As filed with the Securities and Exchange Commission on February 29, 2000.
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. 20 (X)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 21 (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 (650) 312-2000
MURRAY L. SIMPSON, 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)
[X] on March 1, 2000 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Prospectus
FRANKLIN
TEMPLETON
GLOBAL TRUST
CLASS A
INVESTMENT STRATEGY
GLOBAL INCOME
FRANKLIN TEMPLETON GLOBAL CURRENCY FUND
FRANKLIN TEMPLETON HARD CURRENCY FUND
MARCH 1, 2000
[Insert Franklin Templeton Ben Head]
The SEC has not approved or disapproved these securities or passed upon the
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
CONTENTS
[Begin callout]
INFORMATION ABOUT EACH FUND YOU SHOULD KNOW BEFORE INVESTING
[End callout]
THE FUNDS
2 Franklin Templeton
Global Currency Fund
11 Franklin Templeton
Hard Currency Fund
20 Distributions and Taxes
YOUR ACCOUNT
[Begin callout]
INFORMATION ABOUT SALES CHARGES, ACCOUNT TRANSACTIONS AND SERVICES
[End callout]
21 Sales Charges
24 Buying Shares
26 Investor Services
29 Selling Shares
31 Account Policies
34 Questions
FOR MORE INFORMATION
[Begin callout]
WHERE TO LEARN MORE ABOUT EACH FUND
[End callout]
Back Cover
FRANKLIN TEMPLETON
GLOBAL CURRENCY FUND
[Insert graphic of bullseye and arrows] GOAL AND STRATEGIES
GOAL The fund's investment goal is to maximize total return through a
combination of interest income and changes in the fund's net asset value due to
changes in currency exchange rates.
PRINCIPAL INVESTMENT STRATEGIES The fund invests in high-quality, short-term
money market instruments denominated in foreign and domestic currencies. The
manager may vary its emphasis between interest income and currency appreciation
from time to time.
[Begin callout]
MAJOR CURRENCIES include the Australian dollar, Belgian franc, British pound
sterling, Canadian dollar, Danish krone, Netherlands guilder, the euro, French
franc, German mark, Greek drachma, Irish punt, Italian lira, Japanese yen, New
Zealand dollar, Norwegian krona, Spanish peseta, Swedish krona, Swiss
franc and U.S. dollar.
[End callout]
Money market instruments are issued by foreign and domestic governments,
financial institutions, corporations and other entities to borrow money. The
issuer pays a fixed, floating or variable rate of interest, and must repay the
amount borrowed at maturity. To try to reduce credit and interest rate risk to
its portfolio, the fund maintains a weighted average portfolio maturity of 120
days or less and only buys money market instruments:
o with effective maturities of one year or less at the time of purchase, and
o that the manager considers comparable in quality to instruments rated in the
top two ratings by U.S. nationally recognized rating services or issued by
companies with an outstanding unsecured debt issue rated in the top two
ratings.
Under normal market conditions, the fund invests at least 65% of its total
assets in money market instruments denominated in any combination of three or
more major currencies and does not intend to invest more than (i) 50% in
instruments denominated in any one major currency, other than the U.S. dollar,
(ii) 5% in instruments denominated in any one non-major currency, or (iii) 25%
in instruments denominated in non-major currencies.
The fund's investments may include a significant amount of euro-denominated
instruments. The European Economic and Monetary Union introduced the euro on
January 1, 1999. By July 1, 2002, the euro will have replaced the national
currencies of the following countries: Austria, Belgium, Finland, France,
Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain.
Currently, the exchange rate of the currencies of each of these countries is
fixed to the euro and the new European Central Bank has control over each
country's monetary policies. The government of each of these countries, however,
continues to have the authority to set its own tax and spending policies and
public debt levels.
To gain exposure to a foreign currency when the availability of instruments
denominated in that currency is low or when the manager believes it may be more
efficient than a direct investment in a foreign currency-denominated instrument,
the fund may invest in a combination of forward currency contracts and U.S.
dollar-denominated money market instruments. A forward currency contract is an
agreement to buy or sell a specific currency at a future date and at a price set
at the time of the contract. When combined with an investment in a U.S.
dollar-denominated money market instrument, the manager attempts to obtain an
investment result that is substantially the same as a direct investment in a
foreign currency-denominated instrument
The fund also may invest in forward currency contracts to try to hedge (protect)
against currency exchange rate fluctuations. While forward currency contracts
may reduce the risk of loss from a change in value of a currency, they also
limit any potential gains and do not protect against fluctuations in the value
of the underlying instrument.
THE VALUE OF FUND SHARES WILL FLUCTUATE. THE FUND IS NOT A
SUBSTITUTE FOR A U.S. DOLLAR MONEY MARKET FUND.
[Insert graphic of chart with line going up and down] MAIN RISKS
CURRENCY Changes in foreign currency exchange rates will affect the value of
what the fund owns and the fund's share price. Generally, when the U.S. dollar
rises in value against a foreign currency, an investment denominated in that
currency loses value because that currency is worth fewer U.S. dollars.
Devaluation of a currency by a country's government or banking authority also
will have a significant impact on the value of any investments denominated in
that currency. Currency markets generally are not as regulated as securities
markets.
Currency management strategies may substantially change the fund's exposure to
exchange rates and could result in losses to the fund if currencies do not
perform as the manager expects. There is no assurance that the manager's use of
currency management strategies will benefit the fund or that they will be, or
can be, used at appropriate times.
[Begin callout]
Because currency exchange rates fluctuate, the value of your investment in the
fund will go up and down. This means you could lose money over short or even
extended periods. [End callout]
EURO. The change to the euro as a single currency is new and untested. It is not
possible to predict the impact of the euro on currency values or on the business
or financial condition of European countries and issuers whose securities the
fund may hold, or the impact, if any, on fund performance. The fund's non-U.S.
dollar (euro or other) denominated investments will still be exposed to currency
risk due to fluctuations in those currencies versus the U.S. dollar.
FOREIGN MONEY MARKET INSTRUMENTS Money market instruments of companies and
governments located outside the U.S. may involve risks that can increase the
potential for losses in the fund.
COUNTRY. General money market movements in any country where the fund has
investments are likely to affect the value of the instruments the fund owns that
are denominated in that country's currency. These movements will affect the
fund's share price and fund performance.
The political, economic and social structures of some countries the fund invests
in may be less stable and more volatile than those in the U.S. The risks of
investing in these countries include the possibility of the imposition of
exchange controls, currency devaluations, foreign ownership limitations,
expropriation, restrictions on removal of currency and other assets,
nationalization of assets, punitive taxes and certain custody and settlement
risks. Foreign money markets may have substantially lower trading volumes than
U.S. markets, resulting in less liquidity and more volatility than in the U.S.
To the extent the fund invests in developing or emerging money markets, its
investments in such markets will be subject to all of the risks of foreign
investing generally, and have additional heightened risks due to a lack of
established legal, political, business and social frameworks to support money
markets.
COMPANY. Foreign companies may not be subject to the same disclosure,
accounting, auditing and financial reporting standards and practices as U.S.
companies and their money market instruments may not be as liquid as money
market instruments of similar U.S. companies. Foreign trading systems,
brokers and companies generally have less government supervision and
regulation than in the U.S. The fund may have greater difficulty pursuing
legal remedies and obtaining judgments with respect to foreign investments in
foreign courts than with respect to U.S. investments in U.S. courts.
INCOME Since the fund can only distribute what it earns, the fund's
distributions to its shareholders may decline when interest rates fall.
CREDIT It is possible that an issuer will be unable to make interest payments
and repay principal. Changes in an issuer's financial strength or in an
instrument's credit rating may affect the instrument's value and, thus, impact
fund performance.
INTEREST RATE When interest rates rise, the price of money market instruments
may fall. The opposite is also true: the price of money market instruments may
rise when interest rates fall. In general, instruments with longer maturities
are more sensitive to these price changes.
DERIVATIVE SECURITIES Forward currency contracts are considered derivative
investments, since their value depends on the value of the underlying asset to
be purchased or sold. To the extent the fund enters into these contracts, their
success will depend on the manager's ability to predict market movements.
DIVERSIFICATION The fund is a non-diversified fund. It may invest a greater
portion of its assets in the money market instruments of one issuer than a
diversified fund. The fund may be more sensitive to economic, business,
political or other changes affecting similar issuers or money market
instruments, which may result in greater fluctuation in the value of the fund's
shares. The fund, however, intends to meet certain tax diversification
requirements.
YEAR 2000 At this date, it appears neither the fund's operations nor the issuers
of its portfolios securities were adversely affected by Year 2000
computer-related problems. However, Year 2000 problems could still emerge. If an
issuer in which the fund is invested develops problems related to Year 2000, the
price of its securities may be adversely affected, and this may have an adverse
effect on the fund's performance.
Year 2000 has been one of the many factors the manager considers when making
investment decisions. The manager reviewed public filings and other statements
made by issuers about their Year 2000 readiness, but could not audit each issuer
to verify its readiness. Although the risk of the Year 2000 problem should
decrease over time, especially after the leap day of February 29, 2000, the
possibility remains that the fund and the issuers in which it is invested may be
adversely affected by Year 2000 problems until all of their various data
processing activities for the year have been completed.
More detailed information about the fund, its policies and risks can be found in
the fund's Statement of Additional Information (SAI).
[Begin callout]
Mutual fund shares 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. Mutual fund shares involve investment risks, including the possible
loss of principal. [End callout]
[Insert graphic of bull and bear] ERFORMANCE
This bar chart and table show the volatility of the fund's returns, which is one
indicator of the risks of investing in the fund. The bar chart shows changes in
the fund's returns from year to year over the past 10 calendar years. The table
shows how the fund's average annual total returns compare to those of a
broad-based securities market index. Of course, past performance cannot predict
or guarantee future results.
CLASS A ANNUAL TOTAL RETURNS 1
[Insert bar graph]
14.44% 7.61% 3.63% 6.03% 8.07% 5.02% 2.76% -4.54% 7.21% -1.39%
90 91 92 93 94 95 96 97 98 99
YEAR
[Begin callout]
BEST
QUARTER:
Q2 '92
7.81%
WORST
QUARTER:
Q4 '92
- -3.84%
[End callout]
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended December 31, 1999
1 YEAR 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Franklin Templeton Global Currency Fund - Class
A 2 -3.63% 1.26% 4.53%
J.P Morgan Three Month Global Cash Index 3, 4 -3.83% 1.95% 5.44%
1. Figures do not reflect sales charges. If they did, returns would be lower.
2. Figures reflect sales charges.
All fund performance assumes reinvestment of dividends and capital gains.
3. The J.P. Morgan Three Month Global Cash Index is replacing the Salomon
Brothers World Market Index as the fund's benchmark. The Salomon Brothers World
Money Market Index no longer exists.
4. Source: Standard & Poor's Micropal. The unmanaged J.P. Morgan Three Month
Global Cash Index measures the performance of euro-currency deposits in 11
global markets. It includes reinvested interest. One cannot invest directly in
an index, nor is an index representative of the fund's portfolio.
[Insert graphic of percentage sign] FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum sales charge (load) as a percentage of offering price 2.25%
Load imposed on purchases 2.25%
Maximum deferred sales charge (load) None 1
Exchange fee 2 $5.00
Please see "Sales Charges" on page 21 for an explanation of how and when these
sales charges apply.
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
Management fees 0.65%
Distribution and service (12b-1) fees 0.19%
Other expenses 0.29%
-----------
Total annual fund operating expenses 1.13%
===========
1. Except for investments of $1 million or more (see page 21) and purchases by
certain retirement plans without an initial sales charge.
2. This fee is only for market timers (see page 32).
EXAMPLE
This example can help you compare the cost of investing in the fund with the
cost of investing in other mutual funds. It assumes:
o You invest $10,000 for the periods shown;
o Your investment has a 5% return each year;
o The fund's operating expenses remain the same; and
o You sell your shares at the end of the periods shown.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------
$338 1 $576 $833 $1,569
1. Assumes a contingent deferred sales charge (CDSC) will not apply.
[Insert graphic of briefcase] MANAGEMENT
Franklin Advisers, Inc. (Advisers), 777 Mariners Island Blvd., San Mateo, CA
94404, is the fund's investment manager. Together, Advisers and its affiliates
manage over $235 billion in assets.
Under an agreement with Advisers, Templeton Investment Counsel, Inc. (Investment
Counsel), 500 East Broward Blvd., Ft. Lauderdale, FL 33394, through its
Templeton Global Bond Managers division (Global Bond Managers), is the fund's
sub-advisor. A team from Global Bond Managers provides Advisers with investment
management advice and assistance and is responsible for the day-to-day
management of the fund.
The fund pays Advisers a fee for managing the fund's assets. For the fiscal year
ended October 31, 1999, the fund paid 0.65% of its average daily net assets to
the manager for its services.
[Insert graphic of dollar bill] FINANCIAL HIGHLIGHTS
This table presents the fund's financial performance for the past five years.
This information has been audited by PricewaterhouseCoopers LLP.
YEAR ENDED OCTOBER 31,
- --------------------------------------------------------------------------------
1999 2 1998 1997 1996 1995
- --------------------------------------------------------------------------------
PER SHARE DATA ($)
Net asset value, beginning of year 12.06 12.10 12.80 13.67 14.14
-----------------------------------------
Net investment income .41 .50 .49 .69 1.29
Net realized and unrealized gains
(losses) (.39) (.07) (.68) (.54) (.49)
-----------------------------------------
Total from investment operations .02 .43 (.19) .15 .80
-----------------------------------------
Distributions from net investment
income (.16) (.28) - (.71) (1.27)
Tax return of capital (.20) (.19) (.51) (.31) -
-----------------------------------------
Total distributions (.36) (.47) (.51) (1.02) (1.27)
-----------------------------------------
Net asset value, end of year 11.72 12.06 12.10 12.80 13.67
=========================================
Total return (%) 1 .18 3.71 (1.46) 1.27 6.05
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year ($ x 1,000) 27,173 33,703 41,795 50,773 59,942
Ratios to average net assets: (%)
Expenses 1.13 1.19 1.10 .99 .99
Net investment income 3.44 4.08 4.01 4.30 5.29
Portfolio turnover rate (%) .00 .00 .00 .00 46.05
1. Total return does not include sales charges.
2. Based on average weighted shares outstanding.
FRANKLIN TEMPLETON
HARD CURRENCY FUND
[Insert graphic of bullseye and arrows] GOAL AND STRATEGIES
GOAL The fund's investment goal is to protect against depreciation of the
U.S. dollar relative to other currencies.
PRINCIPAL INVESTMENT STRATEGIES The fund normally invests in high-quality,
short-term money market instruments denominated in foreign major currencies of
countries that historically have experienced low inflation rates and, in the
manager's opinion, follow economic policies favorable to continued low inflation
rates and currency appreciation versus the U.S. dollar over the long-term. Not
all foreign major currencies will meet these criteria at any given time.
The fund tries to expose 100% of its net assets to foreign currencies. Under
normal market conditions, the fund will not expose more than 50% of its total
assets to any one foreign currency.
[Begin callout]
FOREIGN MAJOR CURRENCIES include the Australian dollar, Belgian franc, British
pound sterling, Canadian dollar, Danish krone, Netherlands guilder, the euro,
French franc, German mark, Greek drachma, Irish punt, Italian lira, Japanese
yen, New Zealand dollar, Norwegian krona, Spanish peseta, Swedish krona and
Swiss franc. [End callout]
Money market instruments are issued by foreign and domestic governments,
financial institutions, corporations and other entities to borrow money. The
issuer pays a fixed, floating or variable rate of interest, and must repay the
amount borrowed at maturity. To try to reduce credit and interest rate risk to
its portfolio, the fund maintains a weighted average portfolio maturity of 120
days or less and only buys money market instruments:
o with effective maturities of one year or less at the time of purchase, and
o that the manager considers comparable in quality to instruments rated in the
top two ratings by U.S. nationally recognized rating services or issued by
companies with an outstanding unsecured debt issue rated in the top two
ratings.
The fund's investments may include a significant amount of euro-denominated
instruments. The European Economic and Monetary Union introduced the euro on
January 1, 1999. By July 1, 2002, the euro will have replaced the national
currencies of the following countries: Austria, Belgium, Finland, France,
Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain.
Currently, the exchange rate of the currencies of each of these countries is
fixed to the euro and the new European Central Bank has control over each
country's monetary policies. The government of each of these countries, however,
continues to have the authority to set its own tax and spending policies and
public debt levels.
To gain exposure to a foreign currency when the availability of instruments
denominated in that currency is low or when the manager believes it may be more
efficient than a direct investment in a foreign currency-denominated instrument,
the fund may invest in a combination of forward currency contracts and U.S.
dollar-denominated money market instruments. A forward currency contract is an
agreement to buy or sell a specific currency at a future date and at a price set
at the time of the contract. When combined with an investment in a U.S.
dollar-denominated money market instrument, the manager attempts to obtain an
investment result that is substantially the same as a direct investment in a
foreign currency-denominated instrument.
The fund also may invest in forward currency contracts to try to hedge (protect)
against currency exchange rate fluctuations. While forward currency contracts
may reduce the risk of loss from a change in value of a currency, they also
limit any potential gains and do not protect against fluctuations in the value
of the underlying instrument.
THE VALUE OF FUND SHARES WILL FLUCTUATE. THE FUND IS NOT A SUBSTITUTE FOR A
U.S. DOLLAR MONEY MARKET FUND.
[Insert graphic of chart with line going up and down] MAIN RISKS
CURRENCY Changes in foreign currency exchange rates will affect the value of
what the fund owns and the fund's share price. Generally, when the U.S. dollar
rises in value against a foreign currency, an investment in that country loses
value because that currency is worth fewer U.S. dollars. Devaluation of a
currency by a country's government or banking authority also will have a
significant impact on the value of any investments denominated in that currency.
Currency markets generally are not as regulated as securities markets.
Currency management strategies may substantially change the fund's exposure to
exchange rates and could result in losses to the fund if currencies do not
perform as the manager expects. There is no assurance that the manager's use of
currency management strategies will benefit the fund or that they will be, or
can be, used at appropriate times.
[Begin callout]
Because currency exchange rates fluctuate, the value of your investment in the
fund will go up and down. This means you could lose money over short or even
extended periods. [End callout]
EURO. The change to the euro as a single currency is new and untested. It is not
possible to predict the impact of the euro on currency values or on the business
or financial condition of European countries and issuers whose securities the
fund may hold, or the impact, if any, on fund performance. The fund's non-U.S.
dollar (euro or other) denominated investments will still be exposed to currency
risk due to fluctuations in those currencies versus the U.S. dollar.
FOREIGN MONEY MARKET INSTRUMENTS Money market instruments of companies and
governments located outside the U.S. may involve risks that can increase the
potential for losses in the fund.
COUNTRY. General money market movements in any country where the fund has
investments are likely to affect the value of the instruments the fund owns that
are denominated in that country's currency. These movements will affect the
fund's share price and fund performance.
The political, economic and social structures of some countries the fund invests
in may be less stable and more volatile than those in the U.S. The risks of
investing in these countries include the possibility of the imposition of
exchange controls, currency devaluations, foreign ownership limitations,
expropriation, restrictions on removal of currency and other assets,
nationalization of assets, punitive taxes and certain custody and settlement
risks. Foreign money markets may have substantially lower trading volumes than
U.S. markets, resulting in less liquidity and more volatility than in the U.S.
COMPANY. Foreign companies may not be subject to the same disclosure,
accounting, auditing and financial reporting standards and practices as U.S.
companies and their money market instruments may not be as liquid as money
market instruments of similar U.S. companies. Foreign trading systems,
brokers and companies generally have less government supervision and
regulation than in the U.S. The fund may have greater difficulty pursuing
legal remedies and obtaining judgments with respect to foreign investments in
foreign courts than with respect to U.S. investments in U.S. courts.
INCOME Since the fund can only distribute what it earns, the fund's
distributions to its shareholders may decline when interest rates fall.
CREDIT There is the possibility that an issuer will be unable to make interest
payments and repay principal. Changes in an issuer's financial strength or in an
instrument's credit rating may affect the instruments value and, thus, impact
fund performance.
INTEREST RATE When interest rates rise, the price of money market instruments
may fall. The opposite is also true: the price of money market instruments may
rise when interest rates fall. In general, instruments with longer maturities
are more sensitive to these price changes.
DERIVATIVE SECURITIES Forward currency contracts are considered derivative
investments, since their value depends on the value of the underlying asset to
be purchased or sold. To the extent the fund enters into these contracts, their
success will depend on the manager's ability to predict market movements.
DIVERSIFICATION The fund is a non-diversified fund. It may invest a greater
portion of its assets in the money market instruments of one issuer than a
diversified fund. The fund may be more sensitive to economic, business,
political or other changes affecting similar issuers or money market
instruments, which may result in greater fluctuation in the value of the fund's
shares. The fund, however, intends to meet certain tax diversification
requirements.
YEAR 2000 At this date, it appears neither the fund's operations nor the issuers
of its portfolios securities were adversely affected by Year 2000
computer-related problems. However, Year 2000 problems could still emerge. If an
issuer in which the fund is invested develops problems related to Year 2000, the
price of its securities may be adversely affected, and this may have an adverse
effect on the fund's performance.
Year 2000 has been one of the many factors the manager considers when making
investment decisions. The manager reviewed public filings and other statements
made by issuers about their Year 2000 readiness, but could not audit each issuer
to verify its readiness. Although the risk of the Year 2000 problem should
decrease over time, especially after the leap day of February 29, 2000, the
possibility remains that the fund and the issuers in which it is invested may be
adversely affected by Year 2000 problems until all of their various data
processing activities for the year have been completed.
More detailed information about the fund, its policies and risks can be found in
the fund's Statement of Additional Information (SAI).
[Begin callout]
Mutual fund shares 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. Mutual fund shares involve investment risks, including the possible
loss of principal. [End callout]
[Insert graphic of bull and bear] PERFORMANCE
This bar chart and table show the volatility of the fund's returns, which is one
indicator of the risks of investing in the fund. The bar chart shows changes in
the fund's returns from year to year over the past 10 calendar years. The table
shows how the fund's average annual total returns compare to those of a
broad-based securities market index. Of course, past performance cannot predict
or guarantee future results.
CLASS A ANNUAL TOTAL RETURNS 1
[Insert bar graph]
20.19% 8.28% 2.24% 4.65% 15.10% 6.61% -7.02% -10.42% 9.85% -8.39%
90 91 92 93 94 95 96 97 98 99
YEAR
[Begin callout]
BEST
QUARTER:
Q1 '95
11.67%
WORST
QUARTER:
Q4 '92
- -8.47%
[End callout]
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended December 31, 1999
1 YEAR 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Franklin Templeton Hard Currency Fund - Class A 2 -10.46% -2.67% 3.42%
J.P. Morgan Three Month Global Cash Index 3, 4 -3.83% 1.95% 5.44%
1. Figures do not reflect sales charges. If they did, returns would be lower.
2.Figures reflect sales charges.
All fund performance assumes reinvestment of dividends and capital gains.
3. The J.P. Morgan Three Month Global Cash Index is replacing the Salomon
Brothers World Market Index as the fund's benchmark. The Salomon Brothers World
Money Market Index no longer exists.
4. Source: Standard & Poor's Micropal. The unmanaged J.P. Morgan Three Month
Global Cash Index measures the performance of euro-currency deposits in 11
global markets. It includes reinvested interest. One cannot invest directly in
an index, nor is an index representative of the fund's portfolio.
[Insert graphic of percentage sign] FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum sales charge (load) as a percentage of offering price 2.25%
Load imposed on purchases 2.25%
Maximum deferred sales charge (load) None 1
Exchange fee 2 $5.00
Please see "Sales Charges" on page 21 for an explanation of how and when these
sales charges apply.
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
Management fees 0.65%
Distribution and service (12b-1) fees 0.10%
Other expenses 0.34%
-----------
Total annual fund operating expenses 1.09%
===========
1. Except for investments of $1 million or more (see page 21) and purchases by
certain retirement plans without an initial sales charge.
2. This fee is only for market timers (see page 32).
EXAMPLE
This example can help you compare the cost of investing in the fund with the
cost of investing in other mutual funds. It assumes:
o You invest $10,000 for the periods shown;
o Your investment has a 5% return each year;
o The fund's operating expenses remain the same; and
o You sell your shares at the end of the periods shown.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------
$334 1 $564 $812 $1,524
1. Assumes a contingent deferred sales charge (CDSC) will not apply.
[Insert graphic of briefcase] MANAGEMENT
Franklin Advisers, Inc. (Advisers), 777 Mariners Island Blvd., San Mateo, CA
94404, is the fund's investment manager. Together, Advisers and its affiliates
manage over $235 billion in assets.
Under an agreement with Advisers, Templeton Investment Counsel, Inc. (Investment
Counsel), 500 East Broward Blvd., Ft. Lauderdale, FL 33394, through its
Templeton Global Bond Managers division (Global Bond Managers), is the fund's
sub-advisor. A team from Global Bond Managers provides Advisers with investment
management advice and assistance, and is responsible for the day-to-day
management of the fund.
The fund pays Advisers a fee for managing the fund's assets. For the fiscal year
ended October 31, 1999, the fund paid 0.65% of its average daily net assets to
the manager for its services.
[Insert graphic of dollar bill] FINANCIAL HIGHLIGHTS
This table presents the fund's financial performance for the past five years.
This information has been audited by PricewaterhouseCoopers LLP.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
- -----------------------------------------------------------------------------------
1999 2 1998 1997 1996 1995
- -----------------------------------------------------------------------------------
PER SHARE DATA ($)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year 10.39 10.28 11.64 13.09 13.95
--------------------------------------------
Net investment income .30 .30 .37 .57 1.84
Net realized and unrealized gains
(losses) (.95) .12 (1.33) (1.34) (1.02)
--------------------------------------------
Total from investment operations (.65) .42 (.96) (.77) .82
--------------------------------------------
Distributions from net investment
income - (.25) - (.06) (1.68)
Tax return of capital (.22) (.06) (.40) (.62) -
--------------------------------------------
Total distributions (.22) (.31) (.40) (.68) (1.68)
--------------------------------------------
Net asset value, end of year 9.52 10.39 10.28 11.64 13.09
============================================
Total return (%) 1 (6.23) 4.33 (8.28) (5.99) 6.68
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year ($ x 1,000) 56,381 68,902 91,976 124,666 132,089
Ratios to average net assets: (%)
Expenses 1.09 1.35 1.13 1.10 1.15
Net investment income 3.08 3.07 3.53 4.50 4.68
Portfolio turnover rate (%) .00 96.41 2.68 .00 15.72
</TABLE>
1. Total return does not include sales charges.
2. Based on average weighted shares outstanding.
[Insert graphic of dollar signs and stacks of coins]
DISTRIBUTIONS AND TAXES
INCOME AND CAPITAL GAINS DISTRIBUTIONS Each fund intends to pay a dividend at
least quarterly in March, June, September and December representing its net
investment income. Capital gains, if any, may be distributed annually. The
amount of these distributions will vary and there is no guarantee a fund will
pay dividends.
To receive a distribution, you must be a shareholder on the record date. The
record dates for each fund's distributions will vary. Please keep in mind that
if you invest in a fund shortly before the record date of a distribution, any
distribution will lower the value of the fund's shares by the amount of the
distribution and you will receive some of your investment back in the form of a
taxable distribution. If you would like information on upcoming record dates for
a fund's distributions, please call 1-800/DIAL BEN(R).
TAX CONSIDERATIONS In general, fund distributions are taxable to you as either
ordinary income or capital gains. This is true whether you reinvest your
distributions in additional fund shares or receive them in cash. Any capital
gains a fund distributes are taxable to you as long-term capital gains no matter
how long you have owned your shares.
[Begin callout]
BACKUP WITHHOLDING
By law, a fund must withhold 31% of your taxable distributions and redemption
proceeds if you do not provide your correct social security or taxpayer
identification number and certify that you are not subject to backup
withholding, or if the IRS instructs the fund to do so.
[End callout]
Every January, you will receive a statement that shows the tax status of
distributions you received for the previous year. Distributions declared in
December but paid in January are taxable as if they were paid in December.
When you sell your shares of a fund, you may have a capital gain or loss. For
tax purposes, an exchange of your fund shares for shares of a different Franklin
Templeton Fund is the same as a sale.
Fund distributions and gains from the sale or exchange of your shares generally
will be subject to state and local income tax. Any foreign taxes a fund pays on
its investments may be passed through to you as a foreign tax credit. Non-U.S.
investors may be subject to U.S. withholding and estate tax. You should consult
your tax advisor about the federal, state, local or foreign tax consequences of
your investment in a fund.
YOUR ACCOUNT
[Insert graphic of percentage sign] SALES CHARGES
THE SALES CHARGE WHICH EQUALS THIS %
MAKES UP THIS % OF YOUR NET
WHEN YOU INVEST THIS AMOUNT OF THE OFFERING PRICE INVESTMENT
- --------------------------------------------------------------------------------
Under $100,000 2.25 2.30
$100,000 but under $250,000 1.75 1.78
$250,000 but under $500,000 1.25 1.26
$500,000 but under $1 million 1.00 1.01
INVESTMENTS OF $1 MILLION OR MORE If you invest $1 million or more, either as a
lump sum or through our cumulative quantity discount or letter of intent
programs (see page 22), you can buy shares without an initial sales charge.
However, there is a 1% contingent deferred sales charge (CDSC) on any shares you
sell within 12 months of purchase.
The CDSC is based on the current value of the shares being sold or their net
asset value when purchased, whichever is less. There is no CDSC on shares you
acquire by reinvesting your dividends or capital gains distributions.
[Begin callout]
The HOLDING PERIOD FOR THE CDSC begins on the day you buy your shares. Your
shares will age one month on that same date the next month and each following
month.
For example, if you buy shares on the 18th of the month, they will age one month
on the 18th day of the next month and each following month.
[End callout]
To keep your CDSC as low as possible, each time you place a request to sell
shares we will first sell any shares in your account that are not subject to a
CDSC. If there are not enough of these to meet your request, we will sell the
shares in the order they were purchased. We will use this same method if you
exchange your shares into another Franklin Templeton Fund (please see page 27
for exchange information).
DISTRIBUTION AND SERVICE (12B-1) FEES The Global Currency Fund and Class A of
the Hard Currency Fund have a distribution plan, sometimes known as a Rule 12b-1
plan, that allows each fund to pay distribution fees of up to 0.45% per year to
those who sell and distribute the fund's shares and provide other services to
shareholders. Because these fees are paid out of the fund's assets on an
on-going basis, over time these fees will increase the cost of your investment
and may cost you more than paying other types of sales charges.
SALES CHARGE REDUCTIONS AND WAIVERS
If you qualify for any of the sales charge reductions or waivers below, please
let us know at the time you make your investment to help ensure you receive the
lower sales charge.
QUANTITY DISCOUNTS We offer several ways for you to combine your purchases in
the Franklin Templeton Funds to take advantage of the lower sales charges for
large purchases of fund shares.
[Begin callout]
The FRANKLIN TEMPLETON FUNDS include all of the Franklin Templeton U.S.
registered mutual funds, except Franklin Templeton Variable Insurance
Products Trust, Templeton Capital Accumulator Fund, Inc., and Templeton
Variable Products Series Fund.
[End callout]
o Cumulative Quantity Discount - lets you combine all of your shares in the
Franklin Templeton Funds for purposes of calculating the sales charge. You
also may combine the shares of your spouse, and your children or
grandchildren, if they are under the age of 21. Certain company and
retirement plan accounts also may be included.
o Letter of Intent (LOI) - expresses your intent to buy a stated dollar amount
of shares over a 13-month period and lets you receive the same sales charge
as if all shares had been purchased at one time. We will reserve a portion of
your shares to cover any additional sales charge that may apply if you do not
buy the amount stated in your LOI.
TO SIGN UP FOR THESE PROGRAMS, COMPLETE THE APPROPRIATE
SECTION OF YOUR ACCOUNT APPLICATION.
REINSTATEMENT PRIVILEGE If you sell shares of a Franklin Templeton Fund, you may
reinvest some or all of the proceeds within 365 days without an initial sales
charge. The proceeds must be reinvested within the same share class, except
proceeds from the sale of Class B shares will be reinvested in Class A shares.
Certain Franklin Templeton Funds offer multiple share classes not offered by
this fund. For purposes of this privilege, the Global Currency's fund shares are
considered Class A shares.
If you paid a CDSC when you sold your Class A shares, we will credit your
account with the amount of the CDSC paid but a new CDSC will apply. For Class B
shares reinvested in Class A, a new CDSC will not apply, although your account
will not be credited with the amount of any CDSC paid when you sold your Class B
shares.
Proceeds immediately placed in a Franklin Bank Certificate of Deposit (CD) also
may be reinvested without an initial sales charge if you reinvest them within
365 days from the date the CD matures, including any rollover.
This privilege does not apply to shares you buy and sell under our exchange
program. Shares purchased with the proceeds from a money fund may be subject to
a sales charge.
SALES CHARGE WAIVERS Fund shares may be purchased without an initial sales
charge or CDSC by various individuals, institutions and retirement plans or by
investors who reinvest certain distributions and proceeds within 365 days. The
CDSC also may be waived for certain redemptions and distributions. If you would
like information about available sales charge waivers, call your investment
representative or call Shareholder Services at 1-800/632-2301. For information
about retirement plans, you may call Retirement Plan Services at 1-800/527-2020.
A list of available sales charge waivers also may be found in the Statement of
Additional Information (SAI).
GROUP INVESTMENT PROGRAM Allows established groups of 11 or more investors to
invest as a group. For sales charge purposes, the group's investments are added
together. There are certain other requirements and the group must have a purpose
other than buying fund shares at a discount.
[Insert graphic of paper with lines and someone writing] BUYING SHARES
MINIMUM INVESTMENTS
- --------------------------------------------------------------------------------
INITIAL ADDITIONAL
- --------------------------------------------------------------------------------
Regular accounts $1,000 $50
UGMA/UTMA accounts $100 $50
Retirement accounts no minimum no minimum
(other than IRAs, IRA rollovers, Education IRAs or Roth
IRAs)
IRAs, IRA rollovers, Education IRAs or Roth IRAs $250 $50
Broker-dealer sponsored wrap account programs $250 $50
Full-time employees, officers, trustees and directors $100 $50
of
Franklin Templeton entities, and their immediate family
members
PLEASE NOTE THAT YOU MAY ONLY BUY SHARES OF A FUND ELIGIBLE FOR
SALE IN YOUR STATE OR JURISDICTION.
Certain Franklin Templeton Funds offer multiple share classes not offered by the
Global Currency Fund. Please note that for selling or exchanging your shares, or
for other purposes, the Global Currency Fund's shares are considered Class A
shares.
