As filed with the Securities and Exchange Commission on August 2, 1996
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. 15 (X)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 16 (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 October 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.
This amendment is being filed pursuant to Rule 414 under the Securities Act of
1933. The successor issuer is filing the amendment to the registration statement
of predecessor issuer, and expressly adopting the registration statement as its
own.
The filing is made in anticipation of the reorganization of the Franklin
Templetom Global Trust, a Massachusetts business trust (the Massachusetts
Trust), whereby the Fund will merge into the Franklin Templeton Global Trust, a
Delaware business trust. Shareholders of the Massachusetts trust are expected to
approve this reorganization at a meeting expressly called for that purpose
scheduled for August 28, 1996. The reorganization is anticipated to take effect
as of October 1, 1996.
FRANKLIN TEMPLETON GLOBAL TRUST
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 Location In
ITEM NO. ITEM REGISTRATION STATEMENT
1. Cover Page Cover Page
2. Synopsis Expense Summary
3. Condensed Financial "Financial Highlights"; "How Does the
Information Fund Measure Performance?"
4. General Description "How Is the Trust Organized?"; "How
Does the Fund Invest Its Assets?";
"What Are the Fund's Potential Risks?"
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 "How Is the Trust Organized?";
Securities "Services to Help You Manage Your
Account"; "What Distributions Might I
Receive From the Fund?"; "How
Taxation Affects You and the Fund"
7. Purchase of Securities Being "How Do I Buy Shares?"; "May I
Offered Exchange Shares for Shares of Another
Fund?"; "Transaction Procedures and
Special Requirements"; "Services to
Help You Manage Your Account"; "Who
Manages the Fund?"; "Useful Terms and
Definitions"
8. Redemption or Repurchase "May I Exchange Shares for Shares of
Another Fund?"; "How Do I Sell
Shares?"; "Transaction Procedures and
Special Requirements"; "Services to
Help You Manage Your Account"
9. Pending Legal Proceedings Not Applicable
FRANKLIN TEMPLETON GLOBAL TRUST
CROSS REFERENCE SHEET
FORM N-1A
PART A: INFORMATION REQUIRED IN PROSPECTUS
Franklin Templeton German Government Bond Fund
N-1A Location In
ITEM NO. ITEM REGISTRATION STATEMENT
1. Cover Page Cover Page
2. Synopsis Expense Summary
3. Condensed Financial "Financial Highlights - How Does the
Information Fund Measure Performance?"
4. General Description "How Is the Trust Organized?"; "How
Does the Fund Invest Its Assets?";
"What Are the Fund's Potential Risks?"
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 "How Is the Trust Organized?";
Securities "Services to Help You Manage Your
Account"; "What Distributions Might I
Receive From the Fund?"; "How Taxation
Affects You and the Fund?"
7. Purchase of Securities Being "How Do I Buy Shares?"; "May I Exchange
Offered Shares for Shares of Another Fund?";
"Transaction Procedures and Special
Requirements?"; "Services to Help You
Manage Your Account"; "Who Manages the
Fund?"; "Useful Terms and Definitions"
8. Redemption or Repurchase "May I Exchange Shares for Shares of
Another Fund?"; "How Do I Sell
Shares?"; "Transaction Procedures and
Special Requirements"; "Services to
Help You Manage Your Account"
9. Pending Legal Proceedings Not Applicable
FRANKLIN TEMPLETON GLOBAL TRUST
CROSS REFERENCE SHEET
FORM N-1A
Part B: Information Required in
THE STATEMENT OF ADDITIONAL INFORMATION
Franklin Templeton Global Currency Fund
Franklin Templeton Hard Currency Fund
Franklin Templeton High Income Currency Fund
N-1A Location In
ITEM NO. ITEM REGISTRATION STATEMENT
10. Cover Page Cover Page
11. Table of Contents Contents
12. General Information and History Not Applicable
13. Investment Objectives and "How Does the Fund Invest Its
Policies Assets?"; "Investment Restrictions"
14. Management of the Fund "Officers and Trustees";
"Investment Advisory and Other
Services"
15. Control Persons and Principal "Officers and Trustees";
Holders of Securities "Investment Advisory and Other
Services"; "Miscellaneous
Information"
16. Investment Advisory and Other "Investment Advisory and Other
Services Services"; "The Fund's Underwriter"
17. Brokerage Allocation "How Does the Fund Purchase
Securities for Its Portfolio?"
18. Capital Stock and Other See Prospectus "How Is the Trust
Securities Organized?"
19. Purchase, Redemption and "How Do I Buy, Sell and Exchange
Pricing of Securities Shares?"; "How Are Fund Shares
Valued?"; "Financial Statements"
20. Tax Status "Additional Information on
Distributions and Taxes"
21. Underwriters "The Fund's Underwriter"
22. Calculation of Performance Data "How Does the Fund Measure
Performance?"
23. Financial Statements Financial Statements
FRANKLIN TEMPLETON GLOBAL TRUST
CROSS REFERENCE SHEET
FORM N-1A
Part B: Information Required in
STATEMENT OF ADDITIONAL INFORMATION
Franklin Templeton German Government Bond Fund
N-1A Location In
ITEM NO. ITEM REGISTRATION STATEMENT
10. Cover Page Cover Page
11. Table of Contents Contents
12. General Information and History Not Applicable
13. Investment Objectives and "How Does the Fund Invest Its
Policies Assets?"; "Investment Restrictions"
14. Management of the Fund "Officers and Trustees";
"Investment Advisory and Other
Services"
15. Control Persons and Principal "Officers and Trustees";
Holders of Securities "Investment Advisory and Other
Services"; "Miscellaneous
Information"
16. Investment Advisory and Other "Investment Advisory and Other
Services Services"; "The Fund's Underwriter"
17. Brokerage Allocation "How Does the Fund Purchase
Securities for Its Portfolio?"
18. Capital Stock and Other See Prospectus "How Is the Trust
Securities Organized?"
19. Purchase, Redemption and "How Do I Buy, Sell and Exchange
Pricing of Securities Shares?"; "How Are Fund Shares
Valued?"; "Financial Statements?"
20. Tax Status "Additional Information on
Distributions and Taxes"
21. Underwriters "The Fund's Underwriter"
22. Calculation of Performance Data "How Does the Fund Measure
Performance?"
23. Financial Statements Financial Statements
PROSPECTUS & APPLICATION
FRANKLIN TEMPLETON
INTERNATIONAL CURRENCY FUNDS
FRANKLIN TEMPLETON GLOBAL CURRENCY FUND
FRANKLIN TEMPLETON HARD CURRENCY FUND
FRANKLIN TEMPLETON HIGH INCOME CURRENCY FUND
MARCH 1, 1996, AS AMENDED OCTOBER 1, 1996
INVESTMENT STRATEGY: GLOBAL INCOME
This Prospectus contains information you should know before investing in 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").
Please keep it for future reference.
The Fund's SAI, dated March 1, 1996, as amended October 1, 1996, and as may be
amended from time to time, includes more information about the Fund's procedures
and policies. It has been filed with the SEC and is incorporated by reference
into this prospectus. For a free copy or a larger print version of this
prospectus, call 1-800/DIAL BEN or write the Fund at the address shown.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY OF THE U.S.
GOVERNMENT. SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SEC OR ANY STATE SECURITIES COMMISSION NOR HAS THE SEC 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 DISTRIBUTORS.
The Fund may invest in both domestic and foreign securities.
FRANKLIN TEMPLETON GLOBAL CURRENCY FUND
FRANKLIN TEMPLETON HARD CURRENCY FUND
FRANKLIN TEMPLETON HIGH INCOME CURRENCY FUND
March 1, 1996, as amended October 1, 1996
777 Mariners Island Blvd., P.O. Box 7777
San Mateo, CA 94403-7777 1-800/DIAL BEN
TABLE OF CONTENTS
ABOUT THE FUND
Expense Summary
Financial Highlights
How Does the Fund Invest Its Assets?
What Are the Fund's Potential Risks?
Who Manages the Fund?
How Does the Fund Measure Performance?
How Is the Trust Organized?
How Taxation Affects You and the Fund
ABOUT YOUR ACCOUNT
How Do I Buy Shares?
May I Exchange Shares for Shares of Another Fund?
How Do I Sell Shares?
What Distributions Might I Receive From the Fund?
Transaction Procedures and Special Requirements
Services to Help You Manage Your Account
GLOSSARY
Useful Terms and Definitions
When reading this prospectus, you will see certain terms in capital letters.
This means the term is explained in our glossary section.
ABOUT THE FUND
EXPENSE SUMMARY
This table is designed to help you understand the costs of investing in the
Fund. It is based on the Fund's historical expenses for the fiscal year ended
October 31, 1995. Your actual expenses may vary.
Global Hard High
Currency Currency Income
Fund Fund Fund
A. 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
B. 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.................................... 0.11% 0.15% 0.53%
----------------------
Total Fund Operating Expenses..................... 0.99% 1.15% 1.25%**
------------------------
C. EXAMPLE
Assume the Fund's annual return is 5% and its operating expenses are as
described above. For each $1,000 investment, you would pay the following
projected expenses if you sold your shares after the number of years shown.
Global Hard High
CurrencyCurrency Income
Fund Fund Fund
One Year*.................................... $ 40 $ 41 $ 42
Three Years.................................. 61 65 68
Five Years................................... 83 91 97
Ten Years.................................... 148 166 177
THIS IS JUST AN EXAMPLE. IT DOES NOT REPRESENT PAST OR FUTURE EXPENSES OR
RETURNS. ACTUAL EXPENSES AND RETURNS MAY BE MORE OR LESS THAN THOSE shown.
The Fund pays its operating expenses. The effects of these expenses are
reflected in its Net Asset Value or dividends and are not directly charged
to your account.
+If your transaction is processed through your Securities Dealer, you may be
charged a fee by your Securities Dealer for this service.
++There is no front-end sales charge if you invest $1 million or more. A
Contingent Deferred Sales Charge of 1% may apply, however, if you sell the
shares within one year. See "How Do I Sell Shares? - Contingent Deferred Sales
Charge" for details.
*$5.00 fee is only for Market Timers. We process all other exchanges without a
fee.
**Advisers has agreed in advance to limit its management fee for the High
Income Fund so that the Fund's aggregate annual operating expenses do not exceed
1.25% of the Fund's average net assets for the current fiscal year. Absent this
reduction, management fees and total operating expenses for the Fund would have
represented 0.65% and 1.45% of the Fund's average net assets.
***These fees may not exceed 0.45%. 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 charge permitted under the
NASD's rules.
****Assumes a Contingent Deferred Sales Charge will not apply.
FINANCIAL HIGHLIGHTS
This table summarizes the Fund's financial history. 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 in the Trust's Annual Report to Shareholders for the year ended
October 31, 1995. The information for the six months ended April 30, 1996 is
unaudited. The information for the previous fiscal year of the Fund was audited
by other independent auditors whose opinions are not included herein. The Annual
Report to Shareholders also includes more information about the Fund's
performance. For a free copy, please call Fund Information.
Franklin Templeton Global Currency Fund
<TABLE>
<CAPTION>
----------- ------------------------------------------------------------------------------------------------
Year Ended
April 30
(Unaudited) Year Ended April 30 (Audited)
----------- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share
Operating
Performance 19966 19955 19944 19943 1993 1992 1991 1990 1989 1988 19871
--------- --------- --------- --------- -------- ---------- --------- ----------- ------- -------- ---------
Net Asset Value
at Beginning
of Year $13.67 $14.14 $13.85 $13.96 $14.01 $14.23 $13.66 $13.71 $14.76 $13.86 $12.50
--------- --------- --------- --------- -------- ---------- --------- ----------- ------- -------- ---------
Net Investment Income 0.29 1.29 .25 .57 .67 .80 1.07 .97 .85 .52 .46
Net Realized &
Unrealized
Gain (Loss) (0.38) (.49) .32 (.11) 1.01 (.22) .57 .07 (.54) 1.10 1.29
========= ========= ========= ========= ======== ========== ========= =========== ======= ======== =========
Total From
Investment
Operations (0.09) .80 .57 .46 1.68 .58 1.64 1.04 .31 1.62 1.75
========= ========= ========= ========= ======== ========== ========= =========== ======= ======== =========
Distributions
From Net
Investment Income (0.76) (1.27) (.28) (.57) (.69) (.80) (1.07) (.99) (.89) (.57) (.39)
Distributions
From Capital
Gains __ __ __ __ (1.04) __ __ (.10) (.47) (.15) __
--------- --------- --------- --------- -------- ---------- --------- ----------- ------- -------- ---------
Distributions
From Return of
Capital +++ __ __ __ __ __ __ __ __ __ __ __
Total
Distributions (0.76) (1.27) (.28) (.57) (1.73) (.80) (1.07) (1.09) (1.36) (.72) (.39)
--------- --------- --------- --------- -------- ---------- --------- ----------- ------- -------- ---------
Net Asset Value
At End of Year $12.82 $13.67 $14.14 $13.85 $13.96 $14.01 $14.23 $13.66 $13.71 $14.76 $13.86
========= ========= ========= ========= ======== ========== ========= =========== ======= ======== =========
Total Return++ (0.69)% 6.05% 4.14% 3.41% 13.28% 4.29% 12.21% 8.19% 1.97% 12.12% 16.94%
Ratios/Supplemental
Data
Net Assets at
End of Year (in
000's) $54,127 $59,942 $56,098 $51,539 $62,355 $63,589 $72,186 $71,615 $112,009 $138,609 $23,837
Ratio of
Expenses to
Average Net Assets** 1.07%* 0.99% 1.04%* 1.41% 1.67% 1.82% 1.82% 2.09% 2.10% 2.00% 2.10%*
Ratio of Net Investment
Income to Average
Net Assets 4.32%* 5.29% 3.55%* 2.78% 4.64% 5.77% 7.36% 7.16% 6.10% 3.70% 3.88%*
Portfolio
Turnover Rate __% 46.05% 50.82%* 37.16% 10.39% __% __% __% __% __% 71.01%*
Franklin Templeton Hard Currency Fund
---------- --------------------------------------------------------------
Year Ended
April 30
(Unaudited) Year Ended April 30 (Audited)
---------- --------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share
Operating
Performance 19966 19955 19944 19943 1993 1992 1991 19902
--------- --------- -------- -------- -------- -------- -------- --------
Net Asset Value
at Beginning of
Year $13.09 $13.95 $12.95 $13.00 $13.12 $12.83 $13.18 $12.50
--------- --------- -------- -------- -------- -------- -------- --------
Net Investment 0.30 1.84 .26 .50 .71 .77 .92 .42
Income
Net Realized &
Unrealized Gain
(Loss) (1.01) (1.02) .99 (.05) 1.20 .28 .64 .69
--------- --------- -------- -------- -------- -------- -------- --------
Total From
Investment
Operations (0.71) .82 1.26 .45 1.91 1.05 1.56 1.11
========= ========= ======== ======== ======== ======== ======== ========
Distributions
From Net
Investment Income (0.42) (1.68) (.25) (.13) (.69) (.76) (.95) (.35)
Distributions
From Capital
Gains __ __ __ __ (1.34) __ (.96) (.08)
--------- --------- -------- -------- -------- -------- -------- --------
Distributions
From Return of
Capital +++ __ __ __ (.37) __ __ __ __
Total
Distributions (0.42) (1.68) (.25) (.50) (2.03) (.76) (1.91) (.43)
--------- --------- -------- -------- -------- -------- -------- --------
Net Asset Value
at End of Year $11.96 $13.09 $13.95 $12.95 $13.00 $13.12 $12.83 $13.18
========= ========= ======== ======== ======== ======== ======== ========
Total Return++ (5.54)% 6.68% 9.74% 3.62% 17.11% 8.40% 11.04% 8.88%
Ratios/Supplemental
Data
Net Assets at
End of Year (in
000's) $116,989 $132,089 $61,228 $35,739 $49,569 $31,757 $33,599 $26,280
Ratio of
Expenses to
Average Net Assets** 1.21% 1.15% 1.05%* 1.47% 1.75% 1.86% 1.66% 1.65%*
Ratio of Net Investment
Income to Average
Net Assets 4.68%* 4.68% 3.80%* 3.83% 5.23% 5.85% 6.46% 6.21%*
Portfolio
Turnover Rate 0.18%* 15.72% 55.91%* __% 4.88% __% __% __%
Franklin Templeton High Income Currency Fund
-------- --------------------------------------------------------------
Year Ended
April 30
(Unaudited) Year Ended April 30 (Audited)
-------- --------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share
Operating
Performance 19966 19955 19944 19943 1993 1992 1991 19902
-------- -------- --------- -------- -------- -------- ------- --------
Net Asset
Value at
Beginning of Year $11.56 $11.59 $11.28 $12.13 $12.90 $12.92 $12.84 $12.50
-------- -------- --------- -------- -------- -------- ------- --------
Net Investment 0.28 1.47 .31 .59 .90 1.09 1.34 .73
Income
Net Realized &
Unrealized
Gain (Loss) (0.17) (.51) .31 (.85) (.40) (.03) .43 .24
-------- -------- --------- -------- -------- -------- ------- --------
Total From
Investment
Operations 0.11 .96 .62 (.26) .50 1.06 1.77 .97
======== ======== ========= ======== ======== ======== ======= ========
Distributions
From Net
Investment Income (0.86) (.99) (.31) __ (.94) (1.08) (1.38) (.62)
Distributions
From Capital
Gains __ __ __ __ (.33) __ (.31) (.01)
-------- -------- --------- -------- -------- -------- ------- --------
Distributions
From Return of
Capital +++ __ __ __ (.59) __ __ __ __
Total Distributions(0.35) (.99) (.31) (.59) (1.27) (1.08) (1.69) (.63)
-------- -------- --------- -------- -------- -------- ------- --------
Net Asset
Value at End
of Year $10.81 $11.56 $11.59 $11.28 $12.13 $12.90 $12.92 $12.84
======== ======== ========= ======== ======== ======== ======= ========
Total Return++ 1.07% 8.90% 5.60% (2.03)% 4.49% 8.51% 14.09% 7.82%
Ratios/Supplemental
Data
Net Assets at
End of Year
(in 000's) $9,794 $10,902 $16,878 $16,706 $32,341 $46,575 $52,364 $11,808
Ratio of
Expenses to
Average Net Assets**1.25%* 1.25% 1.04%* 1.59% 1.81% 1.83% 1.59% 1.73%*
Ratio of Net Investment
Income to Average
Net Assets 5.05%* 5.56% 5.44%* 4.80% 6.86% 8.38% 9.85% 11.01%*
Portfolio
Turnover Rate __% 115.05%1,588.38%* __% __% __% __% __%
</TABLE>
+Selected data for a share of beneficial interest outstanding throughout the
periods indicated.
++Total return measures the change in value of an investment over the periods
indicated. It does not include the maximum front-end sales charge and assumes
reinvestment of dividends and capital gains at net asset value.
+++Certain distributions have been reclassed to conform with SOP 93-2.
*Annualized
**The Manager has agreed in advance to waive a portion of its management fee and
to make certain payments to reduce expenses of the Funds. Had such action not
been taken, the ratios of expenses to average net assets would have been as
follows:
Ratio of Expenses
to Average
Global Currency Fund Net Assets
1994............. 1.61%
19944............ 1.12*
Ratio of Expenses
to Average
Hard Currency Fund Net Assets
1994............. 1.71%
19944............ 1.28*
Ratio of Expenses
to Average
High Income Fund Net Assets
19902............ 2.04%
1994............. 1.82
19944............ 1.45*
19955............ 1.45
19966............ 1.35*
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 advisor changed to Advisers.
4For the six months ended October 31, 1994, reflecting a change in fiscal year
from April 30.
5For the year ended October 31, 1995.
6Six months ended April 30, 1996 (unaudited)
- --------------------------------------------------------------------------------
HOW DOES THE FUND INVEST ITS ASSETS?
THE FUND'S INVESTMENT OBJECTIVE
The investment objective of each Fund is a fundamental policy and may not be
changed without shareholder approval. Of course there is 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
Investment Managers, 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, 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 Investment Managers 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 Investment Managers,
may affect the value of such currencies.
High Income 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 Investment Managers,
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
Investment Managers 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 1989 through 1995 are listed below:
1995* 1994 1993 1992 1991 1990 1989
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%
U.S..................... 5.99% -- -- -- -- -- 9.21%
*Average for January - November.
**Domestic interbank rates.
Source: Datastream - 3 month Euro-deposit rates
Subject to specific Fund restrictions described more fully below, the Fund 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 Investment
Managers, 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. 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 your particular priorities.
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 Investment Managers 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 Investment Managers 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
Investment Managers, 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 Investment
Managers 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.
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 that 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 these periodic
adjustments. Because the Fund invests primarily in short-term securities which
are excluded from the calculation of portfolio turnover rate, the portfolio
turnover rate for the Fund is usually minimal. (See "Financial Highlights.")
MORE INFORMATION REGARDING THE TYPES OF SECURITIES THE FUND MAY PURCHASE
The issuers of money market instruments in which the Fund may invest may include
governments of, and financial institutions, corporations or other entities
located in or organized under the laws of, any country. The Fund 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 Fund invests only in instruments which are considered by the Managers 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 these fluctuations between the date of purchase or sale and the
settlement date of a transaction, the Fund may enter into these forward
contracts without limitation. Also, the Fund 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 below.
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 these 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 government securities only
when the Trust's Investment Managers 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.
CURRENCY FUTURES TRANSACTIONS. The 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. The 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.
The 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 the 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. The
Fund buys currency futures contracts in order to fix a favorable currency
exchange rate for securities denominated in that currency which the Fund intends
to buy. If a futures contract is purchased by the Fund, the value of the
contract will tend to change with changes in the value of such currency and
securities.
The Fund may also buy put and call options on currency futures contracts for
hedging purposes. A put option purchased by the Fund would give it the right to
assume a position as the seller of a futures contract. A call option purchased
by the Fund would give it the right to assume a position as the buyer of a
futures contract. The 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, the
Fund's loss will be limited to the amount of the premium and any transaction
costs.
The Fund may enter into closing purchase or sale transactions in order to
terminate a futures contract. The Fund may close out an option which it has
purchased by selling an offsetting option of the same series. There is no
guarantee that 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.
CURRENCY OPTIONS TRANSACTIONS. The Fund may, for hedging purposes, buy put and
call options on any currency in which the Fund's investments are denominated.
The Fund is also authorized to enter into closing sale transactions in order to
realize gains or minimize losses on currency options purchased by the Fund.
The Fund would normally buy currency call options to fix a favorable currency
exchange rate for securities denominated in that currency which the Fund intends
to acquire. The purchase of a call option would entitle the Fund, in return for
the premium paid, to purchase specified currency at a specified price, upon
exercise of the option, during the option period. The 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,
the Fund would realize a loss on the purchase of the call option.
The Fund would normally buy 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 the 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. The 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 the Fund would realize a loss on the purchase of the put option.
If the 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 Investment Managers 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). The Fund will purchase
over-the-counter options only from dealers and institutions which the Managers
believe present a minimal credit risk.
For more information about currency futures and options, see "What Are the
Fund's Potential Risks?" below.
CONCENTRATION IN FINANCIAL SERVICES OBLIGATIONS. Under normal market conditions,
each Fund intends to 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 Managers
determine that the Fund should be in a temporary defensive position, it may have
less than 25% of its assets concentrated in the financial services industry. See
"What Are the Fund's' Potential Risks?" for more information.
OTHER INVESTMENT POLICIES OF THE FUND
Except as otherwise noted, the Fund may engage, without limit, in the following
investment transactions:
REPURCHASE AGREEMENTS. the Fund may engage in repurchase transactions in which
the Fund purchases a U.S. government security subject to resale to a bank or
dealer at an agreed-upon price and date. At no time will the Fund invest in
repurchase agreements for more than one year. 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 the 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 the Fund to experience a loss or delay
in the liquidation of the collateral securing the repurchase agreement. The Fund
might also incur disposition costs in liquidating the collateral. The Fund
intends to enter into repurchase agreements only with financial institutions
such as broker-dealers and banks which are deemed creditworthy by the Managers.
A repurchase agreement is deemed to be a loan by the Fund under the 1940 Act.
The U.S. government security subject to resale (the collateral) will be held on
behalf of the Fund by a custodian approved by the Board and will be held
pursuant to a written agreement. See "Investment Restrictions" in the SAI for
more information.
LOANS OF PORTFOLIO SECURITIES. Consistent with procedures approved by the Board
and subject to the following conditions, the Fund may lend its portfolio
securities to qualified securities dealers or other institutional investors,
provided that such loans do not exceed 30% of the value of the Fund's total
assets at the time of the most recent loan. The borrower must deposit with the
Fund's custodian bank, 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 Fund may engage
in security loan arrangements with the primary objective of increasing the
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, the 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 Fund 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 Fund)
or portfolio positions (for example, in respect of security positions already
held by the Fund). 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 Fund 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
Fund.
The Fund conducts currency exchange transactions either on a spot (i.e., cash)
basis at the rate prevailing in the currency market, or by 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.
NON-DIVERSIFICATION. Although the Fund is non-diversified series of the Trust
under the 1940 Act, no 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. See "What Are the Fund' Potential Risks?" below for more information.
ILLIQUID INVESTMENTS. The Fund may not invest more than 10% of its net assets,
at the time of purchase, in illiquid securities, including repurchase agreements
maturing in more than seven days, time deposits maturing in more than seven
days, over-the-counter options bought by the Fund and investments hedged by
over-the counter options. Illiquid securities are generally securities that
cannot be sold within seven days in the normal course of business at
approximately the amount at which the Fund has valued them.
PORTFOLIO TURNOVER. The High Income Fund's portfolio turnover rate for the
fiscal year ended April 30, 1994, the six-month period ended October 31, 1994
and the fiscal year ended October 31, 1995, was 0%, 1,588.38% (annualized) and
115.05%, respectively. 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 as well as the required annualization of
the calculation. Had the Fund's transactions in long-term securities taken place
earlier in the period ended October 31 or had the calculation not been
annualized, the portfolio turnover rate would have been significantly lower. The
high portfolio turnover rate for the fiscal year ended October 31, 1995 was due
to certain long-term securities held by the High Income Fund. 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
rate for the fiscal year ended October 31, 1995 than might otherwise be
expected. High portfolio turnover may increase transaction costs which must be
paid by the Fund.
Certain Fundamental Policies. The following are fundamental policies of each
Fund which cannot be changed, as to any of the Fund 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; the
Fund may incur interest charges in connection with such borrowings); (2) invest
more than 25% of its assets in the securities of issuers in any industry; (3)
lend more than 30% of its total assets, except to the extent that entering into
repurchase agreements or purchasing debt securities may be considered a loan;
and (4) invest more than 5% of its total assets in securities of issuers
(including predecessors) with less than three years' continuous operations.
Restrictions (2) and (4) do not apply to investments in U.S. government
securities.
The Fund 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
about the policies discussed herein, please see "How Does the Fund Invest Its
Assets?" and "Investment Restrictions" in the SAI.
WHAT ARE THE FUND'S POTENTIAL RISKS?
Generally. An investment in shares of the 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 the Fund. The value of the
investments held by the Fund and, therefore,its net asset value, generally will
vary inversely with changes in prevailing interest rates, although this variance
will depend upon the effective maturities of the instruments held. The Fund
intends 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 the 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 the Fund's instruments are denominated may appreciate
relative to other Major Currencies, including the U.S. dollar. If the currency
appreciation more than offsets any negative interest-rate differential, the 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 the 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 the Fund invests will more than offset
any such depreciation, in which case the 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 Fund, expressed in U.S. dollar terms,
will fluctuate and, unlike a money market fund, the Fund does not seek to
maintain a stable net asset value. In addition, the total return on the Fund may
be higher or lower than the total return on a U.S. dollar money market fund.
You, therefore, should not consider the Fund to be a substitute for a U.S.
dollar money market fund.
The value of the investments held by the Fund is calculated in U.S. dollars on
each day that the Exchange is open for business. As a result, to the extent that
the Fund's assets are invested in instruments denominated in currencies other
than the U.S. dollar and the currencies appreciate relative to the U.S. dollar,
the Fund's net asset value per share as expressed in U.S. dollars (and,
therefore, the value of your investment in the 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 the Fund invests.
The currency-related gains and losses experienced by the 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. Your gains or losses on shares of the 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 the 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 Fund may have a higher or lower yield than a portfolio which
invests strictly in U.S. dollar-denominated instruments.
Non-U.S. Securities. The Fund invests in 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 Investment Managers 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 the Fund, expropriation of assets, adverse diplomatic developments,
higher transaction and custody costs, delays attendant in settlement
procedures, and difficulties in enforcing contractual obligations.
NON-DIVERSIFICATION. As a non-diversified Fund, 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. The Fund, however, intends to comply with the
diversification requirements applicable to regulated investment companies under
the Code. As of the last day of each fiscal quarter, the 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, the Fund may not 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 Fund is not
fully diversified under the 1940 Act, it 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.
CURRENCY FUTURES AND OPTIONS TRANSACTIONS. Although currency futures and options
transactions are intended to enable the Fund 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
Managers correctly predict currency exchange rate movements, a hedge could be
unsuccessful if changes in the value of the 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 the Fund's futures and currency
positions may be caused by differences between the futures and currency markets.
The Managers will attempt to minimize these risks through careful selection and
monitoring of the 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 Fund will not use futures transactions for speculation. The 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 the Fund's outstanding futures positions and premiums paid for
outstanding options on futures would exceed 5% of the market value of the Fund's
total assets. These transactions involve brokerage costs, require margin
deposits and, in the case of contracts obligating the Fund to purchase
securities, require the Fund to segregate assets to cover such contracts.
These transactions also involve risks to the Fund of the possible loss of margin
deposits or collateral in the event of bankruptcy of a broker with whom the Fund
has an open position in a futures or options contract. The Fund's ability to
enter into certain futures, forward contracts and options is also limited by the
requirements of 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 SAI.
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. The 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."
The 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 the 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 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.
Concentration in Financial Services Obligations. 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 the 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.
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 increases 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 you own will generally increase. Conversely, if the securities owned by
the Fund decrease in value, the value of your shares will generally decrease. In
this way, you participate in changes in the value of the securities owned by the
Fund.
Under normal market conditions, the Fund invests at least a significant portion
of its assets in instruments denominated in foreign currencies. Therefore, your
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 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 the Fund will fluctuate. In addition, total return on the
Funds may be higher or lower than the total return on a U.S. dollar money market
fund. You, therefore, should not consider the Fund to be a substitute for a U.S.
dollar money market fund.
WHO MANAGES THE FUND?
THE BOARD. The Board oversees the management of the Fund and elects its
officers. The officers are responsible for the Fund's day-to-day operations.
Advisers is the investment manager of the Fund and other funds with aggregate
assets of over $81 billion. It is wholly owned by Resources, a publicly owned
company engaged in the financial services industry through its subsidiaries.
Charles B. Johnson and Rupert H. Johnson, Jr. are the principal shareholders
of Resources.
TICI, an indirect subsidiary of Templeton Worldwide, Inc., is the subadvisor for
the Fund. Templeton Worldwide, Inc., a direct, wholly-owned subsidiary of
Resources, operating through its subsidiaries, is a major investment management
organization with approximately $53 billion of assets currently under management
and a long history of global investing.
The team responsible for the day-to-day management of the Fund's portfolio
is: Mr. Neil S. Devlin since 1993 and Mr. Thomas J. Dickson since 1995.
Neil S. Devlin
Executive Vice President of TICI
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.
Thomas J. Dickson Portfolio Manager of TICI
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.
Donald P. Gould, a Portfolio Manager with Advisers, is founder and president of
the Trust. Mr. Gould supervises the implementation of the Fund's portfolio
investment policies. He 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 the Franklin Templeton Group in November 1993 upon its
acquisition of certain assets of Huntington Advisers, Inc. He has been in the
securities industry since 1981.
SERVICES PROVIDED BY ADVISERS AND TICI. ADVISERS manages the Fund's assets and
makes its investment decisions. Advisers also provide certain administrative
services and facilities for the Fund and performs similar services for other
funds. Please see "Investment Advisory and Other Services" and "Miscellaneous
Information" in the SAI for information on securities transactions and a summary
of the Fund's Code of Ethics. Under a sub-advisory agreement between Advisers
and TICI, TICI provides advice regarding the Fund's investment. TICI's
activities are subject to the Board's review and control as well as Advisers'
instruction and supervision.
BUSINESS MANAGER. The Business Manager is employed through subcontracts with
Advisers to provide various administrative services and facilities for the
Fund.
MANAGEMENT FEES. Under an agreement by Advisers to limit its fees, the High
Income Fund paid management fees and total operating expenses totaling 0.45% and
1.25% of the average monthly net assets of the Fund for the fiscal year ended
October 31, 1995. Absent this agreement, the management fees and total operating
expenses totaled 0.65% and 1.45% for the period. Advisers may end this
arrangement at any time, after October 31, 1996, upon notice to the Board.
Management fees paid by the Global Currency and Hard Currency Funds was 0.65% of
the average daily net assets of each Fund. Total expenses, including Advisers'
fees, totaled 0.99% of the average daily net assets of the Global Currency Fund
and 1.15% of the average daily net assets of the Hard Currency Fund. The
annualized management fees and total operating expenses for the six-month period
ended April 30, 1996 were:
TOTAL OPERATING FUND MANAGEMENT FEES*
EXPENSES*
Global Currency Fund 0.xx% 1.07%
Hard Currency Fund 0.xx% 1.21%
High Income Fund 0.xx%** 1.25%**
*Annualized.
**After management fee waiver of 0.10%. Absent this reduction, management fees
and total operating expenses were 0.65% and 1.35%.
Advisers' payment of sub-advisory fees to TICI and service fees to the Business
Manager has no effect on the Fund's payment of fees to Advisers.
PORTFOLIO TRANSACTIONS. The Managers try to obtain the best execution on all
transactions. If the Managers believe more than one broker or dealer can provide
the best execution, they may consider research and related services and the sale
of Fund shares when selecting a broker or dealer. Please see "How Does the Fund
Buy Securities For Its Portfolio?" in the SAI for more information.
The Fund has a distribution plan or "Rule 12b-1 Plan" under which it may
reimburse Distributors or others for activities primarily intended to sell
shares of the Fund. These expenses may include, among others, distribution or
service fees paid to Securities Dealers or others who have executed a servicing
agreement with the Fund, Distributors or its affiliates, printing prospectuses
and reports used for sales purposes, preparing and distributing sales literature
and advertisements, and a prorated portion of Distributors' overhead expenses.
Payments by the Fund under the plan may not exceed 0.45% per year of the Fund's
average daily net assets. Of this amount, the Fund may reimburse up to 0.25% to
Distributors or others and may reimburse an additional 0.45% to Distributors for
distribution expenses. All distribution expenses over this amount will be borne
by those who have incurred them. For more information, please see "The Fund's
Underwriter" in the SAI.
HOW DOES THE FUND MEASURE PERFORMANCE?
From time to time, the Fund advertises its performance. The more commonly used
measures of performance are total return, current yield and current distribution
rate. Performance figures are usually calculated using the maximum sales charge,
but certain figures may not include the sales charge.
Total return is the change in value of an investment over a given period. It
assumes any dividends and capital gains are reinvested. Current yield shows the
income per share earned by the Fund. The current distribution rate shows the
dividends or distributions paid to shareholders by the Fund. This rate is
usually computed by annualizing the dividends paid per share during a certain
period and dividing that amount by the current Offering Price. Unlike current
yield, the current distribution rate may include income distributions from
sources other than dividends and interest received by the Fund.
The Fund's investment results will vary. Performance figures are always based on
past performance and do not indicate future results. For a more detailed
description of how the Fund calculates its performance figures, please see "How
Does the Fund Measure Performance?" in the SAI.
HOW IS THE TRUST ORGANIZED?
Each is a nondiversified series of Franklin Templeton Global Trust (the
"Trust"), an open-end management investment company, commonly called a mutual
fund. The was organized as a Massachussetts business trust in November 1985 and
reorganized as a Delaware business trust in October 1996. The Trust is
registered with the SEC under the 1940 Act. Shares of each series of the Trust
have equal and exclusive rights to dividends and distributions declared by that
series and the net assets of the series in the event of liquidation or
dissolution. Shares of the Fund are considered Class I shares for redemption,
exchange and other purposes. In the future, additional series and classes of
shares may be offered.
The Trust has noncumulative voting rights. This gives holders of more than 50%
of the shares voting the ability to elect all of the members of the Board. If
this happens, holders of the remaining shares voting will not be able to elect
anyone to the Board.
The Trust does not intend to hold annual shareholder meetings. It may hold a
special meeting of a series, however, for matters requiring shareholder approval
under the 1940 Act. A meeting may also be called by the Board in its discretion
or by shareholders holding at least 10% of the outstanding shares. The 1940 Act
requires that we help you communicate with other shareholders in connection with
electing or removing members of the Board.
HOW TAXATION AFFECTS YOU AND THE FUND
The following discussion reflects some of the tax considerations that affect
mutual funds and their shareholders. For more information on tax matters
relating to the Fund and its shareholders, see "Additional Information on
Distributions and Taxes" in the SAI.
The Fund intends to continue to qualify 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 have 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.
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 that may cause 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 you of the tax status for federal income tax purposes of such dividends
and distributions.
If you are not deemed a U.S. person 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 you from the
Fund and the application of foreign tax laws to these distributions.
ABOUT YOUR ACCOUNT
HOW DO I BUY SHARES?
