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TEMPLETON INCOME FUND
PROSPECTUS -- JANUARY 1, 1995
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INVESTMENT Templeton Income Fund (the "Fund") seeks current income with
OBJECTIVE capital appreciation and growth of income through a flexible
AND POLICIES policy of investing primarily in debt securities of companies,
governments and government agencies of various nations
throughout the world, as well as preferred stock, common
stocks which pay dividends, and income-producing securities
convertible into common stock of such companies. The Fund may
borrow money for investment purposes, which will exaggerate
any increase or decrease in the market value of the Fund's
portfolio and subject the money borrowed to interest and other
costs. The Fund is a series of Templeton Income Trust.
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PURCHASE OF Please complete and return the Shareholder Application. If you
SHARES need assistance in completing this form, please call our
Account Services Department. The Fund's Shares may be
purchased at a price equal to their net asset value plus a
sales charge not exceeding 4.25% of the offering price. The
minimum initial investment is $100 ($25 minimum for subsequent
investments).
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PROSPECTUS This Prospectus sets forth concisely information about the
INFORMATION Fund that a prospective investor ought to know before
investing. Investors are advised to read and retain this
Prospectus for future reference. A Statement of Additional
Information ("SAI") dated January 1, 1995, has been filed with
the Securities and Exchange Commission and is incorporated in
its entirety by reference in and made a part of this
Prospectus. This SAI is available without charge upon request
to Franklin Templeton Distributors, Inc., 700 Central Avenue,
St. Petersburg, Florida 33701-3628 or by calling the Account
Services Department.
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ACCOUNT SERVICES DEPARTMENT -- 1-800-354-9191 OR 813-823-8712
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TEMPLETON "STAR" SERVICE (24 hours, seven days a week access to current
prices, shareholder account balances/values, last transaction and duplicate
account statements) -- 1-800-654-0123
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TABLE OF CONTENTS
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EXPENSE TABLE........ 2
FINANCIAL HIGHLIGHTS. 3
GENERAL DESCRIPTION.. 4
Investment Objective
and Policies........ 4
INVESTMENT
TECHNIQUES.......... 4
Options on
Securities, Indices
and Futures
Contracts........... 4
Forward Foreign
Currency Contracts
and Options on
Foreign Currencies . 5
Futures Contracts.... 5
When-Issued
Securities ......... 6
Borrowing ........... 6
Loans of Portfolio
Securities.......... 6
Collateralized
Mortgage Obligations
("CMOs") ........... 6
U.S. Government
Securities ......... 6
Commercial Paper .... 6
RISK FACTORS......... 7
HOW TO BUY SHARES OF
THE FUND............ 8
Net Asset Value...... 8
Offering Price....... 9
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Cumulative Quantity
Discount............ 10
Letter of Intent..... 10
Group Purchases...... 10
Net Asset Value
Purchases........... 11
Automatic Investment
Plan................ 12
Institutional
Accounts............ 12
Account Statements... 12
Templeton STAR
Service............. 12
Retirement Plans..... 12
EXCHANGE PRIVILEGE... 13
Exchanges by Timing
Accounts............ 13
HOW TO SELL SHARES OF
THE FUND............ 14
Reinstatement
Privilege........... 16
Contingent Deferred
Sales Charge........ 16
Systematic Withdrawal
Plan................ 16
Redemptions by
Telephone........... 17
TELEPHONE
TRANSACTIONS........ 17
Verification
Procedures.......... 17
Restricted Accounts.. 18
General.............. 18
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MANAGEMENT OF THE
FUND................ 18
Investment Manager... 18
Business Manager..... 19
Transfer Agent....... 19
Custodian............ 19
Plan of Distribution. 19
Expenses............. 19
Brokerage
Commissions......... 19
GENERAL INFORMATION.. 19
Description of
Shares/Share
Certificates........ 19
Meetings of
Shareholders........ 20
Dividends and
Distributions....... 20
Federal Tax
Information......... 20
Inquiries............ 21
Performance
Information......... 21
Statements and
Reports............. 21
WITHHOLDING
INFORMATION......... 22
CORPORATE RESOLUTION. 23
AUTHORIZATION
AGREEMENT........... 24
THE FRANKLIN
TEMPLETON GROUP..... 25
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SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK; FURTHER, SUCH SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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EXPENSE TABLE
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SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of Offering
Price)................................................................ 4.25%
Deferred Sales Charge.................................................. None*
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees........................................................ 0.50%
12b-1 Fees............................................................. 0.22%**
Other Expenses (audit, legal, business management, transfer agent and
custodian)............................................................ 0.46%
Total Fund Operating Expenses.......................................... 1.18%
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1 YEAR 3 YEARS 5 YEARS 10 YEARS
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You would pay the following expenses on a
$1,000 investment, assuming (1) 5% annual
return and (2) redemption at the end of
each time period: $54 $78 $105 $180
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*Investments of $1 million or more are not subject to an initial sales
charge; however, a contingent deferred sales charge of 1% is imposed in the
event of certain redemption transactions within one year following such
investments. See "How to Sell Shares of the Fund--Contingent Deferred Sales
Charge."
**These expenses may not exceed 0.25% of the Fund's average net assets
annually. (See "Management of the Fund--Plan of Distribution.") After a
substantial period, these expenses, together with the initial sales charge,
may total more than the maximum sales expense that would have been
permissible if imposed entirely as an initial sales charge.
The information in the table above is an estimate based on the Fund's
expenses as of the end of the most recent fiscal year and has been restated to
reflect current fees. The table is provided for purposes of assisting current
and prospective Shareholders in understanding the various costs and expenses
that an investor in the Fund will bear, directly or indirectly. The
information in the table does not reflect the charge of up to $15 per
transaction if a Shareholder requests that redemption proceeds be sent by
express mail or wired to a commercial bank account or an administrative
service fee of $5.00 per exchange for market timing or allocation service
accounts. THE 5% ANNUAL RETURN AND ANNUAL EXPENSES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF ACTUAL OR EXPECTED FUND PERFORMANCE OR EXPENSES, BOTH OF
WHICH MAY VARY. For a more detailed discussion of the Fund's fees and
expenses, see "Management of the Fund."
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FINANCIAL HIGHLIGHTS
The following table of selected financial information has been audited by
McGladrey & Pullen, independent certified public accountants, whose report
thereon, which is incorporated by reference, appears in the Fund's 1994 Annual
Report to Shareholders. This statement should be read in conjunction with the
other financial statements and notes thereto included in the Fund's 1994
Annual Report to Shareholders, which contains further information about the
Fund's performance, and which is available to shareholders upon request and
without charge.
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PERIOD FROM
PER SHARE OPERATING YEAR ENDED AUGUST 31, SEPTEMBER 24,
PERFORMANCE --------------------------------------------------------------------- 1986**
(FOR A SHARE OUTSTANDING 1994++ 1993 1992 1991 1990 1989 1988 TO AUGUST 31, 1987
THROUGHOUT THE PERIOD) -------- -------- -------- -------- -------- -------- -------- ------------------
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Net asset value,
beginning of year...... $ 9.96 $ 10.55 $ 9.81 $ 9.95 $ 10.18 $ 9.89 $ 10.53 $10.00
Income from investment
operations
Net investment income... 0.72 0.82 0.83 0.91 0.94 0.88 0.74 0.61
Net realized and
unrealized gain (loss). (0.91) (0.35) 0.75 (0.11) (0.18) 0.26 (0.51) 0.55
-------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations............. (0.19) 0.47 1.58 0.80 0.78 1.14 0.23 1.16
-------- -------- -------- -------- -------- -------- -------- --------
Less distributions
Dividends from net
investment income...... (0.53) (0.76) (0.84) (0.91) (0.96) (0.82) (0.75) (0.59)
Distributions from net
realized gains......... (0.07) (0.30) (0.00) (0.03) (0.03) (0.03) (0.12) (0.04)
Tax basis return of
capital................ (0.12) -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Total distributions..... (0.72) (1.06) (0.84) (0.94) (0.99) (0.85) (0.87) (0.63)
-------- -------- -------- -------- -------- -------- -------- --------
Change in net asset
value for the year..... (0.91) (0.59) 0.74 (0.14) (0.23) 0.29 (0.64) 0.53
-------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of
year................... $ 9.05 $ 9.96 $ 10.55 $ 9.81 $ 9.95 $ 10.18 $ 9.89 $ 10.53
-------- -------- -------- -------- -------- -------- -------- --------
TOTAL RETURN+........... (2.01)% 5.00% 16.75% 8.43% 8.08% 11.92% 2.25% 11.86%
RATIOS/SUPPLEMENT DATA
Net assets, end of year
(000).................. $205,482 $206,667 $179,799 $127,888 $112,492 $117,655 $127,519 $123,203
Ratio to average net
assets of:
Expenses............... 1.18% 1.01% 0.98% 1.05% 1.04% 1.10% 1.10% 1.00%*
Net investment income.. 7.50% 8.45% 8.14% 9.23% 9.50% 8.63% 7.12% 6.68%*
Portfolio turnover rate. 139.23% 288.93% 233.93% 408.39% 86.09% 88.50% 158.15% 104.81%
</TABLE>
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+Does not reflect sales charges.
++Based on weighted average shares outstanding.