ACCOUNT APPLICATION If you are opening a new account, please complete and sign
the enclosed account application. To save time, you can sign up now for services
you may want on your account by completing the appropriate sections of the
application (see the next page).
BUYING SHARES
- --------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- --------------------------------------------------------------------------------
[Insert graphic Contact your investment Contact your investment
of hands shaking] representative representative
THROUGH YOUR
INVESTMENT
REPRESENTATIVE
- --------------------------------------------------------------------------------
[Insert graphic Make your check payable Make your check payable
of envelope] to the fund. to the fund. Include
your account number on
BY MAIL Mail the check and your the check.
signed application to
Investor Services. Fill out the deposit slip
from your account
statement. If you do not
have a slip, include a
note with your name, the
fund name, and your
account number.
Mail the check and
deposit slip or note to
Investor Services.
- --------------------------------------------------------------------------------
[Insert graphic Call to receive a wire Call to receive a wire
of three lightning control number and control number and wire
bolts] wire instructions. instructions.
BY WIRE Wire the funds and mail To make a same day wire
your signed application investment, please call
1-800/632-2301 to Investor Services. us by 1:00 p.m. Pacific
(or 1-650/312-2000 Please include the wire time and make sure your
collect) control number or your wire arrives by 3:00 p.m.
new account number on
the application.
To make a same day wire
investment, please call us
by 1:00 p.m. Pacific time
and make sure your wire
arrives by 3:00 p.m.
- --------------------------------------------------------------------------------
[Insert graphic Call Shareholder Services Call Shareholder Services
of two arrows at the number below, or at the number below or
pointing in opposite send signed written our
directions] instructions. The automated TeleFACTS
TeleFACTS system cannot system,
BY EXCHANGE be used to open a new or send signed written
account. instructions.
TeleFACTS(R)
1-800/247-1753 (Please see page 27 for (Please see page 27 for
(around-the-clock information on exchanges.) information on
access) exchanges.)
- --------------------------------------------------------------------------------
FRANKLIN TEMPLETON INVESTOR SERVICES P.O. BOX 997151,
SACRAMENTO, CA 95899-9983
CALL TOLL-FREE: 1-800/632-2301
(MONDAY THROUGH FRIDAY 5:30 A.M. TO 5:00 P.M., PACIFIC TIME
SATURDAY 6:30 A.M. TO 2:30 P.M., PACIFIC TIME)
[Insert graphic of person with headset] INVESTOR SERVICES
AUTOMATIC INVESTMENT PLAN This plan offers a convenient way for you to invest in
a fund by automatically transferring money from your checking or savings account
each month to buy shares. The minimum investment to open an account with an
automatic investment plan is $50 ($25 for an Education IRA). To sign up,
complete the appropriate section of your account application.
AUTOMATIC PAYROLL DEDUCTION You may be able to invest automatically in shares of
a fund by transferring money from your paycheck to the fund by electronic funds
transfer. If you are interested, indicate on your application that you would
like to receive an Automatic Payroll Deduction Program kit.
DISTRIBUTION OPTIONS You may reinvest distributions you receive from a fund in
an existing account in the same share class of the fund or another Franklin
Templeton Fund. Initial sales charges and CDSCs will not apply if you reinvest
your distributions within 365 days. You can also have your distributions
deposited in a bank account, or mailed by check. Deposits to a bank account may
be made by electronic funds transfer.
[Begin callout]
For Franklin Templeton Trust Company retirement plans, special forms may be
needed to receive distributions in cash. Please call 1-800/527-2020 for
information.
[End callout]
Please indicate on your application the distribution option you have chosen,
otherwise we will reinvest your distributions in the same share class of the
fund.
RETIREMENT PLANS Franklin Templeton offers a variety of retirement plans for
individuals and businesses. These plans require separate applications and their
policies and procedures may be different than those described in this
prospectus. For more information, including a free retirement plan brochure or
application, please call Retirement Plan Services at 1-800/527-2020.
TELEFACTS(R) Our TeleFACTS system offers around-the-clock access to information
about your account or any Franklin Templeton Fund. This service is available
from touch-tone phones at 1-800/247-1753. For a free TeleFACTS brochure, call
1-800/DIAL BEN.
TELEPHONE PRIVILEGES You will automatically receive telephone privileges when
you open your account, allowing you and your investment representative to sell
or exchange your shares and make certain other changes to your account by phone.
For accounts with more than one registered owner, telephone privileges also
allow the fund to accept written instructions signed by only one owner for
transactions and account changes that could otherwise be made by phone. For all
other transactions and changes, all registered owners must sign the
instructions.
As long as we take certain measures to verify telephone requests, we will not be
responsible for any losses that may occur from unauthorized requests. Of course,
you can decline telephone exchange or redemption privileges on your account
application.
EXCHANGE PRIVILEGE You can exchange shares between most Franklin Templeton Funds
within the same class*, generally without paying any additional sales charges.
If you exchange shares held for less than six months, however, you may be
charged the difference between the initial sales charge of the two funds if the
difference is more than 0.25%. If you exchange shares from a money fund, a sales
charge may apply no matter how long you have held the shares.
[Begin callout]
An EXCHANGE is really two transactions: a sale of one fund and the purchase of
another. In general, the same policies that apply to purchases and sales apply
to exchanges, including minimum investment amounts. Exchanges also have the same
tax consequences as ordinary sales and purchases.
[End callout]
Generally exchanges may only be made between identically registered accounts,
unless you send written instructions with a signature guarantee. Any CDSC will
continue to be calculated from the date of your initial investment and will not
be charged at the time of the exchange. The purchase price for determining a
CDSC on exchanged shares will be the price you paid for the original shares. If
you exchange shares subject to a CDSC into a Class A money fund, the time your
shares are held in the money fund will not count towards the CDSC holding
period.
*Certain Class Z shareholders of Franklin Mutual Series Fund Inc. may exchange
into the fund without any sales charge. Advisor Class shareholders of another
Franklin Templeton Fund also may exchange into the Global Currency Fund without
any sales charge. Advisor Class shareholders who exchange their shares for
shares of the Global Currency Fund and later decide they would like to exchange
into another fund that offers Advisor Class may do so.
Frequent exchanges can interfere with fund management or operations and drive up
costs for all shareholders. To protect shareholders, there are limits on the
number and amount of exchanges you may make (please see "Market Timers" on page
32).
SYSTEMATIC WITHDRAWAL PLAN This plan allows you to automatically sell your
shares and receive regular payments from your account. A CDSC may apply to
withdrawals that exceed certain amounts. Certain terms and minimums apply. To
sign up, complete the appropriate section of your application.
[Insert graphic of certificate] SELLING SHARES
You can sell your shares at any time. Please keep in mind that a contingent
deferred sales charge (CDSC) may apply.
SELLING SHARES IN WRITING Generally, requests to sell $100,000 or less can be
made over the phone or with a simple letter. Sometimes, however, to protect you
and the fund we will need written instructions signed by all registered owners,
with a signature guarantee for each owner, if:
[Begin callout]
A SIGNATURE GUARANTEE helps protect your account against fraud. You can obtain a
signature guarantee at most banks and securities dealers.
A notary public CANNOT provide a signature guarantee.
[End callout]
o you are selling more than $100,000 worth of shares
o you want your proceeds paid to someone who is not a registered owner
o you want to send your proceeds somewhere other than the address of record, or
preauthorized bank or brokerage firm account
We also may require a signature guarantee on instructions we receive from an
agent, not the registered owners, or when we believe it would protect the fund
against potential claims based on the instructions received.
SELLING RECENTLY PURCHASED SHARES If you sell shares recently purchased with a
check or draft, we may delay sending you the proceeds until your check or draft
has cleared, which may take seven business days or more. A certified or
cashier's check may clear in less time.
REDEMPTION PROCEEDS Your redemption check will be sent within seven days after
we receive your request in proper form. We are not able to receive or pay out
cash in the form of currency. Redemption proceeds may be delayed if we have not
yet received your signed account application.
RETIREMENT PLANS You may need to complete additional forms to sell shares in a
Franklin Templeton Trust Company retirement plan. For participants under age
591/2, tax penalties may apply. Call Retirement Plan Services at 1-800/527-2020
for details.
SELLING SHARES
- --------------------------------------------------------------------------------
TO SELL SOME OR ALL OF YOUR SHARES
- --------------------------------------------------------------------------------
[Insert graphic Contact your investment representative
of hands shaking]
THROUGH YOUR
INVESTMENT
REPRESENTATIVE
- --------------------------------------------------------------------------------
[Insert graphic Send written instructions and endorsed share
of envelope] certificates (if you hold share certificates) to
Investor Services. Corporate, partnership or trust
BY MAIL accounts may need to send additional documents.
Specify the fund, the account number and the dollar value
or number of shares you wish to sell. Be sure to include
all necessary signatures and any additional documents, as
well as signature guarantees if required.
A check will be mailed to the name(s) and address on the
account, or otherwise according to your written
instructions.
- --------------------------------------------------------------------------------
[Insert graphic As long as your transaction is for $100,000 or less, you
of phone] do not hold share certificates and you have not changed
your address by phone within the last 15 days, you can
BY PHONE sell your shares by phone.
1-800/632-2301 A check will be mailed to the name(s) and address on the
account. Written instructions, with a signature
guarantee, are required to send the check to another
address or to make it payable to another person.
- --------------------------------------------------------------------------------
[Insert graphic You can call or write to have redemption proceeds sent
of three lightning to a bank account. See the policies above for selling
bolts] shares by mail or phone.
BY ELECTRONIC Before requesting to have redemption proceeds sent to a
FUNDS TRANSFER bank account, please make sure we have your bank account
(ACH) information on file. If we do not have this information,
you will need to send written instructions with your
bank's name and address, a voided check or savings
account deposit slip, and a signature guarantee if the
ownership of the bank and fund accounts are different.
If we receive your request in proper form by 1:00 p.m.
Pacific time, proceeds sent by ACH generally will be
available within two to three business days.
- --------------------------------------------------------------------------------
[Insert graphic Obtain a current prospectus for the fund you are
of two arrows considering.
pointing in
opposite Call Shareholder Services at the number below or our
directions] automated TeleFACTS system, or send signed written
instructions. See the policies above for selling shares
BY EXCHANGE by mail or phone.
TeleFACTS(R) If you hold share certificates, you will need to return
1-800/247-1753 them to the fund before your exchange can be processed.
(around-the-clock
access)
- --------------------------------------------------------------------------------
FRANKLIN TEMPLETON INVESTOR SERVICES P.O. BOX 997151,
SACRAMENTO, CA 95899-9983
CALL TOLL-FREE: 1-800/632-2301
(MONDAY THROUGH FRIDAY 5:30 A.M. TO 5:00 P.M., PACIFIC TIME
SATURDAY 6:30 A.M. TO 2:30 P.M., PACIFIC TIME)
[Insert graphic of paper and pen] ACCOUNT POLICIES
CALCULATING SHARE PRICE Each fund calculates the net asset value per share (NAV)
each business day at the close of trading on the New York Stock Exchange
(normally 1:00 p.m. Pacific time). Each fund's NAV is calculated by dividing its
net assets by the number of its shares outstanding.
[Begin callout]
When you buy shares, you pay the offering price. The offering price is the NAV
plus any applicable sales charge.
When you sell shares, you receive the NAV minus any applicable contingent
deferred sales charge (CDSC).
[End callout]
The funds' assets are generally valued at their market value. If market prices
are unavailable, or if an event occurs after the close of the trading market
that materially affects the values, assets may be valued at their fair value. If
a fund holds securities listed primarily on a foreign exchange that trades on
days when the fund is not open for business, the value of your shares may change
on days that you cannot buy or sell shares.
Requests to buy and sell shares are processed at the NAV next calculated after
we receive your request in proper form.
ACCOUNTS WITH LOW BALANCES If the value of your account falls below $250 ($50
for employee and UGMA/UTMA accounts) because you sell some of your shares, we
may mail you a notice asking you to bring the account back up to its applicable
minimum investment amount. If you choose not to do so within 30 days, we may
close your account and mail the proceeds to the address of record. You will not
be charged a CDSC if your account is closed for this reason.
STATEMENTS AND REPORTS You will receive quarterly account statements that show
all your account transactions during the quarter. You also will receive written
notification after each transaction affecting your account (except for
distributions and transactions made through automatic investment or withdrawal
programs, which will be reported on your quarterly statement). You also will
receive the fund's financial reports every six months. To reduce fund expenses,
we try to identify related shareholders in a household and send only one copy of
the financial reports. If you need additional copies, please call 1-800/DIAL
BEN.
If there is a dealer or other investment representative of record on your
account, he or she also will receive copies of all notifications and statements
and other information about your account directly from the fund.
STREET OR NOMINEE ACCOUNTS You may transfer your shares from the street or
nominee name account of one dealer to another, as long as both dealers have an
agreement with Franklin Templeton Distributors, Inc. We will process the
transfer after we receive authorization in proper form from your delivering
securities dealer.
JOINT ACCOUNTS Unless you specify a different registration, accounts with two or
more owners are registered as "joint tenants with rights of survivorship" (shown
as "Jt Ten" on your account statement). To make any ownership changes to a joint
account, all owners must agree in writing, regardless of the law in your state.
MARKET TIMERS The funds may restrict or refuse exchanges by market timers. If
accepted, each exchange by a market timer will be charged $5 by
Franklin/Templeton Investor Services, Inc., the funds' transfer agent. You will
be considered a market timer if you have (i) requested an exchange out of a fund
within two weeks of an earlier exchange request, or (ii) exchanged shares out of
a fund more than twice in a calendar quarter, or (iii) exchanged shares equal to
at least $5 million, or more than 1% of a fund's net assets, or (iv) otherwise
seem to follow a timing pattern. Shares under common ownership or control are
combined for these limits.
ADDITIONAL POLICIES Please note that the fund maintains additional policies and
reserves certain rights, including:
o The funds may refuse any order to buy shares, including any purchase under
the exchange privilege.
o At any time, the funds may change their investment minimums or waive or lower
their minimums for certain purchases.
o The funds may modify or discontinue the exchange privilege on 60 days'
notice.
o In unusual circumstances, we may temporarily suspend redemptions, or postpone
the payment of proceeds, as allowed by federal securities laws.
o For redemptions over a certain amount, the funds reserve the right to make
payments in securities or other assets of the fund, in the case of an
emergency or if the payment by check, wire or electronic funds transfer would
be harmful to existing shareholders.
o To permit investors to obtain the current price, dealers are responsible for
transmitting all orders to the fund promptly.
DEALER COMPENSATION Qualifying dealers who sell fund shares may receive sales
commissions and other payments. These are paid by Franklin Templeton
Distributors, Inc. (Distributors) from sales charges, distribution and service
(12b-1) fees and its other resources.
COMMISSION (%) -
Investment under $100,000 2.00
$100,000 but under $250,000 1.50
$250,000 but under $500,000 1.00
$500,000 but under $1 million 0.85
$1 million or more up to 0.75 1
12B-1 FEE TO DEALER 0.45 2
A dealer commission of up to 1% may be paid on NAV purchases by certain
retirement plans1 and up to 0.25% on NAV purchases by certain trust companies
and bank trust departments, retirement plans, eligible governmental authorities,
and broker-dealers or others on behalf of clients participating in comprehensive
fee programs.
1. During the first year after purchase, dealers may not be eligible to receive
the 12b-1 fee.
2. The fund may pay up to 0.45% to Distributors or others, out of
which 0.20% generally will be retained by Distributors for its distribution
expenses.
[Insert graphic of question mark] QUESTIONS
If you have any questions about the fund or your account, you can write to us at
P.O. Box 997151, Sacramento, CA 95899-9983. You can also call us at one of the
following numbers. For your protection and to help ensure we provide you with
quality service, all calls may be monitored or recorded.
HOURS (PACIFIC TIME,
DEPARTMENT NAME TELEPHONE NUMBER MONDAY THROUGH FRIDAY)
- --------------------------------------------------------------------------------
Shareholder Services 1-800/632-2301 5:30 a.m. to 5:00 p.m.
6:30 a.m. to 2:30 p.m. (Saturday)
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 Plan Services 1-800/527-2020 5:30 a.m. to 5:00 p.m.
Dealer Services 1-800/524-4040 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.
FOR MORE INFORMATION
You can learn more about each fund in the following documents:
ANNUAL/SEMIANNUAL REPORT TO SHAREHOLDERS
Includes a discussion of recent market conditions and fund strategies, financial
statements, detailed performance information, portfolio holdings, and the
auditor's report.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
Contains more information about each fund, its investments and policies. It is
incorporated by reference (is legally a part of this prospectus).
For a free copy of the current annual/semiannual report or the SAI, please
contact your investment representative or call us at the number below.
FRANKLIN(R)TEMPLETON(R)
1-800/DIAL BEN(R) (1-800/342-5236)
TDD (Hearing Impaired) 1-800/851-0637
www.franklintempleton.com
You can also obtain information about each fund by visiting the SEC's Public
Reference Room in Washington, D.C. (phone 1-202/942-8090) or the EDGAR Database
on the SEC's Internet site at http://www.sec.gov. You can obtain copies of this
information, after paying a duplicating fee, by writing to the SEC's Public
Reference Section, Washington, D.C. 20549-0102 or by electronic request at the
following E-mail address: publicinfo(R)sec.gov.
Investment Company Act file #811-4450 FTGT P 03/00
Prospectus
FRANKLIN TEMPLETON
HARD CURRENCY FUND
ADVISOR CLASS
INVESTMENT STRATEGY
GLOBAL INCOME
MARCH 1, 2000
[Insert Franklin Templeton Ben Head]
The SEC has not approved or disapproved these securities or passed upon the
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
CONTENTS
THE FUND
[Begin callout]
INFORMATION ABOUT THE FUND YOU SHOULD KNOW BEFORE INVESTING
[End callout]
2 Goal and Strategies
4 Main Risks
7 Performance
8 Fees and Expenses
9 Management
10 Distributions and Taxes
11 Financial Highlights
YOUR ACCOUNT
[Begin callout]
INFORMATION ABOUT QUALIFIED INVESTORS, ACCOUNT TRANSACTIONS AND SERVICES
[End callout]
12 Qualified Investors
14 Buying Shares
15 Investor Services
17 Selling Shares
19 Account Policies
21 Questions
FOR MORE INFORMATION
[Begin callout]
WHERE TO LEARN MORE ABOUT THE FUND
[End callout]
Back Cover
THE FUND
[Insert graphic of bullseye and arrows] GOAL AND STRATEGIES
GOAL The fund's investment goal is to protect against depreciation of the
U.S. dollar relative to other currencies.
PRINCIPAL INVESTMENT STRATEGIES The fund normally invests in high-quality,
short-term money market instruments denominated in foreign major currencies
of countries that historically have experienced low inflation rates and, in
the manager's opinion, follow economic policies favorable to continued low
inflation rates and currency appreciation versus the U.S. dollar over the
long-term. Not all foreign major currencies will meet these criteria at any
given time.
The fund tries to expose 100% of its net assets to foreign currencies. Under
normal market conditions, the fund will not expose more than 50% of its total
assets to any one foreign currency.
[Begin callout]
FOREIGN MAJOR CURRENCIES include the Australian dollar, Belgian franc,
British pound sterling, Canadian dollar, Danish krone, Netherlands guilder,
the euro, French franc, German mark, Greek drachma, Irish punt, Italian lira,
Japanese yen, New Zealand dollar, Norwegian krona, Spanish peseta, Swedish
krona
and Swiss franc.
[End callout]
Money market instruments are issued by foreign and domestic governments,
financial institutions, corporations and other entities to borrow money. The
issuer pays a fixed, floating or variable rate of interest, and must repay
the amount borrowed at maturity. To try to reduce credit and interest rate
risk to its portfolio, the fund maintains a weighted average portfolio
maturity of 120 days or less and only buys money market instruments:
o with effective maturities of one year or less at the time of purchase, and
o that the manager considers comparable in quality to instruments rated in
the top two ratings by U.S. nationally recognized rating services or
issued by companies with an outstanding unsecured debt issue rated in the
top two ratings.
The fund's investments may include a significant amount of euro-denominated
instruments. The European Economic and Monetary Union introduced the euro on
January 1, 1999. By July 1, 2002, the euro will have replaced the national
currencies of the following countries: Austria, Belgium, Finland, France,
Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain.
Currently, the exchange rate of the currencies of each of these countries is
fixed to the euro and the new European Central Bank has control over each
country's monetary policies. The government of each of these countries,
however, continues to have the authority to set its own tax and spending
policies and public debt levels.
To gain exposure to a foreign currency when the availability of instruments
denominated in that currency is low or when the manager believes it may be
more efficient than a direct investment in a foreign currency-denominated
instrument, the fund may invest in a combination of forward currency
contracts and U.S. dollar-denominated money market instruments. A forward
currency contract is an agreement to buy or sell a specific currency at a
future date and at a price set at the time of the contract. When combined
with an investment in a U.S. dollar-denominated money market instrument, the
manager attempts to obtain an investment result that is substantially the
same as a direct investment in a foreign currency-denominated instrument.
The fund also may invest in forward currency contracts to try to hedge
(protect) against currency exchange rate fluctuations. While forward currency
contracts may reduce the risk of loss from a change in value of a currency,
they also limit any potential gains and do not protect against fluctuations
in the value of the underlying instrument.
THE VALUE OF FUND SHARES WILL FLUCTUATE. THE FUND IS NOT A SUBSTITUTE FOR A
U.S. DOLLAR MONEY MARKET FUND.
[Insert graphic of chart with line going up and down] MAIN RISKS
CURRENCY Changes in foreign currency exchange rates will affect the value of
what the fund owns and the fund's share price. Generally, when the U.S.
dollar rises in value against a foreign currency, an investment in that
country loses value because that currency is worth fewer U.S. dollars.
Devaluation of a currency by a country's government or banking authority also
will have a significant impact on the value of any investments denominated in
that currency. Currency markets generally are not as regulated as securities
markets.
Currency management strategies may substantially change the fund's exposure
to exchange rates and could result in losses to the fund if currencies do not
perform as the manager expects. There is no assurance that the manager's use
of currency management strategies will benefit the fund or that they will be,
or can be, used at appropriate times.
[Begin callout]
Because currency exchange rates fluctuate, the value of your investment in
the fund will go up and down. This means you could lose money over short or
even extended periods.
[End callout]
EURO. The change to the euro as a single currency is new and untested. It is
not possible to predict the impact of the euro on currency values or on the
business or financial condition of European countries and issuers whose
securities the fund may hold, or the impact, if any, on fund performance. The
fund's non-U.S. dollar (euro or other) denominated investments will still be
exposed to currency risk due to fluctuations in those currencies versus the
U.S. dollar.
FOREIGN MONEY MARKET INSTRUMENTS Money market instruments of companies and
governments located outside the U.S. may involve risks that can increase the
potential for losses in the fund.
COUNTRY. General money market movements in any country where the fund has
investments are likely to affect the value of the instruments the fund owns
that are denominated in that country's currency. These movements will affect
the fund's share price and fund performance.
The political, economic and social structures of some countries the fund
invests in may be less stable and more volatile than those in the U.S. The
risks of investing in these countries include the possibility of the
imposition of exchange controls, currency devaluations, foreign ownership
limitations, expropriation, restrictions on removal of currency and other
assets, nationalization of assets, punitive taxes and certain custody and
settlement risks. Foreign money markets may have substantially lower trading
volumes than U.S. markets, resulting in less liquidity and more volatility
than in the U.S.
COMPANY. Foreign companies may not be subject to the same disclosure,
accounting, auditing and financial reporting standards and practices as U.S.
companies and their money market instruments may not be as liquid as money
market instruments of similar U.S. companies. Foreign trading systems,
brokers and companies generally have less government supervision and
regulation than in the U.S. The fund may have greater difficulty pursuing
legal remedies and obtaining judgments with respect to foreign investments in
foreign courts than with respect to U.S. investments in U.S. courts.
INCOME Since the fund can only distribute what it earns, the fund's
distributions to its shareholders may decline when interest rates fall.
CREDIT There is the possibility that an issuer will be unable to make
interest payments and repay principal. Changes in an issuer's financial
strength or in an instrument's credit rating may affect the instruments value
and, thus, impact fund performance.
INTEREST RATE When interest rates rise, the price of money market
instruments may fall. The opposite is also true: the price of money market
instruments may rise when interest rates fall. In general, instruments with
longer maturities are more sensitive to these price changes.
DERIVATIVE SECURITIES Forward currency contracts are considered derivative
investments, since their value depends on the value of the underlying asset
to be purchased or sold. To the extent the fund enters into these contracts,
their success will depend on the manager's ability to predict market
movements.
DIVERSIFICATION The fund is a non-diversified fund. It may invest a greater
portion of its assets in the money market instruments of one issuer than a
diversified fund. The fund may be more sensitive to economic, business,
political or other changes affecting similar issuers or money market
instruments, which may result in greater fluctuation in the value of the
fund's shares. The fund, however, intends to meet certain tax diversification
requirements.
YEAR 2000 At this date, it appears neither the fund's operations nor the
issuers of its portfolios securities were adversely affected by Year 2000
computer-related problems. However, Year 2000 problems could still emerge. If
an issuer in which the fund is invested develops problems related to Year
2000, the price of its securities may be adversely affected, and this may
have an adverse effect on the fund's performance.
Year 2000 has been one of the many factors the manager considers when making
investment decisions. The manager reviewed public filings and other
statements made by issuers about their Year 2000 readiness, but could not
audit each issuer to verify its readiness. Although the risk of the Year 2000
problem should decrease over time, especially after the leap day of February
29, 2000, the possibility remains that the fund and the issuers in which it
is invested may be adversely affected by Year 2000 problems until all of
their various data processing activities for the year have been completed.
More detailed information about the fund, its policies and risks can be found
in the fund's Statement of Additional Information (SAI).
[Begin callout]
Mutual fund shares 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. Mutual fund shares involve investment risks, including the
possible loss of principal.
[End callout]
[Insert graphic of bull and bear] PERFORMANCE
This bar chart and table show the volatility of the fund's returns, which is
one indicator of the risks of investing in the fund. The bar chart shows
changes in the fund's returns from year to year over the past 10 calendar
years. The table shows how the fund's average annual total returns compare to
those of a broad-based securities market index. Of course, past performance
cannot predict or guarantee future results.
ADVISOR CLASS ANNUAL TOTAL RETURNS 1
[Insert bar graph]
20.19% 8.28% 2.24% 4.65% 15.10% 6.61% -7.02% -10.17% 10.48% -8.36%
90 91 92 93 94 95 96 97 98 99
YEAR
[Begin callout]
BEST
QUARTER:
Q1 '95
11.67%
WORST
QUARTER:
Q4 '92
- -8.47%
[End callout]
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended December 31, 1999
1 YEAR 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Franklin Templeton Hard Currency Fund - Advisor
Class 1 -8.36% -2.05% 3.75%
J.P. Morgan Three Month Global Cash Index 2,3 -3.83% 1.95% 5.44%
1. Performance figures reflect a "blended" figure combining the following
methods of calculation: (a) For periods before January 1, 1997, a restated
figure is used based on the fund's Class A performance, excluding the effect
of Class A' s maximum initial sales charge and including the effect of the
Class A distribution and service (12b-1) fees; and (b) for periods after
January 1, 1997, an actual Advisor Class figure is used reflecting a
deduction of all applicable charges and fees for that class. This blended
figure assumes reinvestment of dividends and capital gains.
2. The J.P. Morgan Three Month Global Cash Index is replacing the Salomon
Brothers World Money Market Index as the fund's benchmark. The Salomon
Brothers World Money Market Index no longer exists.
3. Source: Standard & Poor's Micropal. The unmanaged J.P. Morgan Three Month
Global Cash Index measures the performance of euro-currency deposits in 11
global markets. It includes reinvested interest. One cannot invest directly
in an index, nor is an index representative of the fund's portfolio.
[Insert graphic of percentage sign] FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of the fund.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
ADVISOR CLASS
- --------------------------------------------------------------------------------
Maximum sales charge (load) imposed on purchases None
Exchange fee 1 $5.00
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
ADVISOR CLASS
- --------------------------------------------------------------------------------
Management fees 0.65%
Distribution and service (12b-1) fees None
Other expenses 0.34%
--------------
Total annual fund operating expenses 0.99%
==============
1. This fee is only for market timers (see page 20).
EXAMPLE
This example can help you compare the cost of investing in the fund with the
cost of investing in other mutual funds. It assumes:
o You invest $10,000 for the periods shown;
o Your investment has a 5% return each year;
o The fund's operating expenses remain the same; and
o You sell your shares at the end of the periods shown.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
$101 $315 $547 $1,213
[Insert graphic of briefcase] MANAGEMENT
Franklin Advisers, Inc. (Advisers), 777 Mariners Island Blvd., San Mateo, CA
94404, is the fund's investment manager. Together, Advisers and its affiliates
manage over $235 billion in assets.
Under an agreement with Advisers, Templeton Investment Counsel, Inc. (Investment
Counsel), 500 East Broward Blvd., Ft. Lauderdale, FL 33394, through its
Templeton Global Bond Managers division (Global Bond Managers), is the fund's
sub-advisor. A team from Global Bond Managers provides Advisers with investment
management advice and assistance and is responsible for the day-to-day
management of the fund.
The fund pays Advisers a fee for managing the fund's assets. For the fiscal year
ended October 31, 1999, the fund paid 0.65% of its average daily net assets to
the manager for its services.
[Insert graphic of dollar signs and stacks of coins] DISTRIBUTIONS AND TAXES
INCOME AND CAPITAL GAINS DISTRIBUTIONS The fund intends to pay a dividend at
least quarterly in March, June, September and December, representing its net
investment income. Capital gains, if any, may be distributed annually. The
amount of these distributions will vary and there is no guarantee the fund
will pay dividends.
To receive a distribution, you must be a shareholder on the record date. The
record dates for the fund's distributions will vary. Please keep in mind that
if you invest in the fund shortly before the record date of a distribution,
any distribution will lower the value of the fund's shares by the amount of
the distribution and you will receive some of your investment back in the
form of a taxable distribution. If you would like information on upcoming
record dates for the fund's distributions, please call 1-800/DIAL BEN(R).
TAX CONSIDERATIONS In general, fund distributions are taxable to you as
either ordinary income or capital gains. This is true whether you reinvest
your distributions in additional fund shares or receive them in cash. Any
capital gains the fund distributes are taxable to you as long-term capital
gains no matter how long you have owned your shares.
[Begin callout]
BACKUP WITHHOLDING
By law, the fund must withhold 31% of your taxable distributions and
redemption proceeds if you do not provide your correct social security or
taxpayer identification number and certify that you are not subject to backup
withholding, or if the IRS instructs the fund to do so.
[End callout]
Every January, you will receive a statement that shows the tax status of
distributions you received for the previous year. Distributions declared in
December but paid in January are taxable as if they were paid in December.
When you sell your shares of the fund, you may have a capital gain or loss.
For tax purposes, an exchange of your fund shares for shares of a different
Franklin Templeton Fund is the same as a sale.
Fund distributions and gains from the sale or exchange of your shares
generally will be subject to state and local income tax. Any foreign taxes
the fund pays on its investments may be passed through to you as a foreign
tax credit. Non-U.S. investors may be subject to U.S. withholding and estate
tax. You should consult your tax advisor about the federal, state, local or
foreign tax consequences of your investment in the fund.
[Insert graphic of dollar bill] FINANCIAL HIGHLIGHTS
This table presents the financial performance for Advisor Class since its
inception. This information has been audited by PricewaterhouseCoopers LLP.
ADVISOR CLASS YEAR ENDED OCTOBER 31,
- --------------------------------------------------------------------------------
1999 2 1998 1997 4
- --------------------------------------------------------------------------------
PER SHARE DATA ($)
Net asset value, beginning of year 10.41 10.28 11.28
----------------------------------
Net investment income .35 .33 .34
Net realized and unrealized gains (losses) (.99) .14 (1.00)
----------------------------------
Total from investment operations (.64) .47 (.66)
----------------------------------
Less distributions from:
Net investment income - (.28) -
Tax return of capital (.24) (.06) (.34)
----------------------------------
Total distributions (.24) (.34) (.34)
----------------------------------
Net asset value, end of year 9.53 10.41 10.28
==================================
Total return (%) 1 (6.17) 4.89 (5.84)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year ($ x 1,000) 3,827 3,343 249
Ratios to average net assets: (%)
Expenses .99 1.01 .94 3
Net investment income 3.54 3.29 3.67 3
Portfolio turnover rate (%) .00 96.41 2.68
1. Total return is not annualized.
2. Based on average weighted shares outstanding.
3. Annualized.
4. For the period January 2, 1997 (effective date) through October 31, 1997.
YOUR ACCOUNT
[Insert graphic of pencil marking an X] QUALIFIED INVESTORS
The following investors may qualify to buy Advisor Class shares of the fund.
o Qualified registered investment advisors with clients invested in any
series of Franklin Mutual Series Fund Inc. on October 31, 1996, or who buy
through a broker-dealer or service agent who has an agreement with
Franklin Templeton Distributors, Inc. (Distributors). Minimum investments:
$1,000 initial and $50 additional.
o Broker-dealers, registered investment advisors or certified financial
planners who have an agreement with Distributors for clients participating
in comprehensive fee programs. Minimum investments: $250,000 initial
($100,000 initial for an individual client) and $50 additional.
o Officers, trustees, directors and full-time employees of Franklin
Templeton and their immediate family members. Minimum investments: $100
initial ($50 for accounts with an automatic investment plan) and $50
additional.
o Each series of the Franklin Templeton Fund Allocator Series. Minimum
investments: $1,000 initial and $1,000 additional.
[Begin callout]
The FRANKLIN TEMPLETON FUNDS include all of the Franklin Templeton U.S.
registered mutual funds, except Franklin Templeton Variable Insurance
Products Trust, Templeton Capital Accumulator Fund, Inc., and Templeton
Variable Products Series Fund.