OPENING YOUR ACCOUNT
To open your account, contact your investment representative or complete and
sign the enclosed shareholder application and return it to the Fund with your
check.
MINIMUM
INVESTMENTS*
To Open Your Account...... $100
To Add to Your Account.... $ 25
*We may waive these minimums for retirement plans. We may also refuse any
order to buy shares. SALES CHARGE REDUCTIONS AND WAIVERS
If you qualify to buy shares under one of the sales charge reduction or
waiver categories described below, please include a written statement with
each purchase order explaining which privilege applies. If you don't include
this statement, we cannot guarantee that you will receive the sales charge
reduction or waiver.
QUANTITY DISCOUNTS. The sales charge you pay depends on the dollar amount you
invest, as shown in the table below.
TOTAL SALES CHARGE AMOUNT PAID TO
AS A PERCENTAGE OF DEALER AS A
AMOUNT OF PURCHASE OFFERING NET AMOUNT PERCENTAGE OF
AT OFFERING PRICE PRICE INVESTED OFFERING 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 None***
CUMULATIVE QUANTITY DISCOUNTS. To determine if you may pay a reduced sales
charge, the amount of your current purchase is added to 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. If you are the sole owner of a
company, you may also add any company accounts, including retirement plan
accounts. Companies with one or more retirement plans may add together the total
plan assets invested in the Franklin Templeton Funds to determine the sales
charge that applies.
LETTER OF INTENT. You may buy 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.
BY COMPLETING THE LETTER OF INTENT SECTION OF THE SHAREHOLDER APPLICATION, YOU
ACKNOWLEDGE AND AGREE TO THE FOLLOWING:
You authorize Distributors to reserve 5% of your total intended purchase in
Fund shares registered in your name until you fulfill your Letter.
You give Distributors a security interest in the reserved shares and appoint
Distributors as attorney-in-fact.
Distributors may sell any or all of the reserved shares to cover any
additional sales charge if you do not fulfill the terms of the Letter.
Although you may exchange your shares, you may not sell reserved shares
until you complete the Letter or pay the higher sales charge.
Your periodic statements will include the reserved shares in the total shares
you own. We will pay or reinvest dividend and capital gain distributions on the
reserved shares as you direct. Our policy of reserving shares does not apply to
certain retirement plans.
If you would like more information about the Letter of Intent privilege, please
see "How Do I Buy, Sell and Exchange Shares? - Letter of Intent" in the SAI or
call Shareholder Services.
GROUP PURCHASES. If you are a member of a qualified group, you may buy Fund
shares at a reduced sales charge that applies 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.
A qualified group is one that:
Was formed at least six months ago,
Has a purpose other than buying Fund shares at a discount,
Has more than 10 members, Can arrange for meetings
between our representatives and group members,
Agrees to include sales and other Franklin Templeton Fund materials
in publications and mailings to its members at reduced or no cost to
Distributors,
Agrees to arrange for payroll deduction or other bulk transmission of
investments to the Fund,
and Meets other uniform criteria that allow Distributors to achieve cost
savings in distributing shares.
SALES CHARGE WAIVERS. The Fund's sales charges (front-end and contingent
deferred) will not apply to certain purchases. For waiver categories 1, 2 or 3
below: (i) the distributions or payments must be reinvested within 365 days of
their payment date, and (ii) Class II distributions may be reinvested in either
Class I or Class II shares. Class I distributions may only be reinvested in
Class I shares.
The Fund's sales charges will not apply if you are buying shares with money from
the following sources:
1. Dividend and capital gain distributions from any Franklin Templeton Fund or a
REIT sponsored or advised by Franklin Properties, Inc.
2. Distributions from an existing retirement plan invested in the Franklin
Templeton Funds
3. Annuity payments received under either an annuity option or from death
benefit proceeds, only if the annuity contract offers as an investment option
the Franklin Valuemark Funds, Templeton Variable Annuity Fund, the Templeton
Variable Products Series Fund, or the Franklin Government Securities Trust. You
should contact your tax advisor for information on any tax consequences that may
apply.
4. Redemptions from any Franklin Templeton Fund if you:
Originally paid a sales charge on the shares, Reinvest the money
within 365 days of the redemption date, and Reinvest the money in the
SAME CLASS of shares.
An exchange is not considered a redemption for this privilege. The Contingent
Deferred Sales Charge will not be waived if the shares reinvested were subject
to a Contingent Deferred Sales Charge when sold. We will credit your account in
shares, at the current value, in proportion to the amount reinvested for any
Contingent Deferred Sales Charge paid in connection with the earlier redemption,
but a new Contingency Period will begin.
If you immediately placed your redemption proceeds in a Franklin Bank CD, you
may reinvest them as described above. The proceeds must be reinvested within 365
days from the date the CD matures, including any rollover.
5. Redemptions from other mutual funds
If you sold shares of the Fund that is not a Franklin Templeton Fund within the
past 60 days, you may invest the proceeds without any sales charge if (a) the
investment objectives were similar to the Fund's, and (b) your shares in that
fund were subject to any front-end or contingent deferred sales charges at the
time of purchase. You must provide a copy of the statement showing your
redemption.
The Fund's sales charges will also not apply to purchases by:
6. Trust companies and bank trust departments agreeing to invest in
Franklin Templeton Funds over a 13 month period at least $1 million of
assets held in a fiduciary, agency, advisory, custodial or similar
capacity and over which the trust companies and bank trust departments
or other plan fiduciaries or participants, in the case of certain
retirement plans, have full or shared investment discretion. We will
accept orders for these 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 the order.
7. Group annuity separate accounts offered to retirement plans
8. Retirement plans that (i) are sponsored by an employer with at least 100
employees, (ii) have plan assets of $1 million or more, or (iii) agree to
invest at least $500,000 in the Franklin Templeton Funds over a 13 month
period. Retirement plans that are not Qualified Retirement Plans or SEPS,
such as 403(b) or 457 plans, must also meet the requirements described
under "Group Purchases" above.
9. An Eligible Governmental Authority. Please consult your legal and
investment advisors to determine if an investment in the Fund is
permissible and suitable for you and the effect, if any, of payments by
the Fund on arbitrage rebate calculations.
10. Broker-dealers and qualified registered investment advisors who have
entered into a supplemental agreement with Distributors for their clients
who are participating in comprehensive fee programs, sometimes known as
wrap fee programs
11. Registered Securities Dealers and their affiliates, for their
investment accounts only
12. Current employees of Securities Dealers and their affiliates and
their family members, as allowed by the internal policies of their
employer
13. Officers, trustees, directors and full-time employees of the Franklin
Templeton Funds or the Franklin Templeton Group, and their family
members, consistent with our then-current policies
14. Investment companies exchanging shares or selling assets pursuant to
a merger, acquisition or exchange offer
15. Accounts managed by the Franklin Templeton Group
16. Certain unit investment trusts and their holders reinvesting
distributions from the trusts
HOW DO I BUY SHARES IN CONNECTION WITH RETIREMENT PLANS?
Your individual or employer-sponsored retirement plan may invest in the Fund.
Plan documents are required for all retirement plans. Trust Company can provide
the plan documents for you and serve as custodian or trustee.
Trust Company can provide you with brochures containing important information
about its plans. To establish a Trust Company retirement plan, you will need an
application other than the one included in this prospectus. For a retirement
plan brochure or application, please call our Retirement Plans Department.
Please consult your legal, tax or retirement plan specialist before choosing a
retirement plan. Your investment representative or advisor can help you make
investment decisions within your plan.
OTHER PAYMENTS TO SECURITIES DEALERS
The payments below apply to Securities Dealers who initiate and are responsible
for certain purchases made without a sales charge. A Securities Dealer may only
receive one of the following payments for each qualifying purchase. The payments
described below are paid by Distributors or one of its affiliates, at its own
expense, and not by the Fund or its shareholders.
1. Securities Dealers will receive up to 0.75% of the purchase price for
purchases of $1 million or more.
2. Securities Dealers may, in the sole discretion of Distributors, receive up to
1% of the purchase price for purchases made under waiver category 8 above.
3. Securities Dealers may receive up to 0.25% of the purchase price for
purchases made under waiver categories 6 and 9 above.
PLEASE SEE "HOW DO I BUY, SELL AND EXCHANGE SHARES - OTHER PAYMENTS TO
SECURITIES DEALERS" IN THE SAI FOR ANY BREAKPOINTS THAT MAY APPLY.
Securities Dealers may receive additional compensation from Distributors or an
affiliated company in connection with selling shares of the Franklin Templeton
Funds. Compensation may include financial assistance for conferences,
shareholder services, automation, sales or training programs, or promotional
activities. Registered representatives and their families may be paid for travel
expenses, including lodging, in connection with business meetings or seminars.
In some cases, this compensation may only be available to Securities Dealers
whose representatives have sold or are expected to sell significant amounts of
shares. Securities Dealers may not use sales of the Fund's shares to qualify for
this compensation if prohibited by the laws of any state or self-regulatory
agency, such as the NASD.
MAY I EXCHANGE SHARES FOR SHARES OF ANOTHER FUND?
We offer a wide variety of funds. If you would like, you can move your
investment from your Fund account to an existing or new account in another
Franklin Templeton Fund (an "exchange"). Because it is technically a sale and a
purchase of shares, an exchange is a taxable transaction.
Before making an exchange, please read the prospectus of the fund you are
interested in. This will help you learn about the fund and its rules and
requirements for exchanges. For example, some Franklin Templeton Funds do not
accept exchanges and others may have different investment minimums.
- --------------------------------------------------------------------------------
METHOD STEPS TO FOLLOW
- --------------------------------------------------------------------------------
BY MAIL 1. Send us written instructions signed by all
account owners
2. Include any outstanding share certificates for
the shares you're exchanging
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BY PHONE Call Shareholder Services or TeleFACTS(R)
If you do not want the ability to exchange by phone
to apply to your account, please let us know.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THROUGH YOUR DEALER Call your investment representative
- --------------------------------------------------------------------------------
Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to exchange shares.
WILL SALES CHARGES APPLY TO MY EXCHANGE?
You generally will not pay a front-end sales charge on exchanges. If you have
held your shares less than six months, however, you will pay the percentage
difference between the sales charge you previously paid and the applicable sales
charge of the new fund. If you have never paid a sales charge on your shares
because, for example, they have always been held in a money fund, you will pay
the Fund's applicable sales charge no matter how long you have held your shares.
These charges may not apply if you qualify to buy shares without a sales charge.
CONTINGENT DEFERRED SALES CHARGE. We will not impose a Contingent Deferred Sales
Charge when you exchange shares. Any shares subject to a Contingent Deferred
Sales Charge at the time of exchange, however, will remain so in the new fund.
For accounts with shares subject to a Contingent Deferred Sales Charge, shares
are exchanged into the new fund in the order they were purchased. If you
exchange shares into one of our money funds, the time your shares are held in
that fund will not count towards the completion of any Contingency Period. For
more information about the Contingent Deferred Sales Charge, please see that
section under "How Do I Sell Shares?"
EXCHANGE RESTRICTIONS
Please be aware that the following restrictions apply to exchanges:
You may only exchange shares within the SAME CLASS.
The accounts must be identically registered. You may exchange shares from
a Fund account requiring two or more signatures into an identically
registered money fund account requiring only one signature for all
transactions. PLEASE NOTIFY US IN WRITING IF YOU DO NOT WANT THIS OPTION
TO BE AVAILABLE ON YOUR ACCOUNT(S). Additional procedures may apply.
Please see "Transaction Procedures and Special Requirements."
Trust Company IRA or 403(b) retirement plan accounts may exchange shares as
described above. Restrictions may apply to other types of retirement plans.
Please contact our Retirement Plans Department for information on exchanges
within these plans.]
The fund you are exchanging into must be eligible for sale in your state. We
may modify or discontinue our exchange policy if we give you 60 days'
written notice.
Your exchange may be restricted or refused if you: (i) request an exchange
out of the Fund within two weeks of an earlier exchange request, (ii)
exchange shares out of the Fund more than twice in a calendar quarter, or
(iii) exchange shares equal to at least $5 million, or more than 1% of the
Fund's net assets. Shares under common ownership or control are combined for
these limits. If you exchange shares as described in this paragraph, you will
be considered a Market Timer. Each exchange by a Market Timer, if accepted,
will be charged $5.00. Some of our funds do not allow investments by Market
Timers.
Because excessive trading can hurt Fund performance and shareholders, we may
refuse any exchange purchase if (i) we believe the Fund would be harmed or
unable to invest effectively, or (ii) the Fund receives or anticipates
simultaneous orders that may significantly affect the Fund.
HOW DO I SELL SHARES?
You may sell (redeem) your shares at any time.
- --------------------------------------------------------------------------------
METHOD STEPS TO FOLLOW
- --------------------------------------------------------------------------------
BY MAIL 1. Send us written instructions signed by all
account owners
2. Include any outstanding share certificates for
the shares you are selling
3. Provide a signature guarantee if required
4. Corporate, partnership and trust accounts may
need to send additional documents. Accounts under
court jurisdiction may have additional requirements.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BY PHONE Call Shareholder Services
(Only available if you Telephone requests will be accepted:
have completed and sent
to us the telephone If the request is $50,000 or less. Institutional
redemption agreement accounts may exceed $50,000 by completing a
included with this separate agreement. Call Institutional Services
prospectus) to receive a copy.
If there are no share certificates issued for the
shares you want to sell or you have already
returned them to the Fund
Unless you are selling shares in a Trust
Company retirement plan account
Unless the address on your account was changed
by phone within the last 30 days
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THROUGH YOUR DEALER Call your investment representative
- --------------------------------------------------------------------------------
We will send your redemption check within seven days after we receive your
request in proper form. If you sell your shares by phone, the check may only be
made payable to all registered owners on the account and sent to the address of
record. We are not able to receive or pay out cash in the form of currency.
If you sell shares you just purchased with a check or draft, we may delay
sending you the proceeds for up to 15 days or more to allow the check or draft
to clear. A certified or cashier's check may clear in less time.
Under unusual circumstances, we may suspend redemptions or postpone payment for
more than seven days as permitted by federal securities law.
Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to sell shares.
TRUST COMPANY RETIREMENT PLAN ACCOUNTS
To comply with IRS regulations, you need to complete additional forms before
selling shares in a Trust Company retirement plan account. Tax penalties
generally apply to any distribution from these plans to a participant under age
59 1/2, unless the distribution meets an exception stated in the Code. To obtain
the necessary forms, please call our Retirement Plans Department.
CONTINGENT DEFERRED SALES CHARGE
If you did not pay a front-end sales charge because you invested $1 million or
more, a Contingent Deferred Sales Charge may apply if you sell all or a part of
your investment within the Contingency Period. The charge is 1% of the value of
the shares sold or the Net Asset Value at the time of purchase, whichever is
less. Distributors keeps the charge to recover payments made to Securities
Dealers.
We will first redeem shares not subject to the charge in the following order:
1) A calculated number of shares equal to the capital appreciation on shares
held less than the Contingency Period,
2) Shares purchased with reinvested dividends and capital gain distributions,
and
3) Shares held longer than the Contingency Period.
We then redeem shares subject to the charge in the order they were purchased.
Unless otherwise specified, when you request to sell a stated DOLLAR AMOUNT, we
will redeem additional shares to cover any Contingent Deferred Sales Charge. For
requests to sell a stated NUMBER OF SHARES, we will deduct the amount of the
Contingent Deferred Sales Charge, if any, from the sale proceeds.
WAIVERS. We waive the Contingent Deferred Sales Charge for:
Exchanges
Account fees
Sales of shares purchased pursuant to a sales charge waiver Redemptions by
the Fund when an account falls below the minimum required account size
Redemptions following the death of the shareholder or beneficial owner
Redemptions through a systematic withdrawal plan set up before February
1, 1995
Redemptions through a systematic withdrawal plan set up after February 1,
1995, up to 1% a month of an account's Net Asset Value (3% quarterly, 6%
semiannually or 12% annually). For example, if you maintain an annual balance
of $1 million, you can withdraw up to $120,000 annually through a systematic
withdrawal plan free of charge.
Distributions from individual retirement plan accounts 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
WHAT DISTRIBUTIONS MIGHT I RECEIVE FROM THE FUND?
The Fund declares dividends from its net investment income monthly to
shareholders of record on the first business day before the 15th of the month
and pays them on or about the last day of that month.Capital gains, if any, may
be distributed annually, usually in December
Dividend payments are not guaranteed, are subject to the Board's discretion and
may vary with each payment. THE FUND DOES NOT PAY "INTEREST" OR GUARANTEE ANY
FIXED RATE OF RETURN ON AN INVESTMENT IN ITS SHARES.
If you buy shares shortly before the record date, please keep in mind that any
distribution will lower the value of the Fund's shares by the amount of the
distribution.
DISTRIBUTION OPTIONS
You may receive your distributions from the Fund in any of these ways:
1. BUY ADDITIONAL SHARES OF THE FUND - You may buy additional shares of the 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. BUY SHARES OF OTHER FRANKLIN TEMPLETON FUNDS - You may direct your
distributions to buy 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 receive dividends, or both dividend
and capital gain distributions in cash. If you have the money sent to another
person or to a checking account, you may need a signature guarantee. If you send
the money to a checking account, please see "Electronic Fund Transfers" under
"Services to Help You Manage Your Account."
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 YOU DO NOT SELECT AN OPTION, WE WILL
AUTOMATICALLY REINVEST DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS IN THE FUND. For
Trust Company retirement plans, special forms are required to receive
distributions in cash. You may change your distribution option at any time by
notifying us by mail or phone. Please allow at least seven days prior to the
record date for us to process the new option.
TRANSACTION PROCEDURES AND SPECIAL REQUIREMENTS
HOW AND WHEN SHARES ARE PRICED
The Fund is open for business each day the Exchange is open. We determine the
Net Asset Value per share as of the scheduled close of the Exchange, generally
1:00 p.m. Pacific time. You can find the prior day's closing Net Asset Value and
Offering Price of the Fund in many newspapers.
To calculate Net Asset Value per share, the Fund's assets are valued and
totaled, liabilities are subtracted, and the balance, called net assets, is
divided by the number of shares outstanding. The Fund's assets are valued as
described under "How Are Fund Shares Valued?" in the SAI.
THE PRICE WE USE WHEN YOU BUY OR SELL SHARES
You buy shares at the Offering Price, unless you qualify to buy shares at a
reduced sales charge or with no sales charge. The Offering Price is based on the
Net Asset Value per share and includes the maximum sales charge. We calculate it
to two decimal places using standard rounding criteria. You sell shares at Net
Asset Value.
We will use the Net Asset Value next calculated after we receive your
transaction request in proper form. If you buy or sell shares through your
Securities Dealer, however, we will use the Net Asset Value next calculated
after your Securities Dealer receives your request, which is promptly
transmitted to the Fund. Your redemption proceeds will not earn interest between
the time we receive the order from your dealer and the time we receive any
required documents.
PROPER FORM
An order to buy shares is in proper form when we receive your signed shareholder
application and check. Written requests to sell or exchange shares are in proper
form when we receive written instructions signed by all registered owners, with
a signature guarantee if necessary. We must also receive any outstanding share
certificates for those shares.
WRITTEN INSTRUCTIONS
Written instructions must be signed by all registered owners. To avoid any delay
in processing your transaction, they should include:
Your name,
The Fund's name,
A description of the request,
For exchanges, the name of the fund you're exchanging into, Your account
number, The dollar amount or number of shares, and A telephone number where
we may reach you during the day, or in the
evening if preferred.
SIGNATURE GUARANTEES
For our mutual protection, we require a signature guarantee in the following
situations:
1) You wish to sell over $50,000 worth of shares,
2) You want the proceeds to be paid to someone other than the registered
owners,
3) The proceeds are not being sent to the address of record, preauthorized
bank account, or preauthorized brokerage firm account,
4) We receive instructions from an agent, not the registered owners,
5) We believe a signature guarantee would protect us against potential
claims based on the instructions received.
A signature guarantee verifies the authenticity of your signature and may be
obtained from certain banks, brokers or other eligible guarantors. YOU SHOULD
VERIFY THAT THE INSTITUTION IS AN ELIGIBLE GUARANTOR PRIOR TO SIGNING. A
NOTARIZED SIGNATURE IS NOT SUFFICIENT.
SHARE CERTIFICATES
We will credit your shares to your Fund account. We do not issue share
certificates unless you specifically request them. This eliminates the costly
problem of replacing lost, stolen or destroyed certificates. If a certificate is
lost, stolen or destroyed, you may have to pay an insurance premium of up to 2%
of the value of the certificate to replace it.
Any outstanding share certificates must be returned to the Fund if you want to
sell or exchange those shares or if you would like to start a systematic
withdrawal plan. The certificates should be properly endorsed. You can do this
either by signing the back of the certificate or by completing a share
assignment form. For your protection, you may prefer to complete a share
assignment form. In this case, you should send the certificate and assignment
form in separate envelopes.
TELEPHONE TRANSACTIONS
You may initiate many transactions by phone. Please refer to the sections of
this prospectus that discuss the transaction you would like to make or call
Shareholder Services.
We may only be liable for losses resulting from unauthorized telephone
transactions if we do not follow reasonable procedures designed to verify the
identity of the caller. When you call, we will request personal or other
identifying information, and will also record calls. For your protection, we may
delay a transaction or not implement one if we are not reasonably satisfied that
telephone instructions are genuine. If this occurs, we will not be liable for
any loss.
If our lines are busy or you are otherwise unable to reach us by phone, you may
wish to ask your investment representative for assistance or send written
instructions to us, as described elsewhere in this prospectus. If you are unable
to execute a transaction by telephone, we will not be liable for any loss.
TRUST COMPANY RETIREMENT PLAN ACCOUNTS. You may not sell shares or change
distribution options on Trust Company retirement plans by phone. While you may
exchange shares of Trust Company IRA and 403(b) retirement accounts by phone,
certain restrictions may be imposed on other retirement plans.
To obtain any required forms or more information about distribution or transfer
procedures, please call our Retirement Plans Department.]
ACCOUNT REGISTRATIONS AND REQUIRED DOCUMENTS
When you open an account, you need to tell us how you want your shares
registered. How you register your account will affect your ownership rights and
ability to make certain transactions. If you have questions about how to
register your account, you should consult your investment representative or
legal advisor. Please keep the following information in mind when registering
your account.
JOINT OWNERSHIP. If you open an account with two or more owners, we register the
account as "joint tenants with rights of survivorship" unless you tell us
otherwise. An account registered as "joint tenants with rights of survivorship"
is shown as "Jt Ten" on your account statement. For any account with two or more
owners, ALL owners must sign instructions to process transactions and changes to
the account. Even if the law in your state says otherwise, you will not be able
to change owners on the account unless all owners agree in writing. If you would
like another person or owner to sign for you, please send us a current power of
attorney.
GIFTS AND TRANSFERS TO MINORS. You may set up a custodial account for a minor
under your state's Uniform Gifts/Transfers to Minors Act. Other than this form
of registration, a minor may not be named as an account owner.
TRUSTS. If you register your account as a trust, you should have a valid written
trust document to avoid future disputes or possible court action over who owns
the account.
REQUIRED DOCUMENTS. For corporate, partnership and trust accounts, please send
us the following documents when you open your account. This will help avoid
delays in processing your transactions while we verify who may sign on the
account.
- --------------------------------------------------------------------------------
TYPE OF ACCOUNT DOCUMENTS REQUIRED
- --------------------------------------------------------------------------------
CORPORATION Corporate Resolution
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PARTNERSHIP 1. The pages from the partnership agreement that identify
the general partners, or
2. A certification for a partnership agreement
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST 1. The pages from the trust document that identify the
trustees, or
2. A certification for trust
- --------------------------------------------------------------------------------
STREET OR NOMINEE ACCOUNTS. If you have Fund shares held in a "street" or
"nominee" name account with your Securities Dealer, you may transfer the shares
to the street or nominee name account of another Securities Dealer. Both dealers
must have an agreement with Distributors or we will not process the transfer.
Contact your Securities Dealer to initiate the transfer. We will process the
transfer after we receive authorization in proper form from your delivering
Securities Dealer. Accounts may be transferred electronically through the NSCC.
For accounts registered in street or nominee name, we may take instructions
directly from the Securities Dealer or your nominee.
ELECTRONIC INSTRUCTIONS. If there is a Securities Dealer or other representative
of record on your account, we are authorized to use and execute electronic
instructions. We can accept electronic instructions directly from your dealer or
representative without further inquiry. Electronic instructions may be processed
through the services of the NSCC, which currently include the NSCC's
"Networking," "Fund/SERV," and "ACATS" systems, or through Franklin/Templeton's
PCTrades II(TM) System.
TAX IDENTIFICATION NUMBER
For tax reasons, we must have your correct Social Security or tax identification
number on a signed shareholder application or applicable tax form. Federal law
requires us to withhold 31% of your taxable distributions and sale proceeds if
(i) you have not furnished a certified correct taxpayer identification number,
(ii) you have not certified that withholding does not apply, (iii) the IRS or a
Securities Dealer notifies the Fund that the number you gave us is incorrect, or
(iv) you are subject to backup withholding.
We may refuse to open an account if you fail to provide the required tax
identification number and certifications. We may also close your account if the
IRS notifies us that your tax identification number is incorrect. If you
complete an "awaiting TIN" certification, we must receive a correct tax
identification number within 60 days of your initial purchase to keep your
account open.
KEEPING YOUR ACCOUNT OPEN
Due to the relatively high cost of maintaining a small account, we may close
your account if the value of your shares is less than $50. We will only do this
if the value of your account fell below this amount because you voluntarily sold
your shares and your account has been inactive (except for the reinvestment of
distributions) for at least six months. Before we close your account, we will
notify you and give you 30 days to increase the value of your account to $100.
SERVICES TO HELP YOU MANAGE YOUR ACCOUNT
AUTOMATIC INVESTMENT PLAN
Our automatic investment plan offers a convenient way to invest in the Fund.
Under the plan, you can have money transferred automatically from your checking
account to the Fund each month to buy additional shares. If you are interested
in this program, please refer to the automatic investment plan application
included with this prospectus or contact your investment representative. 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
discontinue the program at any time by notifying Investor Services by mail or
phone.
AUTOMATIC PAYROLL DEDUCTION
You may have money transferred from your paycheck to the Fund to buy additional
shares. Your investments will continue automatically until you instruct the Fund
and your employer to discontinue the plan. To process your investment, we must
receive both the check and payroll deduction information in required form. Due
to different procedures used by employers to handle payroll deductions, there
may be a delay between the time of the payroll deduction and the time we receive
the money.
SYSTEMATIC WITHDRAWAL PLAN
Our systematic withdrawal plan allows you to sell your shares and receive
regular payments from your account on a monthly, quarterly, semiannual or annual
basis. The value of your account must be at least $5,000 and the minimum payment
amount for each withdrawal must be at least $50. 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 direct your payments to buy the same class of shares of another
Franklin Templeton Fund or 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.
You will generally receive your payment by the fifth business day of the month
in which a payment is scheduled. When you sell your shares under a systematic
withdrawal plan, it is a taxable transaction.
Because of the Fund's front-end sales charge, you may not want to set up a
systematic withdrawal plan if you plan to buy shares on a regular basis. Shares
sold 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 discontinue a systematic withdrawal plan, change the amount and schedule
of withdrawal payments, or suspend one payment by notifying us in writing at
least seven business days before the end of the month preceding a scheduled
payment. Please see "How Do I Buy, Sell and Exchange Shares? Systematic
Withdrawal Plan" in the SAI for more information.
ELECTRONIC FUND TRANSFERS
You may choose to have dividend and capital gain distributions from the Fund or
payments under a systematic withdrawal plan sent directly to a checking account.
If the checking account is with 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. We will send any payments made during that time to the
address of record on your account.
TELEFACTS(R)
From a touch-tone phone, you may call our TeleFACTS system (day or night) at
1-800/247-1753 to:
obtain information about your account;
obtain price and performance information about any Franklin Templeton Fund;
exchange shares between identically registered Franklin accounts; and
request duplicate statements and deposit slips.
You will need the Fund's code number to use TeleFACTS. The Funds'codes are 211
for the Global Currency Fund, 213 for the High Income Fund, and 212 for the Hard
Currency Fund.
STATEMENTS AND REPORTS TO SHAREHOLDERS
We will send you the following statements and reports on a regular basis:
Confirmation and account statements reflecting transactions in your account,
including additional purchases and dividend reinvestments. PLEASE VERIFY THE
ACCURACY OF YOUR STATEMENTS WHEN YOU RECEIVE THEM.
Financial reports of the Fund will be sent every six months. To reduce Fund
expenses, we attempt to identify related shareholders within a household and
send only one copy of a report. Call Fund Information if you would like an
additional free copy of the Fund's financial reports or an interim quarterly
report.
INSTITUTIONAL ACCOUNTS
Additional methods of buying, selling or exchanging shares of the Fund may be
available to institutional accounts. For further information, call Institutional
Services.
AVAILABILITY OF THESE SERVICES
The services above are available to most shareholders. If, however, your shares
are held by a financial institution, in a street name account, or networked
through the NSCC, the Fund may not be able to offer these services directly to
you. Please contact your investment representative.
WHAT IF I HAVE QUESTIONS ABOUT MY ACCOUNT?
If you have any questions about your account, you may write to Investor Services
at 777 Mariners Island Blvd., P.O. Box 7777, San Mateo, California 94403-7777.
The Fund, Distributors and Advisers are also located at this address. You may
also contact us by phone at one of the numbers listed below.
HOURS OF OPERATION
(PACIFIC TIME)
DEPARTMENT NAME TELEPHONE NO. (MONDAY THROUGH FRIDAY)
Shareholder Services 1-800/632-2301 5:30 a.m. to 5:00 p.m.
Dealer Services 1-800/524-4040 5:30 a.m. to 5:00 p.m.
Fund Information 1-800/DIAL BEN 5:30 a.m. to 8:00 p.m.
(1-800/342-5236) 6:30 a.m. to 2:30 p.m.
(Saturday)
Retirement Plans 1-800/527-2020 5:30 a.m. to 5:00 p.m.
Institutional Services 1-800/321-8563 6:00 a.m. to 5:00 p.m.
TDD (hearing impaired) 1-800/851-0637 5:30 a.m. to 5:00 p.m.
Your phone call may be monitored or recorded to ensure we provide you with high
quality service. You will hear a regular beeping tone if your call is being
recorded.
GLOSSARY
USEFUL TERMS AND DEFINITIONS
1940 ACT - Investment Company Act of 1940, as amended
ADVISERS - Franklin Advisers, Inc., the Fund's investment manager
BOARD - The Board of Trustees of the Trust
BUSINESS MANAGER - TEMPLETON GLOBAL INVESTORS, INC.
CD - Certificate of deposit
CLASS I AND CLASS II - Certain funds in the Franklin Templeton Funds offer two
classes of shares, designated "Class I" and "Class II." The two classes have
proportionate interests in the same portfolio of investment securities. They
differ, however, primarily in their sales charge structures and Rule 12b-1
plans. Because the Fund's sales charge structure and Rule 12b-1 plan are similar
to those of Class I shares, shares of the Fund are considered Class I shares for
redemption, exchange and other purposes.
CODE - Internal Revenue Code of 1986, as amended
CONTINGENCY PERIOD - The 12 month period during which a Contingent Deferred
Sales Charge may apply. Regardless of when during the month you purchased
shares, they will age one month on the last day of that month and each following
month.
CONTINGENT DEFERRED SALES CHARGE (CDSC) - A sales charge of 1% that may apply if
you sell your shares within the Contingency Period.
DISTRIBUTORS - Franklin/Templeton Distributors, Inc., the Fund's principal
underwriter. The SAI lists the officers and Board members who are affiliated
with Distributors. See "Officers and Trustees."
ELIGIBLE GOVERNMENTAL AUTHORITY - Any state or local government or any
instrumentality, department, authority or agency thereof that has determined the
Fund is a legally permissible investment and that can only buy shares of the
Fund without paying sales charges.
EXCHANGE - New York Stock Exchange
FRANKLIN FUNDS - The mutual funds in the Franklin Group of Funds(R) except
Franklin Valuemark Funds and the Franklin Government Securities Trust
FRANKLIN TEMPLETON FUNDS - The Franklin Funds and the Templeton Funds
FRANKLIN TEMPLETON GROUP - Franklin Resources, Inc., a publicly owned holding
company, and its various subsidiaries
INVESTOR SERVICES - Franklin/Templeton Investor Services, Inc., the Fund's
shareholder servicing and transfer agent
IRS - Internal Revenue Service
LETTER - Letter of Intent
MANAGERS - Franklin Advisers, Inc., the Fund's investment manager, and Templeton
Investment Counsel, Inc., the Fund's subadvisor.
MARKET TIMER(S) - Market Timers generally include market timing or allocation
services, accounts administered so as to buy, sell or exchange shares based on
predetermined market indicators, or any person or group whose transactions seem
to follow a timing pattern.
NASD - National Association of Securities Dealers, Inc.
NET ASSET VALUE (NAV) - The value of a mutual fund is determined by deducting
the fund's liabilities from the total assets of the portfolio. The net asset
value per share is determined by dividing the net asset value of the fund by the
number of shares outstanding.
NSCC - National Securities Clearing Corporation
OFFERING PRICE - The public offering price is based on the Net Asset Value per
share and includes the 3.0% sales charge.
QUALIFIED RETIREMENT PLAN(S) - An employer sponsored pension or profit-sharing
plan that qualifies under section 401 of the Code. Examples include 401(k),
money purchase pension, profit sharing and defined benefit plans.
REIT - Real Estate Investment Trust
RESOURCES - Franklin Resources, Inc.
SAI - Statement of Additional Information
SEC - U.S. Securities and Exchange Commission
SECURITIES DEALER - A financial institution that, either directly or through
affiliates, has an agreement with Distributors to handle customer orders and
accounts with the Fund. This reference is for convenience only and does not
indicate a legal conclusion of capacity.
SEP - An employer sponsored simplified employee pension plan established under
section 408(k) of the Code
TELEFACTS(R) - Franklin Templeton's automated customer servicing system
TEMPLETON FUNDS - 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
TICI - Templeton Investment Counsel, Inc., the Fund's subadvisor.
TRUST COMPANY - Franklin Templeton Trust Company. Trust Company is an
affiliate of Distributors and both are wholly owned subsidiaries of Resources.
U.S. - United States
WE/OUR/US - Unless the context indicates a different meaning, these terms refer
to the Fund and/or Investor Services, Distributors, or another wholly owned
subsidiary of Resources.
PROSPECTUS & APPLICATION
FRANKLIN TEMPLETON GERMAN GOVERNMENT BOND FUND
FRANKLIN TEMPLETON GLOBAL TRUST
MARCH 1, 1996, AS AMENDED OCTOBER 1, 1996
INVESTMENT STRATEGY: GLOBAL INCOME
This prospectus describes the Franklin Templeton German Government Bond Fund
(the "Fund"). It contains information you should know before investing in the
Fund. Please keep it for future reference.
The Fund's SAI, dated March 1, 1996, as amended October 1, 1996, and as may be
amended from time to time, includes more information about the Fund's procedures
and policies. It has been filed with the SEC and is incorporated by reference
into this prospectus. For a free copy or a larger print version of this
prospectus, call 1-800/DIAL BEN or write the Fund at the address shown.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY OF THE U.S.
GOVERNMENT. SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SEC OR ANY STATE SECURITIES COMMISSION NOR HAS THE SEC 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 DISTRIBUTORS.
The Fund may invest in both domestic and foreign securities.
FRANKLIN TEMPLETON GERMAN GOVERNMENT FUND
March 1, 1996, as amended October 1, 1996
777 Mariners Island Blvd., P.O. Box 7777
San Mateo, CA 94403-7777 1-800/DIAL BEN
TABLE OF CONTENTS
ABOUT THE FUND
Expense Summary..........................................
Financial Highlights.....................................
How Does the Fund Invest Its Assets?.....................
What Are the Fund's Potential Risks?.....................
Who Manages the Fund?....................................
How Does the Fund Measure Performance?...................
How Is the Trust Organized?.......................
How Taxation Affects You and the Fund....................
ABOUT YOUR ACCOUNT
How Do I Buy Shares?.....................................
May I Exchange Shares for Shares of Another Fund?........
How Do I Sell Shares?....................................
What Distributions Might I Receive From the Fund?........
Transaction Procedures and Special Requirements..........
Services to Help You Manage Your Account.................
GLOSSARY
Useful Terms and Definitions.............................
When reading this prospectus, you will see certain terms in capital letters.
This means the term is explained in our glossary section.
ABOUT THE FUND
EXPENSE SUMMARY
This table is designed to help you understand the costs of investing in the
Fund. It is based on the Fund's historical expenses for the fiscal year ended
October 31, 1995. Your actual expenses may vary.
A. SHAREHOLDER TRANSACTION EXPENSES+
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)................... 3.00%
Deferred Sales Charge................................... None++
Exchange Fee (per transaction).......................... $5.00*
B. ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees.......................................... 0.51%**
Rule 12b-1 Fees.......................................... 0.19%***
Other Expenses:
Other Expenses.......................................... 0.55%
-----
Total Fund Operating Expenses............................ 1.25%**
=======
C. EXAMPLE
Assume the Fund's annual return is 5% and its operating expenses are as
described above. For each $1,000 investment, you would pay the following
projected expenses if you sold your shares after the number of years
shown.
