a Fund's average annual compounded rate, except they will be
based on a Fund's actual return for a specified period rather than on its
average return over one-, five- and ten-year periods, or fractional portion
thereof. The total rates of return for each Currency Fund for the indicated
periods ended on October 31 was as follows:
ONE-YEAR FIVE-YEAR
PERIOD PERIOD
ENDING ENDING FROM
FUND NAME (10/31/95) (10/31/95) INCEPTION
Global Currency 2.85% 30.84% 107.04%
Fund
Hard Currency 3.51% 40.62% 80.57%
Fund
High Income 5.72% 24.04% 52.40%
Fund
CURRENT YIELD
Current yield reflects the income per share earned by a Fund's portfolio
investments and is determined by dividing the net investment income per share
earned during a 30-day base period by the maximum offering price per share on
the last day of the period and annualizing the result. Expenses accrued for the
period include any fees charged to all shareholders during the base period. The
yield for each Fund for the 30-day period ended on October 31 was as follows:
FUND NAME
Global Currency Fund 4.14%
Hard Currency Fund 4.43
High Income Fund 4.93
These figures were obtained using the following SEC formula:
6
Yield = 2 [( a-b + 1 ) - 1]
----
cd
where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period that
were entitled to receive dividends
d = the maximum offering price per share on the last day of the period
CURRENT DISTRIBUTION RATE
Current yield which is calculated according to a formula prescribed by the SEC
is not indicative of the amounts which were or will be paid to a Fund's
shareholders. Amounts paid to shareholders are reflected in the quoted "current
distribution rate." The current distribution rate is computed by dividing the
total amount of dividends per share paid by a Fund during the past 12 months by
a current maximum offering price. Under certain circumstances, such as when
there has been a change in the amount of dividend payout, or a fundamental
change in investment policies, it might be appropriate to annualize the
dividends paid over the period such policies were in effect, rather than using
the dividends during the past 12 months. The current distribution rate differs
from the current yield computation because it may include distributions to
shareholders from sources other than dividends and interest, such as premium
income from option writing and short-term capital gains, and is calculated over
a different period of time.
VOLATILITY
Occasionally, statistics may be used to specify Fund volatility or risk.
Measures of volatility or risk are generally used to compare Fund net asset
value or performance relative to a market index. One measure of volatility is
beta. Beta is the volatility of a fund relative to the total market as
represented by the Standard & Poor's 500 Stock Index. A beta of more than 1.00
indicates volatility greater than the market, and a beta of less than 1.00
indicates volatility less than the market. Another measure of volatility or risk
is standard deviation. Standard deviation is used to measure variability of net
asset value or total return around an average over a specified period of time.
The idea is that greater volatility means greater risk undertaken in achieving
performance.
OTHER PERFORMANCE QUOTATIONS
For investors who are permitted to purchase shares of the Funds at net asset
value, sales literature pertaining to the Funds may quote a current distribution
rate, yield, total return, average annual total return and other measures of
performance as described elsewhere in this SAI with the substitution of net
asset value for the public offering price.
Sales literature referring to the use of the Fund(s) as a potential investment
for Individual Retirement Accounts (IRAs), Business Retirement Plans, and other
tax-advantaged retirement plans may quote a total return based upon compounding
of dividends on which it is presumed no federal income
tax applies.
Regardless of the method used, past performance is not necessarily indicative of
future results, but is an indication of the return to shareholders only for the
limited historical period used.
Each Fund may include in its advertising or sales material information relating
to investment objectives and performance results of funds belonging to the
Templeton Group of Funds. Resources is the parent company of the advisers and
underwriter of both the Franklin Group of Funds and Templeton Group of Funds.
COMPARISONS
To help you better evaluate how an investment in the Fund(s) may satisfy your
investment objective, advertisements and other materials regarding the Fund(s)
may discuss certain measures of Fund performance as reported by various
financial publications. Materials may also compare performance (as calculated
above) to performance as reported by other investments, indices, and averages.
Such comparisons may include, but are not limited to, the following examples:
a) Dow Jones Composite Average or its component averages - an unmanaged index
composed of 30 blue-chip industrial corporation stocks (Dow Jones Industrial
Average), 15 utilities company stocks (Dow Jones Utilities Average), and 20
transportation company stocks. Comparisons of performance assume reinvestment of
dividends.
b) Standard & Poor's 500 Stock Index or its component indices - an unmanaged
index composed of 400 industrial stocks, 40 financial stocks, 40 utilities
stocks, and 20 transportation stocks. Comparisons of performance assume
reinvestment of dividends.
c) The New York Stock Exchange composite or component indices - an unmanaged
index of all industrial, utilities, transportation, and finance stocks listed on
the New York Stock Exchange.
d) Wilshire 5000 Equity Index - represents the return on the market value of all
common equity securities for which daily pricing is available. Comparisons of
performance assume reinvestment of dividends.
e) Lipper - Mutual Fund Performance Analysis, Lipper - Fixed Income Fund
Performance Analysis and Lipper - Mutual Fund Yield Survey -- measure total
return and average current yield for the mutual fund industry and rank
individual mutual fund performance over specified time periods, assuming
reinvestment of all distributions, exclusive of any applicable sales charges.
f) CDA Mutual Fund Report, published by CDA Investment Technologies, Inc. -
analyzes price, current yield, risk, total return, and average rate of return
(average annual compounded growth rate) over specified time periods for the
mutual fund industry.
g) Mutual Fund Source Book, published by Morningstar, Inc. - analyzes price,
yield, risk, and total return for equity funds.
h) Financial publications: The Wall Street Journal and Business Week, Changing
Times, Financial World, Forbes, Fortune, and Money magazines - provide
performance statistics over specified time periods.
i) Consumer Price Index (or Cost of Living Index), published by the U.S. Bureau
of Labor Statistics - a statistical measure of change, over time, in the price
of goods and services in major expenditure groups.
j) Stocks, Bonds, Bills, and Inflation, published by Ibbotson Associates -
historical measure of yield, price, and total return for common and small
company stock, long-term government bonds, Treasury bills, and inflation.
k) Savings and Loan Historical Interest Rates - as published in the U.S.
Savings & Loan League Fact Book.
l) Historical data supplied by the research departments of First Boston
Corporation, the J. P. Morgan companies, Salomon Brothers, Merrill Lynch,
Lehman Brothers and Bloomberg L.P.
m) Standard & Poor's 100 Stock Index - an unmanaged index based on the prices of
100 blue-chip stocks, including 92 industrials, one utility, two transportation
companies, and 5 financial institutions. The S&P 100 Stock Index is a smaller,
more flexible index for options trading.
From time to time, advertisements or information for a Fund may include a
discussion of certain attributes or benefits to be derived by an investment in a
Fund. Such advertisements or information may include symbols, headlines, or
other material which highlight or summarize the information discussed in more
detail in the communication.
Advertisements or information may also compare a Fund's performance to the
return on certificates of deposit or other investments. You should be aware,
however, that an investment in a Fund involves the risk of fluctuation of
principal value, a risk generally not present in an investment in a certificate
of deposit issued by a bank. For example, as the general level of interest rates
rise, the value of a Fund's fixed-income investments, as well as the value of
its shares which are based upon the value of such portfolio investments, can be
expected to decrease. Conversely, when interest rates decrease, the value of a
Fund's shares can be expected to increase. Certificates of deposit are
frequently insured by an agency of the U.S. government. An investment in a Fund
is not insured by any federal, state or private entity.
In assessing comparisons of performance, you should keep in mind that the
composition of the investments in the reported indices and averages is not
identical to a Fund's portfolio, the indices and averages are generally
unmanaged, and the items included in the calculations of the averages may not be
identical to the formula used by a Fund to calculate its figures. In addition,
there can be no assurance that a Fund will continue this performance as compared
to such other averages.
OTHER FEATURES AND BENEFITS
Each Fund may help you achieve various investment goals such as accumulating
money for retirement, saving for a down payment on a home, college cost and/or
other long-term goals. The Franklin College Costs Planner may assist you in
determining how much money must be invested on a monthly basis in order to have
a projected amount available in the future to fund a child's college education.
(Projected college cost estimates are based upon current costs published by the
College Board.) The Franklin Retirement Planning Guide leads you through the
steps to start a retirement savings program. Of course, an investment in a Fund
cannot guarantee that such goals will be met.
MISCELLANEOUS INFORMATION
The Funds of the Trust are members of the Franklin Templeton Group of Funds, one
of the largest mutual fund organizations in the United States and may be
considered in a program for diversification of assets. Founded in 1947,
Franklin, one of the oldest mutual fund organizations, has managed mutual funds
for over 47 years and now services more than 2.5 million shareholder accounts.
In 1992, Franklin, a leader in managing fixed-income mutual funds and an
innovator in creating domestic equity funds, joined forces with Templeton
Worldwide, Inc., a pioneer in international investing. Together, the Franklin
Templeton Group has over $130 billion in assets under management for more than
3.9 million U.S.-based mutual fund shareholder and other accounts. The Franklin
Group of Funds and the Templeton Group of Funds offer to the public offers 115
U.S.-based mutual funds. A Fund may identify itself by its NASDAQ symbol or
CUSIP number.
The Dalbar Surveys, Inc. broker-dealer survey has ranked Franklin number one
in service quality by Dalbar for five of the past six years.
Employees of Resources or its subsidiaries who are access persons under the 1940
Act are permitted to engage in personal securities transactions subject to the
following general restrictions and procedures: (i) the trade must receive
advance clearance from a compliance officer and must be completed within 24
hours after clearance; (ii) copies of all brokerage confirmations must be sent
to a 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; and (iii) access persons involved in preparing and making
investment decisions must, in addition to (i) and (ii) above, file annual
reports of their securities holdings each January and 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.
OWNERSHIP AND AUTHORITY DISPUTES
In the event of disputes involving multiple claims of ownership or authority to
control your 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; (b) interplead disputed funds or
accounts with a court of competent jurisdiction; or (c) surrender ownership of
all or a portion of the account to the Internal Revenue Service in response to a
Notice of Levy.
FRANKLIN TEMPLETON
GERMAN GOVERNMENT
BOND FUND
STATEMENT OF
ADDITIONAL INFORMATION
777 MARINERS ISLAND BLVD., P.O. BOX 7777
SAN MATEO, CA 94403-7777 1-800/DIAL BEN
MARCH 1, 1996
This Statement of Additional Information pertains to the Franklin Templeton
German Government Bond Fund (the "Fund"), a separate non-diversified series of
the Franklin Templeton Global Trust (the "Trust"), formerly known as the
Huntington Funds, an open-end management investment company.
The Fund seeks, over the long term, total return through investment in a managed
portfolio of German government bonds. Total return consists of a combination of
interest income, capital appreciation and currency gains.
A Prospectus for the Fund dated March 1, 1996, as may be amended from time to
time, provides the basic information an investor should know before investing in
the Fund and may be obtained without charge from the Fund or from its principal
underwriter, Franklin/Templeton Distributors, Inc. ("Distributors") at the
address shown above.
THIS STATEMENT OF ADDITIONAL INFORMATION (THE "SAI") IS NOT A PROSPECTUS. IT
CONTAINS INFORMATION IN ADDITION TO AND IN MORE DETAIL THAN SET FORTH IN THE
PROSPECTUS. THIS STATEMENT IS INTENDED TO PROVIDE INVESTORS WITH ADDITIONAL
INFORMATION REGARDING THE ACTIVITIES AND OPERATIONS OF THE FUND, AND SHOULD BE
READ IN CONJUNCTION WITH THE FUNDS' PROSPECTUS.
CONTENTS PAGE
How Does the Fund Invest It's Assets?
Potential Benefits of Investing
in German Government Obligations
Officers and Trustees
Investment Advisory and Other Services
How Does the Fund Purchase Securities For It's Portfolio?
How are Fund Shares Valued?
Additional Information
Regarding Taxation
The Fund's Underwriter
General Information
Financial Statements
HOW DOES THE FUND INVEST IT'S ASSETS?
The following information supplements and should be read in conjunction with the
section in the Fund's Prospectus entitled "How Does the Fund Invest It's
Assets?"
INVESTING IN FOREIGN SECURITIES
Foreign securities markets generally are not as developed or efficient as those
in the United States ("U.S."). Securities of some foreign issuers are less
liquid and more volatile than securities of comparable U.S. issuers. Similarly,
volume and liquidity in most foreign securities markets are less than in the
U.S. and, at times, volatility of prices can be greater than in the U.S. In
addition, there may be less publicly available information about a non-U.S.
issuer, and non-U.S. issuers are not generally subject to uniform accounting and
financial reporting standards, practices and requirements comparable to those
applicable to U.S. issuers.
Because foreign securities are purchased with and payable in currencies of
foreign countries, the value of these assets as measured in U.S. dollars will be
affected favorably or unfavorably by changes in currency exchange rates and
exchange control regulations. Currency exchange costs may be incurred when the
Fund sells instruments denominated in one currency and purchases instruments
denominated in another.
Furthermore, some of these securities may be subject to transaction taxes levied
by foreign governments, which would have the effect of increasing the cost of
such investments and which would reduce the realized gain or increase the
realized loss on such securities at the time of sale. Transaction costs and
custodial expenses for a portfolio of non-U.S. securities generally are higher
than for a portfolio of U.S. securities. Interest payments from certain foreign
securities may be subject to foreign withholding taxes on interest income
payable on the securities.
U.S. government policies have in the past, through taxation and other
restrictions, discouraged certain investments abroad by U.S. investors. While
no such restrictions are currently in effect, they could be reinstituted. In
such event, it may be necessary for the Fund to invest temporarily all or
substantially all of its assets in U.S. money market instruments, or it may
become necessary to liquidate the Fund.
The German government obligations in which the Fund invests are denominated in
the German mark and are rated at time of purchase triple A by a U.S. nationally
recognized rating service, such as Standard & Poor's Corporation ("S&P") or
Moody's Investors Service ("Moody's"), or, if unrated, are considered by the
Fund's Advisers to be of a quality comparable to a triple A rated instrument.
Consistent with its investment objective, the Fund may also invest up to 25% of
its total assets in (i) German mark-denominated bonds and other debt instruments
issued by sovereign governments other than the Federal Republic of Germany and
by supranational organizations (such as the World Bank) which are rated at time
of purchase triple A by a U.S. nationally recognized rating service, such as S&P
or Moody's, or which, if unrated, are considered by the Fund's Advisers to be of
a quality comparable to a triple A rated instrument; and (ii) cash and money
market instruments denominated in the German mark which are rated at time of
purchase A-1+ by S&P and/or P-1 by Moody's, or which, if unrated, are considered
by the Fund's Advisers to be of comparable high quality.
CURRENCY TRANSACTIONS
Generally, the currency exchange transactions of the Fund are conducted on a
spot (i.e., cash) basis at the spot rate prevailing in the currency exchange
market for purchasing or selling currency. The Fund does not engage in hedging
strategies to protect against possible variations in the exchange rates between
the U.S. dollar and the German mark. However, the Fund may enter into forward
currency contracts in conjunction with money market instruments for the purpose
of obtaining an investment result that is substantially equivalent to a direct
investment in a foreign currency-denominated instrument. A forward currency
contract is an agreement to purchase or sell a specified currency at a specified
future date and price set at the time of the contract. The Fund may not enter
into a forward contract with a term of more than one year.
When using forward contracts for hedging purposes, the Fund may enter into
forward contracts with respect to specific transactions ("transaction hedging").
Transaction hedging is the purchase or sale of forward contracts with respect to
specific receivables or payables of the Fund generally owing in connection with
the purchase and sale of portfolio securities. The Fund will not speculate in
forward contracts; the Fund will, however, utilize forward contracts in
conjunction with money market instruments in a manner which is unrelated to the
Fund's normal transaction hedging activities as described above (i.e., to obtain
an investment result that is substantially equivalent to a direct investment in
a foreign currency-denominated instrument).
When the Fund enters into a hedging transaction, its custodian bank will place
cash or high-quality readily marketable liquid debt securities in a segregated
account of the Fund in an amount equal to the value of its total assets
committed to the consummation of such forward contract. If the value of the
securities placed in the segregated account declines, additional cash or
securities will be placed in the account so that the value of the account will
equal the amount of the Fund's commitment with respect to such contracts.
It may not be possible for the Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the currency
at a price above the devaluation level it anticipates. It is possible that,
under certain circumstances, the Fund may have to limit currency transactions to
qualify as a regulated investment company under the Internal Revenue Code of
1986, as amended (the "Code").
At or before the maturity of a forward contract, the Fund may either sell a
portfolio security and make delivery of the currency, or it may retain the
security and terminate its contractual obligation to deliver the currency by
purchasing an "offsetting" contract obligating it to purchase, on the same
maturity date, the same amount of the currency.
If the Fund enters into a forward contract, retains the portfolio security and
engages in an offsetting transaction, the Fund will incur a gain or loss (as
described below) to the extent that there has been movement in forward contract
prices. If the Fund engages in an offsetting transaction, it may subsequently
enter into a new forward contract to sell the currency. Should forward prices
decline during the period between the Fund's entering into a forward contract
for the sale of a currency and the date it enters into an offsetting contract
for the purchase of the currency, the Fund will realize a gain to the extent
that the price of the currency it has agreed to sell exceeds the price of the
currency it has agreed to purchase. Should forward prices increase, the Fund
will suffer a loss to the extent the price of the currency it has agreed to
purchase exceeds the price of the currency it has agreed to sell.
Transactions in forward contracts by the Fund will be limited to the
transactions described above. Of course, the Fund is not required to enter into
such contracts, and will not do so unless deemed appropriate by the Fund's
Advisers. Investors should realize that the use of forward contracts does not
eliminate fluctuations in the underlying prices of the securities. Such
contracts simply establish a rate of exchange that the Fund can achieve at some
future point in time. Additionally, although such contracts tend to minimize the
risk of loss due to fluctuations in the value of the hedged currency, at the
same time they tend to limit any potential gain which might result from the
change in the value of such currency.
Because the Fund invests primarily in debt securities denominated in German
marks, it may hold German marks pending their investment in such instruments or
their conversion into U.S. dollars. Although the Fund values its assets daily
(as described in its Prospectus) in terms of U.S. dollars, the Fund does not
convert its holdings of German marks into U.S. dollars on a daily basis. It will
do so from time to time, however, and investors should be aware of the costs of
currency conversion. Foreign exchange dealers do not charge a fee for
conversion, but they do realize a profit based on the difference, which is known
as the spread, between the prices at which they are buying and selling various
currencies. Thus, a dealer may offer to sell a foreign currency to the Fund at
one rate, while offering a lesser rate of exchange should the Fund desire to
resell the currency to the dealer.
CURRENCY MOVEMENTS
Exchange rates fluctuate for a number of reasons. Depending on the currency in
question and the point in time, some factors may outweigh others in determining
the course of exchange rate movements.
1. INFLATION. The most fundamental reason exchange rates change is to reflect
changes in currencies' purchasing power. Different countries experience
different inflation rates due to different monetary and fiscal policies,
different product and labor market conditions and a host of other factors.
2. TRADE DEFICITS. Countries with trade deficits tend to experience a
depreciating currency. Often, inflation is the cause of a trade deficit,
making a country's goods more expensive and less competitive and so reducing
demand for its currency.
3. INTEREST RATES. High interest rates tend to boost currency values in the
short run by making such currencies more attractive to investors. Since high
interest rates are often the result of high inflation, however, long-term
results may be the opposite.
4. BUDGET DEFICITS AND LOW SAVINGS RATES. Countries that run large budget
deficits and save little of their national income tend to suffer a depreciating
currency because they are forced to borrow abroad to finance their deficits.
Payments of interest on this debt can "flood" the currency markets with the
currency of the debtor nation.
Also, budget deficits can indirectly contribute to currency depreciation if a
government chooses to cope with its deficits and debt by means of inflation.
5. POLITICAL FACTORS. Political instability in a country can cause a currency
to depreciate. If the country appears a less desirable place in which to
invest and do business, demand for the currency is likely to fall.
6. GOVERNMENT CONTROL. Through their own buying and selling of currencies, the
world's central banks sometimes manipulate exchange rate movements. In addition,
governments occasionally issue statements to influence people's expectations
about the direction of exchange rates, or they may instigate policies with an
exchange rate target as the goal.
INVESTMENT RESTRICTIONS
The Fund has adopted the following restrictions as fundamental policies, which
means that they may not be changed without approval of a majority of the Fund's
shareholders. In order to change any of these restrictions, the lesser of (i)
67% or more of the voting securities of the Fund present at a meeting of
shareholders if the holders of more than 50% of the voting securities of the
Fund are represented at that meeting or (ii) more than 50% of the outstanding
voting securities of the Fund must vote to make the change.
The Fund may not:
1. Purchase common stocks, preferred stocks, warrants or other equity
securities.
2. Borrow money, except from banks for temporary or emergency (not leveraging)
purposes in an amount up to 33 1/3% of the value of the Fund's total assets
(including the amount borrowed) based on the lesser of cost or market, less
liabilities (not including the amount borrowed) at the time the borrowing is
made. While borrowings exceed 5% of the Fund's total assets, the Fund will not
make any additional investments.
3. Pledge, hypothecate, mortgage or otherwise encumber its assets, except in an
amount up to 33 1/3% of the value of its total assets, but only to secure
borrowing for temporary or emergency purposes provided that the deposit or
payment of initial or variation margin in connection with transactions in
options and futures shall not be treated as a pledge of assets hereunder.
4. Sell securities short or purchase securities on margin, provided that the
deposit or payment of initial or variation margin in connection with
transactions in options and futures shall not be treated as the purchase of
securities on margin thereunder, provided such transactions are effected in
compliance with investment restriction no. 6 below.
5. Underwrite the securities of other issuers, purchase interests in oil, gas
or other mineral exploration or development programs, including mineral leases,
or purchase or sell real estate or securities issued by real estate limited
partnerships, real estate investment trusts, or by companies that invest in real
estate or interests therein.
6. Invest more than 10% of its net assets in (i) securities subject to
restrictions on disposition under the Securities Act of 1933 ("restricted
securities") or other illiquid securities, (ii) repurchase agreements providing
for settlement in more than seven days, (iii) options which are traded in the
over-the-counter market and investments hedged by such options, and (iv) other
securities which are not readily marketable, provided that the Fund may invest
up to 15% of its net assets in time deposits of over seven days duration. The
Fund may not write put or call options on securities, but the Fund may buy and
sell put and call options on securities, financial futures contracts and options
thereon, provided that (A) the aggregate premiums paid on all such options which
are held at any time by the Fund do not exceed 20% of the Fund's net assets, and
(B) the aggregate margin deposits required on all such futures contracts or
options thereon do not exceed 5% of the Fund's total assets.
7. Purchase or sell commodities, except that the Fund may purchase or sell
currencies, may enter into futures contracts on securities, currencies,
securities and other indices or any other financial instruments, and may
purchase and sell options on such futures contracts.
8. Make loans to others except through the purchase of debt obligations
referred to in its Prospectus and the entry into repurchase agreements and
portfolio lending agreements, provided that the value of securities subject to
such lending agreements may not exceed 30% of the value of the Fund's total
assets. Any loans of portfolio securities will be made according to guidelines
established by the SEC and the Trust's Board of Trustees, including maintenance
of collateral of the borrower equal at all times to at least the current market
value of the securities loaned.
9. Invest more than 25% of its assets in the securities of issuers in any
single industry (or in the securities of any single governmental issuer),
provided that (i) there shall be no limitation on the purchase of securities
issued or guaranteed by the U.S. government, its agencies or instrumentalities
and (ii) the Fund will invest more than 25% of its assets in debt obligations
issued or guaranteed by the Federal Republic of Germany, its agencies,
instrumentalities or political subdivisions.
10. Have invested as of the last day of any fiscal quarter (or other measuring
period used for purposes of determining compliance with Subchapter M of the
Code) (i) more than 25% of its total assets in the securities of any one issuer,
or (ii) with respect to 50% of the Fund's total assets, more than 5% of its
total assets in the obligations of any one issuer, except for cash and cash
items and securities issued or guaranteed by the U.S. Government, its agencies
or instrumentalities, provided that for purposes of this restriction debt
securities issued by different agencies, instrumentalities or political
subdivisions of a national government other than the U.S. Government that are
not guaranteed by the full faith and credit of such national government may be
deemed to have been issued by different issuers.
11. Invest in companies for the purpose of exercising control.
12. Invest in securities of other investment companies.
13. Purchase the securities of any issuer having less than three years'
continuous operations (or any predecessors) if such purchase would cause the
value of the Fund's investments in all such issuers to exceed 5% of the value of
its total assets.
14. Issue senior securities, as defined in the 1940 Act, except that this
restriction shall not be deemed to prohibit the Fund from (i) making any
otherwise permitted borrowing, mortgages or pledges, or (ii) entering into
option contracts, futures contracts, forward contracts or repurchase
transactions.
15. Purchase or retain securities of any issuer if the officers, directors or
trustees of the Fund, its investment manager or investment adviser who own
beneficially more than 1/2 of 1% of such securities outstanding together own
beneficially more than 5% of such securities.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in such percentage resulting from a change in values or
assets will not constitute a violation of that restriction. The Fund has no
current intention of investing in the securities of other investment companies.
POTENTIAL BENEFITS OF INVESTING
IN GERMAN GOVERNMENT OBLIGATIONS
The following information supplements and should be read in conjunction with the
Sections in the Fund's Prospectus entitled "Investment Objective and Policies of
the Fund" and "Investing in German Government Obligations."
As a general principle, the Fund's Advisers believe that investing outside of
the U.S. may be beneficial for any investor over a long term. Through
diversification into German government obligations, U.S. dollar-based investors
may seek to achieve a number of different potential benefits, as discussed
below.
HIGHER CURRENT YIELDS. German government obligations may, from time to time, pay
higher current yields than U.S. government bonds of comparable maturity. U.S.
investors may wish to take advantage of these higher yields when available by
investing in the Fund. Primarily because of interest rate and currency risk, the
total return on German government obligations may be higher or lower than the
total return on U.S. government bonds, regardless of which market offers higher
yields at the time of investment. However, when available, the higher current
yields on German government obligations will provide a margin of protection
against adverse movements of currency exchange rates and/or relative interest
rates.
CAPITAL APPRECIATION. When German market interest rates decline, German
government obligation prices (expressed in German marks) generally will
increase. Investors anticipating a general decline in German interest rates may
wish to invest in the Fund for the opportunity to participate in such capital
gains, should interest rates eventually decline. U.S. investors should
recognize, however, that adverse movements in currency exchange rates could
partially or completely offset any such price appreciation.
CURRENCY GAINS. When the German mark appreciates relative to the U.S. dollar
(i.e., the dollar declines), the U.S. dollar price of securities denominated in
German marks, such as German government obligations, will appreciate, other
things being equal. Investors anticipating appreciation of the German mark
against the U.S. dollar may wish to invest in the Fund for the opportunity to
participate in such currency gains, should such favorable exchange rate movement
materialize. U.S. investors should recognize, however, that an increase in
German interest rates would cause depreciation in German government obligation
prices (expressed in German marks) with a similar effect on the Fund's net asset
value, which could partially or completely offset any such currency gains.
SAFETY OF PRINCIPAL. U.S. investors may wish to invest in the Fund for safety
of principal due to the high credit quality of German government obligations.
Of course, the total return on German government obligations and on the Fund
will also be affected positively or negatively by German interest rate and
currency exchange rate movements.
U.S. investors may also wish to broaden the degree of credit diversification in
their portfolios by including obligations of foreign issuers, such as German
government obligations, through an investment in the Fund. In general, by
increasing credit diversification within a portfolio of fixed-income securities,
an investor may lessen portfolio exposure to adverse developments affecting any
one particular issuer.
PORTFOLIO DIVERSIFICATION. Returns on non-U.S. investments such as German
government obligations tend not to reflect a high degree of correlation with
returns on U.S. financial assets such as U.S. stocks and bonds. This lack of
correlation arises from the fact that at any particular point in time,
countries are likely to differ with respect to: a) the status of their
economy within the overall business cycle; b) the level and direction of
inflation and interest rates; c) the mix of fiscal and monetary policy, d)
the strength or weakness of their domestic currency on foreign exchange
markets; and e) the degree to which one-time events (such as German
unification) may have a material impact on the economy.
In general, combining assets the returns on which are not highly correlated can
be expected to reduce the variability of portfolio returns over time, as weak
performance in one asset class is, from time to time, offset by the strong
performance of another asset class. In general, it can be shown that, up to a
point, international diversification of a U.S. portfolio has reduced overall
portfolio volatility in the past. There can be no assurance, however, that this
will be the case in the future.
Protection of Global Purchasing Power. Depreciation of the U.S. dollar
relative to other major foreign currencies over time reduces the global
purchasing power of U.S. investors, i.e., it increases the amount of dollars
required to buy any given basket of goods and services from around the world.
U.S. dollar depreciation may cause the dollar price to rise both on imports
as well as on domestic output for which there is foreign competition, such as
automobiles. Given the increasing role of imports in U.S. consumption
patterns in recent years, finding ways to protect global purchasing power may
be of increasing importance to Americans now and in the future.
Investments in foreign currency-denominated securities, such as German
government obligations, through an investment in the Fund may help maintain the
global purchasing power of a U.S. investor's portfolio, in the event that the
U.S. dollar depreciates relative to the German mark in the future. Of course,
such currency diversification of an investor's portfolio can work to the
investor's benefit or detriment, depending on the future movement of currency
exchange rates, among other things.
OFFICERS AND TRUSTEES
The Board of Trustees has the responsibility for the overall management of the
Trust and the Fund, including general supervision and review of it's investment
activities. The trustees, in turn, elect the officers of the Trust who are
responsible for administering the day-to-day operations of the Trust. The
affiliations of the officers and trustees and their principal occupations for
the past five years are listed below. Trustees who are deemed to be "interested
persons" of the Trust, as defined in the 1940 Act, are indicated by an asterisk
(*).
POSITIONS AND OFFICES PRINCIPAL OCCUPATION
NAME AND ADDRESS WITH THE FUND DURING PAST FIVE YEARS
Frank H. Abbott, III (74)
1045 Sansome St.
San Francisco, CA 94111
Trustee
President and Director, Abbott Corporation (an investment company); and
director, trustee or managing general partner, as the case may be, of 31 of the
investment companies in the Franklin Group of Funds.
Harris J. Ashton (63)
General Host Corporation
Metro Center, 1 Station Place
Stamford, CT 06904-2045
Trustee
President, Chief Executive Officer and Chairman of the Board, General Host
Corporation (nursery and craft centers); Director, RBC Holdings, Inc. (a bank
holding company) and Bar-S Foods; and director, trustee or managing general
partner, as the case may be, of 56 of the investment companies in the Franklin
Templeton Group of Funds.
David K. Eiteman (66)
HC2, Box 8076
Frazier Park, CA 93225
Trustee
Since 1959, Professor of Finance in the John E. Anderson Graduate School of
Management, University of California, Los Angeles. From 1988 to June 1993, a
Trustee of the Huntington Investment Trust.
S. Joseph Fortunato (63)
Park Avenue at Morris County
P. O. Box 1945
Morristown, NJ 07962-1945
Trustee
Member of the law firm of Pitney, Hardin, Kipp & Szuch; Director of General Host
Corporation; director, trustee or managing general partner, as the case may be,
of 58 of the investment companies in the Franklin Templeton Group of Funds.
David W. Garbellano (81)
111 New Montgomery St., #402
San Francisco, CA 94105
Trustee
Private Investor; Assistant Secretary/Treasurer and Director, Berkeley Science
Corporation (a venture capital company); and director, trustee or managing
general partner, as the case may be, of 30 of the investment companies in the
Franklin Group of Funds.
*Donald P. Gould (37)
777 Mariners Island Blvd.
San Mateo, CA 94404
President and Trustee
From February 1992 to present, independent consultant to the Trust and from
February 1992 to June 1993, independent consultant to Huntington Investment
Trust. From December 1985 to February 1992, Chairman of the board of the Trust.
From 1988 to June 1993, President and Trustee, from 1988 to February 1992,
Chairman of the Board, Huntington Investment Trust. From October 1985 to
February 1992, President and Director of Huntington Advisers, Inc., a mutual
fund investment adviser, and President of Huntington Investments, Inc., a mutual
fund underwriter.
Gerald R. Healy (54)
5917 Cleveland Street
Morton Grove, IL 60053
Trustee
Since April 1994, a private consultant. From July 1993 to March 1994, Director
of Corporate Management Resources of Alliance Imaging, Inc. From 1989, Executive
Vice President of Capital Health services Corp. Prior to that time, a private
investor. From 1988 to June 1993, a Trustee of the Huntington Investment Trust.
*Charles B. Johnson (63)
777 Mariners Island Blvd.
San Mateo, CA 94404
Chairman of the Board and Trustee
President and Director, Franklin Resources, Inc.; Chairman of the Board and
Director, Franklin Advisers, Inc. and Franklin Templeton Distributors, Inc.;
Director, Franklin/Templeton Investor Services, Inc. and General Host
Corporation; and officer and/or director, trustee or managing general
partner, as the case may be, of most other subsidiaries of Franklin
Resources, Inc. and of 57 of the investment companies in the Franklin
Templeton Group of Funds.
*Rupert H. Johnson, Jr. (55)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President and Trustee
Executive Vice President and Director, Franklin Resources, Inc. and Franklin
Templeton Distributors, Inc.; President and Director, Franklin Advisers, Inc.;
Director, Franklin/Templeton Investor Services, Inc.; and officer and/or
director, trustee or managing general partner, as the case may be, of most other
subsidiaries of Franklin Resources, Inc. and of 43 of the investment companies
in the Franklin Templeton Group of Funds.
David P. Kraus (39)
Bet Tzedek Legal Services
145 South Fairfax Ave., Suite 200
Los Angeles, CA 90036-2166
Trustee
Since 1981, an attorney with various private law firms in Los Angeles. Also,
since October 1995, an attorney with Bet Tzedek Legal Services.
Frank W. T. LaHaye (66)
20833 Stevens Creek Blvd.
Suite 102
Cupertino, CA 95014
Trustee
General Partner, Peregrine Associates and Miller & LaHaye, which are General
Partners of Peregrine Ventures and Peregrine Ventures II (venture capital
firms); Chairman of the Board and Director, Quarterdeck Office Systems, Inc.;
Director, FischerImaging Corporation; and director or trustee, as the case may
be, of 26 of the investment companies in the Franklin Group of Funds.
Gordon S. Macklin (67)
8212 Burning Tree Road
Bethesda, MD 20817
Trustee
Chairman, White River Corporation (information services); Director, Fund
American Enterprises Holdings, Inc., Lockheed Martin Corporation, MCI
Communications Corporation, MedImmune, Inc. (biotechnology), InfoVest
Corporation (information services), and Fusion Systems Corporation (industrial
technology); and director, trustee or managing general partner, as the case may
be, of 53 of the investment companies in the Franklin Templeton Group of Funds;
and formerly held the following positions: Chairman, Hambrecht and Quist Group;
Director, H & Q Healthcare Investors; and President, National Association of
Securities Dealers, Inc.
Harmon E. Burns (51)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President
Executive Vice President, Secretary and Director, Franklin Resources, Inc.;
Executive Vice President and Director, Franklin Templeton Distributors, Inc.;
Executive Vice President, Franklin Advisers, Inc.; Director, Franklin/Templeton
Investor Services, Inc.; officer and/or director, as the case may be, of other
subsidiaries of Franklin Resources, Inc.; and officer and/or director or trustee
of 43 of the investment companies in the Franklin Templeton Group of Funds.
Kenneth V. Domingues (63)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President - Financial Reporting and Accounting Standards
Senior Vice President, Franklin Resources, Inc., Franklin Advisers, Inc., and
Franklin Templeton Distributors, Inc.; officer and/or director, as the case may
be, of other subsidiaries of Franklin Resources, Inc.; and officer and/or
managing general partner, as the case may be, of 37 of the investment companies
in the Franklin Group of Funds.
Martin L. Flanagan (35)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President and Chief Financial Officer
Senior Vice President, Chief Financial Officer and Treasurer, Franklin
Resources, Inc.; Executive Vice President, Templeton Worldwide, Inc.; Senior
Vice President and Treasurer, Franklin Advisers, Inc. and Franklin Templeton
Distributors, Inc.; Senior Vice President, Franklin/Templeton Investor Services,
Inc.; officer of most other subsidiaries of Franklin Resources, Inc.; and
officer of 61 of the investment companies in the Franklin Templeton Group of
Funds.
Deborah R. Gatzek (47)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President and Secretary
Senior Vice President - Legal, Franklin Resources, Inc. and Franklin
Templeton Distributors, Inc.; Vice President, Franklin Advisers, Inc. and
officer of 37 of the investment companies in the Franklin Group of Funds.
Charles E. Johnson (39)
777 Mariners Island Blvd.
San Mateo CA 94404
Vice President
Senior Vice President and Director, Franklin Resources, Inc.; Senior Vice
President, Franklin Templeton Distributors, Inc.; President and Director,
Templeton Worldwide, Inc. and Franklin Institutional Services Corporation;
officer and/or director, as the case may be, of some of the subsidiaries of
Franklin Resources, Inc. and officer and/or director or trustee, as the case may
be, of 26 of the investment companies in the Franklin Templeton Group of Funds.
Diomedes Loo-Tam (57)
777 Mariners Island Blvd.
San Mateo, CA 94404
Treasurer and Principal Accounting Officer
Employee of Franklin Advisers, Inc.; and officer of 37 of the investment
companies in the Franklin Group of Funds.
Edward V. McVey (58)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President
Senior Vice President/National Sales Manager, Franklin Templeton Distributors,
Inc.; and officer of 32 of the investment companies in the Franklin Group of
Funds.
The preceding table indicates those officers and directors who are also
affiliated persons of Distributors and Advisers. Directors not affiliated with
the investment manager ("nonaffiliated directors") are currently paid fees of
$800 per month plus $800 per meeting attended. As indicated above, certain of
the Fund's nonaffiliated directors also serve as directors, trustees or managing
general partners of other investment companies in the Franklin Group of Funds(R)
and the Templeton Group of Funds (the "Franklin Templeton Group of Funds") from
which they may receive fees for their services. The following table indicates
the total fees paid to nonaffiliated directors by the Fund and by other funds in
the Franklin Templeton Group of Funds.
<TABLE>
<CAPTION>
NUMBER OF BOARDS IN
THE FRANKLIN
TOTAL FEES RECEIVED TEMPLETON GROUP OF
FROM THE FRANKLIN FUNDS ON WHICH EACH
TOTAL FEES TEMPLETON GROUP OF SERVES***
RECEIVED FROM FUNDS**
NAME FUND*
<S> <C> <C> <C>
Frank H. Abbott, III 5,000 $176,870 31
Harris J. Ashton 5,000 318,125 56
David K. Eiteman 3,400 5,000 1
S. Joseph Fortunato 5,000 334,265 58
David Garbellano 5,000 153,300 30
Gerald R. Healy 4,200 5,800 1
David P. Kraus 5,000 6,600 1
Frank W.T. LaHaye 5,000 150,817 26
Gordon S. Macklin 5,000 301,885 53
* For the fiscal year ended October 31, 1995.
** For the calendar year ended December 31, 1994.
*** The number of boards is based on the number of registered investment
companies in the Franklin Templeton Group of Funds and does not include the
total number of series or funds within each investment company for which the
directors are responsible. The Franklin Templeton Group of Funds currently
includes 61 registered investment companies, consisting of approximately 162
U.S. based funds or series.
</TABLE>
Nonaffiliated directors are reimbursed for expenses incurred in connection with
attending board meetings, paid pro rata by each fund in the Franklin Templeton
Group of Funds for which they serve as director, trustee or managing general
partner. No officer or director received any other compensation directly from
the Fund. Certain officers or directors who are shareholders of Franklin
Resources, Inc. may be deemed to receive indirect remuneration by virtue of
their participation, if any, in the fees paid to its subsidiaries. For
additional information concerning director compensation and expenses, please see
the Fund's Annual Report to Shareholders.
As of December 7, 1995 the directors and officers, as a group, owned of record
and beneficially approximately 59.505 shares, or less than 1% of the total
outstanding shares of the Fund. Many of the Fund's directors also own shares in
various of the other funds in the Franklin Templeton Group of Funds. Charles B.
Johnson and Rupert H. Johnson, Jr. are brothers.
From time to time, the number of Fund shares held in the "street name" accounts
of various securities dealers for the benefit of their clients or in centralized
securities depositories may exceed 5% of the total shares outstanding. To the
best knowledge of the Fund, no other person holds beneficially or of record more
than 5% of the Fund's outstanding shares.
INVESTMENT ADVISORY AND OTHER SERVICES
Resources, the parent company of Adviser and TICI, is a publicly owned holding
company whose shares are listed on the New York Stock Exchange ("Exchange").
Resources owns several other subsidiaries which are involved in investment
management and shareholder services. Such subsidiary companies, together with
Adviser and TICI, currently manage over $114 billion in assets for over 3.7
million shareholders. The preceding table indicates those officers and trustees
who are also affiliated persons of Distributors, Adviser and TICI.
Adviser serves as the Fund's investment adviser pursuant to a management
agreement dated November 12, 1993, which was approved by the trustees of the
Trust and by majority vote of the Fund's shares at a special meeting of
shareholders held on November 5, 1993. Pursuant to the management agreement, the
Fund is obligated to pay Adviser a fee computed at the close of business on the
first business day of each month equal to an annual rate of 0.55% of the value
of the average daily net assets of the Fund.
The Manager has agreed in advance to waive a portion of its management fees and
make certain payments to reduce expenses. This arrangement may be terminated by
the Manager at any time upon notice to the Board. For the fiscal year ended
April 30, 1994, for the period ended October 31, 1994 and for the fiscal year
ended October 31, 1995, management fees, before any advance waiver, were
$35,400, $35,908, and $97,759, respectively. However, after allowances by the
Manager, the Fund paid no fees for the fiscal year ended April 30, 1994 and for
the period ended October 31, 1994. Management fees paid by the Fund for the
fiscal year ended October 31, 1995 was 91,422.
The management agreement is in effect until February 29, 1997. Thereafter, it
may continue in effect for successive annual periods providing such continuance
is specifically approved at least annually by a vote of the Trust's Board of
Trustees or, as to the Fund, by a vote of the holders of a majority of the
Fund's outstanding voting securities, and in either event by a majority vote of
the Trust's trustees who are not parties to the management agreement or
interested persons of any such party (other than as trustees of the Trust), cast
in person at a meeting called for that purpose. The management agreement may be
terminated without penalty at any time by the Fund or by the Manager on behalf
of the Fund on 60 days' written notice and will automatically terminate in the
event of its assignment, as defined in the 1940 Act.
TICI acts as subadviser to the Fund pursuant to a contract between TICI and the
Manager on behalf of the Fund. Pursuant to the subadvisory agreement between the
Manager and Subadviser, and subject to the overall policies, control, direction
and review of the Board of Trustees and to the instructions and supervision of
the Manager, Subadviser will provide the day-to-day portfolio management of the
Fund, including investment research and advice with respect to securities and
investments and cash equivalents in the Fund.
Pursuant to the management agreement, the Manager provides investment research
and portfolio management services, including the selection of securities for the
Fund to purchase, hold or sell and the selection of brokers through whom the
Fund's portfolio transactions are executed. The Manager's activities are subject
to the review and supervision of the Trust's Board of Trustees to whom the
Manager renders periodic reports of the Fund's investment activities. Under the
terms of the management agreement, the Manager provides office space and office
furnishings, facilities and equipment required for managing the business affairs
of the Fund; maintains all internal bookkeeping, clerical, secretarial and
administrative personnel and services; and provides certain telephone and other
mechanical services. The Manager is covered by fidelity insurance on its
officers, directors and employees for the protection of the Trust. The Fund
bears all of its expenses not assumed by the Manager. See the Statement of
Operations in the financial statements included in the Fund's Annual Report to
Shareholders dated October 31, 1995.
The Manager also provides management services to numerous other investment
companies or funds pursuant to management agreements with each fund. The Manager
may give advice and take action with respect to any of the other funds it
manages, or for its own account, which may differ from action taken by the
Manager on behalf of the Fund. Similarly, with respect to the Fund, the Manager
is not obligated to recommend, purchase or sell, or to refrain from
recommending, purchasing or selling any security that the Manager and access
persons, as defined by the 1940 Act, may purchase or sell for its or their own
account or for the accounts of any other fund. Furthermore, the Manager is not
obligated to refrain from investing in securities held by the Fund or other
funds which it manages or administers. Of course, any transactions for the
accounts of the Manager and other access persons will be made in compliance with
the Fund's Code of Ethics.
Prior to November 12, 1993 Huntington Advisers, Inc., 251 South Lake Avenue,
Suite 600, Pasadena, California 91101, an indirect wholly-owned subsidiary of
Long Beach Bank, served as the Trust's manager and Bankers Trust Company, 280
Park Avenue, New York, New York 10015, a wholly-owned subsidiary of Bankers
Trust New York Corporation, served as the Fund's investment adviser. Under its
separate agreements, the Fund was obligated to pay its manager and investment
adviser fees totaling $6,560 and $5,467, respectively, for the Fund's initial
period ended April 30, 1993 and $21,167 and $17,639, respectively, for the
period May 1, 1993 to November 15, 1993. However, after allowances by the
manager and investment adviser, the Fund paid no management fees or advisory
fees.
Under the subadvisory agreement with the Manager, Subadviser will receive a fee
from the Manager equal to an annual rate of 0.25% of the value of the average
daily net assets of the Fund. TICI's fee will not be paid by the Fund.
Franklin/Templeton Investor Services, Inc. ("Investor Services" or "Shareholder
Services Agent"), a wholly-owned subsidiary of Resources, is the shareholder
servicing agent for the Fund and acts as the Fund's transfer agent and
dividend-paying agent. Investor Services is compensated on the basis of a fixed
fee per account. Prior to November 12, 1993, Fund/Plan Services, Inc., Two Elm
Street, Conshohochken, Pennsylvania 19428, served as the Trust's transfer and
dividend disbursing agent.