[End callout]
o Governments, municipalities, and tax-exempt entities that meet the
requirements for qualification under section 501 of the Internal Revenue
Code. Minimum investments: $1 million initial investment in Advisor Class
or Class Z shares of any of the Franklin Templeton Funds and $50
additional.
o Accounts managed by the Franklin Templeton Group. Minimum investments: No
initial minimum and $50 additional.
o The Franklin Templeton Profit Sharing 401(k) Plan. Minimum investments: No
initial or additional minimums.
o Defined contribution plans such as employer stock, bonus, pension or
profit sharing plans that meet the requirements for qualification under
section 401 of the Internal Revenue Code, including salary reduction plans
qualified under section 401(k) of the Internal Revenue Code, and that are
sponsored by an employer (i) with at least 10,000 employees, or (ii) with
retirement plan assets of $100 million or more. Minimum investments: No
initial or additional minimums.
o Trust companies and bank trust departments initially investing in the
Franklin Templeton Funds 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. Minimum investments: No initial or
additional minimums.
o Individual investors. Minimum investments: $5 million initial and $50
additional. You may combine all of your shares in the Franklin Templeton
Funds for purposes of determining whether you meet the $5 million minimum,
as long as $1 million is in Advisor Class or Class Z shares of any of the
Franklin Templeton Funds.
o Any other investor, including a private investment vehicle such as a
family trust or foundation, who is a member of an established group of 11
or more investors. Minimum investments: $5 million initial and $50
additional. For minimum investment purposes, the group's investments are
added together. The group may combine all of its shares in the Franklin
Templeton Funds for purposes of determining whether it meets the $5
million minimum, as long as $1 million is in Advisor Class or Class Z
shares of any of the Franklin Templeton Funds. There are certain other
requirements and the group must have a purpose other than buying fund
shares without a sales charge.
Please note that Advisor Class shares of the fund generally are not available
to retirement plans through Franklin Templeton's ValuSelect(R) program.
Retirement plans in the ValuSelect program before January 1, 1998, however,
may invest in the fund's Advisor Class shares.
[Insert graphic of paper with lines and someone writing]
BUYING SHARES
ACCOUNT APPLICATION If you are opening a new account, please complete and
sign the enclosed account application. To save time, you can sign up now for
services you may want on your account by completing the appropriate sections
of the application (see the next page).
BUYING SHARES
- --------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- --------------------------------------------------------------------------------
[Insert graphic Contact your investment Contact your investment
of hands shaking] representative representative
THROUGH YOUR
INVESTMENT
REPRESENTATIVE
- --------------------------------------------------------------------------------
[Insert graphic Make your check payable Make your check payable
of envelope] to Franklin Templeton to Franklin Templeton
Hard Currency Fund. Hard Currency Fund.
BY MAIL Include your account
Mail the check and your number on the check.
signed application to
Investor Services. Fill out the deposit
slip from your account
statement. If you do
not have a slip, include
a note with your name,
the fund name, and your
account number.
Mail the check and
deposit slip or note
to Investor Services.
- --------------------------------------------------------------------------------
[Insert graphic Call Shareholder Services Call Shareholder Services
of two arrows at the number below, or at the number below, or
pointing in send signed written send signed written
opposite directions] instructions. (Please instructions. (Please
see page 16 for see page 16 for
BY EXCHANGE information on exchanges.) information on exchanges.)
- --------------------------------------------------------------------------------
FRANKLIN TEMPLETON INVESTOR SERVICES P.O. BOX 997151,
SACRAMENTO, CA 95899-9983
CALL TOLL-FREE: 1-800/632-2301
(MONDAY THROUGH FRIDAY 5:30 A.M. TO 5:00 P.M., PACIFIC TIME
SATURDAY 6:30 A.M. TO 2:30 P.M., PACIFIC TIME)
[Insert graphic of person with headset] INVESTOR SERVICES
AUTOMATIC INVESTMENT PLAN This plan offers a convenient way for you to
invest in the fund by automatically transferring money from your checking or
savings account each month to buy shares. To sign up, complete the
appropriate section of your account application.
DISTRIBUTION OPTIONS You may reinvest distributions you receive from the
fund in an existing account in the same share class of the fund or in Advisor
Class or Class A shares of another Franklin Templeton Fund. To reinvest your
distributions in Advisor Class shares of another Franklin Templeton Fund, you
must qualify to buy that fund's Advisor Class shares. For distributions
reinvested in Class A shares of another Franklin Templeton Fund, initial
sales charges and contingent deferred sales charges (CDSCs) will not apply if
you reinvest your distributions within 365 days. You can also have your
distributions deposited in a bank account, or mailed by check. Deposits to a
bank account may be made by electronic funds transfer.
[Begin callout]
For Franklin Templeton Trust Company retirement plans, special forms may be
needed to receive distributions in cash. Please call
1-800/527-2020 for information.
[End callout]
Please indicate on your application the distribution option you have chosen,
otherwise we will reinvest your distributions in the same share class of the
fund.
RETIREMENT PLANS Franklin Templeton offers a variety of retirement plans for
individuals and businesses. These plans require separate applications and
their policies and procedures may be different than those described in this
prospectus. For more information, including a free retirement plan brochure
or application, please call Retirement Plan Services at 1-800/527-2020.
TELEFACTS(R) Our TeleFACTS system offers around-the-clock access to
information about your account or any Franklin Templeton Fund. This service
is available from touch-tone phones at 1-800/247-1753. For a free TeleFACTS
brochure, call 1-800/DIAL BEN.
TELEPHONE PRIVILEGES You will automatically receive telephone privileges
when you open your account, allowing you and your investment representative
to sell or exchange your shares and make certain other changes to your
account by phone.
For accounts with more than one registered owner, telephone privileges also
allow the fund to accept written instructions signed by only one owner for
transactions and account changes that could otherwise be made by phone. For
all other transactions and changes, all registered owners must sign the
instructions.
As long as we take certain measures to verify telephone requests, we will not
be responsible for any losses that may occur from unauthorized requests. Of
course, you can decline telephone exchange or redemption privileges on your
account application.
EXCHANGE PRIVILEGE You can exchange shares between most Franklin Templeton
Funds within the same class. You also may exchange your Advisor Class shares
for Class A shares of a fund that does not currently offer an Advisor Class
(without any sales charge)* or for Class Z shares of Franklin Mutual Series
Fund Inc.
[Begin callout]
An EXCHANGE is really two transactions: a sale of one fund and the purchase
of another. In general, the same policies that apply to purchases and sales
apply to exchanges, including minimum investment amounts. Exchanges also have
the same tax consequences as ordinary sales and purchases.
[End callout]
If you do not qualify to buy Advisor Class shares of Templeton Developing
Markets Trust or Templeton Foreign Fund, you also may exchange your shares
for Class A shares of those funds (without any sales charge)* or for shares
of Templeton Institutional Funds, Inc.
Generally exchanges may only be made between identically registered accounts,
unless you send written instructions with a signature guarantee.
Frequent exchanges can interfere with fund management or operations and drive
up costs for all shareholders. To protect shareholders, there are limits on
the number and amount of exchanges you may make (please see "Market Timers"
on page 20).
*If you exchange into Class A shares and you later decide you would like to
exchange into a fund that offers an Advisor Class, you may exchange your
Class A shares for Advisor Class shares if you otherwise qualify to buy the
fund's Advisor Class shares.
SYSTEMATIC WITHDRAWAL PLAN This plan allows you to automatically sell your
shares and receive regular payments from your account. Certain terms and
minimums apply. To sign up, complete the appropriate section of your
application.
[Insert graphic of certificate] SELLING SHARES
You can sell your shares at any time.
SELLING SHARES IN WRITING Generally, requests to sell $100,000 or less can
be made over the phone or with a simple letter. Sometimes, however, to
protect you and the fund we will need written instructions signed by all
registered owners, with a signature guarantee for each owner, if:
[Begin callout]
A SIGNATURE GUARANTEE helps protect your account against fraud. You can
obtain a signature guarantee at most banks and securities dealers.
A notary public CANNOT provide a signature guarantee.
[End callout]
o you are selling more than $100,000 worth of shares
o you want your proceeds paid to someone who is not a registered owner
o you want to send your proceeds somewhere other than the address of record,
or preauthorized bank or brokerage firm account
We also may require a signature guarantee on instructions we receive from an
agent, not the registered owners, or when we believe it would protect the
fund against potential claims based on the instructions received.
SELLING RECENTLY PURCHASED SHARES If you sell shares recently purchased with
a check or draft, we may delay sending you the proceeds until your check or
draft has cleared, which may take seven business days or more. A certified or
cashier's check may clear in less time.
REDEMPTION PROCEEDS Your redemption check will be sent within seven days
after we receive your request in proper form. We are not able to receive or
pay out cash in the form of currency. Redemption proceeds may be delayed if
we have not yet received your signed account application.
RETIREMENT PLANS You may need to complete additional forms to sell shares in
a Franklin Templeton Trust Company retirement plan. For participants under
age 591/2, tax penalties may apply. Call Retirement Plan Services at
1-800/527-2020 for details.
SELLING SHARES
- --------------------------------------------------------------------------------
TO SELL SOME OR ALL OF YOUR SHARES
- --------------------------------------------------------------------------------
[Insert graphic Contact your investment representative
of hands shaking]
THROUGH YOUR
INVESTMENT
REPRESENTATIVE
- --------------------------------------------------------------------------------
[Insert graphic Send written instructions and endorsed share
of envelope] certificates (if you hold share certificates) to
Investor Services. Corporate, partnership or trust
BY MAIL accounts may need to send additional documents.
Specify the fund, the account number and the dollar
value or number of shares you wish to sell. Be sure to
include all necessary signatures and any additional
documents, as well as signature guarantees if required.
A check will be mailed to the name(s) and address on
the account, or otherwise according to your written
instructions.
- --------------------------------------------------------------------------------
[Insert graphic As long as your transaction is for $100,000 or less,
of phone] you do not hold share certificates and you have not
changed your address by phone within the last 15 days,
BY PHONE you can sell your shares by phone.
1-800/632-2301 A check will be mailed to the name(s) and address on
the account. Written instructions, with a signature
guarantee, are required to send the check to another
address or to make it payable to another person.
- --------------------------------------------------------------------------------
[Insert graphic You can call or write to have redemption proceeds sent
of three to a bank account. See the policies above for selling
lightning bolts] shares by mail or phone.
BY ELECTRONIC FUNDS Before requesting to have redemption proceeds sent to
TRANSFER (ACH) a bank account, please make sure we have your bank
account information on file. If we do not have this
information, you will need to send written
instructions with your bank's name and address, a
voided check or savings account deposit slip, and a
signature guarantee if the ownership of the bank and
fund accounts are different.
If we receive your request in proper form by 1:00 p.m.
Pacific time,
proceeds sent by ACH generally will be available
within two to three business days.
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[Insert graphic Obtain a current prospectus for the fund you are
of two arrows considering.
pointing in
opposite Call Shareholder Services at the number below, or send
directions] signed written instructions. See the policies above
for selling shares by mail or phone.
BY EXCHANGE
If you hold share certificates, you will need to
return them to the fund before your exchange can be
processed.
- --------------------------------------------------------------------------------
FRANKLIN TEMPLETON INVESTOR SERVICES P.O. BOX 997151,
SACRAMENTO, CA 95899-9983
CALL TOLL-FREE: 1-800/632-2301
(MONDAY THROUGH FRIDAY 5:30 A.M. TO 5:00 P.M., PACIFIC TIME
SATURDAY 6:30 A.M. TO 2:30 P.M., PACIFIC TIME)
[Insert graphic of paper and pen] ACCOUNT POLICIES
CALCULATING SHARE PRICE The fund calculates the net asset value per share
(NAV) each business day at the close of trading on the New York Stock
Exchange (normally 1:00 p.m. Pacific time). The NAV for Advisor Class is
calculated by dividing its net assets by the number of its shares
outstanding.
The fund's assets are generally valued at their market value. If market
prices are unavailable, or if an event occurs after the close of the trading
market that materially affects the values, assets may be valued at their fair
value. If the fund holds securities listed primarily on a foreign exchange
that trades on days when the fund is not open for business, the value of your
shares may change on days that you cannot buy or sell shares.
Requests to buy and sell shares are processed at the NAV next calculated
after we receive your request in proper form.
ACCOUNTS WITH LOW BALANCES If the value of your account falls below $250
($50 for employee accounts) because you sell some of your shares, we may mail
you a notice asking you to bring the account back up to its applicable
minimum investment amount. If you choose not to do so within 30 days, we may
close your account and mail the proceeds to the address of record.
STATEMENTS AND REPORTS You will receive quarterly account statements that
show all your account transactions during the quarter. You also will receive
written notification after each transaction affecting your account (except
for distributions and transactions made through automatic investment or
withdrawal programs, which will be reported on your quarterly statement). You
also will receive the fund's financial reports every six months. To reduce
fund expenses, we try to identify related shareholders in a household and
send only one copy of the financial reports. If you need additional copies,
please call 1-800/DIAL BEN.
If there is a dealer or other investment representative of record on your
account, he or she also will receive copies of all notifications and
statements and other information about your account directly from the fund.
STREET OR NOMINEE ACCOUNTS You may transfer your shares from the street or
nominee name account of one dealer to another, as long as both dealers have
an agreement with Franklin Templeton Distributors, Inc. We will process the
transfer after we receive authorization in proper form from your delivering
securities dealer.
JOINT ACCOUNTS Unless you specify a different registration, accounts with
two or more owners are registered as "joint tenants with rights of
survivorship" (shown as "Jt Ten" on your account statement). To make any
ownership changes to a joint account, all owners must agree in writing,
regardless of the law in your state.
MARKET TIMERS The fund may restrict or refuse exchanges by market timers. If
accepted, each exchange by a market timer will be charged $5 by
Franklin/Templeton Investor Services, Inc., the fund's transfer agent. You
will be considered a market timer if you have (i) requested an exchange out
of the fund within two weeks of an earlier exchange request, or (ii)
exchanged shares out of the fund more than twice in a calendar quarter, or
(iii) exchanged shares equal to at least $5 million, or more than 1% of the
fund's net assets, or (iv) otherwise seem to follow a timing pattern. Shares
under common ownership or control are combined for these limits.
ADDITIONAL POLICIES Please note that the fund maintains additional policies
and reserves certain rights, including:
o The fund may refuse any order to buy shares, including any purchase under
the exchange privilege.
o At any time, the fund may change its investment minimums or waive or lower
its minimums for certain purchases.
o The fund may modify or discontinue the exchange privilege on 60 days'
notice.
o You may only buy shares of a fund eligible for sale in your state or
jurisdiction.
o In unusual circumstances, we may temporarily suspend redemptions, or
postpone the payment of proceeds, as allowed by federal securities laws.
o For redemptions over a certain amount, the fund reserves the right to make
payments in securities or other assets of the fund, in the case of an
emergency or if the payment by check, wire or electronic funds transfer
would be harmful to existing shareholders.
o To permit investors to obtain the current price, dealers are responsible
for transmitting all orders to the fund promptly.
DEALER COMPENSATION Qualifying dealers who sell Advisor Class shares may
receive up to 0.25% of the amount invested. This amount is paid by Franklin
Templeton Distributors, Inc. from its own resources.
[Insert graphic of question mark] QUESTIONS
If you have any questions about the fund or your account, you can write to us
at P.O. Box 997151, Sacramento, CA 95899-9983. You can also call us at one of
the following numbers. For your protection and to help ensure we provide you
with quality service, all calls may be monitored or recorded.
HOURS (PACIFIC TIME,
DEPARTMENT NAME TELEPHONE NUMBER MONDAY THROUGH FRIDAY)
- --------------------------------------------------------------------------------
Shareholder Services 1-800/632-2301 5:30 a.m. to 5:00 p.m.
6:30 a.m. to 2:30 p.m. (Saturday)
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 Plan Services 1-800/527-2020 5:30 a.m. to 5:00 p.m.
Dealer Services 1-800/524-4040 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.
FOR MORE INFORMATION
You can learn more about the fund in the following documents:
ANNUAL/SEMIANNUAL REPORT TO SHAREHOLDERS
Includes a discussion of recent market conditions and fund strategies,
financial statements, detailed performance information, portfolio holdings,
and the auditor's report.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
Contains more information about the fund, its investments and policies. It is
incorporated by reference (is legally a part of this prospectus).
For a free copy of the current annual/semiannual report or the SAI, please
contact your investment representative or call us at the number below.
FRANKLIN(R)TEMPLETON(R)
1-800/DIAL BEN(R) (1-800/342-5236)
TDD (Hearing Impaired) 1-800/851-0637
www.franklintempleton.com
You can also obtain information about the fund by visiting the SEC's Public
Reference Room in Washington, D.C. (phone 1-202/942-8090) or the EDGAR
Database on the SEC's Internet site at http://www.sec.gov. You can obtain
copies of this information, after paying a duplicating fee, by writing to the
SEC's Public Reference Section, Washington, D.C. 20549-0102 or by electronic
request at the following E-mail address: publicinfo(R)sec.gov.
Investment Company Act file #811-4450 FTGT PA 03/00
FRANKLIN TEMPLETON
GLOBAL TRUST
FRANKLIN TEMPLETON GLOBAL CURRENCY FUND
FRANKLIN TEMPLETON HARD CURRENCY FUND
CLASS A
STATEMENT OF ADDITIONAL INFORMATION
MARCH 1, 2000
[Insert Franklin Templeton Ben Head]
P.O. BOX 997151, SACRAMENTO, CA 95899-9983 1-800/DIAL BEN(R)
- ------------------------------------------------------------------------------
This Statement of Additional Information (SAI) is not a prospectus. It contains
information in addition to the information in the funds' prospectus. The funds'
prospectus, dated March 1, 2000, which we may amend from time to time, contains
the basic information you should know before investing in a fund. You should
read this SAI together with the funds' prospectus.
The audited financial statements and auditor's report in the funds' Annual
Report to Shareholders, for the fiscal year ended October 31, 1999, are
incorporated by reference (are legally a part of this SAI).
For a free copy of the current prospectus or annual report, contact your
investment representative or call 1-800/DIAL BEN (1-800/342-5236).
CONTENTS
Goals and Strategies ................................. 2
Risks ................................................ 6
Officers and Trustees ................................ 9
Management and Other Services ........................ 12
Portfolio Transactions ............................... 13
Distributions and Taxes .............................. 13
Organization, Voting Rights
and Principal Holders ............................... 15
Buying and Selling Shares ............................ 16
Pricing Shares ....................................... 22
The Underwriter ...................................... 23
Performance .......................................... 24
Miscellaneous Information ............................ 26
Description of Ratings ............................... 26
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MUTUAL FUNDS, ANNUITIES, AND OTHER INVESTMENT PRODUCTS:
O ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY OF THE U.S. GOVERNMENT;
O ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY
BANK;
O ARE SUBJECT TO INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
- --------------------------------------------------------------------------------
FTGT SAI 03/00
GOALS AND STRATEGIES
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The Global Currency Fund's investment goal is to maximize 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 Hard Currency Fund's investment goal is to protect against depreciation of
the U.S. dollar relative to other currencies.
These goals are fundamental, which means they may not be changed without
shareholder approval. Of course, there is no assurance that either fund will
meet its goal.
Below is a description of various types of money market instruments that each
fund may buy, as well as more detailed information about some of the funds'
investment policies. Other types of money market instruments may become
available that are similar to those described below and in which each fund also
may invest if consistent with its investment goal and policies.
MONEY MARKET INSTRUMENTS Money market instruments include short-term government
securities, floating and variable rate notes, commercial paper, repurchase
agreements, CDs, time deposits, bankers' acceptances, and other short-term
liquid instruments.
Each fund may invest in money market instruments issued by foreign and domestic
governments, financial institutions, corporations and other entities in the U.S.
or in any foreign country. Each fund also may invest in money market instruments
issued by supranational organizations such as the World Bank (chartered to
finance development projects in member countries), the European Economic
Community (a twelve-nation organization engaged in cooperative economic
activities), the European Coal and Steel Community (an economic union of various
European nations' steel and coal industries), and the Asian Development Bank (an
international development bank established to lend funds, promote investment and
provide technical assistance to member nations in the Asian and Pacific
regions).
GOVERNMENT SECURITIES. U.S. government securities include securities issued
or guaranteed by the U.S. government, its agencies, or various
instrumentalities that have been established or sponsored by the U.S.
government. Some U.S. government securities, including Treasury bills, notes
and bonds and securities of the Government National Mortgage Association, are
issued or guaranteed by the full faith and credit of the U.S. government or
carry a guarantee that is supported by the full faith and credit of the U.S.
government. Other U.S. government securities are issued or guaranteed by
federal agencies or government-sponsored enterprises and are not considered
direct obligations of the U.S. government. Instead, they involve sponsorship
or guarantees by government agencies or enterprises. For example, some
securities are supported by the right of the issuer to borrow from the U.S.
Treasury, such as obligations of the Federal Home Loan Bank. Other
securities, such as obligations of the Federal Farm Credit Banks Funding
Corporation, are supported only by the credit of the instrumentality. While
the U.S. government provides financial support to these U.S.
government-sponsored agencies and instrumentalities, there is no assurance
that it will continue to do so.
Foreign government securities may include direct obligations, as well as
obligations guaranteed by the foreign government.
FLOATING AND VARIABLE RATE NOTES. Floating and variable rate notes generally are
unsecured obligations issued by financial institutions and other entities. They
typically have a stated maturity of more than one year and an interest rate that
changes either at specific intervals or whenever a benchmark rate changes. The
effective maturity of each floating or variable rate note in a fund's portfolio
will be based on these periodic adjustments. The interest rate adjustments are
designed to help stabilize the note's price. While this feature helps protect
against a decline in the note's market price when interest rates rise, it lowers
the fund's income when interest rates fall. Of course, the fund's income from
its floating and variable rate investments also may increase if interest rates
rise.
COMMERCIAL PAPER. Commercial paper is a short-term, unsecured promissory note
issued to finance short-term credit needs.
REPURCHASE AGREEMENTS. Each fund may enter into repurchase agreements. Under a
repurchase agreement, the fund agrees to buy securities guaranteed as to payment
of principal and interest by the U.S. government or its agencies from a
qualified bank or broker-dealer and then to sell the securities back to the bank
or broker-dealer after a short period of time (generally, less than seven days)
at a higher price. The bank or broker-dealer must transfer to the fund's
custodian securities with an initial market value of at least 102% of the dollar
amount invested by the fund in each repurchase agreement. The manager will
monitor the value of such securities daily to determine that the value equals or
exceeds the repurchase price.
Repurchase agreements may involve risks in the event of default or insolvency of
the bank or broker-dealer, including possible delays or restrictions upon the
fund's ability to sell the underlying securities. The fund will enter into
repurchase agreements only with parties who meet certain creditworthiness
standards, i.e., banks or broker-dealers that the manager has determined present
no serious risk of becoming involved in bankruptcy proceedings within the time
frame contemplated by the repurchase transaction.
FINANCIAL SERVICES OBLIGATIONS. Under normal market conditions, each fund may
invest up to 25% of its net assets in obligations issued by companies in the
financial services industry, including U.S. banks, foreign banks, foreign
branches of U.S. banks and U.S. branches of foreign banks. These obligations
may include:
Certificates of deposit (CDs) - CDs represent an obligation of a bank or a
foreign branch of a bank to repay funds deposited with it for a specified period
of time plus interest at a stated rate.
Time deposits - Time deposits are non-negotiable deposits held in a banking
institution for a specified time at a stated interest rate.
Bankers' acceptances - Bankers' acceptances are short-term credit instruments
frequently used in international trade transactions. They represent a guarantee
by a bank to pay a customer's draft up to a stated amount and for a specified
time. Both the bank and the customer may be liable for its payment at maturity.
Each fund will not invest more than 5% of its total assets in obligations of any
one foreign bank.
CURRENCY TRANSACTIONS Each fund conducts currency exchange transactions on a
spot basis. Currency transactions made on a spot basis are for cash at the spot
rate prevailing in the currency exchange market for buying or selling currency.
Each fund also enters into forward currency contracts. A forward currency
contract is an obligation to buy 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 the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers.
The manager may invest a fund's assets in a combination of forward currency
contracts and U.S. dollar-denominated market instruments in an attempt to obtain
an investment result that is substantially the same as a direct investment in a
foreign currency-denominated instrument. This management technique creates a
"synthetic" position in the particular foreign-currency instrument whose
performance the manager is trying to duplicate. For example, the combination of
U.S. dollar-denominated instruments with "long" forward currency exchange
contracts creates a position economically equivalent to a money market
instrument denominated in the foreign currency itself. Such combined positions
are sometimes necessary when the money market in a particular foreign currency
is small or relatively illiquid.
For hedging purposes, the manager may use forward currency contracts to hedge
either specific transactions (transaction hedging) or portfolio positions
(position hedging). Transaction hedging is the purchase or sale of forward
currency contracts with respect to specific receivables or payables of the fund
in connection with the purchase and sale of portfolio securities. Position
hedging is the sale of a forward currency contract on a particular currency with
respect to portfolio positions denominated or quoted in that currency.
The Global Currency Fund may use forward currency contracts for transaction
hedging without limit and may hedge up to 100% of its portfolio positions. The
Hard Currency Fund may use forward currency contracts for position hedging if
consistent with its policy of trying to expose 100% of its net assets to foreign
currencies. Neither fund may enter into a position hedging, forward currency
contract if more than 10% of its total assets would be committed to such
contracts.
Please keep in mind that the funds are not required to enter into forward
currency contracts for hedging purposes and it is possible that a fund may not
be able to hedge against a currency devaluation that is so generally anticipated
that the fund is unable to contract to sell the currency at a price above the
devaluation level it anticipates. It is also possible, under certain
circumstances, that the funds may have to limit their currency transactions to
qualify as regulated investment companies under the Internal Revenue Code.
Neither fund currently intends to enter into a forward currency contract with a
term of more than one year, or to engage in position hedging with respect to the
currency of a particular country to more 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 currency contracts in conjunction with money market
instruments to) that particular currency.
At or before the maturity of a forward currency contract, each fund may either
sell a portfolio security and make delivery of the currency, or retain the
security and terminate its contractual obligation to deliver the currency by
buying an "offsetting" contract obligating it to buy, on the same maturity date,
the same amount of the currency. If a fund engages in an offsetting transaction,
it may later enter into a new forward currency contract to sell the currency.
If a fund engages in an offsetting transaction, it will incur a gain or loss to
the extent that there has been movement in forward currency contract prices. If
forward prices go down during the period between the date the fund enters into a
forward currency 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 buy. If forward prices go up, the
fund will suffer a loss to the extent the price of the currency it has agreed to
buy exceeds the price of the currency it has agreed to sell.
Since each fund invests in money market instruments denominated in foreign
currencies, it may hold foreign currencies pending investment or conversion into
U.S. dollars. Although the funds value their assets daily in U.S. dollars, they
do not convert their holdings of foreign currencies into U.S. dollars on a daily
basis. The funds will convert their holdings from time to time, however, and
incur 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 between
the prices at which they buy and sell various currencies. Thus, a dealer may
offer to sell a foreign currency to a fund at one rate, and offer to buy the
currency at a lower rate if the fund tries to resell the currency to the dealer.
CURRENCY FUTURES Each fund may enter into currency futures contracts and buy
options on currency futures contracts to try to hedge against changes in
currency exchange rates. A currency futures contract is an agreement to buy or
sell a specified amount of currency at a set price on a future date. When a fund
enters into a futures contract, it must make an initial deposit, known as
"initial margin", as a partial guarantee of its performance under the contract.
As the value of the currency fluctuates, both parties to the contract are
required to make additional margin payments, known as "variation margin," to
cover any additional obligation they may have under the contract.
Each fund may sell currency futures contracts to try to offset a possible
decline in the value of the currency in which its securities are denominated.
The value of a currency futures contract tends to rise when the value of the
currency (and the hedged security) falls and to fall when the value of the
currency (and the hedged security) rises. Each fund may buy currency futures
contracts to try to fix a favorable currency exchange rate for securities
denominated in the currency that the fund intends to buy.
Each fund also may buy put and call options on currency futures contracts for
hedging purposes. A put option gives the fund the right to sell a futures
contract and a call option gives the fund the right to buy a futures contract.
The fund must pay a premium for the option, but is not required to take any
action under the contract. If the fund is unable to profitably exercise the
option before it expires, the fund's loss will be limited to the amount of the
premium and any transaction costs.
Each fund may enter into closing purchase or sale transactions to terminate a
futures contract. Each fund may close out an option that it has purchased by
selling an offsetting option of the same series. There is no guarantee that the
funds will be able to enter into closing transactions. Each fund's ability to
enter into closing transactions will depend on the development and maintenance
of a liquid market, which may not be available at all times.
Neither fund will use currency futures contracts for speculation. Except for
closing purchase and sale transactions, neither fund will buy or sell currency
futures contracts or options on such contracts 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. It is also possible, under certain circumstances, that
the funds may have to limit their futures and options transactions to qualify as
regulated investment companies under the Internal Revenue Code.
CURRENCY OPTIONS For hedging purposes, each fund may buy put and call options on
any currency in which its investments are denominated. Each fund also may enter
into closing sale transactions to try to realize gains or reduce losses on
currency options purchased by the fund.
Each fund may buy currency call options to fix a favorable currency exchange
rate for securities denominated in the currency the fund intends to buy. A call
option gives the fund the right to buy a specified currency at a specified price
in return for the premium paid. The fund may realize a gain if, during the
option period, the value of the currency exceeds the sum of the exercise price,
the premium paid and the transaction costs, otherwise the fund will realize a
loss on the option.
Each fund may buy currency put options to try to hedge against a decline in the
value of the currency in which its securities are denominated. A put option
gives the fund the right to sell a specified currency at a specified price in
return for the premium paid. Gains and losses on put options will be offset by
changes in the value of the underlying currency and the hedged securities. The
fund may realize a gain if, during the option period, the value of the
underlying currency decreases below the exercise price enough to cover the
premium paid and the transaction costs, otherwise the fund will realize a loss
on the option.
If a fund is unable to effect a closing sale transaction with respect to options
it has bought, it will have to exercise the options to realize any profit and
may incur transaction costs upon the purchase or sale of underlying currencies.
Currency options trade on exchanges and in the over-the-counter (OTC) market and
may be bought only when the manager believes a liquid secondary market exists,
although there can be no assurances that a liquid secondary market will exist
for a particular option at any specific time. In general, OTC options differ
from exchange-traded options in that they are two-party contracts with the terms
negotiated between buyer and seller, and they are endorsed and/or guaranteed by
third parties (such as a member of the New York Stock Exchange). The fund may
buy OTC options only from dealers and institutions that the manager believes
present minimal credit risk.
TEMPORARY INVESTMENTS The manager may take a temporary defensive position when
it believes that extraordinary events are disrupting the currency markets or the
economies of countries where the fund invests. Under these circumstances, the
fund may be unable to pursue its investment goal because it may not invest or
may invest substantially less in foreign instruments denominated in a particular
currency affected by such extraordinary events.
ILLIQUID INVESTMENTS Each fund may invest up to 10% of its net assets in
illiquid securities. 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.
The board has authorized each fund to invest in restricted securities if the
investment is consistent with the fund's investment goal. Restricted securities
may be considered liquid if the fund's manager believes that there is a liquid
institutional or other market for the securities, as with restricted securities
that may be freely transferred among qualified institutional buyers under Rule
144A under the Securities Act of 1933 and for which a liquid institutional
market has developed. The board will review any determination by the manager to
treat a restricted security as liquid on a quarterly basis. To the extent a fund
invests in restricted securities that are considered liquid at the time of
purchase, the general level of liquidity in the fund may be reduced if qualified
institutional buyers become uninterested in buying the securities or the market
for the securities otherwise contracts.
LOANS OF PORTFOLIO SECURITIES To generate additional income, each fund may lend
certain of its portfolio securities to qualified banks and broker-dealers. These
loans may not exceed 30% of the value of the fund's total assets, measured at
the time of the most recent loan. For each loan, the borrower must maintain with
the fund's custodian collateral (consisting of any combination of cash,
securities issued by the U.S. government and its agencies and instrumentalities,
or irrevocable letters of credit) with a value at least equal to 100% of the
current market value of the loaned securities. The fund retains all or a portion
of the interest received on investment of the cash collateral or receives a fee
from the borrower. The fund also continues to receive any distributions paid on
the loaned securities. The fund may terminate a loan at any time and obtain the
return of the securities loaned within the normal settlement period for the
security involved.
Where voting rights with respect to the loaned securities pass with the lending
of the securities, the manager intends to call the loaned securities to vote
proxies, or to use other practicable and legally enforceable means to obtain
voting rights, when the manager has knowledge that, in its opinion, a material
event affecting the loaned securities will occur or the manager otherwise
believes it necessary to vote. As with other extensions of credit, there are
risks of delay in recovery or even loss of rights in collateral in the event of
default or insolvency of the borrower. The fund will loan its securities only to
parties who meet creditworthiness standards approved by the fund's board, i.e.,
banks or broker-dealers that the manager has determined present no serious risk
of becoming involved in bankruptcy proceedings within the time frame
contemplated by the loan.
INVESTMENT RESTRICTIONS Each fund has adopted the following restrictions as
fundamental policies. This means they may only be changed if the change is
approved by (i) more than 50% of the fund's outstanding shares or (ii) 67% or
more of the fund's shares present at a shareholder meeting if more than 50% of
the fund's outstanding shares are represented at the meeting in person or by
proxy, whichever is less.
Each fund may not:
1. Buy common stocks, preferred stocks, warrants or other equity securities, or
buy municipal bonds or industrial revenue bonds.
2. Sell securities short or buy 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.
3. Buy or sell real estate, securities of real estate investment trusts,
commodities, or oil and gas interests, except that the fund may buy or sell
currencies, may enter into futures contracts on securities, currencies,
securities and other indices or any other financial instruments, and may buy and
sell options on such futures contracts.
4. 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.
5. 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
Internal Revenue 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.
6. Invest in securities of other investment companies, except as they may be
acquired as part of a merger, consolidation or acquisition of assets.
7. 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.
8. 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.
9. Underwrite the securities of other issuers.
10. 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 U.S. Securities and Exchange Commission and the 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.
11. Invest in companies for the purpose of exercising control.
12. Buy 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,
or by supranational organizations, are considered one industry for concentration
purposes.
If a bankruptcy or other extraordinary event occurs concerning a particular
security a fund owns, the fund may receive stock, real estate, or other
investments that the fund would not, or could not, buy. If this happens, the
funds intend to sell such investments as soon as practicable while maximizing
the return to shareholders.
Generally, the policies and restrictions discussed in this SAI and in the
prospectus apply when a fund makes an investment. In most cases, a fund is not
required to sell a security because circumstances change and the security no
longer meets one or more of the fund's policies or restrictions. If a percentage
restriction or limitation is met at the time of investment, a later increase or
decrease in the percentage due to a change in the value or liquidity of
portfolio securities will not be considered a violation of the restriction or
limitation.
RISKS
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CURRENCY Exchange rates fluctuate for a number of reasons. Depending on the
currency and the point in time, some factors may outweigh others in determining
the course of exchange rate movements.
INFLATION. The most fundamental reason exchange rates change is to reflect
changes in a currency's buying 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.
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.
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.
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. Budget deficits also can indirectly contribute to currency
depreciation if a government chooses to cope with its deficits and debt by means
of inflation.
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.
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.