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
$42* $68 $97 $177
THIS IS JUST AN EXAMPLE. IT DOES NOT REPRESENT PAST OR FUTURE EXPENSES OR
RETURNS. ACTUAL EXPENSES AND RETURNS MAY BE MORE OR LESS THAN THOSE
SHOWN. The Fund pays its operating expenses. The effects of these
expenses are reflected in its Net Asset Value or dividends and are not
directly charged to your account.
+If your transaction is processed through your Securities Dealer, you may be
charged a fee by your Securities Dealer for this service.
++There is no front-end sales charge if you invest $1 million or more. A
Contingent Deferred Sales Charge of 1% may apply, however, if you sell the
shares within one year. See "How Do I Sell Shares? - Contingent Deferred Sales
Charge" for details.
*$5.00 fee is only for Market Timers. We process all other exchanges without a
fee.
**Advisers has agreed in advance to limit its management fee, so that the Fund's
aggregate annual operating expenses do not exceed 1.25% of the Fund's average
net assets for the current fiscal year. Absent this reduction, management fees
and total operating expenses would have represented 0.55% and 1.29%,
respectively, of the Fund's average net assets.
***These fees may not exceed 0.25%. 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 charge permitted under the
NASD's rules.
****Assumes a Contingent Deferred Sales Charge will not apply.
FINANCIAL HIGHLIGHTS
This table summarizes the Fund's financial history. 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 in the Trust's Annual Report to Shareholders for the year ended
October 31, 1995. The information for the six months ended April 30, 1996 is
unaudited. The information for the previous fiscal year of the Fund was audited
by other independent auditors whose opinions are not included herein. The Annual
Report to Shareholders also includes more information about the Fund's
performance. For a free copy, please call Fund Information.
<TABLE>
<CAPTION>
For the Year Ended
---------------- --------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE+ 19965 19954 19943 19942 19931
---------------- --------------- --------------- -------------- ---------------
Net Asset Value at Beginning of year $14.31 $13.26 $12.29 $13.08 $12.50
---------------- --------------- --------------- -------------- ---------------
Net Investment Income 0.39 1.53 .41 .78 .27
Net Realized & Unrealized Gain (Loss) (0.98) 0.71 .92 (.72) .56
================ =============== =============== ============== ===============
Total From Investment Operations (0.59) 2.24 1.33 .06 .83
================ =============== =============== ============== ===============
Distributions From Net Investment Income (0.75) (1.19) (.36) (.39) (.25)
Distributions from Capital Gains (0.03) _ _ (.06) _
---------------- --------------- --------------- -------------- ---------------
Distributions From Return of Capital _ _ _ (.40) _
Total Distributions (0.78) (1.19) (.36) (.85) (.25)
================ =============== =============== ============== ===============
Net Asset Value at End of Year $12.94 $14.31 $13.26 $12.29 $13.08
================ =============== =============== ============== ===============
Tota Return++ (4.33)% 18.28% 10.92% .64% 6.15%
RATIOS/SUPPLEMENTAL DATA
Net Assets at End of Year (in 000's) $21,530 $24,113 $13,236 $13,341 $10,738
Ratio of Expenses to Average Net Assets* * 0.96%* 1.25% 1.04%* 1.00% .87%*
Ratio of Net Investment Income to Average 5.45%* 5.17% 6.37%* 4.74% 6.06%*
Net Assets
Portfolio Turnover Rate 19.01%* 67.77% 301.60%* 185.66% 190.89%*
</TABLE>
1 For the period December 31, 1992 (effective date of registration) to April 30,
1993.
2 On November 12, 1993, the investment advisor changed to Advisers.
3 Six month period ended October 31, 1994, reflecting a change in fiscal year.
4 For the year ended October 31, 1995.
5 Six months ended April 30, 1996.
+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 front-end sales charge and assumes
reinvestment of dividends and capital gains, if any, at net asset value.
*Annualized
**During the periods indicated, the Manager agreed in advance to waive a portion
of its management fees and make certain payments to reduce expenses of the Fund.
Had such action not been taken, the ratios of expenses to average net assets
would have been as follows:
NET ASSETS
1993.................................................. 1.73%*
1994.................................................. 1.83
19943................................................. 1.77
19954................................................. 1.29
HOW DOES THE FUND INVEST ITS ASSETS?
THE FUND'S INVESTMENT OBJECTIVE
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 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 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 objective is a fundamental policy of the Fund and may not be changed without
shareholder approval. Of course, there is no assurance that the Fund's objective
will be achieved or that any of the potential benefits listed above will be
realized.
TYPES OF SECURITIES THE FUND MAY INVEST IN
The Fund will attempt to invest 100% of its net assets, and will invest at least
65% of the Fund's net 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 the 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 Managers to be of
comparable quality 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) that are rated, at the
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 Investment
Managers to be of comparable quality to triple A rated instruments; 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 Investment Managers 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
Managers. 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. You 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 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 Investment Managers 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 "What Are the Fund's Potential Risks?"
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 Managers invest the Fund's assets based on 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 Managers 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.
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
Investment Managers 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 agency
& government guaranteed............ 132.2 2,176.0
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 obligations that the Managers 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
comprises.
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 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 (in the case of a call option) or sell (in the case of a put
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 Investment Managers
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.
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 a
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 that 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 Managers 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 the 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.
OTHER INVESTMENT POLICIES OF THE FUND
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 331/3% 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 time deposits of commercial banks having short-term deposit
ratings of A-1+ (by S&P) and/or P-1 (by Moody's.
ILLIQUID INVESTMENTS. It is the policy of the Fund not to invest more than 10%
of its net assets, at the time of purchase, in illiquid securities, including
repurchase agreements maturing in more than seven days, time deposits maturing
in more than seven days, over-the-counter options bought by the Fund and
investments hedged by over-the counter options. Illiquid securities are
generally securities that cannot be sold within seven days in the normal course
of business at approximately the amount at which the Fund has valued them.
PORTFOLIO TURNOVER. The Fund's portfolio turnover rate 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 was 67.77%, 301.60% and 185.66%, 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 you. (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 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.
PERCENTAGE RESTRICTIONS. If a percentage restriction noted above is adhered to
at the time of investment, a later increase or decrease in the percentage
resulting from a change in value of portfolio securities or the amount of net
assets will not be considered a violation of any of the foregoing policies.
OTHER POLICIES AND RESTRICTIONS. The Fund has a number of additional investment
restrictions that limit its activities to some extent. Some of these
restrictions may only be changed with shareholder approval. For a list of these
restrictions and more information about the Fund's investment policies, please
see "How Does the Fund Invest Its Assets?" and "Investment Restrictions" in the
SAI.
WHAT ARE THE FUND'S POTENTIAL RISKS?
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, your 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 affect the value of the
Fund's portfolio and thus its share price. Increased rates of interest which
frequently accompany higher inflation and/or a growing economy are likely to
have a negative effect 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.
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, you 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 Managers 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. 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 that diversifies its currency
risk across multiple currencies and/or regularly hedges its currency risk. You
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 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 Investment Managers, 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.
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 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 Investment Managers 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.
FORWARDS, FUTURES AND OPTIONS
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 these instruments. The
risks inherent in the use of forwards, futures and options include: (1)
dependence on the ability of the Fund's Investment Managers 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) 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 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
that may affect the amount, timing and character of distributions to
shareholders. Transactions in options, futures and options on futures are
generally considered "derivative securities." These investments and transactions
are discussed further in the tax section included in this Prospectus and in the
SAI.
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 that 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, which means there are no restrictions
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. These 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 no more than 10% of the outstanding voting securities of any
one issuer. The Managers 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.
WHO MANAGES THE FUND?
THE BOARD. The Board oversees the management of the Fund and elects its
officers. The officers are responsible for the Fund's day-to-day operations.
Advisers is the investment manager of the Fund and other funds with aggregate
assets of over $81 billion. It is wholly owned by Resources, a publicly owned
company engaged in the financial services industry through its subsidiaries.
Charles B. Johnson and Rupert H. Johnson, Jr. are the principal shareholders of
Resources. TICI, an indirect subsidiary of Templeton Worldwide, Inc., is the
subadvisor for the Fund. Templeton Worldwide, Inc., a direct, wholly-owned
subsidiary of Resources, operating through its subsidiaries, is a major
investment management organization with approximately $53 billion of assets
currently under management and a long history of global investing.
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
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 of TICI
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, a Portfolio Manager with Advisers, is founder and president of
the Trust. Mr. Gould supervises the implementation of the Funds' portfolio
investment policies. He 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 the Franklin Templeton Group in November 1993 upon its
acquisition of certain assets of Huntington Advisers, Inc. He has been in the
securities industry since 1981.
SERVICES PROVIDED BY ADVISERS AND TICI. ADVISERS manages the Fund's assets and
makes its investment decisions. Advisers also provide certain administrative
services and facilities for the Fund and performs similar services for other
funds. Please see "Investment Advisory and Other Services" and "Miscellaneous
Information" in the SAI for information on securities transactions and a summary
of the Fund's Code of Ethics. Under a sub-advisory agreement between Advisers
and TICI, TICI provides advice regarding the Fund's investment. TICI's
activities are subject to the Board's review and control as well as Advisers'
instruction and supervision.
BUSINESS MANAGER. The Business Manager is employed through subcontracts with
Advisers to provide various administrative services and facilities for the Fund.
MANAGEMENT FEES. Under an agreement by Advisers to limit its fees, the Fund paid
management fees and total operating expenses totaling 0.55% and 1.29% of the
average monthly net assets of the Fund for the fiscal year ended October 31,
1995. Absent this agreement, the management fees and total operating expenses
totaled 0.51% and 1.29% for the period. Advisers may end this arrangement at any
time, after October 31, 1996, upon notice to the Board. The annualized
management fees and total operating expenses for the six-month period ended
April 30, 1996 were 0.xx% and 0.87%, respectively.
Advisers' payment of sub-advisory fees to TICI and service fees to the Business
Manager has no effect on the Fund's payment of fees to Advisers.
PORTFOLIO TRANSACTIONS. The Managers try to obtain the best execution on all
transactions. If the Managers believe more than one broker or dealer can provide
the best execution, they may consider research and related services and the sale
of Fund shares when selecting a broker or dealer. Please see "How Does the Fund
Buy Securities For Its Portfolio?" in the SAI for more information.
THE FUND'S RULE 12B-1 PLAN
The Fund has a distribution plan or "Rule 12b-1 Plan" under which it may
reimburse Distributors or others for activities primarily intended to sell
shares of the Fund. These expenses may include, among others, distribution or
service fees paid to Securities Dealers or others who have executed a servicing
agreement with the Fund, Distributors or its affiliates, printing prospectuses
and reports used for sales purposes, preparing and distributing sales literature
and advertisements, and a prorated portion of Distributors' overhead expenses.
Payments by the Fund under the plan may not exceed 0.25% per year of the Fund's
average daily net assets. All distribution expenses over this amount will be
borne by those who have incurred them. For more information, please see "The
Fund's Underwriter" in the SAI.
HOW DOES THE FUND MEASURE PERFORMANCE?
From time to time, the Fund advertises its performance. The more commonly used
measures of performance are total return, current yield and current distribution
rate. Performance figures are usually calculated using the maximum sales charge,
but certain figures may not include the sales charge.
Total return is the change in value of an investment over a given period. It
assumes any dividends and capital gains are reinvested. Current yield shows the
income per share earned by the Fund. The current distribution rate shows the
dividends or distributions paid to shareholders by the Fund. This rate is
usually computed by annualizing the dividends paid per share during a certain
period and dividing that amount by the current Offering Price. Unlike current
yield, the current distribution rate may include income distributions from
sources other than dividends and interest received by the Fund.
The Fund's investment results will vary. Performance figures are always based on
past performance and do not indicate future results. For a more detailed
description of how the Fund calculates its performance figures, please see "How
Does the Fund Measure Performance?" in the SAI.
HOW IS THE TRUST ORGANIZED?
The Fund is a nondiversified series of Franklin Templeton Global Trust (the
"Trust"), an open-end management investment company, commonly called a mutual
fund. It was organized as a Massachussetts business trust in November 1985 and
reorganized as a Delaware business trust in October 1996.The Trust is registered
with the SEC under the 1940 Act. Shares of each series of the Trust have equal
and exclusive rights to dividends and distributions declared by that series and
the net assets of the series in the event of liquidation or dissolution. Shares
of the Fund are considered Class I shares for redemption, exchange and other
purposes. In the future, additional series and classes of shares may be offered.
The Trust has noncumulative voting rights. This gives holders of more than 50%
of the shares voting the ability to elect all of the members of the Board. If
this happens, holders of the remaining shares voting will not be able to elect
anyone to the Board.
The Trust does not intend to hold annual shareholder meetings. It may hold a
special meeting of a series, however, for matters requiring shareholder approval
under the 1940 Act. A meeting may also be called by the Board in its discretion
or by shareholders holding at least 10% of the outstanding shares. The 1940 Act
requires that we help you communicate with other shareholders in connection with
electing or removing members of the Board.
HOW TAXATION AFFECTS YOU AND THE FUND
The following discussion reflects some of the tax considerations that affect
mutual funds and their shareholders. For more information on tax matters
relating to the Fund and its shareholders, see "Additional Information on
Distributions and Taxes" in the SAI.
The Fund intends to continue to qualify 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 have 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.
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 that may cause 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 you of the tax status for federal income tax purposes of such dividends
and distributions.
If you are not deemed a U.S. person 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 you from the
Fund and the application of foreign tax laws to these distributions.
ABOUT YOUR ACCOUNT
HOW DO I BUY SHARES?
OPENING YOUR ACCOUNT
To open your account, contact your investment representative or complete and
sign the enclosed shareholder application and return it to the Fund with your
check.
MINIMUM
INVESTMENTS*
To Open Your Account...... $100
To Add to Your Account.... $ 25
*We may waive these minimums for retirement plans. We may also refuse any order
to buy shares. SALES CHARGE REDUCTIONS AND WAIVERS
If you qualify to buy shares under one of the sales charge reduction or
waiver categories described below, please include a written statement with
each purchase order explaining which privilege applies. If you don't
include this statement, we cannot guarantee that you will receive the
sales charge reduction or waiver.
QUANTITY DISCOUNTS. The sales charge you pay depends on the dollar amount you
invest, as shown in the table below.
TOTAL SALES CHARGE AMOUNT PAID TO
AS A PERCENTAGE OF DEALER AS A
AMOUNT OF PURCHASE OFFERING NET AMOUNT PERCENTAGE OF
AT OFFERING PRICE PRICE INVESTED OFFERING 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 None***
CUMULATIVE QUANTITY DISCOUNTS. To determine if you may pay a reduced sales
charge, the amount of your current purchase is added to 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. If you are the sole owner of a
company, you may also add any company accounts, including retirement plan
accounts. Companies with one or more retirement plans may add together the total
plan assets invested in the Franklin Templeton Funds to determine the sales
charge that applies.
LETTER OF INTENT. You may buy 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.
BY COMPLETING THE LETTER OF INTENT SECTION OF THE SHAREHOLDER APPLICATION, YOU
ACKNOWLEDGE AND AGREE TO THE FOLLOWING:
You authorize Distributors to reserve 5% of your total intended purchase
in Fund shares registered in your name until you fulfill your Letter.
You give Distributors a security interest in the reserved shares and
appoint Distributors as attorney-in-fact. Distributors may sell any or
all of the reserved shares to cover any additional sales charge if you do
not fulfill the terms of the Letter.
Although you may exchange your shares, you may not sell reserved shares
until you complete the Letter or pay the higher sales charge.
Your periodic statements will include the reserved shares in the total shares
you own. We will pay or reinvest dividend and capital gain distributions on the
reserved shares as you direct. Our policy of reserving shares does not apply to
certain retirement plans.
If you would like more information about the Letter of Intent privilege, please
see "How Do I Buy, Sell and Exchange Shares? - Letter of Intent" in the SAI or
call Shareholder Services.
GROUP PURCHASES. If you are a member of a qualified group, you may buy Fund
shares at a reduced sales charge that applies 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.
A qualified group is one that:
Was formed at least six months ago,
Has a purpose other than buying Fund shares at a discount, Has more than
10 members, Can arrange for meetings between our representatives and
group members,
Agrees to include sales and other Franklin Templeton Fund materials in
publications and mailings to its members at reduced or no cost to
Distributors,
Agrees to arrange for payroll deduction or other bulk transmission of
investments to the Fund, and Meets other uniform criteria that allow
Distributors to achieve cost savings in distributing shares.
SALES CHARGE WAIVERS. The Fund's sales charges (front-end and contingent
deferred) will not apply to certain purchases. For waiver categories 1, 2 or 3
below: (i) the distributions or payments must be reinvested within 365 days of
their payment date, and (ii) Class II distributions may be reinvested in either
Class I or Class II shares. Class I distributions may only be reinvested in
Class I shares.
The Fund's sales charges will not apply if you are buying shares with money from
the following sources:
1. Dividend and capital gain distributions from any Franklin Templeton Fund
or a REIT sponsored or advised by Franklin Properties, Inc.
2. Distributions from an existing retirement plan invested in the Franklin
Templeton Funds
3. Annuity payments received under either an annuity option or from death
benefit proceeds, only if the annuity contract offers as an investment option
the Franklin Valuemark Funds, Templeton Variable Annuity Fund, the Templeton
Variable Products Series Fund, or the Franklin Government Securities Trust. You
should contact your tax advisor for information on any tax consequences that may
apply.
4. Redemptions from any Franklin Templeton Fund if you:
Originally paid a sales charge on the shares, Reinvest the
money within 365 days of the redemption date, and Reinvest the
money in the SAME CLASS of shares.
An exchange is not considered a redemption for this privilege. The Contingent
Deferred Sales Charge will not be waived if the shares reinvested were subject
to a Contingent Deferred Sales Charge when sold. We will credit your account in
shares, at the current value, in proportion to the amount reinvested for any
Contingent Deferred Sales Charge paid in connection with the earlier redemption,
but a new Contingency Period will begin.
If you immediately placed your redemption proceeds in a Franklin Bank CD, you
may reinvest them as described above. The proceeds must be reinvested within 365
days from the date the CD matures, including any rollover.
5. Redemptions from other mutual funds
If you sold shares of a fund that is not a Franklin Templeton Fund within the
past 60 days, you may invest the proceeds without any sales charge if (a) the
investment objectives were similar to the Fund's, and (b) your shares in that
fund were subject to any front-end or contingent deferred sales charges at the
time of purchase. You must provide a copy of the statement showing your
redemption.
The Fund's sales charges will also not apply to purchases by:
6. Trust companies and bank trust departments agreeing to invest in
Franklin Templeton Funds over a 13 month period at least $1 million of assets
held in a fiduciary, agency, advisory, custodial or similar capacity and over
which the trust companies and bank trust departments or other plan fiduciaries
or participants, in the case of certain retirement plans, have full or shared
investment discretion. We will accept orders for these 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 the order.
7. Group annuity separate accounts offered to retirement plans
8. Retirement plans that (i) are sponsored by an employer with at least 100
employees, (ii) have plan assets of $1 million or more, or (iii) agree to invest
at least $500,000 in the Franklin Templeton Funds over a 13 month period.
Retirement plans that are not Qualified Retirement Plans or SEPS, such as 403(b)
or 457 plans, must also meet the requirements described under "Group Purchases"
above.
9. An Eligible Governmental Authority. Please consult your legal and
investment advisors to determine if an investment in the Fund is permissible and
suitable for you and the effect, if any, of payments by the Fund on arbitrage
rebate calculations.
10. Broker-dealers and qualified registered investment advisors who have
entered into a supplemental agreement with Distributors for their clients who
are participating in comprehensive fee programs, sometimes known as wrap fee
programs
11. Registered Securities Dealers and their affiliates, for their
investment accounts only
12. Current employees of Securities Dealers and their affiliates and their
family members, as allowed by the internal policies of their employer
13. Officers, trustees, directors and full-time employees of the Franklin
Templeton Funds or the Franklin Templeton Group, and their family members,
consistent with our then-current policies
14. Investment companies exchanging shares or selling assets pursuant to a
merger, acquisition or exchange offer
15. Accounts managed by the Franklin Templeton Group
16. Certain unit investment trusts and their holders reinvesting
distributions from the trusts
MAY I BUY SHARES IN GERMAN MARKS?
Normally you can add to your existing account in German marks. The
minimum is 10,000 German marks.
You cannot use a currency other than U.S. dollar or German marks
without our preapproval.
You need our preapproval to open a new account.
Provided that we receive 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. You
should check with your bank for any wire and other fees you may need to pay for
the transaction.
To invest in the Fund with German marks, please follow the directions below:
1. Call us at 1-800/632-2301 (or 1-415/312-3400) or fax the instructions at
1-415/312-4175 by 1:00 p.m., Eastern time, at least two business days prior your
wiring the money. If the call or fax is made after 1:00 p.m, please allow three
business days. Include the following information:
Date of Wire (Value Date)
Amount of Wire (in German marks)
Name of Bank Wiring Funds
Your Name (as it appears on your account)
Your Account Number
Wire Order Number (a new number will be assigned each time)
2. At least two or three business days after the call or fax, you should request
your bank to transmit, for value, immediately available funds in 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 RETIREMENT PLANS?
Your individual or employer-sponsored retirement plan may invest in the Fund.
Plan documents are required for all retirement plans. Trust Company can provide
the plan documents for you and serve as custodian or trustee.
Trust Company can provide you with brochures containing important information
about its plans. To establish a Trust Company retirement plan, you will need an
application other than the one included in this prospectus. For a retirement
plan brochure or application, please call our Retirement Plans Department.
Please consult your legal, tax or retirement plan specialist before choosing a
retirement plan. Your investment representative or advisor can help you make
investment decisions within your plan.
OTHER PAYMENTS TO SECURITIES DEALERS
The payments below apply to Securities Dealers who initiate and are responsible
for certain purchases made without a sales charge. A Securities Dealer may only
receive one of the following payments for each qualifying purchase. The payments
described below are paid by Distributors or one of its affiliates, at its own
expense, and not by the Fund or its shareholders.
1. Securities Dealers will receive up to 0.75% of the purchase price for
purchases of $1 million or more.
2. Securities Dealers may, in the sole discretion of Distributors, receive up to
1% of the purchase price for purchases made under waiver category 8 above.
3. Securities Dealers may receive up to 0.25% of the purchase price for
purchases made under waiver categories 6 and 9 above.
PLEASE SEE "HOW DO I BUY, SELL AND EXCHANGE SHARES - OTHER PAYMENTS TO
SECURITIES DEALERS" IN THE SAI FOR ANY BREAKPOINTS THAT MAY APPLY.
Securities Dealers may receive additional compensation from Distributors or an
affiliated company in connection with selling shares of the Franklin Templeton
Funds. Compensation may include financial assistance for conferences,
shareholder services, automation, sales or training programs, or promotional
activities. Registered representatives and their families may be paid for travel
expenses, including lodging, in connection with business meetings or seminars.
In some cases, this compensation may only be available to Securities Dealers
whose representatives have sold or are expected to sell significant amounts of
shares. Securities Dealers may not use sales of the Fund's shares to qualify for
this compensation if prohibited by the laws of any state or self-regulatory
agency, such as the NASD.
MAY I EXCHANGE SHARES FOR SHARES OF ANOTHER FUND?
We offer a wide variety of funds. If you would like, you can move your
investment from your Fund account to an existing or new account in another
Franklin Templeton Fund (an "exchange"). Because it is technically a sale and a
purchase of shares, an exchange is a taxable transaction.
Before making an exchange, please read the prospectus of the fund you are
interested in. This will help you learn about the fund and its rules and
requirements for exchanges. For example, some Franklin Templeton Funds do not
accept exchanges and others may have different investment minimums.
<TABLE>
<CAPTION>
- -------------------------------------------- -------------------------------------------------------------------------------------
<S> <C>
METHOD STEPS TO FOLLOW
- -------------------------------------------- --------------------------------------------------------------------------------------
BY MAIL 1. Send us written instructions signed by all account owners
2. Include any outstanding share certificates for the shares you're exchanging
- -------------------------------------------- --------------------------------------------------------------------------------------
- -------------------------------------------- --------------------------------------------------------------------------------------
BY PHONE Call Shareholder Services or TeleFACTS(R)
If you do not want the ability to
exchange by phone to apply to your
account, please let us know.
- -------------------------------------------- --------------------------------------------------------------------------------------
- -------------------------------------------- --------------------------------------------------------------------------------------
THROUGH YOUR DEALER Call your investment representative
- -------------------------------------------- --------------------------------------------------------------------------------------
</TABLE>
Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to exchange shares.
WILL SALES CHARGES APPLY TO MY EXCHANGE?
You generally will not pay a front-end sales charge on exchanges.
If you have held your shares less than six months, however, you will pay the
percentage difference between the sales charge you previously paid and the
applicable sales charge of the new fund. If you have never paid a sales charge
on your shares because, for example, they have always been held in a money fund,
you will pay the Fund's applicable sales charge no matter how long you have held
your shares. These charges may not apply if you qualify to buy shares without a
sales charge.
CONTINGENT DEFERRED SALES CHARGE. We will not impose a Contingent Deferred Sales
Charge when you exchange shares. Any shares subject to a Contingent Deferred
Sales Charge at the time of exchange, however, will remain so in the new fund.
For accounts with shares subject to a Contingent Deferred Sales Charge, shares
are exchanged into the new fund in the order they were purchased. If you
exchange shares into one of our money funds, the time your shares are held in
that fund will not count towards the completion of any Contingency Period. For
more information about the Contingent Deferred Sales Charge, please see that
section under "How Do I Sell Shares?"
EXCHANGE RESTRICTIONS
Please be aware that the following restrictions apply to exchanges:
You may only exchange shares within the SAME CLASS.
The accounts must be identically registered. You may exchange shares from a Fund
account requiring two or more signatures into an identically registered money
fund account requiring only one signature for all transactions. PLEASE NOTIFY US
IN WRITING IF YOU DO NOT WANT THIS OPTION TO BE AVAILABLE ON YOUR ACCOUNT(S).
Additional procedures may apply. Please see "Transaction Procedures and Special
Requirements."
Trust Company IRA or 403(b) retirement plan accounts may exchange shares as
described above. Restrictions may apply to other types of retirement plans.
Please contact our Retirement Plans Department for information on exchanges
within these plans.]
The fund you are exchanging into must be eligible for sale in your state. We may
modify or discontinue our exchange policy if we give you 60 days' written
notice.
Your exchange may be restricted or refused if you: (i) request an exchange out
of the Fund within two weeks of an earlier exchange request, (ii) exchange
shares out of the Fund more than twice in a calendar quarter, or (iii) exchange
shares equal to at least $5 million, or more than 1% of the Fund's net assets.
Shares under common ownership or control are combined for these limits. If you
exchange shares as described in this paragraph, you will be considered a Market
Timer. Each exchange by a Market Timer, if accepted, will be charged $5.00. Some
of our funds do not allow investments by Market Timers.
Because excessive trading can hurt Fund performance and shareholders, we may
refuse any exchange purchase if (i) we believe the Fund would be harmed or
unable to invest effectively, or (ii) the Fund receives or anticipates
simultaneous orders that may significantly affect the Fund.
HOW DO I SELL SHARES?
You may sell (redeem) your shares at any time.
- --------------------- ----------------------------------------------------------
METHOD STEPS TO FOLLOW
- --------------------- ----------------------------------------------------------
BY MAIL
1. Send us written
instructions signed by all account owners
2. Include any outstanding
share certificates for the shares
you are selling
3. Provide a signature guarantee if required
4. Corporate, partnership and trust
accounts may need to send
additional documents.
Accounts under court jurisdiction may have
additional requirements.
- --------------------- ----------------------------------------------------------
- --------------------- ----------------------------------------------------------
BY PHONE Call Shareholder Services
(Only available
if you have completed and Telephone requests will be accepted:
sent to us the
telephone redemption
agreement included with this
prospectus) If the request is
$50,000 or less.
Institutional accounts may
exceed $50,000 by completing
a separate agreement. Call
Institutional Services to
receive a copy.
If there are no share
certificates issued for the
shares you want to sell or
you have already returned
them to the Fund
Unless you are selling
shares in a Trust Company
retirement plan account
Unless the address on your
account was changed by phone
within the last 30 days
- ------------------------- -----------------------------------
- ------------------------- -----------------------------------
THROUGH YOUR DEALER Call your investment representative
- ------------------------- -----------------------------------
We will send your redemption check within seven days after we receive your
request in proper form. If you sell your shares by phone, the check may only be
made payable to all registered owners on the account and sent to the address of
record. We are not able to receive or pay out cash in the form of currency.
If you sell shares you just purchased with a check or draft, we may delay
sending you the proceeds for up to 15 days or more to allow the check or draft
to clear. A certified or cashier's check may clear in less time.
Under unusual circumstances, we may suspend redemptions or postpone payment for
more than seven days as permitted by federal securities law.
MAY I RECEIVE MY REDEMPTION PROCEEDS IN GERMAN MARKS?
To request payment of redemption proceeds in German marks:
First, you need to have on file a Foreign Currency Redemption
Authorization Form. Please call us for the form at 1-800/632-2301 (or
1-415/312-3400) or fax your request to 1-415/312-4175.
you must have established a German mark-denominated bank account
The redemption proceeds must be for a minimum of U.S. $5,000.
Your redemption proceeds paid in German marks will be calculated
using the NAV per share and the U.S. dollar-German mark exchange rate next
determined after receipt of the redemption request in proper form.
Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to sell shares.
TRUST COMPANY RETIREMENT PLAN ACCOUNTS
To comply with IRS regulations, you need to complete additional forms before
selling shares in a Trust Company retirement plan account. Tax penalties
generally apply to any distribution from these plans to a participant under age
59 1/2, unless the distribution meets an exception stated in the Code. To obtain
the necessary forms, please call our Retirement Plans Department.
CONTINGENT DEFERRED SALES CHARGE
If you did not pay a front-end sales charge because you invested $1 million or
more, a Contingent Deferred Sales Charge may apply if you sell all or a part of
your investment within the Contingency Period. The charge is 1% of the value of
the shares sold or the Net Asset Value at the time of purchase, whichever is
less. Distributors keeps the charge to recover payments made to Securities
Dealers.
We will first redeem shares not subject to the charge in the following order:
1) A calculated number of shares equal to the capital appreciation on shares
held less than the Contingency Period, 2) Shares purchased with reinvested
dividends and capital gain distributions, and 3) Shares held longer than the
Contingency Period.
We then redeem shares subject to the charge in the order they were purchased.
Unless otherwise specified, when you request to sell a stated DOLLAR AMOUNT, we
will redeem additional shares to cover any Contingent Deferred Sales Charge. For
requests to sell a stated NUMBER OF SHARES, we will deduct the amount of the
Contingent Deferred Sales Charge, if any, from the sale proceeds.
WAIVERS. We waive the Contingent Deferred Sales Charge for:
Exchanges
Account fees
Sales of shares purchased pursuant to a sales charge waiver
Redemptions by the Fund when an account falls below the minimum required
account size Redemptions following the death of the shareholder or
beneficial owner Redemptions through a systematic withdrawal plan set up
before February 1, 1995
Redemptions through a systematic withdrawal plan set up after February 1,
1995, up to 1% a month of an account's Net Asset Value (3% quarterly, 6%
semiannually or 12% annually). For example, if you maintain an annual
balance of $1 million, you can withdraw up to $120,000 annually through a
systematic withdrawal plan free of charge.
Distributions from individual retirement plan accounts 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
WHAT DISTRIBUTIONS MIGHT I RECEIVE FROM THE FUND?
The Fund declares dividends from its net investment income monthly to
shareholders of record on the first business day before the 15th of the month
and pays them on or about the last day of that month.Capital gains, if any, may
be distributed annually, usually in December
Dividend payments are not guaranteed, are subject to the Board's discretion and
may vary with each payment. THE FUND DOES NOT PAY "INTEREST" OR GUARANTEE ANY
FIXED RATE OF RETURN ON AN INVESTMENT IN ITS SHARES.
If you buy shares shortly before the record date, please keep in mind that any
distribution will lower the value of the Fund's shares by the amount of the
distribution.
DISTRIBUTION OPTIONS
You may receive your distributions from the Fund in any of these ways:
1. BUY ADDITIONAL SHARES OF THE FUND - You may buy additional shares of the 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. BUY SHARES OF OTHER FRANKLIN TEMPLETON FUNDS - You may direct your
distributions to buy 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 receive dividends, or both dividend
and capital gain distributions in cash. If you have the money sent to another
person or to a checking account, you may need a signature guarantee. If you send
the money to a checking account, please see "Electronic Fund Transfers" under
"Services to Help You Manage Your Account."
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 YOU DO NOT SELECT AN OPTION, WE WILL
AUTOMATICALLY REINVEST DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS IN THE FUND. For
Trust Company retirement plans, special forms are required to receive
distributions in cash. You may change your distribution option at any time by
notifying us by mail or phone. Please allow at least seven days prior to the
record date for us to process the new option.
TRANSACTION PROCEDURES AND SPECIAL REQUIREMENTS
HOW AND WHEN SHARES ARE PRICED
The Fund is open for business each day the Exchange is open. We determine the
Net Asset Value per share as of the scheduled close of the Exchange, generally
1:00 p.m. Pacific time. You can find the prior day's closing Net Asset Value and
Offering Price of the Fund in many newspapers.
To calculate Net Asset Value per share, the Fund's assets are valued and
totaled, liabilities are subtracted, and the balance, called net assets, is
divided by the number of shares outstanding. The Fund's assets are valued as
described under "How Are Fund Shares Valued?" in the SAI.
THE PRICE WE USE WHEN YOU BUY OR SELL SHARES
You buy shares at the Offering Price, unless you qualify to buy shares at a
reduced sales charge or with no sales charge. The Offering Price is based on the
Net Asset Value per share and includes the maximum sales charge. We calculate it
to two decimal places using standard rounding criteria. You sell shares at Net
Asset Value.
We will use the Net Asset Value next calculated after we receive your
transaction request in proper form. If you buy or sell shares through your
Securities Dealer, however, we will use the Net Asset Value next calculated
after your Securities Dealer receives your request, which is promptly
transmitted to the Fund. Your redemption proceeds will not earn interest between
the time we receive the order from your dealer and the time we receive any
required documents.
PROPER FORM
An order to buy shares is in proper form when we receive your signed shareholder
application and check. Written requests to sell or exchange shares are in proper
form when we receive written instructions signed by all registered owners, with
a signature guarantee if necessary. We must also receive any outstanding share
certificates for those shares.
WRITTEN INSTRUCTIONS
Written instructions must be signed by all registered owners. To avoid any delay
in processing your transaction, they should include:
Your name,
The Fund's name,
A description of the request,
For exchanges, the name of the fund you're exchanging into, Your account
number, The dollar amount or number of shares, and
A telephone number where we may reach you during the day, or in the
evening if preferred.
SIGNATURE GUARANTEES
For our mutual protection, we require a signature guarantee in the following
situations:
1) You wish to sell over $50,000 worth of shares,
2) You want the proceeds to be paid to someone other than the registered owners,
3) The proceeds are not being sent to the address of record, preauthorized bank
account, or preauthorized brokerage firm account, 4) We receive instructions
from an agent, not the registered owners, 5) We believe a signature guarantee
would protect us against potential claims based on the instructions received.
A signature guarantee verifies the authenticity of your signature and may be
obtained from certain banks, brokers or other eligible guarantors. YOU SHOULD
VERIFY THAT THE INSTITUTION IS AN ELIGIBLE GUARANTOR PRIOR TO SIGNING. A
NOTARIZED SIGNATURE IS NOT SUFFICIENT.
SHARE CERTIFICATES
We will credit your shares to your Fund account. We do not issue share
certificates unless you specifically request them. This eliminates the costly
problem of replacing lost, stolen or destroyed certificates. If a certificate is
lost, stolen or destroyed, you may have to pay an insurance premium of up to 2%
of the value of the certificate to replace it.
Any outstanding share certificates must be returned to the Fund if you want to
sell or exchange those shares or if you would like to start a systematic
withdrawal plan. The certificates should be properly endorsed. You can do this
either by signing the back of the certificate or by completing a share
assignment form. For your protection, you may prefer to complete a share
assignment form. In this case, you should send the certificate and assignment
form in separate envelopes.
TELEPHONE TRANSACTIONS
You may initiate many transactions by phone. Please refer to the sections of
this prospectus that discuss the transaction you would like to make or call
Shareholder Services.
We may only be liable for losses resulting from unauthorized telephone
transactions if we do not follow reasonable procedures designed to verify the
identity of the caller. When you call, we will request personal or other
identifying information, and will also record calls. For your protection, we may
delay a transaction or not implement one if we are not reasonably satisfied that
telephone instructions are genuine. If this occurs, we will not be liable for
any loss.
If our lines are busy or you are otherwise unable to reach us by phone, you may
wish to ask your investment representative for assistance or send written
instructions to us, as described elsewhere in this prospectus. If you are unable
to execute a transaction by telephone, we will not be liable for any loss.
TRUST COMPANY RETIREMENT PLAN ACCOUNTS. You may not sell shares or change
distribution options on Trust Company retirement plans by phone. While you may
exchange shares of Trust Company IRA and 403(b) retirement accounts by phone,
certain restrictions may be imposed on other retirement plans.
To obtain any required forms or more information about distribution or transfer
procedures, please call our Retirement Plans Department.]