Bank of America NT & SA, 555 California Street, 4th Floor, San Francisco,
California 94104, acts as custodian of certain of the securities and other
assets of the Fund. Chase Manhattan Bank, Global Securities Service, Chase
MetroTech Center, Brooklyn, New York 11245, also acts as custodian of certain
securities and other assets of the Fund. Citibank Delaware, One Penn's Way, New
Castle, Delaware 19720, acts as custodian in connection with transfer services
through bank automated clearing houses. The custodians do not participate in
decisions relating to the purchase and sale of portfolio securities. Prior to
November 12, 1993, Bankers Trust Company, 280 Park Avenue, New York, New York
10015, served as the Trust's custodian.
Coopers & Lybrand L.L.P., 333 Market Street, San Francisco, California 94105,
are the Fund's independent auditors. During the fiscal year ended April 30,
1995, their auditing services consisted of rendering an opinion on the financial
statements of the Fund included in the Fund's Annual Report and this SAI.
Previous fiscal years of the Fund were audited by other independent auditors.
HOW DOES THE FUND PURCHASE SECURITIES FOR IT'S PORTFOLIO?
Under the current management agreement with Adviser, the selection of brokers
and dealers to execute transactions in the Fund's portfolio is made by the
Manager in accordance with criteria set forth in the management agreement and
any directions which the Trust's Board of Trustees may give. Under the
subadvisory agreement, Adviser may delegate to TICI the authority to select
securities dealers to execute portfolio transactions for the Fund.
When placing a portfolio transaction, the Fund's Advisers attempt to obtain the
best net price and execution of the transaction. On portfolio transactions which
are done on a securities exchange, the amount of commission paid by the Fund is
negotiated between the Fund's Advisers and the broker executing the transaction.
The Fund's Advisers seek to obtain the lowest commission rate available from
brokers which are felt to be capable of efficient execution of the transactions.
The determination and evaluation of the reasonableness of the brokerage
commissions paid in connection with portfolio transactions are based to a large
degree on the professional opinions of the persons responsible for the placement
and review of such transactions. These opinions are formed on the basis of,
among other things, the experience of these individuals in the securities
industry and information available to them concerning the level of commissions
being paid by other institutional investors of comparable size. The Fund's
Advisers will ordinarily place orders for the purchase and sale of
over-the-counter securities on a principal rather than agency basis with a
principal market maker unless, in the opinion of the Fund's Advisers, a better
price and execution can otherwise be obtained. Purchases of portfolio securities
from underwriters will include a commission or concession paid by the issuer to
the underwriter, and purchases from dealers will include a spread between the
bid and ask price. As a general rule, the Fund does not purchase bonds in
underwritings where it is not given any choice, or only limited choice, in the
designation of dealers to receive the commission. The Fund seeks to obtain
prompt execution of orders at the most favorable net price.
The amount of commission is not the only relevant factor to be considered in the
selection of a broker to execute a trade. If it is felt to be in the Fund's best
interests, the Fund's Advisers may place portfolio transactions with brokers who
provide the types of services described below, even if it means the Fund will
have to pay a higher commission than would be the case if no weight were given
to the broker's furnishing of these services. This will be done only if, in the
opinion of the Fund's Advisers, the amount of any additional commission is
reasonable in relation to the value of the services. Higher commissions will be
paid only when the brokerage and research services received are bona fide and
produce a direct benefit to the Fund or assist the Fund's Advisers in carrying
out their responsibilities to the Fund, or when it is otherwise in the best
interest of the Fund to do so, whether or not such data may also be useful to
the Fund's Advisers in advising other clients.
When it is felt that several brokers are equally able to provide the best net
price and execution, the Fund's Advisers may decide to execute transactions
through brokers who provide quotations and other services to the Fund,
specifically including the quotations necessary to determine the value of the
Fund's net assets, in such amount of total brokerage as may reasonably be
required in light of such services, and through brokers who supply research,
statistical and other data to the Fund and the Fund's Advisers in such amount of
total brokerage as may reasonably be required.
It is not possible to place a dollar value on the special executions or on the
research services received by the Fund's Advisers from dealers effecting
transactions in portfolio securities. The allocation of transactions in order to
obtain additional research services permits the Fund's Advisers to supplement
its own research and analysis activities and to receive the views and
information of individuals and research staff of other securities firms. As long
as it is lawful and appropriate to do so, the Fund's Advisers and their
affiliates may use this research and data in their investment advisory
capacities with other clients. Provided that the Trust's officers are satisfied
that the best execution is obtained, the sale of Fund shares may also be
considered as a factor in the selection of securities dealers to execute the
Fund's portfolio transactions.
Because Distributors is a member of the National Association of Securities
Dealers, it is sometimes entitled to obtain certain fees when the Fund tenders
portfolio securities pursuant to a tender-offer solicitation. As a means of
recapturing brokerage for the benefit of the Fund, any portfolio securities
tendered by the Fund will be tendered through Distributors if it is legally
permissible to do so. In turn, the next management fee payable to Adviser under
the management agreement will be reduced by the amount of any fees received by
Distributors in cash, less any costs and expenses incurred in connection
therewith.
If purchases or sales of securities of the Fund and one or more other investment
companies or clients supervised by the Fund's Advisers are considered at or
about the same time, transactions in such securities will be allocated among the
several investment companies and clients in a manner deemed equitable to all by
the Fund's Advisers, taking into account the respective sizes of the funds and
the amount of securities to be purchased or sold. It is recognized that in some
cases this procedure could possibly have a detrimental effect on the price or
volume of the security so far as the Fund is concerned. In other cases it is
possible that the ability to participate in volume transactions and to negotiate
lower brokerage commissions will be beneficial to the Fund.
During the fiscal year ended April 30, 1994, the period ended October 31, 1994,
and the fiscal year ended October 31, 1995 the Fund paid no brokerage
commissions. As of October 31, 1995, the Fund did not own securities of its
regular broker-dealers.
HOW DO I BUY AND SELL SHARES?
All checks, drafts, wires and other payment mediums used for purchasing or
redeeming shares of the Fund must be denominated in U.S. dollars. The Fund
reserves the right, in its sole discretion, to either (a) reject any order for
the purchase or sale of shares denominated in any other currency, or (b) honor
the transaction or make adjustments to a shareholder's account for the
transaction as of a date and with a foreign currency exchange factor determined
by the drawee bank.
In connection with exchanges (see Prospectus "What If My Investment Outlook
Changes - Exchange Privilege"), it should be noted that since the proceeds from
the sale of shares of an investment company generally are not available until
the fifth business day following the redemption, the funds into which the Fund
shareholders are seeking to exchange reserve the right to delay issuing shares
pursuant to an exchange until said fifth business day. The redemption of shares
of the Fund to complete an exchange for shares of any of the investment
companies will be effected at the close of business on the day the request for
exchange is received in proper form at the net asset value then effective.
The Fund may impose a $10 charge for each returned item , against any
shareholder account which, in connection with the purchase of Fund shares,
submits a check or a draft which is returned unpaid to the Fund.
Dividend checks which are returned to the Fund marked "unable to forward" by the
postal service will be deemed to be a request by the shareholder to change the
dividend option and the proceeds will be reinvested in additional shares at net
asset value until new instructions are received.
The Fund may deduct from a shareholder's account the costs of its efforts to
locate a shareholder if mail is returned as undeliverable or the Fund is
otherwise unable to locate the shareholder or verify the current mailing
address. These costs may include a percentage of the account when a search
company charges a percentage fee in exchange for their location services.
Under agreements with certain banks in Taiwan, Republic of China, the Fund's
shares are available to such banks' discretionary trust funds at net asset
value. The banks may charge service fees to their customers who participate in
the discretionary trusts. Pursuant to agreements, a portion of such service fees
may be paid to Distributors, or an affiliate of Distributors, to help defray
expenses of maintaining a service office in Taiwan, including expenses related
to local literature fulfillment and communication facilities.
Shares of the Fund may be offered to investors in Taiwan through securities
firms known locally as Securities Investment Consulting Enterprises. In
conformity with local business practices in Taiwan, shares of the Fund will be
offered with the following schedule of sales charges:
SIZE OF PURCHASE SALES CHARGE
- ---------------- ------------
Up to U.S. $100,000 3%
U.S. $100,000 to U.S. $1,000,000 2%
Over U.S. $1,000,000 1%
PURCHASES AND REDEMPTIONS
THROUGH SECURITIES DEALERS
Orders for the purchase of shares of the Fund received in proper form prior to
1:00 p.m. Pacific time any business day that the Exchange is open for trading
and promptly transmitted to the Fund will be based upon the public offering
price determined that day. Purchase orders received by securities dealers or
other financial institutions after 1:00 p.m. Pacific time will be effected at
the Fund's public offering price on the day it is next calculated. The use of
the term "securities dealer" herein shall include other financial institutions
which, pursuant to an agreement with Distributors (directly or through
affiliates), handle customer orders and accounts with the Fund. Such reference,
however, is for convenience only and does not indicate a legal conclusion of
capacity.
Orders for the redemption of shares are effected at net asset value subject to
the same conditions concerning time of receipt in proper form. It is the
securities dealer's responsibility to transmit the order in a timely fashion and
any loss to the customer resulting from failure to do so must be settled between
the customer and the securities dealer.
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 shares of the Fund without a front-end sales charge ("net asset value")
or a contingent deferred sales charge. Distributors 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. As a condition for these
payments, Distributors or its affiliates 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 Distributors, or its affiliates, and the
securities dealer.
The following amounts may be paid by Distributors 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 taxable-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 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; and (ii) purchases of most
taxable 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,
Distributors, or one of its affiliates, out of its own resources, may pay up to
1% of the amount invested.
LETTER OF INTENT.
An investor may qualify for a reduced sales charge on the purchase of shares of
the Fund, as described in the Prospectus. At any time within 90 days after the
first investment which the investor wants to qualify for the reduced sales
charge, a signed Shareholder Application, with the Letter of Intent section
completed, may be filed with the Fund. After the Letter of Intent is filed, each
additional investment will be entitled to the sales charge applicable to the
level of investment indicated on the Letter. Sales charge reductions based upon
purchases in more than one of the Franklin Templeton Funds will be effective
only after notification to Distributors that the investment qualifies for a
discount. The shareholder's holdings in the Franklin Templeton Funds acquired
more than 90 days before the Letter of Intent is filed will be counted towards
completion of the Letter of Intent but will not be entitled to a retroactive
downward adjustment in the sales charge. Any redemptions made by the
shareholder, other than by a designated benefit plan during the 13-month period
will be subtracted from the amount of the purchases for purposes of determining
whether the terms of the Letter of Intent have been completed. If the Letter of
Intent is not completed within the 13-month period, there will be an upward
adjustment of the sales charge, depending upon the amount actually purchased
(less redemptions) during the period. The upward adjustment does not apply to
designated benefit plans. An investor who executes a Letter of Intent prior to a
change in the sales charge structure for the Fund will be entitled to complete
the Letter of Intent at the lower of (i) the new sales charge structure; or (ii)
the sales charge structure in effect at the time the Letter of Intent was filed
with the Fund.
As mentioned in the Prospectus, five percent (5%) of the amount of the total
intended purchase will be reserved in shares of the Fund registered in the
investor's name, unless the investor is a designated benefit plan. If the total
purchases, less redemptions, equal the amount specified under the Letter, the
reserved shares will be deposited to an account in the name of the investor or
delivered to the investor or the investor's order. If the total purchases, less
redemptions, exceed the amount specified under the Letter of Intent and is an
amount which would qualify for a further quantity discount, a retroactive price
adjustment will be made by Distributors and the securities dealer through whom
purchases were made pursuant to the Letter of Intent (to reflect such further
quantity discount) on purchases made within 90 days before and on those made
after filing the Letter. The resulting difference in offering price will be
applied to the purchase of additional shares at the offering price applicable to
a single purchase or the dollar amount of the total purchases. If the total
purchases, less redemptions, are less than the amount specified under the
Letter, the investor will remit to Distributors an amount equal to the
difference in the dollar amount of sales charge actually paid and the amount of
sales charge which would have applied to the aggregate purchases if the total of
such purchases had been made at a single time. Upon such remittance the reserved
shares held for the investor's account will be deposited to an account in the
name of the investor or delivered to the investor or to the investor's order. If
within 20 days after written request such difference in sales charge is not
paid, the redemption of an appropriate number of reserved shares to realize such
difference will be made. In the event of a total redemption of the account prior
to fulfillment of the Letter of Intent, the additional sales charge due will be
deducted from the proceeds of the redemption, and the balance will be forwarded
to the investor.
If a Letter of Intent is executed on behalf of a benefit plan (such plans are
described under "Purchases at Net Asset Value" in the Prospectus), the level and
any reduction in sales charge for these designated benefit plans will be based
on actual plan participation and the projected investments in the Franklin
Templeton Funds under the Letter of Intent. 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
the Letter of Intent.
REDEMPTIONS IN KIND
The Fund has committed itself to pay in cash (by check) all requests for
redemption by any shareholder of record, limited in amount, however, during any
90-day period to the lesser of $250,000 or 1% of the value of the Fund's net
assets at the beginning of such period. Such commitment is irrevocable without
the prior approval of the Securities and Exchange Commission. In the case of
requests for redemption in excess of such amounts, the trustees reserve the
right to make payments in whole or in part in securities or other assets of the
Fund from which the shareholder is redeeming, in case of an emergency, or if the
payment of such a redemption in cash would be detrimental to the existing
shareholders of the Fund. In such circumstances, the securities distributed
would be valued at the price used to compute the Fund's net assets. Should the
Fund do so, a shareholder may incur brokerage fees in converting the securities
to cash. The Fund does not intend to redeem illiquid securities in kind;
however, should it happen, shareholders may not be able to timely recover their
investment and may also incur brokerage costs in selling such securities.
REDEMPTIONS BY THE FUND
Due to the relatively high cost of handling small investments, the Fund reserves
the right to redeem, involuntarily, at net asset value, the shares of any
shareholder whose account has a value of less than one-half of the initial
minimum investment required for that shareholder, but only where the value of
such account has been reduced by the shareholder's prior voluntary redemption of
shares. Until further notice, it is the present policy of the Fund not to
exercise this right with respect to any shareholder whose account has a value of
$50 or more. In any event, before the Fund redeems such shares and sends the
proceeds to the shareholder, it will notify the shareholder that the value of
the shares in the account is less than the minimum amount and allow the
shareholder 30 days to make an additional investment in an amount which will
increase the value of the account to at least $100.
HOW ARE FUND SHARES VALUED?
As noted in the Prospectus, the Fund calculates net asset value as of the
scheduled close of the Exchange (generally 1:00 p.m. Pacific time) each day that
the Exchange is open for trading. As of the date of this SAI, the Fund is
informed that the Exchange observes the following holidays: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
For the purpose of determining the aggregate net assets of the Fund, cash and
receivables are valued at their realizable amounts. Interest is recorded as
accrued and dividends are recorded on the ex-dividend date. Portfolio securities
listed on a securities exchange or on the NASDAQ National Market System for
which market quotations are readily available are valued at the last quoted sale
price of the day or, if there is no such reported sale, within the range of the
most recent quoted bid and ask prices. The value of a foreign security is
determined as of the close of trading on the foreign exchange on which it is
traded or as of the scheduled close of trading on the 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 ask price is used. Occasionally, events which
affect the values of foreign securities and foreign exchange rates may occur
between the times at which they are determined and the close of the exchange and
will, therefore, not be reflected in the computation of the Fund's net asset
value. If events materially affect the value of these foreign securities occur
during such period, then these securities will be valued in accordance with
procedures established by the Board.
Portfolio securities underlying actively traded call options are valued at their
market price as determined above. The current market value of any option held by
the Fund is its last sale price on the relevant exchange prior to the time when
assets are valued. Lacking any sales that day or if the last sale price is
outside the bid and ask prices, the options are valued within the range of the
current closing bid and ask prices if such valuation is believed to fairly
reflect the contract's market value.
Over-the-counter portfolio securities are valued within the range of the most
recent quoted bid and ask price. Portfolio securities which are traded both in
the over-the-counter market and on a stock exchange are valued according to the
broadest and most representative market as determined by the Manager. With the
approval of directors, the Fund may utilize a pricing service, bank or
securities dealer to perform any of the above described functions.
Generally, trading in corporate bonds, U.S. government securities and money
market instruments is substantially completed each day at various times prior to
the scheduled closing of the Exchange. The values of such securities used in
computing the net asset value of the Fund's shares are determined as of such
times. Occasionally, events affecting the values of such securities may occur
between the times at which they are determined and the scheduled closing of the
Exchange which will 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 their fair value as
determined in good faith by the Board of Trustees.
Other securities for which market quotations are readily available are valued at
the current market price, which may be obtained from a pricing service, based on
a variety of factors including recent trades, institutional size trading in
similar types of securities (considering yield, risk and maturity) and/or
developments related to specific issues. Securities and other assets for which
market prices are not readily available are valued at fair value as determined
following procedures approved by the Board. With the approval of trustees, the
Fund may utilize a pricing service, bank or securities dealer to perform any of
the above described functions.
REINVESTMENT DATE
Shares acquired through the reinvestment of dividends will be purchased at the
net asset value determined on the business day following the dividend record
date (sometimes known as "ex-dividend date"). 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.
REPORTS TO SHAREHOLDERS
The Fund sends annual and semiannual reports to its shareholders regarding the
Fund's performance and its portfolio holdings. Shareholders who would like to
receive an interim quarterly report may phone Fund Information at 1-800 DIAL
BEN.
SPECIAL SERVICES
The Franklin Templeton Institutional Services Department provides specialized
services, including recordkeeping, for institutional investors of the Fund.
The cost of these services is not borne by the Fund.
Investor Services may pay certain financial institutions which maintain omnibus
accounts with the Fund on behalf of numerous beneficial owners for recordkeeping
operations performed with respect to such beneficial owners. For each beneficial
owner in the omnibus account, the Fund may reimburse Investor Services an amount
not to exceed the per account fee which the Fund normally pays Investor
Services. Such financial institutions may also charge a fee for their services
directly to their clients.
ADDITIONAL INFORMATION REGARDING TAXATION
The following information is a supplement to and should be read in conjunction
with the section in the Fund's Prospectus entitled "Taxation of the Fund and Its
Shareholders."
Under Subchapter M of the Code, the Fund is to be treated as a separate entity
for U.S. federal income tax purposes. As stated in the Prospectus, the Fund has
elected to be treated as a regulated investment company under Subchapter M of
the Code, qualified as such, and intends to continue to so qualify. The Trustees
reserve the right not to maintain the qualification of the Fund as a regulated
investment company if they determine such course of action to be beneficial to
the shareholders. In such case, the Fund will be subject to federal and possibly
state corporate taxes on its taxable income and gains, and distributions to
shareholders will be ordinary dividend income to the extent of the Fund's
available earnings and profits.
The Code requires all funds to distribute at least 98% of their taxable ordinary
income earned during the calendar year and at least 98% of their capital gain
net income earned during the twelve month period ending October 31 of each year
(in addition to amounts from the prior year that were neither distributed nor
taxed to the Fund) to shareholders by December 31 of each year in order to avoid
the imposition of a federal excise tax. Under these rules, certain distributions
which are declared in October, November or December but which, for operational
reasons, may not be paid to the shareholder until the following January, will be
treated for tax purposes as if paid by the Fund and received by the shareholder
on December 31 of the calendar year in which they are declared. The Fund intends
as a matter of policy to declare and pay such dividends, if any, in December to
avoid the imposition of this tax, but does not guarantee that its distributions
will be sufficient to avoid any or all federal excise taxes.
All or a portion of a loss realized upon a redemption of shares will be
disallowed to the extent other shares of the Fund are purchased (through
reinvestment of dividends or otherwise) within 30 days before or after such
redemption. Any loss disallowed under these rules will be added to the tax basis
of the shares purchased.
The Fund's investment in options, futures contracts and forward contracts,
including transactions involving actual or deemed short sales or foreign
exchange gains or losses are subject to many complex and special tax rules. For
example, over-the-counter options on debt securities and equity options,
including options on stock and on narrow-based stock indexes, will be subject to
tax under Section 1234 of the Code, generally producing a long-term or
short-term capital gain or loss upon exercise, lapse, or closing out of the
option or sale of the underlying stock or security. By contrast, the Fund
treatment of certain other options, futures and forward contracts entered into
by the Fund is generally governed by Section 1256 of the Code. These "Section
1256" positions generally include listed options on debt securities, options on
broad-based stock indexes, options on securities indexes, options on futures
contracts, regulated futures contracts and certain foreign currency contracts
and options thereon.
Absent a tax election to the contrary, each such Section 1256 position held by
the Fund will be marked-to-market (i.e., treated as if it were sold for fair
market value) on the last business day of the Fund's fiscal year, and all gain
or loss associated with fiscal year transactions and mark-to-market positions at
fiscal year end (except certain foreign currency gain or loss covered by Section
988 of the Code, which is treated as ordinary income or loss) will generally be
treated as 60% long-term capital gain or loss and 40% short-term capital gain or
loss. The effect of Section 1256 mark-to-market rules may be to accelerate
income or to convert what otherwise would have been long-term capital gains into
short-term capital gains or short-term capital losses into long-term capital
losses within the Fund. The acceleration of income on Section 1256 positions may
require the Fund to accrue taxable income without the corresponding receipt of
cash. In order to generate cash to satisfy the distribution requirements of the
Code, the Fund may be required to dispose of portfolio securities that it
otherwise would have continued to hold or to use cash flows from other sources
such as the sale of Fund shares. In these ways, any or all of these rules may
affect both the amount, character and time of income distributed to shareholders
by the Fund.
When the Fund holds an option or contract which substantially diminishes the
Fund's risk of loss with respect to another position of the Fund (as might occur
in some hedging transactions), this combination of positions could be treated as
a "straddle" for tax purposes, resulting in possible deferral of losses,
adjustments in the holding periods of Fund securities and conversion of
short-term capital losses into long-term capital losses. Certain tax elections
exist for mixed straddles (i.e., straddles comprised of at least one Section
1256 position and at least one non-Section 1256 position) which may reduce or
eliminate the operation of these straddle rules.
As a regulated investment company, the Fund is subject to the requirement that
less than 30% of its annual gross income be derived from the sale or other
disposition of securities and certain other investments held for less than three
months ("short-short income"). This requirement may limit the Fund's ability to
engage in options, straddles, hedging transactions and forward or futures
contracts because these transactions are often consummated in less than three
months, may require the sale of portfolio securities held less than three months
and may, as in the case of short sales of portfolio securities reduce the
holding periods of certain securities within the Fund, resulting in additional
short-short income for the Fund.
The Fund will monitor its transactions in such options and contracts and may
make certain other tax elections in order to mitigate the effect of the above
rules and to prevent disqualification of the Fund as a regulated investment
company under Subchapter M of the Code.
The Fund may be subject to foreign withholding taxes on income from certain of
its foreign securities. If more than 50% of the total assets of the Fund at the
end of its fiscal year are invested in securities of foreign corporations, the
Fund may elect to pass through to its shareholders the pro rata share of foreign
taxes paid by the Fund. If this election is made, shareholders will be (i)
required to include in their gross income their pro rata share of foreign source
income (including any foreign taxes paid by the Fund), and (ii) entitled to
either deduct their share of such foreign taxes in computing their taxable
income or to claim a credit for such taxes against their U.S. income tax,
subject to certain limitations under the Code. Shareholders will be informed by
the Fund at the end of each calendar year regarding the availability of any
credits and the amount of foreign source income (including any foreign taxes
paid by the Fund) to be included on their income tax returns.
Foreign exchange gains and losses realized by the Fund in connection with
certain transactions involving foreign currencies, foreign currency payables or
receivables, foreign currency-denominated debt securities, foreign currency
forward contracts, and options or futures contracts on foreign currencies are
subject to special tax rules which may cause such gains and losses to be treated
as ordinary income and losses rather than capital gains and losses and may
affect the amount and timing of the Fund's income or loss from such transactions
and in turn its distributions to shareholders. Additionally, investments in
foreign securities pose special issues to the Fund in meeting its asset
diversification and income tests as a regulated investment company. The Fund
will limit its investments in foreign securities to the extent necessary to
comply with these requirements.
In order for the Fund to qualify as a regulated investment company, at least 90%
of the Fund's annual gross income must consist of dividends, interest and
certain other types of qualifying income, and no more than 30% of its annual
gross income may be derived from the sale or other disposition of securities on
certain other instruments held for less than three months. Foreign exchange
gains derived by a Fund with respect to the Fund's business of investing in
stock or securities, or options or futures with respect to such stock or
securities is qualifying income for purposes of this 90% limitation.
Currency speculation or the use of currency forward contracts or other currency
instruments for non-hedging purposes may generate gains deemed to be not derived
with respect to the Fund's principal business of investing in stock or
securities and related options or futures. Under current law, non-directly
related gains arising from foreign currency positions or instruments held for
less than three months are treated as derived from the disposition of securities
held less than three months in determining the Fund's compliance with the 30%
limitation. The Fund will limit its activities involving foreign exchange gains
to the extent necessary to comply with these requirements.
The foregoing discussion and related discussion in the Prospectus have been
prepared by the management of the Trust and do not purport to be a complete
description of all tax implications of an investment in the Fund. Shareholders
are advised to consult their own tax advisers with respect to the particular tax
consequences to them of an investment in shares of the Fund.
THE FUND'S UNDERWRITER
Pursuant to an underwriting agreement dated November 12, 1993 in effect until
February 29, 1996, Distributors acts as principal underwriter in a continuous
public offering for shares of the Fund. Prior to that date Huntington
Investments, Inc., an indirect wholly-owned subsidiary of Long Beach Bank and an
affiliate of Huntington Advisers, Inc., the Fund's former manager, served as the
Fund's principal underwriter.
The underwriting agreement will continue in effect for successive annual periods
thereafter provided that its continuance is specifically approved at least
annually by a vote of the Trust's Board of Trustees or by a vote of the holders
of a majority of the Fund's outstanding voting securities, and in either event
by a majority vote of the Trust's trustees who are not parties to the
underwriting agreement or interested persons of any such party (other than as
trustees of the Trust), cast in person at a meeting called for that purpose. The
underwriting agreement terminates automatically in the event of its assignment
and may be terminated by either party on 90 days' written notice.
Distributors pays the expenses of distribution of Fund shares, including
advertising expenses and the costs of printing sales material and prospectuses
used to offer shares to the public. The Fund pays the expenses of preparing and
printing amendments to its registration statements and prospectuses (other than
those necessitated by the activities of Distributors) and of sending
prospectuses to existing shareholders.
Until April 30, 1994, income dividends were reinvested at the offering price
(which includes the sales charge) and Distributors allowed 50% of the entire
commission to the securities dealer of record, if any, on an account. Starting
with any income dividends paid after April 30, 1994, such reinvestment is at net
asset value.
In connection with the offering of shares of all four of the Trust's series,
including the Fund, aggregate underwriting commissions for the fiscal year ended
April 30, 1994, the period ended October 31, 1994 and the fiscal year ended
October 31, 1995 were $442,640, $30,522, and $256,910 respectively. After
allowances to dealers, Huntington Investments, Inc. retained $37,000 for the
fiscal year ended April 30, 1994, and Distributors retained $14,854, $232 and
$28,562 for the fiscal year ended April 30, 1994, the period ended October 31,
1994 and for the fiscal year ended October 31, 1995 respectively. Huntington
Investments, Inc. and Distributors received no other compensation from the Funds
for acting as underwriter.
DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan pursuant to Rule 12b-1 under the 1940
Act (the "Plan") whereby the Fund may pay up to a maximum of 0.25% per annum of
its average daily net assets for expenses incurred in the promotion and
distribution of its shares.
Pursuant to the Plan, Distributors or others will be entitled to be reimbursed
each quarter (up to the maximum as stated above) for actual expenses incurred in
the distribution and promotion of the Fund's shares, including, but 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 Distributors' 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, Distributors or its affiliates.
In addition to the payments to which Distributors or others are entitled under
the Plan, the Plan also provides that to the extent the Fund, the Manager or
Distributors or other parties on behalf of the Fund, the Manager or
Distributors, make payments that are deemed to be payments for the financing of
any activity primarily intended to result in the sale of shares of the Fund
within the context of Rule 12b-1 under the 1940 Act, then such payments shall be
deemed to have been made pursuant to the Plan.
In no event shall the aggregate asset-based sales charges which include payments
made under the Plan, plus any other payments deemed to be made pursuant to the
Plan, exceed the amount permitted to be paid pursuant to the Rules of Fair
Practice of the National Association of Securities Dealers, Inc., Article III,
Section 26(d)4.
The terms and provisions of the Plan relating to required reports, term, and
approval are consistent with Rule 12b-1. The Plan does not permit unreimbursed
expenses incurred in a particular year to be carried over to or reimbursed in
subsequent years.
To the extent fees are for distribution or marketing functions, as distinguished
from administrative servicing or agency transactions, certain banks will not be
entitled to participate in the Plan as a result of applicable federal law
prohibiting certain banks from engaging in the distribution of mutual fund
shares. Such banking institutions, however, are permitted to receive fees under
the Plan for administrative servicing or for agency transactions. If a bank were
prohibited from providing such services, its customers who are shareholders
would be permitted to remain shareholders of the Fund, and alternate means for
continuing the servicing of such shareholders would be sought. In such an event,
changes in the services provided might occur and such shareholders might no
longer be able to avail themselves of any automatic investment or other services
then being provided by the bank. It is not expected that shareholders would
suffer any adverse financial consequences as a result of any of these changes.
Securities laws of states in which the Fund's shares are offered for sale may
differ from the interpretations of federal law expressed herein, and banks and
financial institutions selling shares of the Fund may be required to register as
dealers pursuant to state law.
The Board of Trustees has determined that a consistent cash flow resulting from
the sale of new shares is necessary and appropriate to meet redemptions and to
take advantage of buying opportunities of portfolio securities without having to
make unwarranted liquidations of other portfolio securities. The Board of
Trustees, therefore, felt that it would benefit the Fund to have monies
available for the direct distribution activities of Distributors or others in
promoting the sale of its shares. The Board of Trustees, including the
non-interested trustees, concluded that, in the exercise of their reasonable
business judgment and in light of their fiduciary duties, there is a reasonable
likelihood that the Plan will benefit the Fund and its shareholders.
The Plan has been approved by the trustees of the Trust, including those
trustees who are not interested persons, as defined in the 1940 Act and by a
majority vote of the Fund's shares at a special meeting of shareholders held on
November 5, 1993. The Plan is effective through February 29, 1996 and renewable
annually by a vote of the Trust's Board of Trustees, including a majority vote
of the trustees who are non-interested persons of the Trust and who have no
direct or indirect financial interest in the operation of the Plan, cast in
person at a meeting called for that purpose. It is also required that the
selection and nomination of such trustees be done by the non-interested
trustees. The Plan and any related agreement may be terminated at any time,
without any penalty, by vote of a majority of the non-interested trustees on not
more than 60 days' written notice, by Distributors, on not more than 60 days'
written notice, by any act that constitutes an assignment of the management
agreement with the Manager or the Underwriting Agreement with Distributors, or
by vote of a majority of the Fund's outstanding shares. Distributors or any
dealer or other firm may also terminate their respective distribution or service
agreement at any time upon written notice.
The Plan and any related agreements may not be amended to increase materially
the amount to be spent for distribution expenses without approval by a majority
of the Fund's outstanding shares, and all material amendments to the Plan or any
related agreements shall be approved by a vote of the non-interested trustees,
cast in person at a meeting called for the purpose of voting on any such
amendment.
Distributors is required to report in writing to the Board of Trustees at least
quarterly on the amounts and purpose of any payment made under the Plan and any
related agreements, as well as to furnish the Board of Trustees with such other
information as may reasonably be requested in order to enable the Board of
Trustees to make an informed determination of whether the Plan should be
continued.
For the fiscal year ended October 31, 1995, the Fund paid $32,842
to Distributors or others pursuant to the Plan, all of which was paid to
dealers.
GENERAL INFORMATION
PERFORMANCE
As noted in the Prospectus, the Fund may from time to time quote various
performance figures to illustrate the Fund's past performance. It may
occasionally cite statistics to reflect its volatility or risk.
Performance quotations by investment companies are subject to rules adopted by
the SEC. These rules require the use of standardized performance quotations or,
alternatively, that every non-standardized performance quotation furnished by
the Fund be accompanied by certain standardized performance information computed
as required by the SEC. Current yield and average annual compounded total return
quotations used by the Fund are based on the standardized methods of computing
performance mandated by the SEC. An explanation of those and other methods used
by the Fund to compute or express performance follows.
TOTAL RETURN
The average annual total return is determined by finding the average annual
compounded rates of return over one-, five- and ten-year periods, or fractional
portion thereof, that would equate an initial hypothetical $1,000 investment to
its ending redeemable value. The calculation assumes the maximum sales charge is
deducted from the initial $1,000 purchase order and income dividends and capital
gains are reinvested at net asset value. The quotation assumes the account was
completely redeemed at the end of each one-, five- and ten-year period (or
fractional portion thereof) and the deduction of all applicable charges and
fees. The average annual compounded rate of return for the Fund for the one-year
period ended October 31, 1995 was 14.72% and for the period from inception of
the Fund (12/31/92) to October 31, 1995 was 11.42%.
These figures were calculated according to the SEC formula:
n
P(1+T) = ERV
where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the one-, five- or ten-year periods at the end of the one-,
five- or ten-year periods (or fractional portion thereof)
As discussed in the Prospectus, in the future the Fund may quote total rates of
return in addition to its average annual total return. Such quotations are
computed in the same manner as the Fund's average annual compounded rate, except
that such quotations will be based on the Fund's actual return for a specified
period rather than on its average return over one-, five- and ten-year periods
(or fractional portion thereof). The total rate of return for the Fund for the
one-year period ended October 31, 1995 was 14.72% and for the period from
inception of the Fund to October 31, 1995 was 35.89%.
In considering the quotations of total return by the Fund, investors should
remember that the 3.00% maximum sales charge reflected in each quotation is a
one time fee (charged on all direct purchases which will have its greatest
impact during the early stages of an investor's investment in the Fund. The
actual performance of an investment will be affected less by this charge the
longer an investor retains the investment in the Fund.
YIELD
Current yield reflects the income per share earned by the Fund's portfolio
investments.
Current yield is determined by dividing the net investment income per share
earned during a 30-day base period by the maximum offering price per share on
the last day of the period and annualizing the result. Expenses accrued for the
period include any fees charged to all shareholders during the base period. The
yield for the Fund for the 30-day period ended on the date of the financial
statements included herein was 4.34%.
These figures were obtained using the following SEC formula:
6
Yield = 2 [( a-b + 1 ) - 1]
----
cd
where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period that
were entitled to receive dividends
d = the maximum offering price per share on the last day of the period
CURRENT DISTRIBUTION RATE
Yield which is calculated according to a formula prescribed by the SEC is not
indicative of the amounts which were or will be paid to the Fund's shareholders.
Amounts paid to shareholders are reflected in the quoted "current distribution
rate." The current distribution rate is computed by dividing the total amount of
dividends per share paid by the Fund during the past 12 months by a current
maximum offering price. Under certain circumstances, such as when there has been
a change in the amount of dividend payout, or a fundamental change in investment
policies, it might be appropriate to annualize the dividends paid over the
period such policies were in effect, rather than using the dividends during the
past 12 months. The current distribution rate differs from the current yield
computation because it may include distributions to shareholders from sources
other than dividends and interest, such as premium income from option writing
and short-term capital gains and is calculated over a different period of time.
VOLATILITY
Occasionally statistics may be used to specify Fund volatility or risk. Measures
of volatility or risk are generally used to compare Fund net asset value or
performance relative to a market index. One measure of volatility is beta. Beta
is the volatility of a fund relative to the total market as represented by the
Standard & Poor's 500 Stock Index. A beta of more than 1.00 indicates volatility
greater than the market, and a beta of less than 1.00 indicates volatility less
than the market. Another measure of volatility or risk is standard deviation.
Standard deviation is used to measure variability of net asset value or total
return around an average over a specified period of time. The premise is that
greater volatility connotes greater risk undertaken in achieving performance.
OTHER PERFORMANCE QUOTATIONS
With respect to those categories of investors who are permitted to purchase
shares of the Fund at net asset value, sales literature pertaining to the Fund
may quote a current distribution rate, yield, total return, average annual total
return and other measures of performance as described elsewhere in this SAI with
the substitution of net asset value for the public offering price.
Sales literature referring to the use of the Fund(s) as a potential investment
for Individual Retirement Accounts (IRAs), Business Retirement Plans, and other
tax-advantaged retirement plans may quote a total return based upon compounding
of dividends on which it is presumed no federal income
tax applies.
Regardless of the method used, past performance is not necessarily indicative of
future results, but is an indication of the return to shareholders only for the
limited historical period used.
The Fund may include in its advertising or sales material information relating
to investment objectives and performance results of funds belonging to the
Templeton Group of Funds. Resources is the parent company of the advisers and
underwriter of both the Franklin Group of Funds and Templeton Group of Funds.
COMPARISONS
To help investors better evaluate how an investment in the Fund(s) might satisfy
their investment objective, advertisements and other materials regarding the
Fund(s) may discuss various measures of Fund performance as reported by various
financial publications. Materials may also compare performance (as calculated
above) to performance as reported by other investments, indices, and averages.
Such comparisons may include, but are not limited to, the following examples:
a) Dow Jones Composite Average or its component averages - an unmanaged index
composed of 30 blue-chip industrial corporation stocks (Dow Jones Industrial
Average), 15 utilities company stocks (Dow Jones Utilities Average), and 20
transportation company stocks. Comparisons of performance assume reinvestment of
dividends.
b) Standard & Poor's 500 Stock Index or its component indices - an unmanaged
index composed of 400 industrial stocks, 40 financial stocks, 40 utilities
stocks, and 20 transportation stocks. Comparisons of performance assume
reinvestment of dividends.
c) The New York Stock Exchange composite or component indices - unmanaged
indices of all industrial, utilities, transportation, and finance stocks listed
on the New York Stock Exchange.
d) Wilshire 5000 Equity Index - represents the return on the market value of all
common equity - securities for which daily pricing is available. Comparisons of
performance assume reinvestment of dividends.
e) Lipper - Mutual Fund Performance Analysis and Lipper - Fixed Income Fund
Performance Analysis and Lipper - Mutual Fund Yield Survey - measure total
return and average current yield for the mutual fund industry. Rank individual
mutual fund performance over specified time periods, assuming reinvestment of
all distributions, exclusive of any applicable sales charges.
f) CDA Mutual Fund Report, published by CDA Investment Technologies, Inc.
analyzes price, current yield, risk, total return, and average rate of return
(average annual compounded growth rate) over specified time periods for the
mutual fund industry.
g) Mutual Fund Source Book, published by Morningstar, Inc. - analyzes price,
yield, risk, and total return for equity funds.
h) Financial publications: The Wall Street Journal and Business Week, Changing
Times, Financial World, Forbes, Fortune, and Money magazines provide performance
statistics over specified time periods.
i) Consumer Price Index (or Cost of Living Index), published by the U.S. Bureau
of Labor Statistics - a statistical measure of change, over time, in the price
of goods and services in major expenditure groups.
j) Stocks, Bonds, Bills, and Inflation, published by Ibbotson Associates
historical measure of yield, price, and total return for common and small
company stock, long-term government bonds, Treasury bills, and inflation.
k) Savings and Loan Historical Interest Rates - as published in the U.S.
Savings & Loan League Fact Book.
l) Historical data supplied by the research departments of First Boston
Corporation, the J. P. Morgan companies, Salomon Brothers, Merrill Lynch,
Pierce, Fenner & Smith, Lehman Brothers and Bloomberg L.P.
m) Standard & Poor's 100 Stock Index - an unmanaged index based on the prices of
100 blue- chip stocks, including 92 industrials, one utility, two transportation
companies, and 5 financial institutions. The S&P 100 Stock Index is a smaller
more flexible index for options trading.
From time to time, advertisements or information for the Fund may include a
discussion of certain attributes or benefits to be derived by an investment in
the Fund. Such advertisements or information may include symbols, headlines, or
other material which highlight or summarize the information discussed in more
detail in the communication.
Advertisements or information may also compare the Fund's performance to the
return on certificates of deposit or other investments. Investors should be
aware, however, that an investment in the Fund involves the risk of fluctuation
of principal value, a risk generally not present in an investment in a
certificate of deposit issued by a bank. For example, as the general level of
interest rates rise, the value of the Fund's fixed-income investments, as well
as the value of its shares which are based upon the value of such portfolio
investments, can be expected to decrease. Conversely, when interest rates
decrease, the value of the Fund's shares can be expected to increase.
Certificates of deposit are frequently insured by an agency of the U.S.
government. An investment in the Fund is not insured by any federal, state or
private entity.
In assessing such comparisons of performance an investor should keep in mind
that the composition of the investments in the reported indices and averages is
not identical to the Fund's portfolio, that the indices and averages are
generally unmanaged, and that the items included in the calculations of such
averages may not be identical to the formula used by the Fund to calculate its
figures. In addition, there can be no assurance that the Fund will continue this
performance as compared to such other averages.
OTHER FEATURES AND BENEFITS
The Fund may help investors achieve various investment goals such as
accumulating money for retirement, saving for a down payment on a home, college
cost and/or other long-term goals. The Franklin College Costs Planner may assist
an investor in determining how much money must be invested on a monthly basis in
order to have a projected amount available in the future to fund a child's
college education. (Projected college cost estimates are based upon current
costs published by the College Board.) The Franklin Retirement Planning Guide
leads an investor through the steps to start a retirement savings program. Of
course, an investment in the Fund cannot guarantee that such goals will be met.
MISCELLANEOUS INFORMATION
The Funds of the Trust are members of the Franklin Templeton Group, one of the
largest mutual fund organizations in the United States and may be considered in
a program for diversification of assets. Founded in 1947, Franklin, one of the
oldest mutual fund organizations, has managed mutual funds for over 45 years and
now services more than 2.5 million shareholder accounts. In 1992, Franklin, a
leader in managing fixed-income mutual funds and an innovator in creating
domestic equity funds, joined forces with Templeton Worldwide, Inc., a pioneer
in international investing. Together, the Franklin Templeton Group has over $130
billion in assets under management for more than 3.9 million shareholder
accounts and offers 117 U.S.-based mutual funds. The Fund may identify itself by
its NASDAQ or CUSIP number.
The Dalbar Surveys, Inc. dealer survey has ranked Franklin number one in
service quality for five of the past seven years.
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.
OWNERSHIP AND AUTHORITY DISPUTES
In the event of disputes involving multiple claims of ownership or authority to
control a shareholder's account, the 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; (b) interplead disputed funds
or accounts with a court of competent jurisdiction; or (c) surrender ownership
of all or a portion of the account to the Internal Revenue Service in response
to a Notice of Levy.
FINANCIAL STATEMENTS
The audited financial statements contained in the Annual Report to Shareholders
of the Trust dated October 31, 1995, including the auditors' report, are
incorporated herein by reference.
File Nos. 33-01212
811-4450
FORM N-1A
PART C
Other Information
Item 24 Financial Statements and Exhibits
a) Financial Statements incorporated herein by reference to the Registrant's
Annual Report to Shareholders dated October 31, 1995 as filed with the SEC
electronically on form type N-30D on December 27, 1995.
(1) (i) Report of Independent Auditors -November 30, 1995
(ii) Statement of Investments in Securities and Net Assets-October
31, 1995
(iii)Statement of Assets and Liabilities-October 31, 1995
(iv) Statements of Operations-for the fiscal year ended October 31,
1995
(v) Statements of Changes in Net Assets-for the fiscal year ended
October 31, 1995 and for the six month period ended October
31, 1994
(vi) Notes to Financial Statements
b) Exhibits:
The following exhibits, where applicable, are filed herewith, with the
exceptions of Exhibit 14(i) which is incorporated herein by reference.
(1) Copies of the charter as now in effect;
(i) Declaration of Trust dated November 6, 1985
(ii) Certificate of Amendment of Agreement and declaration of Trust
of International Cash Portfolios dated April 26, 1991
(iii)Certificate of Amendment of Agreement and Declaration of Trust
of International Currency Portfolios dated October 23, 1992
(iv) Certificate of Amendment of Agreement and Declaration of Trust
of Huntington Funds dated November 16, 1993
(v) Certificate of Amendment of Agreement and Declaration of Trust
of Franklin Templeton Global Trust dated March 21, 1995
(2) copies of the existing By-Laws or instruments corresponding thereto;
(i) By-Laws dated April 25, 1986
(3) copies of any voting trust agreement with respect to more than five
percent of any class of equity securities of the Registrant;
Not Applicable
(4) specimens or copies of each security issued by the Registrant, including
copies of all constituent instruments, defining the rights of the
holders of such securities, and copies of each security being
registered;
Not applicable
(5) copies of all investment advisory contracts relating to the management
of the assets of the Registrant;
(i) Management agreement between Registrant and Franklin Advisers,
Inc., dated November 12, 1993
(ii) Subadvisory agreement between Franklin Advisers, Inc. and
Templeton Investment Counsel, Inc., dated November 12, 1993
(iii)Subadvisory agreement between Templeton Investment Counsel, Inc.
and Franklin Advisers Inc., dated June 27, 1994
(iv) Amendment to management agreement between Franklin Advisers, Inc.
and Registrant dated August 1, 1995
(6) copies of each underwriting or distribution contract between the
Registrant and a principal underwriter, and specimens or copies of all
agreements between principal underwriters and dealers;
(i) Amended and Restated Distribution Agreement between Registrant
and Franklin/Templeton Distributors, Inc., dated April 23, 1995
(ii) Form of Dealer Agreements between Franklin/Templeton
Distributors, Inc., and securities dealers
(7) copies of all bonus, profit sharing, pension or other similar contracts
or arrangements wholly or partly for the benefit of Trustees or
officers of the Registrant in their capacity as such; any such plan
that is not set forth in a formal document, furnish a reasonably
detailed description thereof;
Not Applicable
(8) copies of all custodian agreements and depository contracts under
Section 17(f) of the Investment Company Act of 1940 (the "1940 Act"),
with respect to securities and similar investments of the Registrant,
including the schedule of remuneration;
(i) Custody agreement between Registrant and Bank of America NT & SA
dated November 12, 1993
(ii) Custody agreement between THE CHASE MANHATTAN BANK, N.A. and
Franklin/Templeton Global Trust dated November 15, 1993
(iii)Supplement to custody agreement between Bank of America and
Franklin/Templeton Global Trust dated April 12, 1995
(9) copies of all other material contracts not made in the ordinary course
of business which are to be performed in whole or in part at or after
the date of filing the Registration Statement;
Not Applicable
(10) an opinion and consent of counsel as to the legality of the securities
being registered, indicating whether they will when sold be legally
issued, fully paid and nonassessable;
Not Applicable
(11) Copies of any other opinions, appraisals or rulings and consents to the
use thereof relied on in the preparation of this registration statement
and required by Section 7 of the 1933 Act;
(i) Consent of Independent Auditors dated December 27, 1995
(12) all financial statements omitted from Item 23;
Not Applicable
(13) Copies of any agreements or understandings made in consideration for
providing the initial capital between or among the Registrant, the
underwriter, adviser, promoter or initial stockholders and written
assurances from promoters or initial stockholders that their purchases
were made for investment purposes without any present intention of
redeeming or reselling;
Not Applicable
(14) Copies of the model plan used in the establishment of any retirement
plan in conjunction with which Registrant offers its securities, any
instructions thereto and any other documents making up the model plan.