The value of each fund's investments is calculated in U.S. dollars each day that
the New York Stock Exchange is open for business. As a result, to the extent
that a fund's assets are invested in instruments denominated in foreign
currencies 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) should increase. If the U.S. dollar appreciates
relative to the other currencies, the opposite 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 each fund will be based on
changes in the value of portfolio securities attributable to currency
fluctuations only in relation to the original purchase price of such securities
as stated in U.S. dollars. 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 the shares. The 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.
The funds may incur currency exchange costs when they sell instruments
denominated in one currency and buy instruments denominated in another.
CURRENCY MANAGEMENT. Currency management strategies, including the creation of
synthetic currency positions, may substantially change a fund's investment
exposure to exchange rates and could result in losses to the fund if currencies
do not perform as the manager anticipates. There is no assurance that the
manager's use of currency management strategies will be advantageous to a fund
or that they will be used at appropriate times. Although synthetic positions
involve costs to the funds, these costs are typically lower than the costs
associated with direct investments in securities denominated in foreign
currencies.
EURO. On January 1, 1999, the European Economic and Monetary Union (EMU)
introduced a new single currency called the euro. By July 1, 2002, the euro,
which will be implemented in stages, will have fully replaced the national
currencies of the following member countries: Austria, Belgium, Finland,
France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and
Spain.
Currently, the exchange rate of the currencies of each of these countries is
fixed to the euro. The euro trades on currency exchanges and is available for
non-cash transactions. The participating countries currently issue sovereign
debt exclusively in euro. By July 1, 2002, euro-denominated bills and coins will
replace the bills and coins of the above countries. The new European Central
Bank has control over each country's monetary policies. Therefore, the
participating countries no longer control their own monetary policies by
directing independent interest rates for their currencies. The national
governments of the participating countries, however, have retained the authority
to set tax and spending policies and public debt levels.
It is uncertain how eleven different economies will adjust to a unified monetary
system and the loss of exchange rate flexibility. In the first six months of the
euro's existence, the exchange rates of the euro versus many of the world's
major currencies steadily declined. In this environment, U.S. and other foreign
investors experienced erosion on their investment returns on their
euro-denominated securities. The transition and the elimination of currency risk
among EMU countries may change the economic environment and behavior of
investors, particularly in European markets.
While the implementation of the euro could have a negative effect on the funds,
the funds' manager and its affiliated services providers are taking steps they
believe are reasonably designed to address the euro issue.
FOREIGN Foreign money market instruments may involve risks that can increase the
potential for losses in the funds. These risks can be significantly greater for
investments in emerging markets.
The risks of foreign investing include the possibility of cessation of trading
on national exchanges, expropriation, nationalization of assets, confiscatory or
punitive taxation, withholding and other foreign taxes on income or other
amounts, foreign exchange controls (which may include suspension of the ability
to transfer currency from a given country), restrictions on removal of assets,
political or social instability, or diplomatic developments that could affect
investments in money market instruments of foreign issuers.
There may be less public information available about foreign issuers, as
compared to the reports and ratings published about issuers in the U.S. Foreign
issuers may not be subject to uniform accounting or financial reporting
standards, and auditing practices and requirements may not be comparable to
those applicable to U.S. issuers. A fund, therefore, may have difficulty
obtaining market quotations to value its portfolio and calculate its net asset
value.
Certain countries' financial markets and services are less developed than those
in the U.S. or other major economies. In many foreign countries there is less
government supervision and regulation of stock exchanges, brokers, and listed
companies than in the U.S. Foreign markets have substantially less volume than
the New York Stock Exchange and money market instruments of some foreign issuers
are less liquid and more volatile than money market instruments of comparable
U.S. issuers. Commission rates in foreign countries, which are generally fixed
rather than subject to negotiation as in the U.S., are likely to be higher.
Settlement practices may be cumbersome and result in delays that may affect
portfolio liquidity. The funds may have greater difficulty voting proxies,
exercising shareholder rights, pursuing legal remedies, and obtaining judgments
with respect to foreign investments in foreign courts than with respect to
domestic issuers in U.S. courts.
A fund's investments in foreign money market instruments may result in a lower
level of liquidity in the fund's portfolio. This could inhibit the fund's
ability to meet a large number of shareholder redemption requests in the event
of economic or political turmoil in a country in which the fund has substantial
investments or deterioration in relations between the U.S. and the foreign
country.
Investments in companies in developing countries may be subject to potentially
higher risks than investments in developed countries. These risks include (i)
less economic stability; (ii) political and social uncertainty (for example,
regional conflicts and risk of war); (iii) pervasiveness of corruption and
crime; (iv) the small current size of the markets for such investments and the
currently low or nonexistent volume of trading, which result in a lack of
liquidity and in greater price volatility; (v) delays in settling portfolio
transactions; (vi) risk of loss arising out of the system of share registration
and custody; (vii) certain national policies that may restrict the funds'
investment opportunities, including restrictions on investment in issuers or
industries deemed sensitive to national interests; (viii) foreign taxation; (ix)
the absence of developed legal structures governing private or foreign
investment or allowing for judicial redress for injury to private property; (x)
the absence of a capital market structure or market-oriented economy; and (xi)
the possibility that any recent favorable economic developments may be slowed or
reversed by unanticipated political or social events.
In addition, some countries in which the Global Currency Fund may invest have
experienced substantial, and in some periods extremely high, rates of inflation
for many years. Inflation and rapid fluctuations in inflation rates have had and
may continue to have negative effects on the economies and money markets of
certain countries. Moreover, the economies of some developing countries may
differ favorably or unfavorably from the U.S. economy in such respects as growth
of gross domestic product, rate of inflation, currency depreciation, capital
reinvestment, resource self-sufficiency, and balance of payments position.
Foreign investments may be subject to transaction taxes charged by foreign
governments. This would increase the cost of an investment and reduce the
realized gain or increase the realized loss on an investment at the time of
sale. Transaction costs and custodial expenses for a portfolio of foreign
investments generally are higher than for a portfolio of U.S. securities.
Interest payments from certain foreign money market instruments may be subject
to foreign withholding taxes on interest income payable on the money market
instruments.
U.S. government policies have, in the past, through taxation and other
restrictions, discouraged certain investments abroad by U.S. investors. While
currently there are no such restrictions, they could be reinstituted. In that
event, it may be necessary for the funds to temporarily invest all or
substantially all of their assets in U.S. money market instruments, or it may
become necessary to liquidate the funds.
FINANCIAL SERVICES OBLIGATIONS. U.S. banks are subject to a substantial body of
federal and/or state law and regulation designed to promote financial soundness.
Most are insured by the Federal Deposit Insurance Corporation, although this
insurance may not be of great benefit to the funds depending on the amount of a
bank's obligations that a fund holds. Foreign banks and foreign branches of U.S.
banks, however, may not be subject to the same laws and regulations as U.S.
banks and may involve additional risks. These risks include foreign economic and
political developments, foreign government restrictions that may adversely
affect payment of principal and interest, foreign exchange controls and foreign
withholding and other taxes on interest income. Foreign banks and foreign
branches of U.S. banks may not be subject to the same requirements as U.S. banks
with respect to mandatory reserves, loan limitations and accounting, auditing
and financial recordkeeping. In addition, less information may be publicly
available about a foreign branch of a U.S. bank or a foreign bank than a U.S.
bank.
U.S. branches of foreign banks may be subject to some federal and/or state
regulation, but typically not to the same extent as U.S. banks. A U.S. branch
of a foreign bank with assets over $1 billion may be subject to federal
and/or state reserve requirements and may be required to pledge or maintain a
certain amount of its assets equal to a percentage of its liabilities with a
regulator or with a state. The deposits of branches licensed by states may
not, however, be insured by the FDIC. Obligations of U.S. branches of foreign
banks also may be limited by government action in the country in which the
foreign bank is headquartered.
CURRENCY FUTURES AND OPTIONS Transactions in options and futures are generally
considered "derivative securities." They are highly specialized and involve
investment techniques and risks different from those associated with ordinary
securities transactions.
Although currency futures contracts and options transactions may be used by the
funds to try to manage currency exchange risks, unanticipated changes in
currency exchange rates could result in poorer performance than if a fund had
not entered into these transactions. Even if the manager correctly predicts
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 a fund's futures and currency positions may be caused by
differences between the futures and currency markets.
These transactions also involve the risk that a fund may lose its margin
deposits or collateral if a broker with whom the fund has an open futures or
options position becomes bankrupt.
OFFICERS AND TRUSTEES
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The trust has a board of trustees. The board is responsible for the overall
management of the trust, including general supervision and review of each fund's
investment activities. The board, in turn, elects the officers of the trust who
are responsible for administering the trust's day-to-day operations. The board
also monitors the Hard Currency Fund to ensure no material conflicts exist among
share classes. While none is expected, the board will act appropriately to
resolve any material conflict that may arise.
The name, age and address of the officers and board members, as well as their
affiliations, positions held with the trust, and principal occupations during
the past five years are shown below.
Frank H. Abbott, III (78)
1045 Sansome Street, San Francisco, CA 94111
TRUSTEE
President and Director, Abbott Corporation (an investment company); director or
trustee, as the case may be, of 27 of the investment companies in the Franklin
Templeton Group of Funds; and FORMERLY, Director, MotherLode Gold Mines
Consolidated (gold mining) (until 1996) and Vacu-Dry Co. (food processing)
(until 1996).
Harris J. Ashton (67)
191 Clapboard Ridge Road, Greenwich, CT 06830
TRUSTEE
Director, RBC Holdings, Inc. (bank holding company) and Bar-S Foods (meat
packing company); director or trustee, as the case may be, of 47 of the
investment companies in the Franklin Templeton Group of Funds; and FORMERLY,
President, Chief Executive Officer and Chairman of the Board, General Host
Corporation (nursery and craft centers) (until 1998).
David K. Eiteman (70)
15340 Albright Street #301, Pacific Palisades, CA 90272
TRUSTEE
Professor of Finance, John E. Anderson Graduate School of Management,
University of California, Los Angeles (1959-1991) and Professor Emeritus
(1991-present).
S. Joseph Fortunato (67)
Park Avenue at Morris County, P.O. Box 1945
Morristown, NJ 07962-1945
TRUSTEE
Member of the law firm of Pitney, Hardin, Kipp & Szuch; and director or trustee,
as the case may be, of 49 of the investment companies in the Franklin Templeton
Group of Funds.
Gerald R. Healy (58)
22237 1/2 Erwin St., Woodland Hills , CA 91367
TRUSTEE
Private consultant; Executive Vice President, Capital Health Services Corp.;
and FORMERLY, Director, Corporate Management Resources of Alliance Imaging,
Inc.
*Charles B. Johnson (67)
777 Mariners Island Blvd., San Mateo, CA 94404
CHAIRMAN OF THE BOARD AND TRUSTEE
Chairman of the Board, Chief Executive Officer, Member - Office of the Chairman
and Director, Franklin Resources, Inc.; Chairman of the Board and Director,
Franklin Advisers, Inc. and Franklin Investment Advisory Services, Inc.; Vice
President, Franklin Templeton Distributors, Inc.; Director, Franklin/Templeton
Investor Services, Inc. and Franklin Templeton Services, Inc.; officer and/or
director or trustee, as the case may be, of most of the other subsidiaries of
Franklin Resources, Inc. and of 48 of the investment companies in the Franklin
Templeton Group of Funds.
*Rupert H. Johnson, Jr. (59)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT AND TRUSTEE
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources,
Inc.; Executive Vice President and Director, Franklin Templeton Distributors,
Inc.; Director, Franklin Advisers, Inc. and Franklin Investment Advisory
Services, Inc.; Senior Vice President, Franklin Advisory Services, LLC;
Director, Franklin/Templeton Investor Services, Inc.; and officer and/or
director or trustee, as the case may be, of most of the other subsidiaries of
Franklin Resources, Inc. and of 51 of the investment companies in the Franklin
Templeton Group of Funds.
David P. Kraus (42)
2707 Stoner Ave., Los Angeles, CA 90064
TRUSTEE
Attorney with various private law firms in Los Angeles (1981-present); and
Attorney with Bet Tzedek Legal Services (1995-February 1999).
Frank W.T. LaHaye (70)
20833 Stevens Creek Blvd., Suite 102,
Cupertino, CA 95014
TRUSTEE
General Partner, Miller & LaHaye, which is the General Partner of Peregrine
Ventures II (venture capital firm); director or trustee, as the case may be, of
27 of the investment companies in the Franklin Templeton Group of Funds; and
FORMERLY, Director, Fischer Imaging Corporation (medical imaging systems),
Digital Transmission Systems, Inc. (wireless communications) and Quarterdeck
Corporation (software firm), and General Partner, Peregrine Associates, which
was the General Partner of Peregrine Ventures (venture capital firm).
Gordon S. Macklin (71)
8212 Burning Tree Road, Bethesda, MD 20817
TRUSTEE
Director, Fund American Enterprises Holdings, Inc. (holding company), Martek
Biosciences Corporation, MCI WorldCom (information services), MedImmune, Inc.
(biotechnology) and Spacehab, Inc. (aerospace services); director or trustee, as
the case may be, of 47 of the investment companies in the Franklin Templeton
Group of Funds; and formerly, Chairman, White River Corporation (financial
services) and Hambrecht and Quist Group (investment banking), President,
National Association of Securities Dealers, Inc. and Director, Real 3D
(software).
Harmon E. Burns (55)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources,
Inc., Franklin Templeton Distributors, Inc. and Franklin Templeton Services,
Inc.; Executive Vice President, Franklin Advisers, Inc.; Director, Franklin
Investment Advisory Services, Inc. and Franklin/Templeton Investor Services,
Inc.; and officer and/or director or trustee, as the case may be, of most of the
other subsidiaries of Franklin Resources, Inc. and of 51 of the investment
companies in the Franklin Templeton Group of Funds.
Martin L. Flanagan (39)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
President, Member - Office of the President, Franklin Resources, Inc.; Senior
Vice President, Chief Financial Officer and Director, Franklin/Templeton
Investor Services, Inc.; Senior Vice President and Chief Financial Officer,
Franklin Mutual Advisers, LLC; Executive Vice President, Chief Financial Officer
and Director, Templeton Worldwide, Inc.; Executive Vice President, Chief
Operating Officer and Director, Templeton Investment Counsel, Inc.; Executive
Vice President and Chief Financial Officer, Franklin Advisers, Inc.; Chief
Financial Officer, Franklin Advisory Services, LLC and Franklin Investment
Advisory Services, Inc.; President and Director, Franklin Templeton Services,
Inc.; officer and/or director of some of the other subsidiaries of Franklin
Resources, Inc.; and officer and/or director or trustee, as the case may be, of
51 of the investment companies in the Franklin Templeton Group of Funds.
Deborah R. Gatzek (51)
1840 Gateway Drive, San Mateo, CA 94404
SECRETARY
Partner, Stradley, Ronon, Stevens & Young, LLP; officer of 33 of the investment
companies in the Franklin Templeton Group of Funds; and FORMERLY, Senior Vice
President and General Counsel, Franklin Resources, Inc., Senior Vice President,
Franklin Templeton Services, Inc. and Franklin Templeton Distributors, Inc.,
Executive Vice President, Franklin Advisers, Inc., Vice President, Franklin
Advisory Services, LLC and Franklin Mutual Advisers, LLC, and Vice President,
Chief Legal Officer and Chief Operating Officer, Franklin Investment Advisory
Services, Inc. (until January 2000).
Charles E. Johnson (43)
777 Mariners Island Blvd., San Mateo, CA 94404
PRESIDENT
President, Member - Office of the President and Director, Franklin Resources,
Inc.; Senior Vice President, Franklin Templeton Distributors, Inc.; President
and Director, Templeton Worldwide, Inc.; Chairman and Director, Templeton
Investment Counsel, Inc.; President, Franklin Advisers, Inc. and Franklin
Investment Advisory Services, Inc.; officer and/or director of some of the other
subsidiaries of Franklin Resources, Inc.; and officer and/or director or
trustee, as the case may be, of 32 of the investment companies in the Franklin
Templeton Group of Funds.
Edward V. McVey (62)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT
Senior Vice President and National Sales Manager, Franklin Templeton
Distributors, Inc.; and officer of 28 of the investment companies in the
Franklin Templeton Group of Funds.
David Goss (53)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT
President, Chief Executive Officer and Director, Franklin Select Realty Trust,
Property Resources, Inc., Property Resources Equity Trust and Franklin Real
Estate Management, Inc.; President and Chief Executive Officer, Franklin
Properties, Inc.; officer of 51 of the investment companies in the Franklin
Templeton Group of Funds; and FORMERLY, President, Chief Executive Officer and
Director, Franklin Real Estate Income Fund and Franklin Advantage Real Estate
Income Fund (until 1996).
Barbara J. Green (53)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT AND SECRETARY
Vice President and Deputy General Counsel, Franklin Resources, Inc.; Senior Vice
President, Templeton Worldwide, Inc. and Templeton Global Investors, Inc.;
officer of 51 of the investment companies in the Franklin Templeton Group of
Funds; and FORMERLY, Deputy Director, Division of Investment Management,
Executive Assistant and Senior Advisor to the Chairman, Counselor to the
Chairman, Special Counsel and Attorney Fellow, U.S. Securities and Exchange
Commission (1986-1995), Attorney, Rogers & Wells, and Judicial Clerk, U.S.
District Court (District of Massachusetts).
Murray L. Simpson (63)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT
Executive Vice President and General Counsel, Franklin Resources, Inc.; officer
of 51 of the investment companies in the Franklin Templeton Group of Funds; and
FORMERLY, Chief Executive Officer and Managing Director, Templeton Franklin
Investment Services (Asia) Limited (until January 2000) and Director, Templeton
Asset Management Ltd. (until 1999).
Kimberley Monasterio (37)
777 Mariners Island Blvd., San Mateo, CA 94404
TREASURER AND PRINCIPAL ACCOUNTING OFFICER
Vice President, Franklin Templeton Services, Inc.; and officer of 32 of the
investment companies in the Franklin Templeton Group of Funds.
*This board member is considered an "interested person" under federal
securities laws.
Note: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers and the
father and uncle, respectively, of Charles E. Johnson.
The trust pays noninterested board members $800 per year plus $800 per meeting
attended. Board members who serve on the audit committee of the trust and other
funds in the Franklin Templeton Group of Funds receive a flat fee of $2,000 per
committee meeting attended, a portion of which is allocated to the trust.
Members of a committee are not compensated for any committee meeting held on the
day of a board meeting. Noninterested board members also may serve as directors
or trustees of other funds in the Franklin Templeton Group of Funds and may
receive fees from these funds for their services. The fees payable to certain
noninterested board members by the trust are subject to reductions resulting
from fee caps limiting the amount of fees payable to board members who serve on
other boards within the Franklin Templeton Group of Funds. The following table
provides the total fees paid to noninterested board members by the trust and by
the Franklin Templeton Group of Funds.
NUMBER OF
TOTAL FEES BOARDS IN
RECEIVED THE FRANKLIN
FROM TEMPLETON
TOTAL FEES THE FRANKLIN GROUP
RECEIVED TEMPLETON OF FUNDS
FROM GROUP ON WHICH
NAME THE TRUST 1 ($) OF FUNDS 2 ($) EACH SERVES 3
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Frank H. Abbott, III 3,758 156,060 27
Harris J. Ashton 3,586 363,165 47
David K. Eiteman 3,200 2,400 1
S. Joseph Fortunato 3,478 363,238 49
Gerald R. Healy 3,200 3,200 1
David P. Kraus 4,000 4,000 1
Frank W.T. LaHaye 4,325 156,060 27
Gordon S. Macklin 3,586 363,165 47
1. For the fiscal year ended October 31, 1999.
2. For the calendar year ended December 31, 1999.
3. 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 53 registered investment companies, with approximately 155 U.S. based
funds or series.
Noninterested board members 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 or trustee. No officer
or board member received any other compensation, including pension or retirement
benefits, directly or indirectly from the funds or other funds in the Franklin
Templeton Group of Funds. Certain officers or board members who are shareholders
of Franklin Resources, Inc. may be deemed to receive indirect remuneration by
virtue of their participation, if any, in the fees paid to its subsidiaries.
Messrs. Abbott, Ashton, Fortunato, LaHaye and Macklin historically have followed
a policy of having substantial investments in one or more of the funds in the
Franklin Templeton Group of Funds, as is consistent with their individual
financial goals. In February 1998, this policy was formalized through adoption
of a requirement that each such board member invest one-third of fees received
for serving as a director or trustee of a Templeton fund in shares of one or
more Templeton funds and one-third of fees received for serving as a director or
trustee of a Franklin fund in shares of one or more Franklin funds until the
value of such investments equals or exceeds five times the annual fees paid such
board member. Investments in the name of family members or entities controlled
by a board member constitute fund holdings of such board member for purposes of
this policy, and a three year phase-in period applies to such investment
requirements for newly elected board members. In implementing such policy, a
board member's fund holdings existing on February 27, 1998, are valued as of
such date with subsequent investments valued at cost.
MANAGEMENT AND OTHER SERVICES
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MANAGER AND SERVICES PROVIDED The funds' manager is Franklin Advisers, Inc.
The manager is a wholly owned subsidiary of Franklin Resources, Inc.
(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.
The manager provides investment research and portfolio management services, and
selects the securities for the funds to buy, hold or sell. The manager also
selects the brokers who execute the funds' portfolio transactions. The manager
provides periodic reports to the board, which reviews and supervises the
manager's investment activities. To protect the funds, the manager and its
officers, directors and employees are covered by fidelity insurance.
The manager and its affiliates manage numerous other investment companies and
accounts. The manager 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 the manager on behalf of the funds. Similarly, with respect to the
funds, the manager is not obligated to recommend, buy or sell, or to refrain
from recommending, buying or selling any security that the manager and access
persons, as defined by applicable federal securities laws, may buy or sell for
its or their own account or for the accounts of any other fund. The manager is
not obligated to refrain from investing in securities held by the funds or other
funds it manages.
The funds, their manager and principal underwriter have each adopted a code of
ethics, as required by federal securities laws. Under the code of ethics,
employees who are designated as access persons may engage in personal securities
transactions, including transactions involving securities that are being
considered for the funds or that are currently held by the funds, subject to
certain general restrictions and procedures. The personal securities
transactions of access persons of the funds, their manager and principal
underwriter will be governed by the code of ethics.
The funds' sub-advisor is Templeton Investment Counsel, Inc., through its Global
Bond Managers division. The sub-advisor has an agreement with the manager and
provides the manager with investment management advice and assistance. The
sub-advisor provides 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. The sub-advisor's activities are
subject to the board's review and control, as well as the manager's instruction
and supervision.
MANAGEMENT FEES Each fund pays the manager a fee equal to an annual rate of
0.65% of the value of the average daily net assets of the funds.
The fee is computed at the close of business on the last business day of each
month according to the terms of the management agreement. Each class of the Hard
Currency Fund's shares pays its proportionate share of the fee.
For the last three fiscal years ended October 31, the funds paid the following
management fees:
MANAGEMENT FEES PAID ($)
--------------------------------------
1999 1998 1997
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Global Currency Fund 121,526 235,045 296,670
Hard Currency Fund 244,119 479,459 682,152
The manager pays the sub-advisor a fee equal to an annual rate of 0.25% of the
value of the average daily net assets of each fund. The manager pays this fee
from the management fees it receives from the funds. For the last three fiscal
years ended October 31, the manager paid the following sub-advisory fees:
SUB-ADVISORY FEES PAID ($)
--------------------------------------
1999 1998 1997
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Global Currency Fund 75,954 90,402 112,800
Hard Currency Fund 152,575 184,407 262,370
ADMINISTRATOR AND SERVICES PROVIDED Franklin Templeton Services, Inc. (FT
Services) has an agreement with the manager to provide certain administrative
services and facilities for the funds. FT Services is wholly owned by Resources
and is an affiliate of the funds' manager and principal underwriter.
The administrative services FT Services provides include preparing and
maintaining books, records, and tax and financial reports, and monitoring
compliance with regulatory requirements.
ADMINISTRATION FEES The manager pays FT Services a monthly fee equal to an
annual rate of:
o 0.15% of the fund's average daily net assets up to $200 million;
o 0.135% of average daily net assets over $200 million up to $700 million;
o 0.10% of average daily net assets over $700 million up to $1.2 billion; and
o 0.075% of average daily net assets over $1.2 billion.
During the last three fiscal years ended October 31, the manager paid FT
Services the following administration fees:
ADMINISTRATION FEES PAID ($)
--------------------------------------
1999 1998 1997
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Global Currency Fund 0 54,262 74,831
Hard Currency Fund 0 110,658 172,706
SHAREHOLDER SERVICING AND TRANSFER AGENT Franklin/Templeton Investor Services,
Inc. (Investor Services) is the funds' shareholder servicing agent and acts as
the funds' transfer agent and dividend-paying agent. Investor Services is
located at 777 Mariners Island Blvd., San Mateo, CA 94404. Please send all
correspondence to Investor Services to P.O. Box 997151, Sacramento, CA
95899-9983.
For its services, Investor Services receives a fixed fee per account. The funds
also will reimburse Investor Services for certain out-of-pocket expenses, which
may include payments by Investor Services to entities, including affiliated
entities, that provide sub-shareholder services, recordkeeping and/or transfer
agency services to beneficial owners of the funds. The amount of reimbursements
for these services per benefit plan participant fund account per year will not
exceed the per account fee payable by the funds to Investor Services in
connection with maintaining shareholder accounts.
CUSTODIAN The Chase Manhattan Bank, at its principal office at MetroTech Center,
Brooklyn, NY 11245, and at the offices of its branches and agencies throughout
the world, acts as custodian of the funds' assets. As foreign custody manager,
the bank selects and monitors foreign sub-custodian banks, selects and evaluates
non-compulsory foreign depositories, and furnishes information relevant to the
selection of compulsory depositories.
AUDITOR PricewaterhouseCoopers LLP, 200 East Las Olas Blvd., Ft. Lauderdale, FL
33301, is each fund's independent auditor. The auditor gives an opinion on the
financial statements included in the trust's Annual Report to Shareholders and
reviews the trust's registration statement filed with the U.S. Securities and
Exchange Commission (SEC).
PORTFOLIO TRANSACTIONS
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Since most purchases by the funds are principal transactions at net prices, the
fund incurs little or no brokerage costs. The funds deal directly with the
selling or buying principal or market maker without incurring charges for the
services of a broker on its behalf, unless it is determined that a better price
or execution may be obtained by using the services of a broker. 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 prices. The funds seek to obtain prompt execution
of orders at the most favorable net price. Transactions may be directed to
dealers in return for research and statistical information, as well as for
special services provided by the dealers in the execution of orders.
It is not possible to place a dollar value on the special executions or on the
research services the manager receives from dealers effecting transactions in
portfolio securities. The allocation of transactions to obtain additional
research services allows the manager to supplement its own research and analysis
activities and to receive the views and information of individuals and research
staffs of other securities firms. As long as it is lawful and appropriate to do
so, the manager and its affiliates may use this research and data in their
investment advisory capacities with other clients. If the funds' officers are
satisfied that the best execution is obtained, the sale of fund shares, as well
as shares of other funds in the Franklin Templeton Group of Funds, also may be
considered a factor in the selection of broker-dealers to execute the funds'
portfolio transactions.
Because Franklin Templeton Distributors, Inc. (Distributors) is a member of the
National Association of Securities Dealers, Inc., it may sometimes receive
certain fees when a fund tenders portfolio securities pursuant to a tender-offer
solicitation. To recapture brokerage for the benefit of a 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 the
manager 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 funds and one or more other
investment companies or clients supervised by the manager 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 manager, 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
funds are concerned. In other cases it is possible that the ability to
participate in volume transactions may improve execution and reduce transaction
costs to the funds.
During the fiscal years ended October 31, 1999, 1998 and 1997, the fund did not
pay any brokerage commissions.
For the fiscal year ended October 31, 1999, the funds did not pay brokerage
commissions to brokers who provided research services.
As of October 31, 1999, the funds did not own securities of their regular
broker-dealers.
DISTRIBUTIONS AND TAXES
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The Hard Currency Fund calculates dividends and capital gains the same way for
each class. The amount of any income dividends per share will differ, however,
generally due to the difference in any distribution and service (Rule 12b-1)
fees of each class. Distributions are subject to approval by the board. The
funds do not pay "interest" or guarantee any fixed rate of return on an
investment in its shares.
DISTRIBUTIONS OF NET INVESTMENT INCOME The funds receive income generally in the
form of interest on their investments. This income, less expenses incurred in
the operation of a fund, constitutes the funds' net investment income from which
dividends may be paid to you. Any distributions by a fund from such income will
be taxable to you as ordinary income, whether you take them in cash or in
additional shares.
DISTRIBUTIONS OF CAPITAL GAINS The funds may derive capital gains and losses in
connection with sales or other dispositions of their portfolio securities.
Distributions from net short-term capital gains will be taxable to you as
ordinary income. Distributions from net long-term capital gains will be taxable
to you as long-term capital gain, regardless of how long you have held your
shares in a fund. Any net capital gains realized by a fund generally will be
distributed once each year, and may be distributed more frequently, if
necessary, to reduce or eliminate excise or income taxes on the fund.
EFFECT OF FOREIGN INVESTMENTS ON DISTRIBUTIONS Most foreign exchange gains
realized on the sale of debt securities are treated as ordinary income by a
fund. Similarly, foreign exchange losses realized by a fund on the sale of debt
securities are generally treated as ordinary losses by a fund. These gains when
distributed will be taxable to you as ordinary dividends, and any losses will
reduce a fund's ordinary income otherwise available for distribution to you.
This treatment could increase or decrease a fund's ordinary income distributions
to you, and may cause some or all of a fund's previously distributed income to
be classified as a return of capital.
A fund may be subject to foreign withholding taxes on income from certain
foreign securities. If more than 50% of a fund's total assets at the end of the
fiscal year are invested in securities of foreign corporations, the fund may
elect to pass-through to you your pro rata share of foreign taxes paid by the
fund. If this election is made, the year-end statement you receive from the fund
will show more taxable income than was actually distributed to you. However, you
will be entitled to either deduct your share of such taxes in computing your
taxable income or (subject to limitations) claim a foreign tax credit for such
taxes against your U.S. federal income tax. A fund will provide you with the
information necessary to complete your individual income tax return if it makes
this election.
INFORMATION ON THE TAX CHARACTER OF DISTRIBUTIONS The funds will inform you of
the amount of your ordinary income dividends and capital gains distributions at
the time they are paid, and will advise you of their tax status for federal
income tax purposes shortly after the close of each calendar year. If you have
not held fund shares for a full year, a fund may designate and distribute to
you, as ordinary income or capital gain, a percentage of income that is not
equal to the actual amount of such income earned during the period of your
investment in the fund.
ELECTION TO BE TAXED AS A REGULATED INVESTMENT COMPANY Each fund has elected to
be treated as a regulated investment company under Subchapter M of the Internal
Revenue Code, has qualified as such for its most recent fiscal year, and intends
to so qualify during the current fiscal year. As regulated investment companies,
the funds generally pay no federal income tax on the income and gains they
distribute to you. The board reserves the right not to maintain the
qualification of a fund as a regulated investment company if it determines such
course of action to be beneficial to shareholders. In such case, a fund will be
subject to federal, and possibly state, corporate taxes on its taxable income
and gains, and distributions to you will be taxed as ordinary dividend income to
the extent of such fund's earnings and profits.
EXCISE TAX DISTRIBUTION REQUIREMENTS To avoid federal excise taxes, the Internal
Revenue Code requires a fund to distribute to you by December 31 of each year,
at a minimum, the following amounts: 98% of its taxable ordinary income earned
during the calendar year; 98% of its capital gain net income earned during the
twelve month period ending October 31; and 100% of any undistributed amounts
from the prior year. Each fund intends to declare and pay these distributions in
December (or to pay them in January, in which case you must treat them as
received in December) but can give no assurances that its distributions will be
sufficient to eliminate all taxes.
REDEMPTION OF FUND SHARES Redemptions (including redemptions in kind) and
exchanges of fund shares are taxable transactions for federal and state income
tax purposes. If you redeem your fund shares, or exchange your fund shares for
shares of a different Franklin Templeton Fund, the IRS will require that you
report any gain or loss on your redemption or exchange. If you hold your shares
as a capital asset, the gain or loss that you realize will be capital gain or
loss and will be long-term or short-term, generally depending on how long you
hold your shares.
Beginning after the year 2005 (2000 for certain shareholders), gains from the
sale of fund shares held for more than five years may be subject to a reduced
tax rate.
Any loss incurred on the redemption or exchange of shares held for six months or
less will be treated as a long-term capital loss to the extent of any long-term
capital gains distributed to you by the fund on those shares. All or a portion
of any loss that you realize upon the redemption of your fund shares will be
disallowed to the extent that you buy other shares in such fund (through
reinvestment of dividends or otherwise) within 30 days before or after your
share redemption. Any loss disallowed under these rules will be added to your
tax basis in the new shares you buy.
DEFERRAL OF BASIS If you redeem some or all of your shares in a fund, and then
reinvest the sales proceeds in such fund or in another Franklin Templeton Fund
within 90 days of buying the original shares, the sales charge that would
otherwise apply to your reinvestment may be reduced or eliminated. The IRS will
require you to report any gain or loss on the redemption of your original shares
in a fund. In doing so, all or a portion of the sales charge that you paid for
your original shares in a fund will be excluded from your tax basis in the
shares sold (for the purpose of determining gain or loss upon the sale of such
shares). The portion of the sales charge excluded will equal the amount that the
sales charge is reduced on your reinvestment. Any portion of the sales charge
excluded from your tax basis in the shares sold will be added to the tax basis
of the shares you acquire from your reinvestment.
U.S. GOVERNMENT OBLIGATIONS States grant tax-free status to dividends paid to
you from interest earned on direct obligations of the U.S. government, subject
in some states to minimum investment or reporting requirements that must be met
by a fund. Investments in Government National Mortgage Association or Federal
National Mortgage Association securities, bankers' acceptances, commercial paper
and repurchase agreements collateralized by U.S. government securities do not
generally qualify for tax-free treatment. The rules on exclusion of this income
are different for corporations.
DIVIDENDS-RECEIVED DEDUCTION FOR CORPORATIONS Because each fund's income is
derived primarily from investments in foreign rather than domestic securities,
generally none of its distributions will be eligible for the corporate
dividends-received deduction.
INVESTMENT IN COMPLEX SECURITIES The funds may invest in complex securities.
These investments may be subject to numerous special and complex tax rules.
These rules could affect whether gains and losses recognized by a fund are
treated as ordinary income or capital gain, accelerate the recognition of income
to a fund (possibly causing a fund to sell securities to raise the cash for
necessary distributions) and/or defer a fund's ability to recognize losses and,
in limited cases, subject a fund to U.S. federal income tax on income from
certain foreign securities. In turn, these rules may affect the amount, timing
or character of the income distributed to you by a fund.