ACCOUNT REGISTRATIONS AND REQUIRED DOCUMENTS
When you open an account, you need to tell us how you want your shares
registered. How you register your account will affect your ownership rights and
ability to make certain transactions. If you have questions about how to
register your account, you should consult your investment representative or
legal advisor. Please keep the following information in mind when registering
your account.
JOINT OWNERSHIP. If you open an account with two or more owners, we register the
account as "joint tenants with rights of survivorship" unless you tell us
otherwise. An account registered as "joint tenants with rights of survivorship"
is shown as "Jt Ten" on your account statement. For any account with two or more
owners, ALL owners must sign instructions to process transactions and changes to
the account. Even if the law in your state says otherwise, you will not be able
to change owners on the account unless all owners agree in writing. If you would
like another person or owner to sign for you, please send us a current power of
attorney.
GIFTS AND TRANSFERS TO MINORS. You may set up a custodial account for a minor
under your state's Uniform Gifts/Transfers to Minors Act. Other than this form
of registration, a minor may not be named as an account owner.
TRUSTS. If you register your account as a trust, you should have a valid written
trust document to avoid future disputes or possible court action over who owns
the account.
REQUIRED DOCUMENTS. For corporate, partnership and trust accounts, please send
us the following documents when you open your account. This will help avoid
delays in processing your transactions while we verify who may sign on the
account.
<TABLE>
<CAPTION>
- ------------------------------------ ---------------------------------------------------------------------------------------------
<S> <C>
TYPE OF ACCOUNT DOCUMENTS REQUIRED
- ------------------------------------ ---------------------------------------------------------------------------------------------
CORPORATION Corporate Resolution
- ------------------------------------ ---------------------------------------------------------------------------------------------
- ------------------------------------ ---------------------------------------------------------------------------------------------
PARTNERSHIP 1. The pages from the partnership agreement that identify the general partners, or
2. A certification for a partnership agreement
- ------------------------------------ ---------------------------------------------------------------------------------------------
- ------------------------------------ ---------------------------------------------------------------------------------------------
TRUST 1. The pages from the trust document that identify the trustees, or
2. A certification for trust
- ------------------------------------ ---------------------------------------------------------------------------------------------
</TABLE>
STREET OR NOMINEE ACCOUNTS. If you have Fund shares held in a "street" or
"nominee" name account with your Securities Dealer, you may transfer the shares
to the street or nominee name account of another Securities Dealer. Both dealers
must have an agreement with Distributors or we will not process the transfer.
Contact your Securities Dealer to initiate the transfer. We will process the
transfer after we receive authorization in proper form from your delivering
Securities Dealer. Accounts may be transferred electronically through the NSCC.
For accounts registered in street or nominee name, we may take instructions
directly from the Securities Dealer or your nominee.
ELECTRONIC INSTRUCTIONS. If there is a Securities Dealer or other representative
of record on your account, we are authorized to use and execute electronic
instructions. We can accept electronic instructions directly from your dealer or
representative without further inquiry. Electronic instructions may be processed
through the services of the NSCC, which currently include the NSCC's
"Networking," "Fund/SERV," and "ACATS" systems, or through Franklin/Templeton's
PCTrades II(TM) System.
TAX IDENTIFICATION NUMBER
For tax reasons, we must have your correct Social Security or tax identification
number on a signed shareholder application or applicable tax form. Federal law
requires us to withhold 31% of your taxable distributions and sale proceeds if
(i) you have not furnished a certified correct taxpayer identification number,
(ii) you have not certified that withholding does not apply, (iii) the IRS or a
Securities Dealer notifies the Fund that the number you gave us is incorrect, or
(iv) you are subject to backup withholding.
We may refuse to open an account if you fail to provide the required tax
identification number and certifications. We may also close your account if the
IRS notifies us that your tax identification number is incorrect. If you
complete an "awaiting TIN" certification, we must receive a correct tax
identification number within 60 days of your initial purchase to keep your
account open.
KEEPING YOUR ACCOUNT OPEN
Due to the relatively high cost of maintaining a small account, we may close
your account if the value of your shares is less than $50. We will only do this
if the value of your account fell below this amount because you voluntarily sold
your shares and your account has been inactive (except for the reinvestment of
distributions) for at least six months. Before we close your account, we will
notify you and give you 30 days to increase the value of your account to $100.
SERVICES TO HELP YOU MANAGE YOUR ACCOUNT
AUTOMATIC INVESTMENT PLAN
Our automatic investment plan offers a convenient way to invest in the Fund.
Under the plan, you can have money transferred automatically from your checking
account to the Fund each month to buy additional shares. If you are interested
in this program, please refer to the automatic investment plan application
included with this prospectus or contact your investment representative. 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
discontinue the program at any time by notifying Investor Services by mail or
phone.
AUTOMATIC PAYROLL DEDUCTION
You may have money transferred from your paycheck to the Fund to buy additional
shares. Your investments will continue automatically until you instruct the Fund
and your employer to discontinue the plan. To process your investment, we must
receive both the check and payroll deduction information in required form. Due
to different procedures used by employers to handle payroll deductions, there
may be a delay between the time of the payroll deduction and the time we receive
the money.
SYSTEMATIC WITHDRAWAL PLAN
Our systematic withdrawal plan allows you to sell your shares and receive
regular payments from your account on a monthly, quarterly, semiannual or annual
basis. The value of your account must be at least $5,000 and the minimum payment
amount for each withdrawal must be at least $50. 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 direct your payments to buy the same class of shares of another
Franklin Templeton Fund or 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.
You will generally receive your payment by the fifth business day of the month
in which a payment is scheduled. When you sell your shares under a systematic
withdrawal plan, it is a taxable transaction.
Because of the Fund's front-end sales charge, you may not want to set up a
systematic withdrawal plan if you plan to buy shares on a regular basis. Shares
sold 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 discontinue a systematic withdrawal plan, change the amount and schedule
of withdrawal payments, or suspend one payment by notifying us in writing at
least seven business days before the end of the month preceding a scheduled
payment. Please see "How Do I Buy, Sell and Exchange Shares? - Systematic
Withdrawal Plan" in the SAI for more information.
ELECTRONIC FUND TRANSFERS
You may choose to have dividend and capital gain distributions from the Fund or
payments under a systematic withdrawal plan sent directly to a checking account.
If the checking account is with 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. We will send any payments made during that time to the
address of record on your account.
TELEFACTS(R)
From a touch-tone phone, you may call our TeleFACTS system (day or night) at
1-800/247-1753 to:
obtain information about your account;
obtain price and performance information about any Franklin Templeton
Fund; exchange shares between identically registered Franklin accounts;
and request duplicate statements and deposit slips.
You will need the Fund's code number to use TeleFACTS. The Fund's code is 210.
STATEMENTS AND REPORTS TO SHAREHOLDERS
We will send you the following statements and reports on a regular basis:
Confirmation and account statements reflecting transactions in your
account, including additional purchases and dividend reinvestments. PLEASE
VERIFY THE ACCURACY OF YOUR STATEMENTS WHEN YOU RECEIVE THEM.
Financial reports of the Fund will be sent every six months. To reduce
Fund expenses, we attempt to identify related shareholders within a
household and send only one copy of a report. Call Fund Information if you
would like an additional free copy of the Fund's financial reports or an
interim quarterly report.
INSTITUTIONAL ACCOUNTS
Additional methods of buying, selling or exchanging shares of the Fund may be
available to institutional accounts. For further information, call Institutional
Services.
AVAILABILITY OF THESE SERVICES
The services above are available to most shareholders. If, however, your shares
are held by a financial institution, in a street name account, or networked
through the NSCC, the Fund may not be able to offer these services directly to
you. Please contact your investment representative.
WHAT IF I HAVE QUESTIONS ABOUT MY ACCOUNT?
If you have any questions about your account, you may write to Investor Services
at 777 Mariners Island Blvd., P.O. Box 7777, San Mateo, California 94403-7777.
The Fund, Distributors and Advisers are also located at this address. You may
also contact us by phone at one of the numbers listed below.
HOURS OF OPERATION
(PACIFIC TIME)
DEPARTMENT NAME TELEPHONE NO. (MONDAY THROUGH FRIDAY)
Shareholder Services 1-800/632-2301 5:30 a.m. to 5:00 p.m.
Dealer Services 1-800/524-4040 5:30 a.m. to 5:00 p.m.
Fund Information 1-800/DIAL BEN 5:30 a.m. to 8:00 p.m.
(1-800/342-5236) 6:30 a.m. to 2:30 p.m.
(Saturday)
Retirement Plans 1-800/527-2020 5:30 a.m. to 5:00 p.m.
Institutional Services 1-800/321-8563 6:00 a.m. to 5:00 p.m.
TDD (hearing impaired) 1-800/851-0637 5:30 a.m. to 5:00 p.m.
Your phone call may be monitored or recorded to ensure we provide you with high
quality service. You will hear a regular beeping tone if your call is being
recorded.
GLOSSARY
USEFUL TERMS AND DEFINITIONS
1940 ACT - Investment Company Act of 1940, as amended
ADVISERS - Franklin Advisers, Inc., the Fund's investment manager
BOARD - The Board of Trustees of the Trust
BUSINESS MANAGER - TEMPLETON GLOBAL INVESTORS, INC.
CD - Certificate of deposit
CLASS I AND CLASS II - Certain funds in the Franklin Templeton Funds offer two
classes of shares, designated "Class I" and "Class II." The two classes have
proportionate interests in the same portfolio of investment securities. They
differ, however, primarily in their sales charge structures and Rule 12b-1
plans. Because the Fund's sales charge structure and Rule 12b-1 plan are similar
to those of Class I shares, shares of the Fund are considered Class I shares for
redemption, exchange and other purposes.
CODE - Internal Revenue Code of 1986, as amended
CONTINGENCY PERIOD - The 12 month period during which a Contingent Deferred
Sales Charge may apply. Regardless of when during the month you purchased
shares, they will age one month on the last day of that month and each following
month.
CONTINGENT DEFERRED SALES CHARGE (CDSC) - A sales charge of 1% that may apply if
you sell your shares within the Contingency Period.
DISTRIBUTORS - Franklin/Templeton Distributors, Inc., the Fund's principal
underwriter. The SAI lists the officers and Board members who are affiliated
with Distributors. See "Officers and Trustees."
ELIGIBLE GOVERNMENTAL AUTHORITY - Any state or local government or any
instrumentality, department, authority or agency thereof that has determined the
Fund is a legally permissible investment and that can only buy shares of the
Fund without paying sales charges.
EXCHANGE - New York Stock Exchange
FRANKLIN FUNDS - The mutual funds in the Franklin Group of Funds(R) except
Franklin Valuemark Funds and the Franklin Government
Securities Trust
FRANKLIN TEMPLETON FUNDS - The Franklin Funds and the Templeton Funds
FRANKLIN TEMPLETON GROUP - Franklin Resources, Inc., a publicly owned holding
company, and its various subsidiaries
INVESTOR SERVICES - Franklin/Templeton Investor Services, Inc., the Fund's
shareholder servicing and transfer agent
IRS - Internal Revenue Service
LETTER - Letter of Intent
MANAGERS - Franklin Advisers, Inc., the Fund's investment manager, and Templeton
Investment Counsel, Inc., the Fund's subadvisor.
MARKET TIMER(S) - Market Timers generally include market timing or allocation
services, accounts administered so as to buy, sell or exchange shares based on
predetermined market indicators, or any person or group whose transactions seem
to follow a timing pattern.
NASD - National Association of Securities Dealers, Inc.
NET ASSET VALUE (NAV) - The value of a mutual fund is determined by deducting
the fund's liabilities from the total assets of the portfolio. The net asset
value per share is determined by dividing the net asset value of the fund by the
number of shares outstanding.
NSCC - National Securities Clearing Corporation
OFFERING PRICE - The public offering price is based on the Net Asset Value per
share and includes the 3.0% sales charge.
QUALIFIED RETIREMENT PLAN(S) - An employer sponsored pension or profit-sharing
plan that qualifies under section 401 of the Code. Examples include 401(k),
money purchase pension, profit sharing and defined benefit plans.
REIT - Real Estate Investment Trust
RESOURCES - Franklin Resources, Inc.
SAI - Statement of Additional Information
SEC - U.S. Securities and Exchange Commission
SECURITIES DEALER - A financial institution that, either directly or through
affiliates, has an agreement with Distributors to handle customer orders and
accounts with the Fund. This reference is for convenience only and does not
indicate a legal conclusion of capacity.
SEP - An employer sponsored simplified employee pension plan established under
section 408(k) of the Code
TELEFACTS(R) - Franklin Templeton's automated customer servicing system
TEMPLETON FUNDS - 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
TICI - Templeton Investment Counsel, Inc., the Fund's subadvisor.
TRUST COMPANY - Franklin Templeton Trust Company. Trust Company is an affiliate
of Distributors and both are wholly owned subsidiaries of Resources.
U.S. - United States
WE/OUR/US - Unless the context indicates a different meaning, these terms refer
to the Fund and/or Investor Services, Distributors, or another wholly owned
subsidiary of Resources.
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
MARCH 1, 1996, AS AMENDED OCTOBER 1, 1996
777 MARINERS ISLAND BLVD., P.O. BOX 7777
SAN MATEO, CA 94403-7777 1-800/DIAL BEN
TABLE OF CONTENTS
How Does the Fund Invest Its
Assets?......................................................
What Are the Fund's Potential
Risks?.......................................................
Investment Restrictions......................................
Investment Restrictions......................................
Officers and Trustees
Investment Advisory and Other Services.......................
How Does the Fund Buy Securities For Its Portfolio?..........
How Do I Buy, Sell and Exchange Shares?......................
How Are Fund Shares Valued?..................................
Additional Information on Distributions and Taxes............
The Fund's Underwriter.......................................
How Does the Fund Measure Performance?.......................
Miscellaneous Information....................................
Financial Statements.........................................
Useful Terms and Definitions.................................
- -----------------------------------------------------------------------
When reading this SAI, you will see certain terms in capital letters. This
means the term is explained under "Useful Terms and Definitions."
- -----------------------------------------------------------------------
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"),are
each a separate non-diversified series of the Franklin Templeton Global Trust
(the "Trust"), an open-end management investment company. The Global Currency
Fund investment objective is to maximize total return, the Hard Currency Fund is
to protect against depreciation of the U.S. dollar relative to other currencies
and the High Income Fund to obtain high current income at a level significantly
above that available on U.S. dollar money market funds.
The Prospectus, dated March 1, 1996, as amended October 1, 1996, as may be
amended from time to time, contains the basic information you should know before
investing in the Fund. For a free copy, call 1-800/DIAL BEN or write the Fund at
the address shown.
THIS 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 FUND,
AND SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS.
- ------------------------------------------------------------------------------
MUTUAL FUNDS, ANNUITIES, AND OTHER INVESTMENT PRODUCTS:
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY OF THE U.S. GOVERNMENT;
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY ANY
BANK;
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
ARE SUBJECT TO INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
- ------------------------------------------------------------------------------
HOW DOES THE FUND INVEST ITS ASSETS?
The following provides more detailed information about some of the securities
the Fund may buy and its investment policies. You should read it together with
the section in the Fund's prospectus entitled "How Does the Fund Invest Its
Assets?"
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 these notes is based on an identified interest rate index and is
adjusted automatically at specified intervals, generally not less frequently
than semiannually.
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,
the Fund invests at least 25% of its net assets in obligations of companies
engaged in the financial services industry. These 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. These 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 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 (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 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
that 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 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. However, the Fund
has 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 Fund 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 Fund will not speculate in forward contracts;
however, the Fund will utilize forward contracts in conjunction with money
market instruments in a manner which is unrelated to the Fund's 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 the Fund enters into a position hedging transaction, its custodian bank will
place cash or readily marketable liquid securities in a segregated account of
the Fund in an amount equal to the value of its total assets committed to the
consummation of the 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.
The Fund may attempt to hedge up to 100% of its portfolio positions, but will
enter into hedging transactions only to the extent, if any, deemed appropriate
by the Managers. The Fund may not enter into a position hedging forward contract
if, as a result, it would have more than 10% of the value of its total assets
committed to such contracts. The Fund may not enter into a forward contract with
a term of more than one year. The 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 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 retains the portfolio security and engages in an offsetting
transaction, it 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 will be limited to the transactions described
above. Of course, the Fund is not required to enter into forward contracts, and
will not do so unless deemed appropriate by the Managers. You should realize
that the use of forward contracts does not eliminate fluctuations in the
underlying prices of the securities. Forward 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 money market instruments denominated in
non-U.S. currencies, it may hold foreign currencies pending its investment in
the instruments or their conversion into U.S. dollars. Although the Fund values
its assets daily in terms of U.S. dollars, it does not convert its holdings of
foreign currencies into U.S. dollars on a daily basis. The Fund will convert its
holdings from time to time, however, and you 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.
ILLIQUID INVESTMENTS. The Board has authorized the Fund to invest in restricted
securities where the investment is consistent with the Fund's investment
objective and has authorized these securities to be considered liquid to the
extent the Fund's Managers determine that there is a liquid institutional or
other market for these securities, for example, restricted securities which may
be freely transferred among qualified institutional buyers pursuant to Rule 144A
under the 1933 Act and for which a liquid institutional market has developed.
The Board reviews any determination by the Managers to treat a restricted
security as liquid on a quarterly basis, including the Managers' assessment of
current trading activity and the availability of reliable price information. In
determining whether a restricted security is properly considered a liquid
security, the Managers and the Board will take into account the following
factors: (i) the frequency of trades and quotes for the security; (ii) the
number of dealers willing to buy or sell the security and the number of other
potential purchasers; (iii) dealer undertakings to make a market in the
security; and (iv) the nature of the security and the nature of the marketplace
trades (e.g., the time needed to dispose of the security, the method of
soliciting offers and the mechanics of transfer). To the extent a Fund invests
in restricted securities that are deemed liquid, the general level of
illiquidity in the applicable Fund may be increased if qualified institutional
buyers become uninterested in purchasing these securities or the market for
these securities contracts.
WHAT ARE THE FUND'S POTENTIAL RISKS?
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
The Fund has adopted the following restrictions as fundamental policies. These
restrictions may not be changed without the approval of a majority of the
outstanding voting securities of the Fund. Under the 1940 Act, this means the
approval of (i) more than 50% of the outstanding shares of the Fund or (ii) 67%
or more of the shares of the Fund present at a shareholder meeting if more than
50% of the outstanding shares of the Fund are represented at the meeting in
person or by proxy, whichever is less. The Fund MAY 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 331/3% 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 331/3% 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. Purchase or sell real estate, securities of real estate investment trusts,
commodities, or oil and gas interests, 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.
6. 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.
7. Invest more than 25% of its assets in the securities of issuers in any
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.
8. 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.
9. Invest in companies for the purpose of exercising control.
10. Invest in securities of other investment companies, except as they may be
acquired as part of a merger, consolidation or acquisition of assets.
11. 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 met at the time of investment, a later increase
or decrease in the percentage due to a change in value of portfolio securities
or the amount of assets will not be considered a violation of any of the
foregoing restrictions.
OFFICERS AND TRUSTEES
The Board has the responsibility for the overall management of the Fund,
including general supervision and review of its investment activities. The
Board, in turn, elects the officers of the Fund who are responsible for
administering the Fund's day-to-day operations. The affiliations of the officers
and Board members and their principal occupations for the past five years are
shown below. Members of the Board who are considered "interested persons" of the
Fund under the 1940 Act are indicated by an asterisk (*).
POSITIONS AND OFFICES PRINCIPAL OCCUPATION
NAME, AGE AND ADDRESS WITH THE TRUST DURING THE PAST FIVE
YEARS
Frank H. Abbott, III (74) Trustee
1045 Sansome St.
San Francisco, CA 94111
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) Trustee
General Host Corporation
Metro Center, 1 Station Place
Stamford, CT 06904-2045
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) Trustee
HC2, Box 8076
Frazier Park, CA 93225
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) Trustee
Park Avenue at Morris County
P. O. Box 1945
Morristown, NJ 07962-1945
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) Trustee
111 New Montgomery St., #402
San Francisco, CA 94105
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) President
777 Mariners Island Blvd. and Trustee
San Mateo, CA 94404
Managing Director, Templeton Worldwide, Inc.; from November 1993 to present,
Executive Vice President, Franklin Institutional Services Corporation; from
January 1995 to present, Senior Vice President of Templeton Franklin Investment
Services, Inc.; from February 1992 to November 1993, 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) Trustee
5917 Cleveland Street
Morton Grove, IL 60053
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) Chairman
777 Mariners Island Blvd. of the Board
San Mateo, CA 94404 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) Vice President
777 Mariners Island Blvd. and Trustee
San Mateo, CA 94404
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 (38) Trustee
Bet Tzedek Legal Services
145 South Fairfax Ave.,
Suite 200
Los Angeles, CA 90036-2166
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) Trustee
20833 Stevens Creek Blvd.
Suite 102
Cupertino, CA 95014
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) Trustee
8212 Burning Tree Road
Bethesda, MD 20817
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) Vice President
777 Mariners Island Blvd.
San Mateo, CA 94404
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) Vice President -
777 Mariners Island Blvd. Financial Reporting
San Mateo, CA 94404 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) Vice President
777 Mariners Island Blvd. and Chief
San Mateo, CA 94404 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) Vice President
777 Mariners Island Blvd. and Secretary
San Mateo, CA 94404
Senior Vice President and General Counsel, 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) Vice President
777 Mariners Island Blvd.
San Mateo CA 94404
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) Treasurer and
777 Mariners Island Blvd. Principal
San Mateo, CA 94404 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) Vice President
777 Mariners Island Blvd.
San Mateo, CA 94404
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 table above shows the officers and Board members who are affiliated with
Distributors and Advisers. Nonaffiliated members of the Board are currently paid
$800 per month plus $800 per meeting attended] As shown above, some of the
nonaffiliated Board members also serve as directors, trustees or managing
general partners of other investment companies in the Franklin Templeton Group
of Funds. They may receive fees from these funds for their services. The
following table provides the total fees paid to nonaffiliated Board members
Trust and by other funds in the Franklin Templeton Group of Funds.
NUMBER OF BOARDS IN
TOTAL FEES RECEIVED THE FRANKLIN
TOTAL FEES FROM THE FRANKLIN TEMPLETON GROUP OF
RECEIVED FROM THE TEMPLETON GROUP OF FUNDS ON WHICH EACH
TRUST FUNDS SERVES***
NAME
Frank H. Abbott, III....... $5,000 $162,420 31
Harris J. Ashton........... 5,000 327,925 56
David K. Eiteman........... 3,400 2,400 1
S. Joseph Fortunato........ 5,000 344,745 58
David Garbellano........... 5,000 146,100 30
Gerald R. Healy............ 4,200 4,000 1
David P. Kraus............. 5,000 4,800 1
Frank W.T. LaHaye.......... 5,000 143,200 26
Gordon S. Macklin.......... 5,000 321,525 53
*For the fiscal year ended October 31, 1995.
**For the calendar year ended December 31, 1995.
***We base the number of boards on the number of registered investment companies
in the Franklin Templeton Group of Funds. This number does not include the total
number of series or funds within each investment company for which the Board
members are responsible. The Franklin Templeton Group of Funds currently
includes 60 registered investment companies, with approximately 166 U.S. based
funds or series.
Nonaffiliated members of the Board 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 Board member received any other
compensation, including pension or retirement benefits, directly or indirectly
from the Fund or other funds in the Franklin Templeton Group of Funds. Certain
officers or Board members who are shareholders of Resources may be deemed to
receive indirect remuneration by virtue of their participation, if any, in the
fees paid to its subsidiaries.
As of July 29, 1996 the officers and trustees, as a group, owned of record and
beneficially approximately 901, 482 and 175 shares of the Global Currency Fund,
the Hard Currency Fund and the High Income Fund, respectively, or less than 1%
of the total outstanding shares of the Fund. Many of the Fund'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.
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT MANAGER AND SERVICES PROVIDED. The Fund's investment manager is
Advisers. Advisers provides investment research and portfolio management
services, including the selection of securities for the Fund to buy, hold or
sell and the selection of brokers through whom the Fund's portfolio transactions
are executed. Advisers' activities are subject to the review and supervision of
the Board to whom Advisers renders periodic reports of the Fund's investment
activities.
Advisers provides office space and furnishings, facilities and equipment
required for managing the business affairs of the Fund. Advisers also maintains
all internal bookkeeping, clerical, secretarial and administrative personnel and
services and provides certain telephone and other mechanical services. Advisers
is covered by fidelity insurance on its officers, directors and employees for
the protection of the Fund.
Advisers acts as investment manager or administrator to 36 U.S. registered
investment companies with 124 separate series. Advisers may give advice and take
action with respect to any of the other funds it manages, or for its own
account, that may differ from action taken by Advisers on behalf of the Fund.
Similarly, with respect to the Fund, Advisers is not obligated to recommend, buy
or sell, or to refrain from recommending, buying or selling any security that
Advisers and access persons, as defined by the 1940 Act, may buy or sell for its
or their own account or for the accounts of any other fund. Advisers is not
obligated to refrain from investing in securities held by the Fund or other
funds that it manages or administers. Of course, any transactions for the
accounts of Advisers and other access persons will be made in compliance with
the Fund's Code of Ethics.
SUBADVISOR. Templeton Investment Counsel, Inc.("TICI") is the Fund's subadvisor
pursuant to a contract between TICI and Advisers on behalf of the Fund. TICI, is
an affiliate of Templeton Worlwide, Inc. and an indirect wholly-owned subsidiary
of Resources. TICI, a Florida corporation whose principal business address is
500 East Broward Boulevard, Suite 2100, Fort Lauderdale, Florida 33394-3091,
currently acts as either investment manager or subadvisor for 20 investment
companies (36 separate series).
Pursuant to the subadvisory agreement between Advisers and TICI, and subject to
the overall policies, control, direction and review of the Board and to the
instructions and supervision of Advisers, TICI 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.
MANAGEMENT FEES. Under its management agreement, the Fund pays Advisers a
management 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 the Fund. TICI receives a fee from Advisers equal to an annual
rate of 0.25% of the value of the average daily net assets of the Fund. This fee
is not paid by the Fund.
The management fee will be reduced as necessary to comply with the most
stringent limits on Fund expenses of any state where the Fund offers its shares.
Currently, the most restrictive limitation on a fund's allowable expenses for
each fiscal year, as a percentage of its average net assets, is 2.5% of the
first $30 million in assets, 2% of the next $70 million, and 1.5% of assets over
$100 million. Expense reductions have not been necessary based on state
requirements.
Advisers has agreed in advance to waive or limit its management fees in order to
limit the expenses of the Fund to 1.25% of its average monthly net assets. The
table below shows the management fees, before any advance waiver, and the
management fees paid by each Fund for the three periods indicated.
Management Management
Fiscal Year Fees (before Fees Paid
October 31 fee waiver) by the Fund
1996*
Global Currency Fund $181,862 $181,862
Hard Currency Fund 405,992 405,992
High Income Fund 33,442 28,082
1995
Global Currency Fund 379,524 379,524
Hard Currency Fund 634,188 634,188
High Income Fund 82,819 57,812
1994**
Global Currency Fund 173,619 6,878
Hard Currency Fund 179,397 12,025
High Income Fund 56,657 0
1994***
Global Currency Fund 165,435 48,533
Hard Currency Fund 104,552 12,229
High Income Fund 55,225 7,093
*Six-month period ended April 30, 1996.
**Six-month period ended October 31, 1994, resulting from a change in fiscal
year.
***Six-month period ended April 30, 1994, resulting from a change in
fiscal year.
MANAGEMENT AGREEMENT. The management agreement is in effect until [].
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 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 Board or by a vote of the holders of a majority of the 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.
SHAREHOLDER SERVICING AGENT. Investor Services, a wholly-owned subsidiary of
Resources, is the Fund's shareholder servicing agent 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.
CUSTODIANS. Bank of New York, Mutual Funds Division, 90 Washington Street, New
York, New York 10286, acts as custodian of the securities and other assets of
the Fund. Bank of America NT & SA, 555 California Street, 4th Floor, San
Francisco, California 94104, acts as custodian for cash received in connection
with the purchase of Fund shares. 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.
AUDITORS. Coopers & Lybrand L.L.P., 333 Market Street, San Francisco, California
94105, are the Fund'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 Fund included in the Trust's Annual Report to
shareholders for the fiscal year ended October 31, 1995.
PRIOR SERVICES. 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 advisor.
HOW DOES THE FUND BUY SECURITIES FOR ITS PORTFOLIO?
The selection of brokers and dealers to execute transactions in the Fund's
portfolio is made by Advisers in accordance with criteria set forth in the
management agreement and any directions that the Board may give. Under the
subadvisory agreement, Advisers may delegate to TICI the authority to select
securities dealers to execute portfolio transactions for the Fund.
When placing a portfolio transaction, the Managers seek to obtain prompt
execution of orders at the most favorable net price. When portfolio transactions
are done on a securities exchange, the amount of commission paid by the Fund is
negotiated between the Managers and the broker executing the transaction. 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 the transactions. These opinions are based on, among others, the
experience of these individuals in the securities industry and information
available to them about the level of commissions being paid by other
institutional investors of comparable size. The Managers will ordinarily place
orders to buy and sell over-the-counter securities on a principal rather than
agency basis with a principal market maker unless, in the opinion of the
Managers, 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.
The amount of commission is not the only factor the Managers consider in the
selection of a broker to execute a trade. If the Managers believe it is in the
Fund's best interest, the Managers may place portfolio transactions with brokers
who provide the types of services described below, even if it means the Fund
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
Managers, 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 Managers in carrying out its responsibilities
to the Fund, or when it is otherwise in the best interest of the Fund to do so,
whether or not such services may also be useful to the Managers in advising
other clients.
When the Managers believe several brokers are equally able to provide the best
net price and execution,they may decide to execute transactions through brokers
who provide quotations and other services to the Fund, in an amount of total
brokerage as may reasonably be required in light of these services.
Specifically, these services may include providing the quotations necessary to
determine the Fund's Net Asset Value, as well as research, statistical and other
data.
It is not possible to place a dollar value on the special executions or on the
research services received by the Managers from dealers effecting transactions
in portfolio securities. The allocation of transactions in order to obtain
additional research services permits the Managers 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 Managers and their affiliates may use this
research and data in their investment advisory capacities with other clients. If
the Fund's officers are satisfied that the best execution is obtained, the sale
of Fund shares may also be considered a factor in the selection of
broker-dealers to execute the Fund's portfolio transactions.
Because Distributors is a member of the National Association of Securities
Dealers, it may sometimes receive 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 Advisers will be reduced by the
amount of any fees received by Distributors in cash, less any costs and expenses
incurred in connection with the tender.
If purchases or sales of securities of the Fund and one or more other investment
companies or clients supervised by the Managers are considered at or about the
same time, transactions in these securities will be allocated among the several
investment companies and clients in a manner deemed equitable to all by the
Managers, taking into account the respective sizes of the funds and the amount
of securities to be purchased or sold. In some cases this procedure could 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,
the fiscal year ended October 31, 1995 and the six-month period ended April 30,
1996, 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, SELL AND EXCHANGE SHARES?
ADDITIONAL INFORMATION ON BUYING SHARES
The Fund continuously offers its shares through Securities Dealers who have an
agreement with Distributors. Securities Dealers may at times receive the entire
sales charge. A Securities Dealer who receives 90% or more of the sales charge
may be deemed an underwriter under the Securities Act of 1933, as amended.
Securities laws of states where the Fund offers its shares may differ from
federal law. Banks and financial institutions that sell shares of the Fund may
be required by state law to register as Securities Dealers. Financial
institutions or their affiliated brokers may receive an agency transaction fee
in the percentages indicated in the table under "How Do I Buy Shares? Quantity
Discounts" in the Prospectus.
When you buy shares, if you submit a check or a draft that is returned unpaid to
the Fund we may impose a $10 charge against your account for each returned item.
Under agreements with certain banks in Taiwan, Republic of China, the Fund's
shares are available to these banks' trust accounts without a sales charge. The
banks may charge service fees to their customers who participate in the trusts.
A portion of these 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 Fund may be offered to investors in Taiwan through securities
advisory firms known locally as Securities Investment Consulting Enterprises. In
conformity with local business practices in Taiwan, shares may be offered with
the following schedule of sales charges:
SIZE OF PURCHASE - U.S. DOLLARS SALES CHARGE
Under $30,000 3%
$30,000 but less than $100,000 2%
$100,000 but less than $400,000 1%
$400,000 or more 0%
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 to $2 million, plus 0.60% on sales over $2 million to $3 million, plus
0.50% on sales over $3 million to $50 million, plus 0.25% on sales over $50
million to $100 million, plus 0.15% on sales over $100 million.
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 by certain retirement plans pursuant to a sales charge waiver, as
discussed in the Prospectus: 1% on sales of $500,000 to $2 million, plus 0.80%
on sales over $2 million to $3 million, plus 0.50% on sales over $3 million to
$50 million, plus 0.25% on sales over $50 million to $100 million, plus 0.15% on
sales over $100 million. 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 dealer if shares are sold 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.]
These breakpoints are reset every 12 months for purposes of additional
purchases.
LETTER OF INTENT. You may qualify for a reduced sales charge when you buy Fund
shares, as described in the Prospectus. At any time within 90 days after the
first investment that you want to qualify for a reduced sales charge, you may
file with the Fund a signed shareholder application with the Letter of Intent
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 on purchases in more than one Franklin
Templeton Fund 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 during the 13 month period, except in the case of certain
retirement plans, 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 on the amount actually purchased (less
redemptions) during the period. The upward adjustment does not apply to certain
retirement plans. If you execute a Letter prior to a change in the sales charge
structure of the Fund, you may 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 the Fund registered in your name
until you fulfill the Letter. This policy of reserving shares does not apply to
certain retirement plans. If 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 as you direct. If total purchases, less
redemptions, exceed the amount specified under the Letter and is an amount that
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 the purchases had been made at a single
time. Upon remittance, the reserved shares held for your account will be
deposited to an account in your name or delivered to you or as you direct. If
within 20 days after written request the 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 certain retirement plans, 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.
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 the "ex-dividend date"). The processing
date for the reinvestment of dividends may vary and does not affect the amount
or value of the shares acquired.
ADDITIONAL INFORMATION ON EXCHANGING SHARES
If you request the exchange of the total value of your account, declared but
unpaid income dividends and capital gain distributions will be exchanged into
the new fund and will be invested at Net Asset Value. Backup withholding and
information reporting may apply. Information regarding the possible tax
consequences of an exchange is included in the tax section in this SAI and in
the Prospectus.
If a substantial number of shareholders should, within a short period, sell
their shares of the Fund under the exchange privilege, the Fund might have to
sell 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 occurs, it is
the Fund's general policy to initially invest this money in U.S. short-term,
interest-bearing money market instruments unless it is believed that attractive
investment opportunities consistent with the Fund's investment objective exist
immediately. This money will then be withdrawn from the U.S. short-term money
market instruments and invested in portfolio securities in as orderly a manner
as is possible when attractive investment opportunities arise.
The proceeds from the sale of shares of an investment company are generally not
available until the fifth business day following the sale. The funds you are
seeking to exchange into may delay issuing shares pursuant to an exchange until
that fifth business day. The sale of Fund shares to complete an exchange will be
effected at Net Asset Value at the close of business on the day the request for
exchange is received in proper form. Please see "May I Exchange Shares for
Shares of Another Fund?" in the Prospectus.
ADDITIONAL INFORMATION ON SELLING SHARES
SYSTEMATIC WITHDRAWAL PLAN. 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.
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. 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.
The Fund may discontinue a systematic withdrawal plan by notifying you in
writing and will automatically discontinue 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.
THROUGH YOUR SECURITIES DEALER. If you sell shares through your Securities
Dealer, it is your dealer's responsibility to transmit the order to the Fund in
a timely fashion. Any loss to you resulting from your dealer's failure to do so
must be settled between you and your Securities Dealer.
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 the 90-day period. This commitment
is irrevocable without the prior approval of the SEC. In the case of redemption
requests in excess of these amounts, the Board reserves the right to make
payments in whole or in part in securities or other assets of the Fund, 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 these circumstances,
the securities distributed would be valued at the price used to compute the
Fund's net assets and you may incur brokerage fees in converting the securities
to cash. The Fund does not intend to redeem illiquid securities in kind. If this
happens, however, you may not be able to recover your investment in a timely
manner.
GENERAL INFORMATION
If dividend checks are returned to the Fund marked "unable to forward" by the
postal service, we will consider this a request by you to change your dividend
option to reinvest all distributions. The proceeds will be reinvested in
additional shares at Net Asset Value until we receive new instructions.
If mail is returned as undeliverable or we are unable to locate you or verify
your current mailing address, we may deduct the costs of our efforts to find you
from your account. These costs may include a percentage of the account when a
search company charges a percentage fee in exchange for its location services.
All checks, drafts, wires and other payment mediums used to buy or sell shares
of the Fund must be denominated in U.S. dollars. We may, in our sole discretion,
either (a) reject any order to buy or sell 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.
SPECIAL SERVICES. The Franklin Templeton Institutional Services Department
provides specialized services, including recordkeeping, for institutional
investors. The cost of these services is not borne by the Fund.
Investor Services may pay certain financial institutions that maintain omnibus
accounts with the Fund on behalf of numerous beneficial owners for recordkeeping
operations performed with respect to such owners. For each beneficial owner in
the omnibus account, the Fund may reimburse Investor Services an amount not to
exceed the per account fee that the Fund normally pays Investor Services. These
financial institutions may also charge a fee for their services directly to
their clients.