Such form(s) should disclose the costs and fees charged in connection
therewith;
(i) copy of model retirement plan:
Registrant: AGE High Income Fund, Inc.
Filing: Post-effective Amendment No. 26 to Registration Statement
on Form N-1A
File No. 2-30203
Filing Date: August 1, 1989
(15) copies of any plan entered into by Registrant pursuant to Rule 12b-l
under the 1940 Act, which describes all material aspects of the
financing of distribution of Registrant's shares, and any agreements
with any person relating to implementation of such plan.
(i) Distribution Plan between Franklin/Templeton Distributors, Inc.
and Registrant dated November 12, 1993
(16) Schedule for computation of each performance quotation provided in the
registration statement in response to Item 22 (which need not be
audited).
(i) Schedule for Computation of Performance Quotation
(17) Power of Attorney
(i) Power of Attorney dated August 15, 1995
(ii) Certificate of Secretary dated August 15, 1995
(18) Copies of any plan entered into by Registrant pursuant to Rule 18f-3
under the 1940 Act.
Not Applicable
(27) Financial Data Schedule Computation
(i) Financial Data Schedule for Franklin Templeton Global Currency
Fund
(ii) Financial Data Schedule for Franklin Templeton Hard Currency Fund
(iii)Financial Data Schedule Franklin Templeton High Income Currency
Fund
(iv) Financial Data Schedule Franklin Templeton German Government Fund
Item 25 Persons Controlled by or under Common Control with Registrant
None
Item 26 Number of Holders of Securities
As of October 31, 1995, the number of record holders of the only class of
securities of the Registrant are as follows:
Title of Class Number of Record Holders
Shares of Beneficial
Interest:
Global Currency Fund 4,878
stated value $.01 per share
Hard Currency Fund 10,394
stated value $.01 per share
High Income Fund 2,280
stated value $.01 per share
German Government Fund 2,736
stated value $.01 per share
Item 27 Indemnification
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to Trustees, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a Trustee, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
Trustee, officer or controlling person in connection with securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court or appropriate
jurisdiction the question whether such indemnification is against public policy
as expressed in the Act and will be governed by the final adjudication of such
issue.
Item 28 Business and Other Connections of Investment Adviser
a) Franklin Advisers, Inc.
The officers and Directors of the Registrant's manager also serve as officers
and/or directors for (1) the manager's corporate parent, Franklin Resources,
Inc., and/or (2) other investment companies in the Franklin Group of Funds. In
addition, Mr. Charles B. Johnson is a director of General Host Corporation. For
additional information please see Part B and Schedules A and D of Form ADV of
the Funds' Investment Manager (SEC File 801-26292), incorporated herein by
reference, which sets forth the officers and directors of the Investment Manager
and information as to any business, profession, vocation or employment of a
substantial nature engaged in by those officers and directors during the past
two years.
b) Templeton Investment Counsel, Inc.
Templeton Investment Counsel, Inc. ("TICI"), an indirect, wholly owned
subsidiary of Franklin Resources, Inc., serves as each Fund's sub-adviser,
furnishing to Franklin Advisers, Inc. in that capacity, portfolio management
services and investment research. For additional information please see Part B
and Schedules A and D of Form ADV of the Fund's Sub-adviser (SEC File
801-15125), incorporated herein by reference, which sets forth the officers and
directors of the Sub-adviser and information as to any business, profession,
vocation or employment of a substantial nature engages in by those officers and
directors during the past two years.
Item 29 Principal Underwriters
a) Franklin/Templeton Distributors, Inc., ("Distributors") also acts as
principal underwriter of shares of AGE High Income Fund, Inc., 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, Inc., Franklin New York Tax-Free Trust, Franklin
Premier Return Fund, Franklin Real Estate Securities Trust, Franklin Strategic
Mortgage Portfolio, Franklin Strategic Series, Franklin Tax-Exempt Money Fund,
Franklin Tax-Advantaged High Yield Securities Fund, Franklin Tax-Advantaged
International Bond Fund, Franklin Tax-Advantaged U.S. Government Securities
Fund, Franklin Tax-Free Trust, Franklin Value Investors Trust, Institutional
Fiduciary Trust, Templeton American Trust, Inc., Franklin Templeton Japan Fund,
Franklin Templeton Money Fund Trust, Templeton Capital Accumulator Fund, Inc.,
Templeton Developing Markets Trust, Templeton Funds, Inc., Templeton Global
Investment Trust, Templeton Global Opportunities Trust, Templeton Growth Fund,
Inc., Templeton Income Trust, Templeton Institutional Funds, Inc., Templeton
Real Estate Securities Fund, Templeton Smaller Companies Growth Fund, Inc.,
Templeton Variable Products Series Fund.
b) The information required by this Item 29 with respect to each director and
officer of FTDI is incorporated by reference to Part B of this N-1A and Schedule
A of Form BD filed by FTDI with the Securities and Exchange Commission pursuant
to the Securities Act of 1934 (SEC File No. 8-5889).
c) Not Applicable. Registrant's principal underwriter is an affiliated person of
an affiliated person of the Registrant.
Item 30 Location of Accounts and Records
The accounts, books or other documents required to be maintained by Section 31
(a) of the Investment Company Act of 1940 are kept by the Fund or its
shareholder services agent, Franklin/Templeton Investor Services, Inc., both of
whose address is 777 Mariners Island Blvd., San Mateo, CA 94404.
Item 31 Management Services
There are no management-related service contracts not discussed in Part A or
Part B.
Item 32 Undertakings
(a) The Registrant hereby undertakes to promptly call a meeting of shareholders
for the purpose of voting upon the question of removal of any trustee or
trustees when requested in writing to do so by the record holders of not less
than 10 per cent of the Registrant's outstanding shares and to assist its
shareholders in the communicating with other shareholders in accordance with the
requirements of Section 16(c) of the Investment Company Act of 1940.
(b) The Registrant hereby undertakes to comply with the information requirements
in Item 5A of the Form N-1A by including the required information in the Trust's
annual report and to furnish each person to whom a prospectus is delivered a
copy of the annual report upon request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940 the Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of San Mateo, the State of California, on the 29th day of December, 1995.
Franklin Templeton Global Trust
(Registrant)
By: /s/ Donald P. Gould*
Donald P. Gould
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
Donald P. Gould* President and Trustee
Donald P. Gould Dated December 29, 1995
Frank H. Abbott, III* Trustee
Frank H. Abbott, III Dated December 29, 1995
Harris J. Ashton* Trustee
Harris J. Ashton Dated December 29, 1995
David K. Eiteman Trustee
David K. Eiteman
S. Joseph Fortunato* Trustee
S. Joseph Fortunato Dated December 29, 1995
David W. Garbellano* Trustee
David W. Garbellano Dated December 29, 1995
Gerald R. Healy* Trustee
Gerald R. Healy dated December 29, 1995
Charles B. Johnson* Chairman of the Board and Trustee
Charles B. Johnson Dated December 29, 1995
Rupert H. Johnson, Jr.* Trustee
Rupert H. Johnson, Jr. Dated December 29, 1995
David P. Kraus* Trustee
David P. Kraus dated December 29, 1995
Frank W. T. LaHaye* Trustee
Frank W. T. LaHaye Dated December 29, 1995
Gordon S. Macklin* Trustee
Gordon S. Macklin Dated December 29, 1995
Martin L. Flannagan* Principal Financial Officer
Martin L. Flannagan Dated December 29, 1995
Diomedes Loo-Tam* Principal Accounting Officer
Diomedes Loo-Tam Dated December 29, 1995
*By: /s/ Larry L. Greene
Larry L. Greene, Attorney-in-Fact
pursuant to Powers of Attorney filed herewith
FRANKLIN TEMPLETON GLOBAL TRUST
REGISTRATION STATEMENT
EXHIBITS INDEX
EXHIBIT NO. DESCRIPTION LOCATION
EX-99.B1(i) Agreement and Declaration of Trust dated Attached
November 6, 1985
EX-99.B1(ii) Certificate of of Amendment of Agreement and Attached
declaration of Trust of International Cash
Portfolios dated April 26, 1991
EX-99.B1(iii) Certificate of Amendment of Agreement and Attached
Declaration of Trust of International
Currency Portfolios dated October 23, 1992
EX-99.B1(iv) Certificate of Amendment of Agreement and Attached
Declaration of Trust of Huntington Funds
dated November 16, 1993
EX-99.B1(v) Certificate of Amendment of Agreement and Attached
Declaration of Trust of Franklin/Templeton
Global Trust dated March 21, 1995
EX-99.B2(i) By-Laws dated April 25, 1986 Attached
EX-99.B5(i) Management Agreement between Registrant and Attached
and Franklin Advisers, Inc. dated November 12,
1993
EX-99.B5(ii) Subadvisory agreement between Franklin Attached
Advisers, Inc. and Templeton Investment
Counsel, Inc., dated November 12, 1993
EX-99.B5(iii) Subadvisory agreement between Templeton Attached
Investment Counsel, Inc. and Franklin
Advisers, Inc. dated June 27, 1994
EX-99.B5(iv) Amendment to management agreement between Attached
Franklin Advisers, Inc. and Registrant
dated August 1, 1995
EX-99.B6(i) Amended and Restated Distribution Agreement Attached
between Registrant and Franklin/Templeton
Distributors, Inc. dated April 23, 1995
Ex-99.B6(ii) Forms of Dealer Agreements between Attached
Franklin/Templeton Distributors, Inc. and
securities dealers
EX-99.B8(i) Custody agreement between Registrant and Attached
Bank of America NT & SA dated November
12, 1993
EX-99.B8(ii) Custody Agreement between The Chase Attached
Manhattan Bank, N.A. and Franklin/
Templeton Global Trust dated November 15,
1993
EX-99.B8(iii) Supplement to Custody Agreement between Attached
Bank of America and Franklin/Templeton
Global Trust dated April 12, 1995
EX-99.B11(i) Consent of Independent Auditors dated Attached
December 27, 1995
EX-99.B14(i) Copy of Model Retirement Plan *
EX-99.B15(i) Distribution Plan between Franklin/ Attached
Templeton Distributors, Inc. and Registrant
dated November 12, 1993
EX-99.B16(i) Schedule for Computation of Performance Attached
Quotation
EX-99.B17(i) Power of Attorney dated August 15, 1995 Attached
EX-99.B17(ii) Certificate of Secretary dated August 15, Attached
1995
EX-99.B27(i) Financial Data Schedule for Franklin Attached
Templeton Global Currency Fund
EX-99.B27(ii) Financial Data Schedule for Franklin Attached
Templeton Hard Currency Fund
EX-99.B27(iii) Financial Data Schedule for Franklin Attached
Templeton High Income Currency Fund
EX-99.B27(iv) Financial Data Schedule for Franklin Attached
Templeton German Government Fund
* Incorporated by reference
INTERNATIONAL CASH PORTFOLIOS
Declaration of Trust
Dated: November 6, 1985
THIS AGREEMENT AND DECLARATION OF TRUST made at Boston,
Massachusetts, this 6th day of November, 1985 by Donald P. Gould (hereinafter
with any additional and successor trustees referred to as "the Trustees") and
the holders of shares of beneficial interest to be issued hereunder as
hereinafter provided.
W I T N E S S E T H :
WHEREAS, the Trustees have agreed to manage all property coming
into their hands as trustees of a Massachusetts business trust in accordance
with the provisions hereinafter set forth.
NOW, THEREFORE, the Trustees hereby declare that they will hold
all cash, securities and other assets, which they may from time to time
acquire in any manner as Trustees hereunder IN TRUST to manage and dispose of
the same upon the following terms and conditions for the pro rata benefit of
the holders from time to time of Shares, whether or not certificated, in this
Trust as hereinafter set forth.
ARTICLE I
Name and Definitions
Section 1. Name. This Trust shall be known as "International
Cash Portfolios."
section 2. Definitions. Whenever used herein, unless otherwise
required by the context or specifically provided:
(a) The term "Commission" shall have the meaning provided in the
1940 Act;
(b) The "Trust" refers to the Massachusetts business trust
established by this Agreement and Declaration of Trust, as amended from time
to time;
(c) "Shareholder" means a record owner of Shares of the Trust;
(d) "Shares" means the equal proportionate transferable units of
interest into which the beneficial interest in the Trust shall be divided
from time to time or, if more than one series of Shares is authorized by the
Trustees, the equal proportionate transferable units into which each series
of Shares shall be divided from time to time, and includes a fraction of a
Share as well as a whole Share;
(e) The "1940 Act" refers to the Investment Company Act of 1940,
and the Rules and Regulations thereunder, all as amended from time to time.
(f) The term "Manager" is defined in Article IV, Section 5; and
(g) The term "Person" shall mean an individual or any
corporation, partnership, joint venture, trust or other enterprise.
ARTICLE II
Purposes of Trust
This Trust is formed for the following purpose or purposes:
(a) to conduct, operate and carry on the business of an
investment company;
(b) to subscribe for, invest in, reinvest in, purchase or
otherwise acquire, hold, pledge, sell, assign, transfer, lend, write options
on, exchange, distribute or otherwise dispose of and deal in and with
securities of every nature, kind, character, type and form, including,
without limitation of the generality of the foregoing, all types of stocks,
shares, futures contracts, bonds, debentures, notes, bills and other
negotiable or non-negotiable instruments, obligations, evidences of interest,
certificates of interest, certificates of participation, certificates,
interests, evidences of ownership, guarantees, warrants, options or evidence
of indebtedness issued or created by or guaranteed as to principal and
interest by any state or local government or any agency or instrumentality
thereof, by the United States Government or any agency, instrumentality,
territory, district or possession thereof, by any corporation organized under
the laws of any state, the United States or any territory or possession
thereof or under the laws of any foreign country, bank certificates of
deposit, bank time deposits, bankers' acceptances and commercial paper; to
pay for the same in cash or by the issue of stock, including treasury stock,
bonds or notes of the Trust or otherwise; and to exercise any and all right,
powers and privileges of ownership or interest in respect of any and all
rights, powers and privileges of ownership or interest in respect of any and
all such investments of every kind and description, including, without
limitation, the right to consent and otherwise act with respect thereto, with
power to designate one or more persons, firms, associations, or corporations
to exercise any of said rights, powers and privileges in respect of any said
instruments;
(c) to borrow money or otherwise obtain credit and to secure the
same by mortgaging, pledging or otherwise subjecting as security the assets
of the Trust;
(d) to issue, sell, repurchase, redeem, retire, cancel, acquire,
hold, resell, reissue, dispose of, transfer, and otherwise deal in, Shares
including Shares in fractional denominations, and to apply to any such
repurchase, redemptions, retirement, cancellation or acquisition of Shares of
any funds or other assets of the appropriate series of Shares, whether
capital or surplus or otherwise, to the full extent now or hereafter
permitted by the laws of The Commonwealth of Massachusetts;
(e) to conduct, its business, promote its purposes, and carry on
its operations in any and all of its branches and maintain offices both
within and without The Commonwealth of Massachusetts, in any and all States
of the United States of America, in the District of Columbia, and in any
other parts of the world; and
(f) to do all and everything necessary, suitable, convenient, or
proper for the conduct, promotion, and attainment of any of the businesses
and purposes herein specified or which at any time may be incidental thereto
or may appear conductive to or expedient for the accomplishment of any of
such businesses and purposes and which might be engaged in or carried on by a
Trust organized under the Massachusetts General Laws, and to have and
exercise all of the powers conferred by the laws of The Commonwealth of
Massachusetts upon a Massachusetts business trust.
The foregoing provisions of this Article II shall be construed
both as purposes and powers and each as an independent purpose and power.
ARTICLE III
Beneficial Interest
Section 1. Shares of Beneficial Interest. The Shares of the
Trust shall be issued in one or more series as the Trustees may, without
Shareholder approval, authorize. Each series shall be preferred over all
other series in respect of the assets allocated to that series. The
beneficial interest in each series at all times shall be divided into Shares,
with or without par value as the Trustees may from time to time determine,
each of which shall represent an equal proportionate interest in the series
with each other Share of the same series, none having priority or preference
over another. The number of Shares authorized shall be unlimited, and the
Shares so authorized may be represented in part by fractional Shares. From
time to time, the Trustees may divide or combine the Shares of any series
into a greater or lesser number without thereby changing the proportionate
beneficial interests in the series.
Section 2. Ownership of Shares. The ownership of Shares will be
recorded in the books of the Trust or a transfer agent. The record books of
the Trust or any transfer agent, as the case may be, shall be conclusive as
to who are the holders of Shares of each series and as to the number of
Shares of each series held from time to time by each. No certificates
certifying the ownership of Shares need be issued except as the Trustees may
otherwise determine from time to time.
Section 3. Issuance of Shares. The Trustees are authorized,
from time to time, to issue or authorize the issuance of Shares at not less
than the par value thereof, if any, and to fix the price or the minimum price
or the consideration (in cash and/or such other property, real or personal,
tangible or intangible, as from time to time they may determine) or minimum
consideration for such Shares. Anything herein to the contrary
notwithstanding, the Trustees may issue shares pro rata to the Shareholders
at any time as a stock dividend.
All consideration received by the Trust for the issue or sale of
Shares of each series, together with all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation thereof, and any funds or payments derived from any reinvestment
of such proceeds in whatever form the same may be, shall belong irrevocably
to the series of Shares with respect to which the same were received by the
Trust for all purposes, subject only to the rights of creditors, and shall be
so handled upon the books of account of the Trust and are herein referred to
as "assets of" such series.
Shares may be issued in fractional denominations to the same
extent as whole Shares, and Shares in fractional denominations shall be
Shares having proportionately to the respective fractions represented thereby
all the rights of whole Shares, including, without limitation, the right to
vote, the right to receive dividends and distributions, and the right to
participate upon liquidation of the Trust or of a particular series of Shares.
Section 4. No Preemptive Rights. Shareholders shall have no
preemptive or other right to subscribe for any additional Shares or other
securities issued by the Trust.
Section 5. Status of Shares and Limitation of Personal
Liability. Shares shall be deemed to be personal property giving only the
rights provided in this instrument. Every Shareholder by virtue of having
become a Shareholder shall be held to have expressly assented and agreed to
the terms hereof and to have become a party hereto. The death of a
Shareholder during the continuance of the Trust shall not operate to
terminate the same nor entitle the representative of any deceased Shareholder
to an accounting or to take any action in court or elsewhere against the
Trust or the Trustees, but only to the rights of said decedent under this
Trust. Ownership of Shares shall not entitle the Shareholder to any title in
or to the whole or any part of the Trust property or right to call for a
partition or division of the same or for an accounting, nor shall the
ownership of Shares constitute the Shareholders partners. Neither the Trust
nor the Trustees, nor any officer, employee or agent of the Trust shall have
any power to bind any Shareholder or Trustee personally or to call upon any
Shareholder for the payment of any sum of money or assessment whatsoever
other than such as the Shareholder at any time personally may agree to pay by
way of subscription for any Shares or otherwise. Every note, bond, contract
or other undertaking issued by or on behalf of the Trust shall include a
recitation limiting the obligation represented thereby to the Trust and its
assets (but the omission of such a recitation shall not operate to bind any
Shareholder or Trustee personally).
ARTICLE IV
Trustees
Section 1. Election. A Trustee may be elected either by the
Trustees or the Shareholders. The Trustees named herein shall serve until
the first meeting of the Shareholders or until the election and qualification
of their successors. Prior to the first meeting of Shareholders the initial
Trustees hereunder may elect additional Trustees to serve until such meeting
and until their successors are elected and qualified. The Trustees also at
any time may elect Trustees to fill vacancies in the number of Trustees. The
number of Trustees shall be fixed from time to time by the Trustees and, at
or after the commencement of the business of the Trust, shall be not less
than three. Each Trustee, whether named above or hereafter becoming a
Trustee, shall serve as a Trustee during the lifetime of this Trust, until
such Trustee dies, resigns, retires, or is removed, or, if sooner, until the
next meeting of Shareholders called for the purpose of electing Trustees and
the election and qualification of his successor. Subject to Section 16(a) of
the 1940 Act, the Trustees may elect their own successors and, pursuant to
this Section, may appoint Trustees to fill vacancies.
Section 2. Powers. The Trustees shall have all powers necessary
or desirable to carry out the purposes of the Trust, including, without
limitation, the powers referred to in Article II hereof. Without limiting
the generality of the foregoing, the Trustees may adopt By-Laws not
inconsistent with this Declaration of Trust providing for the conduct of the
business of the Trust and may amend and repeal them to the extent that they
do not reserve that right to the Shareholders; they may fill vacancies in
their number, including vacancies resulting from increases in their own
number, and may elect and remove such officers and employ, appoint and
terminate such employees or agents as they consider appropriate; they may
appoint from their own number and terminate any one or more committees; they
may employ one or more custodians of the assets of the Trust and may
authorize such custodians to employ subcustodians and to deposit all or any
part of such assets in a system or systems for the central handling of
securities, retain a transfer agent and a Shareholder servicing agent, or
both, provide for the distribution of Shares through a principal underwriter
or otherwise, set record dates, and in general delegate such authority as
they consider desirable (including, without limitation, the authority to
purchase and sell securities and to invest funds, to determine the net income
of the Trust for any period, the value of the total assets of the Trust and
the net asset value of each Share, and to execute such deeds, agreements or
other instruments either in the name of the Trust or the names of the
Trustees or as their attorney or attorneys or otherwise as the Trustees from
time to time may deem expedient) to any officer of the Trust, committee of
the Trustees, any such employee, agent, custodian or underwriter or to any
Manager.
Without limiting the generality of the foregoing, the
Trustees shall have full power and authority:
(a) To invest and reinvest cash and to hold cash
uninvested;
(b) To vote or give assent, or exercise any rights
of ownership, with respect to stock or other securities or
property; and to execute and deliver proxies or powers of attorney to such
person or persons as the Trustees shall deem proper, granting to such person
or persons such power and discretion with relation to securities or property
as the Trustees shall deem proper;
(c) To hold any security or property in a form not indicating
any trust whether in bearer, unregistered or other negotiable form or in the
name of the Trust or a custodian,
subcustodian or other depository or a nominee or nominees or otherwise;
(d) To consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or concern, any
security of which is held in the Trust; to consent to any contract, lease,
mortgage, purchase or sale of property by such corporation or concern, and to
pay calls or subscriptions with respect to any security held in the Trust;
(e) To join with other security holders in acting through a
committee, depositary, voting trustee or otherwise, and in that connection to
deposit any security with, or transfer any security to, any such committee,
depositary or trustee, and to delegate to them such power and authority with
relation to any security (whether or not so deposited or transferred) as the
Trustees shall deem proper, and to agree to pay, and to pay, such portion of
the expenses and compensation of such committee, depositary or trustee as the
Trustees shall deem proper;
(f) To compromise, arbitrate, or otherwise adjust claims in
favor of or against the Trust or any matter in controversy, including, but
not limited to, claims for taxes;
(g) To allocate assets, liabilities and expenses of the Trust to
a particular series of Shares or to apportion the same among two or more
series, provided that any liabilities or expenses incurred by a particular
series of Shares shall be payable solely out of the assets of that series;
(h) To enter into joint ventures, general or limited
partnerships and any other combinations or associations;
(i) To purchase and pay for entirely out of Trust property such
insurance as they may deem necessary or appropriate for the conduct of the
business, including, without limitation, insurance policies insuring the
assets of the Trust and payment of distributions and principal on its
portfolio investments, and insurance policies insuring the Shareholders,
Trustees, officers, employees, agents, investment advisers or Managers,
principal underwriters, or independent contractors of the Trust individually
against all claims and liabilities of every nature arising by reason of
holding, being or having held any such office or position, or by reason of
any action alleged to have been taken or omitted by any such person as
Shareholder, Trustee, officer, employee, agent, investment adviser or
Manager, principal underwriter, or independent contractor, including any
action taken or omitted that may be determined to constitute negligence,
whether or not the Trust would have the power to indemnify such person
against such liability; and
(j) To pay pensions for faithful service, as deemed appropriate
by the Trustees, and to adopt, establish and carry out pension,
profit-sharing, share bonus, share purchase, savings, thrift and other
retirement, incentive and benefit plans, trusts and provisions, including the
purchasing of life insurance and annuity contracts as a means of providing
such retirement and other benefits, for any or all of the Trustees, officers,
employees and agents of the Trust.
Further, without limiting the generality of the foregoing, the
Trustees shall have full power and authority to incur and pay out of the
principal or income of the Trust such expenses and liabilities as may be
deemed by the Trustees to be necessary or proper for the purposes of the
Trust; provided, however, that all expenses and liabilities incurred or
arising in connection with a particular series of Shares, as determined by
the Trustees, shall be payable solely out of the assets of that series.
Any determination made in good faith and, so far as accounting
matters are involved, in accordance with generally accepted accounting
principles by or pursuant to the authority granted by the Trustees, as to the
amount of the assets, debts, obligations or liabilities of the Trust; the
amount of any reserves or charges set up and the propriety thereof; the time
of or purpose for creating such reserves or charges; the use, alteration or
cancellation of any reserves or charges (whether or not any debt, obligation
or liability for which such reserves or charges shall have been created shall
have been paid or discharged or shall be then or thereafter required to be
paid or discharged); the price or closing bid or asked price of any
investment owned or held by the Trust; the market value of any investment or
fair value of any other asset of the Trust; the number of Shares outstanding;
the estimated expense to the Trust in connection with purchases of its
Shares; the ability to liquidate investments in an orderly fashion; the
extent to which it is practicable to deliver a cross-section of the portfolio
of the Trust in payment for any such Shares, or as to any other matters
relating to the issue, sale, purchase and/or other acquisition or disposition
of investments or Shares of the Trust, shall be final and conclusive, and
shall be binding upon the Trust and its Shareholders, past, present and
future, and Shares are issued and sold on the condition and understanding
that any and all such determinations shall be binding as aforesaid.
Section 3. Meetings. At any meeting of the Trustees, a majority
of the Trustees then in office shall constitute a quorum. Any meeting may be
adjourned from time to time by a majority of the votes cast upon the
question, whether or not a quorum is present, and the meeting may be held as
adjourned without further notice.
When a quorum is present at any meeting, a majority of the
Trustees present may take any action, except when a larger vote is required
by this Declaration of Trust, the By-Laws or the 1940 Act.
Any action required or permitted to be taken at any meeting of
the Trustees or of any committee thereof may be taken without a meeting, if a
written consent to such action is signed by a majority of the Trustees or
members of any such committee then in office, as the case may be, and such
written consent is filed with the minutes of proceedings of the Trustees or
any such committee.
The Trustees or any committee designated by the Trustees may
participate in a meeting of the Trustees or such committee by means of a
conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other at the same
time. Participation by such means shall constitute presence in person at a
meeting.
Section 4. Ownership of Assets of the Trust. Title to all of
the assets of each series of Shares of the Trust at all times shall be
considered as vested in the Trustees.
Section 5. Investment Advice and Management Services. The
Trustees shall not in any way be bound or limited by any present or future
law or custom in regard to investments by trustees. The Trustees from time
to time may enter into a written contract or contracts with any person or
persons (herein called the "Manager"), including Huntington Capital Advisers
Inc. and BT Investment Management Limited or any other firm, corporation,
trust or association in which any Trustee or Shareholder may be interested,
to act as investment advisers and/or managers of the Trust and to provide
such investment advice and/or management as the Trustees from time to time
may consider necessary for the proper management of the assets of the Trust,
including, without limitation, authority to determine from time to time what
investments shall be purchased, held, sold or exchanged and what portion, if
any, of the assets of the Trust shall be held uninvested and to make changes
in the Trust's investments. Any such contract shall be subject to the
requirements of the 1940 Act with respect to its continuance in effect, its
termination and the method of authorization and approval of such contract, or
any amendment thereto or renewal thereof.
Any Trustee or any organization with which any Trustee may be
associated also may act as broker for the Trust in making purchases and sales
of securities for or to the Trust for its investment portfolio, and may
charge and receive from the Trust the usual and customary commission for such
service. Any organization with which a Trustee may be associated in acting
as broker for the Trust shall be responsible only for the proper execution of
transactions in accordance with the instructions of the Trust and shall be
subject to no further liability of any sort whatever.
The Manager, or any affiliate thereof, also may be a distributor
for the sale of Shares by separate contract or may be a person controlled by
or affiliated with any Trustee or any distributor or a person in which any
Trustee or any distributor is interested financially, subject only to
applicable provisions of law. Nothing herein contained shall operate to
prevent any Manager, who also acts as such a distributor, from also receiving
compensation for services rendered as such distributor.
Section 6. Removal and Resignation of Trustees. The Trustees or
the Shareholders (by vote of 66-2/3% of the outstanding shares entitled to
vote thereon) may remove at any time any Trustee with or without cause, and
any Trustee may resign at any time as Trustee, without penalty by written
notice to the Trust; provided that sixty days' advance written notice shall
be given in the event that there are only three or less Trustees at the time
a notice of resignation is submitted.
ARTICLE V
Shareholders' Voting Powers and Meetings
Section 1. Voting Powers. The Shareholders shall have power to
vote only (i) for the election of Trustees as provided in Article IV, Section
1, of this Declaration of Trust; provided, however, that no meeting of
Shareholders is required to be called for the purpose of electing Trustees
unless and until such time as less than a majority of the Trustees have been
elected by the Shareholders, (ii) for the removal of Trustees as provided in
Article IV, Section 6, (iii) with respect to any Manager as provided in
Article IV, Section 5, (iv) with respect to any amendment of this Declaration
of Trust as provided in Article IX, Section 8, (v) with respect to a
consolidation, merger or certain sales of assets as provided in Article IX,
Section 4, (vi) with respect to the termination of the Trust or a series of
Shares as provided in Article IX, Section 5, (vii) to the same extent as the
stockholders of a Massachusetts business corporation, as to whether or not a
court action, proceeding or claim should be brought or maintained
derivatively or as a class action on behalf of the Trust or the Shareholders,
and (viii) with respect to such additional matters relating to the Trust as
may be required by law, by this Declaration of Trust, or the By-Laws of the
Trust or any registration of the Trust with the Commission or any state, or
as the Trustees may consider desirable. Each whole Share shall be entitled
to one vote as to any matter on which it is entitled to vote (except that in
the election of Trustees said vote may be cast for as many persons as there
are Trustees to be elected), and each fractional Share shall be entitled to a
proportionate fractional vote. Notwithstanding any other provision of this
Declaration of Trust, on any matter submitted to a vote of Shareholders, all
Shares of the Trust then entitled to vote shall be voted by individual
series, except (i) when required by the 1940 Act, Shares shall be voted in
the aggregate and not by individual series and (ii) when the Trustees have
determined that the matter affects only the interests of one or more series,
then only Shareholders of such series shall be entitled to vote thereon.
There shall be no cumulative voting in the election of Trustees. Shares may
be voted in person or by proxy. A proxy with respect to Shares held in the
name of two or more persons shall be valid if executed by any one of them,
unless at or prior to exercise of the proxy the Trust receives a specific
written notice to the contrary from any one of them. A proxy purporting to
be executed by or on behalf of a Shareholder shall be deemed valid unless
challenged at or prior to its exercise and the burden of proving invalidity
shall rest on the challenger. Until Shares are issued, the Trustees may
exercise all rights of Shareholders and may take any action required by law,
this Declaration of Trust or any By-Laws of the Trust to be taken by
Shareholders.
Section 2. Meetings. Meetings of the Shareholders may be called
by the Trustees or such other person or persons as may be specified in the
By-Laws and shall be called by the Trustees upon the written request of
Shareholders owning at least 30% of the outstanding Shares entitled to vote.
Shareholders shall be entitled to at least ten days' prior notice of any
meeting.
Section 3. Quorum and Required Vote. Thirty percent (30%) of
the outstanding Shares shall be a quorum for the transaction of business at a
Shareholders' meeting, except that where any provision of law or of this
Declaration of Trust permits or requires that holders of any series shall
vote as a series, then thirty percent (30%) of the aggregate number of Shares
of that series entitled to vote shall be necessary to constitute a quorum for
the transaction of business by that series. Any lesser number, however,
shall be sufficient for adjournment and any adjourned session or sessions may
be held within 90 days after the date set for the original meeting without
the necessity of further notice. Except when a larger vote is required by
any provision of this Declaration of Trust or the By-Laws of the Trust and
subject to any applicable requirements of law, a majority of the Shares voted
shall decide any question and a plurality shall elect a Trustee, provided
that where any provision of law or of this Declaration of Trust permits or
requires that the holders of any series shall vote as a series, then a
majority of the Shares of that series voted on the matter (or a plurality
with respect to the election of a Trustee) shall decide that matter insofar
as that series is concerned.
Section 4. Action by Written Consent. Any action
required or permitted to be taken at any meeting may be taken without a
meeting if a consent in writing, setting forth such action, is signed by all
the Shareholders entitled to vote on the subject matter thereof and such
consent is filed with the records of the Trust.
Section 5. Additional Provisions. The By-Laws may include
further provisions for Shareholders' votes and meetings and related matters.
ARTICLE VI
Distributions and Redemptions
Section 1. Distributions. The Trustees shall distribute
periodically to the Shareholders of each series of Shares an amount
approximately equal to the net income of that series, determined by the
Trustees or as they may authorize and as herein provided. Distributions of
income may be made in one or more payments, which shall be in Shares, cash or
otherwise, and on a date or dates and as of a record date or dates determined
by the Trustees. At any time and from time to time in their discretion, the
Trustees also may cause to be distributed to the Shareholders of any one or
more series as of a record date or dates determined by the Trustees, in
Shares, cash or otherwise, all or part of any gains realized on the sale or
disposition of the assets of the series or all or part of any other principal
of the Trust attributable to the series. Each distribution pursuant to this
Section 1 shall be made ratably according to the number of Shares of the
series held by the several Shareholders on the record date for such
distribution, provided that no distribution need be made on Shares purchased
pursuant to orders received, or for which payment is made, after such time or
times as the Trustees may determine.
Section 2. Determination of Net Income. In determining the net
income of each series of Shares for any period, there shall be deducted from
income for that period (a) such portion of all charges, taxes, expenses and
liabilities due or accrued as the Trustees shall consider properly chargeable
and fairly applicable to income for that period or any earlier period and (b)
whatever reasonable reserves the Trustees shall consider advisable for
possible future charges, taxes, expenses and liabilities which the Trustees
shall consider properly chargeable and fairly applicable to income for that
period or any earlier period. The net income of each series for any period
may be adjusted for amounts included on account of net income in the net
asset value of Shares issued or redeemed or repurchased during that period.
In determining the net income of a series for a period ending on a date other
than the end of its fiscal year, income may be estimated as the Trustees
shall deem fair. Gains on the sale or disposition of assets shall not be
treated as income, and losses shall not be charged against income unless
appropriate under applicable accounting principles, except in the exercise of
the discretionary powers of the Trustees. Any amount contributed to the
Trust which is received as income pursuant to a decree of any court of
competent jurisdiction shall be applied as required by the said decree.
Section 3. Redemptions. Any Shareholder shall be entitled to
require the Trust to redeem and the Trust shall be obligated to redeem at the
option of such Shareholder all or any part of the Shares owned by said
Shareholder, at the redemption price, pursuant to the method, upon the terms
and subject to the conditions hereinafter set forth:
(a) Certificates for Shares, if issued, shall be presented for
redemption in proper form for transfer to the Trust or the agent of the Trust
appointed for such purpose, and these shall be presented with a written
request that the Trust redeem all or any part of the Shares represented
thereby.
(b) The redemption price per Share shall be the net asset value
per Share when next determined by the Trust at such time or times as the
Trustees shall designate, following the time of presentation of certificates
for Shares, if issued, and an appropriate request for redemption, or such
other time as the Trustees may designate in accordance with any provision of
the 1940 Act, or any rule or regulation made or adopted by any securities
association registered under the Securities Exchange Act of 1934, as
determined by the Trustees.
(c) Net asset value of each series of Shares (for the purpose of
issuance of Shares as well as redemptions thereof) shall be determined by
dividing:
(i) the total value of the assets of such series
determined as provided in paragraph (d) below less, to the
extent determined by or pursuant to the direction of the
Trustees in accordance with generally accepted accounting
principles, all debts, obligations and liabilities of such
series (which debts, obligations and liabilities shall include,
without limitation of the generality of the foregoing, any and
all debts, obligations, liabilities, or claims, of any and
every kind and nature, fixed, accrued and otherwise, including
the estimated accrued expenses of management and supervision,
administration and distribution and any reserves or charges for
any or all of the foregoing, whether for taxes, expenses, or
otherwise, and the price of Shares redeemed but not paid for)
but excluding the Trust's liability upon its Shares and its
surplus, by
(ii) the total number of Shares of such
series outstanding.
The Trustees are empowered, in their absolute discretion, to
establish other methods for determining such net asset value whenever such
other methods are deemed by them to be necessary to enable the Trust to
comply with, or are deemed by them to be desirable, provided they are not
inconsistent with any provision of the 1940 Act.
(d) In determining for the purposes of this Declaration of Trust
the total value of the assets of each series of Shares at any time,
investments and any other assets of such series shall be valued in such
manner as may be determined from time to time by or pursuant to the order of
the Trustees.
(e) Payment of the redemption price by the Trust may be made
either in cash or in securities or other assets at the time owned by the
Trust or partly in cash and partly in securities or other assets at the time
owned by the Trust. The value of any part of such payment to be made in
securities or other assets of the Trust shall be the value employed in
determining the redemption price. Payment of the redemption price shall be
made on or before the seventh day following the day on which the Shares are
properly presented for redemption hereunder, except that delivery of any
securities included in any such payment shall be made as promptly as any
necessary transfers on the books of the issuers whose securities are to be
delivered may be made and, except as postponement of the date of payment may
be permissible under the 1940 Act.
Pursuant to resolution of the Trustees, the Trust may deduct from
the payment made for any Shares redeemed a liquidating charge not in excess
of one percent (1%) of the redemption price of the Shares so redeemed, and
the Trustees may alter or suspend any such liquidating charge from time to
time.
(f) The right of any holder of Shares redeemed by the Trust as
provided in this Article VI to receive dividends or distributions thereon and
all other rights of such Shareholder with respect to such Shares shall
terminate at the time as of which the redemption price of such Shares is
determined, except the right of such Shareholder to receive (i) the
redemption price of such Shares from the Trust in accordance with the
provisions hereof, and (ii) any dividend or distribution to which such
Shareholder previously had become entitled as the record holder of such
Shares on the record date for such dividend or distribution.
(g) Redemption of Shares by the Trust is conditional upon the
Trust having funds or other assets legally available therefor.
(h) The Trust, either directly or through an agent, may
repurchase its Shares, out of funds legally available therefor, upon such
terms and conditions and for such consideration as the Trustees shall deem
advisable, by agreement with the owner at a price not exceeding the net asset
value per Share as determined by or pursuant to the order of the Trustees at
such time or times as the Trustees shall designate, less a charge not to
exceed one percent (1%) of such net asset value, if and as fixed by
resolution of the Trustees from time to time, and to take all other steps
deemed necessary or advisable in connection therewith.
(i) Shares purchased or redeemed by the Trust shall be cancelled
or held by the Trust for reissue, as the Trustees from time to time may
determine.
(j) The obligations set forth in this Article VI may be
suspended or postponed, (1) for any period (i) during which the New York
Stock Exchange is closed other than for customary weekend and holiday
closings, or (ii) during which trading on the New York Stock Exchange is
restricted, (2) for any period during which an emergency exists as a result
of which (i) the disposal by the Trust of investments owned by it is not
reasonably practicable, or (ii) it is not reasonably practicable for the
Trust fairly to determine the value of its net assets, or (3) for such other
periods as the Commission or any successor governmental authority by order
may permit.
Notwithstanding any other provision of this Section 3 of Article
VI, if certificates representing such Shares have been issued, the redemption
or repurchase price need not be paid by the Trust until such certificates are
presented in proper form for transfer to the Trust or the agent of the Trust
appointed for such purpose; however, the redemption or repurchase shall be
effective, in accordance with the resolution of the Trustees, regardless of
whether or not such presentation has been made.
Section 4. Redemptions at the Option of the Trust. The Trust
shall have the right at its option and at any time to redeem Shares of any
Shareholder at the net asset value thereof as determined in accordance with
Section 3 of Article VI of this Declaration of Trust: (i) if at such time
such Shareholder owns fewer Shares than, or Shares having an aggregate net
asset value of less than, an amount determined from time to time by the
Trustees; or (ii) to the extent that such Shareholder owns Shares of a
particular series of Shares equal to or in excess of a percentage of the
outstanding Shares of that series determined from time to time by the
Trustees; or (iii) to the extent that such Shareholder owns Shares of the
Trust representing a percentage equal to or in excess of such percentage of
the
aggregate number of outstanding Shares of the Trust or the aggregate net
asset value of the Trust determined from time to time by the Trustees.
Section 5. Dividends, Distributions, Redemptions and
Repurchases. No dividend or distribution (including, without limitation, any
distribution paid upon termination of the Trust or of any series) with
respect to, nor any redemption or repurchase of, the Shares of any series
shall be effected by the Trust other than from the assets of such series.
ARTICLE VII
Compensation and Limitation of
Liability of Trustees
Section 1. Compensation. The Trustees shall be entitled to
reasonable compensation from the Trust and may fix the amount of their
compensation.
Section 2. Limitation of Liability. The Trustees shall not be
responsible or liable in any event for any neglect or wrongdoing of any
officer, agent, employee or Manager of the Trust, nor shall any Trustee be
responsible for the act or omission of any other Trustee, but nothing herein
contained shall protect any Trustee against any liability to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.
Every note, bond, contract, instrument, certificate, share, or
undertaking and every other act or thing whatsoever executed or done by or on
behalf of the Trust or the Trustees or any of them in connection with the
Trust, shall be deemed conclusively to have been executed or done only in
their or his capacity as Trustees or Trustee, and such Trustees or Trustee
shall not be personally liable thereon.
ARTICLE VIII
Indemnification
Section 1. Indemnification of Trustees, Officers, Employees and
Agents. Each person who is or was a Trustee, officer, employee or agent of
the Trust shall be entitled to indemnification out of the assets of the Trust
to the extent provided in, and subject to the provisions of, the By-Laws,
provided that no indemnification shall be granted by the Trust in
contravention of the 1940 Act.
Section 2. Merged Corporations. For the purposes of this
Article VIII references to "the Trust" include any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power
and authority to indemnify its directors, officers, employees or agents as
well as the resulting or surviving entity; so that any person who is or was a
director, officer, employee or agent of such a constituent corporation or is
or was serving at the request of such a constituent corporation as a trustee,
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise shall stand in the same position
under the provisions of this Article VIII with respect to the resulting or
surviving entity as he would have with respect to such a constituent
corporation if its separate existence had continued.
Section 3. Shareholders. In case any Shareholder or former
Shareholder shall be held to be personally liable solely by reason of his
being or having been a Shareholder and not because of his acts or omissions
or for some other reason, the Shareholder or former Shareholder (or his
heirs, executors, administrators or other legal representatives or in the
case of a corporation or other entity, its corporate or other general
successor) shall be entitled out of the assets of the Trust to be held
harmless from and indemnified against all losses and expenses arising from
such liability. Upon request, the Trust shall cause its counsel to assume
the defense of any claim which, if successful, would result in an obligation
of the Trust to indemnify the Shareholder as aforesaid.
ARTICLE IX
Status of the Trust and Other General Provisions
Section 1. Trust Not a Partnership. It is hereby expressly
declared that a trust and not a partnership is created hereby. Neither the
Trust nor the Trustees, nor any officer, employee or agent of the Trust shall
have any power to bind personally either the Trust's Trustees or officers or
any Shareholders. All persons extending credit to, contracting with or
having any claim against the Trust or a particular series of Shares shall
look only to the assets of the Trust or the assets of that particular series
for payment under such credit, contract or claim; and neither the
Shareholders nor the Trustees, nor any of the Trust's officers, employees or
agents, whether past, present or future, shall be personally liable
therefor. Nothing in this Declaration of Trust shall protect any Trustee
against any liability to which such Trustee otherwise would be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office of Trustee
hereunder.
Section 2. Trustee's Good Faith Action, Expert Advice, No Bond
or Surety. The exercise by the Trustees of their powers and discretion
hereunder under the circumstances then prevailing, shall be binding upon
everyone interested. A Trustee shall be liable for his or her own willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee, and for nothing else, and
shall not be liable for errors of judgment or mistakes of fact or law. The
Trustees may take advice of counsel or other experts with respect to the
meaning and operation of this Declaration of Trust, and subject to the
provisions of Section 1 of this Article IX shall be under no liability for
any act or omission in accordance with such advice or for failing to follow
such advice. The Trustees shall not be required to give any bond as such,
nor any surety if a bond is required.
Section 3. Liability of Third Persons Dealing with Trustees. No
person dealing with the Trustees shall be bound to make any inquiry
concerning the validity of any transaction made or to be made by the Trustees
pursuant hereto or to see to the application of any payments made or property
transferred to the Trust or upon its order.