ORGANIZATION, VOTING RIGHTS AND PRINCIPAL HOLDERS
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The funds are series' of Franklin Templeton Global Trust, an open-end management
investment company, commonly called a mutual fund. The trust was organized as a
Massachusetts business trust in November 1985 and reorganized as a Delaware
business trust on October 1, 1996, and is registered with the SEC.
As a shareholder of a Massachusetts business trust, you could, under certain
circumstances, be held personally liable as a partner for its obligations. The
Agreement and Declaration of Trust, however, contains an express disclaimer of
shareholder liability for acts or obligations of the funds. The Declaration of
Trust also provides for indemnification and reimbursement of expenses out of the
funds' assets if you are held personally liable for obligations of the funds.
The Declaration of Trust provides that the funds shall, upon request, assume the
defense of any claim made against you for any act or obligation of the funds and
satisfy any judgment thereon. All such rights are limited to the assets of the
funds. The Declaration of Trust further provides that the funds may maintain
appropriate insurance (for example, fidelity bonding and errors and omissions
insurance) for the protection of the funds, their shareholders, trustees,
officers, employees and agents to cover possible tort and other liabilities.
Furthermore, the activities of the funds as an investment company, as
distinguished from an operating company, would not likely give rise to
liabilities in excess of the funds' total assets. Thus, the risk that you would
incur financial loss on account of shareholder liability is limited to the
unlikely circumstance in which both inadequate insurance exists and the funds
themselves are unable to meet their obligations.
Certain funds in the Franklin Templeton Funds offer multiple classes of shares.
The different 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 Global Currency Fund's sales charge
structure and Rule 12b-1 plan are similar to those of Class A shares, shares of
the fund are considered Class A shares for redemption, exchange and other
purposes.
The Hard Currency Fund currently offers two classes of shares, Class A and
Advisor Class. The fund may offer additional classes of shares in the future.
The full title of each class is:
o Franklin Templeton Hard Currency Fund - Class A
o Franklin Templeton Hard Currency Fund - Advisor Class
Shares of each class of the Hard Currency Fund represent proportionate interests
in the fund's assets. On matters that affect the fund as a whole, each class has
the same voting and other rights and preferences as any other class. On matters
that affect only one class, only shareholders of that class may vote. Each class
votes separately on matters affecting only that class, or expressly required to
be voted on separately by state or federal law. Shares of each class of a series
have the same voting and other rights and preferences as the other classes and
series of the trust for matters that affect the trust as a whole. Additional
series may be offered in the future.
The trust has noncumulative voting rights. For board member elections, 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. The trust or a
series of the trust may hold special meetings, however, for matters requiring
shareholder approval. A meeting may be called by the board to consider the
removal of a board member if requested in writing by shareholders holding at
least 10% of the outstanding shares. In certain circumstances, we are required
to help you communicate with other shareholders about the removal of a board
member. A special meeting also may be called by the board in its discretion.
As of February 1, 2000, the principal shareholders of the funds, beneficial or
of record, were:
PERCENTAGE
NAME AND ADDRESS SHARE CLASS (%)
- --------------------------------------------------------------------------------
HARD CURRENCY FUND
Albert A. Haust III Advisor Class 9.3
1156 Morningside Avenue
South San Francisco, CA 94080
Franklin Resources, Inc. 1 Advisor Class 52.3
555 Airport Blvd. 4th Floor
Burlingame, CA 94010
John S. Sawaya Advisor Class 18.1
3441 Data Drive Apt 301
Rancho Cordova, CA 95670
1. Franklin Resources, Inc. is a Delaware Corporation.
Note: Charles B. Johnson and Rupert H. Johnson, Jr., who are officers and
trustees of the trust, may be considered beneficial holders of the fund
shares held by Franklin Resources, Inc. (Resources). As principal
shareholders of Resources, they may be able to control the voting of
Resources' shares of the funds.
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.
As of February 4, 2000, the officers and board members, as a group, owned of
record and beneficially less than 1% of the outstanding shares of each class.
The board members may own shares in other funds in the Franklin Templeton Group
of Funds.
BUYING AND SELLING SHARES
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The funds continuously offer their shares through securities dealers who have an
agreement with Franklin Templeton Distributors, Inc. (Distributors). A
securities dealer includes any financial institution that, either directly or
through affiliates, has an agreement with Distributors to handle customer orders
and accounts with the funds. This reference is for convenience only and does not
indicate a legal conclusion of capacity. Banks and financial institutions that
sell shares of the funds may be required by state law to register as securities
dealers.
For investors outside the U.S., the offering of fund shares may be limited in
many jurisdictions. An investor who wishes to buy shares of the funds should
determine, or have a broker-dealer determine, the applicable laws and
regulations of the relevant jurisdiction. Investors are responsible for
compliance with tax, currency exchange or other regulations applicable to
redemption and purchase transactions in any jurisdiction to which they may be
subject. Investors should consult appropriate tax and legal advisors to obtain
information on the rules applicable to these transactions.
All checks, drafts, wires and other payment mediums used to buy or sell shares
of the funds 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. We may deduct any applicable banking charges
imposed by the bank from your account.
When you buy shares, if you submit a check or a draft that is returned unpaid to
a fund we may impose a $10 charge against your account for each returned item.
If you buy shares through the reinvestment of dividends, the shares 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.
INITIAL SALES CHARGES The maximum initial sales charge is 2.25%. The initial
sales charge may be reduced for certain large purchases, as described in the
prospectus. We offer several ways for you to combine your purchases in the
Franklin Templeton Funds to take advantage of the lower sales charges for large
purchases. The Franklin Templeton Funds include the U.S. registered mutual funds
in the Franklin Group of Funds(R) and the Templeton Group of Funds except
Franklin Templeton Variable Insurance Products Trust, Templeton Capital
Accumulator Fund, Inc., and Templeton Variable Products Series Fund.
CUMULATIVE QUANTITY DISCOUNT. For purposes of calculating the sales charge, you
may combine the amount of your current purchase with the cost or current value,
whichever is higher, of your existing shares in the Franklin Templeton Funds.
You also may combine the shares of your spouse, children under the age of 21 or
grandchildren under the age of 21. If you are the sole owner of a company, you
also may 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 (LOI). You may buy shares at a reduced sales charge by
completing the letter of intent section of your account 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 application, you
acknowledge and agree to the following:
o You authorize Distributors to reserve 5% of your total intended purchase in
shares registered in your name until you fulfill your LOI. Your periodic
statements will include the reserved shares in the total shares you own, and
we will pay or reinvest dividend and capital gain distributions on the
reserved shares according to the distribution option you have chosen.
o You give Distributors a security interest in the reserved shares and appoint
Distributors as attorney-in-fact.
o 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 LOI.
o Although you may exchange your shares, you may not sell reserved shares until
you complete the LOI or pay the higher sales charge.
After you file your LOI with the fund, you may buy shares at the sales charge
applicable to the amount specified in your LOI. 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. Any
purchases you made within 90 days before you filed your LOI also may qualify for
a retroactive reduction in the sales charge. If you file your LOI with the fund
before a change in the fund's sales charge, you may complete the LOI at the
lower of the new sales charge or the sales charge in effect when the LOI was
filed.
Your holdings in the Franklin Templeton Funds acquired more than 90 days before
you filed your LOI will be counted towards the completion of the LOI, but they
will not be entitled to a retroactive reduction 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 LOI have been completed.
If the terms of your LOI are met, the reserved shares will be deposited to an
account in your name or delivered to you or as you direct. If the amount of your
total purchases, less redemptions, is more than the amount specified in your LOI
and is an amount that would qualify for a further sales charge reduction, a
retroactive price adjustment will be made by Distributors and the securities
dealer through whom purchases were made. The price adjustment will be made on
purchases made within 90 days before and on those made after you filed your LOI
and will be applied towards the purchase of additional shares at the offering
price applicable to a single purchase or the dollar amount of the total
purchases.
If the amount of your total purchases, less redemptions, is less than the amount
specified in your LOI, the sales charge will be adjusted upward, depending on
the actual amount purchased (less redemptions) during the period. You will need
to send Distributors an amount equal to the difference in the actual dollar
amount of sales charge paid and the amount of sales charge that would have
applied to the total purchases if the total of the purchases had been made at
one time. Upon payment of this amount, 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, we will redeem an appropriate number of reserved shares to realize
the difference. If you redeem the total amount in your account before you
fulfill your LOI, we will deduct the additional sales charge due from the sale
proceeds and forward the balance to you.
For LOIs filed 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 LOI. These plans are not subject to the requirement to reserve 5% of
the total intended purchase or to the policy on upward adjustments in sales
charges described above, 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 LOI.
GROUP PURCHASES. If you are a member of a qualified group, you may buy 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:
o Was formed at least six months ago,
o Has a purpose other than buying fund shares at a
discount,
o Has more than 10 members,
o Can arrange for meetings between our representatives and group members,
o Agrees to include Franklin Templeton Fund sales and other materials in
publications and mailings to its members at reduced or no cost to
Distributors,
o Agrees to arrange for payroll deduction or other bulk transmission of
investments to the fund, and
o Meets other uniform criteria that allow Distributors to achieve cost savings
in distributing shares.
A qualified group generally does not include a 403(b) plan that only allows
salary deferral contributions, although any such plan that purchased the fund's
shares at a reduced sales charge under the group purchase privilege before
February 1, 1998, may continue to do so.
WAIVERS FOR INVESTMENTS FROM CERTAIN PAYMENTS. Fund shares may be purchased
without an initial sales charge or contingent deferred sales charge (CDSC) by
investors who reinvest within 365 days:
o Dividend and capital gain distributions from any Franklin Templeton Fund. The
distributions generally must be reinvested in the same share class. Certain
exceptions apply, however, to Class C shareholders of another Franklin
Templeton Fund who chose to reinvest their distributions in shares of the
fund before November 17, 1997, and to Advisor Class or Class Z shareholders
of a Franklin Templeton Fund who may reinvest their distributions in the
fund.
o Annuity payments received under either an annuity option or from death
benefit proceeds, if the annuity contract offers as an investment option the
Franklin Templeton Variable Insurance Products Trust or the Templeton
Variable Products Series Fund. You should contact your tax advisor for
information on any tax consequences that may apply.
o Redemption proceeds from a repurchase of shares of Franklin Floating Rate
Trust, if the shares were continuously held for at least 12 months.
If you immediately placed your redemption proceeds in a Franklin Bank CD or a
Franklin Templeton money fund, you may reinvest them as described above. The
proceeds must be reinvested within 365 days from the date the CD matures,
including any rollover, or the date you redeem your money fund shares.
o Redemption proceeds from the sale of Class A shares of any of the Templeton
Global Strategy Funds if you are a qualified investor.
If you paid a CDSC when you redeemed your Class A shares from a Templeton
Global Strategy Fund, a new CDSC will apply to your purchase of fund shares
and the CDSC holding period will begin again. We will, however, credit your
fund account with additional shares based on the CDSC you previously paid and
the amount of the redemption proceeds that you reinvest.
If you immediately placed your redemption proceeds in a Franklin Templeton
money fund, you may reinvest them as described above. The proceeds must be
reinvested within 365 days from the date they are redeemed from the money
fund.
o Distributions from an existing retirement plan invested in the Franklin
Templeton Funds
WAIVERS FOR CERTAIN INVESTORS. Fund shares also may be purchased without an
initial sales charge or CDSC by various individuals and institutions due to
anticipated economies in sales efforts and expenses, including:
o 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.
o Any state or local government or any instrumentality, department, authority
or agency thereof that has determined a fund is a legally permissible
investment and that can only buy fund shares without paying sales charges.
Please consult your legal and investment advisors to determine if an
investment in a fund is permissible and suitable for you and the effect, if
any, of payments by the fund on arbitrage rebate calculations.
o Broker-dealers, registered investment advisors or certified financial
planners who have entered into an agreement with Distributors for clients
participating in comprehensive fee programs
o Qualified registered investment advisors who buy through a broker-dealer or
service agent who has entered into an agreement with Distributors
o Registered securities dealers and their affiliates, for their investment
accounts only
o Current employees of securities dealers and their affiliates and their family
members, as allowed by the internal policies of their employer
o 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
o Any investor who is currently a Class Z shareholder of Franklin Mutual Series
Fund Inc. (Mutual Series), or who is a former Mutual Series Class Z
shareholder who had an account in any Mutual Series fund on October 31, 1996,
or who sold his or her shares of Mutual Series Class Z within the past 365
days
o Investment companies exchanging shares or selling assets pursuant to a
merger, acquisition or exchange offer
o Accounts managed by the Franklin Templeton Group
o Certain unit investment trusts and their holders reinvesting distributions
from the trusts
o Group annuity separate accounts offered to retirement plans
o Chilean retirement plans that meet the requirements described under
"Retirement plans" below
RETIREMENT PLANS. Retirement plans sponsored by an employer (i) with at least
100 employees, or (ii) with retirement plan assets of $1 million or more, or
(iii) that agrees to invest at least $500,000 in the Franklin Templeton Funds
over a 13 month period may buy shares without an initial sales charge.
Retirement plans that are not qualified retirement plans (employer sponsored
pension or profit-sharing plans that qualify under section 401 of the Internal
Revenue Code, including 401(k), money purchase pension, profit sharing and
defined benefit plans), SIMPLEs (savings incentive match plans for employees) or
SEPs (employer sponsored simplified employee pension plans established under
section 408(k) of the Internal Revenue Code) must also meet the group purchase
requirements described above to be able to buy shares without an initial sales
charge. We may enter into a special arrangement with a securities dealer, based
on criteria established by the funds, to add together certain small qualified
retirement plan accounts for the purpose of meeting these requirements.
For retirement plan accounts opened on or after May 1, 1997, a CDSC may apply if
the retirement plan is transferred out of the Franklin Templeton Funds or
terminated within 365 days of the retirement plan account's initial purchase in
the Franklin Templeton Funds.
SALES IN TAIWAN. Under agreements with certain banks in Taiwan, Republic of
China, the funds' 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.
The funds' shares 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 3.0
$30,000 but less than $100,000 2.0
$100,000 but less than $400,000 1.0
$400,000 or more 0
DEALER COMPENSATION 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. Financial
institutions or their affiliated brokers may receive an agency transaction fee
in the percentages indicated in the dealer compensation table in the funds'
prospectus.
Distributors may 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.
These breakpoints are reset every 12 months for purposes of additional
purchases.
Distributors or one of its affiliates may pay up to 1%, out of its own
resources, to securities dealers who initiate and are responsible for purchases
by certain retirement plans without an initial sales charge. These payments may
be made 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.
In addition to the payments above, Distributors and/or its affiliates may
provide financial support to securities dealers that sell shares of the Franklin
Templeton Group of Funds. This support is based primarily on the amount of sales
of fund shares and/or total assets with the Franklin Templeton Group of Funds.
The amount of support may be affected by: total sales; net sales; levels of
redemptions; the proportion of a securities dealer's sales and marketing efforts
in the Franklin Templeton Group of Funds; a securities dealer's support of, and
participation in, Distributors' marketing programs; a securities dealer's
compensation programs for its registered representatives; and the extent of a
securities dealer's marketing programs relating to the Franklin Templeton Group
of Funds. Financial support to securities dealers may be made by payments from
Distributors' resources, from Distributors' retention of underwriting
concessions and, in the case of funds that have Rule 12b-1 plans, from payments
to Distributors under such plans. In addition, certain securities dealers may
receive brokerage commissions generated by fund portfolio transactions in
accordance with the rules of the National Association of Securities Dealers,
Inc.
Distributors routinely sponsors due diligence meetings for registered
representatives during which they receive updates on various Franklin Templeton
Funds and are afforded the opportunity to speak with portfolio managers.
Invitation to these meetings is not conditioned on selling a specific number of
shares. Those who have shown an interest in the Franklin Templeton Funds,
however, are more likely to be considered. To the extent permitted by their
firm's policies and procedures, registered representatives' expenses in
attending these meetings may be covered by Distributors.
CONTINGENT DEFERRED SALES CHARGE (CDSC) If you invest $1 million or more, either
as a lump sum or through our cumulative quantity discount or letter of intent
programs, a CDSC may apply on any shares you sell within 12 months of purchase.
The CDSC is 1% of the value of the shares sold or the net asset value at the
time of purchase, whichever is less.
Certain retirement plan accounts opened on or after May 1, 1997, and that
qualify to buy shares without an initial sales charge also may be subject to a
CDSC if the retirement plan is transferred out of the Franklin Templeton Funds
or terminated within 365 days of the account's initial purchase in the Franklin
Templeton Funds.
CDSC WAIVERS. The CDSC generally will be waived for:
o Account fees
o Sales of shares purchased without an initial sales charge by certain
retirement plan accounts if (i) the account was opened before May 1, 1997, or
(ii) the securities dealer of record received a payment from Distributors of
0.25% or less, or (iii) Distributors did not make any payment in connection
with the purchase, or (iv) the securities dealer of record has entered into a
supplemental agreement with Distributors
o Redemptions by investors who purchased $1 million or more without an initial
sales charge if the securities dealer of record waived its commission in
connection with the purchase
o Redemptions by the funds when an account falls below the minimum required
account size
o Redemptions following the death of the shareholder or beneficial owner
o Redemptions through a systematic withdrawal plan set up before February 1,
1995
o Redemptions through a systematic withdrawal plan set up on or after February
1, 1995, up to 1% monthly, 3% quarterly, 6% semiannually or 12% annually of
your account's net asset value depending on the frequency of your plan
o Redemptions by Franklin Templeton Trust Company employee benefit plans or
employee benefit plans serviced by ValuSelect(R)
o Distributions from individual retirement accounts (IRAs) due to death or
disability or upon periodic distributions based on life expectancy
o Returns of excess contributions (and earnings, if applicable) from
retirement plan accounts
o Participant initiated distributions from employee benefit plans or
participant initiated exchanges among investment choices in employee benefit
plans
EXCHANGE PRIVILEGE If you request the exchange of the total value of your
account, declared but unpaid income dividends and capital gain distributions
will be reinvested in the fund and exchanged into the new fund at net asset
value when paid. Backup withholding and information reporting may apply.
If a substantial number of shareholders should, within a short period, sell
their fund shares 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
each fund's general policy to initially invest this money in short-term,
interest-bearing money market instruments, unless it is believed that attractive
investment opportunities consistent with the funds' investment goals exist
immediately. This money will then be withdrawn from the short-term,
interest-bearing 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 generally are not
available until the seventh day following the sale. The funds you are seeking to
exchange into may delay issuing shares pursuant to an exchange until that
seventh 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.
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. There are no service charges for establishing or
maintaining a systematic withdrawal plan.
Payments under the plan will be made from the redemption of an equivalent amount
of shares in your account, generally on the 25th day of the month in which a
payment is scheduled. If the 25th falls on a weekend or holiday, we will process
the redemption on the next business day. When you sell your shares under a
systematic withdrawal plan, it is a taxable transaction.
To avoid paying sales charges on money you plan to withdraw within a short
period of time, 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 also may be
subject to a CDSC.
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.
You may discontinue a systematic withdrawal plan, change the amount and schedule
of withdrawal payments, or suspend one payment by notifying us by mail or by
phone at least seven business days before the end of the month preceding a
scheduled payment. The funds 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.
REDEMPTIONS IN KIND Each fund has committed itself to pay in cash (by check) all
requests for redemption by any shareholder of record, limited in amount,
however, during any 90-day period to the lesser of $250,000 or 1% of the value
of the fund's net assets at the beginning of the 90-day period. This commitment
is irrevocable without the prior approval of the U.S. Securities and Exchange
Commission (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 funds do 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.
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 and to send the certificate and assignment form in separate
envelopes.
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.
Distribution or redemption checks sent to you do not earn interest or any other
income during the time the checks remain uncashed. Neither the funds nor their
affiliates will be liable for any loss caused by your failure to cash such
checks. The funds are not responsible for tracking down uncashed checks, unless
a check is returned as undeliverable.
In most cases, if mail is returned as undeliverable we are required to take
certain steps to try to find you free of charge. If these attempts are
unsuccessful, however, we may deduct the costs of any additional 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.
Sending redemption proceeds by wire or electronic funds transfer (ACH) is a
special service that we make available whenever possible. By offering this
service to you, the funds are not bound to meet any redemption request in less
than the seven day period prescribed by law. Neither the funds nor their agents
shall be liable to you or any other person if, for any reason, a redemption
request by wire or ACH is not processed as described in the prospectus.
Franklin Templeton Investor Services, Inc. (Investor Services) may pay certain
financial institutions that maintain omnibus accounts with the funds on behalf
of numerous beneficial owners for recordkeeping operations performed with
respect to such owners. For each beneficial owner in the omnibus account, the
fund may reimburse Investor Services an amount not to exceed the per account fee
that a fund normally pays Investor Services. These financial institutions also
may charge a fee for their services directly to their clients.
If you buy or sell shares through your securities dealer, we use the net asset
value next calculated after your securities dealer receives your request, which
is promptly transmitted to the fund. 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. 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. Any loss to you resulting from your dealer's failure to transmit your
redemption order to the fund in a timely fashion must be settled between you and
your securities dealer.
Certain shareholder servicing agents may be authorized to accept your
transaction request.
For institutional accounts, there may be additional methods of buying or selling
fund shares than those described in this SAI or in the prospectus.
In the event of disputes involving multiple claims of ownership or authority to
control your account, each fund has the right (but has no obligation) to: (a)
freeze the account and require the written agreement of all persons deemed by
the fund to have a potential property interest in the account, before 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.
PRICING SHARES
- ------------------------------------------------------------------------------
When you buy shares, you pay the offering price. The offering price is the net
asset value (NAV) per share plus any applicable sales charge, calculated to two
decimal places using standard rounding criteria. When you sell shares, you
receive the NAV minus any applicable CDSC.
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.
The funds calculate the NAV per share of each class each business day at the
close of trading on the New York Stock Exchange (normally 1:00 p.m. Pacific
time). The funds do not calculate the NAV on days the New York Stock Exchange
(NYSE) is closed for trading, which include New Year's Day, Martin Luther King
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day.
When determining its NAV, each fund values cash and receivables at their
realizable amounts, and records interest as accrued and dividends on the
ex-dividend date. If market quotations are readily available for portfolio
securities listed on a securities exchange or on the Nasdaq National Market
System, each fund values those securities at the last quoted sale price of the
day or, if there is no reported sale, within the range of the most recent quoted
bid and ask prices. Each fund values over-the-counter portfolio securities
within the range of the most recent quoted bid and ask prices. If portfolio
securities trade both in the over-the-counter market and on a stock exchange,
each fund values them according to the broadest and most representative market
as determined by the manager.
Each fund values portfolio securities underlying actively traded call options at
their market price as determined above. The current market value of any option a
fund holds is its last sale price on the relevant exchange before the fund
values its assets. If there are no sales that day or if the last sale price is
outside the bid and ask prices, the fund values options within the range of the
current closing bid and ask prices if the fund believes the valuation fairly
reflects the contract's market value.
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed well before the close of business
of the NYSE on each day that the NYSE is open. Trading in European or Far
Eastern securities generally, or in a particular country or countries, may not
take place on every NYSE business day. Furthermore, trading takes place in
various foreign markets on days that are not business days for the NYSE and on
which a fund's NAV is not calculated. Thus, the calculation of a fund's NAV does
not take place contemporaneously with the determination of the prices of many of
the portfolio securities used in the calculation and, if events materially
affecting the values of these foreign securities occur, the securities will be
valued at fair value as determined by management and approved in good faith by
the board.
Generally, trading in U.S. government securities and money market instruments is
substantially completed each day at various times before the close of the NYSE.
The value of these securities used in computing the NAV 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 close of the NYSE that
will not be reflected in the computation of the NAV. 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
funds may use a pricing service, bank or securities dealer to perform any of the
above described functions.
THE UNDERWRITER
- ------------------------------------------------------------------------------
Franklin Templeton Distributors, Inc. (Distributors) acts as the principal
underwriter in the continuous public offering of each fund's shares.
Distributors is located at 777 Mariners Island Blvd., San Mateo, CA 94404.
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. Each fund pays the expenses of preparing and
printing amendments to its registration statements and prospectuses (other than
those necessitated by the activities of Distributors) and of sending
prospectuses to existing shareholders.
The table below shows the aggregate underwriting commissions Distributors
received in connection with the offering of the funds' shares, the net
underwriting discounts and commissions Distributors retained after allowances to
dealers, and the amounts Distributors received in connection with redemptions or
repurchases of shares for the last three fiscal years ended October 31:
AMOUNT
RECEIVED IN
CONNECTION
WITH
TOTAL AMOUNT REDEMPTIONS
COMMISSIONS RETAINED BY AND
RECEIVED DISTRIBUTORS REPURCHASES
($) ($) ($)
- -------------------------------------------------------------------------------
1999
Global Currency Fund 5,465 671 0
Hard Currency Fund 32,175 3,662 0
1998
Global Currency Fund 16,137 2,242 0
Hard Currency Fund 110,110 12,854 0
1997
Global Currency Fund 39,015 4,434 0
Hard Currency Fund 337,549 36,786 0
Distributors may be entitled to reimbursement under the Rule 12b-1 plan, as
discussed below. Except as noted, Distributors received no other compensation
from the funds for acting as underwriter.
DISTRIBUTION AND SERVICE (12B-1) FEES The board has adopted a plan pursuant to
Rule 12b-1 for the Global Currency Fund and Class A of the Hard Currency Fund.
The plan is designed to benefit the funds and their shareholders. The plan is
expected to, among other things, increase advertising of the funds, encourage
sales of the funds and service to their shareholders, and increase or maintain
assets of the funds so that certain fixed expenses may be spread over a broader
asset base, resulting in lower per share expense ratios. In addition, a positive
cash flow into the funds are useful in managing the funds because the manager
has more flexibility in taking advantage of new investment opportunities and
handling shareholder redemptions.
Under the plan, the funds pay Distributors or others for the expenses of
activities that are primarily intended to sell shares of the funds. These
expenses also may include service fees paid to securities dealers or others who
have executed a servicing agreement with the funds, Distributors or their
affiliates who provide service or account maintenance to shareholders (service
fees); the expenses of printing prospectuses and reports used for sales
purposes, and of preparing and distributing sales literature and advertisements;
and a prorated portion of Distributors' overhead expenses related to these
activities. Together, these expenses, including the service fees, are "eligible
expenses."
The funds may pay up to 0.45% per year of the funds' average daily net assets.
Of this amount, the fund may pay up to 0.45% to Distributors or others, out of
which Distributors generally will retain 0.20% for distribution expenses.
The plan is a reimbursement plan. It allows the funds to reimburse Distributors
for eligible expenses that Distributors has shown it has incurred. The funds
will not reimburse more than the maximum amount allowed under the plan.
For the fiscal year ended October 31, 1999, the amounts paid by the funds
pursuant to the plan were:
GLOBAL HARD
CURRENCY CURRENCY
FUND FUND
($) ($)
- -------------------------------------------------------------------------------
Advertising 670 13,888
Printing and mailing prospectuses other
than to current shareholders 3,284 5,090
Payments to underwriters 713 5,363
Payments to broker-dealers 57,692 109,998
Other 6,854 18,611
----------------------------
Total 69,213 152,950
============================
In addition to the payments that Distributors or others are entitled to under
the plan, the plan also provides that to the extent the funds, the manager or
Distributors or other parties on behalf of the funds, the manager or
Distributors make payments that are deemed to be for the financing of any
activity primarily intended to result in the sale of fund shares within the
context of Rule 12b-1 under the Investment Company Act of 1940, as amended, then
such payments shall be deemed to have been made pursuant to the plan.
To the extent fees are for distribution or marketing functions, as distinguished
from administrative servicing or agency transactions, certain banks may not
participate in the plan because of applicable federal law prohibiting certain
banks from engaging in the distribution of mutual fund shares. These banks,
however, are allowed to receive fees under the plan for administrative servicing
or for agency transactions.
Distributors must provide written reports to the board at least quarterly on the
amounts and purpose of any payment made under the plan and any related
agreements, and furnish the board with such other information as the board may
reasonably request to enable it to make an informed determination of whether the
plan should be continued.
The plan has been approved according to the provisions of Rule 12b-1. The terms
and provisions of the plan also are consistent with Rule 12b-1.
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 a fund be accompanied by
certain standardized performance information computed as required by the SEC.
Average annual total return and current yield quotations used by the funds are
based on the standardized methods of computing performance mandated by the SEC.
Performance figures reflect Rule 12b-1 fees from the date of the plan's
implementation. An explanation of these and other methods used by the funds to
compute or express performance follows. Regardless of the method used, past
performance does not guarantee future results, and is an indication of the
return to shareholders only for the limited historical period used.
AVERAGE ANNUAL TOTAL RETURN Average annual total return is determined by finding
the average annual rates of return over the periods indicated below that would
equate an initial hypothetical $1,000 investment to its ending redeemable value.
The calculation assumes the maximum initial 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 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 initial sales
charge currently in effect.
When considering the average annual total return quotations, you should keep in
mind that the maximum initial 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 average
annual total returns for the indicated periods ended October 31, 1999, were:
1 5 10 SINCE
INCEPTION YEAR YEARS YEARS INCEPTION
DATE (%) (%) (%) (%)
- -------------------------------------------------------------------------------
Global Currency Fund 6/27/86 -2.09 1.45 5.09 5.95
Hard Currency Fund 11/17/89 -8.43 -2.53 - 4.40
The following SEC formula was used to calculate these figures:
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 each period at the end of each period
CUMULATIVE TOTAL RETURN Like average annual total return, cumulative total
return assumes the maximum initial sales charge is deducted from the initial
$1,000 purchase, income dividends and capital gain distributions are reinvested
at net asset value, the account was completely redeemed at the end of each
period and the deduction of all applicable charges and fees. Cumulative total
return, however, is based on the actual return for a specified period rather
than on the average return over the periods indicated above. The cumulative
total returns for the indicated periods ended October 31, 1999, were:
1 5 10 SINCE
INCEPTION YEAR YEARS YEARS INCEPTION
DATE (%) (%) (%) (%)
- --------------------------------------------------------------------------------
Global Currency Fund 6/27/86 -2.09 7.44 64.30 116.33
Hard Currency Fund 11/17/89 -8.43 -12.02 - 55.51
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 applicable 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
yields for the 30-day period ended October 31, 1999, were:
YIELD
(%)
- -------------------------------------------------------------------------------
Global Currency Fund 3.67%
Hard Currency Fund 3.81%
The following SEC formula was used to calculate these figures:
6
Yield = 2 [(A-B + 1) - 1]
cd
where:
a = 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. 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. The current distribution rates for
the 30-day period ended October 31, 1999, were:
DISTRIBUTION
RATE
(%)
- --------------------------------------------------------------------------------
Global Currency Fund 3.17%
Hard Currency Fund 2.46%
VOLATILITY Occasionally statistics may be used to show a fund's volatility or
risk. Measures of volatility or risk are generally used to compare a 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 A fund also may quote the performance of shares
without a sales charge. Sales literature and advertising may quote a cumulative
total return, average annual total return and other measures of performance with
the substitution of net asset value for the public offering price.
Sales literature referring to the use of the funds as a potential investment for
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 funds may include in their advertising or sales material information
relating to investment goals and performance results of funds belonging to the
Franklin Templeton Group of Funds. Franklin Resources, Inc. is the parent
company of the advisors and underwriter of the Franklin Templeton Group of
Funds.
COMPARISONS To help you better evaluate how an investment in the funds may
satisfy your investment goal, advertisements and other materials about the funds
may discuss certain measures of fund performance as reported by various
financial publications. Materials also may 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:
o Salomon Brothers Broad Bond Index or its component indices - measures yield,
price and total return for Treasury, agency, corporate and mortgage bonds.
o Lehman Brothers Aggregate Bond Index or its component indices - measures
yield, price and total return for Treasury, agency, corporate, mortgage and
Yankee bonds.
o Lehman Brothers Municipal Bond Index or its component indices - measures
yield, price and total return for the municipal bond market.
o Bond Buyer 20 Index - an index of municipal bond yields based upon yields of
20 general obligation bonds maturing in 20 years.
o Bond Buyer 40 Index - an index composed of the yield to maturity of 40 bonds.
The index attempts to track the new-issue market as closely as possible, so
it changes bonds twice a month, adding all new bonds that meet certain
requirements and deleting an equivalent number according to their secondary
market trading activity. As a result, the average par call date, average
maturity date, and average coupon rate can and have changed over time. The
average maturity generally has been about 29-30 years.
o Financial publications: THE WALL STREET JOURNAL, AND BUSINESS WEEK, FINANCIAL
WORLD, FORBES, FORTUNE, AND MONEY MAGAZINES - provide performance statistics
over specified time periods.
o Salomon Brothers Composite High Yield Index or its component indices measures
yield, price and total return for the Long-Term High-Yield Index,
Intermediate-Term High-Yield Index, and Long-Term Utility High-Yield Index.
o Historical data supplied by the research departments of CS First Boston
Corporation, the J.P. Morgan(R) companies, Salomon Brothers, Merrill Lynch,
Lehman Brothers(R) and Bloomberg(R) L.P.
o Morningstar - information published by Morningstar, Inc., including
Morningstar proprietary mutual fund ratings. The ratings reflect
Morningstar's assessment of the historical risk-adjusted performance of a
fund over specified time periods relative to other funds within its category.
o Lipper - Mutual Fund Performance Analysis and Lipper - Fixed Income Fund
Performance Analysis - 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.
From time to time, advertisements or information for the funds may include a
discussion of certain attributes or benefits to be derived from an investment in
the funds. 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 sales material issued by the fund also may discuss or be based
upon information in a recent issue of the Special Report on Tax Freedom Day
published by the Tax Foundation, a Washington, D.C. based nonprofit research and
public education organization. The report illustrates, among other things, the
annual amount of time the average taxpayer works to satisfy his or her tax
obligations to the federal, state and local taxing authorities.
Advertisements or information also may compare the funds' performance to the
return on certificates of deposit (CDs) or other investments. You should be
aware, however, that an investment in a fund involves the risk of fluctuation of
principal value, a risk generally not present in an investment in a 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 fall.
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 a fund is not insured by any federal, state or
private entity.
In assessing comparisons of performance, you should keep in mind that the
composition of the investments in the reported indices and averages is not
identical to the funds' 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 funds to calculate their figures. In
addition, there can be no assurance that the funds will continue their
performance as compared to these other averages.
MISCELLANEOUS INFORMATION
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The funds 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 to have a
projected amount available in the future to fund a child's college education.
(Projected college cost estimates are based upon current costs published by the
College Board.) The Franklin Retirement Planning Guide leads you through the
steps to start a retirement savings program. Of course, an investment in a fund
cannot guarantee that these goals will be met.