Certain shareholder servicing agents may be authorized to accept your
transaction request.
HOW ARE FUND SHARES VALUED?
We calculate the Net Asset Value per share 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. Over-the-counter portfolio securities are
valued within the range of the most recent quoted bid and ask prices. Portfolio
securities that 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 Advisers.
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, options are valued within the range of the
current closing bid and ask prices if the valuation is believed to fairly
reflect the contract's market value.]
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. The 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 prices is used.
Occasionally events that 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 affecting the values of
these foreign securities occur during this period, the securities will be valued
in accordance with procedures established by the Board.
Generally, trading in U.S. government securities and money market instruments is
substantially completed each day at various times before the scheduled close of
the Exchange. The value of these securities used in computing the Net Asset
Value of the Fund's shares is determined as of such times. Occasionally, events
affecting the values of these securities may occur between the times at which
they are determined and the scheduled close of the Exchange that will not be
reflected in the computation of the Fund's Net Asset Value. If events materially
affecting the values of these securities occur during this period, the
securities will be valued at their fair value as determined in good faith by the
Board].
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 the Board, the
Fund may utilize a pricing service, bank or Securities Dealer to perform any of
the above described functions.
ADDITIONAL INFORMATION ON DISTRIBUTIONS AND TAXES
DISTRIBUTIONS
You may receive two types of distributions from the Fund:
1. INCOME DIVIDENDS. The Fund receives income generally 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 capital loss carry forward or post October
loss deferral) 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 capital gains from the prior
fiscal year. 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.
TAXES
As stated in the Prospectus, the Fund has elected to be treated] as a regulated
investment company under Subchapter M of the Code. The Board reserves the right
not to maintain the qualification of the Fund as a regulated investment company
if it determines this course of action to be beneficial to shareholders. In that
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 taxable
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 you until the following January, will be treated for
tax purposes as if paid by the Fund and received by you 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 the Fund for the
fiscal year ended October 31, 1995 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 your basis in the shares
and the amount received, subject to the rules described below. If such shares
are a capital asset in your hands, 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 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 Templeton Funds 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 Funds will inform you of the source of dividends and distributions at the
time they are paid, and will promptly after the close of each calendar year
advise you 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 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, the 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 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 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
recognize 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 timing of income distributed to you 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, 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 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 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 the Fund as a regulated investment
company under Subchapter M of the Code.
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 you.
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 or
certain other instruments held for less than three months. Foreign exchange
gains, derived by the Funds with respect to the 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 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. Each Fund will limit its activities
involving foreign exchange gains to the extent necessary to comply with these
requirements.
Income received by the Funds from sources within foreign countries may be
subject to withholding and other income or similar taxes imposed by such
countries. If more than 50% of the value of the Fund's total assets at the close
of its taxable year consists of securities of foreign corporations, that Fund
will be eligible and intends to elect to "pass through" to you, as the Fund's
shareholders, the amount of foreign taxes paid by the Fund. Pursuant to this
election, you will be required to include in gross income (in addition to
taxable dividends actually received) your pro rata share of the foreign taxes
paid by the Fund, and will be entitled either to deduct (as an itemized
deduction) your pro rata share of the foreign income and similar taxes in
computing your taxable income or to use it as a foreign tax credit against your
U.S. Federal income tax liability, subject to limitations. You may not claim a
deduction for foreign taxes if you do not itemize deductions, but you may be
eligible to claim the foreign tax credit (see below). You will be notified
within 60 days after the close of the Funds' fiscal year whether the foreign
taxes paid by the Fund will "pass through" for that year.
Generally, a credit for foreign taxes is subject to the limitation that it may
not exceed a shareholder's U.S. tax attributable to the shareholder's foreign
source taxable income. For this purpose, if the pass-though election is made,
the source of the Fund's income flows through to its shareholders. With respect
to the Funds, gains from the sale of securities will be treated as derived from
U.S. sources and certain currency fluctuation gains, including fluctuation gains
from foreign currency-denominated debt securities, receivables and payables,
will be treated as ordinary income derived from U.S. sources. The limitation on
the foreign tax credit is applied separately to foreign source passive income
(as defined for purposes of the foreign tax credit), including the foreign
source passive income passed through by the Funds. You may be unable to claim a
credit for the full amount of your proportionate share of the foreign taxes paid
by the Fund. Foreign taxes may not be deducted in computing alternative minimum
taxable income and the foreign tax credit can be used to offset only 90% of the
alternative minimum tax (as computed under the Code for purposes of this
limitation) imposed on corporations and individuals. If the Fund is not eligible
to make the election to "pass through" to you its foreign taxes, the foreign
income taxes it pays generally will reduce investment company taxable income and
the distributions by that Fund will be treated as U.S. source income.
THE FUND'S UNDERWRITER
Pursuant to an underwriting agreement, Distributors acts as principal
underwriter in a continuous public offering for shares of the Fund. The
underwriting agreement will continue in effect for successive annual periods if
its continuance is specifically approved at least annually by a vote of the
Board 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 Board members who are
not parties to the underwriting agreement or interested persons of any such
party (other than as members of the Board), 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 the 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.
In connection with the offering of the Fund's shares, aggregate underwriting
commissions for the six-month period ended April 30, 1996, the fiscal year ended
October 31, 1995 and the six-month period ended October 31, 1994 were $455,024,
$1,765,383 and $280,011, respectively. After allowances to dealers, Distributors
retained $59,393, $199,595 and $5,455 for the respective periods. Distributors
may be entitled to reimbursement under the Fund's Rule 12b-1 plan, as discussed
below. Except as noted, Distributors received no other compensation from the
Fund for acting as underwriter.
THE FUND'S RULE 12B-1 PLAN
The Fund has adopted a distribution plan or "Rule 12b-1 plan" pursuant to Rule
12b-1 of the 1940 Act. Under the plan, the Fund may pay up to a maximum of 0.25%
per year of its average daily net assets, payable quarterly, for expenses
incurred in the promotion and distribution of its shares. In addition, the Fund
is permitted to pay Distributors up to an additional 0.20% per year of its
average daily net assets for reimbursement of distribution expenses.
In addition to the payments that Distributors or others are entitled to under
the plan, the plan also provides that to the extent the Fund, Advisers or
Distributors or other parties on behalf of the Fund, Advisers or Distributors
make payments that are deemed to be 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. These 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 these services, you would
be permitted to remain a shareholder of the Fund, and alternate means for
continuing the servicing would be sought. In this 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 plan has been approved in accordance with the provisions of Rule 12b-1. The
plan is renewable annually by a vote of the Board, including a majority vote of
the Board members who are not interested persons of the Fund 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 Board members be done by the non-interested
members of the Board. The plan and any related agreement may be terminated at
any time, without penalty, by vote of a majority of the non-interested Board
members 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 Advisers, 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 members of
the Board, 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 Global Currency Fund paid
$132,583 pursuant to the Plan was $132,583, the Hard Currency Fund paid $349,101
and the High Income Fund paid $34,722. These amounts were used for the following
purposes:
Dollar Amounts
Global Hard High
Currency Currency Income Fund
Fund Fund
Advertising........................................ $27,991 $198,366 $16,275
Printing and mailing of prospectuses
other than to current shareholders................ 14,579 18,103 5,369
Payments to underwriters........................... 6,710 29,572 440
Payments to broker-dealers......................... 83,303 103,060 12,638
For the six-month period ended April 30, 1996, the Global Currency Fund paid
$84,082 pursuant to the plan, the Hard Currency Fund paid $250,023 and the High
Income Fund paid $17,910. These amounts were used for the following purposes:
Dollar Amounts
Global Hard High
Currency Currency Income Fund
Fund Fund
Advertising........................................ $x $x $x
Printing and mailing of prospectuses
other than to current shareholders................ x x x
Payments to underwriters........................... x x x
Payments to broker-dealers......................... x x x
HOW DOES THE FUND MEASURE PERFORMANCE?
Performance quotations are subject to SEC rules. 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 total return quotations used by the Fund are
based on the standardized methods of computing performance mandated by the SEC.
If a Rule 12b-1 plan is adopted, performance figures reflect fees from the date
of the plan's implementation. An explanation of these and other methods used by
the Fund to compute or express performance follows. 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.
TOTAL RETURN
AVERAGE ANNUAL TOTAL RETURN. Average annual total return is determined by
finding the average annual 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, and income dividends and capital gain distributions 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 to the sales charge structure,
historical performance information will be restated to reflect the maximum
front-end sales charge currently in effect.
When considering the Fund's average annual total return quotations, you should
keep in mind that the maximum front-end 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. This charge will affect
actual performance less the longer you retain your investment in the Fund. The
Fund's average annual rates of return for each Fund for the indicated periods
ended on October 31, 1995 were as follows:
From
Fund Name One-YearFive-YearInception
Global Currency Fund 2.87% 5.52% 8.10%
(6-27-86)
Hard Currency Fund 3.48% 7.04% 10.43%
(11-17-89)
High Income Fund 5.63% 4.40% 7.33%
(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)
CUMULATIVE TOTAL RETURN. The Fund may also quote its cumulative total return, in
addition to its average annual total return. These quotations are computed the
same way, except the cumulative total return 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 cumulative rates of
return for the Fund for the indicated periods ended on October 31, 1995 was as
follows:
From
Fund Name One Year Five Year Inception
Global Currency Fund 2.87% 30.84% 107.04%
Hard Currency Fund 3.48% 40.62% 80.57%
High Income Fund 5.63% 24.04% 52.40%
YIELD
CURRENT YIELD. Current yield shows the income per share earned by the Fund. It
is calculated 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, 1995 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 shareholders of
the Fund. Amounts paid to shareholders are reflected in the quoted current
distribution rate. The current distribution rate is usually computed by
annualizing the dividends paid per share during a certain period and dividing
that amount by the current maximum Offering Price. The current distribution rate
differs from the current yield computation because it may include distributions
to shareholders from sources other than 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 show the Fund's volatility or risk.
Measures of volatility or risk are generally used to compare the Fund's Net
Asset Value or performance 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
an index considered representative of the types of securities in which the fund
invests. 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 buy shares of the Fund without a sales
charge, sales literature about the Fund may quote a current distribution rate,
yield, cumulative 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 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.
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 advisors 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 may satisfy your
investment objective, advertisements and other materials about the Fund 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. These
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, 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 the Fund may include a
discussion of certain attributes or benefits to be derived from an investment in
the Fund. The advertisements or information may include symbols, headlines, or
other material that highlights or summarizes the information discussed in more
detail in the communication.
Advertisements or information may also compare the Fund's performance to the
return on CDs or other investments. You 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 CD 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 that 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. CDs 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 comparisons of performance, you should keep in mind that the
composition of the investments in the reported indices and averages is not
identical to the 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 the Fund to calculate its figures. In addition,
there can be no assurance that the Fund will continue its performance as
compared to these other averages.
MISCELLANEOUS INFORMATION
The Fund may help you achieve various investment goals such as accumulating
money for retirement, saving for a down payment on a home, college costs and
other long-term goals. The Franklin College Costs Planner may help 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 the
Fund cannot guarantee that these goals will be met.
The Dalbar Surveys, Inc. broker-dealer survey has ranked Franklin number one
in service quality for five of the past eight years.
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.
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.
In the event of disputes involving multiple claims of ownership or authority to
control your 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 IRS in response to a Notice of Levy.
FINANCIAL STATEMENTS
The audited financial statements contained in the Annual Report to Shareholders
of the Trust, for the fiscal year ended October 31, 19995, including the
auditors' report, and the unaudited financial statements contained in the
Semiannual Report to Shareholders of the Trust for the six-month period ended
April 30, 1996, are incorporated herein by reference.
USEFUL TERMS AND DEFINITIONS
1940 ACT - Investment Company Act of 1940, as amended
ADVISERS - Franklin Advisers, Inc., the Fund's investment manager
BOARD - The Board of Trustees of the Trust
CD - Certificate of deposit
CLASS I AND CLASS II - Certain funds in the Franklin Templeton Funds offer two
classes of shares, designated "Class I" and "Class II." The two classes have
proportionate interests in the same portfolio of investment securities. They
differ, however, primarily in their sales charge structures and Rule 12b-1
plans. Because the Fund's sales charge structure and Rule 12b-1 plan are similar
to those of Class I shares, shares of the Fund are considered Class I shares for
redemption, exchange and other purposes.
CODE - Internal Revenue Code of 1986, as amended
DISTRIBUTORS - Franklin/Templeton Distributors, Inc., the Fund's principal
underwriter
EXCHANGE - New York Stock Exchange
FRANKLIN FUNDS - The mutual funds in the Franklin Group of FundsAE except
Franklin Valuemark Funds and the Franklin Government Securities Trust
FRANKLIN TEMPLETON FUNDS - The Franklin Funds and the Templeton Funds
FRANKLIN TEMPLETON GROUP - Franklin Resources, Inc., a publicly owned holding
company, and its various subsidiaries
FRANKLIN TEMPLETON GROUP OF FUNDS - All U.S. registered mutual funds in the
Franklin Group of FundsAE and the Templeton Group of Funds
INVESTOR SERVICES - Franklin/Templeton Investor Services, Inc., the Fund's
shareholder servicing and transfer agent
IRS - Internal Revenue Service
LETTER - Letter of Intent
MANAGERS - Advisers and TICI, the Fund's subadvisor
NET ASSET VALUE (NAV) - The value of a mutual fund is determined by deducting
the fund's liabilities from the total assets of the portfolio. The net asset
value per share is determined by dividing the net asset value of the fund by the
number of shares outstanding.
OFFERING PRICE - The public offering price is based on the Net Asset Value per
share and includes the 3% sales charge.
PROSPECTUS - The prospectus for the Fund dated March 1, 1996, as amended October
1, 1996, as may be amended from time to time
RESOURCES - Franklin Resources, Inc.
SAI - Statement of Additional Information
SEC - U.S. Securities and Exchange Commission
SECURITIES DEALER - A financial institution which, either directly or through
affiliates, has an agreement with Distributors to handle customer orders and
accounts with the Fund. This reference is for convenience only and does not
indicate a legal conclusion of capacity.
TEMPLETON FUNDS - 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
U.S. - United States
WE/OUR/US - Unless a different meaning is indicated by the context, these terms
refer to the Fund and/or Investor Services, Distributors, or another
wholly-owned subsidiary of Resources.
FRANKLIN TEMPLETON
GERMAN GOVERNMENT
BOND FUND
STATEMENT OF ADDITIONAL INFORMATION
MARCH 1, 1996, AS AMENDED OCTOBER 1, 1996
777 MARINERS ISLAND BLVD., P.O. BOX 7777
SAN MATEO, CA 94403-7777 1-800/DIAL BEN
TABLE OF CONTENTS
How Does the Fund Invest Its Assets?.........................
Investment Restrictions......................................
Potential Benefits of Investing
in German Government Obligations
Officers and Trustees............................
Investment Advisory and Other Services.......................
How Does the Fund Buy Securities For Its Portfolio?..........
How Do I Buy, Sell and Exchange Shares?......................
How Are Fund Shares Valued?..................................
Additional Information on Distributions and Taxes............
The Fund's Underwriter.......................................
How Does the Fund Measure Performance?.......................
Miscellaneous Information....................................
Financial Statements.........................................
Useful Terms and Definitions.................................
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When reading this SAI, you will see certain terms in capital
letters. This means the term is explained under "Useful Terms
and Definitions."
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The Franklin Templeton German Government Fund (the "Fund") is a
nondiversified series of Franklin Templeton Global Trust (the "Trust"), an
open-end management investment company. The Fund's investment objective is
total return over the long term. Total return consists of a combination of
interest income, capital appreciation and currency gains. The Fund seeks to
achieve its objective by investing in a managed portfolio of German
government bonds.
The Prospectus, dated March 1, 1996, as amended October 1, 1996, as may be
amended from time to time, contains the basic information you should know
before investing in the Fund. For a free copy, call 1-800/DIAL BEN or write
the Fund at the address shown.
THIS 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 FUND, AND SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS.
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MUTUAL FUNDS, ANNUITIES, AND OTHER INVESTMENT PRODUCTS:
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ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY OF THE U.S. GOVERNMENT;
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ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY ANY
BANK;
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ARE SUBJECT TO INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
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HOW DOES THE FUND INVEST ITS ASSETS?
The following provides more detailed information about some of the securities
the Fund may buy and its investment policies. You should read it together
with the section in the Fund's prospectus entitled "How Does the Fund Invest
Its Assets?"
INVESTING IN FOREIGN SECURITIES
Foreign securities markets generally are not as developed or efficient as
those in the 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 the 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 Managers to be of comparable quality to a triple A
rated instrument.
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 comparable quality 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 Investment Managers 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 the 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. You should realize that the use of forward contracts does
not eliminate fluctuations in the underlying prices of the securities.
Forward contracts simply establish a rate of exchange that the Fund can
achieve at some future point in time. Additionally, although forward
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 you 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.
ILLIQUID INVESTMENTS. The Board has authorized the Fund to invest in
restricted securities where the investment is consistent with the Fund's
investment objective and has authorized these securities to be considered
liquid to the extent the Fund's Managers determine that there is a liquid
institutional or other market for these securities, for example, restricted
securities which may be freely transferred among qualified institutional
buyers pursuant to Rule 144A under the 1933 Act and for which a liquid
institutional market has developed. The Board reviews any determination by
the Managers to treat a restricted security as liquid on a quarterly basis,
including the Managers' assessment of current trading activity and the
availability of reliable price information. In determining whether a
restricted security is properly considered a liquid security, the Managers
and the Board will take into account the following factors: (i) the frequency
of trades and quotes for the security; (ii) the number of dealers willing to
buy or sell the security and the number of other potential purchasers; (iii)
dealer undertakings to make a market in the security; and (iv) the nature of
the security and the nature of the marketplace trades (e.g., the time needed
to dispose of the security, the method of soliciting offers and the mechanics
of transfer). To the extent a Fund invests in restricted securities that are
deemed liquid, the general level of illiquidity in the applicable Fund may be
increased if qualified institutional buyers become uninterested in purchasing
these securities or the market for these securities contracts.
INVESTMENT RESTRICTIONS
The Fund has adopted the following restrictions as fundamental policies.
These restrictions may not be changed without the approval of a majority of
the outstanding voting securities of the Fund. Under the 1940 Act, this means
the approval of (i) more than 50% of the outstanding shares of the Fund or
(ii) 67% or more of the shares of the Fund present at a shareholder meeting
if more than 50% of the outstanding shares of the Fund are represented at the
meeting in person or by proxy, whichever is less. 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 331/3% 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 331/3% 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. 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.
7. 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.
8. 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.
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) (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.
10. Invest in companies for the purpose of exercising control.
11. Invest in securities of other investment companies.
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.
13. 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.
14. 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 met at the time of investment, a later
increase or decrease in the percentage due to a change in value of portfolio
securities or the amount of assets will not be considered a violation of any
of the foregoing restrictions.
POTENTIAL BENEFITS OF INVESTING
IN GERMAN GOVERNMENT OBLIGATIONS
The following provides more detailed information than than included under
"How Does the Fund Invest Its Assets?" in the Prospectus.
As a general principle, the Managers 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. If you are anticipating a general decline in German interest rates,
you 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. If you are anticipating appreciation of the German
mark against the U.S. dollar, you 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, you 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, currency diversification of your portfolio can work to your benefit
or detriment, depending on the future movement of currency exchange rates,
among other things.
OFFICERS AND TRUSTEES
The Board has the responsibility for the overall management of the Fund,
including general supervision and review of its investment activities. The
Board, in turn, elects the officers of the Fund who are responsible for
administering the Fund's day-to-day operations. The affiliations of the
officers and Board members and their principal occupations for the past five
years are shown below. Members of the Board who are considered "interested
persons" of the Fund under the 1940 Act are indicated by an asterisk (*).
POSITIONS AND OFFICES PRINCIPAL OCCUPATION
NAME, AGE AND ADDRESS WITH THE TRUST DURING THE 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
Managing Director, Templeton Worldwide, Inc; from November 1993 to present,
Executive Vice President, Frankin Institutional Services Corporation; from
January 1995 to present, Senior Vice President of Templeton Franklin
Investment Services, Inc.; from February 1992 to November 1993, 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 (38)
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 & General Counsel, 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 table above shows the officers and Board members who are affiliated with
Distributors and Advisers. Nonaffiliated members of the Board are currently
paid $800 per month plus $800 per meeting attended] As shown above, some of
the nonaffiliated Board members also serve as directors, trustees or managing
general partners of other investment companies in the Franklin Templeton
Group of Funds. They may receive fees from these funds for their services.
The following table provides the total fees paid to nonaffiliated Board
members Trust and by other funds in the Franklin Templeton Group of Funds.
NUMBER OF BOARDS IN
THE FRANKLIN
TOTAL FEES RECEIVED TEMPLETON GROUP OF
TOTAL FEES FROM THE FRANKLIN FUNDS ON WHICH EACH
RECEIVED FROM TEMPLETON GROUP OF SERVES***
THETRUST FUNDS**
NAME
Frank H. Abbott, III....... $5,000 $162,420 31
Harris J. Ashton........... 5,000 327,925 56
David K. Eiteman........... 3,400 2,400 1
S. Joseph Fortunato........ 5,000 344,745 58
David Garbellano........... 5,000 146,100 30
Gerald R. Healy............ 4,200 4,000 1
David P. Kraus............. 5,000 4,800 1
Frank W.T. LaHaye.......... 5,000 143,200 26
Gordon S. Macklin.......... 5,000 321,525 53
*For the fiscal year ended October 31, 1995.
**For the calendar year ended December 31, 1995.
***We base the number of boards on the number of registered investment
companies in the Franklin Templeton Group of Funds. This number does not
include the total number of series or funds within each investment company
for which the Board members are responsible. The Franklin Templeton Group of
Funds currently includes 60 registered investment companies, with
approximately 166 U.S. based funds or series.
Nonaffiliated members of the Board 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 Board member received any other
compensation, including pension or retirement benefits, directly or
indirectly from the Fund or other funds in the Franklin Templeton Group of
Funds. Certain officers or Board members who are shareholders of Resources
may be deemed to receive indirect remuneration by virtue of their
participation, if any, in the fees paid to its subsidiaries.
As of July 29, 1996 the officers and trustees, as a group, owned of record
and beneficially approximately 978 shares, or less than 1% of the total
outstanding shares of the Fund. Many of the Fund'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.
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT MANAGER AND SERVICES PROVIDED. The Fund's investment manager is
Advisers. Advisers provides investment research and portfolio management
services, including the selection of securities for the Fund to buy, hold or
sell and the selection of brokers through whom the Fund's portfolio
transactions are executed. Advisers' activities are subject to the review and
supervision of the Board to whom Advisers renders periodic reports of the
Fund's investment activities.
Advisers provides office space and furnishings, facilities and equipment
required for managing the business affairs of the Fund. Advisers also
maintains all internal bookkeeping, clerical, secretarial and administrative
personnel and services and provides certain telephone and other mechanical
services. Advisers is covered by fidelity insurance on its officers,
directors and employees for the protection of the Fund.
Advisers acts as investment manager or administrator to 36 U.S. registered
investment companies with 124 separate series. Advisers may give advice and
take action with respect to any of the other funds it manages, or for its own
account, that may differ from action taken by Advisers on behalf of the Fund.
Similarly, with respect to the Fund, Advisers is not obligated to recommend,
buy or sell, or to refrain from recommending, buying or selling any security
that Advisers and access persons, as defined by the 1940 Act, may buy or sell
for its or their own account or for the accounts of any other fund. Advisers
is not obligated to refrain from investing in securities held by the Fund or
other funds that it manages or administers. Of course, any transactions for
the accounts of Advisers and other access persons will be made in compliance
with the Fund's Code of Ethics.
SUBADVISOR. Templeton Investment Counsel, Inc.("TICI") is the Fund's
subadvisor pursuant to a contract between TICI and Advisers on behalf of the
Fund. TICI, is an affiliate of Templeton Worlwide, Inc. and an indirect
wholly-owned subsidiary of Resources. TICI, a Florida corporation whose
principal business address is 500 East Broward Boulevard, Suite 2100, Fort
Lauderdale, Florida 33394-3091, currently acts as either investment manager
or subadvisor for 20 investment companies (36 separate series).
Pursuant to the subadvisory agreement between Advisers and TICI, and subject
to the overall policies, control, direction and review of the Board and to
the instructions and supervision of Advisers, TICI 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.
MANAGEMENT FEES. Under its management agreement, the Fund pays Advisers a
management 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. TICI receives a fee from Advisers equal to an annual
rate of 0.25% of the value of the average daily net assets of the Fund. This
fee is not paid by the Fund.
The management fee will be reduced as necessary to comply with the most
stringent limits on Fund expenses of any state where the Fund offers its
shares. Currently, the most restrictive limitation on a fund's allowable
expenses for each fiscal year, as a percentage of its average net assets, is
2.5% of the first $30 million in assets, 2% of the next $70 million, and 1.5%
of assets over $100 million. Expense reductions have not been necessary based
on state requirements.
Advisers has agreed in advance to waive or limit its management fees in order
to limit the expenses of the Fund to 1.25% of its average monthly net assets.
For the fiscal year ended April 30, 1994, the period ended October 31, 1994
and the fiscal year ended October 31, 1995, management fees, before any
advance waiver, were $35,400, $35,908, and $97,759, respectively. Management
fees paid by the Fund for the same periods were $0, $0 and $91,422,
respectively. Management fees paid by the Fund for the six-month period ended
April 30, 1996 was $66,305.
MANAGEMENT AGREEMENT. The management agreement is in effect until [].
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 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 Board or by a vote of the
holders of a majority of the 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.
SHAREHOLDER SERVICING AGENT. Investor Services, a wholly-owned subsidiary of
Resources, is the Fund's shareholder servicing agent 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.
CUSTODIANS. Bank of New York, Mutual Funds Division, 90 Washington Street,
New York, New York 10286, acts as custodian of the securities and other
assets of the Fund. Bank of America NT & SA, 555 California Street, 4th
Floor, San Francisco, California 94104, acts as custodian for cash received
in connection with the purchase of Fund shares. 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.
AUDITORS. Coopers & Lybrand L.L.P., 333 Market Street, San Francisco,
California 94105, are the Fund'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 Fund included in the Trust's
Annual Report to shareholders for the fiscal year ended October 31, 1995.
PRIOR SERVICES. 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 advisor.
HOW DOES THE FUND BUY SECURITIES FOR ITS PORTFOLIO?
The selection of brokers and dealers to execute transactions in the Fund's
portfolio is made by Advisers in accordance with criteria set forth in the
management agreement and any directions that the Board may give. Under the
subadvisory agreement, Advisers may delegate to TICI the authority to select
securities dealers to execute portfolio transactions for the Fund.
When placing a portfolio transaction, the Managers seek to obtain prompt
execution of orders at the most favorable net price. When portfolio
transactions are done on a securities exchange, the amount of commission paid
by the Fund is negotiated between the Managers and the broker executing the
transaction. 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 the transactions. These opinions
are based on, among others, the experience of these individuals in the
securities industry and information available to them about the level of
commissions being paid by other institutional investors of comparable size.
The Managers will ordinarily place orders to buy and sell over-the-counter
securities on a principal rather than agency basis with a principal market
maker unless, in the opinion of the Managers, 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.
The amount of commission is not the only factor the Managers consider in the
selection of a broker to execute a trade. If the Managers believe it is in
the Fund's best interest, the Managers may place portfolio transactions with
brokers who provide the types of services described below, even if it means
the Fund 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 Managers, 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 Managers in carrying
out its responsibilities to the Fund, or when it is otherwise in the best
interest of the Fund to do so, whether or not such services may also be
useful to the Managers in advising other clients.
When the Managers believe several brokers are equally able to provide the
best net price and execution,they may decide to execute transactions through
brokers who provide quotations and other services to the Fund, in an amount
of total brokerage as may reasonably be required in light of these services.
Specifically, these services may include providing the quotations necessary
to determine the Fund's Net Asset Value, as well as research, statistical and
other data.
It is not possible to place a dollar value on the special executions or on
the research services received by the Managers from dealers effecting
transactions in portfolio securities. The allocation of transactions in order
to obtain additional research services permits the Managers 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 Managers and their
affiliates may use this research and data in their investment advisory
capacities with other clients. If the Fund's officers are satisfied that the
best execution is obtained, the sale of Fund shares may also be considered a
factor in the selection of broker-dealers to execute the Fund's portfolio
transactions.
Because Distributors is a member of the National Association of Securities
Dealers, it may sometimes receive 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 Advisers
will be reduced by the amount of any fees received by Distributors in cash,
less any costs and expenses incurred in connection with the tender.
If purchases or sales of securities of the Fund and one or more other
investment companies or clients supervised by the Managers are considered at
or about the same time, transactions in these securities will be allocated
among the several investment companies and clients in a manner deemed
equitable to all by the Managers, taking into account the respective sizes of
the funds and the amount of securities to be purchased or sold. In some cases
this procedure could 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, the fiscal year ended October 31, 1995 and the six-month period ended
April 30, 1996, 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, SELL AND EXCHANGE SHARES?
ADDITIONAL INFORMATION ON BUYING SHARES
The Fund continuously offers its shares through Securities Dealers who have
an agreement with Distributors. Securities Dealers may at times receive the
entire sales charge. A Securities Dealer who receives 90% or more of the
sales charge may be deemed an underwriter under the Securities Act of 1933,
as amended.
Securities laws of states where the Fund offers its shares may differ from
federal law. Banks and financial institutions that sell shares of the Fund
may be required by state law to register as Securities Dealers. Financial
institutions or their affiliated brokers may receive an agency transaction
fee in the percentages indicated in the table under "How Do I Buy Shares? -
Quantity Discounts" in the Prospectus.
When you buy shares, if you submit a check or a draft that is returned unpaid
to the Fund we may impose a $10 charge against your account for each returned
item.
Under agreements with certain banks in Taiwan, Republic of China, the Fund's
shares are available to these banks' trust accounts without a sales charge.
The banks may charge service fees to their customers who participate in the
trusts. A portion of these 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 Fund may be offered to investors in Taiwan through securities
advisory firms known locally as Securities Investment Consulting Enterprises.
In conformity with local business practices in Taiwan, shares may be offered
with the following schedule of sales charges:
SIZE OF PURCHASE - U.S. DOLLARS SALES CHARGE
Under $30,000 3%
$30,000 but less than $100,000 2%
$100,000 but less than $400,000 1%
$400,000 or more 0%
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 to $2 million, plus 0.60% on sales over $2 million to $3 million,
plus 0.50% on sales over $3 million to $50 million, plus 0.25% on sales over
$50 million to $100 million, plus 0.15% on sales over $100 million.
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 by certain retirement plans pursuant to a sales
charge waiver, as discussed in the Prospectus: 1% on sales of $500,000 to $2
million, plus 0.80% on sales over $2 million to $3 million, plus 0.50% on
sales over $3 million to $50 million, plus 0.25% on sales over $50 million to
$100 million, plus 0.15% on sales over $100 million. 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 dealer if shares are sold 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.]
These breakpoints are reset every 12 months for purposes of additional
purchases.
LETTER OF INTENT. You may qualify for a reduced sales charge when you buy
Fund shares, as described in the Prospectus. At any time within 90 days after
the first investment that you want to qualify for a reduced sales charge, you
may file with the Fund a signed shareholder application with the Letter of
Intent 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 on
purchases in more than one Franklin Templeton Fund 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
during the 13 month period, except in the case of certain retirement plans,
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 on the amount actually purchased
(less redemptions) during the period. The upward adjustment does not apply to
certain retirement plans. If you execute a Letter prior to a change in the
sales charge structure of the Fund, you may 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 the Fund registered in your
name until you fulfill the Letter. This policy of reserving shares does not
apply to certain retirement plans. If 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 as you direct. If
total purchases, less redemptions, exceed the amount specified under the
Letter and is an amount that 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 the purchases had been made at a single time. Upon remittance,
the reserved shares held for your account will be deposited to an account in
your name or delivered to you or as you direct. If within 20 days after
written request the 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 certain retirement plans, 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.
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 the "ex-dividend date"). The
processing date for the reinvestment of dividends may vary and does not
affect the amount or value of the shares acquired.
ADDITIONAL INFORMATION ON EXCHANGING SHARES
If you request the exchange of the total value of your account, declared but
unpaid income dividends and capital gain distributions will be exchanged into
the new fund and will be invested at Net Asset Value. Backup withholding and
information reporting may apply. Information regarding the possible tax
consequences of an exchange is included in the tax section in this SAI and in
the Prospectus.
If a substantial number of shareholders should, within a short period, sell
their shares of the Fund under the exchange privilege, the Fund might have to
sell 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
occurs, it is the Fund's general policy to initially invest this money in
U.S. short-term, interest-bearing money market instruments unless it is
believed that attractive investment opportunities consistent with the Fund's
investment objective exist immediately. This money will then be withdrawn
from the U.S. short-term money market instrumentsand invested in portfolio
securities in as orderly a manner as is possible when attractive investment
opportunities arise.
The proceeds from the sale of shares of an investment company are generally
not available until the fifth business day following the sale. The funds you
are seeking to exchange into may delay issuing shares pursuant to an exchange
until that fifth business day. The sale of Fund shares to complete an
exchange will be effected at Net Asset Value at the close of business on the
day the request for exchange is received in proper form. Please see "May I
Exchange Shares for Shares of Another Fund?" in the Prospectus.
ADDITIONAL INFORMATION ON SELLING SHARES
SYSTEMATIC WITHDRAWAL PLAN. 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.
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. 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.
The Fund may discontinue a systematic withdrawal plan by notifying you in
writing and will automatically discontinue 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.
THROUGH YOUR SECURITIES DEALER. If you sell shares through your Securities
Dealer, it is your dealer's responsibility to transmit the order to the Fund
in a timely fashion. Any loss to you resulting from your dealer's failure to
do so must be settled between you and your Securities Dealer.
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 the 90-day period. This
commitment is irrevocable without the prior approval of the SEC. In the case
of redemption requests in excess of these amounts, the Board reserves the
right to make payments in whole or in part in securities or other assets of
the Fund, 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 these
circumstances, the securities distributed would be valued at the price used
to compute the Fund's net assets and you may incur brokerage fees in
converting the securities to cash. The Fund does not intend to redeem
illiquid securities in kind. If this happens, however, you may not be able to
recover your investment in a timely manner.
GENERAL INFORMATION
If dividend checks are returned to the Fund marked "unable to forward" by the
postal service, we will consider this a request by you to change your
dividend option to reinvest all distributions. The proceeds will be
reinvested in additional shares at Net Asset Value until we receive new
instructions.
If mail is returned as undeliverable or we are unable to locate you or verify
your current mailing address, we may deduct the costs of our efforts to find
you from your account. These costs may include a percentage of the account
when a search company charges a percentage fee in exchange for its location
services.
All checks, drafts, wires and other payment mediums used to buy or sell
shares of the Fund must be denominated in U.S. dollars. We may, in our sole
discretion, either (a) reject any order to buy or sell 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.
SPECIAL SERVICES. The Franklin Templeton Institutional Services Department
provides specialized services, including recordkeeping, for institutional
investors. The cost of these services is not borne by the Fund.
Investor Services may pay certain financial institutions that maintain
omnibus accounts with the Fund on behalf of numerous beneficial owners for
recordkeeping operations performed with respect to such owners. For each
beneficial owner in the omnibus account, the Fund may reimburse Investor
Services an amount not to exceed the per account fee that the Fund normally
pays Investor Services. These financial institutions may also charge a fee
for their services directly to their clients.
Certain shareholder servicing agents may be authorized to accept your
transaction request.
HOW ARE FUND SHARES VALUED?
We calculate the Net Asset Value per share 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.
Over-the-counter portfolio securities are valued within the range of the most
recent quoted bid and ask prices. Portfolio securities that 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 Advisers.
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, options are valued within the
range of the current closing bid and ask prices if the valuation is believed
to fairly reflect the contract's market value.]
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. The 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
prices is used. Occasionally events that 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 affecting the values of these foreign securities occur during this
period, the securities will be valued in accordance with procedures
established by the Board.
Generally, trading in U.S. government securities and money market instruments
is substantially completed each day at various times before the scheduled
close of the Exchange. The value of these securities used in computing the
Net Asset Value of the Fund's shares is determined as of such times.
Occasionally, events affecting the values of these securities may occur
between the times at which they are determined and the scheduled close of the
Exchange that will not be reflected in the computation of the Fund's Net
Asset Value. If events materially affecting the values of these securities
occur during this period, the securities will be valued at their fair value
as determined in good faith by the Board].
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
the Board, the Fund may utilize a pricing service, bank or Securities Dealer
to perform any of the above described functions.
ADDITIONAL INFORMATION ON DISTRIBUTIONS AND TAXES
DISTRIBUTIONS
You may receive two types of distributions from the Fund:
1. INCOME DIVIDENDS. The Fund receives income generally 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 capital loss carry forward or
post October loss deferral) 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
capital gains from the prior fiscal year. 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.
TAXES
As stated in the Prospectus, the Fund has elected to be treated] as a
regulated investment company under Subchapter M of the Code. The Board
reserves the right not to maintain the qualification of the Fund as a
regulated investment company if it determines this course of action to be
beneficial to shareholders. In that 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 taxable 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 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 Funds
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.
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 mark-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 you 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.