Section 4. Trustees, Shareholders, etc. Not Personally Liable:
Notice. All persons extending credit to, contracting with or having any
claim against the Trust or a particular series of Shares shall look only to
the assets of the Trust or the assets of that particular series of Shares for
payment under such credit, contract or claim; and neither the Shareholders
nor the Trustees, nor any of the Trust's officers, employees or agents,
whether past, present or future, shall be personally liable therefor.
Section 5. Consolidation, Merger, Sale of Assets.
The Trust may, in accordance with the provisions of this Section:
(1) Consolidate with one or more corporations or
trusts to form a new consolidated corporation or trust; or
(2) Merge into a corporation or trust, or have
merged into it one or more corporations or trusts; or
(3) Sell, lease, exchange or transfer all, or substantially all,
its property and assets, including its good will and franchises.
Any such consolidation, merger, sale, lease, exchange or other
transfer of all or substantially all of the property and assets of the Trust
may be made only upon substantially the terms and conditions set forth in a
proposed form of articles of consolidation, articles of merger or articles of
sale, lease, exchange or transfer, as the case may be, which are approved by
votes of the Trustees and Shareholders holding a majority of the Shares
entitled to vote thereon, provided that in the case of a merger in which the
Trust is the surviving entity which effects no reclassification or change of
any outstanding shares of the Trust or other amendment of this Declaration of
Trust, no vote of the Shareholders shall be necessary (and in lieu thereof,
the proposed articles of merger shall be approved by a majority of the
Trustees) if the number of Shares, if any, of the Trust to be issued or
delivered in the merger does not exceed fifteen percent of the number of
Shares outstanding (before giving effect to the merger) on the effective date
of the merger. Any articles of consolidation, merger, sale, lease, exchange
or transfer shall constitute a supplemental Declaration of Trust, copies of
which shall be filed as specified in Section 7 of this Article IX.
Section 6. Termination of Trust. Unless terminated as provided
herein, the Trust shall continue without limitation of time. The Trust may
he terminated at any time by vote of Shareholders holding at least a majority
of the Shares of each series entitled to vote or by the Trustees by written
notice to the Shareholders. Any series of Shares may be terminated at any
time by vote of Shareholders holding at least a majority of the Shares of
such series entitled to vote or by the Trustees by written notice to the
Shareholders of such series.
Upon termination of the Trust or of any one or more series of
Shares, after paying or otherwise providing for all charges, taxes, expenses
and liabilities, whether due or accrued or anticipated as may be determined
by the Trustees, the Trust shall reduce, in accordance with such procedures
as the Trustees consider appropriate, the remaining assets to distributable
form in cash or shares or other securities, or any combination thereof, and
distribute the proceeds to the Shareholders of the series involved, ratably
according to the number of Shares of such series held by the several
Shareholders of such series on the date of termination.
Section 7. Filing of Copies, References, Headings. The original
or a copy of this instrument and of each amendment hereto and of each
Declaration of Trust supplemental hereto shall be kept at the office of the
Trust where it may be inspected by any Shareholder. A copy of this
instrument and of each such amendment and supplemental Declaration of Trust
shall be filed by the Trust with the Secretary of The Commonwealth of
Massachusetts and the Boston City Clerk, as well as any other governmental
office where such filing may from time to time be required. Anyone dealing
with the Trust may rely on a certificate by an officer of the Trust as to
whether or not any such amendments or supplemental Declarations of Trust have
been made and as to matters in connection with the Trust hereunder; and, with
the same effect as if it were the original, may rely on a copy certified by
an officer of the Trust to be a copy of this instrument or of any such
amendment or supplemental Declaration of Trust. In this instrument or in any
such amendment or supplemental Declaration of Trust, references to this
instrument, and all expressions like "herein," "hereof," and "hereunder,"
shall be deemed to refer to this instrument as amended or affected by any
such amendment or supplemental Declaration of Trust. Headings are placed
herein for convenience of reference only and in case of any conflict, the
text of this instrument, rather than the headings, shall control. This
instrument may be executed in any number of counterparts each of which shall
be deemed an original.
Section 8. Applicable Law. The Trust set forth in this
instrument is made in The Commonwealth of Massachusetts, and it is created
under and is to be governed by and construed and administered according to
the laws of said Commonwealth. The Trust shall be of the type commonly
called a Massachusetts business trust, and without limiting the provisions
hereof, the Trust may exercise all powers which are ordinarily exercised by
such a trust.
Section 9. Amendments. This Declaration of Trust may be amended
at any time by an instrument in writing signed by a majority of the then
Trustees when authorized so to do by a vote of Shareholders holding a
majority of the Shares of each series entitled to vote, except that an
amendment which shall affect the holders of one or more series of Shares but
not the holders of all outstanding series shall be authorized by vote of the
Shareholders holding a majority of the Shares entitled to vote of each series
affected and no vote of Shareholders of a series not affected shall be
required. Amendments having the purpose of changing the name of the Trust or
of supplying any omission, curing any ambiguity or curing, correcting or
supplementing any defective or inconsistent provision contained herein shall
not require authorization by Shareholder vote.
IN WITNESS WHEREOF, Donald P. Gould has hereunto set his hand and
seal in the City of Boston, Massachusetts, for himself and his assigns as of
the day and year first above written.
/s/ Donald P. Gould
COMMONWEALTH OF MASSACHUSETTS
Suffolk, ss. Boston, November 6, 1985
Then personally appeared the above-named Donald P. Gould and
acknowledged the foregoing instrument to be his free act and deed, before me.
/s/ Germaine P. Beecher
Notary Public
My Commission expires: 2/20/92
(Notarial Seal)
CERTIFICATE OF AMENDMENT
OF
AGREEMENT AND DECLARATION OF TRUST
OF
INTERNATIONAL CASH PORTFOLIOS
The undersigned certify that:
1. They constitute a majority of the Board of Trustees of
INTERNATIONAL CASH PORTFOLIOS, a Massachusetts business trust
(the "Trust"):
2. They hereby adopt the following amendments to the Agreement and
Declaration of Trust of the Trust (the "Declaration of Trust"):
A. The title of the Declaration of Trust is hereby amended to
read as follows:
INTERNATIONAL CURRENCY PORTFOLIOS
Agreement and Declaration of Trust
B. Article I, Section 1 of the Declaration of Trust is hereby
amended to read as follows:
Section 1. Name. This Trust shall be known as
INTERNATIONAL CURRENCY PORTFOLIOS.
3. It is the determination of the Trustees that approval of the
shareholders of the Trust is not required by the Investment
Company Act of 1940, as amended, or other applicable law. This
amendment is made pursuant to Article IX, Section 9 of the
Declaration of Trust which empowers the Trustees to amend the
Declaration of Trust for the purpose of changing the name of the
Trust.
IN WITNESS WHEREOF, the Trustees named below do hereby
set their hands as of the 26th day of April, 1991.
/s/ Donald P. Gould
Donald P. Gould Alan T. Leupp
/s/ James J. Atkinson, Jr. /s/ Daniel J. Bacastow
James J. Atkinson, Jr. Daniel J. Bacastow
/s/ David P. Kraus /s/ David K. Eiteman
David P. Kraus David K. Eiteman
/s/ Gerald R. Healy
Gerald R. Healy
CERTIFICATE OF AMENDMENT
OF
AGREEMENT AND DECLARATION OF TRUST
OF
INTERNATIONAL CURRENCY PORTFOLIOS
The undersigned certify that:
1. They constitute a majority of the Board of Trustees of INTERNATIONAL
CURRENCY PORTFOLIOS, a Massachusetts business trust (the "Trust"):
2. They hereby adopt the following amendments to the Agreements and
Declaration of Trust of the Trust (the "Declaration of Trust"):
A. The title of the Declaration of Trust is hereby amended to read
as follows:
HUNTINGTON FUNDS
Agreement and Declaration of Trust
B. Article I, Section 1 of the Declaration of Trust is hereby
amended to read as follows:
Section 1. Name. The Trust shall be known as HUNTINGTON FUNDS
3. It is the determination of the Trustees that approval of the
shareholders of the Trust is not required by the Investment Company Act
of 1940, as amended, or other applicable law. This amendment is made
pursuant to Article IX, Section 9 of the Declaration of Trust which
empowers the Trustees to amend the Declaration of Trust for the purpose
of changing the name of the Trust.
IN WITNESS WHEREOF, the Trustees named below do hereby set their hands
as of the 23rd day of October, 1992.
/s/ Donald P. Gould
Donald P. Gould Alan t. Leupp
/s/ James J. Atkinson, Jr. /s/ Daniel J. Bacastow
James J. Atkinson, Jr. Daniel J. Bacastow
/s/ David P. Kraus
David P. Kraus David K. Eiteman
/s/ Gerald R. Healy
Gerald R. Healy
CERTIFICATE OF AMENDMENT OF
AGREEMENT AND DECLARATION OF TRUST OF
HUNTINGTON FUNDS
The undersigned certify that :
1. They constitute a majority of the Board of Trustees of HUNTINGTON
FUNDS, a Massachusetts business trust (the "Trust").
2. They hereby adopt the following amendments to the Agreement and
Declaration of Trust of the Trust (the "Declaration of Trust").
A. The title of the Declaration of Trust is hereby
amended to read as follows:
FRANKLIN/TEMPLETON GLOBAL TRUST
Agreement and Declaration of Trust
B. Article I, Section 1 of the Declaration of Trust is hereby
amended in full to read as follows:
Section 1. Name. This Trust shall be known as
FRANKLIN/TEMPLETON GLOBAL TRUST.
C. Appendix A hereto shall be incorporated by reference as
Appendix A to the Declaration of Trust.
3. It is the determination of the Trustees that approval of the
shareholders of the Trust is not required by the Investment
Company Act of 1940, as amended, or other applicable law. This
amendment is made pursuant to Article IX, Section 9 of the
Declaration of Trust.
IN WITNESS WHEREOF, the Trustees named below do hereby set their
hands as of the 16th day of November, 1993.
/s/ Donald P. Gould /s/ S. Joseph Fortunato
Donald P. Gould S. Joseph Fortunato
/s/ David W. Garbellano
David K. Eiteman David W. Garbellano
/s/ Gerald R. Healy /s/ Charles B. Johnson
Gerald R. Healy Charles B. Johnson
/s/ David P. Kraus /s/ Rupert H. Johnson, Jr.
David P. Kraus Rupert H. Johnson, Jr.
/s/ Frank H. Abbott, III /s/ Frank W.T. LaHaye
Frank H. Abbott, III Frank W.T. LaHaye
/s/ Harris J. Ashton /s/ Gordon S. Macklin
Harris J. Ashton Gordon S. Macklin
Names and Addresses
of Trustees
Donald P. Gould S. Joseph Fortunato
777 Mariners Island Blvd. Park Avenue at, Morris
County P. 0. Box 1945
San Mateo, CA 94404 Morristown, NJ 07962
David K. Eiteman David W. Garbellano
c/o Hong Kong University of 111 New Montgomery Street
Science & Technology San Francisco, CA 94105
Department of Accounting,
Clear Water Bay
Kowloon, Hong Kong
Gerald R. Healy Charles B. Johnson
Alliance Imaging, Inc. 777 Mariners Island Blvd.
Presidents Plaza II San Mateo, CA 94404
8700 West Bryn Mawr
Suite 800 South
Chicago, IL 60631
David P. Kraus Rupert H. Johnson, Jr.
2707 Stoner Ave. 777 Mariners Island Blvd.
Los Angeles, CA 90064 San Mateo, CA 94404
Frank H. Abbott, III Frank W.T. LaHaye
1045 Sansome St. 20833 Stevens Creek Blvd.
San Francisco, CA 94111 Suite 102
Cupertino, CA 95014
Harris J. Ashton Gordon S. Macklin
General Host Corporation 8212 Burning Tree Rd.
Metro Center Bethesda, MD 20817
1 Station Plc.
Stamford, CT 60902
The principal place of business for the Trust is 777 Mariners Island Blvd., San
Mateo, CA 94404.
The name and address of the resident agent for the Trust is CT Corporation
System, 2 Oliver Street, Boston, MA 02109
CERTIFICATE OF AMENDMENT
OF
AGREEMENT AND DECLARATION OF TRUST
OF
FRANKLIN/TEMPLETON GLOBAL TRUST
The undersigned certify that:
1. They constitute a majority of the Board of Trustees of FRANKLIN/TEMPLETON
GLOBAL TRUST, a Massachusetts business trust (the "Trust").
2. They hereby adopt the following amendments to the Agreement and Declaration
of Trust of the Trust (the "Declaration of Trust"):
A. The title of the Declaration of Trust is hereby amended to read as
follows:
B. Article I, Section 1 of the Declaration of Trust is hereby amended in
full to read as follows:
SECTION 1. NAME. This Trust shall be known as FRANKLIN/TEMPLETON GLOBAL
TRUST.
3. It is the determination of the Trustees that approval of the shareholders
of the Trust is not required by the Investment Company Act of 1940, as amended,
or other applicable law. This amendment is made pursuant to Article IX, Section
9 of the Declaration of Trust.
IN WITNESS WHEREOF, the Trustees named below do hereby set their hands
as of March 21, 1995.
/s/ Frank H. Abbott, III /s/ Harris J. Ashton
Frank H. Abbott, III Harris J. Ashton
/s/ S. Joseph Fortunato
David K. Eiteman S. Joseph Fortunato
/s/ David W. Garbellano
David W. Garbellano Donald P. Gould
/s/ Charles B. Johnson
Gerald R. Healy Charles B. Johnson
/s/ Rupert H. Johnson, Jr.
Rupert H. Johnson, Jr. David P. Kraus
/s/ Frank W.T. LaHaye /s/ Gordon S. Macklin
Frank W.T. LaHaye Gordon S. Macklin
BY-LAWS
OF
INTERNATIONAL CASH PORTFOLIOS
ARTICLE 1
Agreement and Declaration of Trust and Principal Office
1.1 Agreement and Declaration of Trust. These By-Laws shall be subject to
the Agreement and Declaration of Trust, as from time to time in effect (the
"Declaration of Trust"), of the above-captioned Massachusetts business trust
established by the Declaration of Trust (the "Trust").
1.2 Principal Office of the Trust. The principal office of the Trust shall
be located in Los Angeles, California. Its resident agent in Massachusetts shall
be CT Corporation System, 2 Oliver Street, Boston, Massachusetts, or such other
person as the Trustees from time to time may select.
ARTICLE 2
Meetings of Trustees
2.1 Regular Meetings. Regular meetings of the Trustees may be held without
call or notice at such places and at such times as the Trustees from time to
time may determine, provided that notice of the first regular meeting following
any such determination shall be given to absent Trustees.
2.2 Special Meetings. Special meetings of the Trustees may be held at any
time and at any place designated in the call of the meeting when called by the
President or the Treasurer or by two or more Trustees, sufficient notice thereof
being given to each Trustee by the Secretary or an Assistant Secretary or by the
officer or the Trustees calling the meeting.
2.3 Notice of Special Meetings. It shall be sufficient notice to a Trustee
of a special meeting to send notice by mail at least forty-eight hours or by
telegram at least twenty-four hours before the meeting addressed to the Trustee
at his or her usual or last known business or residence address least
twenty-four hours before the meeting. Notice of a meeting need not be given to
any Trustee if a written waiver of notice, executed by him or her before or
after the meeting, is filed with the records of the meeting, or to any Trustee
who attends the meeting without protesting prior thereto or at its commencement
the lack of notice to him or her. Neither notice of a meeting nor a waiver of a
notice need specify the purposes of the meeting.
2.4 Notice of Certain Actions by Consent. If in accordance with the
provisions of the Declaration of Trust any action is taken by the Trustees by a
written consent of less than all of the Trustees, then prompt notice of any such
action shall be furnished to each Trustee who did not execute such written
consent, provided that the effectiveness of such action shall not be impaired by
any delay or failure to furnish such notice.
ARTICLE 3
Officers
3.1 Enumeration; Qualification. The officers of the Trust shall be a
President, a Treasurer, a Secretary, and such other officers, if any, as the
Trustees from time to time may in their discretion elect. The Trust also may
have such agents as the Trustees from time to time may in their discretion
appoint. Officers may be but need not be a Trustee or shareholder. Any two or
more offices may be held by the same person.
3.2 Election. The President, the Treasurer and the Secretary shall be
elected by the Trustees upon the occurrence of any vacancy in any such office.
Other officers, if any, may be elected or appointed by the Trustees at any time.
Vacancies in any such other office may be filled at any time.
3.3 Tenure. The President, Treasurer and Secretary shall hold office in
each case until he or she sooner dies, resigns, is removed or becomes
disqualified. Each other officer shall hold office and each agent shall retain
authority at the pleasure of the Trustees.
3.4 Powers. Subject to the other provisions of these By-Laws, each officer
shall have, in addition to the duties and powers herein and in the Declaration
of Trust set forth, such duties and powers as commonly are incident to the
office occupied by him or her as if the Trust were organized as a Massachusetts
business corporation or such other duties and powers as the Trustees may from
time to time designate.
3.5 President. Unless the Trustees otherwise provide, the President shall
preside at all meetings of the shareholders and of the Trustees. Unless the
Trustees otherwise provide, the President shall be the chief executive officer.
3.6 Treasurer. The Treasurer shall be the chief financial and accounting
officer of the Trust, and, subject to the provisions of the Declaration of Trust
and to any arrangement made by the Trustees with a custodian, investment adviser
or manager, or transfer, shareholder servicing or similar agent, shall be in
charge of the valuable papers, books of account and accounting records of the
Trust, and shall have such other duties and powers as may be designated from
time to time by the Trustees or by the President.
3.7 Secretary. The Secretary shall record all proceedings of the
shareholders and the Trustees in books to be kept therefor, which books or a
copy thereof shall be kept at the principal office of the Trust. In the absence
of the Secretary from any meeting of the shareholders or Trustees, an Assistant
Secretary, or if there be none or if he or she is absent, a temporary Secretary
chosen at such meeting shall record the proceedings thereof in the aforesaid
books.
3.8 Resignations and Removals. Any Trustee or officer may resign at any
time by written instrument signed by him or her and delivered to the President
or Secretary or to a meeting of the Trustees. Such resignation shall be
effective upon receipt unless specified to be effective at some other time. The
Trustees may remove any officer elected by them with or without cause. Except to
the extent expressly provided in a written agreement with the Trust, no Trustee
or officer resigning and no officer removed shall have any right to any
compensation for any period following his or her resignation or removal, or any
right to damages on account of such removal.
ARTICLE 4
Committees
4.1 Appointment. The Trustees may appoint from their number an executive
committee and other committees. Except as the Trustees otherwise may determine,
any such committee may make rules for conduct of its business.
4.2 Quorum; Voting. A majority of the members of any Committee of the
Trustees shall constitute a quorum for the transaction of business, and any
action of such a Committee may be taken at a meeting by a vote of a majority of
the members present (a quorum being present).
ARTICLE 5
Reports
The Trustees and officers shall render reports at the time and in the
manner required by the Declaration of Trust or any applicable law. Officers and
Committees shall render such additional reports as they may deem desirable or as
may from time to time be required by the Trustees.
ARTICLE 6
Fiscal Year
Except as from time to time otherwise provided by the Trustees, the fiscal
year of the Trust shall end on the last day in April.
ARTICLE 7
Seal
The seal of the Trust shall consist of a flat-faced die with the word
"Massachusetts," together with the name of the Trust and the year of its
organization cut or engraved thereon but, unless otherwise required by the
Trustees, the seal shall not be necessary to be placed on, and in its absence
shall not impair the validity of, any document, instrument or other paper
executed and delivered by or on behalf of the Trust.
ARTICLE 8
Execution of Papers
Except as the Trustees generally or in particular cases may authorize the
execution thereof in some other manner, all deeds, leases, contracts, notes and
other obligations made by the Trustees shall be signed by the President, any
Vice President, or by the Treasurer and need not bear the seal of the Trust.
ARTICLE 9
Issuance of Share Certificates
9.1 Sale of Shares. Except as otherwise determined by the Trustees, the
Trust will issue and sell for cash or securities from time to time, full and
fractional shares of its shares of beneficial interest, such shares to be issued
and sold at a price of not less than net asset value per share as from time to
time determined in accordance with the Declaration of Trust and these By-Laws
and, in the case of fractional shares, at a proportionate reduction in such
price. In the case of shares sold for securities, such securities shall be
valued in accordance with the provisions for determining value of assets of the
Trust as stated in the Declaration of Trust and these, By-Laws. The officers of
the Trust are severally authorized to take all such actions as may be necessary
or desirable to carry out this Section 9.1.
9.2 Share Certificates. In lieu of issuing certificates for shares, the
Trustees or the transfer agent either may issue receipts therefor or may keep
accounts upon the books of the Trust for the record holders of such shares, who
shall in either case, for all purposes hereunder, be deemed to be the holders of
certificates for such shares as if they had accepted such certificates and shall
be held to have expressly assented and agreed to the terms hereof.
The Trustees at any time may authorize the issuance of share certificates.
In that event, each shareholder shall be entitled to a certificate stating the
number of shares owned by him, in such form as shall be prescribed from time to
time by the Trustees. Such certificate shall be signed by the President or vice
President and by the Treasurer or Assistant Treasurer. Such signatures may be
facsimile if the certificate is signed by a transfer agent, or by a registrar,
other than a Trustee, officer or employee of the Trust. In case any officer who
has signed or whose facsimile signature has been placed on such certificate
shall cease to be such officer before such certificate is issued, it may be
issued by the Trust with the same effect as if he or she were such officer at
the time of its issue.
9.3 Loss of Certificates. The Trust, or if any transfer agent is appointed
for the Trust, the transfer agent with the approval of any two officers of the
Trust, is authorized to issue and countersign replacement certificates for the
shares of the Trust which have been lost, stolen or destroyed subject to the
deposit of a bond or other indemnity in such form and with such security, if
any, as the Trustees may require.
9.4 Discontinuance of Issuance of Certificates. The Trustees at any time
may discontinue the issuance of share certificates and by written notice to each
shareholder, may require the surrender of share certificates to the Trust for
cancellation. Such surrender and cancellation shall not affect the ownership of
shares in the Trust.
ARTICLE 10
Indemnification
10.1 Trustees, Officers, etc. The Trust shall indemnify each of its
Trustees and officers (including persons who serve at the Trust's request as
directors, officers or trustees of another organization in which the Trust has
any interest as a shareholder, creditor or otherwise) (hereinafter referred to
as a "Covered Person") against all liabilities and expenses, including but not
limited to amounts paid in satisfaction of judgments, in compromise or as fines
and penalties, and counsel fees reasonably incurred by any Covered Person in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
legislative body, in which such Covered Person may be or may have been involved
as a party or otherwise or with which such person may be or may have been
threatened, while in office or thereafter, by reason of being or having been
such a Trustee or officer, except with respect to any matter as to which such
Covered Person shall have been finally adjudicated in a decision on the merits
in any such action, suit or other proceeding not to have acted in good faith in
the reasonable belief that such Covered Person's action was in the best
interests of the Trust and except that no Covered Person shall be indemnified
against any liability to the Trust or its Shareholders to which such Covered
Person would otherwise be subject by reason of wilful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
such Covered Person's office. Expenses, including counsel fees so incurred by
any such Covered Person (but excluding amounts paid in satisfaction of
judgments, in compromise or as fines or penalties), may be paid from time to
time by the Trust in advance of the final disposition or any such action, suit
or proceeding upon receipt of an undertaking by or on behalf of such Covered
Person to repay amounts so paid to the Trust if it is ultimately determined that
indemnification of such expenses is not authorized under this Article, provided
that (a) such Covered Person shall provide security for his undertaking, (b) the
Trust shall be insured against losses arising by reason of such Covered Person's
failure to fulfill his undertaking, or (c) a majority of the Trustees who are
disinterested persons and who are not Interested Persons (as that term is
defined in the Investment Company Act of 1940) (provided that a majority of such
Trustees then in office act on the matter), or independent legal counsel in a
written opinion, shall determine, based on a review of readily available facts
(but not a full trial-type inquiry), that there is reason to believe such
Covered Person ultimately will be entitled to indemnification.
10.2 Compromise Payment. As to any matter disposed of (whether by a
compromise payment, pursuant to a consent decree or otherwise) without an
adjudication in a decision on the merits by a court, or by any other body before
which the proceeding was brought, that such Covered Person either (a) did not
act in good faith in the reasonable bel4.ef that such Covered Person's action
was in the best interests of the Trust or (b) is liable to the Trust or its
Shareholders by reason of wilful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of such Covered
Person's office, indemnification shall be provided if (a) approved as in the
best interest of the Trust, after notice that it involves such indemnification,
by at least a majority of the Trustees who are disinterested persons and are not
Interested Persons (provided that a majority of such Trustees then in office act
on the matter), upon a determination, based upon a review of readily available
facts (but not a full trial-type inquiry) that such Covered Person acted in good
faith in the reasonable belief that such Covered Person's action was in the best
interests of the Trust and is not liable to the Trust or its Shareholders by
reason of wilful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of such Covered Person's office, or (b)
there has been obtained an opinion in writing of independent legal counsel,
based upon a review of readily available facts (but not a full trial-type
inquiry) to the effect that such Covered Person appears to have acted in good
faith in the reasonable belief that such Covered Person's action was in the best
interests of the Trust and that such indemnification would not protect such
Covered Person against any liability to the Trust to which such Covered Person
would otherwise be subject by reason of wilful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office. Any approval pursuant to this Section shall not prevent the recovery
from any Covered Person of any amount paid to such Covered Person in accordance
with this Section as indemnification if such Covered Person is subsequently
adjudicated by a court of competent jurisdiction not to have acted in good faith
in the reasonable belief that such Covered Person's action was in the best
interest of the Trust or to have been liable to the Trust or its Shareholders by
reason of wilful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of such Covered Person's office.
10.3 Indemnification Not Exclusive. The right of indemnification hereby
provided shall not be exclusive of or affect any other rights to which any such
Covered Person may be entitled. As used in this Article 10, the term 'Covered
Person' shall include such person's heirs, executors and administrators, and a
disinterested person is a person against whom none of the actions, suits or
other proceedings in question or another action, suit, or other proceeding on
the same or similar grounds is then or has been pending. Nothing contained in
this article shall affect any rights to indemnification to which personnel of
the Trust, other than Trustees and officers, and other persons may be entitled
by contract or otherwise under law, nor the power of the Trust to purchase and
maintain liability insurance on behalf of such person.
10.4 Limitation: Notwithstanding any provisions in the Declaration of Trust
and these By-Laws pertaining to indemnification, all such provisions are limited
by the following undertaking set forth in the rules promulgated by the
Securities and Exchange Commission:
In the event that a claim for indemnification is asserted by a
Trustee, officer or controlling person of the Trust in connection with
the registered securities of the Trust, the Trust will not make such
indemnification unless (i) the Trust has submitted, before a court or
other body, the question of whether the person to be indemnified was
liable by reason of wilful misfeasance, bad faith, gross negligence,
or reckless disregard of duties, and has obtained a final decision on
the merits that such person was not liable by reason of such conductor
(ii) in the absence of such decision, the Trust shall have obtained a
reasonable determination, based upon a review of the facts, that such
person was not liable by virtue of such conduct, by (a)the vote of a
majority of Trustees who are neither interested persons as such term
is defined in the Investment Company Act of 1940, nor parties to the
proceeding or (b) an independent legal counsel in a written opinion.
The Trust will not advance attorneys' fees or other expenses
incurred by the person to be indemnified unless the Trust shall have
(i) received an undertaking by or on behalf of such person to repay
the advance unless it is ultimately determined that such person is
entitled to indemnification and one of the following conditions shall
have occurred: (x) such person shall provide security for his
undertaking, (y) the Trust shall be insured against losses arising by
reason of any lawful advances or (z) a majority of the disinterested,
non-party Trustees of the Trust, or an independent legal counsel in a
written opinion, shall have determined that based on a review of
readily available facts there is reason to believe that such person
ultimately will be found entitled to indemnification.
ARTICLE 11
Shareholders
11.1 Meetings. A meeting of the shareholders shall be called by the
Secretary whenever ordered by the Trustees, or requested in writing by the
holder or holders of at least 10% of the outstanding shares entitled to vote at
such meeting. If the meeting is a meeting of the shareholders of one or more
series of shares, but not a meeting of all shareholders of the Trust, then only
the shareholders of such one or more series shall be entitled to notice of and
to vote at the meeting. If the Secretary, when so ordered or requested, refuses
or neglects for more than five days to call such meeting, the Trustees, or the
shareholders so requesting may, in the name of the Secretary, call the meeting
by giving notice thereof in the manner required when notice is given by the
Secretary.
11.2 Access to Shareholder List. Shareholders of record may apply to the
Trustees for assistance in communicating with other shareholders for the purpose
of calling a meeting in order to vote upon the question of removal of a Trustee.
When ten or more shareholders of record who have been such for at least six
months preceding the date of application and who hold in the aggregate shares
having a net asset value of at least $25,000 or at least 1% of the outstanding
shares, whichever is less, so apply, the Trustees shall within five business
days either:
(i) afford to such applicants access to a list of names and addresses
of all shareholders as recorded on the books of the Trust; or
(ii) inform such applicants of the approximate number of shareholders
of record and the approximate cost of mailing material to them and, within
a reasonable time thereafter, mail, at the applicants' expense, materials
submitted by the applicants, to all such shareholders of record. The
Trustees shall not be obligated to mail materials which they believe to be
misleading or in violation of applicable law.
11.3 Record Dates. For the purpose of determining the shareholders of any
series who are entitled to vote or act at any meeting or any adjournment
thereof, or who are entitled to receive payment of any dividend or of any other
distribution, the Trustees from time to time may fix a time, which shall be not
more than 90 days before the date of any meeting of shareholders or the date of
payment of any dividend or of any other distribution, as the record date for
determining the shareholders of such series having the right to notice of and to
vote at such meeting and any adjournment thereof or the right to receive such
dividend or distribution, and in such case only shareholders of record on such
record date shall have such 'right notwithstanding any transfer of shares on the
books of the Trust after the record date; or without fixing such record date the
Trustees may for any such purposes close the register or transfer books for all
or part of such period.
11.4 Place of Meetings. All meetings of the shareholders shall be held at
the principal office of time Trust or at such other place within the United
States as shall be designated by the Trustees or the President of the Trust.
11.5 Notice of Meetings. A written notice of each meeting of shareholders,
stating the place, date and hour and the purposes of the meeting, shall be given
at least ten days before the meeting to each shareholder entitled to vote
thereat by leaving such notice with him or at his residence or usual place of
business or by mailing it, postage prepaid, and addressed to such shareholder at
his address as it appears in the records of the Trust. Such notice shall be
given by the Secretary or an Assistant Secretary or by an officer designated by
the Trustees. No notice of any meeting of shareholders need be given to a
shareholder if a written waiver of notice, executed before or after the meeting
by such shareholder or his attorney thereunto duly authorized, is filed with the
records of the meeting.
11.6 Ballots. No ballot shall be required for any election unless requested
by a shareholder present or represented at the meeting and entitled to vote in
the election.
11.7 Proxies. Shareholders entitled to vote may vote either in person or by
proxy in writing dated not more than six months before the meeting named
therein, which proxies shall be filed with the Secretary or other person
responsible to record the proceedings of the meeting before being voted. Unless
otherwise specifically limited by their terms, such proxies shall entitle the
holders thereof to vote at any adjournment of such meeting but shall not be
valid after the final adjournment of such meeting.
ARTICLE 12
Amendments to the By-Laws
These By-Laws may be amended or repealed, in whole or in part, by a
majority of the Trustees then in office at any meeting of the Trustees, or by
one or more writings signed by such a majority.
Dated: April 25, 1986
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT is made between the Huntington Funds, a
Massachusetts business trust, hereinafter called the "Trust," on behalf of its
various separate series, and FRANKLIN ADVISERS, INC., a California corporation,
hereinafter called the "Manager."
WHEREAS, the Trust has been organized and intends to operate as an
investment company registered under the Investment Company Act of 1940 (the
"1940 Act") for the purpose of investing and reinvesting its assets in
securities, as set forth in its Agreement and Declaration of Trust, its By-Laws
and its Registration Statements under the 1940 Act and the Securities Act of
1933, all as heretofore and hereafter amended and supplemented;
WHEREAS, the Trust desires to avail itself of the services, information,
advice, assistance and facilities of an investment manager and to have an
investment manager perform various management, statistical, research, investment
advisory and other services for each of the funds currently or hereafter
organized as separate series of the Trust (the "Fund" or together, the "Funds");
and
WHEREAS, the Manager is registered as an investment adviser under the
Investment Advisers Act of 1940, is engaged in the business of rendering
management, investment advisory, counselling and supervisory services to
investment companies and other investment counselling clients, and desires to
provide these services to the Funds.
NOW THEREFORE, in consideration of the terms and conditions hereinafter set
forth, it is mutually agreed as follows:
l. Employment of the Manager. The Trust hereby employs the Manager to
manage the investment and reinvestment of each Fund's assets and to administer
its affairs, subject to the direction of the Board of Trustees and the officers
of the Trust, for the period and on t9he terms hereinafter set forth. The
Manager hereby accepts such employment and agrees during such period to render
the services and to assume the obligations herein set forth for the compensation
herein provided. The Manager shall for all purposes herein be deemed to be an
independent contractor and shall, except as expressly provided or authorized
(whether herein or otherwise), have no authority to act for or represent the
Funds in any way or otherwise be deemed an agent of the Funds or the Trust.
2. Obligations of and Services to be Provided by the Manager. The Manager
undertakes to provide the services hereinafter set forth and to assume the
following obligations:
A. Administrative Services. The Manager shall furnish each Fund
adequate (i) office space, which may be space within the offices of the
Manager or in such other place as may be agreed upon from time to time,
(ii) office furnishings, facilities and equipment as may be reasonably
required for managing the affairs and conducting the business of the Funds,
including conducting correspondence and other communications with the
shareholders of the Funds, maintaining all internal bookkeeping, accounting
and auditing services and records in connection with the Funds' investment
and business activities. The Manager shall employ or provide and compensate
the executive, secretarial and clerical personnel necessary to provide such
services. The Manager shall also compensate all officers and employees of
the Trust who are officers or employees of the Manager or its affiliates.
B. Investment Management Services.
(a) The Manager shall manage each Fund's assets subject to and in
accordance with the respective investment objectives and policies of each
Fund and any directions which the Trust's Board of Trustees may issue from
time to time. In pursuance of the foregoing, the Manager shall make all
determinations with respect to the investment of each Fund's assets and the
purchase and sale of its investment securities, and shall take such steps
as may be necessary to implement the same. Such determinations and services
shall include determining the manner in which any voting rights, rights to
consent to corporate action and any other rights pertaining to each Fund's
investment securities shall be exercised. The Manager shall render or cause
to be rendered regular reports to the Trust, at regular meetings of its
Board of Trustees and at such other times as may be reasonably requested by
the Trust's Board of Trustees, of (i) the decisions made with respect to
the investment of each Fund's assets and the purchase and sale of their
investment securities, (ii) the reasons for such decisions, and (iii) the
extent to which those decisions have been implemented.
(b) The Manager, subject to and in accordance with any directions
which the Trust's Board of Trustees may issue from time to time, shall
place, in the name of each Fund, orders for the execution of the Fund's
securities transactions. When placing such orders the Manager shall seek to
obtain the best net price and execution for the Funds, but this requirement
shall not be deemed to obligate the Manager to place any order solely on
the basis of obtaining the lowest commission rate if the other standards
set forth in this section have been satisfied. The parties recognize that
there are likely to be many cases in which different brokers or dealers are
equally able to provide such best price and execution and that, in
selecting among such brokers or dealers with respect to particular trades,
it is desirable to choose those brokers or dealers who furnish research,
statistical quotations and other information to the Funds and the Manager
in accord with the standards set forth below. Moreover, to the extent that
it continues to be lawful to do so and so long as the Board of Trustees
determines that the Funds will benefit, directly or indirectly, by doing
so, the Manager may place orders with a broker who charges a commission for
that transaction which is in excess of the amount of commission that
another broker would have charged for effecting that transaction, provided
that the excess commission is reasonable in relation to the value of
"brokerage and research services" (as defined in Section 28(e) (3) of the
Securities Exchange Act of 1934) provided by that broker.
Accordingly, the Trust and the Manager agree that the Manager shall select
brokers for the execution of each Fund's transactions from among:
(i) those brokers and dealers who provide quotations and other
services to the Funds, specifically including the quotations necessary to
determine the Funds' net assets, in such amount of total brokerage as may
reasonably be required in light of such services; and
(ii) those brokers and dealers who supply research, statistical and
other data to the Manager or its affiliates which the Manager or its
affiliates may lawfully and appropriately use in their investment advisory
capacities, which relate directly to securities, actual or potential, of
the Funds, or which place the Manager in a better position to make
decisions in connection with the management of each Fund's assets and
securities, whether or not such data may also be useful to the Manager and
its affiliates in managing other portfolios or advising other clients, in
such amount of total brokerage as may reasonably be required. Provided that
the Trust's officers are satisfied that the best execution is obtained, the
sale of shares of the Funds may also be considered as a factor in the
selection of broker-dealers to execute the Funds" portfolio transactions.
(c) It is acknowledged that the Manager may contract with one or more
firms to undertake some or all of the manager's investment management
services as set forth herein pursuant to an agreement which is subject to
substantially the same provisions as contained in paragraphs 6, 7 and 10
herein
(d) When the Manager has determined that any of the Funds should
tender securities pursuant to a "tender offer solicitation,
"Franklin/Templeton Distributors, Inc. ("Distributors") shall be designated
as the "tendering dealer" so long as it is legally permitted to act in such
capacity under the federal securities laws and rules thereunder and the
rules of any securities exchange or association of which Distributors may
be a member. Neither the Manager nor Distributors shall be obligated to
make any additional commitments of capital, expense or personnel beyond
that already committed (other than normal periodic fees or payments
necessary to maintain its corporate existence and membership in the
National Association of Securities Dealers, Inc.) as of the date of this
Agreement. This Agreement shall not obligate the Manager or Distributors
(i) to act pursuant to the foregoing requirement under any circumstances in
which they might reasonably believe that liability might be imposed upon
them as a result of so acting, or (ii) to institute legal or other
proceedings to collect fees which may be considered to be due from others
to it as a result of such a tender, unless the applicable Fund shall enter
into an agreement with the Manager and/or Distributors to reimburse them
for all such expenses connected with attempting to collect such fees,
including legal fees and expenses and that portion of the compensation due
to their employees which is attributable to the time involved in attempting
to collect such fees.
(e) The Manager shall render regular reports to the Trust, not more
frequently than quarterly, of how much total brokerage business has been
placed by the Manager with brokers falling into each of the categories
referred to above and the manner in which the allocation has been
accomplished.
(f) The Manager agrees that no investment decision will be made or
influenced by a desire to provide brokerage for allocation in accordance
with the foregoing, and that the right to make such allocation of brokerage
shall not interfere with the Manager's paramount duty to obtain the best
net price and execution for each Fund.
C. Provision of Information Necessary for Preparation of Securities
Registration Statements - Amendments and Other Materials. The Manager, its
officers and employees will make available and provide accounting and
statistical information required by the Funds in the preparation of
registration statements, reports and other documents required by federal
and state securities laws and with such information as the Funds may
reasonably request for use in the preparation of such documents or of other
materials necessary or helpful for the underwriting and distribution of the
Funds' shares.
D. Other Obligations and Services. The Manager shall make its officers
and employees available to the Board of Trustees and officers of the Trust
for consultation and discussions regarding the administration and
management of the Funds and their investment activities.
3. Expenses of the Funds. It is understood that each Fund will pay all of
its own expenses other than those expressly assumed by the Manager herein, which
expenses payable by the Funds shall include:
A. Fees and expenses paid to the Manager as provided herein;
B. Expenses of all audits by independent public accountants;
C. Expenses of transfer agent, registrar, custodian, dividend
disbursing agent and shareholder record-keeping services, including the
expenses of issue, repurchase or redemption of their shares;
D. Expenses of obtaining quotations for calculating the value of each
Fund's net assets;
E. Salaries and other compensations of executive officers of the Trust
who are not officers, directors, stockholders or employees of the Manager
or its affiliates;
F. Taxes levied against the Fund;
G. Brokerage fees and commissions in connection with the purchase and
sale of securities for each Fund;
H. Costs, including the interest expense, of borrowing money;
I. Costs incident to meetings of Board of Trustees and shareholders of
each Fund, reports to each Fund's shareholders, the filing of reports with
regulatory bodies and the maintenance of each Fund's and the Trust's legal
existence;
J. Legal fees, including the legal fees related to the registration
and continued qualification of each Fund's shares for sale;
K. Trustees' fees and expenses to trustees who are not directors,
officers, employees or stockholders of the Manager or any of its
affiliates;
L. Costs and expense of registering and maintaining the registration
of the Funds and their shares under federal and any applicable state laws;
including the printing and mailing of prospectuses to their shareholders;
M. Trade association dues; and
N. Each Fund's pro rata portion of fidelity bond, errors and
omissions, and trustees and officer liability insurance premiums.
4. Compensation of the Manager. Each Fund shall pay a monthly management
fee in cash to the Manager based upon a percentage of the value of the
respective Fund's net assets, calculated as set forth below, as compensation for
the services rendered and obligations assumed by the Manager, during the
preceding month, on the first business day of the month in each year. The
initial management fee under this Agreement shall be payable on the first
business day of the first month following the effective date of this Agreement,
and shall be reduced by the amount of any advance payments made by the Funds
relating to the previous month.
A. For purposes of calculating such fee, the value of the net assets
of each Fund shall be the average daily net assets of each Fund during each
month, determined in the same manner as each Fund uses to compute the value
of its net assets in connection with the determination of the net asset
value of its shares, all as set forth more fully in the Trust's current
prospectus and statement of additional information. The rate of the monthly
fee payable to the Manager by each of the Funds shall be based upon the
following annual rates:
0.65%of the value of the average daily net assets of each of the
Franklin/Templeton Global Currency Fund, the Franklin/Templeton High Income
Currency Fund, and the Franklin/Templeton Hard Currency Fund;
0.50% of the value of the average daily net assets of the U.S. Cash
Portfolio; and
0.55% of the value of the average daily net assets of the
Franklin/Templeton German Government Bond Fund.
B. The management fee payable by each Fund shall be reduced or
eliminated to the extent that Distributors has actually received cash
payments of tender offer solicitation fees less certain costs and expenses
incurred in connection therewith as set forth in paragraph 2. B. (c) of
this Agreement and to the extent necessary to comply with the limitations
on expenses which may be borne by the Fund as set forth in the laws,
regulations and administrative interpretations of those states in which the
Fund's shares are registered. The Manager may, from time to time,
voluntarily reduce or waive any management fee due to it hereunder.
C. If this Agreement is terminated prior to the end of any month, the
management fee shall be paid to the date of termination.
5. Activities of the Manager. The services of the Manager to the Funds
hereunder are not to be deemed exclusive, and the Manager and any of its
affiliates shall be free to render similar services to others. Subject to and in
accordance with the Agreement and Declaration of Trust and By-Laws of the Trust
and Section 10(a) of the 1940 Act, it is understood that trustees, officers,
agents and shareholders of the Trust are or may be interested in the Manager or
its affiliates as directors, officers, agents or stockholders; that directors,
officers, agents or stockholders of the Manager or its affiliates are or may be
interested in the Trust as trustees, officers, agents, shareholders or
otherwise; that the Manager or its affiliates may be interested in the Funds as
shareholders or otherwise; and that the effect of any such interests shall be
governed by said Agreement and Declaration of Trust, By-Laws and the 1940 Act.
6. Liabilities of the Manager.
A. In the absence of willful misfeasance, bad faith, gross negligence,
or reckless disregard of obligations or duties hereunder on the part of the
Manager, the Manager shall not be subject to liability to the Trust or any
of the Funds or to any shareholder of the Funds for any act or omission in
the course of, or connected with, rendering services hereunder or for any
losses that may be sustained in the purchase, holding or sale of any
security by any of the Funds.
B. Notwithstanding the foregoing the Manager agrees to reimburse the
Trust for any and all costs, expenses, and counsel and trustees' fees
reasonably incurred by the Trust in the preparation, printing and
distribution of proxy statements, amendments to its Registration Statement,
holdings of meetings of its shareholders or trustees, the conduct of
factual investigations, any legal or administrative proceedings (including
any applications for exemptions or determinations by the Securities and
Exchange Commission) which the Trust incurs as the result of action or
inaction of the Manager or any of its affiliates or any of their officers,
directors, employees or stockholders where the action or inaction
necessitating such expenditures (i) is directly or indirectly related to
any transactions or proposed transaction in the stock or control of the
Manager or its affiliates (or litigation related to any pending or proposed
or future transaction in such shares or control) which shall have been
undertaken without the prior, express approval of the Trust's Board of
Trustees; or, (ii) is within the control of the Manager or any of its
affiliates or any of their officers, directors, employees or stockholders.
The Manager shall not be obligated, pursuant to the provisions of this
Subparagraph 6 B., to reimburse the Trust for any expenditures related to
the institution of an administrative proceeding or civil litigation by the
Trust or a shareholder seeking to recover all or a portion of the proceeds
derived by any stockholder of the Manager or any of its affiliates from the
sale of his shares of the Manager, or similar matters. So long as this
Agreement is in effect, the Manager shall pay to the Trust the amount due
for expenses subject to this Subparagraph 6 B. within 30 days after a bill
or statement has been received by the Manager therefor. This provision
shall not be deemed to be a waiver of any claim the Trust may have or may
assert against the Manager or others for costs, expenses or damages
heretofore incurred by the Trust or for costs, expenses or damages the
Trust may hereafter incur which are not reimbursable to it hereunder.
C. No provision of this Agreement shall be construed to protect any
trustee or officer of the Trust, or director or officer of the Manager,
from liability in violation of Sections 17(h) and (i) of the 1940 Act.
7. Renewal and Termination.
A. This Agreement shall become effective on the date written below and
shall continue in effect for two (2) years thereafter, unless sooner
terminated as hereinafter provided and shall continue in effect thereafter
as to each Fund for periods not exceeding one (1) year so long as such
continuation is approved at least annually (i) by a vote of a majority of
the outstanding voting securities of each Fund or by a vote of the Board of
Trustees of the Trust, and (ii) by a vote of a majority of the Trustees of
the Trust who are not parties to the Agreement or interested persons of any
parties to the Agreement (other than as Trustees of the Trust), cast in
person at a meeting called for the purpose of voting on the Agreement.