*Annualized.
**Commencement of Operations.
3
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GENERAL DESCRIPTION
Templeton Income Fund (the "Fund") is a series of Templeton Income Trust
(the "Trust"). The Trust was organized as a Massachusetts business trust on
June 16, 1986, and is registered under the Investment Company Act of 1940 (the
"1940 Act") as an open-end management investment company with two series of
Shares: Templeton Income Fund, a non-diversified fund, and Templeton Money
Fund. A prospectus for Templeton Money Fund is available upon request and
without charge from the Principal Underwriter.
INVESTMENT OBJECTIVE AND POLICIES. The investment objective of the Fund is
current income with capital appreciation and growth of income. The Fund seeks
to achieve its objective through a flexible policy of investing primarily in
debt securities of companies, governments and government agencies of various
nations throughout the world, as well as preferred stock, common stocks which
pay dividends and income-producing securities which are convertible into
common stock of such companies. The Fund's investments in common stocks will
emphasize companies, in various countries and industries, which pay dividends
and may offer prospects for further growth in dividend payments and capital
appreciation.
The Fund may invest in any debt security, including securities rated in any
category by Standard & Poor's Corporation ("S&P") or Moody's Investors
Service, Inc. ("Moody's") and securities which are unrated by any rating
agency. See the Appendix in the SAI for a description of the S&P and Moody's
ratings. As an operating policy, the Fund will not invest more than 5% of its
total assets in debt securities rated BBB or lower by S&P or Baa or lower by
Moody's. The average maturity of the debt securities in the Fund's portfolio
will fluctuate depending upon the Investment Manager's judgment as to future
interest rate changes. In addition, when the Investment Manager determines
that a temporary defensive strategy is warranted, the Fund may invest without
limit in U.S. Government securities maturing in 13 months or less, commercial
paper, bank time deposits with less than seven days remaining to maturity and
bankers' acceptances.
The Fund may buy and sell financial futures contracts, stock and bond index
futures contracts and foreign currency forward and futures contracts. The Fund
also may write and buy put and call options on securities, indices, foreign
currencies and futures contracts. In addition, the Fund may invest in "when-
issued" securities and collateralized mortgage obligations, lend its portfolio
securities and borrow money for investment purposes (i.e., "leverage" its
portfolio). These investment techniques are described below and under the
heading "Investment Objective and Policies" in the SAI.
Although the Fund may invest up to 25% of its assets in a single industry,
there is no present intention of doing so. Under a non-fundamental policy
approved by the Board of Trustees, the Investment Manager will select
securities for purchase by the Fund from many industries that it believes to
be productive and beneficial.
The Fund may invest up to 5% of its total assets in securities that may not
be resold without registration under applicable law ("restricted securities").
There may be a lapse of time between the Fund's decision to sell any
restricted security and the registration of the security. During this period,
the price of the security will be subject to market fluctuations. The Fund may
invest up to 10% of its total assets in restricted securities and other
securities which are not restricted but which are not readily marketable
(i.e., trading in the security is suspended or, in the case of unlisted
securities, market makers do not exist or will not entertain bids or offers).
The Fund does not intend to emphasize short-term trading profits and usually
expects to have a portfolio turnover rate not exceeding 200%.
INVESTMENT TECHNIQUES
OPTIONS ON SECURITIES, INDICES AND FUTURES CONTRACTS. The Fund may write
(i.e., sell) covered put and call options and purchase put and call options on
securities, securities indices or futures contracts that are traded on United
States and foreign exchanges or in the over-the-counter markets. An option on
a security or futures contract is a contract that permits the purchaser of the
option, in return
4
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for the premium paid, the right to buy a specified security or futures
contract (in the case of a call option) or to sell a specified security or
futures contract (in the case of a put option) from or to the writer of the
option at a designated price during the term of the option. An option on a
securities index permits the purchaser of the option, in return for the
premium paid, the right to receive from the seller cash equal to the
difference between the closing price of the index and the exercise price of
the option. The Fund may write a call or put option only if the option is
"covered." This means that so long as the Fund is obligated as the writer of a
call option, it will own the underlying securities or futures contracts
subject to the call, or hold a call at the same or lower exercise price, for
the same exercise period, and on the same securities or futures contracts as
the written call. A put is covered if the Fund maintains liquid assets with a
value equal to the exercise price in a segregated account, or holds a put on
the same underlying securities or futures contracts at an equal or greater
exercise price.
FORWARD FOREIGN CURRENCY CONTRACTS AND OPTIONS ON FOREIGN CURRENCIES. The
Fund will normally conduct its foreign currency exchange transactions either
on a spot (i.e., cash) basis at the spot rate prevailing in the foreign
currency exchange market, or through entering into forward contracts to
purchase or sell foreign currencies. The Fund will generally not enter into a
forward contract with a term of greater than one year. A forward contract is
an obligation to purchase or sell a specific currency for an agreed price at a
future date which is individually negotiated and privately traded by currency
traders and their customers.
The Fund will generally enter into forward contracts only under two
circumstances. First, when the Fund enters into a contract for the purchase or
sale of a security denominated in a foreign currency, it may desire to "lock
in" the U.S. dollar price of the security in relation to another currency by
entering into a forward contract to buy the amount of foreign currency needed
to settle the transaction. Second, when the Investment Manager believes that
the currency of a particular foreign country may suffer or enjoy a substantial
movement against another currency, it may enter into a forward contract to
sell or buy the former foreign currency (or another currency which acts as a
proxy for that currency) approximating the value of some or all of the Fund's
portfolio securities denominated in such foreign currency. This second
investment practice is generally referred to as "cross-hedging." The Fund's
forward transactions may call for the delivery of one foreign currency in
exchange for another foreign currency and may at times not involve currencies
in which its portfolio securities are then denominated. The Fund has no
specific limitation on the percentage of assets it may commit to forward
contracts, subject to its stated investment objective and policies, except
that the Fund will not enter a forward contract if the amount of assets set
aside to cover forward contracts would impede portfolio management or the
Fund's ability to meet redemption requests. Although forward contracts will be
used primarily to protect the Fund from adverse currency movements, they also
involve the risk that anticipated currency movements will not be accurately
predicted.
The Fund may purchase and write put and call options on foreign currencies
for the purpose of protecting against declines in the U.S. dollar value of
foreign currency denominated portfolio securities and against increases in the
U.S. dollar cost of such securities to be acquired. As in the case of other
kinds of options, however, the writing of an option on a foreign currency
constitutes only a partial hedge, up to the amount of the premium received,
and the Fund could be required to purchase or sell foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The purchase of an
option on a foreign currency may constitute an effective hedge against
fluctuations in exchange rates although, in the event of rate movements
adverse to the Fund's position, it may forfeit the entire amount of the
premium plus related transaction costs. Options on foreign currencies to be
written or purchased by the Fund are traded on U.S. and foreign exchanges or
over-the-counter.
FUTURES CONTRACTS. For hedging purposes only, the Fund may buy and sell
financial futures contracts, stock and bond index futures contracts and
foreign currency futures contracts. A financial futures contract is an
agreement between two parties to buy or sell a specified debt security at a
set price on a future date. An index futures contract is an agreement to take
or make delivery of an amount of cash based on the difference between the
value of the index at the beginning and at the end of the contract period. A
futures contract on a foreign currency is an agreement to buy or sell a
specified amount of a currency for 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 security, index or currency
fluctuates, either party to the contract is required to
5
<PAGE>
make additional margin payments, known as "variation margin," to cover any
additional obligation it may have under the contract. In addition, when the
Fund enters into a futures contract, it will segregate assets or "cover" its
position in accordance with the 1940 Act. See "Investment Objectives and
Policies -- Futures Contracts" in the SAI. The Fund may not commit more than
5% of its total assets to initial margin deposits on futures contracts.
WHEN-ISSUED SECURITIES. New issues of certain debt securities are often
offered on a when-issued basis, that is, the payment obligation and the
interest rate are fixed at the time the buyer enters into the commitment, but
delivery and payment for the securities normally take place after the date of
the commitment to purchase. The value of when-issued securities may vary prior
to and after delivery depending on market conditions and changes in interest
rate levels. However, the Fund will not accrue any income on these securities
prior to delivery. The Fund will maintain in a segregated account with its
Custodian an amount of cash or high quality debt securities equal (on a daily
marked-to-market basis) to the amount of its commitment to purchase the when-
issued securities.
BORROWING. The Board of Trustees has adopted a policy of limiting the Fund's
borrowing to 5% of the value of its net assets to increase its holdings of
portfolio securities. Under the 1940 Act, the Fund is required to maintain
continuous asset coverage of 300% with respect to such borrowings and to sell
(within three days) sufficient portfolio holdings to restore such coverage if
it should decline to less than 300% due to market fluctuations or otherwise,
even if disadvantageous from an investment standpoint. Leveraging by means of
borrowing will exaggerate the effect of any increase or decrease in the value
of portfolio securities on the Fund's net asset value, and money borrowed will
be subject to interest and other costs (which may include commitment fees
and/or the cost of maintaining minimum average balances) which may or may not
exceed the income received from the securities purchased with borrowed funds.