Income received by the Fund from sources within foreign countries may be
subject to withholding and other income or similar taxes imposed by such
countries. If more than 50% of the value of the Fund's total assets at the
close of its taxable year consist of securities of foreign corporations, the
Fund will be eligible and intends to elect to "pass through" to the Fund's
shareholders the amount of foreign taxes paid by the Fund. Pursuant to this
election, you will be required to include in gross income (in addition to
taxable dividends actually received) your pro rata share of foreign taxes
paid by the Fund, and will be entitled either to deduct (as an itemized
deduction) his pro rata share of foreign income and similar taxes in
computing your taxable income or to use it as a foreign tax credit against
U.S. Federal income tax liability, subject to limitations. No deduction for
foreign taxes may be subject to limitations. No deductions for foreign taxes
may be claimed by you if you do not itemize deductions, but you may be
eligible to claim the foreign tax credit (see below). You will be notified
within 60 days after the close of the Fund's taxable year whether the foreign
taxes paid by the fund will be "pass through" for that year.
Generally, a credit for foreign taxes is subject to the limitation that it
may not exceed your U.S. tax attributable to foreign source taxable income.
For this purpose, if the pass-through election is made, the source of the
Fund's income flows through to you. With respect to the Fund, gains from the
sales of securities will be treated as derived from U.S. sources and certain
currency fluctuation gains, including fluctuation gains from foreign
currency-denominated debt securities, receivable and payables, will be
treated as ordinary income derived from U.S. sources. The limitation on the
foreign tax credit is applied separately to foreign source passive income (as
defined for purposes of the foreign tax credit), including the foreign source
passive income passed through by the Fund. You may be unable to claim a
credit for the full amount of your proportionate share of the foreign taxes
paid by the Fund. Foreign taxes may not be deducted in computing alternative
minimum taxable income and the foreign tax credit can be used to offset only
90% of the alternative minimum tax (as computed under the Code for purposes
of this limitation) imposed on corporations and individuals. If the Fund is
not eligible to make the election to "pass through" to you its foreign taxes,
the foreign income taxes it pays generally will reduce investment company
taxable income and the distributions by the Fund will be treated as U.S.
source income.
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 the 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 not
to be 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. You are
advised to consult your own tax advisors with respect to the particular tax
consequences to you of an investment in the Fund.
THE FUND'S UNDERWRITER
THE FUND'S UNDERWRITER
Pursuant to an underwriting agreement, Distributors acts as principal
underwriter in a continuous public offering for shares of the Fund. The
underwriting agreement will continue in effect for successive annual periods
if its continuance is specifically approved at least annually by a vote of
the Board 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 Board
members who are not parties to the underwriting agreement or interested
persons of any such party (other than as members of the Board), 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 the 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.
In connection with the offering of shares of the Fund, aggregate underwriting
commissions for the six-month period ended October 31, 1994, the fiscal year
ended October 31, 1995 and the six-month period ended April 30, 1996 were
$30,522, $256,910 and 79,450, respectively. After allowances to dealers
Distributors retained $232 and $28,562 and $9,183 in net underwriting
discount and commissions for the respective periods. Distributors may be
entitled to reimbursement under the Fund's Rule 12b-1 plan, as discussed
below. Except as noted, Distributors received no other compensation from the
Fund for acting as underwriter.
THE FUND'S RULE 12B-1 PLAN
The Fund has adopted a distribution plan or "Rule 12b-1 plan" pursuant to
Rule 12b-1 of the 1940 Act. Under the plan, the Fund may pay up to a maximum
of 0.25% per year of its average daily net assets, payable quarterly, for
expenses incurred in the promotion and distribution of its shares.
In addition to the payments that Distributors or others are entitled to under
the plan, the plan also provides that to the extent the Fund, Advisers or
Distributors or other parties on behalf of the Fund, Advisers or Distributors
make payments that are deemed to be 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. These 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 these services, you would be permitted to remain a shareholder of
the Fund, and alternate means for continuing the servicing would be sought.
In this 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 plan has been approved in accordance with the provisions of Rule 12b-1.
The plan is renewable annually by a vote of the Board, including a majority
vote of the Board members who are not interested persons of the Fund 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 Board members be done by the
non-interested members of the Board. The plan and any related agreement may
be terminated at any time, without penalty, by vote of a majority of the
non-interested Board members 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 Advisers, 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 members of the Board, 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 and the six-month period ended
April 30, 1996 the amounts paid by the Fund pursuant to the Plan for the
respective periods was $32,842 and $20,113, all of which was paid to
broker-dealers.
HOW DOES THE FUND MEASURE PERFORMANCE?
Performance quotations are subject to SEC rules. 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 total return quotations used by the
Fund are based on the standardized methods of computing performance mandated
by the SEC. If a Rule 12b-1 plan is adopted, performance figures reflect fees
from the date of the plan's implementation. An explanation of these and other
methods used by the Fund to compute or express performance follows.
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.
TOTAL RETURN
AVERAGE ANNUAL TOTAL RETURN. Average annual total return is determined by
finding the average annual 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, and income dividends and capital gain distributions
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 to the
sales charge structure, historical performance information will be restated
to reflect the maximum front-end sales charge currently in effect.
When considering the Fund's average annual total return quotations, you
should keep in mind that the maximum front-end 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. This charge
will affect actual performance less the longer you retain your investment in
the Fund. The Fund's average annual total return The Fund's average annual
compounded rates of return for the one-year period ended on October 31, 1995,
was 14.73% and for the period from inception of the Fund (12/31/92) to
October 31, 1995 was 11.45%.
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)
CUMULATIVE TOTAL RETURN. The Fund may also quote its cumulative total return,
in addition to its average annual total return. These quotations are computed
the same way, except the cumulative total return 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 Fund's
cumulative total return for the one-year period ended October 31, 1995 was
14.73% and for the period from inception of the Fund to October 31, 1995 was
35.89%.
YIELD
CURRENT YIELD. Current yield shows the income per share earned by the Fund.
It is calculated 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 Fund's yield for the 30-day period ended on October 31, 1995 was 4.34%.
This figure was 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
shareholders of the Fund. Amounts paid to shareholders are reflected in the
quoted current distribution rate. The current distribution rate is usually
computed by annualizing the dividends paid per share during a certain period
and dividing that amount by the current maximum Offering Price. The current
distribution rate differs from the current yield computation because it may
include distributions to shareholders from sources other than 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 show the Fund's volatility or risk.
Measures of volatility or risk are generally used to compare the Fund's Net
Asset Value or performance 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 an index considered representative of the types of securities
in which the fund invests. 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 buy shares of the Fund without a sales
charge, sales literature about the Fund may quote a current distribution
rate, yield, cumulative 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 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.
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
advisors 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 may satisfy your
investment objective, advertisements and other materials about the Fund 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. These
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 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 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, 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 the Fund may include a
discussion of certain attributes or benefits to be derived from an investment
in the Fund. The advertisements or information may include symbols,
headlines, or other material that highlights or summarizes the information
discussed in more detail in the communication.
Advertisements or information may also compare the Fund's performance to the
return on CDs or other investments. You 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 CD 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 that 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. CDs 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 comparisons of performance, you should keep in mind that the
composition of the investments in the reported indices and averages is not
identical to the 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 the Fund to calculate its figures. In
addition, there can be no assurance that the Fund will continue its
performance as compared to these other averages.
MISCELLANEOUS INFORMATION
The Fund may help you achieve various investment goals such as accumulating
money for retirement, saving for a down payment on a home, college costs and
other long-term goals. The Franklin College Costs Planner may help 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 the Fund cannot guarantee that these goals will be met.
The Dalbar Surveys, Inc. broker-dealer survey has ranked Franklin number one
in service quality for five of the past eight years.
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.
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.
In the event of disputes involving multiple claims of ownership or authority
to control your 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 IRS in response
to a Notice of Levy.
FINANCIAL STATEMENTS
The audited financial statements contained in the Annual Report to
Shareholders of the Trust, for the fiscal year ended October 31, 19995,
including the auditors' report, and the unaudited financial statements
contained in the Semiannual Report to Shareholders of the Trust for the
six-month period ended April 30, 1996, are incorporated herein by reference.
USEFUL TERMS AND DEFINITIONS
1940 ACT - Investment Company Act of 1940, as amended
ADVISERS - Franklin Advisers, Inc., the Fund's investment manager
BOARD - The Board of Trustees of the Trust
CD - Certificate of deposit
CLASS I AND CLASS II - Certain funds in the Franklin Templeton Funds offer
two classes of shares, designated "Class I" and "Class II." The two classes
have proportionate interests in the same portfolio of investment securities.
They differ, however, primarily in their sales charge structures and Rule
12b-1 plans. Because the Fund's sales charge structure and Rule 12b-1 plan
are similar to those of Class I shares, shares of the Fund are considered
Class I shares for redemption, exchange and other purposes.
CODE - Internal Revenue Code of 1986, as amended
DISTRIBUTORS - Franklin/Templeton Distributors, Inc., the Fund's principal
underwriter
EXCHANGE - New York Stock Exchange
FRANKLIN FUNDS - The mutual funds in the Franklin Group of FundsAE except
Franklin Valuemark Funds and the Franklin Government Securities Trust
FRANKLIN TEMPLETON FUNDS - The Franklin Funds and the Templeton Funds
FRANKLIN TEMPLETON GROUP - Franklin Resources, Inc., a publicly owned holding
company, and its various subsidiaries
FRANKLIN TEMPLETON GROUP OF FUNDS - All U.S. registered mutual funds in the
Franklin Group of FundsAE and the Templeton Group of Funds
INVESTOR SERVICES - Franklin/Templeton Investor Services, Inc., the Fund's
shareholder servicing and transfer agent
IRS - Internal Revenue Service
LETTER - Letter of Intent
MANAGERS - Advisers and TICI, the Fund's subadvisor
NET ASSET VALUE (NAV) - The value of a mutual fund is determined by deducting
the fund's liabilities from the total assets of the portfolio. The net asset
value per share is determined by dividing the net asset value of the fund by
the number of shares outstanding.
OFFERING PRICE - The public offering price is based on the Net Asset Value
per share and includes the 3% sales charge.
PROSPECTUS - The prospectus for the Fund dated March 1, 1996, as amended
October 1, 1996, as may be amended from time to time
RESOURCES - Franklin Resources, Inc.
SAI - Statement of Additional Information
SEC - U.S. Securities and Exchange Commission
SECURITIES DEALER - A financial institution which, either directly or through
affiliates, has an agreement with Distributors to handle customer orders and
accounts with the Fund. This reference is for convenience only and does not
indicate a legal conclusion of capacity.
TEMPLETON FUNDS - 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
U.S. - United States
WE/OUR/US - Unless a different meaning is indicated by the context, these
terms refer to the Fund and/or Investor Services, Distributors, or another
wholly-owned subsidiary of Resources.
Franklin Templeton Global Trust
File Nos. 33-01212
811-4450
FORM N-1A
PART C
Other Information
Item 24 Financial Statements and Exhibits
a)(1)Unaudited Financial Statements incorporated herein by reference to the
Registrant's predecessor Semi-Annual Report to Shareholders dated April 30,
1996, as filed with the SEC electronically on Form Type N-30D on
July 10, 1996.
(i) Statement of Investments in Securities and Net Assets -
April 30, 1996
(ii) Statement of Assets and Liabilities - April 30, 1996
(iii) Statements of Operations-for the six months ended
April 30, 1996
(iv) Statements of Changes in Net Assets-for the six months ended April
30, 1996 and the year ended October 31, 1995
(v) Notes to Financial Statements
(2) Financial Statements for the fiscal year ended October 31, 1995
incorporated herein by reference to the Registrant's predecessor Annual
Report to Shareholders as filed with the SEC electronically on Form Type
N-30D on December 27, 1995.
(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 April 31, 1995
(vi) Notes to Financial Statements
b) Exhibits:
The following exhibits, where applicable, are filed herewith, with the
exceptions of Exhibits 6(ii), 8(i), 8(ii), 8(iii), 8(iv), 8(v), 14(i), and 16(i)
which are incorporated by reference.
(1) Copies of the charter as now in effect;
(i) Certificate of Trust, dated May 14, 1996
(ii) Agreement and declaration of Trust, dated May 14, 1996
(2) copies of the existing By-Laws or instruments corresponding thereto;
(i) By-Laws
(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) Form of Management agreement between the Registrant and Franklin
Advisers, Inc.
(ii) Form of Subadvisory agreement on behalf of Registrant between
Franklin Advisers, Inc., and Templeton Investment Counsel, Inc.
(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) Form of Amended and Restated Distribution Agreement between the
Registrant and Franklin/Templeton Distributors, Inc.
(ii) Forms of Dealer Agreements between Franklin/Templeton
Distributors, Inc., and Securities Dealers
Registrant: Franklin Tax-Free Trust
Filing: Post-Effective Amendment No. 22 to Registration Statement
on Form N-1A
File No. 2-94222
Filing Date: March 14, 1996
(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
Filing: Post-Effective Amendment No. 14 to Registration Statement
on Form N-1A
File Nos. 33-01212 & 811-4450
Filing Date: December 29, 1995
(ii) Custody agreement between The Chase Manhattan Bank, N.A. and
Franklin/Templeton Global Trust dated November 15, 1993
Filing: Post-Effective Amendment No. 14 to Registration Statement
on Form N-1A
File Nos. 33-01212 & 811-4450
Filing Date: December 29, 1995
(iii)Copy of Custodian Agreements between Registrant and Citibank
Delaware:
1. Citicash Management ACH Customer Agreement
2. Citibank Cash Management Services Master Agreement
3. Short Form Bank Agreement - Deposits and Disbursements of
Funds
Registant: Franklin Asset Allocation Fund
Filing: Post-Effective Amendment No. 56 to Registration Statement
on Form N-1A
File No. 2-12647
Filing Date: May 17, 1996
(iv) Master Custody Agreement between Registrant and Bank of New York
dated February 16, 1996
Registrant: AGE High Income Fund
Filing: Post-Effective Amendment No. 35 to Registation Statement
on Form N-1A
File No. 2-30203
Filing Date: July 19, 1996
(v) Form of Terminal Link Agreement between Registrant and Bank of
New York dated February 16, 1996
Registrant: AGE High Income Fund
Filing: Post-Effective Amendment No. 35 to Registation Statement
on Form N-1A
File No. 2-30203
Filing Date: July 19, 1996
(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;
(i) Form of Subcontract for Administrative Services on behalf of
Registrant between Franklin Advisers, Inc., and Templeton Global
Investors, Inc.
(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
(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) Form of Distribution Plan pursuant to Rule 12b-1 between Registrant
and Franklin/Templeton Distributors, Inc.
(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
Filing: Post-Effective Amendment No. 14 to Registration Statement
on Form N-1A
File Nos. 33-01212 & 811-4450
Filing Date: December 29, 1995
(17) Power of Attorney
(i) Power of Attorney dated May 14, 1996
(ii) Certificate of Secretary dated May 14, 1996
(18) Copies of any plan entered into by Registrant pursuant to Rule 18f-3 under
the 1940 Act.
Not Applicable
ITEM 25 PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None
ITEM 26 NUMBER OF HOLDERS OF SECURITIES
As of June 30, 1996, 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 2,955
stated value $.01 per share
Hard Currency Fund 7,325
stated value $.01 per share
High Income Fund 1,090
stated value $.01 per share
German Government Fund 1,760
stated value $.01 per share
ITEM 27 INDEMNIFICATION
Reference is made to Section 2 of Article VII of Registrant By-Laws, which are
filed as an Exhibit hereto.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to Trustees, officers and controlling persons of the
Delaware Trust 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 Delaware Trust of
expenses incurred or paid by a Trustee, officer or controlling person of the
Delaware Trust 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 Delaware Trust 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(R).
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 Funds' 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 Asset Allocation Fund
Franklin California Tax-Free Income Fund, Inc.
Franklin California Tax-Free Trust
Franklin Custodian Funds, Inc.
Franklin Equity Fund
Franklin Federal Money Fund
Franklin Federal Tax-Free Income Fund
Franklin Gold Fund
Franklin 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 Real Estate Securities Trust
Franklin Strategic Mortgage Portfolio
Franklin Strategic Series
Franklin Tax-Advantaged High Yield Securities Fund
Franklin Tax-Advantaged International Bond Fund
Franklin Tax-Advantaged U.S. Government Securities
Fund Franklin Tax-Exempt Money Fund
Franklin Tax-Free Trust
Franklin Templeton Global Trust
Franklin Templeton International Trust
Franklin Templeton Money Fund Trust
Franklin Value Investors Trust
Institutional Fiduciary Trust
Franklin Templeton Japan Fund
Templeton American Trust, Inc.
Templeton Capital Accumulator Fund, Inc.
Templeton Developing Markets Trust
Templeton Funds, Inc.
Templeton Global Investment Trust
Templeton Global Opportunities Trust
Templeton Global Real Estate Securities Fund
Templeton Global Smaller Companies Fund, Inc.
Templeton Growth Fund, Inc.
Templeton Income Trust
Templeton Institutional Funds, 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 percent of the Delaware Trust'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 2nd day of August, 1996.
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: August 2, 1996
Frank H. Abbott, III* Trustee
Frank H. Abbott, III Dated: August 2, 1996
Harris J. Ashton* Trustee
Harris J. Ashton Dated: August 2, 1996
David K. Eiteman Trustee
David K. Eiteman Dated: August 2, 1996
S. Joseph Fortunato* Trustee
S. Joseph Fortunato Dated: August 2, 1996
David W. Garbellano* Trustee
David W. Garbellano Dated: August 2, 1996
Gerald R. Healy Trustee
Gerald R. Healy Dated: August 2, 1996
Kenneth V. Domingues* Principal Financial and
Kenneth V. Domingues Accounting Officer
Dated: August 2, 1996
Charles B. Johnson* Chairman of the Board and
Charles B. Johnson Trustee
Dated: August 2, 1996
Rupert H. Johnson, Jr.* Trustee
Rupert H. Johnson, Jr. Dated: August 2, 1996
David P. Kraus Trustee
David P. Kraus Dated: August 2, 1996
Frank W. T. LaHaye* Trustee
Frank W. T. LaHaye Dated: August 2, 1996
Gordon S. Macklin* Trustee
Gordon S. Macklin Dated: August 2, 1996
*By: /s/ Larry L. Greene
Larry L. Greene, Attorney-in-Fact
(pursuant to Power of Attorney filed herewith)
FRANKLIN TEMPLETON GLOBAL TRUST
REGISTRATION STATEMENT
EXHIBITS INDEX
EXHIBIT NO. DESCRIPTION LOCATION
EX-99.B1(i) Certificate of Trust dated May 14, 1996 Attached
EX-99.B1(ii) Agreement and Declaration of Trust dated Attached
May 14, 1996
EX-99.B2(i) By-Laws Attached
EX-99.B5(i) Form of Management Agreement between Attached
Registrant and Franklin Advisers, Inc.
EX-99.B5(ii) Form of Subadvisory agreement on behalf Attached
of Registrant between Franklin Advisers,
Inc., and Templeton Investment Counsel,
Inc.
EX-99.B6(i) Form of Amended and Restated Distribution Attached
Agreement between Registrant and
Franklin/Templeton Distributors, Inc.
EX-99.B6(ii) Forms of Dealer Agreements between *
Franklin/Templeton Distributors, Inc.,
and Securities Dealers
EX-99.B8(i) Custody Agreement between Registrant and *
Bank of America NT & SA dated November
12, 1993
EX-99.B8(ii) Custody Agreement between the Chase *
Manhattan Bank, N.A. and
Franklin/Templeton Global Trust Dated
November 15, 1993
EX-99.B8(iii) Copy of Custodian Agreements between *
Registrant and Citibank Delaware
EX-99.B8(iv) Form of Master Custody Agreement between *
Registrant and Bank of New York dated
February 16, 1996
EX-99.B8(v) Form of Terminal Link Agreement between *
Registrant and Bank of New York dated
February 16, 1996
EX-99.B9(i) Form of Subcontract for Administrative Attached
Services on behalf of Registrant between
Franklin Advisers, Inc., and Templeton
Global Investors, Inc.
EX-99.B11(i) Consent of Independent Auditors Attached
EX-99.B14(i) copy of model retirement plan *
EX-99.B15(i) Form of Distribution Plan pursuant to Attached
Rule 12b-1 between Registrant and
Franklin/Templeton Distributors, Inc.
EX-99.B16(i) Schedule for Computation of Performance *
Quotation
EX-99.B17(i) Power of Attorney dated May 14, 1996 Attached
EX-99.B17(ii) Certificate of Secretary dated May 14, Attached
1996
* Incorporated by Reference
CERTIFICATE OF TRUST
OF
FRANKLIN TEMPLETON GLOBAL TRUST
a Delaware Business Trust
THIS Certificate of Trust of the FRANKLIN TEMPLETON GLOBAL TRUST (the "Trust"),
dated as of this ____ day of ________________, 1996, is being duly executed and
filed, in order to form a business trust pursuant to the Delaware Business Trust
Act (the "Act"), Del. Code Ann. tit. 12, ss.ss.3801-3819.
1. NAME. The name of the business trust formed hereby is "FRANKLIN
TEMPLETON GLOBAL TRUST."
2. REGISTERED OFFICE AND REGISTERED AGENT. The Trust will become, prior to
the issuance of beneficial interests, a registered investment company under the
Investment Company Act of 1940, as amended. Therefore, in accordance with
section 3807(b) of the Act, the Trust has and shall maintain in the State of
Delaware a registered office and a registered agent for service of process.
(a) REGISTERED OFFICE. The registered office of the Trust in Delaware is
The Corporation Trust Company, 1209 Orange Street, Wilmington,
Delaware 19801.
(b) REGISTERED AGENT. The registered agent for service of process on the
Trust in Delaware is The Corporation Trust Company.
3. LIMITATION ON LIABILITY. Pursuant to section 3804 of the Act, in the
event that the Trust's governing instrument, as defined in section 3801(f) of
the Act, creates one or more series as provided in section 3806(b)(2) of the
Act, the debts, liabilities, obligations and expenses incurred, contracted for
or otherwise existing with respect to a particular series of the Trust shall be
enforceable against the assets of such series only, and not against the assets
of the Trust generally.
IN WITNESS WHEREOF, the Trustees named below do hereby execute this Certificate
of Trust as of the date first-above written.
/s/Frank H. Abbott, III /s/Gerald R. Healy
1045 Sansome Street 5917 Cleveland Street
San Francisco, CA 94111 Morton Grove, IL 60053
/s/Harris J. Ashton /s/Charles B. Johnson
Metro Center, 1 Station Place 777 Mariners Island Boulevard.
Stamford, CT San Mateo, CA 94404
/s/David K. Eiteman /s/Rupert H. Johnson, Jr.
HC2, Box 8076 777 Mariners Island Boulevard
Frazier Park, CA 93225 San Mateo, CA 94404
/s/S. Joseph Fortunato /s/David P. Kraus
Park Avenue at Morris County Bet Tzedek Legal Services
P.O. Box 1945 145 South Fairfax Avenue,
Morristown, NJ 07962-1945 Suite 200
Los Angeles, CA 90036-2166
/s/David W. Garbellano /s/Frank W.T. LaHaye
111 New Montgomery Street, #402 20833 Stevens Creek Boulevard,
San Francisco, CA 94105 Suite 102
Cupertino, CA 95014
/s/ Donald P. Gould /s/Gordon S. Macklin
777 Mariners Boulevard 8212 Burning Tree Road
San Mateo, CA 94404 Bethesda, MD 20817
AGREEMENT AND DECLARATION OF TRUST
of
FRANKLIN TEMPLETON GLOBAL TRUST
a Delaware Business Trust
Principal Place of Business:
777 Mariners Island Boulevard
San Mateo, California 94404
TABLE OF CONTENTS
Page
ARTICLE I....................................................................1
Name and Definitions..................................................1
Section 1. Name.................................................1
Section 2. Definitions..........................................1
(a) Trust...........................................1
(b) Trust Property..................................1
(c) Trustees........................................1
(d) Shares..........................................2
(e) Shareholder.....................................2
(f) Person..........................................2
(g) 1940 Act........................................2
(h) Commission and Principal
Underwriter....................................2
(i) Declaration of Trust............................2
(j) By-Laws.........................................2
(k) Interested Person...............................2
(1) Investment Manager..............................2
(m) Series..........................................2
ARTICLE II...................................................................2
Purpose of Trust.......................................................2
ARTICLE III..................................................................3
Shares.................................................................3
Section 1. Division of Beneficial Interest......................3
Section 2. Ownership of Shares..................................3
Section 3. Investments in the Trust.............................4
Section 4. Status of Shares and Limitation of
Personal Liability.................................4
Section 5. Power of Board of Trustees to Change
Provisions Relating to Shares......................4
Section 6. Establishment and Designation of
Shares.............................................5
(a) Assets Held with Respect to a Particular Series......5
(b) Liabilities Held with Respect to a Particular Series.6
(c) Dividends, Distributions, Redemptions, and Repurchases
6
(d) Voting...............................................7
(e) Equality.............................................7
(f) Fractions............................................7
(g) Exchange Privilege...................................7
(h) Combination of Series................................7
(i) Elimination of Series................................8
Section 7. Indemnification of Shareholders......................8
ARTICLE IV...................................................................8
The Board of Trustees..................................................8
Section 1. Number, Election and
Tenure.............................................8
Section 2. Effect of Death, Resignation, etc. of
a Trustee..........................................9
Section 3. Powers...............................................9
Section 4. Payment of Expenses by the Trust....................13
Section 5. Payment of Expenses by Shareholders.................13
Section 6. Ownership of Assets of the Trust....................13
Section 7. Service Contracts...................................14
ARTICLE V 15
Shareholders' Voting Powers and Meetings..............................15
Section 1. Voting Powers.......................................15
Section 2. Voting Power and Meetings...........................16
Section 3. Quorum and Required Vote............................16
Section 4. Action by Written Consent...........................17
Section 5. Record Dates........................................17
Section 6. Additional Provisions...............................17
ARTICLE VI 18
Net Asset Value, Distributions, and Redemptions.......................18
Section 1. Determination of Net Asset Value, Net
Income, and Distributions.........................18
Section 2. Redemptions and Repurchases.........................18
Section 3. Redemptions at the Option of the
Trust.............................................19
ARTICLE VII 19
Compensation and Limitation of Liability of Trustees..................19
Section 1. Compensation........................................19
Section 2. Indemnification and Limitation of
Liability.........................................19
Section 3. Trustee's Good Faith Action, Expert
Advice, No Bond or Surety.........................20
Section 4. Insurance...........................................20
ARTICLE VIII................................................................20
Miscellaneous.........................................................20
Section 1. Liability of Third Persons Dealing
with Trustees.....................................20
Section 2. Termination of Trust or Series......................20
Section 3. Merger and Consolidation............................21
Section 4. Amendments..........................................21
Section 5. Filing of Copies, References, Headings..............22
Section 6. Applicable Law......................................22
Section 7. Provisions in Conflict with Law or
Regulations.......................................22
Section 8. Business Trust Only.................................23
Section 9. Use of the name "Franklin"..........................23
AGREEMENT AND DECLARATION OF TRUST
OF
FRANKLIN TEMPLETON GLOBAL TRUST
WHEREAS, THIS AGREEMENT AND DECLARATION OF TRUST is made and entered
into as of the date set forth below by the Trustees named hereunder for the
purpose of forming a Delaware business trust in accordance with the provisions
hereinafter set forth,
NOW, THEREFORE, the Trustees hereby direct that a Certificate of Trust
be filed with the office of the Secretary of State of the State of Delaware and
do hereby declare that the Trustees will hold IN TRUST all cash, securities and
other assets which the Trust now possesses or may hereafter acquire from time to
time in any manner and manage and dispose of the same upon the following terms
and conditions for the pro rata benefit of the holders of Shares in this Trust.
I. Name and Definitions
1.... Name. This trust shall be known as "Franklin Templeton
Global Trust" and the Trustees shall conduct the business of the Trust under
that name or any other name as they may from time to time determine.
2.... Definitions. Whenever used herein, unless otherwise
required by the context or specifically provided:
(a) The "Trust" refers to the Delaware business trust
established by this Agreement and Declaration of Trust, as amended from time
to time;
(b) The "Trust Property" means any and all property,
real or personal, tangible or intangible, which is owned or held by or for
the account of the Trust, including without limitation the rights referenced
in Article VIII, Section 9 hereof;
(c) "Trustees" refers to the persons who have signed this
Agreement and Declaration of Trust, so long as they continue in office in
accordance with the terms hereof, and all other persons who may from time to
time be duly elected or appointed to serve on the Board of Trustees in
accordance with the provisions hereof, and reference herein to a Trustee or the
Trustees shall refer to such person or persons in their capacity as trustees
hereunder;
(d) "Shares" means the shares of beneficial interest
into which the beneficial interest in the Trust shall be divided from time to
time and includes fractions of Shares as well as whole Shares;
(e) "Shareholder" means a record owner of outstanding
Shares;
(f) "Person" means and includes individuals,
corporations, partnerships, trusts, associations, joint ventures, estates and
other entities, whether or not legal entities, and governments and agencies
and political subdivisions thereof, whether domestic or foreign;
(g) The "1940 Act" refers to the Investment Company Act
of 1940 and the Rules and Regulations thereunder, all as amended from time to
time;
(h) The terms "Commission" and "Principal Underwriter"
shall have the respective meanings given them in Section 2(a)(7) and Section
(2)(a)(29) of the 1940 Act;
(i) "Declaration of Trust" shall mean this Agreement and
Declaration of Trust, as amended or restated from time to time;
(j) "By-Laws" shall mean the By-Laws of the Trust as
amended from time to time and incorporated herein by reference;
(k) The term "Interested Person" has the meaning given
it in Section 2(a)(19) of the 1940 Act;
(l) "Investment Manager" or "Manager" means a party
furnishing services to the Trust pursuant to any contract described in
Article IV, Section 7(a) hereof;
(m) "Series" refers to each Series of Shares established
and designated under or in accordance with the provisions of Article III and
shall mean an entity such as that described in Section 18(f)(2) of the 1940
Act, and subject to Rule 18f-2 thereunder.
II. Purpose of Trust
The purpose of the Trust is to conduct, operate and carry on the
business of a management investment company registered under the 1940 Act
through one or more Series investing primarily in securities.
III. Shares
1.... Division of Beneficial Interest. The beneficial interest in
the Trust shall at all times be divided into an unlimited number of Shares, with
a par value of $ .01 per Share. The Trustees may authorize the division of
Shares into separate Series and the division of Series into separate classes of
Shares. The different Series shall be established and designated, and the
variations in the relative rights and preferences as between the different
Series shall be fixed and determined, by the Trustees. If only one or no Series
(or classes) shall be established, the Shares shall have the rights and
preferences provided for herein and in Article III, Section 6 hereof to the
extent relevant and not otherwise provided for herein, and all references to
Series (and classes) shall be construed (as the context may require) to refer to
the Trust.
Subject to the provisions of Section 6 of this Article III, each
Share shall have voting rights as provided in Article V hereof, and holders of
the Shares of any Series shall be entitled to receive dividends, when, if and as
declared with respect thereto in the manner provided in Article VI, Section I
hereof. No Shares shall have any priority or preference over any other Share of
the same Series with respect to dividends or distributions upon termination of
the Trust or of such Series made pursuant to Article VIII, Section 4 hereof. All
dividends and distributions shall be made ratably among all Shareholders of a
particular (class of a) Series from the assets held with respect to such Series
according to the number of Shares of such (class of such) Series held of record
by such Shareholder on the record date for any dividend or distribution or on
the date of termination, as the case may be. Shareholders shall have no
preemptive or other right to subscribe to any additional Shares or other
securities issued by the Trust or any Series. The Trustees may from time to time
divide or combine the Shares of any particular Series into a greater or lesser
number of Shares of that Series without thereby materially changing the
proportionate beneficial interest ' of the Shares of that Series in the assets
held with respect to that Series or materially affecting the rights of Shares of
any other Series.
2.... Ownership of Shares. The ownership of Shares shall be
recorded on the books of the Trust or a transfer or similar agent for the Trust,
which books shall be maintained separately for the Shares of each Series (or
class). No certificates certifying the ownership of Shares shall be issued
except as the Board of Trustees may otherwise determine from time to time. The
Trustees may make such rules as they consider appropriate for the transfer of
Shares of each Series (or class) and similar matters. The record books of the
Trust as kept by the Trust or any transfer or similar agent, as the case may be,
shall be conclusive as to who are the Shareholders of each Series (or class) and
as to the number of Shares of each Series (or class) held from time to time by
each.
3.... Investments in the Trust. Investments may be accepted by the
Trust from such Persons, at such times, on such terms, and for such
consideration as the Trustees from time to time may authorize. Each investment
shall be credited to the individual Shareholder's account in the form of full
and fractional Shares of the Trust, iii such Series (or class) as the purchaser
shall select, at the net asset value per Share next determined for such Series
(or class) after receipt of the investment; provided, however, that the Trustees
may, in their sole discretion, impose a sales charge upon investments in the
Trust.
4.... 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 existence of the
Trust shall not operate to terminate the Trust, 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 entitles such representative
only to the rights of said deceased Shareholder 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 as partners. Neither the Trust nor the Trustees, nor any officer,
employee or agent of the Trust shall have any power to bind personally any
Shareholders, nor, except as specifically provided herein, to call upon any
Shareholder for the payment of any sum of money or assessment whatsoever other
than such as the Shareholder may at any time personally agree to pay.
5.... Power of Board of Trustees to Change Provisions Relating to
Shares. Notwithstanding any other provisions of this Declaration of Trust and
without limiting the power of the Board of Trustees to amend the Declaration of
Trust as provided elsewhere herein, the Board of Trustees shall have the power
to amend this Declaration of Trust, at any time and from time to time, in such
manner as the Board of Trustees may determine in their sole discretion, without
the need for Shareholder action, so as to add to, delete, replace or otherwise
modify any provisions relating to the Shares contained in this Declaration of
Trust, provided that before adopting any such amendment without Shareholder
approval the Board of Trustees shall determine that it is consistent with the
fair and equitable treatment of all Shareholders or that Shareholder approval is
not otherwise required by the 1940 Act or other applicable law. if Shares have
been issued, Shareholder approval shall be required to adopt any amendments to
this Declaration of Trust which would adversely affect to a material degree the
rights and preferences of the Shares of any Series (or class) or to increase or
decrease the par value of the Shares of any Series (or class).
Subject to the foregoing Paragraph, the Board of Trustees may amend
the Declaration of Trust to amend any of the provisions set forth in paragraphs
(a) through (i) of Section 6 of this Article III.
6.... Establishment and Designation of Shares. The establishment
and designation of any Series (or class) of Shares shall be effective upon the
resolution by a majority of the then Trustees, adopting a resolution which sets
forth such establishment and designation and the relative rights and preferences
of such Series (or class). Each such resolution shall be incorporated herein by
reference upon adoption.
Shares of each Series (or class) established pursuant to this
Section 6, unless otherwise provided in the resolution establishing such Series,
shall have the following relative rights and preferences:
(a) ASSETS HELD WITH RESPECT TO A PARTICULAR SERIES. All consideration
received by the Trust for the issue or sale of Shares of a particular Series,
together with all assets in which such consideration is invested or reinvested,
all income, earnings, profits, and proceeds thereof from whatever source
derived, including, without limitation, any proceeds derived from the sale,
exchange or liquidation of such assets, and any funds or payments derived from
any reinvestment of such proceeds in whatever form the same may be, shall
irrevocably be held with respect to that Series for all purposes, subject only
to the rights of creditors, and shall be so recorded upon the books of account
of the Trust. Such consideration, assets, income, earnings, profits and proceeds
thereof, from whatever source derived, including, without limitation, any
proceeds derived from the sale, exchange or liquidation of such assets, and any
funds or payments derived from any reinvestment of such proceeds, in whatever
form the same may be, are herein referred to as "assets held with respect to"
that Series. In the event that there are any assets, income, earnings, profits
and proceeds thereof, funds or payments which are not readily identifiable as
assets held with respect to any particular Series (collectively "General
Assets"), the Trustees shall allocate such General Assets to, between or among
any one or more of the Series in such manner and on such basis as the Trustees,
in their sole discretion, deem fair and equitable, and any General Asset so
allocated to a particular Series shall be held with respect to that Series. Each
such allocation by the Trustees shall be conclusive and binding upon the
Shareholders of all Series for all purposes.
(b) LIABILITIES HELD WITH RESPECT TO A PARTICULAR SERIES. The assets of the
Trust held with respect to each particular Series shall be charged against the
liabilities of the Trust held with respect to that Series and all expenses,
costs, charges and reserves attributable to that Series, and any general
liabilities of the Trust which are not readily identifiable as being held with
respect to any particular Series shall be allocated and charged by the Trustees
to and among any one or more of the Series in such manner and on such basis as
the Trustees in their sole discretion deem fair and equitable. The liabilities,
expenses, costs, charges, and reserves so charged to a Series are herein
referred to as "liabilities held with respect to" that Series. Each allocation
of liabilities, expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon the holders of all Series for all purposes. All
Persons who have extended credit which has been allocated to a particular
Series, or who have a claim or contract which has been allocated to any
particular Series, shall look, and shall be required by contract to look
exclusively, to the assets of that particular Series for payment of such credit,
claim, or contract. In the absence of an express contractual agreement so
limiting the claims of such creditors, claimants and contract providers, each
creditor, claimant and contract provider will be deemed nevertheless to have
impliedly agreed to such limitation unless an express provision to the contrary
has been incorporated in the written contract or other document establishing the
claimant relationship.