B. This Agreement:
(i) may at any time be terminated with respect to any of the Funds
without the payment of any penalty either by vote of the Board of Trustees
of the Trust or by vote of a majority of the outstanding voting securities
of the Fund, on 60 days' written notice to the Manager;
(ii) shall immediately terminate with respect to all of the Funds in
the event of its assignment; and
(iii) may be terminated by the Manager with respect to any of the
Funds on 60 days' written notice to the applicable Fund.
C. As used in this Paragraph the terms "assignment," "interested
person" and "vote of a majority of the outstanding voting securities" shall
have the meanings set forth for any such terms in the 1940 Act.
D. Any notice under this Agreement shall be given in writing addressed
and delivered, or mailed post-paid, to the other party at any office of
such party.
8. Severability. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
9. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
10. Limitation of Liability. The Manager acknowledges that it has received
notice of and accepts the limitations of each Fund's liability as set forth in
its Agreement and Declaration of Trust. The Manager agrees that each Fund's
obligations hereunder shall be limited to the assets of the Fund, and that the
Manager shall not seek satisfaction of any such obligation from any
shareholders, of the Fund nor from any trustee, officer, employee or agent of
the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and effective on the 12th day of November, 1993.
HUNTINGTON FUNDS
By: /s/ Donald P. Gould
Title: President
FRANKLIN ADVISERS, INC.
By: /s/ Rupert H. Johnson, Jr.
Title:
SUBADVISORY AGREEMENT
HUNTINGTON FUNDS on behalf of
FRANKLIN/TEMPLETON GLOBAL CURRENCY FUND, FRANKLIN/TEMPLETON HIGH INCOME CURRENCY
FUND, FRANKLIN/TEMPLETON HARD CURRENCY FUND, U.S. CASH PORTFOLIO AND
FRANKLIN/TEMPLETON GERMAN GOVERNMENT BOND FUND
THIS SUBADVISORY AGREEMENT is made as of the 12th day of November, 1993, by
and between FRANKLIN ADVISERS, INC., a corporation organized and existing under
the laws of the State of California (hereinafter called "FAI"), and TEMPLETON
INVESTMENT COUNSEL, INC., a Florida corporation (hereinafter called "TICI").
W I T N E S S E T H
WHEREAS, FAI is registered as an investment adviser under the Investment
Advisers Act of 1940 (the "Advisers Act"), and is engaged in the business of
supplying investment advice, and investment management services, as an
independent contractor; and
WHEREAS, FAI has been retained to render investment management services to
Templeton Global Currency Fund, Franklin/Templeton High Income Currency Fund,
Franklin/Templeton Hard Currency Fund and U.S. Cash Portfolio (the "Funds"),
series of Huntington Funds (the "Trust"), an investment company registered with
the U.S. Securities and Exchange Commission (the "SEC") pursuant to the
Investment Company Act of 1940 (the "1940 Act"); and
WHEREAS, FAI desires to retain TICI to render investment advisory, research
and related services to the Funds pursuant to the terms and provisions of this
Agreement, and TICI is interested in furnishing said services.
NOW, THEREFORE, in consideration of the covenants and the mutual promises
hereinafter set forth, the parties hereto, intending to be legally bound hereby,
mutually agree as follows:
1. FAI hereby retains TICI and TICI hereby accepts such engagement, to
furnish certain investment advisory services with respect to the assets of the
Funds, as more fully set forth herein.
(a) Subject to the overall policies, control, direction and review of
the Trust's Board of Trustees (the "Board") and to the instructions and
supervision of FAI, TICI will provide a continuous investment program for
the Funds, including allocation of the Funds' assets among the various
securities markets of the world and, investment research and advice with
respect to securities and investments and cash equivalents in the Funds. So
long as the Board and FAI determine, on no less frequently than an annual
basis, to grant the necessary delegated authority to TICI, and subject to
paragraph (b) below, TICI will determine what securities and other
investments will be purchased, retained or sold by the Funds, and will
place all purchase and sale orders on behalf of the Funds except that
orders regarding U.S. domiciled securities and money market instruments may
also be placed on behalf of the Funds by FAI.
(b) In performing these services, TICI shall adhere to the Funds'
investment objectives, policies and restrictions as contained in their
Prospectus and Statement of Additional Information, and in the Trust's
Declaration of Trust, and to the investment guidelines most recently
established by FAI and shall comply with the provisions of the 1940 Act and
the rules and regulations of the SEC thereunder in all material respects
and with the provisions of the United States Internal Revenue Code of 1986,
as amended, which are applicable to regulated investment companies.
(c) Unless otherwise instructed by FAI or the Board, and subject to
the provisions of this Agreement and to any guidelines or limitations
specified from time to time by FAI or by the Board, TICI shall report daily
all transactions effected by TICI on behalf of the Funds to FAI and to
other entities as reasonably directed by FAI or the Board.
(d) TICI shall provide the Board at least quarterly, in advance of the
regular meetings of the Board, a report of its activities hereunder on
behalf of the Funds and its proposed strategy for the next quarter, all in
such form and detail as requested by the Board. TICI shall also make an
investment officer available to attend such meetings of the Board as the
Board may reasonably request.
(e) In carrying out its duties hereunder, TICI shall comply with all
reasonable instructions of the Funds or FAI in connection therewith. Such
instructions may be given by letter, telex, telefax or telephone confirmed
by telex, by the Board or by any other person authorized by a resolution of
the Board, provided a certified copy of such resolution has been supplied
to TICI.
2. In performing the services described above, TICI shall use its best
efforts to obtain for the Funds the most favorable price and execution
available. Subject to prior authorization of appropriate policies and procedures
by the Board, TICI may, to the extent authorized by law and in accordance with
the terms of the Funds' Prospectus and Statement of Additional Information,
cause the Funds to pay a broker who provides brokerage and research services an
amount of commission for effecting a portfolio investment transaction in excess
of the amount of commission another broker would have charged for effecting that
transaction, in recognition of the brokerage and research services provided by
the broker. To the extent authorized by applicable law, TICI shall not be deemed
to have acted unlawfully or to have breached any duty created by this Agreement
or otherwise solely by reason of such action.
3. (a) TICI shall, unless otherwise expressly provided and authorized, have
no authority to act for or represent FAI or the Funds in any way, or in any way
be deemed an agent for FAI or the Funds.
(b) It is understood that the services provided by TICI are not to be
deemed exclusive. FAI acknowledges that TICI may have investment
responsibilities, or render investment advice to, or perform other
investment advisory services, for individuals or entities, including other
investment companies registered pursuant to the 1940 Act, ("Clients") which
may invest in the same type of securities as the Funds. FAI agrees that
TICI may give advice or exercise investment responsibility and take such
other action with respect to such Clients which may differ from advice
given or the timing or nature of action taken with respect to the Funds.
4. TICI agrees to use its best efforts in performing the services to be
provided by it pursuant to this Agreement.
5. FAI has furnished or will furnish to TICI as soon as available copies
properly certified or authenticated of each of the following documents:
(a) the Trust's Declaration of Trust, as filed with the Secretary of
State of the State of Delaware on March 22, 1991, and any other
organizational documents and all amendments thereto or restatements
thereof;
(b) resolutions of the Trust's Board of Trustees authorizing the
appointment of TICI and approving this Agreement;
(c) the Trust's original Notification of Registration on Form N-8A
under the 1940 Act as filed with the SEC and all amendments thereto if
possessed by or available to FAI;
(d) the Trust's current Registration Statement on Form N-1A under the
Securities Act of 1933, as amended and under the 1940 Act as filed with the
SEC, and all amendments thereto, as it relates to the Funds;
(e) the Funds' most recent Prospectus and Statement of Additional
Information; and
(f) the Investment Management Agreement between the Funds and FAI.
FAI will furnish TICI with copies of all amendments of or supplements to the
foregoing documents.
6. TICI will treat confidentially and as proprietary information of the
Funds all records and other information relative to the Funds and prior, present
or potential shareholders, and will not use such records and information for any
purpose other than performance of its responsibilities and duties hereunder,
except after prior notification to and approval in writing by the Funds, which
approval shall not be unreasonably withheld and may not be withheld where TICI
may be exposed to civil or criminal contempt proceedings for failure to comply
when requested to divulge such information by duly constituted authorities, or
when so requested by the Funds.
7. FAI shall pay a monthly fee in cash to TICI based upon a percentage of
the value of each Fund's net assets, calculated as set forth below, on the first
business day of each month in each year as compensation for the services
rendered and obligations assumed by TICI during the preceding month. The
advisory fee under this Agreement shall be payable on the first business day of
the first month following the effective date of this Agreement, and shall be
reduced by the amount of any advance payments made by FAI relating to the
previous month.
(a) For purposes of calculating such fee, the value of the net assets
of each Fund shall be the average daily net assets of each Fund during each
month, determined in the same manner as the Funds use to compute the value
of their net assets in connection with the determination of the net asset
value of their shares, all as set forth more fully in the Funds' current
Prospectus. The rate of the monthly fee payable to TICI shall be based upon
the following annual rates:
0.25%of the value of the average daily net assets of each of
the Franklin/Templeton Global Currency Fund, Franklin/Templeton
High Income Currency Fund, Franklin/Templeton German Government
Bond Fund and the Franklin/Templeton Hard Currency Fund; and
20% of the value of the average daily net assets of the U.S.
Cash Portfolio.
(b) FAI and TICI shall share equally in any voluntary reduction or
waiver by FAI of the management fee due FAI under the Management Agreement
between FAI and the Funds.
(c) If this Agreement is terminated prior to the end of any month, the
monthly fee shall be prorated for the portion of any month in which this
Agreement is in effect which is not a complete month according to the
proportion which the number of calendar days in the month during which the
Agreement is in effect bears to the total number of calendar days in the
month, and shall be payable within 10 days after the date of termination.
8. Nothing herein contained shall be deemed to relieve or deprive the Board
of its responsibility for and control of the conduct of the affairs of the
Funds.
9. (a) In the absence of willful misfeasance, bad faith, gross negligence,
or reckless disregard of its obligations or duties hereunder on the part of
TICI, neither TICI nor any of its directors, officers, employees or affiliates
shall be subject to liability to FAI or the Funds or to any shareholder of the
Funds for any error of judgment or mistake of law or any other act or omission
in the course of, or connected with, rendering services hereunder or for any
losses that may be sustained in the purchase, holding or sale of any security by
the Funds.
(b) Notwithstanding paragraph 9(a), to the extent that FAI is found by
a court of competent jurisdiction, or the SEC or any other regulatory
agency to be liable to the Funds or any shareholder (a "liability"), for
any acts undertaken by TICI pursuant to authority delegated as described in
Paragraph 1(a), TICI shall indemnify and save FAI and each of its
affiliates, officers, directors and employees (each a "Franklin Indemnified
Party") harmless from, against, for and in respect of all losses, damages,
costs and expenses incurred by a Franklin Indemnified Party with respect to
such liability, together with all legal and other expenses reasonably
incurred by any such Franklin Indemnified Party, in connection with such
liability.
(c) No provision of this Agreement shall be construed to protect any
director or officer of FAI or TICI, from liability in violation of Sections
17(h) or (i), respectively, of the 1940 Act.
(d) FAI will not be liable under this indemnification provision with
respect to any claim made against a Franklin Indemnified Party unless such
Franklin Indemnified Party shall have notified FAI in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Franklin Indemnified Party (or after such Franklin Indemnified Party shall
have received notice of such service on any designated agent). In case any
such action is brought against the Indemnified Parties, FAI will be
entitled to participate, at its own expense, in the defense thereof. FAI
also will be entitled, at its own expense, to assume the defense thereof,
with counsel satisfactory to the party named in the action. After notice
from FAI to such party of FAI's election to assume the defense thereof and
not withstanding paragraph (d) of this Section 9, the Franklin Indemnified
Party will bear the fees and expenses of any additional counsel retained by
it, and FAI will not be liable to such party under this Agreement for any
legal or other expenses subsequently incurred by such party independently
in connection with the defense thereof.
10. During the term of this Agreement, subject to the indemnity in Section
9(d) above, TICI will pay all expenses incurred by it in connection with its
activities under this Agreement other than the cost of securities (including
brokerage commissions, if any) purchased for the Funds. The Funds and FAI will
be responsible for all of their respective expenses and liabilities.
11. This Agreement shall be effective as of November 12, 1993, and shall
continue in effect for two years. It is renewable annually thereafter for
successive periods not to exceed one year each (i) by a vote of the Board or by
the vote of a majority of the outstanding voting securities of the Funds, and
(ii) by the vote of a majority of the trustees of the Trust who are not parties
to this Agreement or interested persons thereof, cast in person at a meeting
called for the purpose of voting on such approval.
12. This Agreement may be terminated at any time, without payment of any
penalty, by the Board or by vote of a majority of the outstanding voting
securities of the Funds, upon sixty (60) days' written notice to FAI and TICI,
and by FAI or TICI upon sixty (60) days' written notice to the other party.
13. This Agreement shall terminate automatically in the event of any
transfer or assignment thereof, as defined in the 1940 Act, and in the event of
any act or event that terminates the Management Agreement between FAI and the
Funds.
14. In compliance with the requirements of Rule 31a-3 under the 1940 Act,
TICI hereby agrees that all records which it maintains for the Funds are the
property of the Funds and further agrees to surrender promptly to a Fund, or to
any third party at the Fund's direction, any of such records upon the Fund's
request. TICI further agrees to preserve for the periods prescribed by Rule
31a-2 under the 1940 Act the records required to be maintained by Rule 31a-1
under the 1940 Act.
15. This Agreement may not be materially amended, transferred, assigned,
sold or in any manner hypothecated or pledged without the affirmative vote or
written consent of the holders of a majority of the outstanding voting
securities of the Funds and may not be amended without the written consent of
FAI and TICI.
16. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule, or otherwise, the remainder of this Agreement
shall not be affected thereby.
17. The terms "majority of the outstanding voting securities" of the Funds
and "interested persons" shall have the meanings as indicated in the 1940 Act.
18. This Agreement shall be interpreted in accordance with and governed by
the laws of the State of California of the United States of America.
19. TICI acknowledges that it has received notice of and accepts the
limitations of the Trust's liability as set forth in Article VII of its
Agreement and Declaration of Trust. TICI agrees that the Trust's obligations
hereunder shall be limited to the assets of the Funds, and that TICI shall not
seek satisfaction of any such obligation from any shareholders of the Funds nor
from any trustee, officer, employee or agent of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested by their duly authorized officers.
FRANKLIN ADVISERS, INC.
By /s/ Rupert H. Johnson, Jr.
Title:
TEMPLETON INVESTMENT COUNSEL, INC.
By /s/ Charles E. Johnson
Title:
FRANKLIN/TEMPLETON GLOBAL CURRENCY FUND, FRANKLIN/TEMPLETON HIGH INCOME CURRENCY
FUND, FRANKLIN/TEMPLETON HARD CURRENCY FUND, U.S. CASH PORTFOLIO AND
FRANKLIN/TEMPLETON GERMAN GOVERNMENT BOND FUND hereby acknowledge and agree to
the provisions of paragraphs 9(a) and 10 of this Agreement.
HUNTINGTON FUNDS on behalf of
FRANKLIN/TEMPLETON GLOBAL CURRENCY FUND, FRANKLIN/TEMPLETON HIGH INCOME CURRENCY
FUND, FRANKLIN/TEMPLETON HARD CURRENCY FUND, U.S. CASH PORTFOLIO AND
FRANKLIN/TEMPLETON GERMAN GOVERNMENT BOND FUND
By /s/ Donald P. Gould
Title: President
SUB-ADVISORY AGREEMENT
AGREEMENT made at St. Petersburg, Florida as of the 27th day of June, 1994
between TEMPLETON INVESTMENT COUNSEL, INC., on behalf of the Templeton Global
Bond Managers division (hereinafter referred to as the "Manager") and FRANKLIN
ADVISERS, INC. (hereinafter referred to as the "Sub-Adviser" or "Franklin").
WHEREAS, the Manager has entered into an Investment Management Agreement
(the "Management Agreement") dated as of June 27, 1994 with Templeton Global
Investment Trust (the "Trust"), a registered open-end investment company,
pursuant to which it acts as investment manager to a series of the Trust,
Templeton Americas Government Securities Fund (the "Fund").
WHEREAS, the Manager wishes to enter into a Sub-Advisory Agreement with
Franklin to avail itself of Franklin's investment management and advisory
services.
In consideration of the mutual agreements herein made, the Manager and the
Sub-Adviser understand and agree as follows:
1. Franklin agrees to provide, subject to the Manager's discretion, a
portion of the investment advisory services for which the Manager is responsible
pursuant to the Management Agreement, including supplying research services.
Research services provided by Franklin may include information, analytical
reports, computer screening studies, statistical data and factual resumes
pertaining to securities throughout the world. All research supplied by Franklin
will be subject to analysis by the Manager before being incorporated into the
investment advisory process.
2. As compensation for the services to be rendered, the Manager shall pay
to the Sub-Adviser a fee payable monthly in U.S. dollars at an annual rate of
0.25% of the Fund's average daily net assets.
3. With respect to the Fund's assets which the Manager may delegate to the
Sub-Adviser to manage, the Sub-Adviser shall be responsible for selecting
brokers and dealers for the execution of the Fund's portfolio transactions
consistent with the Trust's brokerage policies and when applicable, the
regulations of the securities and Exchange Commission and the Commodities
Futures Trading Commission in connection therewith. All decisions and placements
shall be made in accordance with the principles set forth in the Management
Agreement.
4. It is understood that the services provided by the Sub-Adviser are not
to be deemed exclusive and nothing in this Agreement shall preclude the
Sub-Adviser from providing similar services to other investment companies and
other clients, including clients which may invest in the same type of securities
as the Fund or, in providing such services, from using information furnished by
others. When Franklin determines to recommend or to buy or sell the same
security for the Fund that it has selected for other investment companies or
other clients, the orders for all securities transactions shall be placed for
execution by methods determined by it, with approval by the Trust's Board of
Trustees, to be impartial and fair.
5. During the term of this Agreement, Franklin will pay all expenses
incurred by it, its staff and their activities, in connection with the services
to be provided by it under this Agreement.
6. Nothing herein shall be construed as constituting the Sub-Adviser or the
Manager as agent of the other or of the Trust.
7. This Agreement shall become effective on June 27, 1994 and shall
continue in effect until July 31, 1995. 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 Trust's Board of Trustees who are not parties to
this Agreement or "interested persons" (as defined in Investment Company Act of
1940 (the 111940 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 the Trust, as defined in the 1940 Act, or
(b) a majority of the Trust's Board of Trustees as a whole.
8. 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. In addition, this Agreement may be
terminated by the Trust on sixty (60) days' written notice to the Investment
Manager and to the Sub-Adviser, provided that such termination by the Trust is
approved by the vote of a majority of the Trust's Board of Trustees in office at
the time or by vote of a majority of the outstanding voting securities of the
Fund.
9. This Agreement will terminate automatically in the event of its
assignment (as defined in the 1940 Act).
10. This Agreement shall be construed in accordance with the laws of the
State of Florida. As used herein, the terms "interested persons," "assignment"
and "vote of a majority of the outstanding voting securities" shall have the
meaning set forth in the .1940 Act.
11. The Sub-Adviser may rely on information reasonably believed by it to be
accurate and reliable. Except as may otherwise be provided by the 1940 Act,
neither the Sub-Adviser 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 Sub-Adviser of its duties under this Agreement or for any loss or damage
resulting from the imposition by any government of exchange control restrictions
which might affect the liquidity of the Trust'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, except for
any liability, loss or damage resulting from willful misfeasance, bad faith or
gross negligence on the Sub-Adviser's part or by reason of reckless disregard of
the Sub-Adviser's duties under this Agreement.
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 Investment Counsel, Inc.
By /s/ Elizabeth M. Knoblock
Franklin Advisers, Inc.
By /s/ Harmon E. Burns
AMENDMENT TO MANAGEMENT AGREEMENT
This Amendment dated as of August 1, 1995, is to the Management Agreement
dated November 12, 1993, by and between FRANKLIN TEMPLETON GLOBAL TRUST, a
Massachusetts business trust (the "Trust"), on behalf of its series now or
hereafter subject to the Management Agreement, (the "Funds"), and FRANKLIN
ADVISERS, INC., a California corporation, (the "Manager"). The undersigned
parties, intending to be legally bound, hereby agree as follows:
(1) Paragraph 4 B. is amended to read:
B. The management fee payable by a Fund shall be reduced or
eliminated to the extent that Distributors has actually received cash payments
of tender offer solicitation fees less certain cost and expenses incurred in
connection therewith as set forth in paragraph 2.B.(c) of this Agreement and to
the extent necessary to comply with the limitations on expenses which may be
borne by the Fund as set forth in the laws, regulations and administrative
interpretations of those states in which the Fund's shares are registered. The
Manager may waive all or a portion of its fees provided for hereunder and such
waiver shall be treated as a reduction in purchase price of its services. The
Manager shall be contractually bound hereunder by the terms of any publicly
announced waiver of its fee, or any limitation of a Fund's expenses, as if such
waiver or limitation were full set forth herein.
(2) All other provisions of the Management Agreement dated November 12,
1993, remain in full force and effect.
IN WITNESS WHEREOF, we have signed this Amendment as of the date and
year first above written.
FRANKLIN TEMPLETON GLOBAL TRUST
By /s/ Deborah R. Gatzek
FRANKLIN ADVISERS, INC.
By /s/ Harmon E. Burns
FRANKLIN TEMPLETON GLOBAL TRUST
777 Mariners Island Blvd.
San Mateo, California 94404
Franklin/Templeton Distributors, Inc.
777 Mariners Island Blvd.
San Mateo, California 94404
Re: Amended and Restated Distribution Agreement
Gentlemen:
We (the "Fund") are a corporation or business trust operating as an open-end
management investment company or "mutual fund", which is registered under the
Investment Company Act of 1940 (the "1940 Act") and whose shares are registered
under the Securities Act of 1933 (the "1933 Act"). We desire to issue one or
more series or classes of our authorized but unissued shares of capital stock or
beneficial interest (the "Shares") to authorized persons in accordance with
applicable Federal and State securities laws. The Fund's Shares may be made
available in one or more separate series, each of which may have one or more
classes.
You have informed us that your company is registered as a broker-dealer under
the provisions of the Securities Exchange Act of 1934 and that your company is a
member of the National Association of Securities Dealers, Inc. You have
indicated your desire to act as the exclusive selling agent and distributor for
the Shares. We have been authorized to execute and deliver this Distribution
Agreement ("Agreement") to you by a resolution of our Board of Directors or
Trustees ("Board") passed at a meeting at which a majority of Board members,
including a majority who are not otherwise interested persons of the Fund and
who are not interested persons of our investment adviser, its related
organizations or with you or your related organizations, were present and voted
in favor of the said resolution approving this Agreement.
1. Appointment of Underwriter. Upon the execution of this Agreement and in
consideration of the agreements on your part herein expressed and upon the terms
and conditions set forth herein, we hereby appoint you as the exclusive sales
agent for our Shares and agree that we will deliver such Shares as you may sell.
You agree to use your best efforts to promote the sale of Shares, but are not
obligated to sell any specific number of Shares.
However, the Fund and each series retain the right to make direct sales of
its Shares without sales charges consistent with the terms of the then current
prospectus and applicable law, and to engage in other legally authorized
transactions in its Shares which do not involve the sale of Shares to the
general public. Such other transactions may include, without limitation,
transactions between the Fund or any series or class and its shareholders only,
transactions involving the reorganization of the Fund or any series, and
transactions involving the merger or combination of the Fund or any series with
another corporation or trust.
2. Independent Contractor. You will undertake and discharge your
obligations hereunder as an independent contractor and shall have no authority
or power to obligate or bind us by your actions, conduct or contracts except
that you are authorized to promote the sale of Shares. You may appoint
sub-agents or distribute through dealers or otherwise as you may determine from
time to time, but this Agreement shall not be construed as authorizing any
dealer or other person to accept orders for sale or repurchase on our behalf or
otherwise act as our agent for any purpose.
3. Offering Price. Shares shall be offered for sale at a price equivalent
to the net asset value per share of that series and class plus any applicable
percentage of the public offering price as sales commission or as otherwise set
forth in our then current prospectus. On each business day on which the New York
Stock Exchange is open for business, we will furnish you with the net asset
value of the Shares of each available series and class which shall be determined
in accordance with our then effective prospectus. All Shares will be sold in the
manner set forth in our then effective prospectus and statement of additional
information, and in compliance with applicable law.
4. Compensation.
A. Sales Commission. You shall be entitled to charge a sales
commission on the sale or redemption, as appropriate, of each series and
class of each Fund's Shares in the amount of any initial, deferred or
contingent deferred sales charge as set forth in our then effective
prospectus. You may allow any sub-agents or dealers such commissions or
discounts from and not exceeding the total sales commission as you shall
deem advisable, so long as any such commissions or discounts are set forth
in our current prospectus to the extent required by the applicable Federal
and State securities laws. You may also make payments to sub-agents or
dealers from your own resources, subject to the following conditions: (a)
any such payments shall not create any obligation for or recourse against
the Fund or any series or class, and (b) the terms and conditions of any
such payments are consistent with our prospectus and applicable federal and
state securities laws and are disclosed in our prospectus or statement of
additional information to the extent such laws may require.
B. Distribution Plans. You shall also be entitled to compensation for
your services as provided in any Distribution Plan adopted as to any series
and class of any Fund's Shares pursuant to Rule 12b-1 under the 1940 Act.
5. Terms and Conditions of Sales. Shares shall be offered for sale only in
those jurisdictions where they have been properly registered or are exempt from
registration, and only to those groups of people which the Board may from time
to time determine to be eligible to purchase such shares.
6. Orders and Payment for Shares. Orders for Shares shall be directed to
the Fund's shareholder services agent, for acceptance on behalf of the Fund. At
or prior to the time of delivery of any of our Shares you will pay or cause to
be paid to the custodian of the Fund's assets, for our account, an amount in
cash equal to the net asset value of such Shares. Sales of Shares shall be
deemed to be made when and where accepted by the Fund's shareholder services
agent. The Fund's custodian and shareholder services agent shall be identified
in its prospectus.
7. Purchases for Your Own Account. You shall not purchase our Shares for
your own account for purposes of resale to the public, but you may purchase
Shares for your own investment account upon your written assurance that the
purchase is for investment purposes and that the Shares will not be resold
except through redemption by us.
8. Sale of Shares to Affiliates. You may sell our Shares at net asset value
to certain of your and our affiliated persons pursuant to the applicable
provisions of the federal securities statutes and rules or regulations
thereunder (the "Rules and Regulations"), including Rule 22d-1 under the 1940
Act, as amended from time to time.
9. Allocation of Expenses. We will pay the expenses:
(a) Of the preparation of the audited and certified financial
statements of our company to be included in any
Post-Effective Amendments ("Amendments") to our Registration
Statement under the 1933 Act or 1940 Act, including the
prospectus and statement of additional information included
therein;
(b) Of the preparation, including legal fees, and printing of
all Amendments or supplements filed with the Securities and
Exchange Commission, including the copies of the
prospectuses included in the Amendments and the first 10
copies of the definitive prospectuses or supplements
thereto, other than those necessitated by your (including
your "Parent's") activities or Rules and Regulations related
to your activities where such Amendments or supplements
result in expenses which we would not otherwise have
incurred;
(c) Of the preparation, printing and distribution of any reports
or communications which we send to our existing
shareholders; and
(d) Of filing and other fees to Federal and State securities
regulatory authorities necessary to continue offering our
Shares.
You will pay the expenses:
(a) Of printing the copies of the prospectuses and any
supplements thereto and statements of additional information
which are necessary to continue to offer our Shares;
(b) Of the preparation, excluding legal fees, and printing of
all Amendments and supplements to our prospectuses and
statements of additional information if the Amendment or
supplement arises from your (including your "Parent's")
activities or Rules and Regulations related to your
activities and those expenses would not otherwise have been
incurred by us;
(c) Of printing additional copies, for use by you as sales
literature, of reports or other communications which we have
prepared for distribution to our existing shareholders; and
(d) Incurred by you in advertising, promoting and selling our
Shares.
10. Furnishing of Information. We will furnish to you such information with
respect to each series and class of Shares, in such form and signed by such of
our officers as you may reasonably request, and we warrant that the statements
therein contained, when so signed, will be true and correct. We will also
furnish you with such information and will take such action as you may
reasonably request in order to qualify our Shares for sale to the public under
the Blue Sky Laws of jurisdictions in which you may wish to offer them. We will
furnish you with annual audited financial statements of our books and accounts
certified by independent public accountants, with semi-annual financial
statements prepared by us, with registration statements and, from time to time,
with such additional information regarding our financial condition as you may
reasonably request.
11. Conduct of Business. Other than our currently effective prospectus, you
will not issue any sales material or statements except literature or advertising
which conforms to the requirements of Federal and State securities laws and
regulations and which have been filed, where necessary, with the appropriate
regulatory authorities. You will furnish us with copies of all such materials
prior to their use and no such material shall be published if we shall
reasonably and promptly object.
You shall comply with the applicable Federal and State laws and regulations
where our Shares are offered for sale and conduct your affairs with us and with
dealers, brokers or investors in accordance with the Rules of Fair Practice of
the National Association of Securities Dealers, Inc.
12. Redemption or Repurchase Within Seven Days. If Shares are tendered to
us for redemption or repurchase by us within seven business days after your
acceptance of the original purchase order for such Shares, you will immediately
refund to us the full sales commission (net of allowances to dealers or brokers)
allowed to you on the original sale, and will promptly, upon receipt thereof,
pay to us any refunds from dealers or brokers of the balance of sales
commissions reallowed by you. We shall notify you of such tender for redemption
within 10 days of the day on which notice of such tender for redemption is
received by us.
13. Other Activities. Your services pursuant to this Agreement shall not be
deemed to be exclusive, and you may render similar services and act as an
underwriter, distributor or dealer for other investment companies in the
offering of their shares.
14. Term of Agreement. This Agreement shall become effective on the date of
its execution, and shall remain in effect for a period of two (2) years. The
Agreement is renewable annually thereafter, with respect to the Fund or, if the
Fund has more than one series, with respect to each series, for successive
periods not to exceed one year (i) by a vote of (a) a majority of the
outstanding voting securities of the Fund or, if the Fund has more than one
series, of each series, or (b) by a vote of the Board, and (ii) by a vote of a
majority of the members of the Board who are not parties to the Agreement or
interested persons of any parties to the Agreement (other than as members of the
Board), cast in person at a meeting called for the purpose of voting on the
Agreement.
This Agreement may at any time be terminated by the Fund or by any series
without the payment of any penalty, (i) either by vote of the Board or by vote
of a majority of the outstanding voting securities of the Fund or any series on
90 days' written notice to you; or (ii) by you on 90 days' written notice to the
Fund; and shall immediately terminate with respect to the Fund and each series
in the event of its assignment.
15. Suspension of Sales. We reserve the right at all times to suspend or
limit the public offering of Shares upon two days' written notice to you.
16. Miscellaneous. This Agreement shall be subject to the laws of the State
of California and shall be interpreted and construed to further promote the
operation of the Fund as an open-end investment company. This Agreement shall
supersede all Distribution Agreements and Amendments previously in effect
between the parties. As used herein, the terms "Net Asset Value," "Offering
Price," "Investment Company," "Open-End Investment Company," "Assignment,"
"Principal Underwriter," "Interested Person," "Parent," "Affiliated Person," and
"Majority of the Outstanding Voting Securities" shall have the meanings set
forth in the 1933 Act or the 1940 Act and the Rules and Regulations thereunder.
Nothing herein shall be deemed to protect you against any liability to us or to
our securities holders to which you would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of your
duties hereunder, or by reason of your reckless disregard of your obligations
and duties hereunder.
If the foregoing meets with your approval, please acknowledge your acceptance by
signing each of the enclosed copies, whereupon this will become a binding
agreement as of the date set forth below.
Very truly yours,
FRANKLIN TEMPLETON GLOBAL TRUST
By: /s/ Deborah R. Gatzek
Accepted:
Franklin/Templeton Distributors, Inc.
By: /s/ Gregory E. Johnson
DATED: 4/23/95
DEALER AGREEMENT
Effective: May 1, 1995
Dear Securities Dealer:
Franklin/Templeton Distributors, Inc. ("we" or "us") invites you to participate
in the distribution of shares of the Franklin and Templeton mutual funds (the
"Funds") for which we now or in the future serve as principal underwriter,
subject to the terms of this Agreement. We will notify you from time to time of
the Funds which are eligible for distribution and the terms of compensation
under this Agreement. This Agreement supersedes any prior dealer agreements
between us, as stated in paragraph 18, below.
1. Licensing.
(a) You represent that you are a member in good standing of the National
Association of Securities Dealers, Inc. ("NASD") and are presently licensed to
the extent necessary by the appropriate regulatory agency of each state in which
you will offer and sell shares of the Funds. You agree that termination or
suspension of such membership with the NASD, or of your license to do business
by any state or federal regulatory agency, at any time shall terminate or
suspend this Agreement forthwith and shall require you to notify us in writing
of such action. If you are not a member of the NASD but are a dealer subject to
the laws of a foreign country, you agree to conform to the rules of fair
practice of such association. This Agreement is in all respects subject to Rule
26 of the Rules of Fair Practice of the NASD which shall control any provision
to the contrary in this Agreement.
(b) You agree to notify us immediately in writing if at any time you are
not a member in good standing of the Securities Investor Protection Corporation
("SIPC").
2. Sales of Fund Shares. You may offer and sell shares of each Fund and class
only at the public offering price which shall be applicable to, and in effect at
the time of, each transaction. The procedures relating to all orders and the
handling of them shall be subject to the terms of the then current prospectus
and statement of additional information (hereafter, the "prospectus") and new
account application, including amendments, for each such Fund, and our written
instructions from time to time. This Agreement is not exclusive, and either
party may enter into similar agreements with third parties.
3. Duties of Dealer: In General. You agree:
(a) To act as principal, or as agent on behalf of your customers, in all
transactions in shares of the Funds except as provided in paragraph 4 hereof.
You shall not have any authority to act as agent for the issuer (the Funds), for
the Principal Underwriter, or for any other dealer in any respect, nor will you
represent to any third party that you have such authority or are acting in such
capacity.
(b) To purchase shares only from us or from your customers.
(c) To enter orders for the purchase of shares of the Funds only from us
and only for the purpose of covering purchase orders you have already received
from your customers or for your own bona fide investment.
(d) To maintain records of all sales and redemptions of shares made
through you and to furnish us with copies of such records on request.
(e) To distribute prospectuses and reports to your customers in
compliance with applicable legal requirements, except to the extent that we
expressly undertake to do so on your behalf.
(f) That you will not withhold placing customers' orders for shares so
as to profit yourself as a result of such withholding or place orders for shares
in amounts just below the point at which sales charges are reduced so as to
benefit from a higher sales charge applicable to an amount below the breakpoint.
(g) That if any shares confirmed to you hereunder are repurchased or
redeemed by any of the Funds within seven business days after such confirmation
of your original order, you shall forthwith refund to us the full concession
allowed to you on such orders. We shall forthwith pay to the appropriate Fund
our share, if any, of the "charge" on the original sale and shall also pay to
such Fund the refund from you as herein provided. We shall notify you of such
repurchase or redemption within a reasonable time after settlement. Termination
or cancellation of this Agreement shall not relieve you or us from the
requirements of this subparagraph.
(h) That if payment for the shares purchased is not received within the
time customary or the time required by law for such payment, the sale may be
canceled forthwith without any responsibility or liability on our part or on the
part of the Funds, or at our option, we may sell the shares which you ordered
back to the Funds, in which latter case we may hold you responsible for any loss
to the Funds or loss of profit suffered by us resulting from your failure to
make payment as aforesaid. We shall have no liability for any check or other
item returned unpaid to you after you have paid us on behalf of a purchaser. We
may refuse to liquidate the investment unless we receive the purchaser's signed
authorization for the liquidation.
(i) That you shall assume responsibility for any loss to the Funds
caused by a correction made subsequent to trade date, provided such correction
was not based on any error, omission or negligence on our part, and that you
will immediately pay such loss to the Funds upon notification.
(j) That if on a redemption which you have ordered, instructions in
proper form, including outstanding certificates, are not received within the
time customary or the time required by law, the redemption may be canceled
forthwith without any responsibility or liability on our part or on the part of
any Fund, or at our option, we may buy the shares redeemed on behalf of the
Fund, in which latter case we may hold you responsible for any loss to the Fund
or loss of profit suffered by us resulting from your failure to settle the
redemption.
4. Duties of Dealer: Retirement Accounts. In connection with orders for the
purchase of shares on behalf of an Individual Retirement Account, Self-Employed
Retirement Plan or other retirement accounts, by mail, telephone, or wire, you
shall act as agent for the custodian or trustee of such plans (solely with
respect to the time of receipt of the application and payments), and you shall
not place such an order until you have received from your customer payment for
such purchase and, if such purchase represents the first contribution to such a
plan, the completed documents necessary to establish the plan. You agree to
indemnify us and Franklin Templeton Trust Company and/or Templeton Funds Trust
Company as applicable for any claim, loss, or liability resulting from incorrect
investment instructions received from you which cause a tax liability or other
tax penalty.
5. Conditional Orders; Certificates. We will not accept from you any conditional
orders for shares of any of the Funds. Delivery of certificates for shares
purchased shall be made by the Funds only against constructive receipt of the
purchase price, subject to deduction for your concession and our portion of the
sales charge, if any, on such sale. No certificates will be issued unless
specifically requested.
6. Dealer Compensation.
(a) On each purchase of shares by you from us, the total sales charges
and your dealer concessions shall be as stated in each Fund's then current
prospectus, subject to NASD rules and applicable state and federal laws. Such
sales charges and dealer concessions are subject to reductions under a variety
of circumstances as described in the Funds' prospectuses. For an investor to
obtain these reductions, we must be notified at the time of the sale that the
sale qualifies for the reduced charge. If you fail to notify us of the
applicability of a reduction in the sales charge at the time the trade is
placed, neither we nor any of the Funds will be liable for amounts necessary to
reimburse any investor for the reduction which should have been effected.
(b) In accordance with the Funds' prospectuses, we or our affiliates
may, but are not obligated to, make payments to dealers from our own resources
as compensation for certain sales which are made at net asset value and are not
subject to any contingent deferred sales charges ("Qualifying Sales"). If you
notify us of a Qualifying Sale, we may make a contingent advance payment up to
the maximum amount available for payment on the sale. If any of the shares
purchased in a Qualifying Sale are redeemed within twelve months of the end of
the month of purchase, we shall be entitled to recover any advance payment
attributable to the redeemed shares by reducing any account payable or other
monetary obligation we may owe to you or by making demand upon you for repayment
in cash. We reserve the right to withhold advances to any dealer, if for any
reason we believe that we may not be able to recover unearned advances from such
dealer. In addition, dealers will generally be required to enter into a
supplemental agreement with us with respect to such compensation and the
repayment obligation prior to receiving any payments.
7. Redemptions. Redemptions or repurchases of shares will be made at the net
asset value of such shares, less any applicable deferred sales or redemption
charges, in accordance with the applicable prospectuses. Except as permitted by
applicable law, you agree not to purchase any shares from your customers at a
price lower than the redemption or repurchase prices then computed by the Funds.
You shall, however, be permitted to sell shares for the account of the record
owner to the Funds at the repurchase price then currently in effect for such
shares and may charge the owner a fair commission for handling the transaction.
8. Exchanges. Telephone exchange orders will be effective only for shares in
plan balance (uncertificated shares) or for which share certificates have been
previously deposited and may be subject to any fees or other restrictions set
forth in the applicable prospectuses. You may charge the shareholder a fair
commission for handling an exchange transaction. Exchanges from a Fund sold with
no sales charge to a Fund which carries a sales charge, and exchanges from a
Fund sold with a sales charge to a Fund which carries a higher sales charge may
be subject to a sales charge in accordance with the terms of each Fund's
prospectus. You will be obligated to comply with any additional exchange
policies described in each Fund's prospectus, including without limitation any
policy restricting or prohibiting "Timing Accounts" as therein defined.
9. Transaction Processing. All orders are subject to acceptance by us and by the
Fund or its transfer agent, and become effective only upon confirmation by us.
If required by law, each transaction shall be confirmed in writing on a fully
disclosed basis and if confirmed by us, a copy of each confirmation shall be
sent simultaneously to you if you so request. All sales are made subject to
receipt of shares by us from the Funds. We reserve the right in our discretion,
without notice, to suspend the sale of shares or withdraw the offering of shares
entirely. Telephone orders will be effected at the price(s) next computed on the
day they are received from you if, as set forth in each Fund's current
prospectus, they are received prior to the time the price of its shares is
calculated. Orders received after that time will be effected at the price(s)
computed on the next business day. All orders must be accompanied by payment in
U.S. dollars. Orders payable by check must be drawn payable in U.S. dollars on a
U.S. bank, for the full amount of the investment.
10. Multiple Classes. We may from time to time provide to you written compliance
guidelines or standards relating to the sale or distribution of Funds offering
multiple classes of shares with different sales charges and distribution-related
operating expenses. In addition, you will be bound by any applicable rules or
regulations of government agencies or self-regulatory organizations generally
affecting the sale or distribution of mutual funds offering multiple classes of
shares.
11. Rule 12b-1 Plans. You are also invited to participate in all Plans adopted
by the Funds (the "Plan Funds") pursuant to Rule 12b-1 under the 1940 Act.
To the extent you provide administrative and other services, including, but not
limited to, furnishing personal and other services and assistance to your
customers who own shares of a Plan Fund, answering routine inquiries regarding a
Fund, assisting in changing account designations and addresses, maintaining such
accounts or such other services as a Fund may require, to the extent permitted
by applicable statutes, rules, or regulations, we shall pay you a Rule 12b-1
servicing fee. To the extent that you participate in the distribution of Fund
shares which are eligible for a Rule 12b-1 distribution fee, we shall also pay
you a Rule 12b-1 distribution fee. All Rule 12b-1 servicing and distribution
fees shall be based on the value of shares attributable to customers of your
firm and eligible for such payment, and shall be calculated on the basis and at
the rates set forth in the compensation schedule then in effect. Without prior
approval by a majority of the outstanding shares of a Fund, the aggregate annual
fees paid to you pursuant to each Plan shall not exceed the amounts stated as
the "annual maximums" in each Fund's prospectus, which amount shall be a
specified percent of the value of the Fund's net assets held in your customers'
accounts which are eligible for payment pursuant to this Agreement (determined
in the same manner as each Fund uses to compute its net assets as set forth in
its effective Prospectus).
You shall furnish us and each Fund with such information as shall reasonably be
requested by the Boards of Directors, Trustees or Managing General Partners
(hereinafter referred to as "Directors") of such Funds with respect to the fees
paid to you pursuant to the Schedule. We shall furnish to the Boards of
Directors of the Plan Funds, for their review on a quarterly basis, a written
report of the amounts expended under the Plans and the purposes for which such
expenditures were made.
The Plans and provisions of any agreement relating to such Plans must be
approved annually by a vote of the Plan Funds' Directors, including such persons
who are not interested persons of the Plan Funds and who have no financial
interest in the Plans or any related agreement ("Rule 12b-1 Directors"). The
Plans or the provisions of this Agreement relating to such Plans may be
terminated at any time by the vote of a majority of the Plan Funds' Boards of
Directors, including Rule 12b-1 Directors, or by a vote of a majority of the
outstanding shares of the Plan Funds, on sixty (60) days' written notice,
without payment of any penalty. The Plans or the provisions of this Agreement
may also be terminated by any act that terminates the Underwriting Agreement
between us and the Plan Funds, and/or the management or administration agreement
between Franklin Advisers, Inc. or Templeton Investment Counsel, Inc. or their
affiliates and the Plan Funds. In the event of the termination of the Plans for
any reason, the provisions of this Agreement relating to the Plans will also
terminate.
Continuation of the Plans and provisions of this Agreement relating to such
Plans are conditioned on Rule 12b-1 Directors being ultimately responsible for
selecting and nominating any new Rule 12b-1 Directors. Under Rule 12b-1,
Directors of any of the Plan Funds have a duty to request and evaluate, and
persons who are party to any agreement related to a Plan have a duty to furnish,
such information as may reasonably be necessary to an informed determination of
whether the Plan or any agreement should be implemented or continued. Under Rule
12b-1, Plan Funds are permitted to implement or continue Plans or the provisions
of this Agreement relating to such Plans from year-to-year only if, based on
certain legal considerations, the Boards of Directors are able to conclude that
the Plans will benefit the Plan Funds. Absent such yearly determination the
Plans and the provisions of this Agreement relating to the Plans must be
terminated as set forth above. In addition, any obligation assumed by a Fund
pursuant to this Agreement shall be limited in all cases to the assets of such
Fund and no person shall seek satisfaction thereof from shareholders of a Fund.
You agree to waive payment of any amounts payable to you by us under a Fund's
Plan of Distribution pursuant to Rule 12b-1 until such time as we are in receipt
of such fee from the Fund.
The provisions of the Rule 12b-1 Plans between the Plan Funds and us, insofar as
they relate to Plans, shall control over the provisions of this Agreement in the
event of any inconsistency.
12. Registration of Shares. Upon request, we shall notify you of the states or
other jurisdictions in which each Fund's shares are currently registered or
qualified for sale to the public. We shall have no obligation to register or
qualify, or to maintain registration or qualification of, Fund shares in any
state or other jurisdiction. We shall have no responsibility, under the laws
regulating the sale of securities in any U.S. or foreign jurisdiction, for the
qualification or status of persons selling Fund shares or for the manner of sale
of Fund shares. Except as stated in this paragraph, we shall not, in any event,
be liable or responsible for the issue, form, validity, enforceability and value
of such shares or for any matter in connection therewith, and no obligation not
expressly assumed by us in this Agreement shall be implied. Nothing in this
Agreement, however, shall be deemed to be a condition, stipulation or provision
binding any person acquiring any security to waive compliance with any provision
of the Securities Act of 1933, or of the rules and regulations of the Securities
and Exchange Commission, or to relieve the parties hereto from any liability
arising under the Securities Act of 1933.