LOANS OF PORTFOLIO SECURITIES. The Fund may lend to broker-dealers portfolio
securities with an aggregate market value of up to one-third of its total
assets. Such loans must be secured by collateral (consisting of any
combination of cash, U.S. Government securities or irrevocable letters of
credit) in an amount at least equal (on a daily marked-to-market basis) to the
current market value of the securities loaned. The Fund may terminate the
loans at any time and obtain the return of the securities. The Fund will
continue to receive any interest or dividends paid on the loaned securities
and will continue to have voting rights with respect to the securities.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS"). CMOs are fixed-income
securities which are collateralized by pools of mortgage loans created by
commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other issuers in the U.S. In effect, CMOs
"pass through" the monthly payments made by individual borrowers on their
mortgage loans. Timely payment of interest and principal (but not the market
value) of these pools is supported by various forms of insurance or guarantees
issued by U.S. Government agencies, private issuers and the mortgage poolers.
The Fund may buy CMOs without insurance or guarantees if, in the opinion of
the Investment Manager, the sponsor is creditworthy. Prepayments of the
mortgages included in the mortgage pool may influence the yield of the CMO. In
addition, prepayments usually increase when interest rates are decreasing,
thereby decreasing the life of the pool. As a result, reinvestment of
prepayments may be at a lower rate than that on the original CMO.
U.S. GOVERNMENT SECURITIES. U.S. Government securities are obligations of,
or guaranteed by, the U.S. Government, its agencies or instrumentalities. Some
U.S. Government securities, such as Treasury bills and bonds, are supported by
the full faith and credit of the U.S. Treasury; others, such as those of
Federal Home Loan Banks, are supported by the right of the issuer to borrow
from the Treasury; others, such as those of the Federal National Mortgage
Association, are supported by the discretionary authority of the U.S.
Government to purchase the agency's obligations; still others are supported
only by the credit of the instrumentality.
COMMERCIAL PAPER. Investments in commercial paper are limited to obligations
rated Prime-1 by Moody's or A-1 by S&P or, if not rated by Moody's or S&P,
issued by companies having an outstanding debt issue currently rated Aaa or Aa
by Moody's or AAA or AA by S&P. See the Appendix in the SAI for a description
of these ratings.
6
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RISK FACTORS
Shareholders should understand that all investments involve risk and there
can be no guarantee against loss resulting from an investment in the Fund nor
can there be any assurance that the Fund's investment objective will be
attained. As with any investment in securities, the value of, and income from,
an investment in the Fund can decrease as well as increase, depending on a
variety of factors which may affect the values and income generated by the
Fund's portfolio securities, including general economic conditions and market
factors. In addition to the factors which affect the value of individual
securities, a Shareholder may anticipate that the value of the Shares of the
Fund will fluctuate with movements in the broader equity and bond markets, as
well. A decline in the stock market of any country in which the Fund is
invested may also be reflected in declines in the price of Shares of the Fund.
Changes in currency valuations will also affect the price of Shares of the
Fund. History reflects both decreases and increases in worldwide stock markets
and currency valuations, and these may reoccur unpredictably in the future.
Additionally, investment decisions made by the Investment Manager will not
always be profitable or prove to have been correct. The Fund is not intended
as a complete investment program.
The Fund is a "non-diversified" investment company, which means the Fund is
not limited in the proportion of its assets that may be invested in the
securities of a single issuer. However, the Fund intends to conduct its
operations so as to qualify as a "regulated investment company" for purposes
of the Internal Revenue Code of 1986, as amended (the "Code"), which generally
will relieve the Fund of any liability for Federal income tax to the extent
its earnings are distributed to Shareholders. See "Federal Tax Information."
To so qualify, among other requirements, the Fund will limit its investments
so that, at the close of each quarter of the taxable year, (i) not more than
25% of the market value of the Fund's total assets will be invested in the
securities of a single issuer, and (ii) with respect to 50% of the market
value of its total assets, not more than 5% of the market value of its total
assets will be invested in the securities of a single issuer and the Fund will
not own more than 10% of the outstanding voting securities of a single issuer.
The Fund's investments in U.S. Government securities are not subject to these
limitations. Because the Fund, as a non-diversified investment company, may
invest in a smaller number of individual issuers than a diversified investment
company, and may be more susceptible to any single economic, political or
regulatory occurrence, an investment in the Fund may present greater risk to
an investor than an investment in a diversified company.
The Fund has the right to purchase securities in any foreign country,
developed or underdeveloped. Investors should consider carefully the
substantial risks involved in investing in securities issued by companies and
governments of foreign nations, which are in addition to the usual risks
inherent in domestic investments. There is the possibility of expropriation,
nationalization or confiscatory taxation, taxation of income earned in foreign
nations or other taxes with respect to investments in foreign nations, foreign
exchange controls (which may include suspension of the ability to transfer
currency from a given country), default in foreign government securities,
political or social instability or diplomatic developments which could affect
investments in securities of issuers in foreign nations. Some countries may
withhold portions of interest and dividends at the source. In addition, in
many countries there is less publicly available information about issuers than
is available in reports about companies in the United States. Foreign
companies are not generally subject to uniform accounting and auditing and
financial reporting standards, and auditing practice and requirements may not
be comparable to those applicable to United States companies. Further, the
Fund may encounter difficulties or be unable to pursue legal remedies and
obtain judgments in foreign courts. Commission rates in foreign countries,
which are sometimes fixed rather than subject to negotiation as in the United
States, are likely to be higher. Foreign securities markets also have
different clearance and settlement procedures, and in certain markets there
have been times when settlements have been unable to keep pace with the volume
of securities transactions, making it difficult to conduct such transactions.
Delays in settlement could result in temporary periods when assets of the Fund
are uninvested and no return is earned thereon. The inability of the Fund to
make intended security purchases due to settlement problems could cause the
Fund to miss attractive investment opportunities. Inability to dispose of
portfolio securities due to settlement problems could result either in losses
to the Fund due to subsequent declines in value of the portfolio security or,
if the Fund has entered into a contract to sell the security, could result in
possible liability to the purchaser. In many foreign countries, there is less
government supervision and regulation of business and industry practices,
stock exchanges, brokers and listed companies than in the United States.
7
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The foreign securities markets of many of the countries in which the Fund may
invest may also be smaller, less liquid, and subject to greater price
volatility than those in the United States. The Fund may invest in Eastern
European countries, which involves special risks that are described under
"Risk Factors" in the SAI.
The Fund usually effects currency exchange transactions on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign exchange market.
However, some price spread on currency exchange (to cover service charges)
will be incurred when the Fund converts assets from one currency to another.
The Fund is authorized to invest in any debt security, including securities
rated in any category by S&P or Moody's and securities which are unrated by
any rating agency. As an operating policy, which may be changed by the Board
of Trustees without Shareholder approval, the Fund will not invest more than
5% of its total assets in debt securities rated BBB or lower by S&P or Baa or
lower by Moody's. The Board may consider a change in this operating policy if,
in its judgment, economic conditions change such that a higher level of
investment in high risk, lower quality debt securities would be consistent
with the interests of the Fund and its Shareholders. High risk, lower quality
debt securities, commonly referred to as "junk bonds," are regarded, on
balance, as predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with the terms of the
obligation and may be in default. Unrated debt securities are not necessarily
of lower quality than rated securities but they may not be attractive to as
many buyers. Regardless of rating levels, all debt securities considered for
purchase (whether rated or unrated) will be carefully analyzed by the
Investment Manager to insure, to the extent possible, that the planned
investment is sound. The Fund may, from time to time, purchase defaulted debt
securities if, in the opinion of the Investment Manager, the issuer may resume
interest payments in the near future. The Fund will not invest more than 10%
of its total assets in defaulted debt securities, which may be illiquid.
Successful use of futures contracts and related options is subject to
special risk considerations. A liquid secondary market for any futures or
option contract may not be available when the Fund seeks to close a futures or
option position. In addition, there may be an imperfect correlation between
movements in the securities or foreign currency on which the futures or option
contract is based and movements in the securities or currency in the Fund's
portfolio. Successful use of futures or option contracts is further dependent
on the Investment Manager's ability to correctly predict movements in the
securities or foreign currency markets and no assurance can be given that its
judgment will be correct. Successful use of options on securities or indices
is subject to similar risk considerations.
There are further risk considerations, including possible losses through the
holding of securities in domestic and foreign custodian banks and
depositories, described in the SAI.
HOW TO BUY SHARES OF THE FUND
Shares of the Fund may be purchased at the Offering Price through any broker
which has a dealer agreement with Franklin Templeton Distributors, Inc.
("FTD"), the Principal Underwriter of the Shares of the Fund, or directly from
FTD upon receipt by FTD of a completed Shareholder Application and check. The
minimum initial purchase order is $100 (other than in monthly investment
plans, such as sponsored payroll deduction, automatic investment, split-
funding or comparable plans, which require a minimum of $25), with subsequent
investments of $25 or more.