(c) DIVIDENDS, DISTRIBUTIONS, REDEMPTIONS, AND REPURCHASES. Notwithstanding
any other provisions of this Declaration of Trust, including, without
limitation, Article VI, no dividend or distribution including, without
limitation, any distribution paid upon termination of the Trust or of any series
(or class) with respect to, nor any redemption or repurchase of, the Shares of
any Series (or class) shall be effected by the Trust other than from the assets
held with respect to such Series, nor, except as specifically provided in
Section 7 of this Article III, shall any Shareholder of any particular Series
otherwise have any right or claim against the assets held with respect to any
other Series except to the extent that such Shareholder has such a right or
claim hereunder as a Shareholder of such other Series. The Trustees shall have
full discretion, to the extent not inconsistent with the 1940 Act, to determine
which items shall be treated as income and which items as capital; and each such
determination and allocation shall be conclusive and binding upon the
Shareholders.
(d) VOTING. All Shares of the Trust entitled to vote on a matter shall vote
separately by Series (and, if applicable, by class): that is, the Shareholders
of each Series (or class) shall have the right to approve or disapprove matters
affecting the Trust and each respective series (or class) as if the Series (or
classes) were separate companies. There are, however, two exceptions to voting
by separate Series (or classes). First, if the 1940 Act requires all Shares of
the Trust to be voted in the aggregate without differentiation between the
separate Series (or classes), then all the Trust's Shares shall be entitled to
vote on a one-vote-per-Share basis. Second, if any matter affects only the
interests of some but not all Series (or classes), then only the Shareholders of
such affected Series (or classes) shall be entitled to vote on the matter.
(e) EQUALITY. All the Shares of each particular Series shall represent an
equal proportionate undivided interest in the assets held with respect to that
Series (subject to the liabilities held with respect to that Series and such
rights and preferences as may have been established and designated with respect
to classes of Shares within such Series), and each Share of any particular
Series shall be equal to each other Share of that Series.
(f) FRACTIONS. Any fractional Share of a Series shall carry proportionately
all the rights and obligations of a whole share of that Series, including rights
with respect to voting, receipt of dividends and distributions, redemption of
Shares and termination of the Trust.
(g) EXCHANGE PRIVILEGE. The Trustees shall have the authority to provide
that the holders of Shares of any Series shall have the right to exchange said
Shares for Shares of one or more other Series of Shares in accordance with such
requirements and procedures as may be established by the Trustees.
(h) COMBINATION OF SERIES. The Trustees shall have the authority, without
the approval of the Shareholders of any Series unless otherwise required by
applicable law, to combine the assets and liabilities held with respect to any
two or more series into assets and liabilities held with respect to a single
series.
(i) ELIMINATION OF SERIES. At any time that there are no Shares outstanding
of any particular Series (or class) previously established and designated, the
Trustees may by resolution of a majority of the then Trustees abolish that
Series (or class) and rescind the establishment and designation thereof.
7.... Indemnification of Shareholders. If any Shareholder or former
Shareholder shall be exposed to liability by reason of a claim or demand
relating to his or her being or having been a Shareholder, and not because of
his or her acts or omissions, the Shareholder or former Shareholder (or his or
her 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 to be held harmless from and indemnified out of the assets of
the Trust against all loss and expense arising from such claim or demand.
IV. The Board of Trustees
1.... NUMBER, ELECTION AND TENURE. The number of Trustees
constituting the Board of Trustees shall be fixed from time to time by a written
instrument signed, or by resolution approved at a duly constituted meeting, by a
majority of the Board of Trustees, provided, however, that the number of
Trustees shall in no event be less than one (1) nor more than fifteen (15). The
Board of Trustees, by action of a majority of the then Trustees at a duly
constituted meeting, may fill vacancies in the Board of Trustees or remove
Trustees with or without cause. Each Trustee shall serve during the continued
lifetime of the Trust until he or she dies, resigns, is declared bankrupt or
incompetent by a court of appropriate jurisdiction, or is removed, or, if
sooner, until the next meeting of Shareholders called for the purpose of
electing Trustees and until the election and qualification of his or her
successor. Any Trustee may resign at any time by written instrument signed by
him and delivered to any officer of the Trust or to a meeting of the Trustees.
Such resignation shall be effective upon receipt unless specified to be
effective at some other time. Except to the extent expressly provided in a
written agreement with the Trust, no Trustee resigning and no Trustee 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. The
Shareholders may fix the number of Trustees and elect Trustees at any meeting of
Shareholders called by the Trustees for that purpose. Any Trustee may be removed
at any meeting of Shareholders by a vote of two-thirds of the outstanding Shares
of the Trust. A meeting of Shareholders for the purpose of electing or removing
one or more Trustees may be called (i) by the Trustees upon their own vote, or
(ii) upon the demand of Shareholders owning 10% or more of the Shares of the
Trust in the aggregate.
2.... EFFECT OF DEATH, RESIGNATION, ETC. OF A TRUSTEE. The death,
declination, resignation, retirement, removal, or incapacity of one or more
Trustees, or all of them, shall not operate to annul the Trust or to revoke any
existing agency created pursuant to the terms of this Declaration of Trust.
Whenever a vacancy in the Board of Trustees shall occur, until such vacancy is
filled as provided in Article IV, Section 1, the Trustees in office, regardless
of their number, shall have all the powers granted to the Trustees and shall
discharge all the duties imposed upon the Trustees by this Declaration of Trust.
As conclusive evidence of such vacancy, a written instrument certifying the
existence of such vacancy may be executed by an officer of the Trust or by a
majority of the Board of Trustees. In the event of the death, declination,
resignation, retirement, removal, or incapacity of all the then Trustees within
a short period of time and without the opportunity for at least one Trustee
being able to appoint additional Trustees to fill vacancies, the Trust's
Investment Manager(s) are empowered to appoint new Trustees subject to the
provisions of Section 16(a) of the 1940 Act.
3.... POWERS. Subject to the provisions of this Declaration of
Trust, the business of the Trust shall be managed by the Board of Trustees, and
such Board shall have all powers necessary or convenient to carry out that
responsibility including the power to engage in securities transactions of all
kinds on behalf of the Trust. Trustees in all instances shall act as principals,
and are and shall be free from the control of the Shareholders. The Trustees
shall have full power and authority to do any and all acts and to make and
execute any and all contracts and instruments that they nay consider necessary
or appropriate in connection with the administration of the Trust. Without
limiting the foregoing, the Trustees may: adopt By-Laws not inconsistent with
this Declaration of Trust providing for the regulation and management of the
affairs of the Trust and may amend and repeal them to the extent that such
By-Laws do not reserve that right to the Shareholders; fill vacancies in or
remove from their number, and may elect and remove such officers and appoint and
terminate such agents as they consider appropriate; appoint from their own
number and establish and terminate one or more committees consisting of two or
more Trustees which may exercise the powers and authority of the Board of
Trustees to the extent that the Trustees determine; 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 or with a Federal Reserve
Bank, retain a transfer agent or a shareholder servicing agent, or both; provide
for the issuance and distribution of Shares by the Trust directly or through one
or more Principal underwriters or otherwise; redeem, repurchase and transfer
Shares pursuant to applicable law; set record dates for the determination of
Shareholders with respect to various matters; declare and pay dividends and
distributions to Shareholders of each Series from the assets of such Series;
establish from time to time, in accordance with the provisions of Article III,
Section 6 hereof, any Series (or class) of Shares, each such Series (or class)
to operate as a separate and distinct investment medium and with separately
defined investment objectives and policies and distinct investment purpose; and
in general delegate such authority as they consider desirable to any officer of
the Trust, to any committee of the Trustees and to any agent or employee of the
Trust or to any such custodian, transfer or shareholder servicing agent, or
Principal Underwriter. Any determination as to what is in the interests of the
Trust made by the Trustees in good faith shall be conclusive. In construing the
provisions of this Declaration of Trust, the presumption shall be in favor of a
grant of power to the Trustees. Unless otherwise specified or required by law,
any action by the Board of Trustees shall be deemed effective if approved or
taken by a majority of the Trustees then in office. Any action required or
permitted to be taken at any meeting of the Board of Trustees, or any committee
thereof, may be taken without a meeting if all members of the Board of Trustees
or committee (as the case may be) consent thereto in writing, and the writing or
writings are filed with the minutes of the proceedings of the Board of Trustees,
or committee.
Without limiting the foregoing, the Trust shall have power and
authority:
(a) To invest and reinvest cash, to hold cash uninvested, and to subscribe
for, invest in, reinvest in, purchase or otherwise acquire, own, hold, pledge,
sell, assign, transfer, exchange, distribute, write options on, lend or
otherwise deal in or dispose of contracts for the future acquisition or delivery
of fixed income or other securities, and securities of every nature and kind,
including, without limitation, all types of bonds, debentures, stocks, preferred
stocks, negotiable or non-negotiable instruments, obligations, evidences of
indebtedness, certificates of deposit or indebtedness, commercial paper,
repurchase agreements, bankers' acceptances, and other securities of any kind,
issued, created guaranteed, or sponsored by any and all Persons, including,
without limitation, states, territories, and possessions of the United States
and the District of Columbia and any political subdivision, agency, or
instrumentality thereof, any foreign government or any political subdivision of
the U.S. Government or any foreign government, or any international
instrumentality, or by any bank or savings institution, or by any corporation or
organization organized under the laws of the United States or of any state,
territory, or possession thereof, or by any corporation or organization
organized under any foreign law, or in "when issued" contracts for any such
securities, to change the investments of the assets of the Trust; and to
exercise 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, to exercise any of
said rights, powers, and privileges in respect of any of said instruments;
(b) To sell, exchange, lend, pledge, mortgage, hypothecate, lease, or write
options with respect to or otherwise deal in any property rights relating to any
or all of the assets of the Trust or any Series, subject to any requirements of
the 1940 Act;
(c) 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;
(d) To exercise powers and right of subscription or otherwise which in any
manner arise out of ownership of securities;
(e) To hold any security or property in a form not indicating that it is
trust property, whether in bearer, unregistered or other negotiable form, or in
its own name or in the name of a custodian or subcustodian or a nominee or
nominees or otherwise or to authorize the custodian or a subcustodian or a
nominee or nominees to deposit the same in a securities depository, subject in
each case to proper safeguards according to the usual practice of investment
companies or any rules or regulations applicable thereto;
(f) To consent to, or participate in, any plan for the reorganization,
consolidation or merger of any corporation or issuer of any security which is
held in the Trust; to consent to any contract, lease, mortgage, purchase or sale
of property by such corporation or issuer; and to pay calls or subscriptions
with respect to any security held in the Trust;
(g) 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;
(h) 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;
(i) To enter into joint ventures, general or limited partnerships and any
other combinations or associations;
(j) To borrow funds or other property in the name of the Trust exclusively
for Trust purposes;
(k) To endorse or guarantee the payment of any notes or other obligations
of any Person; to make contracts of guaranty or suretyship, or otherwise assume
liability for payment thereof;
(l) To purchase and pay for entirely out of Trust Property such insurance as
the Trustees may deem necessary or appropriate for the conduct of the
business, including, without limitation, insurance policies insuring the
assets of the Trust or payment of distributions and principal on its
portfolio investments, and insurance policies insuring the Shareholders,
Trustees, officers, employees, agents, investment advisers, principal
underwriters, or independent contractors of the Trust, individually against
all claims and liabilities of every nature arising by reason of holding
Shares, 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 Trustee, officer, employee, agent, investment adviser, 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 liability; and
(m) To adopt, establish and carry out pension, profitsharing, 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.
The Trust shall not be limited to investing in obligations maturing before
the possible termination of the Trust or one or more of its Series. The Trust
shall not in any way be bound or limited by any present or future law or custom
in regard to investment by fiduciaries. The Trust shall not be required to
obtain any court order to deal with any assets of the Trust or take any other
action hereunder.
4....PAYMENT OF EXPENSES BY THE TRUST. The Trustees are authorized to pay
or cause to be paid out of the principal or income of the Trust or Series (or
class), or partly out of the principal and partly out of income, and to charge
or allocate the same to, between or among such one or more of the Series (or
class) that may be established or designated pursuant to Article III, Section 6,
as they deem fair, all expenses, fees, charges, taxes and liabilities incurred
or arising in connection with the Trust or Series (or class), or in connection
with the management thereof, including, but not limited to, the Trustees'
compensation and such expenses and charges for the services of the Trust's
officers, employees, investment adviser 'or manager, principal underwriter,
auditors, counsel, custodian, transfer agent, Shareholder servicing agent, and
such other agents or independent contractors and such other expenses and charges
as the Trustees may deem necessary or proper to incur.
5.... PAYMENT OF EXPENSES BY SHAREHOLDERS. The Trustees shall have the
power, as frequently as they may determine, to cause each Shareholder, or each
Shareholder of any particular Series, to pay directly, in advance or arrears,
for charges of the Trust's custodian or transfer, Shareholder servicing or
similar agent, an amount fixed from time to time by the Trustees, by setting off
such charges due from such Shareholder from declared but unpaid dividends owed
such Shareholder and/or by reducing the number of shares in the account of such
Shareholder by that number of full and/or fractional Shares which represents the
outstanding amount of such charges due from such Shareholder.
6.... OWNERSHIP OF ASSETS OF THE TRUST. Title to all of the assets of the
Trust shall at all times be considered as vested in the Trust, except that the
Trustees shall have power to cause legal title to any Trust Property to be held
by or in the name of one or more of the Trustees, or in the name of the Trust,
or in the name of any other Person as nominee, on such terms as the Trustees may
determine. The right, title and interest of the Trustees in the Trust Property
shall vest automatically in each Person who may hereafter become a Trustee. Upon
the resignation, removal or death of a Trustee he or she shall automatically
cease to have any right, title or interest in any of the Trust Property, and the
right, title and interest of such Trustee in the Trust Property shall vest
automatically in the remaining Trustees. Such vesting and cessation of title
shall be effective whether or not conveyancing documents have been executed and
delivered.
7. SERVICE CONTRACTS.
(a) Subject to such requirements and restrictions as nay be set forth in
the By-Laws, the Trustees may, at any time and from time to time, contract for
exclusive or nonexclusive advisory, management and/or administrative services
for the Trust or for any Series with any corporation, trust, association or
other organization; and any such contract may contain such other terms as the
Trustees may determine, including without limitation, authority for the
Investment Manager or administrator to determine from time to time without prior
consultation with the Trustees 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, or such other
activities as may specifically be delegated to such party.
(b) The Trustees may also, at any time and from time to time, contract with
any corporation, trust, association or other organization, appointing it
exclusive or nonexclusive distributor or Principal Underwriter for the Shares of
one or more of the Series (or classes) or other securities to be issued by the
Trust. Every such contract shall comply with such requirements and restrictions
as may be set forth in the By-Laws; and any such contract may contain such other
terms as the Trustees may determine.
(c) The Trustees are also empowered, at any time and from time to time, to
contract with any corporations, trusts, associations or other organizations,
appointing it or them the custodian, transfer agent and/or shareholder servicing
agent for the Trust or one or more of its Series. Every such contract shall
comply with such requirements and restrictions as may be set forth in the
By-Laws or stipulated by resolution of the Trustees.
(d) The Trustees are further empowered, at any tine and from time to time,
to contract with any entity to provide such other services to the Trust or one
or more of the Series, as the Trustees determine to be in the best interests of
the Trust and the applicable Series.
(e) The fact that:
(i) any of the Shareholders, Trustees, or officers of the Trust is a
shareholder, director, officer, partner, trustee, employee, Manager, adviser,
Principal Underwriter, distributor, or affiliate or agent of or for any
corporation, trust, association, or other organization, or for any parent or
affiliate of any organization with which an advisory, management or
administration contract, or principal underwriter's or distributor's contract,
or transfer, shareholder servicing or other type of service contract may have
been or may hereafter be made, or that any such organization, or any parent or
affiliate thereof, is a Shareholder or has an interest in the Trust, or that
(ii) any corporation, trust, association or other organization with which
an advisory, management or administration contract or principal underwriter's or
distributor's contract, or transfer, shareholder servicing or other type of
service contract may have been or may hereafter be made also has an advisory,
management or administration contract, or principal underwriter's or
distributor's contract, or transfer, shareholder servicing or other service
contract with one or more other corporations, trust, associations, or other
organizations, or has other business or interests,
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing the
same, or create any liability or accountability to the Trust or its
Shareholders, provided approval of each such contract is made pursuant to the
requirements of the 1940 Act.
V. Shareholders' Voting Powers and Meetings
1. VOTING POWERS. Subject to the provisions of Article III, Section 6(d),
the Shareholders shall have power to vote only (i) for the election or removal
of Trustees as provided in Article IV, Section 1, and (ii) with respect to such
additional matters relating to the Trust as may be required by this Declaration
of Trust, the By-Laws or any registration of the Trust with the Commission (or
any successor agency) or any state, or as the Trustees may consider necessary or
desirable. Each whole Share shall be entitled to one vote as to any matter on
which it is entitled to vote and each fractional Share shall be entitled to a
proportionate fractional vote. 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.
2. VOTING POWER AND MEETINGS. Meetings of the Shareholders may be called by
the Trustees for the purpose of electing Trustees as provided in Article IV,
Section 1 and for such other purposes as may be prescribed by law, by this
Declaration of Trust or by the By-Laws. Meetings of the Shareholders may also be
called by the Trustees from time to tine for the purpose of taking action upon
any other matter deemed by the Trustees to be necessary or desirable. A meeting
of Shareholders may be held at any place designated by the Trustees. Written
notice of any meeting of Shareholders shall be given or caused to be given by
the Trustees by mailing such notice at least seven (7) days before such meeting,
postage prepaid, stating the time and place of the meeting, to each Shareholder
at the Shareholder's address as it appears on the records of the Trust. Whenever
notice of a meeting is required to be given to a Shareholder under this
Declaration of Trust or the By-Laws, a written waiver thereof, executed before
or after the meeting by such Shareholder or his or her attorney thereunto
authorized and filed with the records of the meeting, shall be deemed equivalent
to such notice.
3. QUORUM AND REQUIRED VOTE. Except when a larger quorum is required by
applicable law, by the By-Laws or by this Declaration of Trust, forty percent
(40%) of the Shares entitled to vote shall constitute a quorum at a
Shareholders' meeting. When any one or more Series (or classes) is to vote as a
single class separate from any other Shares, forty percent (40%) of the Shares
of each such Series (or classes) entitled to vote shall constitute a quorum at a
Shareholder's meeting of that Series. Any meeting of Shareholders may be
adjourned from time to time by a majority of the votes properly cast upon the
question of adjourning a meeting to another date and tine, whether or not a
quorum is present, and the meeting may be held as adjourned within a reasonable
time after the date set for the original meeting without further notice. Subject
to the provisions of Article III, Section 6(d), when a quorum is present at any
meeting, a majority of the Shares voted shall decide any questions and a
plurality shall elect a Trustee, except when a larger vote is required by any
provision of this Declaration of Trust or the By-Laws or by applicable law.
4. ACTION BY WRITTEN CONSENT. Any action taken by Shareholders may be taken
without a meeting if Shareholders holding a majority of the Shares entitled to
vote on the matter (or such larger proportion thereof as shall be required by
any express provision of this Declaration of Trust or by the By-Laws) and
holding a majority (or such larger proportion as aforesaid) of the Shares of any
Series (or class) entitled to vote separately on the matter consent to the
action in writing and such written consents are filed with the records of the
meetings of Shareholders. Such consent shall be treated for all purposes as a
vote taken at a meeting of Shareholders.
5. RECORD DATES. For the purpose of determining the Shareholders of any
Series (or class) who are entitled to vote or act at any meeting or any
adjournment thereof, the Trustees may from time to time fix a time, which shall
be not more than ninety (90) days before the date of any meeting of
Shareholders, as the record date for determining the Shareholders of such Series
(or class) having the right to notice of and to vote at such meeting and any
adjournment thereof, 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. For the purpose of determining the
Shareholders of any Series (or class) who are entitled to receive payment of any
dividend or of any other distribution, the Trustees may from time to time fix a
date, which shall be before the date for the payment of such dividend or such
other payment, as the record date for determining the Shareholders of such
Series (or class) having the right to receive such dividend or distribution.
Without fixing a record date the Trustees may for voting and/or distribution
purposes close the register or transfer books for one or more Series for all or
any part of the period between a record date and a meeting of Shareholders or
the payment of a distribution. Nothing in this Section shall be construed as
precluding the Trustees from setting different record dates for different Series
(or classes).
6. ADDITIONAL PROVISIONS. The By-Laws may include further provisions for
Shareholders' votes and meetings and related matters.
VI. Net Asset Value, Distributions, and Redemptions
1. DETERMINATION OF NET ASSET VALUE, NET INCOME, AND DISTRIBUTIONS. Subject
to Article III, Section 6 hereof, the Trustees, in their absolute discretion,
may prescribe and shall set forth in the By-laws or in a duly adopted vote of
the Trustees such bases and time for determining the per Share or net asset
value of the Shares of any Series or net income attributable to the Shares of
any Series, or the declaration and payment of dividends and distributions on the
Shares of any Series, as they may deem necessary or desirable.
2. REDEMPTIONS AND REPURCHASES. The Trust shall purchase such Shares as are
offered by any Shareholder for redemption, upon the presentation of a proper
instrument of transfer together with a request directed to the Trust or a Person
designated by the Trust that the Trust purchase such Shares or in accordance
with such other procedures for redemption as the Trustees may from time to time
authorize; and the Trust will pay therefor the net asset value thereof, in
accordance with the By-Laws and applicable law. Payment for said Shares shall be
made by the Trust to the Shareholder within seven days after the date on which
the request is made in proper form. The obligation set forth in this Section 2
is subject to the provision that in the event that any time the New York Stock
Exchange (the "Exchange") is closed for other than weekends or holidays, or if
permitted by the Rules of the Commission during periods when trading on the
Exchange is restricted or during any emergency which makes it impracticable for
the Trust to dispose of the investments of the applicable Series or to determine
fairly the value of the net assets held with respect to such Series or during
any other period permitted by order of the Commission for the protection of
investors, such obligations may be suspended or postponed by the Trustees.
The redemption price may in any case or cases be paid wholly or partly in
kind if the Trustees determine that such payment is advisable in the interest of
the remaining Shareholders of the Series for which the Shares are being
redeemed. Subject to the foregoing, the fair value, selection and quantity of
securities or other property so paid or delivered as all or part of the
redemption price may be determined by or under authority of the Trustees. In no
case shall the Trust be liable for any delay of any corporation or other Person
in transferring securities selected for delivery as all or part of any payment
in kind.
3. REDEMPTIONS AT THE OPTION OF THE TRUST. The Trust shall have the right
at its option and at any tine to redeem Shares of any Shareholder at the net
asset value thereof as described in Section 1 of this Article VI: (i) if at such
time such Shareholder owns Shares of any Series having an aggregate net asset
value of less than an amount determined from time to time by the Trustees prior
to the acquisition of said Shares; or (ii) to the extent that such Shareholder
owns Shares of a particular Series 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 equal to or in excess
of a percentage, determined from time to time by the Trustees, of the
outstanding Shares of the Trust or of any Series.
VII. Compensation and Limitation of Liability of Trustees
1. COMPENSATION. The Trustees as such shall be entitled to reasonable
compensation from the Trust, and they may fix the amount of such compensation.
Nothing herein shall in any way prevent the employment of any Trustee for
advisory, management, legal, accounting, investment banking or other services
and payment for the same by the Trust.
2. INDEMNIFICATION AND LIMITATION OF LIABILITY. The Trustees shall not be
responsible or liable in any event for any neglect or wrong-doing of any
officer, agent, employee, Manager or Principal Underwriter of the Trust, nor
shall any Trustee be responsible for the act or omission of any other Trustee,
and the Trust out of its assets shall indemnify and hold harmless each and every
Trustee from and against any and all claims and demands whatsoever arising out
of or related to each Trustee's performance of his or her duties as a Trustee of
the Trust; provided that nothing herein contained shall indemnify, hold harmless
or protect any Trustee from or against an y liability to the Trust or any
Shareholder to which he or she 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 or her office.
Every note, bond, contract, instrument, certificate or undertaking and
every other act or thing whatsoever issued, executed or done by or on behalf of
the Trust or the Trustees or any of them in connection with the Trust shall be
conclusively deemed to have been issued, executed or done only in or with
respect to their or his or her capacity as Trustees or Trustee, and such
Trustees or Trustee shall not be personally liable thereon.
3. TRUSTEE'S GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR SURETY. The
exercise by the Trustees of their powers and discretions hereunder shall be
binding upon everyone interested. A Trustee shall be liable to the Trust and to
any Shareholder solely 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 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 shall be
under no liability for any act or omission in accordance with such advice nor
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.
4. INSURANCE. The Trustees shall be entitled and empowered to the fullest
extent permitted by law to purchase with Trust assets insurance for liability
and for all expenses reasonably incurred or paid or expected to be paid by a
Trustee or officer in connection with any claim, action, suit or proceeding in
which he or she becomes involved by virtue of his or her capacity or former
capacity with the Trust, whether or not the Trust would have the power to
indemnify him or her against such liability under the provisions of this
Article.
VIII. Miscellaneous
1. 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 or to see to the application of
any payments made or property transferred to the Trust or upon its order.
2. TERMINATION OF TRUST OR SERIES. Unless terminated as provided herein,
the Trust shall continue without limitation of time. The Trust may be terminated
at any time by vote of a majority of the Shares of each Series entitled to vote,
voting separately by Series, or by the Trustees by written notice to the
Shareholders. Any Series may be terminated at any time by vote of a majority of
the Shares of that Series or by the Trustees by written notice to the
Shareholders of that Series.
Upon termination of the Trust (or any Series, as the case may be), after
paying or otherwise providing for all charges, taxes, expenses and liabilities
held, severally, with respect to each Series (or the applicable Series, as the
case may be), whether due or accrued or anticipated as may be determined by the
Trustees, the Trust shall, in accordance with such procedures as the Trustees
consider appropriate, reduce the remaining assets held, severally, with respect
to each Series (or the applicable Series, as the case may be), to distributable
form in cash or shares or other securities, or any combination thereof, and
distribute the proceeds held with respect to each Series (or the applicable
Series, as the case nay be), to the Shareholders of that Series, as a Series,
ratably according to the number of Shares of that Series held by the several
Shareholders on the date of termination.
3. MERGER AND CONSOLIDATION. The Trustees may cause (i) the Trust or one or
more of its Series to the extent consistent with applicable law to be merged
into or consolidated with another Trust or company, (ii) the Shares of the Trust
or any Series to be converted into beneficial interests in another business
trust (or series thereof) created pursuant to this Section 3 of Article VIII, or
(iii) the Shares to be exchanged under or pursuant to any state or federal
statute to the extent permitted by law. Such merger or consolidation, Share
conversion or Share exchange must be authorized by vote of a majority of the
outstanding Shares of the Trust, as a whole, or any affected Series, as may be
applicable; provided that in all respects not governed by statute or applicable
law, the Trustees shall have power to prescribe the procedure necessary or
appropriate to accomplish a sale of assets, merger or consolidation including
the power to create one or more separate business trusts to which all or any
part of the assets, liabilities, profits or losses of the Trust may be
transferred and to provide for the conversion of Shares of the Trust or any
Series into beneficial interests in such separate business trust or trusts (or
series thereof).
4. AMENDMENTS. This Declaration of Trust may be restated and/or amended at
any time by an instrument in writing signed by a majority of the then Trustees
and, if required, by approval of such amendment by Shareholders in accordance
with Article V, Section 3 hereof. Any such restatement and/or amendment hereto
shall be effective immediately upon execution and approval. The Certificate of
Trust of the Trust may be restated and/or amended by a similar procedure, and
any such restatement and/or amendment shall be effective immediately upon filing
with the Office of the Secretary of State of the State of Delaware or upon such
future date as may be stated therein.
5. FILING OF COPIES, REFERENCES, HEADINGS. The original or a copy of this
instrument and of each restatement and/or amendment hereto shall be kept at the
office of the Trust where it may be inspected by any Shareholder. Anyone dealing
with the Trust may rely on a certificate by an officer of the Trust as to
whether or not any such restatements and/or amendments have been made and as to
any 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 restatements and/or amendments.
In this instrument and in any such restatements and/or amendment, 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
restatements and/or amendments. Headings are placed herein for convenience of
reference only and shall not be taken as a part hereof or control or affect the
meaning, construction or effect of this instrument. Whenever the singular number
is used herein, the same shall include the plural; and the neuter, masculine and
feminine genders shall include each other, as applicable. This instrument may be
executed in any number of counterparts each of which shall be deemed an
original.
6. APPLICABLE LAW. This Agreement and Declaration of Trust is created under
and is to be governed by and construed and administered according to the laws of
the State of Delaware and the Delaware Business Trust Act, as amended from time
to time (the "Act"). The Trust shall be a Delaware business trust pursuant to
such Act, and without limiting the provisions hereof, the Trust may exercise all
powers which are ordinarily exercised by such a business trust.
7. PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS.
(a) The provisions of the Declaration of Trust are severable, and if the
Trustees shall determine, with the advice of counsel, that any of such
provisions is in conflict with the 1940 Act, the regulated investment company
provisions of the Internal Revenue Code or with other applicable laws and
regulations, the conflicting provision shall be deemed never to have constituted
a part of the Declaration of Trust; provided, however, that such determination
shall not affect any of the remaining provisions of the Declaration of Trust or
render invalid or improper any action taken or omitted prior to such
determination.
(b) If any provision of the Declaration of Trust shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of the
Declaration of Trust in any jurisdiction.
8. BUSINESS TRUST ONLY. It is the intention of the Trustees to create a
business trust pursuant to the Delaware Business Trust Act, as amended from time
to time (the "Act"), and thereby to create only the relationship of trustee and
beneficial owners within the meaning of such Act between the Trustees and each
Shareholder. It is not the intention of the Trustees to create a general
partnership, limited partnership, joint stock association, corporation,
bailment, or any form of legal relationship other than a business trust pursuant
to such Act. Nothing in this Declaration of Trust shall be construed to make the
Shareholders, either by themselves or with the Trustees, partners or members of
a joint stock association.
9. USE OF THE NAME "FRANKLIN". The name "Franklin" and all rights to the
use of the name "Franklin" belongs to Franklin Resources, Inc. ("Franklin"), the
sponsor of the Trust. Franklin has consented to the use by the Trust of the
identifying word "Franklin" and has granted to the Trust a nonexclusive license
to use the name "Franklin" as part of the name of the Trust and the name of any
Series of Shares. In the event Franklin or an affiliate of Franklin is not
appointed as Manager and/or Principal Underwriter or ceases to be the Manager
and/or Principal Underwriter of the Trust or of any Series using such names, the
non-exclusive license granted herein may be revoked by Franklin and the Trust
shall cease using the name "Franklin" as part of its name or the name of any
Series of Shares, unless otherwise consented to by Franklin or any successor to
its interests in such names.
IN WITNESS WHEREOF, the Trustees named below do hereby make and enter into
this Declaration of Trust as of the ___ day of ____________, 1996.
/s/Frank H. Abbott, III /s/Gerald R. Healy
1045 Sansome Street 5917 Cleveland Street
San Francisco, CA 94111 Morton Grove, IL 60053
/s/Harris J. Ashton /s/Charles B. Johnson
Metro Center, 1 Station Place 777 Mariners Island Blvd.
Stamford, CT 06904-2045 San Mateo, CA 94404
/s/David K. Eiteman /s/Rupert H. Johnson, Jr.
HC2, Box 8076 777 Mariners Island Blvd.
Frazier Park, CA 93225 San Mateo, CA 94404
/s/S. Joseph Fortunato /s/David P. Kraus
Park Avenue at Morris County Bet Tzedek Legal Services
P.O. Box 1945 145 South Fairfax Ave.,
Morristown, NJ 07962-1945 Suite 200
Los Angeles, CA 90036-2166
/s/David W. Garbellano /s/Frank W.T. LaHaye
111 New Montgomery St. #402 20833 Stevens Creek Blvd.,
San Francisco, CA 94105 Suite 102
Cupertino, CA 95014
/s/Donald P. Gould /s/Gordon S. Macklin
777 Mariners Island Blvd 8212 Burning Tree Road
San Mateo, CA 94404 Bethesda, MD 20817
THE PRINCIPAL PLACE OF BUSINESS OF THE TRUST IS 777 Mariners
Island Boulevard, San Mateo, California 94404
BY-LAWS
OF
FRANKLIN TEMPLETON GLOBAL TRUST
A Delaware Business Trust
OFFICES
1. PRINCIPAL OFFICE. The Board of Trustees shall fix and, from time to
time, may change the location of the principal executive office of the Trust at
any place within or outside the State of Delaware.
2. OTHER OFFICES. The Board of Trustees may at any time establish branch or
subordinate offices at any place or places where the Trust intends to do
business.
MEETINGS OF SHAREHOLDERS
1. PLACE OF MEETINGS. Meetings of shareholders shall be held at any place
within or outside the State of Delaware designated by the Board of Trustees. In
the absence of any such designation, shareholders' meetings shall be held at the
principal executive office of the Trust.
2. CALL OF MEETING. A meeting of the shareholders may be called at any time
by the Board of Trustees or by the Chairman of the Board or by the president.
3. NOTICE OF SHAREHOLDERS' MEETING. All notices of meetings of shareholders
shall be sent or otherwise given in accordance with Section 4 of this Article II
not less than seven (7) nor more than seventy-five (75) days before the date of
the meeting. The notice shall specify (i) the place, date and hour of the
meeting, and (ii) the general nature of the business to be transacted. The
notice of any meeting at which trustees are to be elected also shall include the
name of any nominee or nominees whom at the time of the notice are intended to
be presented for election.
If action is proposed to be taken at any meeting for approval of (i) a
contract or transaction in which a trustee has a direct or indirect financial
interest, (ii) an amendment of the Declaration of Trust, (iii) a reorganization
of the Trust, or (iv) a voluntary dissolution of the Trust, the notice shall
also state the general nature of that proposal.
4. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE. Notice of any meeting of
shareholders shall be given either personally or by first-class mail or
telegraphic or other written communication, charges prepaid, addressed to the
shareholder at the address of that shareholder appearing on the books of the
Trust or its transfer agent or given by the shareholder to the Trust for the
purpose of notice. If no such address appears on the Trust's books or is given,
notice shall be deemed to have been given if sent to that shareholder by
first-class mail or telegraphic or other written communication to the Trust's
principal executive office, or if published at least once in a newspaper of
general circulation in the county where that office is located. Notice shall be
deemed to have been given at the time when delivered personally or deposited in
the mail or sent by telegram or other means of written communication.
If any notice addressed to a shareholder at the address of that shareholder
appearing on the books of the Trust is returned to the Trust by the United
States Postal Service marked to indicate that the Postal Service is unable to
deliver the notice to the shareholder at that address, all future notices or
reports shall be deemed to have been duly given without further mailing if these
shall be available to the shareholder on written demand of the shareholder at
the principal executive office of the Trust for a period of one year from the
date of the giving of the notice.
An affidavit of the mailing or other means of giving any notice of any
shareholder's meeting shall be executed by the secretary, assistant secretary or
any transfer agent of the Trust giving the notice and shall be filed and
maintained in the minute book of the Trust.
5. ADJOURNED MEETING; NOTICE. Any shareholder's meeting, whether or not a
quorum is present, may be adjourned from time to time by the vote of the
majority of the shares represented at that meeting, either in person or by
proxy.
When any meeting of shareholders is adjourned to another time or place,
notice need not be given of the adjourned meeting at which the adjournment is
taken, unless a new record date of the adjourned meeting is fixed or unless the
adjournment is for more than sixty (60) days from the date set for the original
meeting, in which case the Board of Trustees shall set a new record date. Notice
of any such adjourned meeting shall be given to each shareholder of record
entitled to vote at the adjourned meeting in accordance with the provisions of
Sections 3 and 4 of this Article II. At any adjourned meeting, the Trust may
transact any business which might have been transacted at the original meeting.
6. VOTING. The shareholders entitled to vote at any meeting of shareholders
shall be determined in accordance with the provisions of the Declaration of
Trust, as in effect at such time. The shareholders, vote may be by voice vote or
by ballot, provided, however, that any election for trustees must be by ballot
if demanded by any shareholder before the voting has begun. on any matter other
than elections of trustees, any shareholder may vote part of the shares in favor
of the proposal and refrain from voting the remaining shares or vote them
against the proposal, but if the shareholder fails to specify the number of
shares which the shareholder is voting affirmatively, it will be conclusively
presumed that the shareholder's approving vote is with respect to the total
shares that the shareholder is entitled to vote on such proposal.
7. WAIVER OF NOTICE BY CONSENT OF ABSENT SHAREHOLDERS. The transactions of
the meeting of shareholders, however called and noticed and wherever held, shall
be as valid as though had at a meeting duly held after regular call and notice
if a quorum be present either in person or by proxy and if either before or
after the meeting, each person entitled to vote who was not present in person or
by proxy signs a written waiver of notice or a consent to a holding of the
meeting or an approval of the minutes. The waiver of notice or consent need not
specify either the business to be transacted or the purpose of any meeting of
shareholders.