13. Additional Registrations. If it is necessary to register or qualify the
shares in any foreign jurisdictions in which you intend to offer the shares of
any Funds, it will be your responsibility to arrange for and to pay the costs of
such registration or qualification; prior to any such registration or
qualification, you will notify us of your intent and of any limitations that
might be imposed on the Funds, and you agree not to proceed with such
registration or qualification without the written consent of the Funds and of
ourselves.
14. Fund Information. No person is authorized to give any information or make
any representations concerning shares of any Fund except those contained in the
Fund's current prospectus or in materials issued by us as information
supplemental to such prospectus. We will supply prospectuses, reasonable
quantities of supplemental sale literature, sales bulletins, and additional
information as issued. You agree not to use other advertising or sales material
relating to the Funds except that which (a) conforms to the requirements of any
applicable laws or regulations of any government or authorized agency in the
U.S. or any other country, having jurisdiction over the offering or sale of
shares of the Funds, and (b) is approved in writing by us in advance of such
use. Such approval may be withdrawn by us in whole or in part upon notice to
you, and you shall, upon receipt of such notice, immediately discontinue the use
of such sales literature, sales material and advertising. You are not authorized
to modify or translate any such materials without our prior written consent.
15. Indemnification. You further agree to indemnify, defend and hold harmless
the Principal Underwriter, the Funds, their officers, directors and employees
from any and all losses, claims, liabilities and expenses arising out of (1) any
alleged violation of any statute or regulation (including without limitation the
securities laws and regulations of the United States or any state or foreign
country) or any alleged tort or breach of contract, in or related to the offer
and sale by you of shares of the Funds pursuant to this Agreement (except to the
extent that our negligence or failure to follow correct instructions received
from you is the cause of such loss, claim, liability or expense), (2) any
redemption or exchange pursuant to telephone instructions received from you or
your agent or employees, or (3) the breach by you of any of the terms and
conditions of this Agreement.
16. Termination; Succession; Amendment. Each party to this Agreement may cancel
its participation in this Agreement by giving written notice to the other
parties. Such notice shall be deemed to have been given and to be effective on
the date on which it was either delivered personally to the other parties or any
officer or member thereof, or was mailed postpaid or delivered to a telegraph
office for transmission to the other parties' Chief Legal Officers at the
addresses shown herein or in the most recent NASD Manual. This Agreement shall
terminate immediately upon the appointment of a Trustee under the Securities
Investor Protection Act or any other act of insolvency by you. The termination
of this Agreement by any of the foregoing means shall have no effect upon
transactions entered into prior to the effective date of termination. A trade
placed by you subsequent to your voluntary termination of this Agreement will
not serve to reinstate the Agreement. Reinstatement, except in the case of a
temporary suspension of a dealer, will only be effective upon written
notification by us. Unless terminated, this Agreement shall be binding upon each
party's successors or assigns. This Agreement may be amended by us at any time
by written notice to you and your placing of an order or acceptance of payments
of any kind after the effective date and receipt of notice of any such Amendment
shall constitute your acceptance of such Amendment.
17. Setoff; Dispute Resolution. Should any of your concession accounts with us
have a debit balance, we may offset and recover the amount owed from any other
account you have with us, without notice or demand to you. In the event of a
dispute concerning any provision of this Agreement, either party may require the
dispute to be submitted to binding arbitration under the commercial arbitration
rules of the NASD or the American Arbitration Association. Judgment upon any
arbitration award may be entered by any state or federal court having
jurisdiction. This Agreement shall be construed in accordance with the laws of
the State of California, not including any provision which would require the
general application of the law of another jurisdiction.
18. Acceptance; Cumulative Effect. This Agreement is cumulative and supersedes
any agreement previously in effect. It shall be binding upon the parties hereto
when signed by us and accepted by you. If you have a current dealer agreement
with us, your first trade or acceptance of payments from us after receipt of
this Agreement, as it may be amended pursuant to paragraph 16, above, shall
constitute your acceptance of its terms. Otherwise, your signature below shall
constitute your acceptance of its terms.
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
By:
Greg Johnson, President
777 Mariners Island Blvd. San Mateo, CA 94404 Attention: Chief Legal Officer
(for legal notices only) 415/312-2000
700 Central Avenue St. Petersburg, Florida 33701-3628 813/823-8712
Dealer: If you have NOT previously signed a Dealer Agreement with us, please
complete and sign this section and return the original to us.
DEALER NAME
By:
(Signature)
Name:
Title:
Address:
Telephone:
NASD CRD #
Franklin Templeton Dealer #
(Internal Use Only)
95.89/104 (05/95)
MUTUAL FUND PURCHASE AND SALES AGREEMENT
FOR ACCOUNTS OF BANK AND TRUST COMPANY CUSTOMERS
Effective: July 1, 1995
1. INTRODUCTION
The parties to this Agreement are a bank or trust company ("Bank") and
Franklin/Templeton Distributors, Inc. ("FTDI"). This Agreement sets forth the
terms and conditions under which FTDI will execute purchases and redemptions of
shares of the Franklin or Templeton mutual funds for which FTDI now or in the
future serves as principal underwriter ("Funds"), at the request of the Bank
upon the order and for the account of Bank's customers ("Customers"). In this
Agreement, "Customer" shall include the beneficial owners of an account and any
agent or attorney-in-fact duly authorized or appointed to act on the owners'
behalf with respect to the account. FTDI will notify Bank from time to time of
the Funds which are eligible for distribution and the terms of compensation
under this Agreement. This Agreement is not exclusive, and either party may
enter into similar agreements with third parties. This Agreement supersedes any
prior agreements between the parties, as stated in paragraph 6(j), below.
2. REPRESENTATIONS AND WARRANTIES OF BANK
Bank warrants and represents to FTDI and the Funds that:
a) Bank is a "bank" as defined in Section 3(a)(6) of the Securities and Exchange
Act of 1934, as amended (the "34 Act"):
"The term 'bank' means (A) a banking institution organized under the laws
of the United States, (B) a member bank of the Federal Reserve System, (C) any
other banking institution, whether incorporated or not, doing business under the
law of any State or of the United States, a substantial portion of the business
of which consists of receiving deposits or exercising a fiduciary power similar
to those permitted to national banks under the authority of the Comptroller of
the Currency pursuant to the first section of Public Law 87-722 (12 U.S.C. 92a),
and which is supervised and examined by State or Federal authority having
supervision over banks, and which is not operated for the purpose of evading the
provisions of this title, and (D) a receiver, conservator, or other liquidating
agent of any institution or firm included in clauses (A), (B) or (C) of this
paragraph."
b) Bank is authorized to enter into this Agreement, and Bank's performance of
its obligations and receipt of consideration under this Agreement will not
violate any law, regulation, charter, agreement, or regulatory restriction to
which Bank is subject.
c) Bank has received all regulatory agency approvals and taken all legal and
other steps necessary for offering the services Bank will provide to Customers
in connection with this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL UNDERWRITER
FTDI warrants and represents to Bank that:
a) FTDI is a broker/dealer registered under the '34 Act.
b) FTDI is the principal underwriter of the Funds.
4. COVENANTS OF BANK
For each Transaction under this Agreement, Bank will:
a) be authorized to engage in the Transaction;
b) act as agent for the Customer;
c) act solely at the request of and for the account of the Customer;
d) not submit an order unless Bank has already received the order from the
Customer;
e) not submit a purchase order unless Bank has already delivered to the
Customer a copy of the then current prospectus for the Fund(s) whose
shares are to be purchased;
f) not withhold placing any Customer's order for the purpose of profiting from
the delay;
g) have no beneficial ownership of the securities in any purchase Transaction
(the Customer will have the full beneficial ownership), unless Bank is the
Customer (in which case, Bank will not engage in the Transaction unless the
Transaction is legally permissible for Bank); and
h) not accept or withhold any Fee otherwise allowed under Sections 5(d) and (e)
of this Agreement, if prohibited by the Employee Retirement Income Security Act
("ERISA") or trust or similar laws to which Bank is subject, in the case of
purchases or redemptions (hereinafter, "Transactions") of Fund shares involving
retirement plans, trusts, or similar accounts.
i) maintain records of all sales and redemptions of shares made through Bank and
to furnish FTDI with copies of such records on request.
j) distribute prospectuses, statements of additional information and reports to
Bank's customers in compliance with applicable legal requirements, except to the
extent that FTDI expressly undertakes to do so on behalf of Bank.
While this Agreement is in effect, Bank will:
k) not purchase any shares from any person at a price lower than the redemption
price then quoted by the applicable Fund;
l) repay FTDI the full Fee received by Bank under Sections 5(d) and (e) of this
Agreement, for any shares purchased under this Agreement which are repurchased
by the Fund within 7 business days after the purchase; in turn, FTDI shall pay
to the Fund the amount repaid by Bank and will notify Bank of any such
repurchase within a reasonable time;
m) in connection with orders for the purchase of shares on behalf of an
Individual Retirement Account, Self-Employed Retirement Plan or other retirement
accounts, by mail, telephone, or wire, Bank shall act as agent for the custodian
or trustee of such plans (solely with respect to the time of receipt of the
application and payments) and shall not place such an order until Bank has
received from its customer payment for such purchase and, if such purchase
represents the first contribution to such a plan, the completed documents
necessary to establish the plan. Bank agrees to indemnify FTDI and Franklin
Templeton Trust Company and/or Templeton Funds Trust Company as applicable for
any claim, loss, or liability resulting from incorrect investment instructions
received from Bank which cause a tax liability or other tax penalty.
n) be responsible for compliance with all laws and regulations, including those
of the applicable federal and state bank regulatory authorities, with regard to
Bank and Bank's Customers; and
o) immediately notify FTDI in writing at the address given below, should Bank
cease to be a bank as set forth in Section 2(a) of this Agreement.
5. TERMS AND CONDITIONS FOR TRANSACTIONS
a) Price
Transaction orders received from Bank will be accepted only at the public
offering price and in compliance with procedures applicable to each order as set
forth in the then current prospectus and statement of additional information
(hereinafter, collectively, "prospectus") for the applicable Fund. All orders
must be accompanied by payment in U.S. dollars. Orders payable by check must be
drawn payable in U.S. dollars on a U.S. bank, for the full amount of the
investment. All sales are made subject to receipt of shares by FTDI from the
Funds. FTDI reserves the right in its discretion, without notice, to suspend the
sale of shares or withdraw the offering of shares entirely.
b) Orders and Confirmations
All purchase orders are subject to acceptance or rejection by FTDI and by
the Fund or its transfer agent at their sole discretion, and become effective
only upon confirmation by FTDI. Transaction orders shall be made using the
procedures and forms required by FTDI from time to time. Orders received on any
business day after the time for calculating the price of Fund shares as set
forth in each Fund's current prospectus will be effected at the price determined
on the next business day. A written confirming statement will be sent to Bank
and to Customer upon settlement of each Transaction.
c) Multiple Class Guidelines
FTDI may from time to time provide to Bank written compliance guidelines
or standards relating to the sale or distribution of Funds offering multiple
classes of shares with different sales charges and distribution-related
operating expenses. In addition, Bank will be bound by any applicable rules or
regulations of government agencies or self-regulatory organizations generally
affecting the sale or distribution of mutual funds offering multiple classes of
shares.
d) Payments by Bank for Purchases
On the settlement date for each purchase, Bank shall either (i) remit the
full purchase price by wire transfer to an account designated by FTDI, or (ii)
following FTDI's procedures, wire the purchase price less the Fee allowed by
Section 5(e) of this Agreement. Twice monthly, FTDI will pay Bank Fees not
previously paid to or withheld by Bank. Each calendar month, FTDI, as
applicable, will prepare and mail an activity statement summarizing all
Transactions.
e) Fees and Payments
Where permitted by the prospectus for each Fund, a charge, concession, or
fee ("Fee") may be paid to Bank, related to services provided by Bank in
connection with Transactions. The amount of the Fee, if any, is set by the
relevant prospectus. Adjustments in the Fee are available for certain purchases,
and Bank is solely responsible for notifying FTDI when any purchase order is
qualified for such an adjustment. If Bank fails to notify FTDI of the
applicability of a reduction in the sales charge at the time the trade is
placed, neither FTDI nor any of the Funds will be liable for amounts necessary
to reimburse any investor for the reduction which should have been effected.
In accordance with the Funds' prospectuses, FTDI or its affiliates may,
but are not obligated to, make payments from their own resources to banks or
dealers as compensation for certain sales which are made at net asset value and
are not subject to any contingent deferred sales charges ("Qualifying Sales").
If Bank notifies FTDI of a Qualifying Sale, FTDI may make a contingent advance
payment up to the maximum amount available for payment on the sale. If any of
the shares purchased in a Qualifying Sale are redeemed within twelve months of
the end of the month of purchase, FTDI shall be entitled to recover any advance
payment attributable to the redeemed shares by reducing any account payable or
other monetary obligation FTDI may owe to Bank or by making demand upon Bank for
repayment in cash. FTDI reserves the right to withhold advances to any bank or
dealer, if for any reason it believes that it may not be able to recover
unearned advances from such bank or dealer. In addition, banks and dealers will
generally be required to enter into a supplemental agreement with FTDI with
respect to such compensation and the repayment obligation prior to receiving any
payments.
f) Rule 12b-1 Plans
Bank is also invited to participate in all Plans adopted by the Funds (the
"Plan Funds") pursuant to Rule 12b-1 under the 1940 Act.
To the extent Bank provides administrative and other services, including,
but not limited to, furnishing personal and other services and assistance to
Bank's customers who own shares of a Plan Fund, answering routine inquiries
regarding a Fund, assisting in changing account designations and addresses,
maintaining such accounts or such other services as a Fund may require, to the
extent permitted by applicable statutes, rules, or regulations, FTDI shall pay
Bank Rule 12b-1 fees. All Rule 12b-1 fees shall be based on the value of shares
attributable to customers of Bank and eligible for such payment, and shall be
calculated on the basis and at the rates set forth in the compensation schedule
then in effect. Without prior approval by a majority of the outstanding shares
of a Fund, the aggregate annual fees paid to Bank pursuant to each Plan shall
not exceed the amounts stated as the "annual maximums" in each Fund's
prospectus, which amount shall be a specified percent of the value of the Fund's
net assets held in Bank's customers' accounts which are eligible for payment
pursuant to this Agreement (determined in the same manner as each Fund uses to
compute its net assets as set forth in its effective Prospectus).
Bank shall furnish FTDI and each Fund with such information as shall
reasonably be requested by the Board of Directors, Trustees or Managing General
Partners (hereinafter referred to as "Directors") of such Funds with respect to
the fees paid to Bank pursuant to the Schedule. FTDI shall furnish to the Boards
of Directors of the Plan Funds, for their review on a quarterly basis, a written
report of the amounts expended under the Plans and the purposes for which such
expenditures were made.
The Plans and provisions of any agreement relating to such Plans must be
approved annually by a vote of the Plan Funds' Directors, including such persons
who are not interested persons of the Plan Funds and who have no financial
interest in the Plans or any related agreement ("Rule 12b-1 Directors"). The
Plans or the provisions of this Agreement relating to such Plans may be
terminated at any time by the vote of a majority of the Plan Funds' Boards of
Directors, including Rule 12b-1 Directors, or by a vote of a majority of the
outstanding shares of the Plan Funds, on sixty (60) days' written notice,
without payment of any penalty. The Plans or the provisions of this Agreement
may also be terminated by any act that terminates the Underwriting Agreement
between FTDI and the Plan Funds, and/or the management or administration
agreement between Franklin Advisers, Inc. or Templeton Investment Counsel, Inc.
or their affiliates and the Plan Funds. In the event of the termination of the
Plans for any reason, the provisions of this Agreement relating to the Plans
will also terminate.
Continuation of the Plans and provisions of this Agreement relating to
such Plans are conditioned on Rule 12b-1 Directors being ultimately responsible
for selecting and nominating any new Rule 12b-1 Directors. Under Rule 12b-1,
Directors of any of the Plan Funds have a duty to request and evaluate, and
persons who are party to any agreement related to a Plan have a duty to furnish,
such information as may reasonably be necessary to an informed determination of
whether the Plan or any agreement should be implemented or continued. Under Rule
12b-1, Plan Funds are permitted to implement or continue Plans or the provisions
of this Agreement relating to such Plans from year-to-year only if, based on
certain legal considerations, the Boards of Directors are able to conclude that
the Plans will benefit the Plan Funds. Absent such yearly determination, the
Plans and the provisions of this Agreement relating to the Plans must be
terminated as set forth above. In addition, any obligation assumed by a Fund
pursuant to this Agreement shall be limited in all cases to the assets of such
Fund and no person shall seek satisfaction thereof from shareholders of a Fund.
Bank agrees to waive payment of any amounts payable to Bank by FTDI under a
Fund's Plan of Distribution pursuant to Rule 12b-1 until such time as FTDI is in
receipt of such fee from the Fund.
The provisions of the Rule 12b-1 Plans between the Plan Funds and FTDI,
insofar as they relate to Plans, shall control over the provisions of this
Agreement in the event of any inconsistency.
g) Other Distribution Services
From time to time, FTDI may offer telephone and other augmented services
in connection with Transactions under this Agreement. If Bank uses any such
service, Bank will be subject to the procedures applicable to the service,
whether or not Bank has executed any agreement required for the service.
h) Conditional Orders; Certificates
FTDI will not accept any conditional Transaction orders. Delivery of
certificates or confirmations for shares purchased shall be made by the Fund
conditional upon receipt of the purchase price, subject to deduction of any Fee.
No certificates will be issued unless specifically requested.
i) Cancellation of Orders
If payment for shares purchased is not received within the time customary
or the time required by law for such payment, the sale may be canceled without
notice or demand, and neither FTDI nor the Fund(s) shall have any responsibility
or liability for such a cancellation; alternatively, the unpaid shares may be
sold back to the Fund, and Bank shall be liable for any resulting loss to FTDI
or to the Fund(s). FTDI shall have no liability for any check or other item
returned unpaid to Bank after Bank has paid FTDI on behalf of a purchaser. FTDI
may refuse to liquidate the investment unless it receives the purchaser's signed
authorization for the liquidation.
j) Order Corrections
Bank shall assume responsibility for any loss to a Fund(s) caused by a
correction made subsequent to trade date, provided such correction was not based
on any error, omission or negligence on FTDI's part, and Bank will immediately
pay such loss to the Fund(s) upon notification.
k) Redemptions; Cancellation
Redemptions or repurchases of shares will be made at the net asset value
of such shares, less any applicable deferred sales or redemption charges, in
accordance with the applicable prospectuses. As agent, Bank may sell shares for
the account of the record owner to the Funds at the repurchase price then
currently in effect for such shares and may charge the owner a fair fee for
handling the transaction. If on a redemption which Bank has ordered,
instructions in proper form, including outstanding certificates, are not
received within the time customary or the time required by law, the redemption
may be canceled forthwith without any responsibility or liability on the part of
FTDI or any Fund, or at its option FTDI may buy the shares redeemed on behalf of
the Fund, in which latter case it may hold Bank responsible for any loss to the
Fund or loss of profit suffered by FTDI resulting from Bank's failure to settle
the redemption.
l) Exchanges
Telephone exchange orders will be effective only for shares in plan
balance (uncertificated shares) or for which share certificates have been
previously deposited and may be subject to any fees or other restrictions set
forth in the applicable prospectuses. Bank may charge the shareholder a fair fee
for handling an exchange transaction. Exchanges from a Fund sold with no sales
charge to a Fund which carries a sales charge, and exchanges from a Fund sold
with a sales charge to a Fund which carries a higher sales charge may be subject
to a sales charge in accordance with the terms of each Fund's prospectus. Bank
will be obligated to comply with any additional exchange policies described in
each Fund's prospectus, including without limitation any policy restricting or
prohibiting "Timing Accounts" as therein defined.
m) Qualification of Shares; Indemnification
Upon request, FTDI shall notify Bank of the states or other jurisdictions
in which each Fund's shares are currently registered or qualified for sale to
the public. FTDI shall have no obligation to register or qualify, or to maintain
registration or qualification of, Fund shares in any state or other
jurisdiction. FTDI shall have no responsibility, under the laws regulating the
sale of securities in any U.S. or foreign jurisdiction, for the qualification or
status of persons selling Fund shares or for the manner of sale of Fund shares.
Except as stated in this paragraph, FTDI shall not, in any event, be liable or
responsible for the issue, form, validity, enforceability and value of such
shares or for any matter in connection therewith, and no obligation not
expressly assumed by FTDI in this Agreement shall be implied. If it is necessary
to register or qualify shares of any Fund in any foreign jurisdictions in which
Bank intends to offer such shares, it will be Bank's responsibility to arrange
for and to pay the costs of such registration or qualification; prior to any
such registration or qualification Bank will notify FTDI of its intent and of
any limitations that might be imposed on the Funds and Bank agrees not to
proceed with such registration or qualification without the written consent of
the Funds and of FTDI.
Bank further agrees to indemnify, defend and hold harmless the Principal
Underwriter, the Funds, their officers, directors and employees from any and all
losses, claims, liabilities and expenses, arising out of (1) any alleged
violation of any statute or regulation (including without limitation the
securities laws and regulations of the United States or any state or foreign
country) or any alleged tort or breach of contract, in or related to the offer
and sale by Bank of shares of the Funds pursuant to this Agreement (except to
the extent that FTDI's negligence or failure to follow correct instructions
received from Bank is the cause of such loss, claim, liability or expense), (2)
any redemption or exchange pursuant to telephone instructions received from Bank
or its agents or employees, or (3) the breach by Bank of any of the terms and
conditions of this Agreement.
However, nothing in this Agreement shall be deemed to be a condition,
stipulation, or provision binding any person acquiring any security to waive
compliance with any provision of the Securities Act of 1933, or of the rules and
regulations of the Securities and Exchange Commission, or to relieve the parties
hereto from any liability arising under the Securities Act of 1933.
n) Prospectus and Sales Materials; Limit on Advertising
No person is authorized to give any information or make any
representations concerning shares of any Fund except those contained in the
Fund's current prospectus or in materials issued by FTDI as information
supplemental to such prospectus. FTDI will supply prospectuses, reasonable
quantities of supplemental sale literature, sales bulletins, and additional
information as issued. Bank agrees not to use other advertising or sales
material relating to the Funds except that which (a) conforms to the
requirements of any applicable laws or regulations of any government or
authorized agency in the U.S. or any other country, having jurisdiction over the
offering or sale of shares of the Funds, and (b) is approved in writing by FTDI
in advance of such use. Such approval may be withdrawn by FTDI in whole or in
part upon notice to Bank, and Bank shall, upon receipt of such notice,
immediately discontinue the use of such sales literature, sales material and
advertising. Bank is not authorized to modify or translate any such materials
without the prior written consent of FTDI.
o) Customer Information
(1) Definition. For purposes of this paragraph 5(h)(iv), 'Customer
Information' means customer names and other identifying information pertaining
to Bank's mutual fund customers which is furnished by Bank to FTDI in the
ordinary course of business under this Agreement. Customer Information shall not
include any information obtained from other sources.
(2) Permitted Uses. FTDI may use Customer Information to fulfill its
obligations under this Agreement, the Distribution Agreements between the Funds
and FTDI, the Funds' prospectuses, or other duties imposed by law. In addition,
FTDI or its affiliates may use Customer Information in communications to
shareholders to market the Funds or other investment products or services,
including without limitation variable annuities, variable life insurance, and
retirement plans and related services. FTDI may also use Customer Information if
it obtains Bank's prior written consent.
(3) Prohibited Uses. Except as stated above, FTDI shall not disclose
Customer Information to third parties, and shall not use Customer Information in
connection with any advertising, marketing or solicitation of any products or
services, provided that Bank offers or soon expect to offer comparable products
or services to mutual fund customers and have so notified FTDI.
(4) Survival; Termination. The agreements described in this paragraph
5(h)(iv) shall survive the termination of this Agreement, but shall terminate as
to any account upon FTDI's receipt of valid notification of either the
termination of that account with Bank or the transfer of that account to another
bank or dealer.
6. GENERAL
a) Successors and Assignments
This Agreement binds Bank and FTDI and their respective heirs, successors
and assigns. Bank may not assign its right and duties under this Agreement
without the advance, written authorization of FTDI.
b) Paragraph Headings
The paragraph headings of this Agreement are for convenience only, and
shall not be deemed to define, limit, or describe the scope or intent of this
Agreement.
c) Severability
Should any provision of this Agreement be determined to be invalid or
unenforceable under any law, rule, or regulation, that determination shall not
affect the validity or enforceability of any other provision of this Agreement.
d) Waivers
There shall be no waiver of any provision of this Agreement except a
written waiver signed by Bank and FTDI. No written waiver shall be deemed a
continuing waiver or a waiver of any other provision, unless the waiver
expresses such intention.
e) Sole Agreement
This Agreement is the entire agreement of Bank and FTDI and supersedes all
oral negotiations and prior writings.
f) Governing Law
This Agreement shall be construed in accordance with the laws of the State
of California, not including any provision which would require the general
application of the law of another jurisdiction, and shall be binding upon the
parties hereto when signed by FTDI and accepted by Bank, either by Bank's
signature in the space provided below or by Bank's first trade entered after
receipt of this Agreement.
g) Arbitration
Should any of Bank's concession accounts with FTDI have a debit balance,
FTDI may offset and recover the amount owed from any other account Bank has with
FTDI, without notice or demand to Bank. Either party may submit any dispute
under this Agreement to binding arbitration under the commercial arbitration
rules of the American Arbitration Association. Judgment upon any arbitration
award may be entered by any state or federal court having jurisdiction.
h) Amendments
FTDI may amend this Agreement at any time by depositing a written notice
of the amendment in the U.S. mail, first class postage pre-paid, addressed to
Bank's address given below. Bank's placement of any Transaction order or
acceptance of any payments after the effective date and receipt of notice of any
such amendment shall constitute Bank's acceptance of the amendment.
i) Term and Termination
This Agreement shall continue in effect until terminated. FTDI or Bank may
terminate this Agreement at any time by written notice to the other, but such
termination shall not affect the payment or repayment of Fees on Transactions
prior to the termination date. Termination also will not affect the indemnities
given under this Agreement.
j) Acceptance; Cumulative Effect
This Agreement is cumulative and supersedes any agreement previously in
effect. It shall be binding upon the parties hereto when signed by FTDI and
accepted by Bank. If Bank has a current agreement with FTDI, Bank's first trade
or acceptance of payments from FTDI after receipt of this Agreement, as it may
be amended pursuant to paragraph 6(h), above, shall constitute Bank's acceptance
of the terms of this Agreement. Otherwise, Bank's signature below shall
constitute Bank's acceptance of these terms.
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
By:
Greg Johnson, President
777 Mariners Island Blvd. San Mateo, CA 94404 Attention: Chief Legal Officer
(for legal notices only)
415/312-2000
700 Central Avenue St. Petersburg, Florida 33701-3628
813/823-8712
To the Bank or Trust Company: If you have not previously signed an agreement
with us for the sale of mutual fund shares to your customers, please complete
and sign this section and return the original to us.
BANK or TRUST COMPANY
(Firm's name)
By:
(Signature)
Name:
Title:Address:
Telephone:
CUSTODY AGREEMENT
THIS CUSTODY AGREEMENT ("Agreement") is made and entered into as of
November 12, 1993, by and between the HUNTINGTON FUNDS, a Massachusetts business
trust (the "Trust"), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
a banking association organized under the laws of the United States (the
"Custodian").
RECITALS
A. The Trust is an investment company registered under the Investment
Company Act of 1940, as amended (the "Investment Company Act") that invests
and reinvests, on behalf of its series, in Domestic Securities and Foreign
Securities.
B. The Custodian is, and has represented to the Trust that the
Custodian is, a "bank" as that term is defined in Section 2(a)(5) of the
Investment Company Act of 1940, as amended and is eligible to receive and
maintain custody of investment company assets pursuant to Section 17(f) and
Rule 17f-2 thereunder.
C. The Trust and the Custodian desire to provide for the retention of
the Custodian as a custodian of the assets of the Trust and such subsequent
series as the parties hereto may determine from time-to-time, on the terms
and subject to the provisions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
Section 1. DEFINITIONS
For purposes of this Agreement, the following terms shall have the
respective meanings specified below:
"Agreement" shall mean this Custody Agreement.
"Board of Trustees" shall mean the Board of Trustees of the Trust.
"Business Day" with respect to any Domestic Security means any day,
other than a Saturday or Sunday, that is not a day on which banking
institutions are authorized or required by law to be closed in The City of
New York and, with respect to Foreign Securities, a London Business Day.
"London Business Day" shall mean any day on which dealings and deposits in
U.S. dollars are transacted in the London interbank market.
"Custodian" shall mean Bank of America National Trust and Savings
Association.
"Domestic Securities" shall have the meaning provided in Subsection
2.1 hereof.
"Executive Committee" shall mean the executive committee of the Board
of Trustees.
"Foreign Custodian" shall have the meaning provided in Section 4.1
hereof.
"Foreign Securities" shall have the meaning provided in Section 2.1
hereof.
"Foreign Securities Depository" shall have the meaning provided in
Section 4.1 hereof.
"Trust" shall mean the Huntington Funds and any separate series of the
Trust hereinafter organized.
"Investment Company Act" shall mean the Investment Company Act of
1940, as amended.
"Securities" shall have the meaning provided in Section 2.1 hereof.
"Securities System" shall have the meaning provided in Section 3.1
hereof.
"Securities System Account" shall have the meaning provided in
Subsection 3.8(a) hereof.
"Shares" shall mean shares of beneficial interest of the Trust.
"Subcustodian" shall have the meaning provided in Subsection 3.7
hereof, but shall not include any Foreign Custodian.
"Transfer Agent" shall mean the duly appointed and acting transfer
agent for the Trust.
"Writing" shall mean a communication in writing, a communication by
telex, the Custodian's Global Custody Instruction SystemTM, facsimile
transmission, bankwire or other teleprocess or electronic instruction
system acceptable to the Custodian.
Section 2. APPOINTMENT OF CUSTODIAN; DELIVERY OF ASSETS
2.1 Appointment of Custodian. The Trust hereby appoints and designates
the Custodian as a custodian of the assets of the Trust including cash,
securities the Trust desires to be held within the United States ("Domestic
Securities") and securities it desires to be held outside the United States
("Foreign Securities"). Domestic Securities and Foreign Securities are
sometimes referred to herein, collectively, as "Securities." The Custodian
hereby accepts such appointment and designation and agrees that it shall
maintain custody of the assets of the Trust delivered to it hereunder in
the manner provided for herein.
2.2 Delivery of Assets. The Trust agrees to deliver to the Custodian
Securities and cash owned by the Trust, payments of income, principal or
capital distributions received by the Trust with respect to Securities
owned by the Trust from time to time, and the consideration received by it
for such Shares or other securities of the Trust as may be issued and sold
from time to time. The Custodian shall have no responsibility whatsoever
for any property or assets of the Trust held or received by the Trust and
not delivered to the Custodian pursuant to and in accordance with the terms
hereof. All Securities accepted by the Custodian on behalf of the Trust
under the terms of this Agreement shall be in "street name" or other good
delivery form as determined by the Custodian.
2.3 Subcustodians. Upon receipt of Proper Instructions and a certified
copy of a resolution of the Board of Trustees or of the Executive Committee
certified by the Secretary or an Assistant Secretary of the Trust, the
Custodian may from time to time appoint one or more Subcustodians or
Foreign Custodians to hold assets of the Trust in accordance with the
provisions of this Agreement.
2.4 No Duty to Manage. The Custodian, a Subcustodian or a Foreign
Custodian shall not have any duty or responsibility to manage or recommend
investments of the assets of the Trust held by them or to initiate any
purchase, sale or other investment transaction in the absence of Proper
Instructions or except as otherwise specifically provided herein.
Section 3. DUTIES OF THE CUSTODIAN WITH RESPECT TO
ASSETS OF THE TRUST HELD BY THE CUSTODIAN
3.1 Holding Securities. The Custodian shall hold and physically
segregate from any property owned by the Custodian, for the account of the
Trust, all non-cash property delivered by the Trust to the Custodian
hereunder other than Securities which, pursuant to Subsection 3.8 hereof,
are held through a registered clearing agency, a registered securities
depository, the Federal Reserve's book-entry securities system (referred to
herein, individually, as a "Securities System"), or held by a Subcustodian,
Foreign Custodian or in a Foreign Securities Depository.
3.2 Delivery of Securities. Except as otherwise provided in Subsection
3.5 hereof, the Custodian, upon receipt of Proper Instructions, shall
release and deliver Securities owned by the Trust and held by the Custodian
in the following cases or as otherwise directed in Proper Instructions:
(a) except as otherwise provided herein, upon sale of such Securities
for the account of the Trust and receipt by the Custodian, a Subcustodian
or a Foreign Custodian of payment therefor;
(b) upon the receipt of payment by the Custodian, a Subcustodian or a
Foreign Custodian in connection with any repurchase agreement related to
such Securities entered into by the Trust;
(c) in the case of a sale effected through a Securities System, in
accordance with the provisions of Subsection 3.8 hereof;
(d) to a tender agent or other authorized agent in connection with (i)
a tender or other similar offer for Securities owned by the Trust, or (ii)
a tender offer or repurchase by the Trust of its own Shares;
(e) to the issuer thereof or its agent when such Securities are
called, redeemed, retired or otherwise become payable; provided, that in
any such case, the cash or other consideration is to be delivered to the
Custodian, a Subcustodian or a Foreign Custodian;
(f) to the issuer thereof, or its agent, for transfer into the name or
nominee name of the Trust, the name or nominee name of the Custodian, the
name or nominee name of any Subcustodian or Foreign Custodian; or for
exchange for a different number of bonds, certificates or other evidence
representing the same aggregate face amount or number of units; provided
that, in any such case, the new Securities are to be delivered to the
Custodian, a Subcustodian or Foreign Custodian;
(g) to the broker selling the same for examination in accordance with
the "street delivery" custom;
(h) for exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, or reorganization of the issuer of such
Securities, or pursuant to a conversion of such Securities; provided that,
in any such case, the new Securities and cash, if any, are to be delivered
to the Custodian or a Subcustodian;
(i) in the case of warrants, rights or similar securities, the
surrender thereof in connection with the exercise of such warrants, rights
or similar Securities or the surrender of interim receipts or temporary
Securities for definitive Securities; provided that, in any such case, the
new Securities and cash, if any, are to be delivered to the Custodian, a
subcustodian or a Foreign Custodian;
(j) for delivery in connection with any loans of Securities made by
the Trust, but only against receipt by the Custodian, a Subcustodian or a
Foreign Custodian of adequate collateral as determined by the Trust (and
identified in Proper Instructions communicated to the Custodian), which may
be in the form of cash or obligations issued by the United States
government, its agencies or instrumentalities, except that in connection
with any loans for which collateral is to be credited to the account of the
Custodian, a Subcustodian or a Foreign Custodian in the Federal Reserve's
book-entry securities system, the Custodian will not be held liable or
responsible for the delivery of Securities owned by the Trust prior to the
receipt of such collateral;
(k) for delivery as security in connection with any borrowings by the
Trust requiring a pledge of assets by the Trust, but only against receipt
by the Custodian, a Subcustodian or a Foreign Custodian of amounts
borrowed;
(l) for delivery in accordance with the provisions of any agreement
among the Trust, the Custodian, a Subcustodian or a Foreign Custodian and a
broker-dealer relating to compliance with the rules of registered clearing
corporations and of any registered national securities exchange, or of any
similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Trust;
(m) for delivery in accordance with the provisions of any agreement
among the Trust, the Custodian, a Subcustodian or a Foreign Custodian and a
futures commission merchant, relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any contract market, or any
similar organization or organizations, regarding account deposits in
connection with transactions by the Trust;
(n) upon the receipt of instructions from the Transfer Agent for
delivery to the Transfer Agent or to the holders of Shares in connection
with distributions in kind in satisfaction of requests by holders of Shares
for repurchase or redemption; and
(o) for any other proper purpose, but only upon receipt of proper
Instructions, and a certified copy of a resolution of the Trustees or of
the Executive Committee certified by the Secretary or an Assistant
Secretary of the Trust, specifying the securities to be delivered, setting
forth the purpose for which such delivery is to be made, declaring such
purpose to be a proper purpose, and naming the person or persons to whom
delivery of such securities shall be made.
3.3 Registration of Securities. Securities held by the Custodian, a
Subcustodian or a Foreign Custodian (other than bearer Securities) shall be
registered in the name or nominee name of the Trust, in the name or nominee
name of the Custodian or in the name or nominee name of any Subcustodian or
Foreign Custodian. The Trust agrees to hold the Custodian, any such
nominee, Subcustodian or Foreign Custodian harmless from any liability as a
holder of record of such Securities.
3.4 Bank Accounts. The Custodian shall open and maintain a separate
bank account or accounts for the Trust, subject only to draft or order by
the Custodian acting pursuant to the terms of this Agreement, and shall
hold in such account or accounts, subject to the provisions hereof, all
cash received by it hereunder from or for the account of the Trust, other
than cash maintained by the Trust in a bank account established and used in
accordance with Rule 17f-3 under the Investment Company Act. Funds held by
the Custodian for the Trust may be deposited by it to its credit as
Custodian in the banking departments of the Custodian, a Subcustodian or a
Foreign Custodian. It is understood and agreed by the Custodian and the
Trust that the rate of interest, if any, payable on such funds (including
foreign currency deposits) that are deposited with the Custodian may not be
a market rate of interest and that the rate of interest payable by the
Custodian to the Trust shall be agreed upon by the Custodian and the Trust
from time to time. Such funds shall be deposited by the Custodian in its
capacity as Custodian and shall be withdrawable by the Custodian only in
that capacity.
3.5 Collection of Income; Trade Settlement; Crediting of Accounts. The
Custodian shall collect income payable with respect to Securities owned by
the Trust, settle Securities trades for the account of the Trust and credit
and debit the Trust's account with the Custodian in connection therewith as
follows:
(a) Upon receipt of Proper Instructions, the Custodian shall effect
the purchase of a Security by charging the account of the Trust on the
contractual settlement date. The Custodian shall have no liability of any
kind to any person, including the Trust, if the Custodian effects payment
on behalf of the Trust as provided for herein or in Proper Instructions,
and the seller or selling broker fails to deliver the Securities purchased.
(b) Upon receipt of Proper Instructions, the Custodian shall effect
the sale of a Security by delivering a certificate or other indicia of
ownership, and shall credit the account of the Trust with the proceeds of
such sale on the contractual settlement date. The Custodian shall have no
liability of any kind to any person, including the Trust, if the Custodian
delivers such a certificate(s) or other indicia of ownership as provided
for herein or in Proper Instructions, and the purchaser or purchasing
broker fails to effect payment to the Trust within a reasonable time
period, as determined by the Custodian in its sole discretion. In such
event, the Custodian shall be entitled to reimbursement of the amount so
credited to the account of the Trust in connection with such sale.
(c) The Trust is responsible for ensuring that the Custodian receives
timely and accurate Proper Instructions to enable the Custodian to effect
settlement of any purchase or sale. If the Custodian does not receive such
instructions within the required time period, the Custodian shall have no
liability of any kind to any person, including the Trust, for failing to
effect settlement on the contractual settlement date. However, the
Custodian shall use its best reasonable efforts to effect settlement as
soon as possible after receipt of Proper Instructions.
(d) The Custodian shall credit the account of the Trust with interest
income payable on interest bearing Securities on payable date. Interest
income on cash balances will be credited monthly to the account of the
Trust on the first Business Day (on which the Custodian is open for
business) following the end of each month. Dividends and other amounts
payable with respect to Domestic Securities and Foreign Securities shall be
credited to the account of the Trust when received by the Custodian. The
Custodian shall not be required to commence suit or collection proceedings
or resort to any extraordinary means to collect such income and other
amounts payable with respect to Securities owned by the Trust. The
collection of income due the Trust on Domestic Securities loaned pursuant
to the provisions of Subsection 3.2(j) shall be the responsibility of the
Trust. The Custodian will have no duty or responsibility in connection
therewith, other than to provide the Trust with such information or data as
may be necessary to assist the Trust in arranging for the timely delivery
to the Custodian of the income to which the Trust is entitled. The
Custodian shall have no liability to any person, including the Trust, if
the Custodian credits the account of the Trust with such income or other
amounts payable with respect to Securities owned by the Trust (other than
Securities loaned by the Trust pursuant to Subsection 3.2(j) hereof) and
the Custodian subsequently is unable to collect such income or other
amounts from the payors thereof within a reasonable time period, as
determined by the Custodian in its sole discretion. In such event, the
Custodian shall be entitled to reimbursement of the amount so credited to
the account of the Trust.
3.6 Payment of Trust Monies. Upon receipt of Proper Instructions the
Custodian shall pay out monies of the Trust in the following cases or as
otherwise directed in Proper Instructions:
(a) upon the purchase of Securities, futures contracts or options on
futures contracts for the account of the Trust but only, except as
otherwise provided herein, (i) against the delivery of such securities, or
evidence of title to futures contracts or options on futures contracts, to
the Custodian or a Subcustodian registered pursuant to Subsection 3.3
hereof or in proper form for transfer; (ii) in the case of a purchase
effected through a Securities System, in accordance with the conditions set
forth in Subsection 3.8 hereof; or (iii) in the case of repurchase
agreements entered into between the Trust and the Custodian, another bank
or a broker-dealer (A) against delivery of the Securities either in
certificated form to the Custodian or a Subcustodian or through an entry
crediting the Custodian's account at the appropriate Federal Reserve Bank
with such Securities or (B) against delivery of the confirmation evidencing
purchase by the Trust of Securities owned by the Custodian or such
broker-dealer or other bank along with written evidence of the agreement by
the Custodian or such broker-dealer or other bank to repurchase such
Securities from the Trust;
(b) in connection with conversion, exchange or surrender of Securities
owned by the Trust as set forth in Subsection 3.2 hereof;
(c) for the redemption or repurchase of Shares issued by the Trust;
(d) for the payment of any expense or liability incurred by the Trust,
including but not limited to the following payments for the account of the
Trust: custodian fees, interest, taxes, management, accounting, transfer
agent and legal fees and operating expenses of the Trust whether or not
such expenses are to be in whole or part capitalized or treated as deferred
expenses; and
(e) for the payment of any dividends or distributions declared by the
Board of Trustees with respect to the Shares.
3.7 Appointment of Subcustodians. The Custodian may, upon receipt of
Proper Instructions, appoint another bank or trust company, which is itself
qualified under the Investment Company Act to act as a custodian (a
"Subcustodian"), as the agent of the Custodian to carry out such of the
duties of the Custodian hereunder as a Custodian may from time to time
direct; provided, however, that the appointment of any Subcustodian shall
not relieve the Custodian of its responsibilities or liabilities hereunder.
3.8 Deposit of Securities in Securities Systems. The Custodian may
deposit and/or maintain Domestic Securities owned by the Trust in a
Securities System in accordance with applicable Federal Reserve Board and
Securities and Exchange Commission rules and regulations, if any, and
subject to the following provisions:
(a) the Custodian may hold Domestic Securities of the Trust in the
Depository Trust Company or the Federal Reserve's book entry system or,
upon receipt of Proper Instructions, in another Securities System provided
that such securities are held in an account of the Custodian in the
Securities System ("Securities System Account") which shall not include any
assets of the Custodian other than assets held as a fiduciary, custodian or
otherwise for customers;
(b) the records of the Custodian with respect to Domestic Securities
of the Trust which are maintained in a Securities System shall identify by
book-entry those Domestic Securities belonging to the Trust;
(c) the Custodian shall pay for Domestic Securities purchased for the
account of the Trust upon (i) receipt of advice from the Securities System
that such securities have been transferred to the Securities System
Account, and (ii) the making of an entry on the records of the Custodian to
reflect such payment and transfer for the account of the Trust. The
Custodian shall transfer Domestic Securities sold for the account of the
Trust upon (A) receipt of advice from the Securities System that payment
for such securities has been transferred to the Securities System Account,
and (B) the making of an entry on the records of the Custodian to reflect
such transfer and payment for the account of the Trust. Copies of all
advices from the Securities System of transfers of Domestic Securities for
the account of the Trust shall be maintained for the Trust by the Custodian
and be provided to the Trust at its request. Upon request, the Custodian
shall furnish the Trust confirmation of each transfer to or from the
account of the Trust in the form of a written advice or notice; and
(d) upon request, the Custodian shall provide the Trust with any
report obtained by the Custodian on the Securities System's accounting
system, internal accounting control and procedures for safeguarding
domestic securities deposited in the Securities System.
3.9 Segregated Account. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or accounts for
and on behalf of the Trust, into which account or accounts may be
transferred cash and/or Securities, including Securities maintained in an
account by the Custodian pursuant to Section 3.8 hereof, (i) in accordance
with the provisions of any agreement among the Trust, the Custodian and a
broker-dealer or futures commission merchant, relating to compliance with
the rules of registered clearing corporations and of any national
securities exchange (or the Commodity Futures Trading Commission or any
registered contract market), or of any similar organization or
organizations, regarding escrow or other arrangements in connection with
transactions by the Trust, (ii) for purposes of segregating cash or
securities in connection with options purchased, sold or written by the
Trust or commodity futures contracts or options thereon purchased or sold
by the Trust and (iii) for other proper corporate purposes, but only, in
the case of this clause (iii), upon receipt of, in addition to Proper
Instructions, a certified copy of a resolution of the Board of Trustees or
of the Executive Committee certified by the Secretary or an Assistant
Secretary, setting forth the purpose or purposes of such segregated account
and declaring such purposes to be proper corporate purposes.
3.10 Ownership Certificates for Tax Purposes. The Custodian shall
execute ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other payments
with respect to domestic securities of the Trust held by it and in
connection with transfers of such securities.