NET ASSET VALUE. The net asset value of the Shares of the Fund is computed
as of the close of trading on each day the New York Stock Exchange is open for
trading, by dividing the value of the Fund's securities plus any cash and
other assets (including accrued interest and dividends receivable) less all
liabilities (including accrued expenses) by the number of Shares outstanding,
adjusted to the nearest whole cent. A security listed or traded on a
recognized stock exchange or NASDAQ is valued at its last sale price on the
principal exchange on which the security is traded. The value of a foreign
security is determined in its national currency as of the close of trading on
the foreign exchange on which it is traded, or as of the close of trading on
the New York Stock Exchange, if that is earlier, and that value is then
converted into its U.S. dollar equivalent at the foreign exchange rate in
effect at noon, New York time, on the day the value
8
<PAGE>
of the foreign security is determined. If no sale is reported at that time,
the mean between the current bid and asked price is used. Occasionally, events
which affect the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the New York
Stock Exchange, and will therefore not be reflected in the computation of the
Fund's net asset value. If events materially affecting the value of such
securities occur during such period, then these securities will be valued at
fair value as determined by the management and approved in good faith by the
Board of Trustees. All other securities for which over-the-counter market
quotations are readily available are valued at the mean between the current
bid and asked price. Securities for which market quotations are not readily
available and other assets are valued at fair value as determined by the
management and approved in good faith by the Board of Trustees.
OFFERING PRICE. The price to the public on purchases of the Fund's Shares
made at one time by a single purchaser, by an individual, his or her spouse
and their children under the age of 21, or by a single trust or fiduciary
account other than an employee benefit plan holding Shares of the Fund on or
before February 1, 1995, is the net asset value per Share plus a sales charge
not exceeding 4.25% of the Offering Price (equivalent to 4.44% of the net
asset value), which is reduced on larger sales as shown below.
<TABLE>
<CAPTION>
TOTAL SALES CHARGE
-------------------------------------------- -------------------
AS A PERCENTAGE OF AS A PERCENTAGE OF NET PORTION OF TOTAL
AMOUNT OF SINGLE SALE OFFERING PRICE OF THE ASSET VALUE OF THE OFFERING PRICE
AT OFFERING PRICE SHARES PURCHASED SHARES PURCHASED RETAINED BY DEALERS
--------------------- --------------------- ---------------------- -------------------
<S> <C> <C> <C>
Less than $100,000...... 4.25% 4.44% 4.00%
$100,000 but less than
$250,000............... 3.50% 3.63% 3.25%
$250,000 but less than
$500,000............... 2.75% 2.83% 2.50%
$500,000 but less than
$1,000,000............. 2.15% 2.20% 2.00%
$1,000,000 or more...... none none (see below)*
</TABLE>
- -------
* The following commissions will be paid by FTD to dealers who initiate and
are responsible for purchases of $1 million or more or for purchases made at
net asset value by certain retirement plans of organizations with collective
retirement plan assets of $10 million or more: 1.00% on sales of up to $2
million, plus 0.80% on sales of $2 million to $3 million, plus 0.50% on
sales of $3 million to $50 million, plus 0.25% on sales of $50 million to
$100 million, plus 0.15% on sales in excess of $100 million.
No initial sales charge applies on investments of $1 million or more, but a
contingent deferred sales charge of 1% is imposed on certain redemptions
within one year of the purchase. See "How to Sell Shares of the Fund --
Contingent Deferred Sales Charge."
A sales charge of 4% of the Offering Price (4.17% of the net asset value) is
applicable to all purchases of Shares made for any qualified or non-qualified
employee benefit plan which is a Shareholder in the Fund on or before February
1, 1995. Of the 4% sales charge applicable to such purchases, 3.20% of the
Offering Price will be retained by dealers.
At the discretion of FTD, the entire sales commission may at times be
reallowed to dealers. During periods when 90% or more of the sales commission
is reallowed, such dealers may be deemed to be underwriters as that term is
defined in the Securities Act of 1933. FTD or its affiliates, at their
expense, may also provide additional compensation to dealers in connection
with sales of Shares of the Fund and other funds in the Franklin Group of
Funds(R) and the Templeton Family of Funds (collectively, the "Franklin
Templeton Group"). Compensation may include financial assistance to dealers in
connection with conferences, sales or training programs for their employees,
seminars for the public, advertising, sales campaigns and/or shareholder
services and programs regarding one or more funds in the Franklin Templeton
Group and other dealer-sponsored programs or events. In some instances, this
compensation may be made available only to certain dealers whose
representatives have sold or are expected to sell significant amounts of such
Shares. Compensation may include payment for travel expenses, including
lodging, incurred in connection with trips taken by invited registered
representatives and members of their families to locations within or outside
of the U.S. for meetings or seminars of a business nature. Dealers may not use
sales of the Fund's Shares to qualify for this compensation to the extent such
may be prohibited by the laws of any state or any self-regulatory agency, such
as the National Association of Securities Dealers, Inc. In addition, FTD or
its affiliates may
9
<PAGE>
make ongoing payments to brokerage firms, financial institutions (including
banks), and others to facilitate the administration and servicing of
shareholder accounts. None of the aforementioned additional compensation is
paid for by the Fund or its Shareholders.
A continuing trail fee will be paid to qualifying dealers at the annual rate
of 0.15% of the average daily net asset value of the Fund Shares purchased
prior to January 1, 1993, and 0.25% of the average daily net asset value of
the Fund Shares purchased after January 1, 1993, for Fund Shares registered in
the name of that broker-dealer as nominee or held in a Shareholder account
that designates that broker-dealer as dealer of record. This fee is paid in
order to promote selling efforts and to compensate dealers for providing
certain services, including processing purchase and redemption transactions,
establishing Shareholder accounts and providing certain information and
assistance with respect to the Fund.
As to telephone orders placed with FTD by dealers, the dealer must receive
the investor's order before the close of the New York Stock Exchange and
transmit it to FTD by 5:00 p.m., New York time, for the investor to receive
that day's Offering Price. Payment for such orders must be by check in U.S.
currency and must be promptly submitted to FTD. Orders mailed to FTD by
dealers or individual investors are effected at the Offering Price next
computed after the purchase order accompanied by payment has been received by
FTD. Such payment must be by check in U.S. currency drawn on a commercial bank
in the U.S. and, if over $100,000, may not be deemed to have been received
until the proceeds have been collected unless the check is certified or issued
by such bank. Any subscription may be rejected by FTD or by the Fund.
The Fund may impose a $10 charge against a Shareholder account in the event
that a check or draft submitted for the purchase of Fund Shares is returned
unpaid to the Fund.
Investors should promptly check the confirmation advice that is mailed after
each purchase (or redemption) in order to insure that it has been accurately
recorded in the investor's account.
CUMULATIVE QUANTITY DISCOUNT. The schedule of reduced sales charges also may
be applied to qualifying sales on a cumulative basis. For this purpose, the
dollar amount of the sale is added to the higher of (1) the value (calculated
at the applicable Offering Price) or (2) the purchase price, of any other
Shares of the Fund and/or other funds in the Franklin Templeton Group owned at
that time by the purchaser, his or her spouse, and their children under age
21. In addition, the aggregate investments of a trustee or other fiduciary
account (for an account under exclusive investment authority) may be
considered in determining whether a reduced sales charge is available, even
though there may be a number of beneficiaries of the account. For example, if
the investor held Shares valued at $90,000 (or, if valued at less than
$90,000, had been purchased for $90,000) and purchased an additional $10,000
of the Fund's Shares, the sales charge for the $10,000 purchase would be at
the rate of 3.50%. It is FTD's policy to give investors the best sales charge
rate possible; however, there can be no assurance that an investor will
receive the appropriate discount unless, at the time of placing the purchase
order, the investor or the dealer makes a request for the discount and gives
FTD sufficient information to determine whether the purchase will qualify for
the discount. On telephone orders from dealers for the purchase of Shares to
be registered in "street name," FTD will accept the dealer's instructions with
respect to the applicable sales charge rate. The cumulative quantity discount
may be amended or terminated at any time.
LETTER OF INTENT. Investors may also reduce sales charges on all investments
by means of a Letter of Intent ("LOI") which expresses the investor's
intention to invest a certain amount within a 13-month period in Shares of the
Fund or any other fund in the Franklin Templeton Group. See the Shareholder
Application. The minimum initial investment under an LOI is 5% of the total
LOI amount. Shares purchased with the first 5% of such amount will be held in
escrow to secure payment of the higher sales charge applicable to the Shares
actually purchased if the full amount indicated is not purchased, and such
escrowed Shares will be involuntarily redeemed to pay the additional sales
charge, if necessary. A purchase not originally made pursuant to an LOI may be
included under a subsequent LOI executed within 90 days of the purchase. Any
redemptions made by the Shareholder during the 13-month period will be
subtracted from the amount of the purchases for purposes of determining
whether the terms of the LOI have been completed. For a further description of
the Letter of Intent, see "Purchase, Redemption and Pricing of Shares --
Letter of Intent" in the SAI.
GROUP PURCHASES. An individual who is a member of a qualified group may also
purchase Shares of the Fund at the reduced sales charge applicable to the
group as a whole. The sales charge is based upon the aggregate dollar value of
Shares previously
10
<PAGE>
purchased and still owned by the group, plus the amount of the current
purchase. For example, if members of the group had previously invested and
still held $90,000 of Fund Shares and now were investing $10,000, the sales
charge would be 3.50%. Information concerning the current sales charge
applicable to a group may be obtained by contacting FTD.