Each fund is a member of the Franklin Templeton Group of Funds, one of the
largest mutual fund organizations in the U.S., and may be considered in a
program for diversification of assets. Founded in 1947, Franklin is one of the
oldest mutual fund organizations and now services approximately 3 million
shareholder accounts. In 1992, Franklin, a leader in managing fixed-income
mutual funds and an innovator in creating domestic equity funds, joined forces
with Templeton, a pioneer in international investing. The Mutual Series team,
known for its value-driven approach to domestic equity investing, became part of
the organization four years later. Together, the Franklin Templeton Group has
over $235 billion in assets under management for more than 5 million U.S. based
mutual fund shareholder and other accounts. The Franklin Templeton Group of
Funds offers 103 U.S. based open-end investment companies to the public. Each
fund may identify itself by its Nasdaq symbol or CUSIP number.
Currently, there are more mutual funds than there are stocks listed on the New
York Stock Exchange. While many of them have similar investment goals, no two
are exactly alike. Shares of the funds are generally sold through securities
dealers, whose investment representatives are experienced professionals who can
offer advice on the type of investments suitable to your unique goals and needs,
as well as the risks associated with such investments.
DESCRIPTION OF RATINGS
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SHORT-TERM DEBT & COMMERCIAL PAPER RATINGS
MOODY'S
Moody's short-term debt ratings are opinions of the ability of issuers to repay
punctually senior debt obligations. These obligations have an original maturity
not exceeding one year, unless explicitly noted. Moody's commercial paper
ratings are opinions of the ability of issuers to repay punctually their
promissory obligations not having an original maturity in excess of nine months.
Moody's employs the following designations for both short-term debt and
commercial paper, all judged to be investment grade, to indicate the relative
repayment capacity of rated issuers:
P-1 (Prime-1): Superior capacity for repayment.
P-2 (Prime-2): Strong capacity for repayment.
S&P
S&P's ratings are a current assessment of the likelihood of timely payment of
debt having an original maturity of no more than 365 days. Ratings are graded
into four categories, ranging from "A" for the highest quality obligations to
"D" for the lowest. Issues within the "A" category are delineated with the
numbers 1, 2 and 3 to indicate the relative degree of safety, as follows:
A-1: This designation indicates the degree of safety regarding timely payment is
very strong. A "plus" (+) designation indicates an even stronger likelihood of
timely payment.
A-2: Capacity for timely payment on issues with this designation is strong. The
relative degree of safety, however, is not as overwhelming as for issues
designated A-1.
A-3: Issues carrying this designation have a satisfactory capacity for timely
payment. They are, however, somewhat more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.
FRANKLIN TEMPLETON
HARD CURRENCY FUND
FRANKLIN TEMPLETON GLOBAL TRUST
ADVISOR CLASS
STATEMENT OF ADDITIONAL INFORMATION
MARCH 1, 2000
[Insert Franklin Templeton Ben Head]
P.O. BOX 997151, SACRAMENTO, CA 95899-9983 1-800/DIAL BEN(R)
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This Statement of Additional Information (SAI) is not a prospectus. It
contains information in addition to the information in the fund's prospectus.
The fund's prospectus, dated March 1, 2000, which we may amend from time to
time, contains the basic information you should know before investing in the
fund. You should read this SAI together with the fund's prospectus.
The audited financial statements and auditor's report in the fund's Annual
Report to Shareholders, for the fiscal year ended October 31, 1999, are
incorporated by reference (are legally a part of this SAI).
For a free copy of the current prospectus or annual report, contact your
investment representative or call 1-800/DIAL BEN (1-800/342-5236).
CONTENTS
Goal and Strategies ..................................... 2
Risks ................................................... 6
Officers and Trustees ................................... 8
Management and Other Services ........................... 11
Portfolio Transactions .................................. 13
Distributions and Taxes ................................. 13
Organization, Voting Rights
and Principal Holders .................................. 15
Buying and Selling Shares ............................... 15
Pricing Shares .......................................... 18
The Underwriter ......................................... 19
Performance ............................................. 19
Miscellaneous Information ............................... 21
Description of Ratings .................................. 21
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MUTUAL FUNDS, ANNUITIES, AND OTHER INVESTMENT PRODUCTS:
o ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY OF THE U.S. GOVERNMENT;
o ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK;
o ARE SUBJECT TO INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
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FTGT SAIA 03/00
GOAL AND STRATEGIES
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The fund's investment goal is to protect against depreciation of the U.S.
dollar relative to other currencies. This goal is fundamental, which means it
may not be changed without shareholder approval. Of course, there is no
assurance that the fund will meet its goal.
Below is a description of various types of money market instruments that the
fund may buy, as well as more detailed information about some of the fund's
investment policies. Other types of money market instruments may become
available that are similar to those described below and in which the fund
also may invest if consistent with its investment goal and policies.
MONEY MARKET INSTRUMENTS Money market instruments include short-term
government securities, floating and variable rate notes, commercial paper,
repurchase agreements, CDs, time deposits, bankers' acceptances, and other
short-term liquid instruments.
The fund may invest in money market instruments issued by foreign and
domestic governments, financial institutions, corporations and other entities
in the U.S. or in any foreign country. The fund also may invest in money
market instruments issued by supranational organizations such as the World
Bank (chartered to finance development projects in member countries), the
European Economic Community (a twelve-nation organization engaged in
cooperative economic activities), the European Coal and Steel Community (an
economic union of various European nations' steel and coal industries), and
the Asian Development Bank (an international development bank established to
lend funds, promote investment and provide technical assistance to member
nations in the Asian and Pacific regions).
GOVERNMENT SECURITIES. U.S. government securities include securities issued
or guaranteed by the U.S. government, its agencies, or various
instrumentalities that have been established or sponsored by the U.S.
government. Some U.S. government securities, including Treasury bills, notes
and bonds and securities of the Government National Mortgage Association, are
issued or guaranteed by the full faith and credit of the U.S. government or
carry a guarantee that is supported by the full faith and credit of the U.S.
government. Other U.S. government securities are issued or guaranteed by
federal agencies or government-sponsored enterprises and are not considered
direct obligations of the U.S. government. Instead, they involve sponsorship
or guarantees by government agencies or enterprises. For example, some
securities are supported by the right of the issuer to borrow from the U.S.
Treasury, such as obligations of the Federal Home Loan Bank. Other
securities, such as obligations of the Federal Farm Credit Banks Funding
Corporation, are supported only by the credit of the instrumentality. While
the U.S. government provides financial support to these U.S.
government-sponsored agencies and instrumentalities, there is no assurance
that it will continue to do so.
Foreign government securities may include direct obligations, as well as
obligations guaranteed by the foreign government.
FLOATING AND VARIABLE RATE NOTES. Floating and variable rate notes generally
are unsecured obligations issued by financial institutions and other
entities. They typically have a stated maturity of more than one year and an
interest rate that changes either at specific intervals or whenever a
benchmark rate changes. The effective maturity of each floating or variable
rate note in the fund's portfolio will be based on these periodic
adjustments. The interest rate adjustments are designed to help stabilize the
note's price. While this feature helps protect against a decline in the
note's market price when interest rates rise, it lowers the fund's income
when interest rates fall. Of course, the fund's income from its floating and
variable rate investments also may increase if interest rates rise.
COMMERCIAL PAPER. Commercial paper is a short-term, unsecured promissory note
issued to finance short-term credit needs.
REPURCHASE AGREEMENTS. The fund may enter into repurchase agreements. Under a
repurchase agreement, the fund agrees to buy securities guaranteed as to
payment of principal and interest by the U.S. government or its agencies from
a qualified bank or broker-dealer and then to sell the securities back to the
bank or broker-dealer after a short period of time (generally, less than
seven days) at a higher price. The bank or broker-dealer must transfer to the
fund's custodian securities with an initial market value of at least 102% of
the dollar amount invested by the fund in each repurchase agreement. The
manager will monitor the value of such securities daily to determine that the
value equals or exceeds the repurchase price.
Repurchase agreements may involve risks in the event of default or insolvency
of the bank or broker-dealer, including possible delays or restrictions upon
the fund's ability to sell the underlying securities. The fund will enter
into repurchase agreements only with parties who meet certain
creditworthiness standards, i.e., banks or broker-dealers that the manager
has determined present no serious risk of becoming involved in bankruptcy
proceedings within the time frame contemplated by the repurchase transaction.
FINANCIAL SERVICES OBLIGATIONS. Under normal market conditions, the fund may
invest up to 25% of its net assets in obligations issued by companies in the
financial services industry, including U.S. banks, foreign banks, foreign
branches of U.S. banks and U.S. branches of foreign banks. These obligations
may include:
Certificates of deposit (CDs) - CDs represent an obligation of a bank or a
foreign branch of a bank to repay funds deposited with it for a specified
period of time plus interest at a stated rate.
Time deposits - Time deposits are non-negotiable deposits held in a banking
institution for a specified time at a stated interest rate.
Bankers' acceptances - Bankers' acceptances are short-term credit instruments
frequently used in international trade transactions. They represent a
guarantee by a bank to pay a customer's draft up to a stated amount and for a
specified time. Both the bank and the customer may be liable for its payment
at maturity.
The fund will not invest more than 5% of its total assets in obligations of
any one foreign bank.
CURRENCY TRANSACTIONS The fund conducts currency exchange transactions on a
spot basis. Currency transactions made on a spot basis are for cash at the
spot rate prevailing in the currency exchange market for buying or selling
currency. The fund also enters into forward currency contracts. A forward
currency contract is an obligation to buy 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 the interbank market conducted
directly between currency traders (usually large commercial banks) and their
customers.
The manager may invest the fund's assets in a combination of forward currency
contracts and U.S. dollar-denominated market instruments in an attempt to
obtain an investment result that is substantially the same as a direct
investment in a foreign currency-denominated instrument. This management
technique creates a "synthetic" position in the particular foreign-currency
instrument whose performance the manager is trying to duplicate. For example,
the combination of U.S. dollar-denominated instruments with "long" forward
currency exchange contracts creates a position economically equivalent to a
money market instrument denominated in the foreign currency itself. Such
combined positions are sometimes necessary when the money market in a
particular foreign currency is small or relatively illiquid.
For hedging purposes, the manager may use forward currency contracts to hedge
either specific transactions (transaction hedging) or portfolio positions
(position hedging). Transaction hedging is the purchase or sale of forward
currency contracts with respect to specific receivables or payables of the
fund in connection with the purchase and sale of portfolio securities.
Position hedging is the sale of a forward currency contract on a particular
currency with respect to portfolio positions denominated or quoted in that
currency.
The fund may use forward currency contracts for position hedging if
consistent with its policy of trying to expose 100% of its net assets to
foreign currencies. The fund may not enter into a position hedging, forward
currency contract if more than 10% of its total assets would be committed to
such contracts.
Please keep in mind that the fund is not required to enter into forward
currency contracts for hedging purposes and it is possible that the fund may
not be able to hedge against a currency devaluation that is so generally
anticipated that the fund is unable to contract to sell the currency at a
price above the devaluation level it anticipates. It is also possible, under
certain circumstances, that the fund may have to limit its currency
transactions to qualify as regulated investment companies under the Internal
Revenue Code.
The fund currently does not intend to enter into a forward currency contract
with a term of more than one year, or to engage in position hedging with
respect to the currency of a particular country to more 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 currency contracts in
conjunction with money market instruments to) that particular currency.
At or before the maturity of a forward currency contract, the fund may either
sell a portfolio security and make delivery of the currency, or retain the
security and terminate its contractual obligation to deliver the currency by
buying an "offsetting" contract obligating it to buy, on the same maturity
date, the same amount of the currency. If the fund engages in an offsetting
transaction, it may later enter into a new forward currency contract to sell
the currency.
If the fund engages in an offsetting transaction, it will incur a gain or
loss to the extent that there has been movement in forward currency contract
prices. If forward prices go down during the period between the date the fund
enters into a forward currency 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 buy. If
forward prices go up, the fund will
suffer a loss to the extent the price of the currency it has agreed to buy
exceeds the price of the currency it has agreed to sell.
Since the fund invests in money market instruments denominated in foreign
currencies, it may hold foreign currencies pending investment or conversion
into U.S. dollars. Although the fund value its assets daily in 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 incur 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 between the prices at which they buy and sell various currencies.
Thus, a dealer may offer to sell a foreign currency to the fund at one rate,
and offer to buy the currency at a lower rate if the fund tries to resell the
currency to the dealer.
CURRENCY FUTURES The fund may enter into currency futures contracts and buy
options on currency futures contracts to try to hedge against changes in
currency exchange rates. A currency futures contract is an agreement to buy
or sell a specified amount of currency at a set price on a future date. When
the fund enters into a futures contract, it must make an initial deposit,
known as "initial margin", as a partial guarantee of its performance under
the contract. As the value of the currency fluctuates, both parties to the
contract are required to make additional margin payments, known as "variation
margin," to cover any additional obligation they may have under the contract.
The fund may sell currency futures contracts to try to
offset a possible decline in the value of the currency in which its
securities are denominated. The value of a currency futures contract tends to
rise when the value of the currency (and the hedged security) falls and to
fall when the value of the currency (and the hedged security) rises. The fund
may buy currency futures contracts to try to fix a favorable currency
exchange rate for securities denominated in the currency that the fund
intends to buy.
The fund also may buy put and call options on currency futures contracts for
hedging purposes. A put option gives the fund the right to sell a futures
contract and a call option gives the fund the right to buy a futures
contract. The fund must pay a premium for the option, but is not required to
take any action under the contract. If the fund is unable to profitably
exercise the option 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 to terminate a
futures contract. The fund may close out an option that it has purchased by
selling an offsetting option of the same series. There is no guarantee that
the fund will be able to enter into closing transactions. The fund's ability
to enter into closing transactions will depend on the development and
maintenance of a liquid market, which may not be available at all times.
The fund will not use currency futures contracts for speculation. Except for
closing purchase and sale transactions, the fund will not buy or sell
currency futures contracts or options on such contracts 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. It is also possible, under
certain circumstances, that the fund may have to limit its futures and
options transactions to qualify as a regulated investment company under the
Internal Revenue Code.
CURRENCY OPTIONS For hedging purposes, the fund may buy put and call options
on any currency in which its investments are denominated. The fund also may
enter into closing sale transactions to try to realize gains or reduce losses
on currency options purchased by the fund.
The fund may buy currency call options to fix a favorable currency exchange
rate for securities denominated in the currency the fund intends to buy. A
call option gives the fund the right to buy a specified currency at a
specified price in return for the premium paid. The fund may realize a gain
if, during the option period, the value of the currency exceeds the sum of
the exercise price, the premium paid and the transaction costs, otherwise the
fund will realize a loss on the option.
The fund may buy currency put options to try to hedge against a decline in
the value of the currency in which its securities are denominated. A put
option gives the fund the right to sell a specified currency at a specified
price in return for the premium paid. Gains and losses on put options will be
offset by changes in the value of the underlying currency and the hedged
securities. The fund may realize a gain if, during the option period, the
value of the underlying currency decreases below the exercise price enough to
cover the premium paid and the transaction costs, otherwise the fund will
realize a loss on the option.
If the fund is unable to effect a closing sale transaction with respect to
options it has bought, it will have to exercise the options to realize any
profit and may incur transaction costs upon the purchase or sale of
underlying currencies.
Currency options trade on exchanges and in the over-the-counter (OTC) market
and may be bought only when the manager believes a liquid secondary market
exists, although there can be no assurances that a liquid secondary market
will exist for a particular option at any specific time. In general, OTC
options differ from exchange-traded options in that they are two-party
contracts with the terms negotiated between buyer and seller, and they are
endorsed and/or guaranteed by third parties (such as a member of the New York
Stock Exchange). The fund may buy OTC options only from dealers and
institutions that the manager believes present minimal credit risk.
TEMPORARY INVESTMENTS The manager may take a temporary defensive position
when it believes that extraordinary events are disrupting the currency
markets or the economies of countries where the fund invests. Under these
circumstances, the fund may be unable to pursue its investment goal because
it may not invest or may invest substantially less in foreign instruments
denominated in a particular currency affected by such extraordinary events.
ILLIQUID INVESTMENTS The fund may invest up to 10% of its net assets in
illiquid securities. 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.
The board has authorized the fund to invest in restricted securities if the
investment is consistent with the fund's investment goal. Restricted
securities may be considered liquid if the fund's manager believes that there
is a liquid institutional or other market for the securities, as with
restricted securities that may be freely transferred among qualified
institutional buyers under Rule 144A under the Securities Act of 1933 and for
which a liquid institutional market has developed. The board will review any
determination by the manager to treat a restricted security as liquid on a
quarterly basis. To the extent the fund invests in restricted securities that
are considered liquid at the time of purchase, the general level of liquidity
in the fund may be reduced if qualified institutional buyers become
uninterested in buying the securities or the market for the securities
otherwise contracts.
LOANS OF PORTFOLIO SECURITIES To generate additional income, the fund may
lend certain of its portfolio securities to qualified banks and
broker-dealers. These loans may not exceed 30% of the value of the fund's
total assets, measured at the time of the most recent loan. For each loan,
the borrower must maintain with the fund's custodian collateral (consisting
of any combination of cash, securities issued by the U.S. government and its
agencies and instrumentalities, or irrevocable letters of credit) with a
value at least equal to 100% of the current market value of the loaned
securities. The fund retains all or a portion of the interest received on
investment of the cash collateral or receives a fee from the borrower. The
fund also continues to receive any distributions paid on the loaned
securities. The fund may terminate a loan at any time and obtain the return
of the securities loaned within the normal settlement period for the security
involved.
Where voting rights with respect to the loaned securities pass with the
lending of the securities, the manager intends to call the loaned securities
to vote proxies, or to use other practicable and legally enforceable means to
obtain voting rights, when the manager has knowledge that, in its opinion, a
material event affecting the loaned securities will occur or the manager
otherwise believes it necessary to vote. As with other extensions of credit,
there are risks of delay in recovery or even loss of rights in collateral in
the event of default or insolvency of the borrower. The fund will loan its
securities only to parties who meet creditworthiness standards approved by
the fund's board, i.e., banks or broker-dealers that the manager has
determined present no serious risk of becoming involved in bankruptcy
proceedings within the time frame contemplated by the loan.
INVESTMENT RESTRICTIONS The fund has adopted the following restrictions as
fundamental policies. This means they may only be changed if the change is
approved by (i) more than 50% of the fund's outstanding shares or (ii) 67% or
more of the fund's shares present at a shareholder meeting if more than 50%
of the fund's outstanding shares are represented at the meeting in person or
by proxy, whichever is less.
The fund may not:
1. Buy common stocks, preferred stocks, warrants or other equity securities,
or buy municipal bonds or industrial revenue bonds.
2. Sell securities short or buy 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.
3. Buy or sell real estate, securities of real estate investment trusts,
commodities, or oil and gas interests, except that the fund may buy or sell
currencies, may enter into futures contracts on securities, currencies,
securities and other indices or any other financial instruments, and may buy
and sell options on such futures contracts.
4. 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.
5. 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
Internal Revenue 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.
6. Invest in securities of other investment companies, except as they may be
acquired as part of a merger, consolidation or acquisition of assets.
7. Borrow money, except from banks for temporary or emergency (not
leveraging) purposes in an amount up to 33 1/3% of the value of the fund's
total assets (including the amount borrowed) based on the lesser of cost or
market, less liabilities (not including the amount borrowed) at the time the
borrowing is made. While borrowings exceed 5% of the fund's total assets, the
fund will not make any additional investments.
8. 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.
9. Underwrite the securities of other issuers.
10. 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 U.S. Securities and Exchange Commission and the
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.
11. Invest in companies for the purpose of exercising control.
12. Buy 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,
or by supranational organizations, are considered one industry for concentration
purposes.
If a bankruptcy or other extraordinary event occurs concerning a particular
security the fund owns, the fund may receive stock, real estate, or other
investments that the fund would not, or could not, buy. If this happens, the
fund intends to sell such investments as soon as practicable while maximizing
the return to shareholders.
Generally, the policies and restrictions discussed in this SAI and in the
prospectus apply when the fund makes an investment. In most cases, the fund
is not required to sell a security because circumstances change and the
security no longer meets one or more of the fund's policies or restrictions.
If a percentage restriction or limitation is met at the time of investment, a
later increase or decrease in the percentage due to a change in the value or
liquidity of portfolio securities will not be considered a violation of the
restriction or limitation.
RISKS
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CURRENCY Exchange rates fluctuate for a number of reasons. Depending on the
currency and the point in time, some factors may outweigh others in
determining the course of exchange rate movements.
INFLATION. The most fundamental reason exchange rates change is to reflect
changes in a currency's buying 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.
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.
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.
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. Budget deficits also can
indirectly contribute to currency depreciation if a government chooses to
cope with its deficits and debt by means of inflation.
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.
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.
The value of the fund's investments is calculated in U.S. dollars each day
that the New York Stock Exchange is open for business. As a result, to the
extent that the fund's assets are invested in instruments denominated in
foreign currencies 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) should increase. If the U.S. dollar
appreciates relative to the other currencies, the opposite 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 the shares. The 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.
The fund may incur currency exchange costs when its sells instruments
denominated in one currency and buy instruments denominated in another.
CURRENCY MANAGEMENT. Currency management strategies, including the creation
of synthetic currency positions, may substantially change the fund's
investment exposure to exchange rates and could result in losses to the fund
if currencies do not perform as the manager anticipates. There is no
assurance that the manager's use of currency management strategies will be
advantageous to the fund or that they will be used at appropriate times.
Although synthetic positions involve costs to the fund, these costs are
typically lower than the costs associated with direct investments in
securities denominated in foreign currencies.
EURO. On January 1, 1999, the European Economic and Monetary Union (EMU)
introduced a new single currency called the euro. By July 1, 2002, the euro,
which will be implemented in stages, will have fully replaced the national
currencies of the following member countries: Austria, Belgium, Finland,
France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and
Spain.
Currently, the exchange rate of the currencies of each of these countries is
fixed to the euro. The euro trades on currency exchanges and is available for
non-cash transactions. The participating countries currently issue sovereign
debt exclusively in euro. By July 1, 2002, euro-denominated bills and coins
will replace the bills and coins of the above countries. The new European
Central Bank has control over each country's monetary policies. Therefore,
the participating countries no longer control their own monetary policies by
directing independent interest rates for their currencies. The national
governments of the participating countries, however, have retained the
authority to set tax and spending policies and public debt levels.
It is uncertain how eleven different economies will adjust to a unified
monetary system and the loss of exchange rate flexibility. In the first six
months of the euro's existence, the exchange rates of the euro versus many of
the world's major currencies steadily declined. In this environment, U.S. and
other foreign investors experienced erosion on their investment returns on
their euro-denominated securities. The transition and the elimination of
currency risk among EMU countries may change the economic environment and
behavior of investors, particularly in European markets.
While the implementation of the euro could have a negative effect on the
fund, the fund's manager and its affiliated services providers are taking
steps they believe are reasonably designed to address the euro issue.
FOREIGN Foreign money market instruments may involve risks that can increase the
potential for losses in the fund. These risks can be significantly greater for
investments in emerging markets.
The risks of foreign investing include the possibility of cessation of trading
on national exchanges, expropriation, nationalization of assets, confiscatory or
punitive taxation, withholding and other foreign taxes on income or other
amounts, foreign exchange controls (which may include suspension of the ability
to transfer currency from a given country), restrictions on removal of assets,
political or social instability, or diplomatic developments that could affect
investments in money market instruments of foreign issuers.
There may be less public information available about foreign issuers, as
compared to the reports and ratings published about issuers in the U.S. Foreign
issuers may not be subject to uniform accounting or financial reporting
standards, and auditing practices and requirements may not be comparable to
those applicable to U.S. issuers. The fund, therefore, may have difficulty
obtaining market quotations to value its portfolio and calculate its net asset
value.
Certain countries' financial markets and services are less developed than those
in the U.S. or other major economies. In many foreign countries there is less
government supervision and regulation of stock exchanges, brokers, and listed
companies than in the U.S. Foreign markets have substantially less volume than
the New York Stock Exchange and money market instruments of some foreign issuers
are less liquid and more volatile than money market instruments of comparable
U.S. issuers. Commission rates in foreign countries, which are generally fixed
rather than subject to negotiation as in the U.S., are likely to be higher.
Settlement practices may be cumbersome and result in delays that may affect
portfolio liquidity. The fund may have greater difficulty voting proxies,
exercising shareholder rights, pursuing legal remedies, and obtaining judgments
with respect to foreign investments in foreign courts than with respect to
domestic issuers in U.S. courts.
The fund's investments in foreign money market instruments may result in a
lower level of liquidity in the fund's portfolio. This could inhibit the
fund's ability to meet a large number of shareholder redemption requests in
the event of economic or political turmoil in a country in which the fund has
substantial investments or deterioration in relations between the U.S. and
the foreign country.
Investments in companies in developing countries may be subject to potentially
higher risks than investments in developed countries. These risks include (i)
less economic stability; (ii) political and social uncertainty (for example,
regional conflicts and risk of war); (iii) pervasiveness of corruption and
crime; (iv) the small current size of the markets for such investments and the
currently low or nonexistent volume of trading, which result in a lack of
liquidity and in greater price volatility; (v) delays in settling portfolio
transactions; (vi) risk of loss arising out of the system of share registration
and custody; (vii) certain national policies that may restrict the fund's
investment opportunities, including restrictions on investment in issuers or
industries deemed sensitive to national interests; (viii) foreign taxation; (ix)
the absence of developed legal structures governing private or foreign
investment or allowing for judicial redress for injury to private property; (x)
the absence of a capital market structure or market-oriented economy; and (xi)
the possibility that any recent favorable economic developments may be slowed or
reversed by unanticipated political or social events.
Foreign investments may be subject to transaction taxes charged by foreign
governments. This would increase the cost of an investment and reduce the
realized gain or increase the realized loss on an investment at the time of
sale. Transaction costs and custodial expenses for a portfolio of foreign
investments generally are higher than for a portfolio of U.S. securities.
Interest payments from certain foreign money market instruments may be subject
to foreign withholding taxes on interest income payable on the money market
instruments.
U.S. government policies have, in the past, through taxation and other
restrictions, discouraged certain investments abroad by U.S. investors. While
currently there are no such restrictions, they could be reinstituted. In that
event, it may be necessary for the fund to temporarily invest all or
substantially all of its assets in U.S. money market instruments, or it may
become necessary to liquidate the fund.
FINANCIAL SERVICES OBLIGATIONS. U.S. banks are subject to a substantial body
of federal and/or state law and regulation designed to promote financial
soundness. Most are insured by the Federal Deposit Insurance Corporation,
although this insurance may not be of great benefit to the fund depending on
the amount of a bank's obligations that the fund holds. Foreign banks and
foreign branches of U.S. banks, however, may not be subject to the same laws
and regulations as U.S. banks and may involve additional risks. These risks
include foreign economic and political developments, foreign government
restrictions that may adversely affect payment of principal and interest,
foreign exchange controls and foreign withholding and other taxes on interest
income. Foreign banks and foreign branches of U.S. banks may not be subject
to the same requirements as U.S. banks with respect to mandatory reserves,
loan limitations and accounting, auditing and financial recordkeeping. In
addition, less information may be publicly available about a foreign branch
of a U.S. bank or a foreign bank than a U.S. bank.
U.S. branches of foreign banks may be subject to some federal and/or state
regulation, but typically not to the same extent as U.S. banks. A U.S. branch
of a foreign bank with assets over $1 billion may be subject to federal
and/or state reserve requirements and may be required to pledge or maintain a
certain amount of its assets equal to a percentage of its liabilities with a
regulator or with a state. The deposits of branches licensed by states may
not, however, be insured by the FDIC. Obligations of U.S. branches of foreign
banks also may be limited by government action in the country in which the
foreign bank is headquartered.
CURRENCY FUTURES AND OPTIONS Transactions in options and futures are
generally considered "derivative securities." They are highly specialized and
involve investment techniques and risks different from those associated with
ordinary securities transactions.
Although currency futures contracts and options transactions may be used by
the fund to try to manage currency exchange risks, unanticipated changes in
currency exchange rates could result in poorer performance than if the fund
had not entered into these transactions. Even
if the manager correctly predicts 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.
These transactions also involve the risk that the fund may lose its margin
deposits or collateral if a broker with whom the fund has an open futures or
options position becomes bankrupt.
OFFICERS AND TRUSTEES
- ------------------------------------------------------------------------------
The trust has a board of trustees. The board is responsible for the overall
management of the trust, including general supervision and review of the fund's
investment activities. The board, in turn, elects the officers of the trust who
are responsible for administering the trust's day-to-day operations. The board
also monitors the Hard Currency Fund to ensure no material conflicts exist among
share classes. While none is expected, the board will act appropriately to
resolve any material conflict that may arise.
The name, age and address of the officers and board members, as well as their
affiliations, positions held with the trust, and principal occupations during
the past five years are shown below.
Frank H. Abbott, III (78)
1045 Sansome Street, San Francisco, CA 94111
TRUSTEE
President and Director, Abbott Corporation (an investment company); director
or trustee, as the case may be, of 27 of the investment companies in the
Franklin Templeton Group of Funds; and FORMERLY, Director, MotherLode Gold
Mines Consolidated (gold mining) (until 1996) and Vacu-Dry Co. (food
processing) (until 1996).
Harris J. Ashton (67)
191 Clapboard Ridge Road, Greenwich, CT 06830
TRUSTEE
Director, RBC Holdings, Inc. (bank holding company) and Bar-S Foods (meat
packing company); director or trustee, as the case may be, of 47 of the
investment companies in the Franklin Templeton Group of Funds; and FORMERLY,
President, Chief Executive Officer and Chairman of the Board, General Host
Corporation (nursery and craft centers) (until 1998).
David K. Eiteman (70)
15340 Albright Street #301, Pacific Palisades, CA 90272
TRUSTEE
Professor of Finance, John E. Anderson Graduate School of Management,
University of California, Los Angeles (1959-1991) and Professor Emeritus
(1991-present).
S. Joseph Fortunato (67)
Park Avenue at Morris County, P.O. Box 1945
Morristown, NJ 07962-1945
TRUSTEE
Member of the law firm of Pitney, Hardin, Kipp & Szuch; and director or
trustee, as the case may be, of 49 of the investment companies in the
Franklin Templeton Group of Funds.
Gerald R. Healy (58)
222371/2 Erwin St., Woodland Hills, CA 91367
TRUSTEE
Private consultant; Executive Vice President, Capital Health Services Corp.;
and FORMERLY, Director, Corporate Management Resources of Alliance Imaging,
Inc.
*Charles B. Johnson (67)
777 Mariners Island Blvd., San Mateo, CA 94404
CHAIRMAN OF THE BOARD AND TRUSTEE
Chairman of the Board, Chief Executive Officer, Member - Office of the
Chairman and Director, Franklin Resources, Inc.; Chairman of the Board and
Director, Franklin Advisers, Inc. and Franklin Investment Advisory Services,
Inc.; Vice President, Franklin Templeton Distributors, Inc.; Director,
Franklin/Templeton Investor Services, Inc. and Franklin Templeton Services,
Inc.; officer and/or director or trustee, as the case may be, of most of the
other subsidiaries of Franklin Resources, Inc. and of 48 of the investment
companies in the Franklin Templeton Group of Funds.
*Rupert H. Johnson, Jr. (59)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT AND TRUSTEE
Vice Chairman, Member - Office of the Chairman and Director, Franklin
Resources, Inc.; Executive Vice President and Director, Franklin Templeton
Distributors, Inc.; Director, Franklin Advisers, Inc. and Franklin Investment
Advisory Services, Inc.; Senior Vice President, Franklin Advisory Services,
LLC; Director, Franklin/Templeton Investor Services, Inc.; and officer and/or
director or trustee, as the case may be, of most of the other subsidiaries of
Franklin Resources, Inc. and of 51 of the investment companies in the
Franklin Templeton Group of Funds.
David P. Kraus (42)
2707 Stoner Ave., Los Angeles, CA 90064
TRUSTEE
Attorney with various private law firms in Los Angeles (1981-present); and
Attorney with Bet Tzedek Legal Services (1995-February 1999).
Frank W.T. LaHaye (70)
20833 Stevens Creek Blvd., Suite 102
Cupertino, CA 95014
TRUSTEE
General Partner, Miller & LaHaye, which is the General Partner of Peregrine
Ventures II (venture capital firm); director or trustee, as the case may be,
of 27 of the investment companies in the Franklin Templeton Group of Funds;
and FORMERLY, Director, Fischer Imaging Corporation (medical imaging
systems), Digital Transmission Systems, Inc. (wireless communications) and
Quarterdeck Corporation (software firm), and General Partner, Peregrine
Associates, which was the General Partner of Peregrine Ventures (venture
capital firm).
Gordon S. Macklin (71)
8212 Burning Tree Road, Bethesda, MD 20817
TRUSTEE
Director, Fund American Enterprises Holdings, Inc. (holding company), Martek
Biosciences Corporation, MCI WorldCom (information services), MedImmune, Inc.
(biotechnology) and Spacehab, Inc. (aerospace services); director or trustee,
as the case may be, of 47 of the investment companies in the Franklin
Templeton Group of Funds; and FORMERLY, Chairman, White River Corporation
(financial services) and Hambrecht and Quist Group (investment banking),
President, National Association of Securities Dealers, Inc. and Director,
Real 3D (software).
Harmon E. Burns (55)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources,
Inc., Franklin Templeton Distributors, Inc. and Franklin Templeton Services,
Inc.; Executive Vice President, Franklin Advisers, Inc.; Director, Franklin
Investment Advisory Services, Inc. and Franklin/Templeton Investor Services,
Inc.; and officer and/or director or trustee, as the case may be, of most of the
other subsidiaries of Franklin Resources, Inc. and of 51 of the investment
companies in the Franklin Templeton Group of Funds.
Martin L. Flanagan (39)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
President, Member - Office of the President, Franklin Resources, Inc.; Senior
Vice President, Chief Financial Officer and Director, Franklin/Templeton
Investor Services, Inc.; Senior Vice President and Chief Financial Officer,
Franklin Mutual Advisers, LLC; Executive Vice President, Chief Financial
Officer and Director, Templeton Worldwide, Inc.; Executive Vice President,
Chief Operating Officer and Director, Templeton Investment Counsel, Inc.;
Executive Vice President and Chief Financial Officer, Franklin Advisers,
Inc.; Chief Financial Officer, Franklin Advisory Services, LLC and Franklin
Investment Advisory Services, Inc.; President and Director, Franklin
Templeton Services, Inc.; officer and/or director of some of the other
subsidiaries of Franklin Resources, Inc.; and officer and/or director or
trustee, as the case may be, of 51 of the investment companies in the
Franklin Templeton Group of Funds.