3.11 Proxies. The Custodian shall, with respect to the Securities held
hereunder, promptly deliver to the Trust all proxies, all proxy soliciting
materials and all notices relating to such Securities. If the Securities
are registered otherwise than in the name of the Trust or a nominee of the
Trust, the Custodian shall use its best reasonable efforts, consistent with
applicable law, to cause all proxies to be promptly executed by the
registered holder of such Securities in accordance with Proper
Instructions.
3.12 Communications Relating to Trust Portfolio Securities. The
Custodian shall transmit promptly to the Trust all written information
(including, without limitation, pendency of calls and maturities of
Securities and expirations of rights in connection therewith and notices of
exercise of put and call options written by the Trust and the maturity of
futures contracts purchased or sold by the Trust) received by the Custodian
from issuers of Securities being held for the Trust. With respect to tender
or exchange offers, the Custodian shall transmit promptly to the Trust all
written information received by the Custodian from issuers of the
Securities whose tender or exchange is sought and from the party (or its
agents) making the tender or exchange offer. If the Trust desires to take
action with respect to any tender offer, exchange offer or any other
similar transaction, the Trust shall notify the Custodian at least three
Business Days prior to the date of which the Custodian is to take such
action.
3.13 Reports by Custodian. Custodian shall each business day furnish
the Trust with a statement summarizing all transactions and entries for the
account of the Fund for the preceding day. At the end of every month
Custodian shall furnish the Trust with a list of the portfolio securities
showing the quantity of each issue owned, the cost of each issue and the
market value of each issue at the end of each month. Such monthly report
shall also contain separate listings of (a) unsettled trades and (b)
when-issued securities. Custodian shall furnish such other reports as may
be mutually agreed upon from time-to-time.
Section 4. CERTAIN DUTIES OF THE CUSTODIAN WITH RESPECT TO ASSETS OF THE TRUST
HELD OUTSIDE THE UNITED STATES
4.1 Custody outside the United States. The Trust authorizes the
Custodian to hold Foreign Securities and cash in custody accounts which
have been established by the Custodian with (i) its foreign branches, (ii)
foreign banking institutions, foreign branches of United States banks and
subsidiaries of United States banks or bank holding companies (each a
"Foreign Custodian") and (iii) Foreign Securities depositories or clearing
agencies (each a "Foreign Securities Depository"); provided, however, that
the Board of Trustees or the Executive Committee has approved in advance
the use of each such Foreign Custodian and Foreign Securities Depository
and the contract between the Custodian and each Foreign Custodian and that
such approval is set forth in Proper Instructions and a certified copy of a
resolution of the Board of Trustees or of the Executive Committee certified
by the Secretary or an Assistant Secretary of the Trust. Unless expressly
provided to the contrary in this Section 4, custody of Foreign Securities
and assets held outside the United States by the Custodian, a Foreign
Custodian or through a Foreign Securities Depository shall be governed by
Section 3 hereof.
4.2 Assets to be Held. The Custodian shall limit the securities and
other assets maintained in the custody of its foreign branches, Foreign
Custodians and Foreign Securities Depositories to: (i) "foreign
securities", as defined in paragraph (c) (1) of Rule 17f-5 under the
Investment Company Act, and (ii) cash and cash equivalents in such amounts
as the Custodian or the Trust may determine to be reasonably necessary to
effect the Trust's Foreign Securities transactions.
4.3 Foreign Securities Depositories. Except as may otherwise be agreed
upon in writing by the Custodian and the Trust, assets of the Trust shall
be maintained in Foreign Securities Depositories only through arrangements
implemented by the Custodian or Foreign Custodians pursuant to the terms
hereof.
4.4 Segregation of Securities. The Custodian shall identify on its
books and records as belonging to the Trust, the Foreign Securities of the
Trust held by each Foreign Custodian.
4.5 Agreements with Foreign Custodians. Each agreement with a Foreign
Custodian shall provide generally that: (a) the Trust's assets will not be
subject to any right, charge, security interest, lien or claim of any kind
in favor of the Foreign Custodian or its creditors, except a claim of
payment for their safe custody or administration; (b) beneficial ownership
for the Trust's assets will be freely transferable without the payment of
money or value other than for custody or administration; (c) adequate
records will be maintained identifying the assets as belonging to the
Trust; (d) the independent public accountants for the Trust, will be given
access to the records of the Foreign Custodian relating to the assets of
the Trust or confirmation of the contents of those records; (e) the
disposition of assets of the Trust held by the Foreign Custodian will be
subject only to the instructions of the Custodian or its agents; (f) the
Foreign Custodian shall indemnify and hold harmless the Custodian and the
Trust from and against any loss, damage, cost, expense, liability or claim
arising out of or in connection with the Foreign Custodian's performance of
its obligations under such agreement; (g) to the extent practicable, the
Trust's assets will be adequately insured in the event of loss; and (h) the
Custodian will receive periodic reports with respect to the safekeeping of
the Trust's assets, including notification of any transfer to or from the
Trust's account.
4.6 Access of Independent Accountants of the Trust. Upon request of
the Trust, the Custodian will use its best reasonable efforts to arrange
for the independent accountants of the Trust to be afforded access to the
books and records of any Foreign Custodian insofar as such books and
records relate to the custody by any such Foreign Custodian of assets of
the Trust.
4.7 Transactions in Foreign Custody Accounts. Upon receipt of Proper
Instructions, the Custodian shall instruct the appropriate Foreign
Custodian to transfer, exchange or deliver Foreign Securities owned by the
Trust, but, except to the extent explicitly provided herein, only in any of
the cases specified in Subsection 3.2. Upon receipt of Proper Instructions,
the Custodian shall pay out or instruct the appropriate Foreign Custodian
to pay out monies of the Trust in any of the cases specified in Subsection
3.6. Notwithstanding anything herein to the contrary, settlement and
payment for Foreign Securities received for the account of the Trust and
delivery of Foreign Securities maintained for the account of the Trust may
be effected in accordance with the customary or established securities
trading or securities processing practices and procedures in the
jurisdiction or market in which the transaction occurs, including, without
limitation, delivering securities to the purchaser thereof or to a dealer
therefor (or an agent for such purchaser or dealer) against a receipt with
the expectation of receiving later payment for such securities from such
purchaser or dealer. Foreign Securities maintained in the custody of a
Foreign Custodian may be maintained in the name of such entity or its
nominee name to the same extent as set forth in Section 3.3 of this
Agreement and the Trust agrees to hold any Foreign Custodian and its
nominee harmless from any liability as a holder of record of such
securities.
4.8 Liability of Foreign Custodian. Each agreement between the
Custodian and a Foreign Custodian shall require the Foreign Custodian to
exercise reasonable care in the performance of its duties and to indemnify
and hold harmless the Custodian and the Trust from and against any loss,
damage, cost, expense, liability or claim arising out of or in connection
with the Foreign Custodian's performance of such obligations. At the
election of the Trust, it shall be entitled to be subrogated to the rights
of the Custodian with respect to any claims against a Foreign Custodian as
a consequence of any such loss, damage, cost, expense, liability or claim
if and to the extent that the Trust has not been made whole for any such
loss, damage, cost, expense, liability or claim.
4.9 Monitoring Responsibilities.
(a) The Custodian will promptly inform the Trust in the event that the
Custodian learns of a material adverse change in the financial condition of
a Foreign Custodian or is notified by (i) a foreign banking institution
employed as a Foreign Custodian that there appears to be a substantial
likelihood that its shareholders' equity will decline below $200 million or
that its shareholders' equity has declined below $200 million (in each case
computed in accordance with generally accepted United States accounting
principles) and denominated in U.S. dollars, or (ii) a subsidiary of a
United States bank or bank holding company acting as a Foreign Custodian
that there appears to be a substantial likelihood that its shareholders'
equity will decline below $100 million or that its shareholders' equity has
declined below $100 million (in each case computed in accordance with
generally accepted United States accounting principles) and denominated in
U.S. dollars.
(b) The custodian will furnish such information as may be reasonably
necessary to assist the Trust's Board of Trustees in its annual review and
approval of the continuance of all contracts or arrangements with Foreign
Subcustodians.
Section 5. PROPER INSTRUCTIONS
As used in this Agreement, the term "Proper Instructions" means
instructions of the Trust received by the Custodian via telephone or in Writing
which the Custodian believes in good faith to have been given by Authorized
Persons (as defined below) or which are transmitted with proper testing or
authentication pursuant to terms and conditions which the Custodian may specify.
Any Proper Instructions delivered to the Custodian by telephone shall promptly
thereafter be confirmed in Writing by an Authorized Person, but the Trust will
hold the Custodian harmless for its failure to send such confirmation in
writing, the failure of such confirmation to conform to the telephone
instructions received or the Custodian's failure to produce such confirmation at
any subsequent time. Unless otherwise expressly provided, all Proper
Instructions shall continue in full force and effect until cancelled or
superseded. If the Custodian requires test arrangements, authentication methods
or other security devices to be used with respect to Proper Instructions, any
Proper Instructions given by the Trust thereafter shall be given and processed
in accordance with such terms and conditions for the use of such arrangements,
methods or devices as the Custodian may put into effect and modify from time to
time. The Trust shall safeguard any testkeys, identification codes or other
security devices which the Custodian shall make available to it. The Custodian
may electronically record any Proper Instructions given by telephone, and any
other telephone discussions, with respect to its activities hereunder. As used
in this Agreement, the term "Authorized Persons" means such officers or such
agents of the Trust as have been designated by a resolution of the Board of
trustees or of the Executive Committee, a certified copy of which has been
provided to the Custodian, to act on behalf of the Trust under this Agreement.
Each of such persons shall continue to be an Authorized Person until such time
as the Custodian receives Proper Instructions that any such officer or agent is
no longer an Authorized Person.
Section 6. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express authority from the
Trust:
(a) make payments to itself or others for minor expenses of handling
Securities or other similar items relating to its duties under this
Agreement, provided that all such payments shall be accounted for to the
Trust;
(b) endorse for collection, in the name of the Trust, checks, drafts
and other negotiable instruments; and
(c) in general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and other
dealings with the Securities and property of the Trust except as otherwise
provided in Proper Instructions.
Section 7. EVIDENCE OF AUTHORITY
The Custodian shall be protected in acting upon any instructions (conveyed
by telephone or in Writing), notice, request, consent, certificate or other
instrument or paper believed by it to be genuine and to have been properly given
or executed by or on behalf of the Trust. The Custodian may receive and accept a
certified copy of a resolution of the Board of Trustees or Executive Committee
as conclusive evidence (a) of the authority of any person to act in accordance
with such resolution or (b) of any determination or of any action by the Board
of Trustees or Executive Committee as described in such resolution, and such
resolution may be considered as in full force and effect until receipt by the
Custodian of written notice by an Authorized Person to the contrary.
Section 8. DUTY OF CUSTODIAN TO SUPPLY INFORMATION
The Custodian shall cooperate with and supply necessary information in its
possession (to the extent permissible under applicable law) to the entity or
entities appointed by the Board of Trustees to keep the books of account of the
Trust and/or compute the net asset value per Share of the outstanding Shares of
the Trust.
Section 9. RECORDS
The Custodian shall create and maintain all records relating to its
activities under this Agreement which are required with respect to such
activities under Section 31 of the Investment Company Act and Rules 31a-1 and
31a-2 thereunder. All such records shall be the property of the Trust and shall
at all times during the regular business hours of the Custodian be open for
inspection by duly authorized officers, employees or agents of the Trust and
employees and agents of the Securities and Exchange Commission. The Custodian
shall, at the Trust's request, supply the Trust with a tabulation of Securities
owned by the Trust and held by the Custodian and shall, when requested to do so
by the Trust and for such compensation as shall be agreed upon between the Trust
and the Custodian, include certificate numbers in such tabulations.
Section 10. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable compensation for its services
and expenses as Custodian, as agreed upon from time to time between the Trust
and the Custodian.
Section 11. RESPONSIBILITY OF CUSTODIAN
The Custodian shall be responsible for the performance of only such duties
as are set forth herein or contained in Proper Instructions and shall use
reasonable care in carrying out such duties. The Custodian shall be liable to
the Trust for any loss which shall occur as the result of the failure of a
Foreign Custodian or a Foreign Securities Depository engaged by such Foreign
Custodian or the Custodian to exercise reasonable care with respect to the
safekeeping of securities and other assets of the Trust to the same extent that
the Custodian would be liable to the Trust if the Custodian itself were holding
such securities and other assets. In the event of any loss to the Trust by
reason of the failure of the Custodian, a Foreign Custodian or a Foreign
Securities Depository engaged by such Foreign Custodian or the Custodian to
utilize reasonable care, the Custodian shall be liable to the Trust to the
extent of the Trust's damages, to be determined based on the market value of the
property which is the subject of the loss at the date of discovery of such loss
and without reference to any special conditions or circumstances. The Custodian
shall be held to the exercise of reasonable care in carrying out this Agreement.
The Trust agrees to indemnify and hold harmless the Custodian and its nominees
from all taxes, charges, expenses, assessments, claims and liabilities
(including legal fees and expenses) incurred by any of them in connection with
the performance of this Agreement, except such as may arise from any negligent
action, negligent failure to act or willful misconduct on the part of the
indemnified entity or any Foreign Custodian or Foreign Securities Depository.
The Custodian shall be entitled to rely, and may act, on advice of counsel (who
may be counsel for the Trust) on all matters and shall be without liability for
any action reasonably taken or omitted pursuant to such advice. The Custodian
need not maintain any insurance for the benefit of the Trust.
All collections of funds or other property paid or distributed in respect
of Securities held by the Custodian, agent, Subcustodian or Foreign Custodian
hereunder shall be made at the risk of the Trust. The Custodian shall have no
liability for any loss occasioned by delay in the actual receipt of notice by
the Custodian, agent, Subcustodian or by a Foreign Custodian of any payment,
redemption or other transaction regarding securities in respect of which the
Custodian has agreed to take action as provided in Section 3 hereof. The
Custodian shall not be liable for any action taken in good faith upon Proper
Instructions or upon any certified copy of any resolution of the Board of
Trustees and may rely on the genuineness of any such documents which it may in
good faith believe to be validly executed. The Custodian shall not be liable for
any loss resulting from, or caused by, the direction of the Trust to maintain
custody of any Securities or cash in a foreign country including, but not
limited to, losses resulting from nationalization, expropriation, currency
restrictions, civil disturbance, acts of war or terrorism, insurrection,
revolution, nuclear fusion, fission or radiation or other similar occurrences or
events beyond the control of the Custodian. Finally, the Custodian shall not be
liable for any taxes, including interest and penalties with respect thereto,
that may be levied or assessed upon or in respect of any assets of the Trust
held by the Custodian.
Section 12. LIMITED LIABILITY OF THE TRUST
The Custodian acknowledges that it has received notice of and accepts the
limitations of the Trust's liability as set forth in its Agreement and
Declaration of Trust. The Custodian agrees that the Trust's obligation hereunder
shall be limited to the assets of the Trust, and that the Custodian shall not
seek satisfaction of any such obligation from the shareholders of the Trust nor
from any Trustee, officer, employee, or agent of the Trust.
Section 13. EFFECTIVE PERIOD; TERMINATION
This Agreement shall become effective as of the date of its execution and
shall continue in full force and effect until terminated as hereinafter
provided. This Agreement may be terminated by the Trust or the Custodian by 60
days notice in Writing to the other provided that any termination by the Trust
shall be authorized by a resolution of the Board of Trustees, a certified copy
of which shall accompany such notice of termination, and provided further, that
such resolution shall specify the names of the persons to whom the Custodian
shall deliver the assets of the Trust held by it. If notice of termination is
given by the Custodian, the Trust shall, within 60 days following the giving of
such notice, deliver to the Custodian a certified copy of a resolution of the
Board of Trustees specifying the names of the persons to whom the Custodian
shall deliver assets of the Trust held by it. In either case the Custodian will
deliver such assets to the persons so specified, after deducting therefrom any
amounts which the Custodian determines to be owed to it hereunder (including all
costs and expenses of delivery or transfer of Trust assets to the persons so
specified). If within 60 days following the giving of a notice of termination by
the Custodian, the Custodian does not receive from the Trust a certified copy of
a resolution of the Board of Trustees specifying the names of the persons to
whom the Custodian shall deliver the assets of the Trust held by it, the
Custodian, at its election, may deliver such assets to a bank or trust company
doing business in the State of California to be held and disposed of pursuant to
the provisions of this Agreement or may continue to hold such assets until a
certified copy of one or more resolutions as aforesaid is delivered to the
Custodian. The obligations of the parties hereto regarding the use of reasonable
care, indemnities and payment of fees and expenses shall survive the termination
of this Agreement.
Section 14. MISCELLANEOUS
14.1 Relationship. Nothing contained in this Agreement shall (i)
create any fiduciary, joint venture or partnership relationship between the
Custodian and the Trust or (ii) be construed as or constitute a prohibition
against the provision by the Custodian or any of its affiliates to the
Trust of investment banking, securities dealing or brokerages services or
any other banking or financial services.
14.2 Further Assurances. Each party hereto shall furnish to the other
party hereto such instruments and other documents as such other party may
reasonably request for the purpose of carrying out or evidencing the
transactions contemplated by this Agreement.
14.3 Attorneys' Fees. If any lawsuit or other action or proceeding
relating to this Agreement is brought by a party hereto against the other
party hereto, the prevailing party shall be entitled to recover reasonable
attorneys' fees, costs and disbursements (including allocated costs and
disbursements of in-house counsel), in addition to any other relief to
which the prevailing party may be entitled.
14.4 Notices. Except as otherwise specified herein, each notice or
other communication hereunder shall be in Writing and shall be delivered to
the intended recipient at the following address (or at such other address
as the intended recipient shall have specified in a written notice given to
the other parties hereto):
if to the Trust:
Huntington Funds
c/o Franklin Resources, Inc.
777 Mariners Island Blvd.
San Mateo, CA 94404
Attention: Trust Manager
if to the Custodian:
Bank of America NT & SA
1455 Market Street
16th Floor, Dept. 5014
San Francisco, CA 94104
14.5 Headings. The underlined headings contained herein are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the
interpretation hereof.
14.6 Counterparts. This Agreement may be executed in counterparts,
each of which shall constitute an original and both of which, when taken
together, shall constitute one agreement.
14.7 Governing Law. This Agreement shall be construed in accordance
with, and governed in all respects by, the laws of the State of California
(without giving effect to principles of conflict of laws).
14.8 Force Majeure. Subject to the provisions of Section 11 hereof
regarding the Custodian's general standard of care, no failure, delay or
default in performance of any obligation hereunder shall constitute an
event of default or a breach of this agreement, or give rise to any
liability whatsoever on the part of one party hereto to the other, to the
extent that such failure to perform, delay or default arises out of a cause
beyond the control and without negligence of the party otherwise chargeable
with failure, delay or default; including, but not limited to: action or
inaction of governmental, civil or military authority; fire; strike;
lockout or other labor dispute; flood; war; riot; theft; earthquake;
natural disaster; breakdown of public or common carrier communications
facilities; computer malfunction; or act, negligence or default of the
other party. This paragraph shall in no way limit the right of either party
to this Agreement to make any claim against third parties for any damages
suffered due to such causes.
14.9 Successors and Assigns. This Agreement shall be binding upon, and
shall inure to the benefit of, the parties hereto and their respective
successors and assigns, if any.
14.10 Waiver. No failure on the part of any person to exercise any
power, right, privilege or remedy hereunder, and no delay on the part of
any person in the exercise of any power, right, privilege or remedy
hereunder, shall operate as a waiver thereof; and no single or partial
exercise of any such power, right, privilege or remedy shall preclude any
other or further exercise thereof or of any other power, right, privilege
or remedy.
14.11 Amendments. This Agreement may not be amended, modified, altered
or supplemented other than by means of an agreement or instrument executed
on behalf of each of the parties hereto.
14.12 Severability. In the event that any provision of this Agreement,
or the application of any such provision to any person or set of
circumstances, shall be determined to be invalid, unlawful, void or
unenforceable to any extent, the remainder of this Agreement, and the
application of such provision to persons or circumstances other than those
as to which it is determined to be invalid, unlawful, void or
unenforceable, shall not be impaired or otherwise affected and shall
continue to be valid and enforceable to the fullest extent permitted by
law.
14.13 Parties in Interest. None of the provisions of this Agreement is
intended to provide any rights or remedies to any person other than the
Trust and the Custodian and their respective successors and assigns, if
any.
14.14 Entire Agreement. This Agreement sets forth the entire
understanding of the parties hereto and supersedes all prior agreements and
understandings between the parties hereto relating to the subject matter
hereof.
14.15 Variations of Pronouns. Whenever required by the context hereof,
the singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; and the neuter gender
shall include the masculine and feminine genders.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
"Custodian": BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By /s/ Thomas E. Vision
Its Vice President
"Trust": HUNTINGTON FUNDS
By /s/ Donald P. Gould
Its President
CUSTODY AGREEMENT
This AGREEMENT is effective November 15, 1993, and is between THE CHASE
MANHATTAN BANK, N.A. (the "Bank") and Franklin/Templeton Global Trust (the
"Customer") which includes the funds listed in Schedule B, as such schedule may
be amended from time to time.
1. Customer Accounts.
The Bank agrees to establish and maintain the following accounts
("Accounts"):
(a) A custody account in the name of the Customer ("Custody Account") for
any and all stocks, shares, bonds, debentures, notes, mortgages or other
obligations for the payment of money, bullion, coin and any certificates,
receipts, warrants or other instruments representing rights to receive, purchase
or subscribe for the same or evidencing or representing any other rights or
interests therein and other similar property whether certificated or
uncertificated as may be received by the Bank or its Subcustodian (as defined in
Section 3) for the account of the Customer ("Securities,,); and
(b) A deposit account in the name of the Customer ("Deposit Account") for
any and all cash in any currency received by the Bank or its Subcustodian for
the account of the Customer, which cash shall not be subject to withdrawal by
draft or check.
The Customer warrants its authority to: 1) deposit the cash and Securities
("Assets") received in the Accounts and 2) give instructions (as defined in
Section 11) concerning the Accounts. The Bank may deliver securities of the same
class in place of those deposited in the Custody Account.
Upon written agreement between the Bank and the Customer, additional
Accounts may be established and separately accounted for as additional Accounts
under the terms of this Agreement.
2. Maintenance of Securities and Cash at Bank and Subcustodian Locations.
Unless instructions specifically require another location acceptable to the
Bank:
(a) Securities will be held in the country or other jurisdiction in which
the principal trading market for such Securities is located, where such
Securities are to be presented for payment or where such Securities are
acquired; and
(b) Cash will be credited to an account in a country or other jurisdiction
in which such cash may be legally deposited or is the legal currency for the
payment of public or private debts.
Cash may be held pursuant to Instructions in either interest or
non-interest bearing accounts as may be available for the particular currency.
To the extent instructions are issued and the Bank can comply with such
instructions, the Bank is authorized to maintain cash balances on deposit for
the Customer with itself or one of its affiliates at such reasonable rates of
interest as may from time to time be paid on such accounts, or in non-interest
bearing accounts as the Customer may direct, if acceptable to the Bank.
If the Customer wishes to have any of its Assets held in the custody of an
institution other than the established Subcustodians or their securities
depositories, such arrangement must be authorized by a written agreement, signed
by the Bank and the Customer.
3. Subcustodians and Securities Depositories.
The Bank may act under this Agreement through the subcustodians listed in
Schedule A of this Agreement with which the Bank has entered into subcustodial
agreements ("Subcustodians"). The Customer authorizes the Bank to hold Assets in
the Accounts in accounts which the Bank has established with one or more of its
branches or Subcustodians. The Bank and Subcustodians are authorized to hold any
of the Securities in their account with any securities depository in which they
participate.
The Bank reserves the right to add new, replace or remove Subcustodians.
The Customer will be given reasonable notice by the Bank of any amendment to
Schedule A. Upon request by the Customer, the Bank will identify the name,
address and principal place of business of any Subcustodian of the Customer's
Assets and the name and address of the governmental agency or other regulatory
authority that supervises or regulates such Subcustodian.
The terms Subcustodian and securities depositories as used in this
Agreement shall mean a branch of a qualified U.S. bank, an eligible foreign
custodian or an eligible foreign securities depository, which are further
defined as follows:
(a) "qualified U.S. Bank" shall mean a qualified U.S. bank as defined in
Rule 17f-5 under the Investment Company Act of 1940;
(b) "eligible foreign custodian" shall mean (i) a banking institution or
trust company, incorporated or organized under the laws of a country other than
the United States, that is regulated as such by that country's government or an
agency thereof and that has shareholders' equity in excess of $200 million in
U.S. currency (or a foreign currency equivalent thereof), (ii) a majority-owned
direct or indirect subsidiary of a qualified U.S. bank or bank-holding company
that is incorporated or organized under the laws of a country other than the
United States and that has shareholders, equity in excess of $100 million in
U.S. currency (or a foreign currency equivalent thereof), (iii) a banking
institution or trust company, incorporated or organized under the laws of a
country other than the United States, or a majority-owned direct or indirect
subsidiary of a qualified U.S. bank or bank-holding company that is incorporated
or organized under the laws of a country other than the United States which has
such other qualifications as shall be specified in Instructions and approved by
the Bank, or (iv) any other entity that shall have been so qualified by
exemptive rule or other appropriate action of the Securities and Exchange
Commission; and
(c) "eligible foreign securities depository" shall mean a securities
depository or clearing agency, incorporated or organized under the laws of a
country other than the United States, which operates (i) the central system for
handling of securities or equivalent book-entries in that country or (ii) a
transnational system for the central handling of securities or equivalent
book-entries.
The Customer represents that its Board of Trustees has approved each of the
Subcustodians listed in Schedule A of this Agreement and the terms of the
subcustody agreements between the Bank and each Subcustodian, and further
represents that its Board has determined that the use of each Subcustodian and
the terms of each subcustody agreement are consistent with the best interests of
the Customer's fund(s) and its (their) shareholders. The Bank will supply the
Customer with any amendment to Schedule A for approval. The Customer has
supplied or will supply the Bank with certified copies of its Board of Trustees
resolutions with respect to the foregoing prior to placing Assets with any
Subcustodian so approved.
4. Use of Subcustodian.
(a) The Bank will identify Assets on its books as belonging to the
Customer.
(b) A Subcustodian will hold Assets together with assets belonging to other
customers of the Bank in accounts identified on such Subcustodian's books as
special custody accounts for the exclusive benefit of customers of the Bank.
(c) Any Assets in the Accounts held by a Subcustodian will be subject only
to the instructions of the Bank or its agent. Any Securities held in a
securities depository for the account of a Subcustodian will be subject only to
the instructions of such
Subcustodian.
(d) Any agreement the Bank enters into with a Subcustodian for holding its
customer's assets shall provide that such assets will not be subject to any
right, charge, security interest, lien or claim of any kind in favor of such
Subcustodian except for safe custody or administration, and that the beneficial
ownership of such assets will be freely transferable without the payment of
money or value other than for safe custody or administration. The foregoing
shall not apply to the extent of any special agreement or arrangement made by
the Customer with any particular Subcustodian.
5. Deposit Account Transactions.
(a) The Bank or its Subcustodians will make payments from the Deposit
Account upon receipt of Instructions which include all information required by
the Bank.
(b) In the event that any payment to be made under this Section 5 exceeds
the funds available in the Deposit Account, the Bank, in its discretion, may
advance the Customer such excess amount which shall be deemed a loan payable on
demand, bearing interest at the rate customarily charged by the Bank on similar
loans.
(c) If the Bank credits the Deposit Account on a payable date, or at any
time prior to actual collection and reconciliation to the Deposit Account, with
interest, dividends, redemptions or any other amount due, the Customer will
promptly return any such amount upon oral or written notification: (i) that such
amount has not been received in the ordinary course of business or (ii) that
such amount was incorrectly credited. If the Customer does not promptly return
any amount upon such notification, the Bank shall be entitled, upon oral or
written notification to the Customer, to reverse such credit by debiting the
Deposit Account for the amount previously credited. The Bank or its Subcustodian
shall have no duty or obligation to institute legal proceedings, file a claim or
a proof of claim in any insolvency proceeding or take any other action with
respect to the collection of such amount, but may act for the Customer upon
Instructions after consultation with the Customer.
6. Custody Account Transactions.
(a) Securities will be transferred, exchanged or delivered by the Bank or
its Subcustodian upon receipt by the Bank of Instructions which include all
information required by the Bank. Settlement and payment for Securities received
for, and delivery of Securities out of, the Custody Account may be made in
accordance with the customary or established securities trading or securities
processing practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivery of Securities to a
purchaser, dealer or their agents against a receipt with the expectation of
receiving later payment and free delivery. Delivery of Securities out of the
Custody Account may also be made in any manner specifically required by
Instructions acceptable to the Bank.
(b) The Bank, in its discretion, may credit or debit the Accounts on a
contractual settlement date with cash or Securities with respect to any sale,
exchange or purchase of Securities. otherwise, such transactions will be
credited or debited to the Accounts on the date cash or Securities are actually
received by the Bank and reconciled to the Accounts.
(i) The Bank may reverse credits or debits made to the Accounts in its
discretion if the related transaction fails to settle within a reasonable
period, determined by the Bank in its discretion, after the contractual
settlement date for the related transaction.
(ii) If any Securities delivered pursuant to this Section 6 are
returned by the recipient thereof, the Bank may reverse the credits and
debits of the particular transaction at any time.
7. Actions of the Bank.
The Bank shall follow Instructions received regarding Assets held in the
Accounts. However, until it receives Instructions to the contrary, the Bank will
perform the following functions.
(a) Present for payment any Securities which are called, redeemed or
retired or otherwise become payable and all coupons and other income items which
call for payment upon presentation, to the extent that the Bank or Subcustodian
is actually aware of such opportunities.
(b) Execute in the name of the Customer such ownership and other
certificates as may be required to obtain payments in respect of Securities.
(c) Exchange interim receipts or temporary Securities for definitive
Securities.
(d) Appoint brokers and agents for any transaction involving the
Securities, including, without limitation, affiliates of the Bank or any
Subcustodian.
(e) Issue statements to the Customer, at times mutually agreed upon,
identifying the Assets in the Accounts.
The Bank will send the Customer an advice or notification of any transfers
of Assets to or from the Accounts. Such statements, advices or notifications
shall indicate the identity of the entity having custody of the Assets. Unless
the Customer sends the Bank a written exception or objection to any Bank
statement within sixty days of receipt, the Customer shall be deemed to have
approved such statement. In such event, or where the Customer has otherwise
approved any such statement, the Bank shall, to the extent permitted by law, be
released, relieved and discharged with respect to all matters set forth in such
statement or reasonably implied therefrom as though it had been settled by the
decree of a court of competent jurisdiction in an action where the Customer and
all persons having or claiming an interest in the Customer or the Customer's
Accounts were parties.
All collections of funds or other property paid or distributed in respect
of Securities in the Custody Account shall be made at the risk of the Customer.
The Bank shall have no liability for any loss occasioned by delay in the actual
receipt of notice by the Bank or by its Subcustodians of any payment, redemption
or other transaction regarding Securities in the Custody Account in respect of
which the Bank has agreed to take any action under this Agreement.
8. Corporate Actions; Proxies.
Whenever the Bank receives information concerning the Securities which
requires discretionary action by the beneficial owner of the Securities (other
than a proxy), such as subscription rights, bonus issues, stock repurchase plans
and rights offerings, or legal notices or other material intended to be
transmitted to securities holders ("Corporate Actions"), the Bank will give the
Customer notice of such Corporate Actions to the extent that the Bank's central
corporate actions department has actual knowledge of a Corporate Action in time
to notify its customers.
When a rights entitlement or a fractional interest resulting from a rights
issue, stock dividend, stock split or similar Corporate, Action is received
which bears an expiration date, the Bank will endeavor to obtain Instructions
from the Customer or its Authorized Person, as defined in Section 10, but if
Instructions are not received in time for the Bank to take timely action, or
actual notice of such Corporate Action was received too late to seek
Instructions, the Bank is authorized to sell such rights entitlement or
fractional interest and to credit the Deposit Account with the proceeds or take
any other action it deems, in good faith, to be appropriate, in which case it
shall be held harmless for any such action.
The Bank will deliver proxies to the Customer or its designated agent
pursuant to special arrangements which may have been agreed to in writing. Such
proxies shall be executed in the appropriate nominee name relating to Securities
in the Custody Account registered in the name of such nominee but without
indicating the manner in which such proxies are to be voted; and where bearer
Securities are involved, proxies will be delivered in accordance with
Instructions.
9. Nominees.
Securities which are ordinarily held in registered form may be registered
in a nominee name of the Bank, Subcustodian or securities depository, as the
case may be. The Bank may, without notice to the Customer, cause any such
Securities to cease to be registered in the name of any such nominee and to be
registered in the name of the Customer. In the event that any Securities
registered in a nominee name are called for partial redemption by the issuer,
the Bank may allot the called portion to the respective beneficial holders of
such class of security in any manner the Bank deems to be fair and equitable.
The Customer agrees to hold the Bank, Subcustodians, and their respective
nominees harmless from any liability arising directly or indirectly from their
status as a mere record holder of Securities in the Custody Account.
10. Authorized Persons.
As used in this Agreement, the term "Authorized Person" means employees or
agents, including investment managers, as have been designated by written notice
from the Customer or its designated agent to act on behalf of the Customer under
this Agreement. Such persons shall continue to be Authorized Persons until such
time as the Bank receives Instructions from the Customer or its designated agent
that any such employee or agent is no longer an Authorized Person.
11. Instructions.
The term "Instructions" means instructions of any Authorized Person
received by the Bank via telephone, telex, TWX, facsimile transmission, bank
wire or other teleprocess or electronic instruction or trade information system
acceptable to the Bank which the Bank believes in good faith to have been given
by Authorized Persons or which are transmitted with proper testing or
authentication pursuant to terms and conditions which the Bank may specify.
Unless otherwise expressly provided, all Instructions shall continue in full
force and effect until cancelled or superseded.
Any Instructions delivered to the Bank by telephone shall promptly
thereafter be confirmed in writing by an Authorized Person (which confirmation
may bear the facsimile signature of such Person), but the Customer will hold the
Bank harmless for the failure of an Authorized Person to send such confirmation
in writing, the failure of such confirmation to conform to the telephone
instructions received or the Bank's failure to produce such confirmation at any
subsequent time. Either Party may electronically record any Instructions given
by telephone, and any other telephone discussions with respect to the Custody
Account. The Customer shall be responsible for safeguarding any testkeys,
identification codes or other security devices which the Bank shall make
available to the Customer or its Authorized Persons.
Account transactions made pursuant to Sections 5 and 6 of this Agreement
may be made only for the purposes listed below. Instructions must specify the
purpose for which any transaction is to be made and the Customer shall be solely
responsible to assure that Instructions are in accord with any limitations or
restrictions applicable to the Customer by law or as may be set forth in its
prospectus.
(a) In connection with the purchase or sale of Securities at prices as
confirmed by Instructions.
(b) When Securities are called, redeemed or retired, or otherwise become
payable.
(c) In exchange for or upon conversion into other securities alone or other
securities and cash pursuant to any plan or merger, consolidation,
reorganization, recapitalization or readjustment.
(d) Upon conversion of Securities pursuant to their terms into other
securities.
(e) Upon exercise of subscription, purchase or other similar rights
represented by Securities.
(f) For the payment of interest, taxes, management or supervisory fees,
distributions or operating expenses.
(g) In connection with any borrowings by the Customer requiring a pledge of
Securities, but only against receipt of amounts borrowed.
(h) In connection with any loans, but only against receipt of adequate
collateral as specified in Instructions which shall reflect any restrictions
applicable to the Customer.
(i) For the purpose of redeeming shares of the capital stock of the
Customer and the delivery to, or the crediting to the account of the Bank, its
Subcustodian or the Customer's transfer agent, such shares to be purchased or
redeemed.
(j) For the purpose of redeeming in kind shares of the Customer against
delivery of the shares to be redeemed to the Bank, its Subcustodian or the
Customer's transfer agent.
(k) For delivery in accordance with the provisions of any agreement among
the Customer, the Bank and a broker-dealer registered under the Securities
Exchange Act of 1934 (the "Exchange Act") and a member of the National
Association of Securities Dealers, Inc., relating to compliance with the rules
of The Options Clearing Corporation and of any registered national securities
exchange, or of any similar organization or organizations, regarding escrow or
other arrangements in connection with transactions by the Customer.
(1) For release of Securities to designated brokers under covered call
options, provided, however, that such Securities shall be released only upon
payment to the Bank of monies for the premium due and a receipt for the
Securities which are to be held in escrow. Upon exercise of the option, or at
expiration, the Bank will receive the Securities previously deposited from
brokers. The Bank will act strictly in accordance with Instructions in the
delivery of Securities to be held in escrow and will have no responsibility or
liability for any such Securities which are not returned promptly when due other
than to make proper request for such return.
(m) For spot or forward foreign exchange transactions to facilitate
security trading, receipt of income from Securities or related transactions.
(n) For other proper purposes as may be specified in Instructions issued by
an officer of the Customer which shall include a statement of the purpose for
which the delivery or payment is to be made, the amount of the payment or
specific Securities to be delivered, the name of the person or persons to whom
delivery or payment is to be made, and a certification that the purpose is a
proper purpose under the instruments governing the Customer.
(o) Upon the termination of this Agreement as set forth in Section 14(i).
12. Standard of Care; Liabilities.
(a) The Bank shall be responsible for the performance of only such duties
as are set forth in this Agreement or expressly contained in Instructions which
are consistent with the provisions of this Agreement.
(i) The Bank will use reasonable care with respect to its obligations
under this Agreement and the safekeeping of Assets. The Bank shall be
liable to the Customer for any loss which shall occur as the result of the
failure of a Subcustodian to exercise reasonable care with respect to the
safekeeping of such Assets to the same extent that the Bank would be liable
to the Customer if the Bank were holding such Assets in New York. In the
event of any loss to the Customer by reason of the failure of the Bank or
its Subcustodian to utilize reasonable care, the Bank shall be liable to
the Customer only to the extent of the Customers direct damages, to be
determined based on the market value of the property which is the subject
of the loss at the date of discovery of such loss and without reference to
any special conditions or circumstances.
(ii) The Bank will not be responsible for any act, omission, default
or for the solvency of any broker or agent which it or a Subcustodian
appoints unless such appointment was made negligently or in bad faith.
(iii) The Bank shall be indemnified by and without liability to the
Customer for any action taken or omitted by the Bank whether pursuant to
Instructions or otherwise within the scope of this Agreement if such act or
omission was in good faith without negligence. In performing its
obligations under this Agreement, the Bank may rely on the genuineness of
any document which it believes in good faith to have been validly executed.
(iv) The Customer agrees to pay for and hold the Bank harmless from
any liability or loss resulting from the imposition or assessment of any
taxes or other governmental charges, and any related expenses with respect
to income from or Assets in the Accounts.
(v) The Bank shall be entitled to rely and may act upon the advice of
counsel (who may be counsel for the Customer) on-all matters, and shall be
without liability for any action reasonably taken or omitted pursuant to
such advice.
(vi) The Bank need not maintain any insurance for the benefit of the
Customer.
(vii) Without limiting the foregoing, the Bank shall not be liable for
any loss which results from: 1) the general risk of investing or 2)
investing or holding Assets in a particular country including, but not
limited to, losses resulting from nationalization, expropriation or other
governmental actions; regulation of the banking or securities industry;
currency restrictions, devaluations or fluctuations; and market conditions
which prevent the orderly execution of securities transactions or affect
the value of Assets.
(viii)Neither party shall be liable to the other for any loss due to
forces beyond their control including, but not limited to, strikes or work
stoppages, acts of war or terrorism, insurrection, revolution, nuclear
fusion, fission or radiation, or acts of God.
(b) Consistent with and without limiting the first paragraph of this
Section 12, it is specifically acknowledged that the Bank shall have no duty or
responsibility to:
(i) question Instructions or make any suggestions to the Customer or
an Authorized Person regarding such Instructions;
(ii) supervise or make recommendations with respect to investments or
the retention of Securities;
(iii) advise the Customer or an Authorized Person regarding any
default in the payment of principal or income of any security other than as
provided in Section 5(c) of this Agreement;
(iv) evaluate or report to the Customer or an Authorized Person
regarding the financial condition of any broker, agent or other party to
which Securities are delivered or payments are made pursuant to this
Agreement; or
(v) review or reconcile trade confirmations received from brokers. The
Customer or its Authorized Persons issuing Instructions shall bear any
responsibility to review such confirmations against Instructions issued to
and statements issued by the Bank.
(c) The Customer authorizes the Bank to act under this Agreement
notwithstanding that the Bank or any of its divisions or affiliates may have a
material interest in a transaction, or circumstances are such that the Bank may
have a potential conflict of duty or interest including the fact that the Bank
or any of its affiliates may provide brokerage services to other customers, act
as financial advisor to the issuer of Securities, act as a lender to the issuer
of Securities, act in the same transaction as agent for more than one customer,
have a material interest in the issue of Securities, or earn profits from any of
the activities listed herein.
(d) The Bank hereby warrants to the Customer that in its opinion, after due
inquiry, the established procedures to be followed by each of its branches, each
branch of a qualified U.S. bank, each eligible foreign custodian and each
eligible foreign securities depository holding the Customer's Securities
pursuant to this Agreement afford protection for such Securities at least equal
to that afforded by the Bank's established procedures with respect to similar
securities held by the Bank and its securities depositories in New York.
13. Fees and Expenses.
The Customer agrees to pay the Bank for its services under this Agreement
such amount as may be agreed upon in writing, together with the Bank's
reasonable out-of-pocket or incidental expenses, including, but not limited to,
legal fees. The Bank shall have a lien on and is authorized to charge any
Accounts of the Customer for any amount owing to the Bank under any provision of
this Agreement.
14. MISCELLANEOUS.
(a) FOREIGN EXCHANGE TRANSACTIONS. To facilitate the administration of the
Customer's trading and investment activity, the Bank is authorized to enter into
spot or forward foreign exchange contracts with the Customer or an Authorized
Person for the Customer and may also provide foreign exchange through its
subsidiaries, affiliates or Subcustodians. Instructions, including standing
Instructions, may be issued with respect to such contracts but the Bank may
establish rules or limitations concerning any foreign exchange facility made
available. In all cases where the Bank, its subsidiaries, affiliates or
Subcustodians enter into a foreign exchange contract related to Accounts, the
terms and conditions of the then current foreign exchange contract of the Bank,
its subsidiary, affiliate or Subcustodian and, to the extent not inconsistent,
this Agreement, shall apply to such transaction.
(b) CERTIFICATION OF RESIDENCY, ETC. The Customer certifies that it is a
resident of the United States and agrees to notify the Bank of any changes in
residency. The Bank may rely upon this certification or the certification of
such other facts as may be required to administer the Bank's obligations under
this Agreement. The Customer will indemnify the Bank against all losses,
liability, claims or demands arising directly or indirectly from any such
certifications.
(c) ACCESS TO RECORDS. The Bank shall allow the Customer's independent
public auditors reasonable access to the records of the Bank relating to the
Assets as is required in connection with their examination of books and records
pertaining to the Customer's affairs. Subject to restrictions under applicable
law, the Bank shall also obtain an undertaking to permit the Customer's
independent public auditors reasonable access to the records of any Subcustodian
which has physical possession of any Assets as may be required in connection
with the examination of the Customer's books and records. Upon reasonable
request from the Customer, the Bank shall furnish the Customer such reports (or
portions thereof) of the Bank's system of internal accounting controls
applicable to the Bank's duties under this Agreement. The Bank shall endeavor to
obtain and furnish the Customer with such similar reports as it may reasonably
request with respect to each Subcustodian and securities depository holding the
Customer's assets.
(d) GOVERNING LAW; SUCCESSORS AND ASSIGNS. This Agreement shall be governed
by the laws of the State of New York and shall not be assignable by either
party, but shall bind the successors in interest of the Customer and the Bank.
(e) ENTIRE AGREEMENT; APPLICABLE RIDERS. Customer represents that the
Assets deposited in the Accounts are (check one):
-----employee benefit plan or other assets subject to the
Employee Retirement Income Security Act of 1974; as amended
("ERISA");
--X--mutual fund assets subject to Securities and Exchange
Commission ("SEC") rules and regulations; or
-----neither of the above.
This Agreement consists exclusively of this document together with Schedule
A and Schedule B and the following rider(s) [check applicable rider(s)]:
-----ERISA
--X--MUTUAL FUND
-----SPECIAL TERMS AND CONDITIONS
There are no other provisions of this Agreement and this Agreement
supersedes any other agreements, whether, written or oral, between the parties.
Any amendment to this Agreement must be in writing, executed by both parties.
(f) SEVERABILITY. In the event that one or more provisions of this
Agreement are held invalid, illegal or unenforceable in any respect on the basis
of any particular circumstances or in any jurisdiction, the validity, legality
and enforceability of any such provision and the remaining provisions, under
other circumstances or in other jurisdictions will not in any way be affected or
impaired.
(g) WAIVER. Except as otherwise-provided in this Agreement, no failure or
delay on the part of either party in exercising any power or right under this
Agreement operates as a waiver, nor does any single or partial exercise of any
power or right preclude any other or further exercise thereof, or the exercise
,of any other power or right. No waiver by a party of any provision of this
Agreement, or waiver of any breach or default, is effective unless in writing
and signed by the party against whom the waiver is to be enforced.
(h) NOTICES. All notices under this Agreement shall be effective when
actually received. Any notices or other communications which may be required
under this Agreement are to be sent to the parties at the following addresses or
such other addresses as may subsequently be given to the other party in writing;
Bank: The Chase Manhattan Bank, N.A.