A "qualified group" is one which (i) has been in existence for more than six
months, (ii) has a purpose other than acquiring Fund Shares at a discount, and
(iii) satisfies uniform criteria which enable FTD to realize economies of
scale in its costs of distributing Shares. A qualified group must have more
than 10 members, must be available to arrange for group meetings between
representatives of the Fund or FTD and the members, must agree to include
sales and other materials related to the Fund in its publications and mailings
to members at reduced or no cost to FTD, and must seek to arrange for payroll
deduction or other bulk transmission of investments to the Fund.
If an investor selects a payroll deduction plan, subsequent investments will
be automatic and will continue until such time as the investor notifies the
Fund and the investor's employer to discontinue further investments. Due to
the varying procedures to prepare, process and forward the payroll deduction
information to the Fund, there may be a delay between the time of the payroll
deduction and the time the money reaches the Fund. The investment in the Fund
will be made at the Offering Price per share determined on the day that both
the check and payroll deduction data are received in required form by the
Fund.
NET ASSET VALUE PURCHASES. Shares of the Fund may be purchased at net asset
value without imposition of a sales charge by the following persons: (i)
trustees or other fiduciaries purchasing securities for certain retirement
plans with assets of $10 million or more; (ii) directors, trustees and
officers of the investment companies sponsored by Templeton Worldwide, Inc.
and its affiliates (the "Templeton Group"), directors, officers and employees
(current or retired) in the Templeton Group (and their families) and
retirement plans established by the Templeton Group for employees; (iii)
companies exchanging shares with or selling assets to the Fund pursuant to a
merger, acquisition or exchange offer; (iv) registered securities dealers and
their affiliates, for their investment account only, and registered personnel
and employees of securities dealers and their spouses and family members in
accordance with the internal policies and procedures of the employing
securities dealer; (v) insurance company separate accounts for pension plan
contracts; (vi) accounts managed by the Templeton Group; (vii) Shareholders of
Templeton Institutional Funds, Inc. reinvesting redemption proceeds from that
fund under an employee benefit plan qualified under Section 401 of the
Internal Revenue Code of 1986, as amended (the "Code") in Shares of the Fund;
(viii) certain unit investment trusts and unit holders of such trusts
reinvesting their distributions from the trusts in the Fund; and (ix)
employees (and their families) of financial institutions which have, directly
or through affiliates, signed an agreement with FTD.
Shares of the Fund may be purchased at net asset value by investment
advisers and/or affiliated broker-dealers who have entered into a supplemental
agreement with FTD, on behalf of their clients who are participating in a
comprehensive fee program (also known as a wrap fee program). Contact Franklin
Templeton Institutional Services for additional information.
Shares of the Fund may also be purchased at net asset value by employee
benefit plans qualified under Section 401 of the Code including salary
reduction plans qualified under Section 401(k) of the Code, subject to minimum
requirements with respect to number of employees or amount of purchase, which
may be established by FTD. Currently, those criteria require that the employer
establishing the plan have 500 or more employees or that the amount invested
or to be invested during the subsequent 13-month period in the Fund or any
other funds in the Franklin Templeton Group must total at least $1 million.
Employee benefit plans not qualified under Section 401 of the Code may be
afforded the same privilege if they meet the above requirements as well as the
uniform criteria for qualified groups described above under "Group Purchases"
which enable FTD to realize economies of scale in its sales efforts and sales-
related expenses. If investments by employee benefit plans at net asset value
are made through a dealer who has executed a dealer agreement with FTD, FTD or
one of its affiliates may make a payment, out of their own resources, to such
dealer in an amount not to exceed 0.25% of the amount invested. Contact
Franklin Templeton Institutional Services for additional information.
Shares of the Fund may also be purchased at net asset value by anyone who
has taken a distribution from an existing retirement plan already invested in
any fund(s) in the Franklin Templeton Group. In order to exercise this
privilege, a written order for the purchase of Shares of the Fund must be
received by Franklin Templeton Trust Company, the Fund, or Franklin Templeton
Investor Services, Inc.
11
<PAGE>
(the "Transfer Agent") within 120 days after the plan distribution. To obtain
a free Prospectus for any fund in the Franklin Templeton Group, please call
toll free at 1-800-DIAL BEN (1-800-342-5236).
Shares of the Fund may be purchased at net asset value by trust companies
and bank trust departments for funds over which they exercise exclusive
discretionary investment authority and which are held in a fiduciary, agency,
advisory, custodial or similar capacity. Such purchases are subject to minimum
requirements with respect to amount of purchase, which may be established by
FTD. Currently, those criteria require that the amount invested or to be
invested during the subsequent 13-month period in the Fund or any other funds
in the Franklin Templeton Group must total at least $1 million. Orders for
such accounts will be accepted by mail accompanied by a check, or by telephone
or other means of electronic data transfer directly from the bank or trust
company, with payment by federal funds received by the close of business on
the next business day following such order. If an investment by a trust
company or bank trust department at net asset value is made through a dealer
who has executed a dealer agreement with FTD, FTD or one of its affiliates may
make payment, out of their own resources, to such dealer in an amount not to
exceed 0.25% of the amount invested. Contact Franklin Templeton Institutional
Services for additional information.
Shares of the Fund may also be purchased at net asset value by an investor
who has, within the past 60 days, redeemed an investment in an unaffiliated
mutual fund which charged the investor a contingent deferred sales charge upon
redemption, and which has investment objectives similar to those of the Fund.
Shares of the Fund may also be purchased at net asset value by any state,
county or city, or any instrumentality, department, authority or agency
thereof, which has determined that the Fund is a legally permissible
investment and which is prohibited by applicable investment laws from paying a
sales charge or commission in connection with the purchase of shares of any
registered management investment company an ("eligible governmental
authority"). Such investors should consult their own legal advisers to
determine whether and to what extent the Shares of the Fund constitute legal
investments for them. Municipal investors considering investment of proceeds
of bond offerings into the Fund should consult with expert counsel to
determine the effect, if any, of various payments made by the Fund or its
investment manager on arbitrage rebate calculations. If an investment by an
eligible governmental authority at net asset value is made through a dealer
who has executed a dealer agreement with FTD, FTD or one of its affiliates may
make a payment, out of their own resources, to such dealer in an amount not to
exceed 0.25% of the amount invested. Contact Franklin Templeton Institutional
Services for additional information.
AUTOMATIC INVESTMENT PLAN. Investors may accumulate Fund Shares regularly
each month by means of automatic debits to their checking accounts ($25
minimum). Forms for this purpose are in the Shareholder Application in this
Prospectus. Such a plan is voluntary and may be discontinued by written notice
to FTD, which must be received at least 10 days prior to the collection date,
or by FTD upon written notice to the investor at least 30 days prior to the
collection date.
INSTITUTIONAL ACCOUNTS. Institutional investors will likely be required to
complete an institutional account application. There may also be additional
methods of opening accounts, purchasing, redeeming or exchanging Shares of the
Fund available for institutional accounts. To obtain an institutional account
application or additional information regarding institutional accounts,
contact Franklin Templeton Institutional Services at 1-800-321-8563.
ACCOUNT STATEMENTS. Shareholder accounts are opened in accordance with the
Shareholder's registration instructions. Transactions in the account, such as
additional investments and dividend reinvestments, will be reflected on
regular confirmation statements from the Transfer Agent.
TEMPLETON STAR SERVICE. Shareholders may check the current prices of Shares,
account balances/values, a description of the last transaction, and duplicate
account statements, 24 hours a day, 365 days a year, with Templeton STAR
Service by calling 1-800-654-0123 from a touch-tone telephone. A fund code
(the Fund's Code is 206) and the Shareholder's account number are necessary
for accessing information (other than Share prices) from Templeton STAR
Service.
RETIREMENT PLANS. Shares of the Fund may be purchased through various
retirement plans including the following plans for which Franklin Templeton
Trust Company or its affiliate acts as trustee or custodian: IRAs, Simplified
Employee Pensions, 403(b) plans,
12
<PAGE>
qualified plans for corporations, self-employed individuals and partnerships,
and 401(k) plans. For further information about any of the plans, agreements,
applications and annual fees, contact Franklin Templeton Distributors, Inc. To
determine which retirement plan is appropriate, an investor should contact his
or her tax adviser.
EXCHANGE PRIVILEGE
A Shareholder may exchange Shares into other funds in the Franklin Templeton
Group (except Templeton American Trust, Inc., Templeton Capital Accumulator
Fund, Inc., Templeton Variable Annuity Fund, Templeton Variable Products
Series Fund and Franklin Valuemark II). However, until February 1, 1995,
Shares purchased at net asset value and subject to a contingent deferred sales
charge (see "How to Sell Shares of the Fund -- Contingent Deferred Sales
Charge") are not eligible for exchange between the Templeton Family of Funds
and the Franklin Group of Funds (R) (this restriction does not apply to
exchanges within an employee benefit plan).
Exchange purchases are subject to the minimum investment requirements of the
fund purchased and no sales charge generally applies. However, exchanges of
shares from the Franklin Templeton Money Funds are subject to applicable sales
charges on the funds being purchased, unless the Franklin Templeton Money Fund
shares were acquired by an exchange from a fund having a sales charge, or by
reinvestment of dividends or capital gains distributions. Exchanges of shares
of a fund which were purchased with a lower sales charge to a fund which has a
higher sales charge will be charged the difference, unless the shares were
held in the original fund for at least six months prior to executing the
exchange. All exchanges are permitted only after at least 15 days have elapsed
from the date of the purchase of the Shares to be exchanged.