Deborah R. Gatzek (51)
1840 Gateway Drive, San Mateo, CA 94404
SECRETARY
Partner, Stradley, Ronon, Stevens & Young, LLP; officer of 33 of the
investment companies in the Franklin Templeton Group of Funds; and FORMERLY,
Senior Vice President and General Counsel, Franklin Resources, Inc., Senior
Vice President, Franklin Templeton Services, Inc. and Franklin Templeton
Distributors, Inc., Executive Vice President, Franklin Advisers, Inc., Vice
President, Franklin Advisory Services, LLC and Franklin Mutual Advisers, LLC,
and Vice President, Chief Legal Officer and Chief Operating Officer, Franklin
Investment Advisory Services, Inc. (until January 2000).
Charles E. Johnson (43)
777 Mariners Island Blvd., San Mateo, CA 94404
PRESIDENT
President, Member - Office of the President and Director, Franklin Resources,
Inc.; Senior Vice President, Franklin Templeton Distributors, Inc.; President
and Director, Templeton Worldwide, Inc.; Chairman and Director, Templeton
Investment Counsel, Inc.; President, Franklin Advisers, Inc. and Franklin
Investment Advisory Services, Inc.; officer and/or director of some of the
other subsidiaries of Franklin Resources, Inc.; and officer and/or director
or trustee, as the case may be, of 32 of the investment companies in the
Franklin Templeton Group of Funds.
Edward V. McVey (62)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT
Senior Vice President and National Sales Manager, Franklin Templeton
Distributors, Inc.; and officer of 28 of the investment companies in the
Franklin Templeton Group of Funds.
David Goss (53)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT
President, Chief Executive Officer and Director, Franklin Select Realty
Trust, Property Resources, Inc., Property Resources Equity Trust and Franklin
Real Estate Management, Inc.; President and Chief Executive Officer, Franklin
Properties, Inc.; officer of 51 of the investment companies in the Franklin
Templeton Group of Funds; and FORMERLY, President, Chief Executive Officer
and Director, Franklin Real Estate Income Fund and Franklin Advantage Real
Estate Income Fund (until 1996).
Barbara J. Green (53)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT AND SECRETARY
Vice President and Deputy General Counsel, Franklin
Resources, Inc.; Senior Vice President, Templeton Worldwide, Inc. and
Templeton Global Investors, Inc.; officer of 51 of the investment companies
in the Franklin Templeton Group of Funds; and FORMERLY, Deputy Director,
Division of Investment Management, Executive Assistant and Senior Advisor to
the Chairman, Counselor to the Chairman, Special Counsel and Attorney Fellow,
U.S. Securities and Exchange Commission (1986-1995), Attorney, Rogers &
Wells, and Judicial Clerk, U.S. District Court (District of Massachusetts).
Murray L. Simpson (63)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT
Executive Vice President and General Counsel, Franklin Resources, Inc.;
officer of 51 of the investment companies in the Franklin Templeton Group of
Funds; and FORMERLY, Chief Executive Officer and Managing Director, Templeton
Franklin Investment Services (Asia) Limited (until January 2000) and
Director, Templeton Asset Management Ltd. (until 1999).
Kimberley Monasterio (37)
777 Mariners Island Blvd., San Mateo, CA 94404
TREASURER AND PRINCIPAL ACCOUNTING OFFICER
Vice President, Franklin Templeton Services, Inc.; and officer of 32 of the
investment companies in the Franklin Templeton Group of Funds.
*This board member is considered an "interested person" under federal
securities laws.
Note: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers and the
father and uncle, respectively, of Charles E. Johnson.
The trust pays noninterested board members $800 per year plus $800 per
meeting attended. Board members who serve on the audit committee of the trust
and other funds in the Franklin Templeton Group of Funds receive a flat fee
of $2,000 per committee meeting attended, a portion of which is allocated to
the trust. Members of a committee are not compensated for any committee
meeting held on the day of a board meeting. Noninterested board members also
may serve as directors or trustees of other funds in the Franklin Templeton
Group of Funds and may receive fees from these funds for their services. The
fees payable to certain noninterested board members by the trust are subject
to reductions resulting from fee caps limiting the amount of fees payable to
board members who serve on other boards within the Franklin Templeton Group
of Funds. The following table provides the total fees paid to noninterested
board members by the trust and by the Franklin Templeton Group of Funds.
NUMBER OF
BOARDS IN
TOTAL FEES THE FRANKLIN
RECEIVED FROM TEMPLETON
TOTAL FEES THE FRANKLIN GROUP
RECEIVED TEMPLETON OF FUNDS
FROM GROUP ON WHICH
NAME THE TRUST 1 ($) OF FUNDS 2 ($) EACH SERVES 3
- --------------------------------------------------------------------------------
Frank H. Abbott, III 3,758 156,060 27
Harris J. Ashton 3,586 363,165 47
David K. Eiteman 3,200 2,400 1
S. Joseph Fortunato 3,478 363,238 49
Gerald R. Healy 3,200 3,200 1
David P. Kraus 4,000 4,000 1
Frank W.T. LaHaye 4,325 156,060 27
Gordon S. Macklin 3,586 363,165 47
1. For the fiscal year ended October 31, 1999.
2. For the calendar year ended December 31, 1999.
3. 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 53 registered investment companies, with
approximately 155 U.S. based funds or series.
Noninterested board members 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 or
trustee. 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 Franklin Resources, Inc.
may be deemed to receive indirect remuneration by virtue of their
participation, if any, in the fees paid to its subsidiaries.
Messrs. Abbott, Ashton, Fortunato, LaHaye and Macklin historically have
followed a policy of having substantial investments in one or more of the
funds in the Franklin Templeton Group of Funds, as is consistent with their
individual financial goals. In February 1998, this policy was formalized
through adoption of a requirement that each such board member invest
one-third of fees received for serving as a director or trustee of a
Templeton fund in shares of one or more Templeton funds and one-third of fees
received for serving as a director or trustee of a Franklin fund in shares of
one or more Franklin funds until the value of such investments equals or
exceeds five times the annual fees paid such board member. Investments in the
name of family members or entities controlled by a board member constitute
fund holdings of such board member for purposes of this policy, and a three
year phase-in period applies to such investment requirements for newly
elected board members. In implementing such policy, a board member's fund
holdings existing on February 27, 1998, are valued as of such date with
subsequent investments valued at cost.
MANAGEMENT AND OTHER SERVICES
- ------------------------------------------------------------------------------
MANAGER AND SERVICES PROVIDED The fund's manager is Franklin Advisers, Inc.
The manager is a wholly owned subsidiary of Franklin Resources, Inc.
(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.
The manager provides investment research and portfolio management services,
and selects the securities for the fund to buy, hold or sell. The manager
also selects the brokers who execute the fund's portfolio transactions. The
manager provides periodic reports to the board, which reviews and supervises
the manager's investment activities. To protect the fund, the manager and its
officers, directors and employees are covered by fidelity insurance.
The manager and its affiliates manage numerous other investment companies and
accounts. The manager 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 the manager on behalf of the fund. Similarly, with respect to
the fund, the manager is not obligated to recommend, buy or sell, or to
refrain from recommending, buying or selling any security that the manager
and access persons, as defined by applicable federal securities laws, may buy
or sell for its or their own account or for the accounts of any other fund.
The manager is not obligated to refrain from investing in securities held by
the fund or other funds it manages.
The fund, its manager and principal underwriter have each adopted a code of
ethics, as required by federal securities laws. Under the code of ethics,
employees who are designated as access persons may engage in personal
securities transactions, including transactions involving securities that are
being considered for the fund or that are currently held by the fund, subject
to certain general restrictions and procedures. The personal securities
transactions of access persons of the fund, its manager and principal
underwriter will be governed by the code of ethics.
The fund's sub-advisor is Templeton Investment Counsel, Inc., through its
Global Bond Managers division. The sub-advisor has an agreement with the
manager and provides the manager with investment management advice and
assistance. The sub-advisor provides a continuous investment program for the
fund, including allocation of the fund's assets among the various securities
markets of the world and, investment research and advice with respect to
securities and investments and cash equivalents in the fund. The
sub-advisor's activities are subject to the board's review and control, as
well as the manager's instruction and supervision.
MANAGEMENT FEES The fund pays the manager a fee equal to an annual rate of
0.65% of the value of the average daily net assets of the fund.
The fee is computed at the close of business on the last business day of each
month according to the terms of the management agreement. Each class of the
fund's shares pays its proportionate share of the fee.
For the last three fiscal years ended October 31, the fund paid the following
management fees:
MANAGEMENT
FEES PAID ($)
- --------------------------------------------------------------------------------
1999 244,119
1998 479,459
1997 682,152
The manager pays the sub-advisor a fee equal to an annual rate of 0.25% of
the value of the average daily net assets of the fund. The manager pays this
fee from the management fees it receives from the fund. For the last three
fiscal years ended October 31, the manager paid the following sub-advisory
fees:
SUB-ADVISORY
FEES PAID ($)
- --------------------------------------------------------------------------------
1999 152,575
1998 184,407
1997 262,370
ADMINISTRATOR AND SERVICES PROVIDED Franklin Templeton Services, Inc. (FT
Services) has an agreement with the manager to provide certain administrative
services and facilities for the fund. FT Services is wholly owned by
Resources and is an affiliate of the fund's manager and principal underwriter.
The administrative services FT Services provides include preparing and
maintaining books, records, and tax and financial reports, and monitoring
compliance with regulatory requirements.
ADMINISTRATION FEES The manager pays FT Services a monthly fee equal to an
annual rate of:
o 0.15% of the fund's average daily net assets up to $200 million;
o 0.135% of average daily net assets over $200 million up to $700 million;
o 0.10% of average daily net assets over $700 million up to $1.2 billion; and
o 0.075% of average daily net assets over $1.2 billion.
During the last three fiscal years ended October 31, the manager paid FT
Services the following administration fees:
ADMINISTRATION
FEES PAID ($)
- --------------------------------------------------------------------------------
1999 0
1998 110,658
1997 172,706
SHAREHOLDER SERVICING AND TRANSFER AGENT Franklin/Templeton Investor Services,
Inc. (Investor Services) is the fund's shareholder servicing agent and acts as
the fund's transfer agent and dividend-paying agent. Investor Services is
located at 777 Mariners Island Blvd., San Mateo, CA 94404. Please send all
correspondence to Investor Services to P.O. Box 997151, Sacramento, CA
95899-9983.
For its services, Investor Services receives a fixed fee per account. The
fund also will reimburse Investor Services for certain out-of-pocket
expenses, which may include payments by Investor Services to entities,
including affiliated entities, that provide sub-shareholder services,
recordkeeping and/or transfer agency services to beneficial owners of the
fund. The amount of reimbursements for these services per benefit plan
participant fund account per year will not exceed the per account fee payable
by the fund to Investor Services in connection with maintaining shareholder
accounts.
CUSTODIAN The Chase Manhattan Bank, at its principal office at MetroTech
Center, Brooklyn, NY 11245, and at the offices of its branches and agencies
throughout the world, acts as custodian of the fund's assets. As foreign
custody manager, the bank selects and monitors foreign subcustodian banks,
selects and evaluates non-compulsory foreign depositories, and furnishes
information relevant to the selection of compulsory depositories.
AUDITOR PricewaterhouseCoopers LLP, 200 East Las Olas Blvd., Ft. Lauderdale,
FL 33301, is the fund's independent auditor. The auditor gives an opinion on
the financial statements included in the trust's Annual Report to
Shareholders and reviews the trust's registration statement filed with the
U.S. Securities and Exchange Commission (SEC).
PORTFOLIO TRANSACTIONS
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Since most purchases by the fund are principal transactions at net prices,
the fund incurs little or no brokerage costs. The fund deals directly with
the selling or buying principal or market maker without incurring charges for
the services of a broker on its behalf, unless it is determined that a better
price or execution may be obtained by using the services of a broker.
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 prices. The fund seeks
to obtain prompt execution of orders at the most favorable net price.
Transactions may be directed to dealers in return for research and
statistical information, as well as for special services provided by the
dealers in the execution of orders.
It is not possible to place a dollar value on the special executions or on
the research services the manager receives from dealers effecting
transactions in portfolio securities. The allocation of transactions to
obtain additional research services allows the manager to supplement its own
research and analysis activities and to receive the views and information of
individuals and research staffs of other securities firms. As long as it is
lawful and appropriate to do so, the manager and its 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, as well as shares of other funds in the Franklin
Templeton Group of Funds, also may be considered a factor in the selection of
broker-dealers to execute the fund's portfolio transactions.
Because Franklin Templeton Distributors, Inc. (Distributors) is a member of
the National Association of Securities Dealers, Inc., it may sometimes
receive certain fees when the fund tenders portfolio securities pursuant to a
tender-offer solicitation. To recapture 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 the manager 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 manager 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 manager, 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 may improve execution and
reduce transaction costs to the fund.
During the fiscal years ended October 31, 1999, 1998 and 1997, the fund did
not pay any brokerage commissions.
For the fiscal year ended October 31, 1999, the fund did not pay brokerage
commissions to brokers who provided research services.
As of October 31, 1999 the fund did not own securities of its regular
broker-dealers.
DISTRIBUTIONS AND TAXES
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The fund calculates dividends and capital gains the same way for each class.
The amount of any income dividends per share will differ, however, generally
due to the difference in any distribution and service (Rule 12b-1) fees of
each class. Distributions are subject to approval by the board. The fund does
not pay "interest" or guarantee any fixed rate of return on an investment in
its shares.
DISTRIBUTIONS OF NET INVESTMENT INCOME The fund receives income generally in
the form of interest on its investments. This income, less expenses incurred
in the operation of the fund, constitutes the fund's net investment income
from which dividends may be paid to you. Any distributions by the fund from
such income will be taxable to you as ordinary income, whether you take them
in cash or in additional shares.
DISTRIBUTIONS OF CAPITAL GAINS The fund may derive capital gains and losses
in connection with sales or other dispositions of its portfolio securities.
Distributions from net short-term capital gains will be taxable to you as
ordinary income. Distributions from net long-term capital gains will be
taxable to you as long-term capital gain, regardless of how long you have
held your shares in the fund. Any net capital gains realized by the fund
generally will be distributed once each year, and may be distributed more
frequently, if necessary, to reduce or eliminate excise or income taxes on
the fund.
EFFECT OF FOREIGN INVESTMENTS ON DISTRIBUTIONS Most foreign exchange gains
realized on the sale of debt securities are treated as ordinary income by the
fund. Similarly, foreign exchange losses realized by the fund on the sale of
debt securities are generally treated as ordinary losses by the fund. These
gains when distributed will be taxable to you as ordinary dividends, and any
losses will reduce the fund's ordinary income otherwise available for
distribution to you. This treatment could increase or decrease the fund's
ordinary income distributions to you, and may cause some or all of the fund's
previously distributed income to be classified as a return of capital.
The fund may be subject to foreign withholding taxes on income from certain
foreign securities. If more than 50% of the fund's total assets at the end of
the fiscal year are invested in securities of foreign corporations, the fund
may elect to pass-through to you your pro rata share of foreign taxes paid by
the fund. If this election is made, the year-end statement you receive from
the fund will show more taxable income than was actually distributed to you.
However, you will be entitled to either deduct your share of such taxes in
computing your taxable income or (subject to limitations) claim a foreign tax
credit for such taxes against your U.S. federal income tax. The fund will
provide you with the information necessary to complete your individual income
tax return if it makes this election.
INFORMATION ON THE TAX CHARACTER OF DISTRIBUTIONS The fund will inform you of
the amount of your ordinary income dividends and capital gains distributions
at the time they are paid, and will advise you of their tax status for
federal income tax purposes shortly after the close of each calendar year. If
you have not held fund shares for a full year, the fund may designate and
distribute to you, as ordinary income or capital gain, a percentage of income
that is not equal to the actual amount of such income earned during the
period of your investment in the fund.
ELECTION TO BE TAXED AS A REGULATED INVESTMENT COMPANY The fund has elected
to be treated as a regulated investment company under Subchapter M of the
Internal Revenue Code, has qualified as such for its most recent fiscal year,
and intends to so qualify during the current fiscal year. As a regulated
investment company, the fund generally pays no federal income tax on the
income and gains it distributes to you. The board reserves the right not to
maintain the qualification of the fund as a regulated investment company if
it determines such course of action to be beneficial to shareholders. In such
case, the fund will be subject to federal, and possibly state, corporate
taxes on its taxable income and gains, and distributions to you will be taxed
as ordinary dividend income to the extent of the fund's earnings and profits.
EXCISE TAX DISTRIBUTION REQUIREMENTS To avoid federal excise taxes, the
Internal Revenue Code requires the fund to distribute to you by December 31
of each year, at a minimum, the following amounts: 98% of its taxable
ordinary income earned during the calendar year; 98% of its capital gain net
income earned during the twelve month period ending October 31; and 100% of
any undistributed amounts from the prior year. The fund intends to declare
and pay these distributions in December (or to pay them in January, in which
case you must treat them as received in December) but can give no assurances
that its distributions will be sufficient to eliminate all taxes.
REDEMPTION OF FUND SHARES Redemptions (including redemptions in kind) and
exchanges of fund shares are taxable transactions for federal and state
income tax purposes. If you redeem your fund shares, or exchange your fund
shares for shares of a different Franklin Templeton Fund, the IRS will
require that you report any gain or loss on your redemption or exchange. If
you hold your shares as a capital asset, the gain or loss that you realize
will be capital gain or loss and will be long-term or short-term, generally
depending on how long you hold your shares.
Beginning after the year 2005 (2000 for certain shareholders), gains from the
sale of fund shares held for more than five years may be subject to a reduced
tax rate.
Any loss incurred on the redemption or exchange of shares held for six months
or less will be treated as a long-term capital loss to the extent of any
long-term capital gains distributed to you by the fund on those shares.
All or a portion of any loss that you realize upon the redemption of your fund
shares will be disallowed to the extent that you buy other shares in the fund
(through reinvestment of dividends or otherwise) within 30 days before or after
your share redemption. Any loss disallowed under these rules will be added to
your tax basis in the new shares you buy.
U.S. GOVERNMENT OBLIGATIONS States grant tax-free status to dividends paid to
you from interest earned on direct obligations of the U.S. government,
subject in some states to minimum investment or reporting requirements that
must be met by the fund. Investments in Government National Mortgage
Association or Federal National Mortgage Association securities, bankers'
acceptances, commercial paper and repurchase agreements collateralized by
U.S. government securities do not generally qualify for tax-free treatment.
The rules on exclusion of this income are different for corporations.
DIVIDENDS-RECEIVED DEDUCTION FOR CORPORATIONS Because the fund's income is
derived primarily from investments in foreign rather than domestic
securities, generally none of its distributions will be eligible for the
corporate dividends-received deduction.
INVESTMENT IN COMPLEX SECURITIES The fund may invest in complex securities.
These investments may be subject to numerous special and complex tax rules.
These rules could affect whether gains and losses recognized by the fund are
treated as ordinary income or capital gain, accelerate the recognition of
income to the fund (possibly causing the fund to sell securities to raise the
cash for necessary distributions) and/or defer the fund's ability to
recognize losses and, in limited cases, subject the fund to U.S. federal
income tax on income from certain foreign securities. In turn, these rules
may affect the amount, timing or character of the income distributed to you
by the fund.
ORGANIZATION, VOTING RIGHTS AND PRINCIPAL HOLDERS
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The fund is a series' of Franklin Templeton Global Trust, an open-end
management investment company, commonly called a mutual fund. The trust was
organized as a Massachusetts business trust in November 1985 and reorganized
as a Delaware business trust on October 1, 1996, and is registered with the
SEC.
As a shareholder of a Massachusetts business trust, you could, under certain
circumstances, be held personally liable as a partner for its obligations.
The Agreement and Declaration of Trust, however, contains an express
disclaimer of shareholder liability for acts or obligations of the fund. The
Declaration of Trust also provides for indemnification and reimbursement of
expenses out of the fund's assets if you are held personally liable for
obligations of the fund. The Declaration of Trust provides that the fund
shall, upon request, assume the defense of any claim made against you for any
act or obligation of the fund and satisfy any judgment thereon. All such
rights are limited to the assets of the fund. The Declaration of Trust
further provides that the fund may maintain appropriate insurance (for
example, fidelity bonding and errors and omissions insurance) for the
protection of the fund, its shareholders, trustees, officers, employees and
agents to cover possible tort and other liabilities. Furthermore, the
activities of the fund as an investment company, as distinguished from an
operating company, would not likely give rise to liabilities in excess of the
fund's total assets. Thus, the risk that you would incur financial loss on
account of shareholder liability is limited to the unlikely circumstance in
which both inadequate insurance exists and the fund itself is unable to meet
its obligations.
The fund currently offers two classes of shares, Class A and Advisor Class.
The fund may offer additional classes of shares in the future. The full title
of each class is:
o Franklin Templeton Hard Currency Fund - Class A
o ranklin Templeton Hard Currency Fund - Advisor Class
Shares of each class represent proportionate interests in the fund's assets.
On matters that affect the fund as a whole, each class has the same voting
and other rights and preferences as any other class. On matters that affect
only one class, only shareholders of that class may vote. Each class votes
separately on matters affecting only that class, or expressly required to be
voted on separately by state or federal law. Shares of each class of a series
have the same voting and other rights and preferences as the other classes
and series of the trust for matters that affect the trust as a whole.
Additional series may be offered in the future.
The trust has noncumulative voting rights. For board member elections, 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. The trust or a
series of the trust may hold special meetings, however, for matters requiring
shareholder approval. A meeting may be called by the board to consider the
removal of a board member if requested in writing by shareholders holding at
least 10% of the outstanding shares. In certain circumstances, we are
required to help you communicate with other shareholders about the removal of
a board member. A special meeting also may be called by the board in its
discretion.
As of February 1, 2000, the principal shareholders of the funds, beneficial
or of record, were:
PERCENTAGE
NAME AND ADDRESS SHARE CLASS (%)
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Albert A. Haust III Advisor 9.3
1156 Morningside Avenue Class
South San Francisco, CA 94080
Franklin Resources, Inc.1 Advisor 52.3
555 Airport Blvd. 4th Floor Class
Burlingame, CA 94010
John S. Sawaya Advisor 18.1
3441 Data Drive Apt 301 Class
Rancho Cordova, CA 95670
1. Franklin Resources, Inc. is a Delaware Corporation.
Note: Charles B. Johnson and Rupert H. Johnson, Jr., who are officers and
trustees of the trust, may be considered beneficial holders of the fund
shares held by Franklin Resources, Inc. (Resources). As principal
shareholders of Resources, they may be able to control the voting of
Resources' shares of the fund.
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.
As of February 4, 2000, the officers and board members, as a group, owned of
record and beneficially less than 1% of the outstanding shares of each class.
The board members may own shares in other funds in the Franklin Templeton
Group of Funds.
BUYING AND SELLING SHARES
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The fund continuously offers its shares through securities dealers who have
an agreement with Franklin Templeton Distributors, Inc. (Distributors). A
securities dealer includes any 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. Banks and financial
institutions that sell shares of the fund may be required by state law to
register as securities dealers.
For investors outside the U.S., the offering of fund shares may be limited in
many jurisdictions. An investor who wishes to buy shares of the fund should
determine, or have a broker-dealer determine, the applicable laws and
regulations of the relevant jurisdiction. Investors are responsible for
compliance with tax, currency exchange or other regulations applicable to
redemption and purchase transactions in any jurisdiction to which they may be
subject. Investors should consult appropriate tax and legal advisors to
obtain information on the rules applicable to these transactions.
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. We may deduct any applicable banking
charges imposed by the bank from your account.
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.
If you buy shares through the reinvestment of dividends, the shares 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.
GROUP PURCHASES As described in the prospectus, members of a qualified group
may add the group's investments together for minimum investment purposes.
A qualified group is one that:
o Was formed at least six months ago,
o Has a purpose other than buying fund shares at a discount,
o Has more than 10 members,
o Can arrange for meetings between our representatives and group members,
o Agrees to include Franklin Templeton Fund sales and other materials in
publications and mailings to its members at reduced or no cost to
Distributors,
o Agrees to arrange for payroll deduction or other bulk transmission of
investments to the fund, and
o Meets other uniform criteria that allow Distributors to achieve cost
savings in distributing shares.
DEALER COMPENSATION Distributors and/or its affiliates may provide financial
support to securities dealers that sell shares of the Franklin Templeton
Group of Funds. This support is based primarily on the amount of sales of
fund shares and/or total assets with the Franklin Templeton Group of Funds.
The amount of support may be affected by: total sales; net sales; levels of
redemptions; the proportion of a securities dealer's sales and marketing
efforts in the Franklin Templeton Group of Funds; a securities dealer's
support of, and participation in, Distributors' marketing programs; a
securities dealer's compensation programs for its registered representatives;
and the extent of a securities dealer's marketing programs relating to the
Franklin Templeton Group of Funds. Financial support to securities dealers
may be made by payments from Distributors' resources, from Distributors'
retention of underwriting concessions and, in the case of funds that have
Rule 12b-1 plans, from payments to Distributors under such plans. In
addition, certain securities dealers may receive brokerage commissions
generated by fund portfolio transactions in accordance with the rules of the
National Association of Securities Dealers, Inc.
Distributors routinely sponsors due diligence meetings for registered
representatives during which they receive updates on various Franklin
Templeton Funds and are afforded the opportunity to speak with portfolio
managers. Invitation to these meetings is not conditioned on selling a
specific number of shares. Those who have shown an interest in the Franklin
Templeton Funds, however, are more likely to be considered. To the extent
permitted by their firm's policies and procedures, registered
representatives' expenses in attending these meetings may be covered by
Distributors.
EXCHANGE PRIVILEGE If you request the exchange of the total value of your
account, declared but unpaid income dividends and capital gain distributions
will be reinvested in the fund and exchanged into the new fund at net asset
value when paid. Backup withholding and information reporting may apply.
If a substantial number of shareholders should, within a short period, sell
their fund shares 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
short-term, interest-bearing money market instruments, unless it is believed
that attractive investment opportunities consistent with the fund's
investment goal exist immediately. This money will then be withdrawn from the
short-term, interest-bearing 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 generally are
not available until the seventh day following the sale. The funds you are
seeking to exchange into may delay issuing shares pursuant to an exchange
until that seventh 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.
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. There are no service charges
for establishing or maintaining a systematic withdrawal plan.
Payments under the plan will be made from the redemption of an equivalent
amount of shares in your account, generally on the 25th day of the month in
which a payment is scheduled. If the 25th falls on a weekend or holiday, we
will process the redemption on the next business day. When you sell your
shares under a systematic withdrawal plan, it is a taxable transaction.
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.
You may discontinue a systematic withdrawal plan, change the amount and
schedule of withdrawal payments, or suspend one payment by notifying us by
mail or by phone at least seven business days before the end of the month
preceding a scheduled payment. 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.
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 U.S. Securities
and Exchange Commission (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.
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 and to send the certificate and assignment form in separate
envelopes.
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.
Distribution or redemption checks sent to you do not earn interest or any
other income during the time the checks remain uncashed. Neither the fund nor
its affiliates will be liable for any loss caused by your failure to cash
such checks. The fund is not responsible for tracking down uncashed checks,
unless a check is returned as undeliverable.
In most cases, if mail is returned as undeliverable we are required to take
certain steps to try to find you free of charge. If these attempts are
unsuccessful, however, we may deduct the costs of any additional 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.
Sending redemption proceeds by wire or electronic funds transfer (ACH) is a
special service that we make available whenever possible. By offering this
service to you, the fund is not bound to meet any redemption request in less
than the seven day period prescribed by law. Neither the fund nor its agents
shall be liable to you or any other person if, for any reason, a redemption
request by wire or ACH is not processed as described in the prospectus.
Franklin Templeton Investor Services, Inc. (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 also may charge a fee for their services
directly to their clients.
If you buy or sell shares through your securities dealer, we use the net
asset value next calculated after your securities dealer receives your
request, which is promptly transmitted to the fund. 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. 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. Any loss to you
resulting from your dealer's failure to transmit your redemption order to the
fund in a timely fashion must be settled between you and your securities
dealer.
Certain shareholder servicing agents may be authorized to accept your
transaction request.
For institutional accounts, there may be additional methods of buying or
selling fund shares than those described in this SAI or in the prospectus.
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,
before 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.
PRICING SHARES
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When you buy and sell shares, you pay the net asset value (NAV) per share.
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.
The fund calculates the NAV per share of each class each business day at the
close of trading on the New York Stock Exchange (normally 1:00 p.m. Pacific
time). The fund does not calculate the NAV on days the New York Stock
Exchange (NYSE) is closed for trading, which include New Year's Day, Martin
Luther King Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day.
When determining its NAV, the fund values cash and receivables at their
realizable amounts, and records interest as accrued and dividends on the
ex-dividend date. If market quotations are readily available for portfolio
securities listed on a securities exchange or on the Nasdaq National Market
System, the fund values those securities at the last quoted sale price of the
day or, if there is no reported sale, within the range of the most recent
quoted bid and ask prices. The fund values over-the-counter portfolio
securities within the range of the most recent quoted bid and ask prices. If
portfolio securities trade both in the over-the-counter market and on a stock
exchange, the fund values them according to the broadest and most
representative market as determined by the manager.
The fund values portfolio securities underlying actively traded call options
at their market price as determined above. The current market value of any
option the fund holds is its last sale price on the relevant exchange before
the fund values its assets. If there are no sales that day or if the last
sale price is outside the bid and ask prices, the fund values options within
the range of the current closing bid and ask prices if the fund believes the
valuation fairly reflects the contract's market value.
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed well before the close of
business of the NYSE on each day that the NYSE is open. Trading in European
or Far Eastern securities generally, or in a particular country or countries,
may not take place on every NYSE business day. Furthermore, trading takes
place in various foreign markets on days that are not business days for the
NYSE and on which the fund's NAV is not calculated. Thus, the calculation of
the fund's NAV does not take place contemporaneously with the determination
of the prices of many of the portfolio securities used in the calculation
and, if events materially affecting the values of these foreign securities
occur, the securities will be valued at fair value as determined by
management and approved in good faith by the board.
Generally, trading in corporate bonds, U.S. government securities and money
market instruments is substantially completed each day at various times
before the close of the NYSE. The value of these securities used in computing
the NAV 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 close of the NYSE that will not be reflected in the
computation of the NAV. 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 use a pricing service, bank or securities dealer to
perform any of the above described functions.
THE UNDERWRITER
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Franklin Templeton Distributors, Inc. (Distributors) acts as the principal
underwriter in the continuous public offering of the fund's shares.
Distributors is located at 777 Mariners Island Blvd., San Mateo, CA 94404.
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.
Distributors does not receive compensation from the fund for acting as
underwriter of the fund's Advisor Class shares.
PERFORMANCE
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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. Average annual total return and current yield quotations used by the
fund are based on the standardized methods of computing performance mandated
by the SEC.
For periods before January 1, 1997, Advisor Class standardized performance
quotations are calculated by substituting Class A performance for the
relevant time period, excluding the effect of Class A's maximum initial sales
charge, and including the effect of the distribution and service (Rule 12b-1)
fees applicable to the fund's Class A shares. For periods after January 1,
1997, Advisor Class standardized performance quotations are calculated as
described below.
An explanation of these and other methods used by the fund to compute or
express performance follows. Regardless of the method used, past performance
does not guarantee future results, and is an indication of the return to
shareholders only for the limited historical period used.
AVERAGE ANNUAL TOTAL RETURN Average annual total return is determined by
finding the average annual rates of return over the periods indicated below
that would equate an initial hypothetical $1,000 investment to its ending
redeemable value. The calculation assumes 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 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 initial sales charge currently in effect.
The average annual total returns for the indicated periods ended October 31,
1999, were:
SINCE
INCEPTION
1 YEAR 5 YEARS 10 YEARS (11/17/89)
(%) (%) (%) (%)
- --------------------------------------------------------------------------------
Hard Currency Fund
Advisor Class -6.17 -1.92 - 4.73
The following SEC formula was used to calculate these figures:
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 each period at the end of each period
CUMULATIVE TOTAL RETURN Like average annual total return, cumulative total
return assumes income dividends and capital gain distributions are reinvested
at net asset value, the account was completely redeemed at the end of each
period and the deduction of all applicable charges and fees. Cumulative total
return, however, is based on the actual return for a specified period rather
than on the average return over the periods indicated above. The cumulative
total returns for the indicated periods ended October 31, 1999, were:
SINCE
INCEPTION
1 YEAR 5 YEARS 10 YEARS (11/17/89)
(%) %) (%) (%)
- --------------------------------------------------------------------------------
Hard Currency Fund
Advisor Class -6.17 -9.22 - 58.42
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 net asset value 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 of the class during the base period. The
yield for the 30-day period ended October 31, 1999, was:
YIELD (%)
- --------------------------------------------------------------------------------
Hard Currency Fund Advisor Class 4.07
The following SEC formula was used to calculate this figure:
6
Yield = 2 [(A-B + 1) - 1]
---
cd
where:
a = 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 net asset value 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. 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 by a class
during a certain period and dividing that amount by the current net asset
value. The current distribution rate differs from the current yield
computation because it may include distributions to shareholders from sources
other than dividends and interest, such as premium income from option writing
and short-term capital gains, and is calculated over a different period of
time. The current distribution rate for the 30-day period ended October 31,
1999, was:
DISTRIBUTION RATE (%)
- --------------------------------------------------------------------------------
Hard Currency Fund Advisor Class 2.56
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 Sales literature referring to the use of the
fund as a potential investment for 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 goals and performance results of funds belonging to
the Franklin Templeton Group of Funds. Franklin Resources, Inc. is the parent
company of the advisors and underwriter of the Franklin Templeton Group of
Funds.
COMPARISONS To help you better evaluate how an investment in the fund may
satisfy your investment goal, advertisements and other materials about the
fund may discuss certain measures of fund performance as reported by various
financial publications. Materials also may 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:
o Salomon Brothers Broad Bond Index or its component indices - measures
yield, price and total return for Treasury, agency, corporate and mortgage
bonds.
o Lehman Brothers Aggregate Bond Index or its component indices - measures
yield, price and total return for Treasury, agency, corporate, mortgage
and Yankee bonds.
o Lehman Brothers Municipal Bond Index or its component indices - measures
yield, price and total return for the municipal bond market.
o Bond Buyer 20 Index - an index of municipal bond yields based upon yields
of 20 general obligation bonds maturing in 20 years.
o Bond Buyer 40 Index - an index composed of the yield to maturity of 40
bonds. The index attempts to track the new-issue market as closely as
possible, so it changes bonds twice a month, adding all new bonds that
meet certain requirements and deleting an equivalent number according to
their secondary market trading activity. As a result, the average par call
date, average maturity date, and average coupon rate can and have changed
over time. The average maturity generally has been about 29-30 years.
o Financial publications: THE WALL STREET JOURNAL, AND BUSINESS WEEK,
FINANCIAL WORLD, FORBES, FORTUNE, AND MONEY MAGAZINES - provide
performance statistics over specified time periods.
o Salomon Brothers Composite High Yield Index or its component indices -
measures yield, price and total return for the Long-Term High-Yield Index,
Intermediate-Term High-Yield Index, and Long-Term Utility High-Yield Index.
o Historical data supplied by the research departments of CS First Boston
Corporation, the J.P. Morgan(R) companies, Salomon Brothers, Merrill Lynch,
Lehman Brothers(R) and Bloomberg(R) L.P.
o Morningstar - information published by Morningstar, Inc., including
Morningstar proprietary mutual fund ratings. The ratings reflect
Morningstar's assessment of the historical risk-adjusted performance of a
fund over specified time periods relative to other funds within its
category.
o Lipper - Mutual Fund Performance Analysis and Lipper - Fixed Income Fund
Performance Analysis - 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.