4 Chase MetroTech Center, 18th Floor
Brooklyn, NY 11245
Attention: Global Investor Services
Customer: Franklin/Templeton Global Trust
777 Mariners Island Blvd.
San Mateo, California 94404
with a copy to: Franklin/Templeton Group of Funds
777 Mariners Island Blvd.
San Mateo, CA 94404
Attention: Department 42
Fund Accounting
(i) TERMINATION. This Agreement may be terminated by the Customer or the
Bank by giving sixty days written notice to the other, provided that such notice
to the Bank shall specify the names of the persons to whom the Bank shall
deliver the Assets in the Accounts. If notice of termination is given by the
Bank, the Customer shall, within sixty days following receipt of the notice,
deliver to the Bank Instructions specifying the names of the persons to whom the
Bank shall deliver the Assets. In either case, the Bank will deliver the Assets
to the persons so specified, after deducting any amounts which the Bank
determines in good faith to be owed to it under Section 13. If within sixty days
following receipt of a notice of termination by the Bank, the Bank does not
receive Instructions from the Customer specifying the names of the persons to
whom the Bank shall deliver the Assets, the Bank, at its election, and
consistent with the requirements of the Investment Company Act of 1940, may
deliver the Assets to a bank or trust company doing business in the State of New
York to be held and-disposed of pursuant to the provisions of this Agreement, or
to Authorized Persons, or may continue to hold the Assets until Instructions are
provided to the Bank.
CUSTOMER
By: /s/ Donald P. Gould
President
Title
THE CHASE MANHATTAN BANK, N.A.
By: /s/ Eligible
Vice President
Title
STATE OF CALIFORNIA
SS.
COUNTY OF LOS ANGELES
On this 25th day of February, 1994, before me personally came Donald P. Gould to
me known, who being by me duly sworn, did depose and say that he/she resides in
Glaremont, CA at 1916 Trinidad Circle that he/she is President of
Franklin/Templeton Global Trust ("Customer"), the Customer which executed the
foregoing Agreement; that he/she knows the seal of the Customer; that the seal
affixed to the Agreement is such seal; that it was affixed by order of the
Customer, and that he/she signed his/her name thereto by like order.
/s/ Donald P. Gould
/s/ Marjorie Sandford
sworn to before me this 25th
day of February 1994
/s/ Marjorie Sandford
Notary
STATE OF NEW YORK
COUNTY OF KINGS
On this 22nd day of February, 1994, before me personally came Lenore M. Vanden
Handel to me known, who being by me duly sworn did depose and say that he/she
resides in Brooklyn, NY at 4 Chase MetroTech Center - 18 that he/she is a Vice
President of THE CHASE MANHATTAN BANK, N.A. ("Bank"), the bank which executed
the foregoing Agreement; that he/she knows the seal of the Bank; that the seal
affixed to the Agreement is such corporate seal; that it was so affixed by order
of the Board of Directors of the Bank, and that he/she signed his/her name
thereon by like order.
/s/ Lenore M. Vanden Handel
Sworn to before me this 22
day of February, 1994
/s/ Allen Hamlin
Notary
Mutual Fund Rider to Global Custody Agreement
Between The Chase Manhattan Bank, N.A. and
Franklin/Templeton Global Trust,
effective November 15, 1993
Customer represents that the Assets being placed in the Bank's custody are
subject to the Investment Company Act of 1940 (the "Act"), as the same may be
amended from time to time.
Except to the extent that the Bank has specifically agreed to comply with a
condition of a rule, regulation or interpretation promulgated by or under the
authority of the Securities and Exchange Commission or the Exemptive Order
applicable to accounts of this nature issued to the Bank (Investment Company Act
of 1940, Release No. 12053, November 20, 1981), as amended, or unless the Bank
has otherwise specifically agreed, the Customer shall be solely responsible to
assure that the maintenance of Assets under this Agreement complies with such
rules, regulations, interpretations or exemptive order promulgated by or under
the authority of the Securities and Exchange Commission.
October, 1993 SCHEDULE A
SUB-CUSTODIAN EMPLOYED BY
THE CHASE MANHATTAN BANK, N.A. LONDON, GLOBAL CUSTODY
COUNTRY SUB-CUSTODIAN CORRESPONDENT BANK
ARGENTINA The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Main Branch, 25 De Mayo 130/140 Buenos Aires
Buenos Aires, ARGENTINA
AUSTRALIA The Chase Manhattan Bank The Chase Manhattan Bank
Australia Limited Australia Limited
36th Floor, World Trade Centre Sydney
Jamison Street, Sydney
New South Wales 2000, AUSTRALIA
AUSTRIA Creditanstalt - Bankverein Credit Lyonnais
Schottengasse 6 Vienna
A - 1011, Vienna, AUSTRIA
BANGLADESH Standard Chartered Bank Standard Chartered Bank
18-20 Motijheel, C.A. Dhaka
Box 536, Dhaka - 1000
BANGLADESH
BELGIUM Generale Bank Credit Lyonnais Bank
3 Montagne Du Parc, 1000 Bruxelles Brussels
BELGIUM
BRAZIL Banco Chase Manhattan, S.A. Banco Chase Manhattan, S.A.
Chase Manhattan Center Sao Paulo
Rua Verbo Divino, 1400
Sao Paulo, SP 04719-002
BRAZIL
CANADA The Royal Bank of Canada Toronto Dominion Bank
Royal Bank Plaza Toronto
Toronto, Ontario M5J 2J5
CANADA
Canada Trust Toronto Dominion Bank
Canada Trust Tower Toronto
BCE Place, 161 Bay at Front
Toronto, Ontario M5J 2T2
CANADA
CHILE The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Agustinas 1235, Casilla 9192 Santiago
Santiago, CHILE
COLOMBIA Cititrust Columbia S.A. Cititrust Columbia S.A.
Sociedad Fiduciaria Sociedad Fiduciaria
Av. Jimenez No 8-89 Santafe de Bogota
Santafe de Bogota, DC
COLOMBIA
DENMARK Den Danske Bank Den Danske Bank
2 Holmens Kanala DK 1091 Copenhagen
Copenhagen
DENMARK
EUROBONDS Cedel S.A. ECU: Lloyds Bank PLC
67 Boulevard Grande Duchesse International Banking
Charlotte Division
LUXEMBOURG London
A/C The Chase Manhattan Bank N.A. For all other countries: see
London relevant country
A/C No. 17817
EURO CDS First Chicago Clearing Centre ECU: Lloyds Bank PLC
27 Leadenhall Street Banking Division London
London EC3A 1AA For all other countries:
UNITED KINGDOM relevant country
FINLAND Kanasallis-Osake-Pankki Kanasallis-Osake-Pankki
Aleksanterinkatu 42 Helsinki
00100 Helsinki 10
FINLAND
FRANCE Banque Paribas Societe Generale
Ref 256, BP 141 Paris
3, Rue D'Antin
75078 Paris, Cedex 02
FRANCE
GERMANY Chase Bank A.G. Chase Bank A.G.
Alexanderstrasse 59 Frankfurt
Postfach 90 01 09
60441 Frankfurt/Main
GERMANY
GREECE National Bank of Greece S.A. National Bank of Greece S.A.
38 Stadiou Street Athens
Athens A/C Chase Manhattan Bank, N.A.
GREECE London
A/C No. 040/7/921578-68
HONG KONG The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
40/F, One Exchange Square Hong Kong
8, Connaught Place
Central, Hong Kong
HUNGARY Citibank Budapest Rt. Citibank Budapest Rt.
Vaci Utca 19-21 Budapest
1052 Budapest V
HUNGARY
INDIA The Hongkong and Shanghai Banking The Chase Manhattan Bank, N.A.
Corporation Limited Corporation Limited
52/60 Mabatma Gandhi Road Bombay
Bombay 400 001
INDIA
INDONESIA The Hongkong and Shanghai Banking The Chase Manhattan Bank, N.A.
Corporation Limited Jakarta
World Trade Center
J1. Jend Sudirman Kav. 29-31
Jakarta 10023
INDONESIA
IRELAND Bank of Ireland Allied Irish Bank
International Financial Dublin
Services Centre
1 Harbourmaster Place
Dublin 1
IRELAND
ISRAEL Bank Leumi Le-Israel B.M. Bank Leumi Le-Israel B.M.
19 Herzl Street Tel Aviv
65136 Tel Aviv
ISRAEL
ITALY The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Piazza Meda 1 Milan
20121 Milan
ITALY
JAPAN The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
1-3 Marunouchi 1-Chome Tokyo
Chiyoda-Ku
Tokyo 100
JAPAN
JORDAN Arab Bank Limited Arab Bank Limited
PO Box 950544-5 Amman
Amman, Shmeisani
JORDAN
LUXEMBOURG Banque Generale du Luxembourg S.A. Banque Generale du Luxembourg
27 Avenue Monterey S.A.
LUXEMBOURG
MALAYSIA The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Pernas International Kuala Lumpur
Jalan Sultan Ismail
50250, Kuala Lumpur
MALAYSIA
MEXICO The Chase Manhattan Bank, N.A. No correspondent Bank
(Equities) Hamburgo 213, Piso 7
06660 Mexico D.F.
MEXICO
(Government
Bonds) Banco Nacional de Mexico No correspondent Bank
Avenida Juarez No. 104-11 Piso
06040 Mexico D.F.
MEXICO
MOROCCO Banque Commerciale du Maroc Banque Commerciale du Maroc
1 Rue Idriss Lahrizi Casablanca
Casablanca 01
MOROCCO
NETHERLANDS ABN AMRO N.V. Credit Lyonnais
Securities Centre Bank Nederland N.V.
PO Box 3200 Rotterdam
4800 De Breda
NETHERLANDS
NEW ZEALAND National Nominees Limited National Bank of New Zealand
Level 2 BNZ Tower Wellington
125 Queen Street, Auckland
NEW ZEALAND
NORWAY Den Norske Bank Den Norske Bank
Kirkegaten 21 Oslo
Oslo 1
NORWAY
PAKISTAN Citibank N.A. Citibank N.A.
State Life Building No. 1 Karachi
I.I. Chundrigar Road
Karachi
PAKISTAN
PERU Citibank N.A. Citibank N.A.
Camino Real 457 Lima
CC Torre Real - 5th Floor
San Isidro, Lima 27
PERU
PHILIPPINES The Hongkong and Shanghai The Hongkong and Shanghai
Banking Corporation Limited Banking Corporation Limited
Hong Kong Bank Centre 3/F Manila
San Miguel Avenue
Ortigas Commercial Centre
Pasig Metro Manila
PHILIPPINES
POLAND Bank Polska Kasa Opieki S.A. Bank Polska Kasa Opieki S.A.
6/12 Nowy Swiat Str Warsaw
00-920 Warsaw
POLAND
PORTUGAL Banco Espirito Santo & Banco Pinto & Sotto Mayor
Commercial de Lisboa Avenida Fontes Pereira de Melo
195, Avenida da Liberdade 1000 Lisbon
P-1200 Lisbon
PORTUGAL
SHANGHAI
(CHINA) The Hongkong and Shanghai The Chase Manhattan Bank, N.A.
Banking Corporation Limited Hong Kong
Shanghai Branch
Corporate Banking Centre
Unit 504, 5/F Shanghai Centre
1376 Nanjing Xi Lu
Shanghai
THE PEOPLE'S REPUBLIC OF CHINA
SHENZHEN
(CHINA) The Hongkong and Shanghai The Chase Manhattan Bank, N.A.
Banking Corporation Limited Hong Kong
1st Floor, Central Plaza Hotel
No. 1 Chun Feng Lu
Shenzhen
THE PEOPLE'S REPUBLIC OF CHINA
SINGAPORE The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Shell Tower Singapore
50 Raffles Place
Singapore 0104
SINGAPORE
SOUTH KOREA The Hongkong and Shanghai The Hongkong and Shanghai
Banking Corporation Limited Banking Corporation Limited
6/F Kyobo Building Seoul
#1 Chongro, 1-ka Chongro-ku
Seoul
SOUTH KOREA
SPAIN The Chase Manhattan Bank, N.A. Banco Zaragozano, S.A.
Calle Peonias 2, 7th Floor Madrid
La Piovera, 28042 Madrid
SPAIN
SRI LANKA The Hongkong and Shanghai The Hongkong and Shanghai
Banking Corporation Limited Banking Corporation Limited
24, Sir Baron Jayatilaka Mawatha, Colombo
Colombo 1,
SRI LANKA
SWEDEN Skandinaviska Enskilda Banken Svenska Handelsbanken
Kungstradgardsgatan 8 Stockholm
Stockholm S-106 40
SWEDEN
SWITZERLAND Union Bank of Switzerland Union Bank of Switzerland
45 Bahnhofstrasse Zurich
8021 Zurich
SWITZERLAND
TAIWAN The Chase Manhattan Bank, N.A. No correspondent Bank
673 Min Sheng East Road - 9th Floor
Taipei
TAIWAN
Republic of China
THAILAND The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Bubhajit Building Bangkok
20 North Sathorn Road
Silom, Bangrak
Bangkok 10500
THAILAND
TURKEY The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Yildiz Posta Caddesi 52 Istanbul
Dedeman Ticaret Merkezi, Kat 11
80700 Esentepe
Istanbul
TURKEY
U.K. The Chase Manhattan Bank, N.A. The Chase Manhattan Bank,
N.A.
Woolgate House London
Coleman Street
London EC2P 2HD
UNITED KINGDOM
URUGUAY The First National Bank of Boston The First National Bank of Boston
Zabala 1463 Montevideo
Montevideo
URUGUAY
U.S.A. The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
1 Chase Manhattan Plaza New York
New York
NY 10081
U.S.A.
VENEZUELA Citibank N.A. Citibank N.A.
Carmelitas a Altagracia Caracas
Edificio Citibank
Caracas 1010
VENEZUELA
February, 1994 SCHEDULE B
LIST OF FUNDS INCLUDED IN
FRANKLIN/TEMPLETON GLOBAL TRUST
1. Franklin/Templeton German Government Bond Fund
2. Franklin/Templeton Global Currency Fund
3. Franklin/Templeton Hard Currency Fund
4. Franklin/Templeton High Income Currency Fund
(Franklin Logo) FRANKLIN
RESOURCES, INC.
777 Mariners Island Blvd.
San Mateo, CA 94404
415/312-5818
Fax 415/312-3528
Martin L. Flanagan CPA, CFA
Senior Vice President
Executive Financial Officer
April 12, 1995
Mr. Stephen H. Kilbuck
Vice President Corporate Banking
Bank of America, NT & SA
555 California Street, 41st Floor
San Francisco, CA 94104
Dear Steve:
Various Franklin Funds/Portfolios (the "Funds") and Bank of America,
National Trust and Savings Association ("Bank") are parties to custody
agreements (the "Agreements") as well as separate cash management and deposit
services arrangements.
By this Letter Agreement, each of the Funds and Bank desire to establish
the cash compensation to be paid by each Fund for services rendered to it by
Bank.
Effective April 1, 1995, commencing with the first statement prepared
thereafter each Fund will pay to Bank a monthly fee in cash equal to an annual
rate of 87.5/100 ths. (.875) basis points of the net asset value of each such
Funds domestic portfolios held in custody by Bank and nine and three-tenths
(9.3) basis points of the net asset value of each such Funds international
portfolios held in custody by Bank or held by foreign sub-custodians calculated
as of the last business day of the month. For purposes of calculating the
monthly fee, 000007291 will be used as the monthly factor for the domestic
portfolio and .0000775 will be used as the monthly factor for the international
portfolio. The obligation of each Fund is separate from the obligation of any
other Fund.
The purpose of this Letter of Agreement is to provide for a fair level of
compensation to Bank for its service. The fee is based on the assumption that
each Fund will continue to use services of a type and volume comparable to the
services currently used. The parties agree that any party may initiate
discussions concerning revisions to the terms of this Letter Agreement at any
time it believes the level of compensation to be inappropriate. The parties
further agree that any party may, upon at least sixty (60) days' written notice,
terminate this Letter Agreement with respect to that party. Upon its
termination, if the parties have not agreed to a substitute fee arrangement, any
party may also terminate all or some of the service provided by Bank upon
additional sixty (60) days' written notice.
On an ongoing basis, Bank will continue to prepare the monthly corporate
account analysis statements on behalf of each Fund, which estimates all revenues
and expenses for the parties' relationship. From time to time, Bank and any
Fund(s) may renegotiate the estimated "prices" used in the account analysis
process. The account analysis statement will provide a basis for any
negotiations between the parties on the appropriateness of the fee agreement as
embodied in this Letter Agreement. However, no payment of any kind shall be due
on account of any shortfall on the account analysis statement.
Sincerely,
Authorized Officer for Each Trust/Franklin
Fund Portfolio (List Attached)
By /s/ Martin L. Flanagan
Martin L. Flanagan
Executive Financial Officer
ACCEPTED AND AGREED TO BY:
BANK OF AMERICA, NT & SA
By /s/ Stephen H. Kilbuck
Title: Vice President
FRANKLIN GROUP OF FUNDS
FUND # FUND INIT NAME OF FUND
022 FUT FRANKLIN UNIVERSAL TRUST - (closed-end)
033 FPMT FRANKLIN PRINCIPAL MATURITY TRUST - (closed-end)
024 FMIT FRANKLIN MULTI-INCOME TRUST - (closed-end)
101 FGF FRANKLIN GOLD FUND
102 FPRF FRANKLIN PREMIER RETURN FUND
(Franklin Option Fund until April 30, 1991)
103 FEF FRANKLIN EQUITY FUND
105 AGE AGE HIGH INCOME FUND, INC.
FCF FRANKLIN CUSTODIAN FUNDS, INC.
106 GROWTH SERIES
107 UTILITIES SERIES
108 DYNATECH SERIES
109 INCOME SERIES
110 U.S. GOVERNMENT SECURITIES SERIES
111* FMF FRANKLIN MONEY FUND (MMP feeder as of 8/1/94)
112 FCTFIF FRANKLIN CALIFORNIA TAX-FREE INCOME FUND, INC.
113* FFMF FRANKLIN FEDERAL MONEY FUND (USGSMMP feeder as of 8/1/94)
114 FTEMF FRANKLIN TAX-EXEMPT MONEY FUND
115 FNYTFIF FRANKLIN NEW YORK TAX-FREE INCOME FUND, INC.
116 FFTFIF FRANKLIN FEDERAL TAX-FREE INCOME FUND
FTFT FRANKLIN TAX-FREE TRUST
118 FRANKLIN MASSACHUSETTS INSURED TAX-FREE INCOME FUND
119 FRANKLIN MICHIGAN INSURED TAX-FREE INCOME FUND
120 FRANKLIN MINNESOTA INSURED TAX-FREE INCOME FUND
121 FRANKLIN INSURED TAX-FREE INCOME FUND
122 FRANKLIN OHIO INSURED TAX-FREE INCOME FUND
123 FRANKLIN PUERTO RICO TAX-FREE INCOME FUND
126 FRANKLIN ARIZONA TAX-FREE INCOME FUND
127 FRANKLIN COLORADO TAX-FREE INCOME FUND
128 FRANKLIN GEORGIA TAX-FREE INCOME FUND
129 FRANKLIN PENNSYLVANIA TAX-FREE INCOME FUND
130 FRANKLIN HIGH YIELD TAX-FREE INCOME FUND
160 FRANKLIN MISSOURI TAX-FREE INCOME FUND
161 FRANKLIN OREGON TAX-FREE INCOME FUND
162 FRANKLIN TEXAS TAX-FREE INCOME FUND
163 FRANKLIN VIRGINIA TAX-FREE INCOME FUND
164 FRANKLIN ALABAMA TAX-FREE INCOME FUND
165 FRANKLIN FLORIDA TAX-FREE INCOME FUND
166 FRANKLIN CONNECTICUT TAX-FREE INCOME FUND
167 FRANKLIN INDIANA TAX-FREE INCOME FUND
168 FRANKLIN LOUISIANA TAX-FREE INCOME FUND
169 FRANKLIN MARYLAND TAX-FREE INCOME FUND
170 FRANKLIN NORTH CAROLINA TAX-FREE INCOME FUND
171 FRANKLIN NEW JERSEY TAX-FREE INCOME FUND
172 FRANKLIN KENTUCKY TAX-FREE INCOME FUND
174 FRANKLIN FEDERAL INTERMEDIATE-TERM TAX-FREE INCOME FUND
177 FRANKLIN ARIZONA INSURED TAX-FREE INCOME FUND
178 FRANKLIN FLORIDA INSURED TAX-FREE INCOME FUND
FCTFT FRANKLIN CALIFORNIA TAX-FREE TRUST
124 FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND
125 FRANKLIN CALIFORNIA TAX-EXEMPT MONEY FUND
152 FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME
FUND
FNYTFT FRANKLIN NEW YORK TAX-FREE TRUST
(Franklin New York-Tax Exempt Money Fund until 1/91)
131 FRANKLIN NEW YORK TAX-EXEMPT MONEY FUND
153 FRANKLIN NEW YORK INTERMEDIATE-TERM TAX-FREE INCOME
FUND
181 FRANKLIN NEW YORK INSURED TAX-FREE INCOME FUND
FIST FRANKLIN INVESTORS SECURITIES TRUST
135 FRANKLIN GLOBAL GOVERNMENT INCOME FUND
(formerly Franklin Global Opportunity Income Fund)
136 FRANKLIN SHORT-INTERMEDIATE U.S. GOVERNMENT
SECURITIES FUND
137 FRANKLIN CONVERTIBLE SECURITIES FUND
138* FRANKLIN ADJUSTABLE U.S. GOVERNMENT SECURITIES FUND
(formerly Franklin Adjustable Rate Mortgage Fund)
(USGARMP feeder)
139 FRANKLIN EQUITY INCOME FUND
(Franklin Special Equity Income Fund until 8/17/93)
151* FRANKLIN ADJUSTABLE RATE SECURITIES FUND
(ARSP retail feeder)
IFT INSTITUTIONAL FIDUCIARY TRUST
140* MONEY MARKET PORTFOLIO (MMP feeder)
141* FRANKLIN LATE DAY MONEY MARKET PORTFOLIO
(Franklin Government Investors Money Market
Portfolio until 6/15/93)
142* FRANKLIN U.S. GOVERNMENT SECURITIES MONEY MARKET
PORTFOLIO (USGSMMP feeder)
143* FRANKLIN U.S. TREASURY MONEY MARKET PORTFOLIO
144* FRANKLIN INSTITUTIONAL ADJUSTABLE U.S. GOVERNMENT
SECURITIES FUND (USGARMP feeder)
145* FRANKLIN INSTITUTIONAL ADJUSTABLE RATE SECURITIES FUND
(ARSP feeder)
146* FRANKLIN U.S. GOVERNMENT AGENCY MONEY MARKET FUND
147* AEA CASH MANAGEMENT FUND (MMP feeder)
(formerly Franklin Star MOney Market Portfolio)
149* FRANKLIN CASH RESERVES FUND (MMP feeder)
150 FBSIF FRANKLIN BALANCE SHEET INVESTMENT FUND
154 FTAIBF FRANKLIN TAX-ADVANTAGED INTERNATIONAL BOND FUND
155 FTAUSGSF FRANKLIN TAX-ADVANTAGED U.S. GOVERNMENT SECURITIES FUND
156 FTAHYSF FRANKLIN TAX-ADVANTAGED HIGH YIELD SECURITIES FUND
FMT FRANKLIN MANAGED TRUST
117 FRANKLIN CORPORATE QUALIFIED DIVIDEND FUND
(Franklin Corporate Cash Portfolio until 5/31/91)
158 FRANKLIN RISING DIVIDENDS FUND
159 FRANKLIN INVESTMENT GRADE INCOME FUND
FRANKLIN INSTITUTIONAL RISING DIVIDENDS FUND
(PT feeder) (not yet filed)
157 FSMP FRANKLIN STRATEGIC MORTGAGE PORTFOLIO (effective 2/1/93)
FMST FRANKLIN MUNICIPAL SECURITIES TRUST
173 FRANKLIN HAWAII MUNICIPAL BOND FUND
175 FRANKLIN CALIFORNIA HIGH YIELD MUNICIPAL FUND
176 FRANKLIN WASHINGTON MUNICIPAL BOND FUND
220 FRANKLIN TENNESSEE MUNICIPAL BOND FUND
221 FRANKLIN ARKANSAS MUNICIPAL BOND FUND
FSS FRANKLIN STRATEGIC SERIES (changed from Cal 250)
194 FRANKLIN STRATEGIC INCOME FUND
195 FRANKLIN MIDCAP GROWTH FUND (filed - not yet being
sold)
196 FRANKLIN INSTITUTIONAL MIDCAP GROWTH FUND
(formerly FISCO MidCap Growth Fund)
197 FRANKLIN GLOBAL UTILITIES FUND
198 FRANKLIN SMALL CAP GROWTH FUND
199 FRANKLIN GLOBAL HEALTH CARE FUND
ARSP ADJUSTABLE RATE SECURITIES PORTFOLIOS (THE PARENT)
182 U.S. GOVERNMENT ADJUSTABLE RATE MORTGAGE PORTFOLIO
(master fund)
183 ADJUSTABLE RATE SECURITIES PORTFOLIO (filed under 1940
Act Only) (master fund)
MMP THE MONEY MARKET PORTFOLIOS (master fund parent)
(filed under 1940 Act only)
184* THE MONEY MARKET PORTFOLIO (master fund)
186* THE U.S. GOVERNMENT SECURITIES MONEY MARKET PORTFOLIO
(master fund)
187 MGP MIDCAP GROWTH PORTFOLIO (master fund) (1940 Act filing only -
not yet being sold)
PT THE PORTFOLIOS TRUST (master fund parent) (1940 Act filing
only - not yet being sold)
188 THE RISING DIVIDENDS PORTFOLIO (master fund)
FIT FRANKLIN INTERNATIONAL TRUST
190 FRANKLIN PACIFIC GROWTH FUND
191 FRANKLIN INTERNATIONAL EQUITY FUND
FREST FRANKLIN REAL ESTATE SECURITIES TRUST
192 FRANKLIN REAL ESTATE SECURITIES FUND
FTGT FRANKLIN TEMPLETON GLOBAL TRUST (formerly Huntington Funds)
210* FRANKLIN TEMPLETON GERMAN GOVERNMENT BOND FUND
211* FRANKLIN TEMPLETON GLOBAL CURRENCY FUND
212* FRANKLIN TEMPLETON HARD CURRENCY FUND
213* FRANKLIN TEMPLETON HIGH INCOME CURRENCY FUND
FVF FRANKLIN VALUEMARK FUNDS (ALLIANZ)
821 MONEY MARKET FUND
822 EQUITY GROWTH FUND
823 PRECIOUS METALS FUND
824 REAL ESTATE SECURITIES FUND
825 UTILITY EQUITY FUND
826 HIGH INCOME FUND
827 GLOBAL INCOME FUND
828 INVESTMENT GRADE INTERMEDIATE BOND FUND
829 INCOME SECURITIES FUND
830 U.S. GOVERNMENT SECURITIES FUND
831 ZERO COUPON FUND - 1995
832 ZERO COUPON FUND - 2000
833 ZERO COUPON FUND - 2005
834 ZERO COUPON FUND - 2010
835 ADJUSTABLE U.S. GOVERNMENT FUND
836 RISING DIVIDENDS FUND
837 TEMPLETON PACIFIC GROWTH FUND (Pacific Growth Fund
until 10/15/93)
838 TEMPLETON INTERNATIONAL EQUITY FUND (International
Equity Fund until 10/15/93)
839 TEMPLETON DEVELOPING MARKETS EQUITY FUND
840 TEMPLETON GLOBAL GROWTH FUND
841 TEMPLETON WORLDWIDE ASSET ALLOCATION FUND
(not yet effective)
891 FGST FRANKLIN GOVERNMENT SECURITIES TRUST (AETNA)
193 FRANKLIN STABLE VALUE FUND
511 FRANKLIN TEMPLETON MONEY FUND II (expected effective
date: 05/01/95)
CONSENT OF INDEPENDENT AUDITORS
To the Board of Directors of
Franklin Templeton Global Trust
We consent to the incorporation by reference in Post-Effective Amendment No. 14
to the Registration Statement of Franklin Templeton Global Trust on Form N-1A
(File No. 33-01212 & 811-4450) of our report dated November 30, 1995 on our
audit of the financial statements and financial highlights of Franklin Templeton
Global Trust, which report is included in the Annual Report to Shareholders for
the year ended October 31, 1995, which is incorporated by reference in the
Registration Statement.
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
San Francisco, California
December 27, 1995
HUNTINGTON FUNDS
Preamble to Distribution Plan
The following Distribution Plan (the "Plan") has been adopted pursuant to
Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by the
Huntington Funds (the "Trust") on behalf of Franklin/Templeton Global Currency
Fund, Franklin/Templeton High Income Currency Fund, Franklin/Templeton German
Government Bond Fund, and Franklin/Templeton Hard Currency Fund (may be
collectively or separately hereinafter referred to as the "Funds" or a "Fund").
The Plan has been approved by a majority vote of the Board of Trustees of the
Trust (the "Board of Trustees"), including a majority of the trustees who are
not interested persons of the Trust and who have no direct or indirect financial
interest in the operation of the Plan (the "non-interested trustees"), cast in
person at a meeting called for the purpose of voting on such Plan.
In reviewing the Plan, the Board of Trustees considered the proposed
schedule and nature of payments and terms of the Management Agreement between
the Trust and Franklin Advisers, Inc. (the "Manager"), and the terms of the
Underwriting Agreement between the Trust and Franklin/Templeton Distributors,
Inc. ("Distributors"). The Board of Trustees concluded that the proposed
compensation of the Manager, under the Management Agreement, and of
Distributors, under the Underwriting Agreement, was fair and not excessive;
however, the Board of Trustees also recognized that uncertainty may exist from
time to time with respect to whether payments to be made by the Funds to the
Manager or to Distributors or others or by the Manager or Distributors to others
may be deemed to constitute distribution expenses. Accordingly, the Board of
Trustees determined that the Plan should provide f or such payments and that
adoption of the Plan would be prudent and in the best interest of each Fund and
its shareholders. Such approval included a determination that in the exercise of
their reasonable business judgment and in light of their fiduciary duties, there
is a reasonable likelihood that the Plan will benefit each Fund and its
shareholders.
DISTRIBUTION PLAN
1. Each Fund shall reimburse Distributors or others for all expenses incurred by
Distributors or others in the promotion and distribution of the shares of each
Fund, including, but 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 Distributors, 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, Distributors or its affiliates, which form of
agreement has been approved from time to time by the trustees, including the
non-interested trustees.
2. The maximum amount which may be reimbursed by each Fund to Distributors or
others pursuant to Paragraph 1 herein shall be .45% per annum of the average
daily net assets of each Fund (other than the Franklin/Templeton German
Government Bond Fund) and .2596 per annum of the average daily net assets of the
Franklin/Templeton German Government Bond Fund. Said reimbursement shall be made
quarterly by each Fund to Distributors or others.
3. In addition to the payments which each Fund is authorized to make pursuant to
paragraphs 1 and 2 hereof, to the extent that the Funds, the Manager,
Distributors or other parties on behalf of a Fund the Manager or Distributors
make payments that are deemed to be payments for the financing of any activity
primarily intended to result in the sale of shares issued by a Fund within the
context of Rule 12b-1 under the Act, then such payments shall be deemed to have
been made pursuant to the Plan.
In no event shall the aggregate asset-based sales charges which include
payments specified in paragraphs 1 and 2, plus any other payments deemed to be
made pursuant to the Plan under this paragraph, exceed the amount permitted to
be paid pursuant to the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., Article III, Section 26(d).
4. Distributors shall furnish to the Board of Trustees, for their review, on a
quarterly basis, a written report of the monies reimbursed to it and to others
under the Plan, and shall furnish the Board of Trustees with such other
information as the Board of Trustees may reasonably request in connection with
the payments made under the Plan in order to enable the Board of Trustees to
make an informed determination of whether the Plan should be continued.
5. The Plan shall continue in effect for a period of more than one year only so
long as such continuance is specifically approved at least annually by a vote of
the Board of Trustees, including the non-interested trustees, cast in person at
a meeting called for the purpose of voting on the Plan.
6. The Plan, and any agreements entered into pursuant to this Plan, may be
terminated at any time, without penalty, by vote of a majority of the
outstanding voting securities of a Fund or by vote of a majority of the
non-interested trustees, on not more than sixty (60) days' written notice, or by
Distributors on not more than sixty (60) days' written notice and shall
terminate automatically in the event of any act that constitutes an assignment
of the Management Agreement between the Trust and the Manager.
7. Without approval by a majority of the Trust's outstanding voting securities,
the Plan and any agreements entered into pursuant to the Plan may not be amended
to increase materially the amount to be spent for distribution pursuant to
Paragraph 2.
8. All material amendments to the Plan, or any agreements entered into pursuant
to the Plan, shall be approved by a vote of the non-interested trustees cast in
person at a meeting called for the purpose of voting on any such amendment.
9. So long as the Plan is in effect, the selection and nomination of the Trust's
non-interested trustees shall be committed to the discretion of such
non-interested trustees.
10. This Plan shall take effect on the 12th day of November, 1993.
This Plan and the terms and provisions thereof are hereby accepted and
agreed to by the Trust on behalf of each Fund and Distributors as evidenced by
their execution hereof.
HUNTINGTON FUNDS
By: /s/ Donald P. Gould
Title: President
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
By: /s/ Rupert H. Johnson, Jr.
Title:
Fund Name:
Period Ending: 12/31/94 12/31/94
MAX OFF NAV
1 Yr T.Return: -6.58% -2.41%
5 Yr T.Return: 61.27% 68.47%
10 Yr T.Return: NA NA
From Inception: 85.09% 93.24%
Inception Date: 05/04/87 05/04/87
SEC STANDARD TOTAL RETURN
AS OF: 12/31/94
MAX OFFER NAV
ONE YEAR -6.58% -2.41%
P= 1000.00 1000.00
T= -0.0658 -0.0241
n= 1 1
ERV= 934.20 975.90
FIVE YEAR 10.03% 11.00%
P= 1000.00 1000.00
T= 0.1003 0.1100
n= 5 5
ERV= 1612.71 1685.06
TEN YEAR 0.00% 0.00%
P= 1000.00 1000.00
T= 0.0000 0.0000
n= 10 10
ERV= 1000.00 1000.00
FROM INCEPTION 05/04/87 8.36% 8.97%
P= 1000.00 1000.00
T= 0.0836 0.0897
n= 7.6685 7.6685
ERV= 1850.94 1932.36
AGGREGATE TOTAL RETURN
1 YEAR -6.58% -2.41%
5 YEAR 61.27% 68.47%
10 YEAR NA NA
FROM INCEPTION 85.09% 93.24%
30-DAY SEC YIELD 10.15%
30-DAY SEC YIELD W/O NA
WAIVER
FISCAL YEAR-END 9.52%
DISTRIBUTION RATE (ON MAX
OFFERING)
FISCAL YEAR-END 9.93%
DISTRIBUTION RATE (ON
NAV)
FUND #
For the year ended 12/31/94
SEC - YIELD CALCULATION
a = interest/dividends earned 751,960
b = expenses accrued 58,736
c = avg # of shares o/s 10,026,685
d = maximum offering price 8.344
a - b 6
SEC Yield= 2[(---------------------------------- + 1) -1]
cd
751,960 - 58,736 6
= 2[(----------------------------------- + 1) -1]
10,026,685 * 8.344
693,224 6
= 2[(------------------------- + 1) -1]
83,662,660
6
= 2[( 1.00828594265330 ) -1]
= 2( 1.05075695727946 - 1)
= 0.1015139146
= 10.15%
POWER OF ATTORNEY
The undersigned officers and trustees of Franklin Templeton Global Trust (the
"Registrant") hereby appoint MARK H. PLAFKER, HARMON E. BURNS, DEBORAH R.
GATZEK, KAREN L. SKIDMORE AND LARRY L. GREENE (with full power to each of them
to act alone) his attorney-in-fact and agent, in all capacities, to execute, and
to file any of the documents referred to below relating to Post-Effective
Amendments to the Registrant's registration statement on Form N-1A under the
Investment Company Act of 1940, as amended, and under the Securities Act of 1933
covering the sale of shares by the Registrant under prospectuses becoming
effective after this date, including any amendment or amendments increasing or
decreasing the amount of securities for which registration is being sought, with
all exhibits and any and all documents required to be filed with respect thereto
with any regulatory authority. Each of the undersigned grants to each of said
attorneys, full authority to do every act necessary to be done in order to
effectuate the same as fully, to all intents and purposes as he could do if
personally present, thereby ratifying all that said attorneys-in-fact and
agents, may lawfully do or cause to be done by virtue hereof.
The undersigned officers and trustees hereby execute this Power of Attorney
as of this 15th day of August 1995.
/s/ Donald P. Gould /s/ Charles B. Johnson
Donald P. Gould, Charles B. Johnson,
Principal Executive Officer Trustee
and Trustee
/s/ Frank H. Abbott, III /s/ Harris J. Ashton
Frank H. Abbott, III, Harris J. Ashton,
Trustee Trustee
/s/ S. Joseph Fortunato
David K. Eiteman, S. Joseph Fortunato,
Trustee Trustee
/s/ David W. Garbellano /s/ Gerald R. Healy
David W. Garbellano, Gerald R. Healy,
Trustee Trustee
/s/ Rupert H. Johnson, Jr. /s/ Gordon S. Macklin
Rupert H. Johnson, Jr., Gordon S. Macklin,
Trustee Trustee
/s/ David P. Kraus /s/ Frank W.T. LaHaye
David P. Kraus, Frank W.T. LaHaye,
Trustee Trustee
/s/ Diomedes Loo-Tam /s/ Martin L. Flanagan
Diomedes Loo-Tam, Martin L. Flanagan,
Principal Accounting Officer Principal Financial Officer
CERTIFICATE OF SECRETARY
I, Deborah R. Gatzek, certify that I am Secretary of FRANKLIN TEMPLETON GLOBAL
TRUST (the "Trust").
As Secretary of the Trust, I further certify that the following resolution was
adopted by a majority of the Trustees of the Trust present at a meeting held at
777 Mariners Island Boulevard, San Mateo, California, on August 15, 1995.
RESOLVED, that a Power of Attorney, substantially in the form of the
Power of Attorney presented to this Board, appointing Mark H. Plafker,
Harmon E. Burns, Deborah R. Gatzek, Karen L. Skidmore and Larry L.
Greene as attorneys-in-fact for the purpose of filing documents with
the Securities and Exchange Commission, be executed by a majority of
the Trustees and designated officers.
I declare under penalty of perjury that the matters set forth in this
certificate are true and correct of my own knowledge.
/s/ Deborah R. Gatzek
Dated: August 15, 1995 Deborah R. Gatzek
Secretary
[ARTICLE] 6
[LEGEND]
THE SCHEDULE CONTAINS SUMMARY FINANCIAL IN FORMATION EXTRACTED FROM THE FRANKLIN
TEMPLETON GLOBAL CURRENCY FUND OCTOBER 31, 1995 ANNUAL REPORT AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
[/LEGEND]
[SERIES]
[NUMBER] 02
[NAME] FRANKLIN TEMEPLETON GLOBAL CURRENCY FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] OCT-31-1995
[PERIOD-END] OCT-31-1995
[INVESTMENTS-AT-COST] 53784926
[INVESTMENTS-AT-VALUE] 54589761
[RECEIVABLES] 294284
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 5382870
[TOTAL-ASSETS] 60266915
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 325083
[TOTAL-LIABILITIES] 325083
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 57743563
[SHARES-COMMON-STOCK] 4384058
[SHARES-COMMON-PRIOR] 3966828
[ACCUMULATED-NII-CURRENT] 1463213
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] -208434
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 943490
[NET-ASSETS] 59941832
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 3668754
[OTHER-INCOME] 0
[EXPENSES-NET] 576838
[NET-INVESTMENT-INCOME] 3091916
[REALIZED-GAINS-CURRENT] 2083056
[APPREC-INCREASE-CURRENT] -2010845
[NET-CHANGE-FROM-OPS] 3164127
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] -5196532
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1387801
[NUMBER-OF-SHARES-REDEEMED] -1293014
[SHARES-REINVESTED] 322443
[NET-CHANGE-IN-ASSETS] 3843934
[ACCUMULATED-NII-PRIOR] 1263410
[ACCUMULATED-GAINS-PRIOR] -19002
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 379524
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 576838
[AVERAGE-NET-ASSETS] 58485121
[PER-SHARE-NAV-BEGIN] 14.14
[PER-SHARE-NII] 1.29
[PER-SHARE-GAIN-APPREC] -0.49
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] -1.27
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 13.67
[EXPENSE-RATIO] 0.99
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[LEGEND]
THE SCHEDULE CONTAINS SUMMARY FINANCIAL IN FORMATION EXTRACTED FROM THE FRANKLIN
TEMPLETON HARD CURRENCY FUND OCTOBER 31, 1995 ANNUAL REPORT AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
[/LEGEND]
[SERIES]
[NUMBER] 03
[NAME] FRANKLIN TEMPLETON HARD CURRENCY FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] OCT-31-1995
[PERIOD-END] OCT-31-1995
[INVESTMENTS-AT-COST] 134399756
[INVESTMENTS-AT-VALUE] 133801760
[RECEIVABLES] 2896255
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 19438
[TOTAL-ASSETS] 136717453
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 4628446
[TOTAL-LIABILITIES] 4628446
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 132535169
[SHARES-COMMON-STOCK] 10089744
[SHARES-COMMON-PRIOR] 4389197
[ACCUMULATED-NII-CURRENT] 1248928
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] -884056
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] -811034
[NET-ASSETS] 132089007
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 5707034
[OTHER-INCOME] 0
[EXPENSES-NET] 1128859
[NET-INVESTMENT-INCOME] 4578175
[REALIZED-GAINS-CURRENT] 1212480
[APPREC-INCREASE-CURRENT] -1732815
[NET-CHANGE-FROM-OPS] 4057840
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] -9027253
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 10970103
[NUMBER-OF-SHARES-REDEEMED] -5816955
[SHARES-REINVESTED] 547399
[NET-CHANGE-IN-ASSETS] 70860508
[ACCUMULATED-NII-PRIOR] -180084
[ACCUMULATED-GAINS-PRIOR] 4385109
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 634188
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1128859
[AVERAGE-NET-ASSETS] 97801784
[PER-SHARE-NAV-BEGIN] 13.95
[PER-SHARE-NII] 1.84
[PER-SHARE-GAIN-APPREC] -1.02
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] -1.68
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 13.09
[EXPENSE-RATIO] 1.15
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[LEGEND]
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FRANKLIN
TEMPLETON HIGH INCOME CURRENCY FUND OCTOBER 31, 1995 ANNUAL REPORT AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
[/LEGEND]
[SERIES]
[NUMBER] 04
[NAME] FRANKLIN TEMPLETON HIGH INCOME CURRENCY FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] OCT-31-1995
[PERIOD-END] OCT-31-1995
[INVESTMENTS-AT-COST] 10543326
[INVESTMENTS-AT-VALUE] 10557255
[RECEIVABLES] 807129
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 41084
[TOTAL-ASSETS] 11405468
[PAYABLE-FOR-SECURITIES] 418349
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 84933
[TOTAL-LIABILITIES] 503282
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 10371961
[SHARES-COMMON-STOCK] 943387
[SHARES-COMMON-PRIOR] 1456305
[ACCUMULATED-NII-CURRENT] 465794
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 12939
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 51492
[NET-ASSETS] 10902186
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 868870
[OTHER-INCOME] 0
[EXPENSES-NET] 159498
[NET-INVESTMENT-INCOME] 709372
[REALIZED-GAINS-CURRENT] 590112
[APPREC-INCREASE-CURRENT] -320372
[NET-CHANGE-FROM-OPS] 979112
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] -1147936
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 158620
[NUMBER-OF-SHARES-REDEEMED] -737848
[SHARES-REINVESTED] 66310
[NET-CHANGE-IN-ASSETS] -5976091
[ACCUMULATED-NII-PRIOR] 18961
[ACCUMULATED-GAINS-PRIOR] 308224
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 82819
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 184505
[AVERAGE-NET-ASSETS] 12759806
[PER-SHARE-NAV-BEGIN] 11.59
[PER-SHARE-NII] 1.47
[PER-SHARE-GAIN-APPREC] -0.51
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] -0.99
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 11.56
[EXPENSE-RATIO] 1.25<F1>
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
<FN>
<F1>THE EXPENSE RATIO FOR THE FRANKLIN TEMPLETON HIGH INCOME CURRENCY FUND FOR
OCTOBER 31, 1995 WITHOUT REIMBURSEMENT EQUALLED 1.45%.
</FN>
</TABLE>
[ARTICLE] 6
[LEGEND]
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FRANKLIN
TEMPLETON GERMAN GOVERNMENT BOND FUND OCTOBER 31, 1995 ANNUAL REPORT AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
[/LEGEND]
[SERIES]
[NUMBER] 01
[NAME] FRANKLIN TEMPLETON GERMAN GOVERNMENT BOND FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] OCT-31-1995
[PERIOD-END] OCT-31-1995
[INVESTMENTS-AT-COST] 20597985
[INVESTMENTS-AT-VALUE] 22293094
[RECEIVABLES] 1149506
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 806416
[TOTAL-ASSETS] 24249016
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 135725
[TOTAL-LIABILITIES] 135725
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 21708380
[SHARES-COMMON-STOCK] 1685047
[SHARES-COMMON-PRIOR] 998153
[ACCUMULATED-NII-CURRENT] 660762
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 42080
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 1702069
[NET-ASSETS] 24113291
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 1143626
[OTHER-INCOME] 0
[EXPENSES-NET] 222683
[NET-INVESTMENT-INCOME] 920943
[REALIZED-GAINS-CURRENT] 713330
[APPREC-INCREASE-CURRENT] 1059514
[NET-CHANGE-FROM-OPS] 2693787
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] -1355870
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1715926
[NUMBER-OF-SHARES-REDEEMED] -1109204
[SHARES-REINVESTED] 80172
[NET-CHANGE-IN-ASSETS] 10877089
[ACCUMULATED-NII-PRIOR] 56449
[ACCUMULATED-GAINS-PRIOR] 367990
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 97759
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 229020
[AVERAGE-NET-ASSETS] 17814630
[PER-SHARE-NAV-BEGIN] 13.26
[PER-SHARE-NII] 1.53
[PER-SHARE-GAIN-APPREC] 0.71
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] -1.19
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 14.31
[EXPENSE-RATIO] 1.25<F1>
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
<FN>
<F1>THE EXPENSE RATIO FOR THE FRANKLIN TEMPLETON GERMAN GOVERNMENT BOND FUND FOR
OCTOBER 31, 1995 WITHOUT REIMBURSEMENT EQUALED 1.2 9%.
</FN>
</TABLE>