A Shareholder may exchange Shares by writing to the Transfer Agent (see "How
to Sell Shares of the Fund"), by contacting his or her investment dealer or --
if the Shareholder Application indicates that the Shareholder has not
declined the option -- by telephoning 1-800-354-9191. Telephone exchange
instructions must be received by FTD by 4:00 p.m., New York time. Telephonic
exchanges can involve only Shares in non-certificated form. Shares held in
certificate form are not eligible, but may be returned and qualify for these
services. All accounts involved in a telephonic exchange must have the same
registration and dividend option as the account from which the Shares are
being exchanged. The Fund and the Transfer Agent will employ reasonable
procedures to confirm that instructions communicated by telephone are genuine.
Please refer to "Telephone Transactions-- Verification Procedures." Forms for
declining the telephone exchange privilege and prospectuses of the other funds
in the Franklin Templeton Group may be obtained from FTD. Exchange redemptions
and purchases are processed simultaneously at the share prices next determined
after the exchange order is received. (See "How to Buy Shares of the Fund --
Offering Price.") A gain or loss for tax purposes generally will be realized
upon the exchange, depending on the tax basis of the Shares redeemed.
This exchange privilege is available only in states where shares of the fund
being acquired may legally be sold and may be modified, limited or terminated
at any time by the Fund upon sixty (60) days' written notice. A Shareholder
who wishes to make an exchange should first obtain and review a current
prospectus of the fund into which he or she wishes to exchange. Broker-dealers
who process exchange orders on behalf of their customers may charge a fee for
their services. Such fee may be avoided by making requests for exchange
directly to the Transfer Agent.
The equivalent of an exchange involving retirement accounts (including IRAs)
between the Templeton Family of Funds and the Franklin Group of Funds (R)
requires the completion of additional documentation before it can be effected.
Call 1-800-354-9191 for further information and forms.
EXCHANGES BY TIMING ACCOUNTS. In the case of market timing or allocation
services ("Timing Accounts"), FTD will deduct an administrative service fee of
$5.00 per exchange. Timing Accounts generally include accounts administered so
as to redeem or purchase shares based upon certain predetermined market
indicators. In accordance with the terms of their respective prospectuses,
certain funds in the Franklin Templeton Group do not accept or may place
differing limitations than those described below on exchanges by Timing
Accounts.
13
<PAGE>
The Fund reserves the right to temporarily or permanently terminate the
exchange privilege or reject any specific purchase order for any Timing
Account or any person whose transactions seem to follow a timing pattern who:
(i) makes an exchange request out of the Fund within two weeks of an earlier
exchange request out of the Fund, (ii) makes more than two exchanges out of
the Fund per calendar quarter, or (iii) exchanges shares equal in value to at
least $5 million, or more than 1% of the Fund's net assets. Accounts under
common ownership or control, including accounts administered so as to redeem
or purchase shares based upon certain predetermined market indicators, will be
aggregated for purposes of the exchange limits.
In addition, the Fund reserves the right to refuse the purchase side of
exchange requests by any Timing Account, person, or group if, in the
Investment Manager's judgment, the Fund would be unable to invest effectively
in accordance with its investment objectives and policies, or would otherwise
potentially be adversely affected. A Shareholder's exchanges into the Fund may
be restricted or refused if the Fund receives or anticipates simultaneous
orders affecting significant portions of the Fund's assets. In particular, a
pattern of exchanges that coincides with a "market timing" strategy may be
disruptive to the Fund and therefore may be refused.
Finally, as indicated above, the Fund and FTD reserve the right to refuse
any order for the purchase of Shares.
HOW TO SELL SHARES OF THE FUND
Shares will be redeemed, without charge, on request of the Shareholder in
"Proper Order" to the Transfer Agent. "PROPER ORDER" MEANS THAT THE REQUEST TO
REDEEM MUST MEET ALL OF THE FOLLOWING REQUIREMENTS:
1. Except as provided below under "Redemptions by Telephone," it must be in
writing, signed by the Shareholder(s) exactly in the manner as the Shares are
registered, and must specify either the number of Shares, or the dollar amount
of Shares, to be redeemed and sent to Franklin Templeton Investor Services,
Inc., P.O. Box 33030, St. Petersburg, Florida 33733-8030;
2. The signature(s) of the redeeming Shareholder(s) must be guaranteed by
an "eligible guarantor," including (1) national or state banks, savings
associations, savings and loan associations, trust companies, savings banks,
industrial loan companies and credit unions; (2) national securities
exchanges, registered securities associations and clearing agencies; (3)
securities broker-dealers which are members of a national securities exchange
or a clearing agency or which have minimum net capital of $100,000; or (4)
institutions that participate in the Securities Transfer Agent Medallion
Program ("STAMP") or other recognized signature medallion program. A notarized
signature will not be sufficient for the request to be in Proper Order. If the
Shares are registered in more than one name, the signature of each of the
redeeming Shareholders must be guaranteed. A signature guarantee is not
required for redemptions of $50,000 or less, requested by and payable to all
Shareholders of record, to be sent to the address of record for that account.
However, the Fund reserves the right to require signature guarantees on all
redemptions. A signature guarantee is required in connection with any written
request for transfer of Shares. Also, a signature guarantee is required if the
Fund or the Transfer Agent believes that a signature guarantee would protect
against potential claims based on the transfer instructions, including, for
example, when (a) the current address of one or more joint owners of an
account cannot be confirmed, (b) multiple owners have a dispute or give
inconsistent instructions to the Fund, (c) the Fund has been notified of an
adverse claim, (d) the instructions received by the Fund are given by an
agent, not the actual registered owner, (e) the Fund determines that joint
owners who are married to each other are separated or may be the subject of
divorce proceedings, or (f) the authority of a representative of a
corporation, partnership, association, or other entity has not been
established to the satisfaction of the Fund;
3. Any outstanding certificates must accompany the request together with a
stock power signed by the Shareholder(s), with signature(s) guaranteed as
described in Item 2 above;
14
<PAGE>
4. Liquidation requests of corporate, partnership, trust and custodianship
accounts, and accounts under court jurisdiction, require the following
documentation to be in proper form:
. Corporation--(i) Signature guaranteed letter of instruction from the
authorized officer(s) of the corporation, and (ii) a corporate
resolution in a form satisfactory to the Transfer Agent;
. Partnership--(i) Signature guaranteed letter of instruction from a
general partner and, if necessary, (ii) pertinent pages from the
partnership agreement identifying the general partners or other
documentation in a form satisfactory to the Transfer Agent;
. Trust--(i) Signature guaranteed letter of instruction from the
trustee(s), and (ii) a copy of the pertinent pages of the trust
document listing the trustee(s) or a certificate of incumbency if the
trustee(s) are not listed on the account registration;
. Custodial (other than a retirement account)--Signature guaranteed
letter of instruction from the custodian;
. Accounts under court jurisdiction--Check court documents and the
applicable state law since these accounts have varying requirements,
depending upon the state of residence; and
5. Redemption of Shares held in a retirement plan for which Franklin
Templeton Trust Company or its affiliate acts as trustee or custodian must
conform to the distribution requirements of the plan and the Fund's redemption
requirements above. Distributions from such plans are subject to additional
requirements under the Code and certain documents (available from the Transfer
Agent) must be completed before the distribution may be made. For example,
distributions from retirement plans are subject to withholding requirements
under the Code, and the IRS Form W-4P (available from the Transfer Agent) may
be required to be submitted to the Transfer Agent with the distribution
request, or the distribution will be delayed. Franklin Templeton Investor
Services, Inc. and its affiliates assume no responsibility to determine
whether a distribution satisfies the conditions of applicable tax laws and
will not be responsible for any penalties assessed.
To avoid delay in redemption or transfer, Shareholders having questions
about these requirements should contact the Account Services Department by
calling 1-800-354-9191 or 813-823-8712.
The redemption price will be the net asset value of the Shares next computed
after the redemption request in Proper Order is received by the Transfer
Agent. Payment of the redemption price ordinarily will be made by check (or by
wire at the sole discretion of the Transfer Agent if wire transfer is
requested, including name and address of the bank and the Shareholder's
account number to which payment of the redemption proceeds is to be wired)
within seven days after receipt of the redemption request in Proper Order.
However, if Shares have been purchased by check, the Fund will make redemption
proceeds available when a Shareholder's check received for the Shares
purchased has been cleared for payment by the Shareholder's bank, which,
depending upon the location of the Shareholder's bank, could take up to
fifteen days or more. The check will be mailed by first class mail to the
Shareholder's registered address (or as otherwise directed). Remittance by
wire (to a commercial bank account in the same name(s) as the Shares are
registered) or express mail, if requested, are subject to a handling charge of
up to $15, which will be deducted from the redemption proceeds.