Attendance by a person at a meeting shall also constitute a waiver of
notice of that meeting, except when the person objects at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened and except that attendance at a meeting is not a waiver of
any right to object to the consideration of matters not included in the notice
of the meeting if that objection is expressly made at the beginning of the
meeting.
8. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Any action
which may be taken at any meeting of shareholders may be taken without a meeting
and without prior notice if a consent in writing setting forth the action so
taken is signed by the holders of outstanding shares having not less than the
minimum number of votes that would be necessary to authorize or take that action
at a meeting at which all shares entitled to vote on that action were present
and voted. All such consents shall be filed with the Secretary of the Trust and
shall be maintained in the Trust's records. Any shareholder giving a written
consent or the shareholder's proxy holders or a transferee of the shares or a
personal representative of the shareholder or their respective-proxy-holders may
revoke the consent by a writing received by the Secretary of the Trust before
written consents of the number of shares required to authorize the proposed
action have been filed with the Secretary.
If the consents of all shareholders entitled to vote have not been
solicited in writing and if the unanimous written consent of all such
shareholders shall not have been received, the Secretary shall give prompt
notice of the action approved by the shareholders without a meeting. This notice
shall be given in the manner specified in Section 4 of this Article II. In the
case of approval of (i) contracts or transactions in which a trustee has a
direct or indirect financial interest, (ii) indemnification of agents of the
Trust, and (iii) a reorganization of the Trust, the notice shall be given at
least ten (10) days before the consummation of any action authorized by that
approval.
9. RECORD DATE FOR SHAREHOLDER NOTICE; VOTING AND GIVING CONSENTS. For
purposes of determining the shareholders entitled to notice of any meeting or to
vote or entitled to give consent to action without a meeting, the Board of
Trustees may fix in advance a record date which shall not be more than ninety
(90) days nor less than seven (7) days before the date of any such meeting as
provided in the Declaration of Trust.
If the Board of Trustees does not so fix a record date:
(a) The record date for determining shareholders entitled to notice of or
to vote at a meeting of shareholders shall be at the close of business on the
business day next preceding the day on which notice is given or if notice is
waived, at the close of business on the business day next preceding the day on
which the meeting is held.
(b) The record date for determining shareholders entitled to give consent
to action in writing without a meeting, (i) when no prior action by the Board of
Trustees has been taken, shall be the day on which the first written consent is
given, or (ii) when prior action of the Board of Trustees has been taken, shall
be at the close of business on the day on which the Board of Trustees adopt the
resolution relating to that action or the seventy-fifth day before the date of
such other action, whichever is later.
10. PROXIES. Every person entitled to vote for trustees or on any other
matter shall have the right to do so either in person or by one or more agents
authorized by a written proxy signed by the person and filed with the Secretary
of the Trust. A proxy shall be deemed signed if the shareholder's name is placed
on the proxy (whether by manual signature, typewriting, telegraphic transmission
or otherwise) by the shareholder or the shareholder's attorney-in-fact. A
validly executed proxy which does not state that it is irrevocable shall
continue in full force and effect unless (i) revoked by the person executing it
before the vote pursuant to that proxy by a writing delivered to the Trust
stating that the proxy is revoked or by a subsequent proxy executed by or
attendance at the meeting and voting in person by the person executing that
proxy; or (ii) written notice of the death or incapacity of the maker of that
proxy is received by the Trust before the vote pursuant to that proxy is
counted; provided however, that no proxy shall be valid after the expiration of
eleven (11) months from the date of the proxy unless otherwise provided in the
proxy. The revocability of a proxy that states on its face that it is
irrevocable shall be governed by the provisions of the General Corporation Law
of the State of California.
11. INSPECTORS OF ELECTION. Before any meeting of shareholders, the
Board of Trustees may appoint any persons other than nominees for office to act
as inspectors of election at the meeting or its adjournment. If no inspectors of
election are so appointed, the chairman of the meeting may and on the request of
any shareholder or a shareholder's proxy shall, appoint inspectors of election
at the meeting. The number of inspectors shall be either one (1) or three (3).
If inspectors are appointed at a meeting on the request of one or more
shareholders or proxies, the holders of a majority of shares or their proxies
present at the meeting shall determine whether one (1) or three (3) inspectors
are to be appointed. If any person appointed as inspector fails to appear or
fails or refuses to act, the chairman of the meeting may and on the request of
any shareholder or a shareholder's proxy, shall appoint a person to fill the
vacancy.
These inspectors shall:
(a) Determine the number of shares outstanding and the voting power of each,
the shares represented at the meeting, the existence of a quorum and the
authenticity, validity and effect of proxies;
(b) Receive votes, ballots or consents;
(c) Hear and determine all challenges and questions in any way arising in
connection with the right to vote;
(d) Count and tabulate all votes or consents;
(e) Determine when the polls shall close;
(f) Determine the result; and
(g) Do any other acts that may be proper to conduct the election or vote with
fairness to all shareholders.
TRUSTEES
1. POWERS. Subject to the applicable provisions of the Declaration of Trust
and these By-Laws relating to action required to be approved by the shareholders
or by the outstanding shares, the business and affairs of the Trust shall be
managed and all powers shall be exercised by or under the direction of the Board
of Trustees.
2. NUMBER AND QUALIFICATION OF TRUSTEES. The exact number of trustees shall
be set forth in the Agreement and Declaration of Trust, until changed by a duly
adopted amendment to the Declaration of Trust.
3. VACANCIES. Vacancies in the Board of Trustees may be filled by a
majority of the remaining trustees, though less than a quorum, or by a sole
remaining trustee, unless the Board of Trustees calls a meeting of shareholders
for the purposes of electing trustees. In the event that at any time less than a
majority of the trustees holding office at that time were so elected by the
holders of the outstanding voting securities of the Trust, the Board of Trustees
shall forthwith cause to be held as promptly as possible, and in any event
within sixty (60) days, a meeting of such holders for the purpose of electing
trustees to fill any existing vacancies in the Board of Trustees, unless such
period is extended by order of the United States Securities and Exchange
Commission.
Notwithstanding the above, whenever and for so long as the Trust is a
participant in or otherwise has in effect a Plan under which the Trust may be
deemed to bear expenses of distributing its shares as that practice is described
in Rule 12b-i under the Investment Company Act of 1940, then the selection and
nomination of the trustees who are not interested persons of the Trust (as that
term is defined in the Investment Company Act of 1940) shall be, and is,
committed to the discretion of such disinterested trustees.
4. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE. All meetings of the
Board of Trustees may be held at any place within or outside the State of
Delaware that has been designated from time to time by resolution of the Board.
In the absence of such a designation, regular meetings shall be held at the
principal executive office of the Trust. Any meeting, regular or special, may be
held by conference telephone or similar communication equipment, so long as all
trustees participating in the meeting can hear one another and all such trustees
shall be deemed to be present in person at the meeting.
5. REGULAR MEETINGS. Regular meetings of the Board of Trustees shall be
held without call at such tine as shall from time to time be fixed by the Board
of Trustees. Such regular meetings may be held without notice.
6. SPECIAL MEETINGS. Special meetings of the Board of Trustees for any
purpose or purposes may be called at any time by the chairman of the board or
the president or any vice president or the secretary or any two (2) trustees.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each trustee or sent by first-class mail or
telegram, charges prepaid, addressed to each trustee at that trustee's address
as it is shown on the records of the Trust. In case the notice is mailed, it
shall be deposited in the United States mail at least seven (7) days before the
tine of the holding of the meeting. In case the notice is delivered personally,
by telephone, to the telegraph company, or by express mail or similar service,
it shall be given at least forty-eight (48) hours before the time of the holding
of the meeting. Any oral notice given personally or by telephone may be
communicated either to the trustee or to a person at the office of the trustee
who the person giving the notice has reason to believe will promptly communicate
it to the trustee. The notice need not specify the purpose of the meeting or the
place if the meeting is to be held at the principal executive office of the
Trust.
7. QUORUM. A majority of the authorized number of trustees shall
constitute a quorum for the transaction of business, except to adjourn as
provided in Section 10 of this Article III. Every act or decision done or made
by a majority of the trustees present at a meeting duly held at which a quorum
is present shall be regarded as the act of the Board of Trustees, subject to the
provisions of the Declaration of Trust. A meeting at which a quorum is initially
present may continue to transact business notwithstanding the withdrawal of
trustees if any action taken is approved by a least a majority of the required
quorum for that meeting.
8. WAIVER OF NOTICE. Notice of any meeting need not be given to any
trustee who either before or after the meeting signs a written waiver of notice,
a consent to holding the meeting, or an approval of the minutes. The waiver of
notice or consent need not specify the purpose of the meeting. All such waivers,
consents, and approvals shall be filed with the records of the Trust or made a
part of the minutes of the meeting. Notice of a meeting shall also be deemed
given to any trustee who attends the meeting without protesting before or at its
commencement the lack of notice to that trustee.
9. ADJOURNMENT. A majority of the trustees present, whether or not
constituting a quorum, may adjourn any meeting to another time and place.
10. NOTICE OF ADJOURNMENT. Notice of the time and place of holding an
adjourned meeting need not be given unless the meeting is adjourned for more
than forty-eight (48) hours, in which case notice of the time and place shall be
given before the time of the adjourned meeting in the manner specified in
Section 7 of this Article III to the trustees who were present at the time of
the adjournment.
11. ACTION WITHOUT A MEETING. Any action required or permitted to be taken
by the Board of Trustees may be taken without a meeting if a majority of the
members of the Board of Trustees shall individually or collectively consent in
writing to that action. Such action by written consent shall have the same force
and effect as a majority vote of the Board of Trustees. Such written consent or
consents shall be filed with the minutes of the proceedings of the Board of
Trustees.
12. FEES AND COMPENSATION OF TRUSTEES. Trustees and members of committees
may receive such compensation, if any, for their services and such reimbursement
of expenses as may be fixed or determined by resolution of the Board of
Trustees. This Section 12 shall not be construed to preclude any trustee from
serving the Trust in any other capacity as an officer, agent, employee, or
otherwise and receiving compensation for those services.
13. DELEGATION OF POWER TO OTHER TRUSTEES. Any Trustee may, by power of
attorney, delegate his power for a period not exceeding six (6) months at any
one time to any other Trustee or Trustees; provided that in no case shall fewer
than two (2) Trustees personally exercise the powers granted to the Trustees
under this Declaration of Trust except as otherwise expressly provided herein or
by resolution of the Board of Trustees.
COMMITTEES
1. COMMITTEES OF TRUSTEES. The Board of Trustees may by resolution adopted
by a majority of the authorized number of trustees designate one or more
committees, each consisting of two (2) or more trustees, to serve at the
pleasure of the Board. The Board may designate one or more trustees as alternate
members of any committee who may replace any absent member at any meeting of the
committee. Any committee to the extent provided in the resolution of the Board,
shall have the authority of the Board, except with respect to:
(a) the approval of any action which under applicable law also requires
shareholders' approval or approval of the outstanding shares, or requires
approval by a majority of the entire Board or certain members of said
Board;
(b) the filling of vacancies on the Board of Trustees or in any committee;
(c) the fixing of compensation of the trustees for serving on the Board of
Trustees or on any committee;
(d) the amendment or repeal of the Declaration of Trust or of the By-Laws or
the adoption of new By-Laws;
(e) the amendment or repeal of any resolution of the Board of Trustees which by
its express terms is not so amendable or repealable;
(f) a distribution to the shareholders of the Trust, except at a rate or in a
periodic amount or within a designated range determined by the Board of
Trustees; or
(g) the appointment of any other committees of the Board of Trustees or the
members of these committees.
2. MEETINGS AND ACTION OF COMMITTEES. Meetings and action of committees
shall be governed by and held and taken in accordance with the provisions of
Article III of these By-Laws, with such changes in the context thereof as are
necessary to substitute the committee and its members for the Board of Trustees
and its members, except that the time of regular meetings of committees may be
determined either by resolution of the Board of Trustees or by resolution of the
committee. Special meetings of committees may also be called by resolution of
the Board of Trustees, and notice of special meetings of committees shall also
be given to all alternate members who shall have the right to attend all
meetings of the committee. The Board of Trustees may adopt rules for the
government of any committee not inconsistent with the provisions of these
By-Laws.
OFFICERS
1. OFFICERS. The officers of the Trust shall be a president, a secretary,
and a treasurer. The Trust may also have, at the discretion of the Board of
Trustees, a chairman of the board, one or more vice presidents, one or more
assistant secretaries, one or more assistant treasurers, and such other officers
as may be appointed in accordance with the provisions of Section 3 of this
Article V. Any number of offices may be held by the same person.
2. ELECTION OF OFFICERS. The officers of the Trust, except such officers as
may appointed in accordance with the provisions of Section 3 or Section 5 of
this Article V, shall be chosen by the Board of Trustees, and each shall serve
at the pleasure of the Board of Trustees, subject to the rights, if any, of an
officer under any contract of employment.
3. SUBORDINATE OFFICERS. The Board of Trustees may appoint and may empower
the president to appoint such other officers as the business of the Trust may
require, each of whom shall hold office for such period, have such authority and
perform such duties as are provided in these By-Laws or as the Board of Trustees
may from time to time determine.
4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the rights, if any, of
an officer under any contract of employment, any officer may be removed, either
with or without cause, by the Board of Trustees at any regular or special
meeting of the Board of Trustees or except in the case of an officer upon whom
such power of removal may be conferred by the Board of Trustees.
Any officer may resign at any time by giving written notice to the Trust.
Any resignation shall take effect at the date of the receipt of that notice or
at any later time specified in that notice; and unless otherwise specified in
that notice, the acceptance of the resignation shall not be necessary to make it
effective. Any resignation is without prejudice to the rights, if any, of the
Trust under any contract to which the officer is a party.
5. VACANCIES IN OFFICES. A vacancy in any office because of death,
resignation, removal, disqualification or other cause shall be filled in the
manner prescribed in these By-Laws for regular appointment to that office.
6. CHAIRMAN OF THE BOARD. The chairman of the board, if such an officer is
elected, shall if present preside at meetings of the Board of Trustees and
exercise and perform such other powers and duties as may be from time to time
assigned to him by the Board of Trustees or prescribed by the By-Laws.
7. PRESIDENT. Subject to such supervisory powers, if any, as may be given
by the Board of Trustees to the chairman of the board, if there be such an
officer, the president shall be the chief executive officer of the Trust and
shall, subject to the control of the Board of Trustees, have general
supervision, direction and control of the business and the officers of the
Trust. He shall preside at all meetings of the shareholders and in the absence
of the chairman of the board or if there be none, at all meetings of the Board
of Trustees. He shall have the general powers and duties of management usually
vested in the office of president of a corporation and shall have such other
powers and duties as may be prescribed by the Board of Trustees or these
By-Laws.
8. VICE PRESIDENTS. In the absence or disability of the president, the vice
presidents, if any, in order of their rank as fixed by the Board of Trustees or
if not ranked, a vice president designated by the Board of Trustees, shall
perform all the duties of the president and when so acting shall have all powers
of and be subject to all the restrictions upon the president. The vice
presidents shall have such other powers and perform such other duties as from
time to time may be prescribed for them respectively by the Board of Trustees or
by these By-Laws and the president or the chairman of the board.
9. SECRETARY. The secretary shall keep or cause to be kept at the principal
executive office of the Trust or such other place as the Board of Trustees may
direct a book of minutes of all meetings and actions of trustees, committees of
trustees and shareholders with the time and place of holding, whether regular or
special, and if special, how authorized, the notice given, the names of those
present at trustees' meetings or committee meetings, the number of shares
present or represented at shareholders' meetings, and the proceedings.
The secretary shall keep or cause to be kept at the principal executive
office of the Trust or at the office of the Trust's transfer agent or registrar,
as determined by resolution of the Board of Trustees, a share register or a
duplicate share register showing the names of all shareholders and their
addresses, the number and classes of shares held by each, the number and date of
certificates issued for the same and the number and date of cancellation of
every certificate surrendered for cancellation.
The secretary shall give or cause to be given notice of all meetings of the
shareholders and of the Board of Trustees required by these By-Laws or by
applicable law to be given and shall have such other powers and perform such
other duties as may be prescribed by the Board of Trustees or by these By-Laws.
10. TREASURER. The treasurer shall be the chief financial officer of the
Trust and shall keep and maintain or cause to be kept and maintained adequate
and correct books and records of accounts of the properties and business
transactions of the Trust, including accounts of its assets, liabilities,
receipts, disbursements, gains, losses, capital, retained earnings and shares.
The books of account shall at all reasonable times be open to inspection by-any
trustee.
The treasurer shall deposit all monies and other valuables in the name and
to the credit of the Trust with such depositories as may be designated by the
Board of Trustees. He shall disburse the funds of the Trust as may be ordered by
the Board of Trustees, shall render to the president and trustees, whenever they
request it, an account of all of his transactions as chief financial officer and
of the financial condition of the Trust and shall have other powers and perform
such other duties as may be prescribed by the Board of Trustees or these
By-Laws.
VI INDEMNIFICATION OF TRUSTEES, OFFICERS,
EMPLOYEES AND OTHER AGENTS
1. AGENTS, PROCEEDINGS AND EXPENSES. For the purpose of this Article,
"agent" means any person who is or was a trustee, officer, employee or other
agent of this Trust or is or was serving at the request of this Trust as a
trustee, director, officer, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust or other enterprise or was a
trustee, director, officer, employee or agent of a foreign or domestic
corporation which was a predecessor of another enterprise at the request of such
predecessor entity; "proceeding" means any threatened, pending or completed
action or proceeding, whether civil, criminal, administrative or investigative;
and "expenses" includes without limitation attorney's fees and any expenses of
establishing a right to indemnification under this Article.
2. ACTIONS OTHER THAN BY TRUST. This Trust shall indemnify any person who
was or is a party or is threatened to be made a party to any proceeding (other
than an action by or in the right of this Trust) by reason of the fact that such
person is or was an agent of this Trust, against expenses, judgments, fines,
settlements and other amounts actually and reasonably.incurred in connection
with such proceeding if that person acted in good faith and in a manner that
person reasonably believed to be in the best interests of this Trust and in the
case of a criminal proceeding, had no reasonable cause to believe the conduct of
that person was unlawful. The termination of any proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contenders or its equivalent shall
not of itself create a presumption that the person did not act in good faith and
in a manner which the person reasonably believed to be in the best interests of
this Trust or that the person had reasonable cause to believe that the person's
conduct was unlawful.
3. ACTIONS OTHER THAN BY TRUST. This Trust shall indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action by or in the right of this Trust to procure a judgment in
its favor by reason of the fact that the person is or was an agent of this
Trust, against expenses actually and reasonably incurred by that person in
connection with the defense or settlement of that action if that person acted in
good faith, in a manner that person believed to be in the best interests of this
Trust and with such care, including reasonable inquiry, as an ordinarily prudent
person in a like position would use under similar circumstances.
4. EXCLUSION OF INDEMNIFICATION. Notwithstanding any provision to the
contrary contained herein, there shall be no right to indemnification for any
liability arising by reason of willful misfeasance, bad faith, gross negligence,
or the reckless disregard of the duties involved in the conduct of the agent's
office with this Trust.
No indemnification shall be made under Sections 2 or 3 of this Article:
(a) In respect of any claim, issue or matter as to which that person shall
have been adjudged to be liable in the performance of that person's duty to this
Trust, unless and only to the extent that the court in which that action was
brought shall determine upon application that in view of all the circumstances
of the case, that person was not liable by reason of the disabling conduct set
forth in the preceding paragraph and is fairly and reasonably entitled to
indemnity for the expenses which the court shall determine; or
(b) In respect of any claim, issue, or matter as to which that person shall
have been adjudged to be liable on the basis that personal benefit was
improperly received by him, whether or not the benefit resulted from an action
taken in the person's official capacity; or
(c) Of amounts paid in settling or otherwise disposing of a threatened or
pending action, with or without court approval, or of expenses incurred in
defending a threatened or pending action which is settled or otherwise disposed
of without court approval, unless the required approval set forth in Section 6
of this Article is obtained.
5. SUCCESSFUL DEFENSE BY AGENT. To the extent that an agent of this Trust
has been successful on the merits in defense of any proceeding referred to in
Sections 2 or 3 of this Article or in defense of any claim, issue or matter
therein, before the court or other body before whom the proceeding was brought,
the agent shall be indemnified against expenses actually and reasonably incurred
by the agent in connection therewith, provided that the Board of Trustees,
including a majority who are disinterested, non-party trustees, also determines
that based upon a review of the facts, the agent was not liable by reason of the
disabling conduct referred to in Section 4 of this Article.
6. REQUIRED APPROVAL. Except as provided in Section 5 of this Article, any
indemnification under this Article shall be made by this Trust only if
authorized in the specific case on a determination that indemnification of the
agent is proper in the circumstances because the agent has met the applicable
standard of conduct set forth in Sections 2 or 3 of this Article and is not
prohibited from indemnification because of the disabling conduct set forth in
Section 4 of this Article, by:
(a) A majority vote of a quorum consisting of trustees who are not parties to
the proceeding and are not interested persons of the Trust (as defined in
the Investment Company Act of 1940); or
(b) A written opinion by an independent legal counsel.
7. ADVANCE OF EXPENSES. Expenses incurred in defending any proceeding may
be advanced by this Trust before the final disposition of the proceeding on
receipt of an undertaking by or on behalf of the agent to repay the amount of
the advance unless it shall be determined ultimately that the agent is entitled
to be indemnified as authorized in this Article, provided the agent provides a
security for his undertaking, or a majority of a quorum of the disinterested,
non-party trustees, or an independent legal counsel in a written opinion,
determine that based on a review of readily available facts, there is reason to
believe that said agent ultimately will be found entitled to indemnification.
8. OTHER CONTRACTUAL RIGHTS. Nothing contained in this Article shall affect
any right to indemnification to which persons other than trustees and officers
of this Trust or any subsidiary hereof may be entitled by contract or otherwise.
9. LIMITATIONS. No indemnification or advance shall be made under this
Article, except as provided in Sections 5 or 6 in any circumstances where it
appears:
(a) That it would be inconsistent with a provision of the Agreement and
Declaration of Trust, a resolution of the shareholders, or an agreement in
effect at the time of accrual of the alleged cause of action asserted in
the proceeding in which the expenses were incurred or other amounts were
paid which prohibits or otherwise limits indemnification; or
(b) That it would be inconsistent with any condition expressly imposed by a
court in approving a settlement.
10. INSURANCE. Upon and in the event of a determination by the Board of
Trustees of this Trust to purchase such insurance, this Trust shall purchase and
maintain insurance on behalf of any agent of this Trust against any liability
asserted against or incurred by the agent in such capacity or arising out of the
agent's status as such, but only to the extent that this Trust would have the
power to indemnify the agent against that liability under the provisions of this
Article.
11. FIDUCIARIES OF EMPLOYEE BENEFIT PLAN. This Article does not apply to
any proceeding against any trustee, investment manager or other fiduciary of an
employee benefit plan in that person' s capacity as such, even though that
person may also be an agent of this Trust as defined in Section 1 of this
Article. Nothing contained in this Article shall limit any right to
indemnification to which such a trustee, investment manager, or other fiduciary
may be entitled by contract or otherwise which shall be enforceable to the
extent permitted by applicable law other than this Article.
RECORDS AND REPORTS
1. MAINTENANCE AND INSPECTION OF SHARE REGISTER. This Trust shall keep at
its principal executive office or at the office of its transfer agent or
registrar, if either be appointed and as determined by resolution of the Board
of Trustees, a record of its shareholders, giving the names and addresses of all
shareholders and the number and series of shares held by each shareholder.
2. MAINTENANCE AND INSPECTION OF BY-LAWS. The Trust shall keep at its
principal executive office the original or a copy of these By-Laws as amended to
date, which shall be open to inspection by the shareholders at all reasonable
times during office hours.
3. MAINTENANCE AND INSPECTION OF OTHER RECORDS. The accounting books and
records and minutes of proceedings of the shareholders and the Board of Trustees
and any committee or committees of the Board of Trustees shall be kept at such
place or places designated by the Board of Trustees or in the absence of such
designation, at the principal executive office of the Trust. The minutes shall
be kept in written form and the accounting books and records shall be kept
either in written form or in any other form capable of being converted into
written form. The minutes and accounting books and records shall be open to
inspection upon the written demand of any shareholder or holder of a voting
trust certificate at any reasonable time during usual business hours for a
purpose reasonably related to the holder's interests as a shareholder or as the
holder of a voting trust certificate. The inspection may be made in person or by
an agent or attorney and shall include the right to copy and make extracts.
4. INSPECTION BY TRUSTEES. Every trustee shall have the absolute right at
any reasonable time to inspect all books, records, and documents of every kind
and the physical properties of the Trust. This inspection by a trustee may be
made in person or by an agent or attorney and the right of inspection includes
the right to copy and make extracts of documents.
5. FINANCIAL STATEMENTS. A copy of any financial statements and any income
statement of the Trust for each quarterly period of each fiscal year and
accompanying balance sheet of the Trust as of the end of each such period that
has been prepared by the Trust shall be kept on file in the principal executive
office of the Trust for at least twelve (12) months and each such statement
shall be exhibited at all reasonable times to any shareholder demanding an
examination of any such statement or a copy shall be mailed to any such
shareholder.
The quarterly income statements and balance sheets referred to in this
section shall be accompanied by the report, if any, of any independent
accountants engaged by the Trust or the certificate of an authorized officer of
the Trust that the financial statements were prepared without audit from the
books and records of the Trust.
GENERAL MATTERS
1. CHECKS, DRAFTS, EVIDENCE OF INDEBTEDNESS. All checks, drafts, or other
orders for payment of money, notes or other evidences of indebtedness issued in
the name of or payable to the Trust shall be signed or endorsed by such person
or persons and in such manner as from time to time shall be determined by
resolution of the Board of Trustees.
2. CONTRACTS AND INSTRUMENTS; HOW EXECUTED. The Board of Trustees, except
as otherwise provided in these By-Laws, may authorize any officer or officers,
agent or agents, to enter into any contract or execute any instrument in the
name of and on behalf of the Trust and this authority may be general or confined
to specific instances; and unless so authorized or ratified by the Board of
Trustees or within the agency power of an officer, no officer, agent, or
employee shall have any power or authority to bind the Trust by any contract or
engagement or to pledge its credit or to render it liable for any purpose or for
any amount.
3. CERTIFICATES FOR SHARES. A certificate or certificates for shares of
beneficial interest in any series of the Trust may be issued to a shareholder
upon his request when such shares are fully paid. All certificates shall be
signed in the name of the Trust by the chairman of the board or the president or
vice president and by the treasurer or an assistant treasurer or the secretary
or any assistant secretary, certifying the number of shares and the series of
shares owned by the shareholders. Any or all of the signatures on the
certificate may be facsimile. In case any officer, transfer agent, or registrar
who has signed or whose facsimile signature has been placed on a certificate
shall have ceased to be that officer, transfer agent, or registrar before that
certificate is issued, it may be issued by the Trust with the same effect as if
that person were an officer, transfer agent or registrar at the date of issue.
Notwithstanding the foregoing, the Trust may adopt and use a system of issuance,
recordation and transfer of its shares by electronic or other means.
4. LOST CERTIFICATES. Except as provided in this Section 4, no new
certificates for shares shall be issued to replace an old certificate unless the
latter is surrendered to the Trust and cancelled at the same time. The Board of
Trustees may in case any share certificate or certificate for any other security
is lost, stolen, or destroyed, authorize the issuance of a replacement
certificate on such terms and conditions as the Board of Trustees may require,
including a provision for indemnification of the Trust secured by a bond or
other adequate security sufficient to protect the Trust against any claim that
may be made against it, including any expense or liability on account of the
alleged loss, theft, or destruction of the certificate or the issuance of the
replacement certificate.
5. REPRESENTATION OF SHARES OF OTHER ENTITIES HELD BY TRUST. The chairman
of the board, the president or any vice president or any other person authorized
by resolution of the Board of Trustees or by any of the foregoing designated
officers, is authorized to vote or represent on behalf of the Trust any and all
shares of any corporation, partnership, trusts, or other entities, foreign or
domestic, standing in the name of the Trust. The authority granted may be
exercised in person or by a proxy duly executed by such designated person.
6. FISCAL YEAR. The fiscal year of the Trust shall be fixed and refixed or
changed from time to time by resolution of the Trustees. The fiscal year of the
Trust shall be the taxable year of each Series of the Trust.
AMENDMENTS
1. AMENDMENT BY SHAREHOLDERS. These By-Laws may be amended or repealed by
the affirmative vote or written consent of a majority of the outstanding shares
entitled to vote, except as otherwise provided by applicable law or by the
Declaration of Trust or these By-Laws.
2. AMENDMENT BY TRUSTEES. Subject to the right of shareholders as provided
in Section 1 of this Article to adopt, amend or repeal By-Laws, and except as
otherwise provided by law or by the Declaration of Trust, these By-Laws may be
adopted, amended, or repealed by the Board of Trustees.
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT is made between FRANKLIN TEMPLETON GLOBAL TRUST, a
Delaware business trust (successor to Franklin Templeton Global Trust, a
Massachusetts business trust formerly known as Huntington Funds), 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 the 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; 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 a 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 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.
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 ___ day of ________, 1996.
FRANKLIN TEMPLETON GLOBAL TRUST
By:
Deborah R. Gatzek
Vice President & Secretary
FRANKLIN ADVISERS, INC.
By:
Harmon E. Burns
Executive Vice President
SUBADVISORY AGREEMENT
FRANKLIN TEMPLETON GLOBAL TRUST (formerly known as Huntington Funds), on
behalf of its series, FRANKLIN TEMPLETON GERMAN GOVERNMENT BOND FUND, FRANKLIN
TEMPLETON GLOBAL CURRENCY FUND, FRANKLIN TEMPLETON HARD CURRENCY FUND AND
FRANKLIN TEMPLETON HIGH INCOME CURRENCY FUND
THIS SUBADVISORY AGREEMENT is made as of the ___ day of _________, 1996,
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
Franklin Templeton German Government Bond Fund, Franklin Templeton Global
Currency Fund, Franklin Templeton Hard Currency Fund and Franklin Templeton High
Income Currency Fund, (the "Funds"), series of Franklin Templeton Global Trust
(the "Trust")(formerly known as the Huntington Funds), 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 German Government Bond Fund, Franklin
Templeton Global Currency Fund, Franklin Templeton Hard
Currency Fund and Franklin Templeton High Income Currency
Fund.
(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 ____________, 1996, 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:________________________________
Title:
TEMPLETON INVESTMENT COUNSEL, INC.
By:_________________________________
Title:
FRANKLIN TEMPLETON GERMAN GOVERNMENT BOND FUND, FRANKLIN TEMPLETON GLOBAL
CURRENCY FUND, FRANKLIN TEMPLETON HARD CURRENCY FUND AND FRANKLIN TEMPLETON HIGH
INCOME CURRENCY FUND, hereby acknowledge and agree to the provisions of
paragraphs 9(a) and 10 of this Agreement.
FRANKLIN TEMPLETON GLOBAL TRUST (formerly known as Huntington Funds) on behalf
of FRANKLIN TEMPLETON GERMAN GOVERNMENT BOND FUND, FRANKLIN TEMPLETON GLOBAL
CURRENCY FUND, FRANKLIN TEMPLETON HARD CURRENCY FUND AND FRANKLIN TEMPLETON HIGH
INCOME CURRENCY FUND
By:___________________________________
Title:
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:_______________________________
Deborah R. Gatzek
Vice President & Secretary
Accepted:
Franklin/Templeton Distributors, Inc.
By:_______________________________
Harmon E. Burns
Executive Vice President
DATED: ______________
SUBCONTRACT FOR ADMINISTRATIVE SERVICES
This Subcontract for Administrative Services ("Subcontract") is made as of
____________, 1996 between Franklin Advisers, Inc., a California Corporation
(the "Investment Manager") and TEMPLETON GLOBAL INVESTORS, INC. (the
"Administrator").
In consideration of the mutual agreements herein made, the
Administrator and the Investment Manager understand and agree as follows:
I. Prime Contract.
This Subcontract is made in order to assist the Investment Manager in fulfilling
certain of the Investment Manager's obligations under that Investment Management
Agreement made as of the ____ day of ___________, 1996 and as it may be amended
in the future ("Agreement") between the Investment Manager and Franklin
Templeton Global Trust, formerly known as the Huntington Funds, on behalf its
series, Franklin Templeton Global Currency Fund, Franklin Templeton High Income
Currency Fund, Franklin Templeton Hard Currency Fund, and Franklin Templeton
German Government Bond Fund ("Funds"). This Subcontract is subject to the terms
of the Agreement, which is incorporated herein by reference.
II. Subcontractual Provisions.
(1) The Administrator agrees, during the life of this Subcontract, to
provide the following services to each Fund on behalf of the Investment Manager,
to the extent required under the Agreement:
(a) providing office space, telephone, office equipment and
supplies for the Fund;
(b) paying compensation of the Fund's officers for services
rendered as such;
(c) authorizing expenditures and approving bills for payment on
behalf of the Fund;
(d) supervising preparation of periodic reports to Shareholders,
notices of dividends, capital gains distributions and tax credits, and attending
to routine correspondence and other communications with individual Shareholders;
(e) daily pricing of the Fund's investment portfolio and preparing
and supervising publication of daily quotations of the bid and asked prices of
the Fund's Shares, earnings reports and other financial data;
(f) monitoring relationships with organizations serving the Fund,
including custodians, transfer agents, public accounting firms, law firms,
printers and other third party service providers;
(g) providing trading desk facilities for the Fund;
(h) supervising compliance by the Fund with recordkeeping
requirements under the Investment Company Act of 1940 (the "1940 Act") and the
rules and regulations thereunder, supervising compliance with recordkeeping
requirements imposed by state laws or regulations, and maintaining books and
records for the Fund (other than those maintained by the custodian and transfer
agent);
(i) preparing and filing of tax reports including the Fund's income
tax returns, and monitoring the Fund's compliance with subchapter M of the
Internal Revenue Code and other applicable tax laws and regulations;
(j) monitoring the Fund's compliance with: the 1940 Act and rules
and regulations thereunder; state and foreign laws and regulations applicable to
the operation of investment companies; the Fund's investment objectives,
policies and restrictions; and the Code of Ethics and other policies adopted by
the Fund's Board of Trustees or by the Adviser and applicable to the Fund;
(k) providing executive, clerical and secretarial personnel
needed to carry out the above responsibilities; and
(l) preparing regulatory reports, including without limitation
NSARs, proxy statements and U.S. and foreign ownership reports.
(2) The Investment Manager agrees to pay to the Administrator as
compensation for such services a monthly fee equal on an annual basis to 0.15%
of the first $200 million of the average daily net assets of each Fund during
the month preceding each payment, reduced as follows: on such net assets in
excess of $200 million up to $700 million, a monthly fee equal on an annual
basis to 0.135%; on such net assets in excess of $700 million up to $1.2
billion, a monthly fee equal on an annual basis to 0.1%; and on such net assets
in excess of $1.2 billion, a monthly fee equal on an annual basis to 0.075%.
(3) This Subcontract shall become effective on the date written above and
shall continue in effect so long as (1) the Agreement is in effect and (2) this
Subcontract is not terminated. This Subcontract will terminate immediately upon
the termination of the Agreement, and may in addition be terminated by either
party at any time, without the payment of any penalty, on sixty (60) days'
written notice to the other party.
(4) In the absence of willful misfeasance, bad faith or gross negligence
on the part of the Administrator, or of reckless disregard of its duties and
obligations hereunder, the Administrator shall not be subject to liability for
any act or omission in the course of, or connected with, rendering services
hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Subcontract
to be executed by their duly authorized officers.
FRANKLIN ADVISERS, INC.
By: ________________________________________
Title: ________________________________________
TEMPLETON GLOBAL INVESTORS, INC.
By: ________________________________________
Title: ________________________________________
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Post-Effective Amendment No. 15
to the Registration Statement of Franklin Templeton Global Trust on Form N-1A
File Nos. 33-01212 and 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.
San Francisco, California
July 31, 1996
FRANKLIN TEMPLETON GLOBAL TRUST
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 FRANKLIN
TEMPLETON GLOBAL TRUST (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 for 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 .25% 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 ___ day of ________, 1996.
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.
FRANKLIN TEMPLETON GLOBAL TRUST
By:____________________________
Deborah R. Gatzek
Vice President & Secretary
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
By:__________________________
Harmon E. Burns
Executive Vice President
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) as attorney-in-fact and agent, in all capacities, to execute, and
to file any of the documents referred to below relating to the Notification of
Registration on Form N-8A registering the Registrant as an investment company
under the Investment Company Act of 1940, as amended, and 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, including any and all amendments
thereto, covering the registration of the Registrant as an investment company
and the sale of shares by the Registrant, including all exhibits and any and all
documents required to be filed with respect thereto with any regulatory
authority, including applications for exemptive order rulings. 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 14th day of May, 1996.
/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/ David K. Eiteman /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/ David P. Kraus
Rubert H. Johnson, Jr., David P. Kraus,
Trustee Trustee
/s/ Frank W.T. LaHaye /s/ Gordon S. Macklin
Frank W.T. LaHaye, Gordon S. Macklin,
Trustee Trustee
/s/ Martin L. Flanagan /s/ Diomedes Loo-Tam
Martin L. Flanagan, Diomedes Loo-Tam,
Principal Financial Officer Principal Accounting
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 May 14, 1996.
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: May 14, 1996 Deborah R. Gatzek
Secretary