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 also may compare the fund's performance to the
return on certificates of deposit (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 fall. 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 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 fund is a member of the Franklin Templeton Group of Funds, one of the
largest mutual fund organizations in the U.S., and may be considered in a
program for diversification of assets. Founded in 1947, Franklin is one of
the oldest mutual fund organizations and now services approximately 3 million
shareholder accounts. In 1992, Franklin, a leader in managing fixed-income
mutual funds and an innovator in creating domestic equity funds, joined
forces with Templeton, a pioneer in international investing. The Mutual
Series team, known for its value-driven approach to domestic equity
investing, became part of the organization four years later. Together, the
Franklin Templeton Group has over $235 billion in assets under management for
more than 5 million U.S. based mutual fund shareholder and other accounts.
The Franklin Templeton Group of Funds offers 103 U.S. based open-end
investment companies to the public. The fund may identify itself by its
Nasdaq symbol or CUSIP number.
Currently, there are more mutual funds than there are stocks listed on the
New York Stock Exchange. While many of them have similar investment goals, no
two are exactly alike. Shares of the fund are generally sold through
securities dealers, whose investment representatives are experienced
professionals who can offer advice on the type of investments suitable to
your unique goals and needs, as well as the risks associated with such
investments.
DESCRIPTION OF RATINGS
- ------------------------------------------------------------------------------
SHORT-TERM DEBT & COMMERCIAL PAPER RATINGS
MOODY'S
Moody's short-term debt ratings are opinions of the ability of issuers to
repay punctually senior debt obligations. These obligations have an original
maturity not exceeding one year, unless explicitly noted. Moody's commercial
paper ratings are opinions of the ability of issuers to repay punctually
their promissory obligations not having an original maturity in excess of
nine months. Moody's employs the following designations for both short-term
debt and commercial paper, all judged to be investment grade, to indicate the
relative repayment capacity of rated issuers:
P-1 (Prime-1): Superior capacity for repayment.
P-2 (Prime-2): Strong capacity for repayment.
S&P
S&P's ratings are a current assessment of the likelihood of timely payment of
debt having an original maturity of no more than 365 days. Ratings are graded
into four categories, ranging from "A" for the highest quality obligations to
"D" for the lowest. Issues within the "A" category are delineated with the
numbers 1, 2 and 3 to indicate the relative degree of safety, as follows:
A-1: This designation indicates the degree of safety regarding timely payment
is very strong. A "plus" (+) designation indicates an even stronger
likelihood of timely payment.
A-2: Capacity for timely payment on issues with this designation is strong.
The relative degree of safety, however, is not as overwhelming as for issues
designated A-1.
A-3: Issues carrying this designation have a satisfactory capacity for timely
payment. They are, however, somewhat more vulnerable to the adverse effects
of changes in circumstances than obligations carrying the higher designations.
FRANKLIN TEMPLETON GLOBAL TRUST
FILE NOS. 33-01212
& 811-4450
FORM N-1A
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS.
The following exhibits are incorporated by reference to the previously
filed document indicated below, except as noted:
(a) Agreement and Declaration of Trust
(i) Agreement and Declaration of Trust dated May 14, 1996
Filing: Post-Effective Amendment No. 15 to Registration
Statement on Form N-1A
File No. 33-01212
Filing Date: August 2, 1996
(ii) Certificate of Trust dated May 14, 1996
Filing: Post-Effective Amendment No. 15 to Registration
Statement on Form N-1A
File No. 33-01212
Filing Date: August 2, 1996
(b) By-Laws
(i) By-Laws
Filing: Post-Effective Amendment No. 15 to Registration
Statement on Form N-1A
File No. 33-01212
Filing Date: August 2, 1996
(c) Instruments Defining Rights of Security Holders
Not Applicable
(d) Investment Advisory Contracts
(i) Management Agreement between Registrant and Franklin
Advisers, Inc. dated August 28, 1996
Filing: Post-Effective Amendment No. 18 to Registration
Statement on Form N-1A
File No. 33-01212
Filing Date: February 27, 1998
(ii) Subadvisory Agreement on behalf of Registrant between
Franklin Advisers, Inc. and Templeton Investment Counsel,
Inc. dated August 28, 1996
Filing: Post-Effective Amendment No. 18 to Registration
Statement on Form N-1A
File No. 33-01212
Filing Date: February 27, 1998
(e) Underwriting Contracts
(i) Amended and Restated Distribution Agreement between
Registrant and Franklin/Templeton Distributors, Inc. dated
August 28, 1996
Filing: Post-Effective Amendment No. 18 to Registration
Statement on Form N-1A
File No. 33-01212
Filing Date: February 27, 1998
(ii) Forms of Dealer Agreements between Franklin/Templeton
Distributors, Inc. and Securities Dealers
Filing: Post-Effective Amendment No. 19 to Registration
Statement on Form N-1A
File No. 33-01212
Filing Date: December 31, 1998
(f) Bonus or Profit Sharing Contracts
Not Applicable
(g) Custodian Agreements
(i) 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 No. 33-01212
Filing Date: December 29, 1995
(ii) Master Custody Agreement between Registrant and Bank of New
York dated February 16, 1996
Filing: Post-Effective Amendment No. 18 to Registration
Statement on Form N-1A
File No. 33-01212
Filing Date: February 27, 1998
(iii) Amendment, dated May 7, 1997, to Master Custody Agreement
between Registrant and Bank of New York dated February 16,
1996
Filing: Post-Effective Amendment No. 18 to Registration
Statement on Form N-1A
File No. 33-01212
Filing Date: February 27, 1998
(iv) Amendment, dated February 27, 1998, to Exhibit A of the
Master Custody Agreement between the Registrant and Bank of
New York dated February 16, 1996
Filing: Post-Effective Amendment No. 19 to Registration
Statement on Form N-1A
File No. 33-01212
Filing Date: December 31, 1998
(v) Terminal Link Agreement between Registrant and Bank of New
York dated February 16, 1996
Filing: Post-Effective Amendment No. 18 to Registration
Statement on Form N-1A
File No. 33-01212
Filing Date: February 27, 1998
(vi) Foreign Custody Manager Agreement between the Registrant
and Bank of New York made as of July 30, 1998, effective
as of February 27, 1998
Filing: Post-Effective Amendment No. 19 to Registration
Statement on Form N-1A
File No. 33-01212
Filing Date: December 31, 1998
(vii) Amendment, dated September 16, 1999, to Exhibit A of the
Master Custody Agreement between Registrant and Bank of
New York dated February 16, 1996
(h) Other Material Contracts
(i) Subcontract for Fund Administrative Services dated October
1, 1996 and Amendment thereto dated December 1, 1998
between Franklin Advisers, Inc. and Franklin Templeton
Services, Inc.
(i) Legal Opinion
(i) Opinion and Consent of Counsel dated December 14, 1998
Filing: Post-Effective Amendment No. 19 to Registration
Statement on Form N-1A
File No. 33-01212
Filing Date: December 31, 1998
(j) Other Opinions
(i) Consent of Independent Accountants
(k) Omitted Financial Statements
Not Applicable
(l) Initial Capital Agreements
Not Applicable
(m) Rule 12b-1 Plan
(i) Distribution Plan pursuant to Rule 12b-1 between Registrant
and Franklin/Templeton Distributors, Inc. dated August 28,
1996
Filing: Post-Effective Amendment No. 18 to Registration
Statement on Form N-1A
File No. 33-01212
Filing Date: February 27, 1998
(o) Rule 18f-3 Plan
(i) Multiple Class Plan on behalf of Franklin Templeton Hard
Currency Fund dated September 17, 1996
Filing: Post-Effective Amendment No. 16 to Registration
Statement on Form N-1A
File No. 33-01212
Filing Date: December 31, 1996
(p) Power of Attorney
(i) Power of Attorney dated February 15, 2000
(ii) Certificate of Secretary dated February 28, 2000
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH FUND
None
ITEM 25. INDEMNIFICATION
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR
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 was formerly 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.
ITEM 27. PRINCIPAL UNDERWRITERS
a) Franklin/Templeton Distributors, Inc., ("Distributors") also acts as
principal underwriter of shares of:
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 Floating Rate Trust
Franklin Gold Fund
Franklin High Income Trust
Franklin Investors Securities Trust
Franklin Managed Trust
Franklin Money Fund
Franklin Mutual Series Fund Inc.
Franklin Municipal Securities Trust
Franklin New York Tax-Free Income Fund
Franklin New York Tax-Free Trust
Franklin Real Estate Securities Trust
Franklin Strategic Mortgage Portfolio
Franklin Strategic Series
Franklin Tax-Exempt Money Fund
Franklin Tax-Free Trust
Franklin Templeton Fund Allocator Series
Franklin Templeton International Trust
Franklin Templeton Money Fund Trust
Franklin Value Investors Trust
Franklin Templeton Variable Insurance Products Trust
(formerly Franklin Valuemark Funds)
Institutional Fiduciary Trust
Templeton Capital Accumulator Fund, Inc.
Templeton Developing Markets Trust
Templeton Funds, Inc.
Templeton Global Investment Trust
Templeton Global Opportunities Trust
Templeton Global Real Estate 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 Distributors is incorporated by reference to Part B of this
N-1A and Schedule A of Form BD filed by Distributors 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 28. 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 29. MANAGEMENT SERVICES
There are no management-related service contracts not discussed in Part A or
Part B.
ITEM 30. UNDERTAKINGS
Not Applicable
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of San Mateo and the State of
California, on the 29th day of February, 2000.
FRANKLIN TEMPLETON GLOBAL TRUST
(Registrant)
BY: /S/ CHARLES E. JOHNSON
Charles E. Johnson
President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
and on the dates indicated.
Martin L. Flanagan* Principal Financial Officer
Martin L. Flanagan Dated: February 29, 2000
Diomedes Loo-Tam* Principal Accounting Officer
Diomedes Loo-Tam Dated: February 29, 2000
Frank H. Abbott, III* Trustee
Frank H. Abbott, III Dated: February 29, 2000
Harris J. Ashton* Trustee
Harris J. Ashton Dated: February 29, 2000
David K. Eiteman* Trustee
David K. Eiteman Dated: February 29, 2000
S. Joseph Fortunato* Trustee
S. Joseph Fortunato Dated: February 29, 2000
Gerald R. Healy* Trustee
Gerald R. Healy Dated: February 29, 2000
Charles B. Johnson* Chairman of the Board and
Charles B. Johnson Trustee
Dated: February 29, 2000
Rupert H. Johnson, Jr.* Trustee
Rupert H. Johnson, Jr. Dated: February 29, 2000
David P. Kraus* Trustee
David P. Kraus Dated: February 29, 2000
Frank W. T. LaHaye* Trustee
Frank W. T. LaHaye Dated: February 29, 2000
Gordon S. Macklin* Trustee
Gordon S. Macklin Dated: February 29, 2000
*By: /S/ DAVID P. GOSS
Attorney-in-Fact
(pursuant to Power of Attorney filed herewith)
FRANKLIN TEMPLETON GLOBAL TRUST
REGISTRATION STATEMENT
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION LOCATION
EX-99.(a)(i) Agreement and Declaration of Trust *
dated May 14, 1996
EX-99.(a)(ii) Certificate of Trust dated May 14, *
1996
EX-99.(b)(i) By-Laws *
EX-99.(d)(i) Management Agreement between *
Registrant and Franklin Advisers,
Inc. dated August 28, 1996
EX-99.(d)(ii) Subadvisory Agreement on behalf of *
Registrant between Franklin
Advisers, Inc. and Templeton
Investment Counsel, Inc. dated
August 28, 1996
EX-99.(e)(i) Amended and Restated Distribution *
Agreement between Registrant and
Franklin/Templeton Distributors,
Inc. dated August 28, 1996
EX-99.(e)(ii) Forms of Dealer Agreements between *
Franklin/Templeton Distributors,
Inc. and Securities Dealers
EX-99.(g)(i) Custody Agreement between The Chase *
Manhattan Bank, N.A. and
Franklin/Templeton Global Trust
dated November 15, 1993
EX-99.(g)(ii) Master Custody Agreement between *
Registrant and Bank of New York
dated February 16, 1996
EX-99.(g)(iii) Amendment, dated May 7, 1997, to *
Master Custody Agreement between
Registrant and Bank of New York
dated February 16, 1996
EX-99.(g)(iv) Amendment, dated February 27, 1998, *
to Exhibit A of the Master Custody
Agreement between the Registrant and
Bank of New York dated February 16,
1996
EX-99.(g)(v) Terminal Link Agreement between *
Registrant and Bank of New York
dated February 16, 1996
EX-99.(g)(vi) Foreign Custody Manager Agreement *
between the Registrant and Bank of
New York made as of July 30, 1998,
effective as of February 27, 1998
EX-99.(g)(vii) Amendment, dated September 16, Attached
1999, to Exhibit A of the Master
Custody Agreement between
Registrant and Bank of New York
dated February 16, 1996
EX-99.(h)(i) Subcontract for Fund Administrative Attached
Services dated October 1, 1996 and
Amendment thereto dated December 1,
1998 between Franklin Advisers, Inc.
and Franklin Templeton Services, Inc.
EX-99.(i)(i) Opinion and Consent of Counsel dated *
December 14, 1998
EX-99.(j)(i) Consent of Independent Accountants Attached
EX-99.(m)(i) Distribution Plan pursuant to Rule *
12b-1 between Registrant and
Franklin/Templeton Distributors,
Inc. dated August 28, 1996
EX-99.(o)(i) Multiple Class Plan on behalf of *
Franklin Templeton Hard Currency
Fund dated September 17, 1996
EX-99.(p)(i) Power of Attorney dated February 15, Attached
2000
EX-99.(p)(ii) Certificate of Secretary dated Attached
February 28, 2000
* Incorporated by Reference
MASTER CUSTODY AGREEMENT
EXHIBIT A
The following is a list of the Investment Companies and their respective
Series for which the Custodian shall serve under the Master Custody Agreement
dated as of February 16, 1996.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Adjustable Rate Securities Delaware Business U.S. Government Adjustable Rate Mortgage
Portfolios Trust Portfolio
Franklin Asset Allocation Fund Delaware Business
Trust
Franklin California Tax-Free Maryland Corporation
Income
Fund, Inc.
Franklin California Tax-Free Massachusetts Franklin California Insured Tax-Free
Trust Business Trust Income Fund
Franklin California Tax-Exempt Money Fund
Franklin California Intermediate-Term
Tax-Free
Income Fund
Franklin Custodian Funds, Inc. Maryland Corporation Growth Series
Utilities Series
Dynatech Series
Income Series
U.S. Government Securities Series
Franklin Equity Fund California
Corporation
Franklin Federal Money Fund California
Corporation
Franklin Federal Tax- Free California
Income Fund Corporation
- -----------------------------------------------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- -----------------------------------------------------------------------------------------------
Franklin Gold Fund California
Corporation
Franklin High Income Trust Delaware Business AGE High Income Fund
Trust
Franklin Investors Securities Massachusetts Franklin Global Government Income Fund
Trust Business Trust Franklin Short-Intermediate U.S. Govt
Securities Fund
Franklin Convertible Securities Fund
Franklin Adjustable U.S. Government
Securities Fund
Franklin Equity Income Fund
Franklin Bond Fund
Franklin Managed Trust Delaware Business Franklin Rising Dividends Fund
Trust
Franklin Money Fund California
Corporation
Franklin Municipal Securities Delaware Business Franklin California High Yield Municipal
Trust Trust Fund
Franklin Tennessee Municipal Bond Fund
Franklin Mutual Series Fund Maryland Corporation Mutual Shares Fund
Inc. Mutual Beacon Fund
Mutual Qualified Fund
Mutual Discovery Fund
Mutual European Fund
Mutual Financial Services Fund
- -----------------------------------------------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
Franklin New York Tax-Free Delaware Business
Income Fund Trust
Franklin New York Tax-Free Massachusetts Franklin New York Tax-Exempt Money Fund
Trust Business Trust Franklin New York Intermediate-Term
Tax-Free
Income Fund
Franklin New York Insured Tax-Free
Income Fund
Franklin Real Estate Delaware Business Franklin Real Estate Securities Fund
Securities Trust Trust
Franklin Strategic Mortgage Delaware Business
Portfolio Trust
Franklin Strategic Series Delaware Business Franklin California Growth Fund
Trust Franklin Strategic Income Fund
Franklin MidCap Growth Fund
Franklin Global Utilities Fund
Franklin Small Cap Growth Fund
Franklin Global Health Care Fund
Franklin Natural Resources Fund
Franklin Blue Chip Fund
Franklin Biotechnology Discovery Fund
Franklin U.S. Long-Short Fund
Franklin Large Cap Growth Fund
Franklin Aggressive Growth Fund
Franklin Tax-Exempt Money Fund California
Corporation
- -----------------------------------------------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES---(IF APPLICABLE)
Franklin Tax-Free Trust Massachusetts Franklin Massachusetts Insured Tax-Free
Business Trust Income Fund
Franklin Michigan Insured Tax-Free
Income Fund
Franklin Minnesota Insured Tax-Free
Income Fund
Franklin Insured Tax-Free Income Fund
Franklin Ohio Insured Tax-Free Income
Fund
Franklin Puerto Rico Tax-Free Income Fund
Franklin Arizona Tax-Free Income Fund
Franklin Colorado Tax-Free Income Fund
Franklin Georgia Tax-Free Income Fund
Franklin Pennsylvania Tax-Free Income
Fund
Franklin High Yield Tax-Free Income Fund
Franklin Missouri Tax-Free Income Fund
Franklin Oregon Tax-Free Income Fund
Franklin Texas Tax-Free Income Fund
Franklin Virginia Tax-Free Income Fund
Franklin Alabama Tax-Free Income Fund
Franklin Florida Tax-Free Income Fund
Franklin Connecticut Tax-Free Income Fund
Franklin Louisiana Tax-Free Income Fund
Franklin Maryland Tax-Free Income Fund
Franklin North Carolina Tax-Free Income
Fund
Franklin New Jersey Tax-Free Income Fund
Franklin Kentucky Tax-Free Income Fund
Franklin Federal Intermediate-Term
Tax-Free Income
Fund
Franklin Arizona Insured Tax-Free Income
Fund
Franklin Florida Insured Tax-Free Income
fund
- -----------------------------------------------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
Franklin Templeton Fund Delaware Business Franklin Templeton Conservative Target
Allocator Series Trust Fund
Franklin Templeton Moderate Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Global Trust Delaware Business Franklin Templeton Global Currency Fund
Trust Franklin Templeton Hard Currency Fund
Franklin Templeton Delaware Business Templeton Pacific Growth Fund
International Trust Trust Templeton Foreign Smaller Companies Fund
Franklin Templeton Money Fund Delaware Business Franklin Templeton Money Fund
Trust Trust
Franklin Value Investors Trust Massachusetts Franklin Balance Sheet Investment Fund
Business Trust Franklin MicroCap Value Fund
Franklin Value Fund
Franklin Templeton Variable Massachusetts Franklin Money Market Fund
Insurance Products Trust Business Trust Franklin Growth and Income Fund
Franklin Natural Resources Securities
Fund
Franklin Real Estate Fund
Franklin Global Communications
Securities Fund
Franklin High Income Fund
Templeton Global Income Securities Fund
Franklin Income Securities Fund
Franklin U.S. Government Fund
Zero Coupon Fund - 2000
Zero Coupon Fund - 2005
Zero Coupon Fund - 2010
Franklin Rising Dividends Securities Fund
- -----------------------------------------------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
Franklin Templeton Variable Massachusetts Templeton Pacific Growth Fund
Insurance Products Trust Business Trust Templeton International Equity Fund
(cont.) Templeton Developing Markets Equity Fund
Templeton Global Growth Fund
Templeton Global Asset Allocation Fund
Franklin Small Cap Fund
Franklin Large Cap Growth Securities Fund
Templeton International Smaller
Companies Fund
Mutual Discovery Securities Fund
Mutual Shares Securities Fund
Franklin Global Health Care Securities
Fund
Franklin Value Securities Fund
Franklin Aggressive Growth Securities
Fund
- -----------------------------------------------------------------------------------------------
Institutional Fiduciary Trust Massachusetts Money Market Portfolio
Business Trust Franklin U.S. Government Securities
Money Market
Portfolio
Franklin Cash Reserves Fund
The Money Market Portfolios Delaware Business The Money Market Portfolio
Trust The U.S. Government Securities Money
Market Portfolio
Templeton Variable Products Franklin Growth Investments Fund
Series Fund Mutual Shares Investments Fund
Mutual Discovery Investments Fund
Franklin Small Cap Investments Fund
- -----------------------------------------------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES---(IF APPLICABLE)
- -----------------------------------------------------------------------------------------------
CLOSED END FUNDS:
Franklin Multi-Income Trust Massachusetts
Business Trust
Franklin Universal Trust Massachusetts
Business Trust
Franklin Floating Rate Trust Delaware Business
Trust
- -----------------------------------------------------------------------------------------------
Revised: 9/16/99
</TABLE>
SUBCONTRACT FOR FUND ADMINISTRATIVE SERVICES
This Subcontract for Fund Administrative Services ("Subcontract")
is made as of October 1, 1996 between FRANKLIN ADVISERS, INC., a California
corporation, hereinafter called the "Investment Manager," and FRANKLIN
TEMPLETON SERVICES, 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 each
investment management and investment advisory agreement ("Agreement") between
the Investment Manager and each Investment Company listed on Exhibit A,
("Investment Company") for itself or on behalf of each of its series listed
on Exhibit A (each, a "Fund"). This Subcontract is subject to the terms of
each Agreement, which is incorporated herein by reference.
II. Subcontractual Provisions.
(1) The Administrator agrees, during the life of this Agreement, to
provide the following services to each Fund:
(a) providing office space, telephone, office equipment and
supplies for the Fund;
(b) providing trading desk facilities for the Fund, unless
these facilities are provided by the Fund's investment adviser;
(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 when asked to do so by the Fund's shareholder
servicing agent or other agents of the Fund;
(e) coordinating the daily pricing of the Fund's investment
portfolio, including collecting quotations from pricing services engaged by
the Fund; providing fund accounting services, including preparing and
supervising publication of daily net asset value quotations, periodic
earnings reports and other financial data; and coordinating trade settlements;
(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) supervising compliance by the Fund with recordkeeping
requirements under the federal securities laws, including the 1940 Act and
the rules and regulations thereunder, and under other applicable state and
federal laws; and maintaining books and records for the Fund (other than
those maintained by the custodian and transfer agent);
(h) 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, as amended, and other applicable tax laws and
regulations;
(i) monitoring the Fund's compliance with: 1940 Act and other
federal securities laws, 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 Investment Company's
Board of Trustees or Directors ("Board") or by the Fund's investment adviser
and applicable to the Fund;
(j) providing executive, clerical and secretarial personnel
needed to carry out the above responsibilities;
(k) preparing and filing regulatory reports, including without
limitation Forms N-1A and NSAR, proxy statements, information statements and
U.S. and foreign ownership reports; and
(l) providing support services incidental to carrying out these
duties.
Nothing in this Agreement shall obligate the Investment Company or any Fund
to pay any compensation to the officers of the Investment Company. Nothing
in this Agreement shall obligate the Administrator to pay for the services of
third parties, including attorneys, auditors, printers, pricing services or
others, engaged directly by the Fund to perform services on behalf of the
Fund.
(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%.
From time to time, the Administrator may waive all or a portion of its fees
provided for hereunder and such waiver shall be treated as a reduction in the
purchase price of its services. The Administrator shall be contractually
bound hereunder by the terms of any publicly announced waiver of its fee, or
any limitation of each affected Fund's expenses, as if such waiver or
limitation were fully set forth herein.
(3) This Subcontract shall become effective on the date written above
and shall continue in effect as to each Investment Company and each Fund so
long as (1) the Agreement applicable to the Investment Company or Fund is in
effect and (2) this Subcontract is not terminated. This Subcontract will
terminate as to any Investment Company or Fund immediately upon the
termination of the Agreement applicable to the Investment Company or Fund,
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: /s/ Deborah R. Gatzek
---------------------
Deborah R. Gatzek
Title: Vice President
& Assistant Secretary
FRANKLIN TEMPLETON SERVICES, INC.
By: /s/ Harmon E. Burns
-------------------
Harmon E. Burns
Title: Executive Vice President
TERMINATION OF AGREEMENT
Franklin Advisers, Inc. and Templeton Global Investors, Inc., hereby agree
that the Subcontracts for Administrative Services between them dated: (1)
August 28, 1996 for the Franklin Templeton Global Trust on behalf of all
series of the Trust; (2) July 24, 1995 for the Franklin Templeton
International Trust on behalf of its series Templeton Foreign Smaller
Companies Fund (formerly known as Franklin International Equity Fund); (3)
July 18, 1995 for the Franklin Templeton International Trust on behalf of its
series Templeton Pacific Growth Fund; and (4) July 14, 1995 for the Franklin
Investors Securities Trust on behalf of its series Franklin Global Government
Income Fund are terminated effective as of the date of the Subcontract for
Fund Administrative Services above.
FRANKLIN ADVISERS, INC.
By /s/ Harmon E. Burns
-------------------
Harmon E. Burns
Executive Vice President
Templeton Global Investors, Inc.
By /s/ Martin L. Flanagan
----------------------
Martin L. Flanagan
President, CEO
AMENDMENT TO SUBCONTRACT FOR
FUND ADMINISTRATIVE SERVICES
The Subcontract for Fund Administrative Services dated October 1,
1996 between FRANKLIN ADVISERS, INC. and FRANKLIN TEMPLETON SERVICES, INC. is
hereby amended, to replace Exhibit A with the attached Exhibit A.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be executed by their duly authorized officers.
FRANKLIN ADVISERS, INC.
By: /s/ Deborah R. Gatzek
---------------------
Deborah R. Gatzek
Vice President & Assistant Secretary
FRANKLIN TEMPLETON SERVICES, INC.
By: /s/ Harmon E. Burns
-------------------
Harmon E. Burns
Executive Vice President
Date: December 1, 1998
<TABLE>
<CAPTION>
SUBCONTRACT FOR FUND ADMINISTRATIVE SERVICES
between
Franklin Advisers, Inc.
and
Franklin Templeton Services, Inc.
EXHIBIT A
- ---------------------------------------------------------------------------------------------------------
INVESTMENT COMPANY SERIES ---(if applicable)
- ---------------------------------------------------------------------------------------------------------
<S> <C>
Franklin High Income Trust AGE High Income Fund
Franklin Asset Allocation Fund
Franklin California Tax-Free Income
Fund, Inc.
Franklin California Tax-Free Trust Franklin California Insured Tax-Free Income Fund
Franklin California Tax-Exempt Money Fund
Franklin California Intermediate-Term Tax-Free
Income Fund
Franklin Custodian Funds, Inc. Utilities Series
Dynatech Series
Income Series
U.S. Government Securities Series
Franklin Equity Fund
Franklin Federal Tax- Free Income
Fund
Franklin Gold Fund
Franklin Investors Securities Trust Franklin Global Government Income Fund
Franklin Short-Intermediate U.S. Government Securities Fund
Franklin Convertible Securities Fund
Franklin Equity Income Fund
Franklin Municipal Securities Trust Franklin Hawaii Municipal Bond Fund
Franklin California High Yield Municipal Fund
Franklin Washington Municipal Bond Fund
Franklin Tennessee Municipal Bond Fund
Franklin Arkansas Municipal Bond Fund
Franklin New York Tax-Free Income
Fund*
- ---------------------------------------------------------------------------------------------------------
INVESTMENT COMPANY SERIES ---(if applicable)
- ---------------------------------------------------------------------------------------------------------
<S> <C>
Franklin New York Tax-Free Trust Franklin New York Tax-Exempt Money Fund
Franklin New York Insured Tax-Free Income Fund
Franklin New York Intermediate-Term Tax-Free
Income Fund**
Franklin Real Estate Securities Franklin Real Estate Securities Fund
Trust
Franklin Strategic Mortgage
Portfolio***
Franklin Strategic Series Franklin California Growth Fund
Franklin Strategic Income Fund
Franklin MidCap Growth Fund
Franklin Global Utilities Fund
Franklin Small Cap Growth Fund
Franklin Global Health Care Fund
Franklin Natural Resources Fund
Franklin Blue Chip Fund
Franklin Tax-Exempt Money Fund
Franklin Tax-Free Trust Franklin Massachusetts Insured Tax-Free Income Fund
Franklin Michigan Insured Tax-Free Income Fund
Franklin Minnesota Insured Tax-Free Income Fund
Franklin Insured Tax-Free Income Fund
Franklin Ohio Insured Tax-Free Income Fund
Franklin Puerto Rico Tax-Free Income Fund
Franklin Arizona Tax-Free Income Fund
Franklin Colorado Tax-Free Income Fund
Franklin Georgia Tax-Free Income Fund
Franklin Pennsylvania Tax-Free Income Fund
Franklin High Yield Tax-Free Income Fund
Franklin Missouri Tax-Free Income Fund
Franklin Oregon Tax-Free Income Fund
Franklin Texas Tax-Free Income Fund
Franklin Virginia Tax-Free Income Fund
Franklin Alabama Tax-Free Income Fund
Franklin Florida Tax-Free Income Fund
Franklin Connecticut Tax-Free Income Fund*
Franklin Indiana Tax-Free Income Fund
Franklin Louisiana Tax-Free Income Fund
Franklin Maryland Tax-Free Income Fund
Franklin North Carolina Tax-Free Income Fund
Franklin New Jersey Tax-Free Income Fund
Franklin Kentucky Tax-Free Income Fund
Franklin Federal Intermediate-Term Tax-Free Income Fund
Franklin Arizona Insured Tax-Free Income Fund
Franklin Florida Insured Tax-Free Income Fund
Franklin Michigan Tax-Free Income Fund
- ---------------------------------------------------------------------------------------------------------
INVESTMENT COMPANY SERIES ---(if applicable)
- ---------------------------------------------------------------------------------------------------------
<S> <C>
Franklin Templeton International Templeton Pacific Growth Fund
Trust Templeton Foreign Smaller Companies Fund
Franklin Templeton Global Trust Franklin Templeton Global Currency Fund
Franklin Templeton Hard Currency Fund
CLOSED END FUNDS:
Franklin Multi-Income Trust
Franklin Universal Trust
- ---------------------------------------------------------------------------------------------------------
- --------
* Effective as of 10/1/98
** Effective as of 3/19/98
*** Effective 2/26/98
</TABLE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in Post-Effective Amendment
No. 20 to the registration statement on Form N-1A ("Registration Statement") of
our report dated November 23, 1999 relating to the financial statements and
financial highlights which appear in the October 31, 1999 Annual Report to
Shareholders of Franklin Templeton Global Trust, which are also incorporated by
reference into the Registration Statement. We also consent to the references to
us under the headings "Financial Highlights" and "Auditors" in such Registration
Statement.
/s/ PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
February 24, 2000
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, LEIANN NUZUM, MURRAY L. SIMPSON,
BARBARA J. GREEN AND DAVID P. GOSS (with full power to each of them to act
alone) his/her attorney-in-fact and agent, in all capacities, to execute,
deliver and file in the names of the undersigned, any and all instruments
that said attorneys and agents may deem necessary or advisable to enable the
Registrant to comply with or register any security issued by the Registrant
under the Securities Act of 1933, as amended, and/or the Investment Company
Act of 1940, as amended, and the rules, regulations and interpretations
thereunder, including but not limited to, any registration statement,
including any and all pre- and post-effective amendments thereto, any other
document to be filed with the U.S. Securities and Exchange Commission and any
and all documents required to be filed with respect thereto with any other
regulatory authority. Each of the undersigned grants to each of said
attorneys, full authority to do every act necessary to be done in order to
effectuate the same as fully, to all intents and purposes, as he/she 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.
This Power of Attorney may be executed in one or more counterparts,
each of which shall be deemed to be an original, and all of which shall be
deemed to be a single document.
The undersigned officers and trustees hereby execute this Power of
Attorney as of the 15TH day of FEBRUARY, 2000.
/s/ Charles E. Johnson /s/ Frank H. Abbott, III
Charles E. Johnson, Frank H. Abbott, III
Principal Executive Officer Trustee
/s/ Harris J. Ashton /s/ David K. Eiteman
Harris J. Ashton, David K. Eiteman,
Trustee Trustee
/s/ Joseph Fortunato /s/ Gerald R. Healy
S. Joseph Fortunato, Trustee Gerald R. Healy, Trustee
/s/ Charles B. Johnson /s/ Rupert H. Johnson, Jr.
Charles B. Johnson, Trustee Rupert H. Johnson, Jr.,
Trustee
/s/ David P. Kraus /s/ Frank W. T. LaHaye
David P. Kraus, Trustee Frank W.T. LaHaye, Trustee
/s/ Gordon S. Macklin /s/ Martin L. Flanagan
Gordon S. Macklin, Trustee Martin L. Flanagan,
Principal Financial Officer
/s/ Kimberley H. Monasterio
Kimberley H. Monasterio,
Principal Accounting Officer
CERTIFICATE OF SECRETARY
I, David P. Goss, certify that I am Assistant Secretary of FRANKLIN TEMPLETON
GLOBAL TRUST (the "Trust").
As Assistant 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
94404, on February 15, 2000.
RESOLVED, that a Power of Attorney, substantially in the
form of the Power of Attorney presented to this Board,
appointing Harmon E. Burns, Deborah R. Gatzek, Mark H.
Plafker, Karen L. Skidmore, Leiann Nuzum, Murray L.
Simpson, Barbara J. Green and David P. Goss as
attorneys-in-fact for the purpose of filing documents with
the Securities and Exchange Commission, be executed by each
Trustee and designated officer.
I declare under penalty of perjury that the matters set forth in this
certificate are true and correct of my own knowledge.
/S/ DAVID P. GOSS
Dated: February 28, 2000 David P. Goss
Assistant Secretary