The Fund, through FTD, also repurchases Shares (whether in certificate or
book-entry form) through securities dealers. The Fund normally will accept
orders to repurchase such Shares by wire or telephone from dealers for their
customers at the net asset value next computed after the dealer has received
the Shareholder's request for repurchase, if the dealer received such request
before closing time of the New York Stock Exchange on that day. Dealers have
the responsibility of submitting such repurchase requests by calling not later
than 5:00 p.m., New York time, on such day in order to obtain that day's
applicable redemption price. Repurchase of Shares is for the convenience of
Shareholders and does not involve a charge by the Fund; however, securities
dealers may impose a charge on the Shareholder for transmitting the notice of
repurchase to the Fund. The Fund reserves the right to reject any order for
repurchase, which right of rejection might adversely affect Shareholders
seeking redemption through the repurchase procedure. Ordinarily payment will
be made to the securities dealer within seven days after receipt of a
repurchase order and Share certificate (if any) in "Proper Order" as set forth
above. The Fund will also accept, from member firms of the New York Stock
Exchange, orders to repurchase Shares for
15
<PAGE>
which no certificates have been issued by wire or telephone without a
redemption request signed by the Shareholder, provided the member firm
indemnifies the Fund and FTD from any liability resulting from the absence of
the Shareholder's signature. Forms for such indemnity agreement can be
obtained from FTD.
The Fund may involuntarily redeem an investor's Shares if the net asset
value of such Shares is less than $100, provided that involuntary redemptions
will not result from fluctuations in the value of an investor's Shares. In
addition, the Fund may involuntarily redeem the Shares of any investor who has
failed to provide the Fund with a certified taxpayer identification number or
such other tax-related certifications as the Fund may require. A notice of
redemption, sent by first-class mail to the investor's address of record, will
fix a date not less than 30 days after the mailing date, and Shares will be
redeemed at the net asset value at the close of business on that date, unless
sufficient additional Shares are purchased to bring the aggregate account
value up to $100 or more, or unless a certified taxpayer identification number
(or such other information as the Fund has requested) has been provided, as
the case may be. A check for the redemption proceeds will be mailed to the
investor at the address of record.
REINSTATEMENT PRIVILEGE. A former Shareholder of any eligible fund in the
Franklin Templeton Group may reinvest proceeds from a redemption or a dividend
or capital gains distribution, without a sales charge, in any other eligible
Templeton Fund by sending a written request and a check to the Transfer Agent
within 120 days after the date of the redemption or distribution. Reinvestment
will be at the next calculated net asset value after receipt. However, if a
Shareholder's original investment was in a Fund with a lower sales charge, or
no sales charge, the Shareholder must pay the difference. Credit will be given
for any contingent deferred sales charge paid on the Shares redeemed. The
amount of gain or loss resulting from a redemption may be affected by exercise
of the reinstatement privilege if the Shares redeemed were held for 90 days or
less, or if a Shareholder reinvests in the same fund within 30 days.
CONTINGENT DEFERRED SALES CHARGE. In order to recover commissions paid to
dealers on qualified investments of $1 million or more, or for purchases made
by certain retirement plans of organizations with collective retirement plan
assets of $10 million or more, a contingent deferred sales charge of 1%
applies to certain redemptions by those investors within the first year after
investing. The charge is 1% of the lesser of the value of the Shares redeemed
(exclusive of reinvested dividends and capital gains distributions) or the
total cost of such Shares, and is retained by FTD. In determining if a charge
applies and the amount of any such charge, the first Shares redeemed are those
purchased with reinvested dividends and capital gains distributions, followed
by others held the longest. The contingent deferred sales charge is waived for
exchanges (except if Shares acquired by exchange were then redeemed within 12
months of the initial purchase); for distributions to participants in
qualified retirement plans due to death, disability or attainment of age 59
1/2; for tax-free returns of excess contributions to employee benefit plans;
for distributions from employee benefit plans; and for redemptions through the
Systematic Withdrawal Plan.
SYSTEMATIC WITHDRAWAL PLAN. A Shareholder may establish a Systematic
Withdrawal Plan ("Plan") and receive periodic payments from the account
provided that the net asset value of the Shares held by the Shareholder is at
least $5,000. There are no service charges for establishing or maintaining a
Plan. The minimum amount which the Shareholder may withdraw is $50 per
withdrawal transaction although this is merely the minimum amount allowed
under the Plan and should not be mistaken for a recommended amount. The Plan
may be established on a monthly, quarterly, semi-annual or annual basis. If
the Shareholder establishes a Plan, any capital gain distributions and income
dividends to the Shareholder's account must be reinvested for the
Shareholder's account in additional Shares at net asset value. Payments are
then made from the liquidation of Shares at net asset value on the day of the
liquidation (which is generally on or about the 25th of the month) to meet the
specified withdrawals. Payments are generally received three to five days
after the date of liquidation. By completing the "Special Payment Instructions
for Distributions" section of the Shareholder Application included with this
Prospectus, a Shareholder may direct the selected withdrawals to another fund
in the Franklin Templeton Group, to another person, or directly to a checking
account. Liquidation of Shares may reduce or possibly exhaust the Shares in
the Shareholder's account, to the extent withdrawals exceed Shares earned
through dividends and distributions, particularly in the event of a market
decline. If the withdrawal amount exceeds the total Plan balance, the account
will be closed and the remaining balance will be sent to the Shareholder. As
with other redemptions, a liquidation to make a withdrawal payment is a sale
for Federal income tax purposes.
16
<PAGE>
Because the amount withdrawn under the Plan may be more than the Shareholder's
actual yield or income, part of such a Plan payment may be a return of the
Shareholder's investment.
Maintaining a Plan concurrently with purchases of additional Shares of the
Fund would be disadvantageous because of the sales charge on the additional
purchases. The Shareholder should ordinarily not make additional investments
of less than $5,000 or three times the annual withdrawals under the Plan
during the time such a Plan is in effect. A Plan may be terminated on written
notice by the Shareholder or the Fund, and it will terminate automatically if
all Shares are liquidated or withdrawn from the account, or upon the Fund's
receipt of notification of the death or incapacity of the Shareholder.
Shareholders may change the amount (but not below $50) and schedule of
withdrawal payments or suspend one such payment by giving written notice to
the Transfer Agent at least seven business days prior to the end of the month
preceding a scheduled payment. Share certificates may not be issued while a
Plan is in effect.
REDEMPTIONS BY TELEPHONE. Shareholders who file a Telephone Redemption
Authorization Agreement (the "Agreement") (a copy of which is included in this
Prospectus) may redeem Shares of the Fund by telephone, subject to the
Restricted Account exception noted under "Telephone Transactions -- Restricted
Accounts." The Fund and the Transfer Agent will employ reasonable procedures
to confirm that instructions given by telephone are genuine. Shareholders,
however, bear the risk of loss in certain cases as described under "Telephone
Transactions -- Verification Procedures."
For Shareholder accounts with a completed Agreement on file, redemptions of
uncertificated Shares or Shares which have previously been deposited with the
Fund or the Transfer Agent may be made for up to $50,000 per day per Fund
account. Telephone redemption requests received before 4:00 p.m., New York
time, on any business day will be processed that same day. The redemption
check will be sent within seven days, made payable to all the registered
owners on the account, and will be sent only to the address of record.
Redemption requests by telephone will not be accepted within 30 days following
an address change by telephone. In that case, a Shareholder should follow the
other redemption procedures set forth in this Prospectus. Institutional
accounts which wish to execute redemptions in excess of $50,000 must complete
an Institutional Telephone Privileges Agreement which is available from
Franklin Templeton Institutional Services by telephoning 1-800-321-8563.
TELEPHONE TRANSACTIONS
Shareholders of the Fund and their dealer of record, if any, may be able to
execute various transactions by calling the Transfer Agent at 1-800-354-9191.
All Shareholders will be able to: (i) effect a change in address, (ii) change
a dividend option (see "Restricted Accounts" below), (iii) transfer Fund
Shares in one account to another identically registered account in the Fund,
and (iv) exchange Fund Shares by telephone as described in this Prospectus. In
addition, Shareholders who complete and file an Agreement as described under
"How to Sell Shares of the Fund -- Redemptions by Telephone" will be able to
redeem Shares of the Fund.
VERIFICATION PROCEDURES. The Fund and the Transfer Agent will employ
reasonable procedures to confirm that instructions communicated by telephone
are genuine. These will include: recording all telephone calls requesting
account activity by telephone, requiring that the caller provide certain
personal and/or account information requested by the telephone service agent
at the time of the call for the purpose of establishing the caller's
identification, and sending a confirmation statement on redemptions to the
address of record each time account activity is initiated by telephone. So
long as the Fund and the Transfer Agent follow instructions communicated by
telephone which were reasonably believed to be genuine at the time of their
receipt, neither they nor their affiliates will be liable for any loss to the
Shareholder caused by an unauthorized transaction. Shareholders are, of
course, under no obligation to apply for or accept telephone transaction
privileges. In any instance where the Fund or the Transfer Agent is not
reasonably satisfied that instructions received by telephone are genuine, the
requested transaction will not be executed and neither the Fund, the Transfer
Agent, nor their affiliates will be liable for any losses which may occur
because of a delay in implementing a transaction.
17
<PAGE>
RESTRICTED ACCOUNTS. Telephone redemptions and dividend option changes may
not be accepted on Franklin Templeton Trust Company ("FTTC") or Templeton
Funds Trust Company ("TFTC") retirement accounts. To assure compliance with
all applicable regulations, special forms are required for any distribution,
redemption, or dividend payment. Although the telephone exchange privilege is
extended to these retirement accounts, a Franklin Templeton Transfer
Authorization Form must be on file in order to transfer retirement plan assets
between the Franklin Group of Funds (R) and the Templeton Family of Funds
within the same plan type. Changes to dividend options for these accounts must
also be made in writing.
To obtain further information regarding distribution or transfer procedures,
including any required forms, FTTC retirement account shareholders may call 1-
800-527-2020 (toll free), and TFTC retirement account shareholders may call 1-
800-354-9191 (press "2") (also toll free).
GENERAL. During periods of drastic economic or market changes, it is
possible that the telephone transaction privileges will be difficult to
execute because of heavy telephone volume. In such situations, Shareholders
may wish to contact their dealer for assistance, or to send written
instructions to the Fund as detailed elsewhere in this Prospectus.
Neither the Fund nor the Transfer Agent will be liable for any losses
resulting from the inability of a Shareholder to execute a telephone
transaction.
The telephone transaction privilege may be modified or discontinued by the
Fund at any time upon 60 days' written notice to Shareholders.
MANAGEMENT OF THE FUND
The Trust is managed by its Board of Trustees and all powers are exercised
by or under authority of the Board. Information relating to the Trustees and
Executive Officers is set forth under the heading "Management of the Trust" in
the SAI.
INVESTMENT MANAGER. Templeton Global Bond Managers, a division of Templeton
Investment Counsel, Inc., Broward Financial Centre, Ft. Lauderdale, Florida
33394-3091, serves as the Investment Manager of the Fund. The Investment
Manager manages the investment and reinvestment of the Fund's assets. The
Investment Manager is an indirect wholly owned subsidiary of Franklin
Resources, Inc. ("Franklin"). Through its subsidiaries, Franklin is engaged in
various aspects of the financial services industry. The Investment Manager and
its affiliates serve as advisers for a wide variety of public investment
mutual funds and private clients in many nations. The Templeton organization
has been investing globally over the past 52 years and, with its affiliates,
provides investment management and advisory services to a worldwide client
base, including over 4.3 million mutual fund shareholders, foundations,
endowments, employee benefit plans and individuals. The Investment Manager and
its affiliates have approximately 4,100 employees in the United States,
Australia, Scotland, Germany, Hong Kong, Luxembourg, Bahamas, Singapore,
Canada and Russia.
The Investment Manager uses a disciplined, long-term approach to value
oriented global and international investing. It has an extensive global
network of investment research sources. Securities are selected for the Fund's
portfolio on the basis of fundamental company-by-company analysis. Many
different selection methods are used for different funds and clients and these
methods are changed and improved by the Investment Manager's research on
superior selection methods.
The Investment Manager does not furnish any other services or facilities for
the Fund, although such expenses are paid by some investment advisers of other
investment companies. As compensation for its services, the Fund pays the
Investment Manager a fee which, during the most recent fiscal year,
represented 0.50% of its average daily net assets.
18
<PAGE>
Currently, the lead portfolio manager for the Fund is Samuel J. Forester,
Jr. Mr. Forester joined the Templeton organization in 1990 as president of
the Investment Manager. As chief investment officer, Mr. Forester is in charge
of the Investment Manager's investment strategy. Prior to joining the
Templeton organization, Mr. Forester was employed for 16 years by Merrill
Lynch, Pierce, Fenner & Smith Incorporated, both in the United Kingdom and in
the U.S., as well as in the Middle East, where he served as advisor to a large
Mid-East central bank. For the year immediately prior to his joining the
Templeton organization, Mr. Forester ran his own investment counseling firm in
Houston, Texas, managing both U.S. and foreign assets. Neil S. Devlin and
Thomas Latta also exercise significant portfolio management responsibilities
with respect to the Fund. Prior to joining the Templeton organization in 1987,
Mr. Devlin, a senior Vice President of the Investment Manager, was a portfolio
manager and bond analyst with Constitutional Capital Management of Boston.
While there, he managed a portion of the Bank of New England's pension money,
a number of trust and corporate pension accounts, and began and managed a
mortgage-backed securities fund for the bank. Before that, Mr. Devlin was a
bond trader and research analyst for the Bank of New England. Prior to
joining the Templeton organization in 1991, Mr. Latta, a Vice President of the
Investment Manager, worked as a portfolio manager with Forester & Hairston, a
Houston based global fixed income investment management firm. Prior to that,
Mr. Latta spent seven years with Merrill Lynch, Pierce, Fenner & Smith
Incorporated, first as an investment adviser to a large Mid-East central bank
and then working in the structured products group in New York. In that
position he developed asset-liability management strategies for large ERISA
plans. Further information concerning the Investment Manager is included under
the heading "Investment Management and Other Services" in the SAI.
BUSINESS MANAGER. Templeton Global Investors, Inc. provides certain
administrative facilities and services for the Fund, including payment of
salaries of officers, preparation and maintenance of books and records,
preparation of tax returns, preparation of financial reports, monitoring
compliance with regulatory requirements and monitoring tax-deferred retirement
plans. For its services, the Business Manager receives a monthly fee
equivalent on an annual basis to 0.15% of the combined average daily net
assets of the Funds included in the Trust (the Fund and Templeton Money Fund),
reduced to 0.135% of such assets in excess of $200 million, to 0.10% of such
assets in excess of $700 million, and to 0.075% of such assets in excess of
$1,200 million.
TRANSFER AGENT. Franklin Templeton Investor Services, Inc. serves as
transfer agent and dividend disbursing agent for the Fund.
CUSTODIAN. The Chase Manhattan Bank, N.A. serves as custodian of the Fund's
assets.
PLAN OF DISTRIBUTION. The Fund has a plan of distribution or "12b-1 Plan"
under which it may reimburse FTD for its costs and expenses for activities
primarily intended to result in the sale of Fund Shares. Expenditures by the
Fund under the plan may not exceed 0.25% annually of the Fund's average daily
net assets. Under the plan, costs and expenses not reimbursed in any one given
month (including costs and expenses not reimbursed because they exceeded the
limit of 0.25% per annum of the Fund's average daily net assets) may be
reimbursed in subsequent months or years, subject to applicable law. FTD has
informed the Fund that it had no unreimbursed expenses under the Plan at
August 31, 1994.
EXPENSES. For the fiscal year ended August 31, 1994, expenses amounted to
1.18% of the Fund's average daily net assets.
BROKERAGE COMMISSIONS. The Fund's brokerage policies are described under the
heading "Brokerage Allocation" in the SAI. The Fund's brokerage policies
provide that the receipt of research services from a broker and the sale of
Shares by a broker are factors which may be taken into account in allocating
securities transactions, so long as the prices and execution provided by the
broker equal the best available within the scope of the Fund's brokerage
policies.
GENERAL INFORMATION
DESCRIPTION OF SHARES/SHARE CERTIFICATES. The capitalization of the Trust
consists of an unlimited number of Shares of beneficial interest, par value
$0.01 per Share. The Board of Trustees is authorized, in its discretion, to
classify and allocate the unissued Shares of the Trust, each such class to
represent a different portfolio of securities. Each Share entitles the holder
to one vote.
Under Massachusetts law, Shareholders could, under certain circumstances, be
held personally liable for the obligations of the Trust. However, the
Declaration of Trust disclaims liability of the Shareholders, Trustees or
officers of the Trust for acts or obligations of
19
<PAGE>
the Trust, which are binding only on the assets and property of the Trust. The
Declaration of Trust provides for indemnification out of Trust property for
all loss and expense of any Shareholder held personally liable for the
obligations of the Trust. The risk of a Shareholder incurring financial loss
on account of Shareholder liability is limited to circumstances in which the
Trust itself would be unable to meet its obligations and, thus, should be
considered remote.
The Fund will not ordinarily issue certificates for Shares purchased. Share
certificates representing whole (not fractional) Shares are issued only upon
the specific request of the Shareholder made in writing to the Transfer Agent.
No charge is made for the issuance of one certificate for all or some of the
Shares purchased in a single order.
MEETINGS OF SHAREHOLDERS. The Trust is not required to hold regular annual
meetings of Shareholders and may elect not to do so. The Trust will call a
special meeting of Shareholders when requested to do so by Shareholders
holding at least 10% of the Trust's outstanding Shares. In addition, the Trust
is required to assist Shareholder communications in connection with the
calling of Shareholder meetings to consider removal of a Trustee or Trustees.
DIVIDENDS AND DISTRIBUTIONS. The Fund intends normally to pay a monthly
dividend representing all or substantially all of its net investment income
and to distribute at least annually any net realized capital gains. Income
dividends and capital gains distributions paid by the Fund on its Shares,
other than those Shares whose owners keep them registered in the name of a
broker-dealer, are automatically reinvested in whole or fractional Shares of
the Fund at net asset value as of the ex-dividend date, unless a Shareholder
elects at the time of his investment or makes a subsequent written or
telephonic request for payments in cash. The processing date for the
reinvestment of dividends may vary from month to month, and does not affect
the amount or value of the Shares acquired. Income dividends and capital gain
distributions will be paid in cash on Shares during the time their owners keep
them registered in the name of a broker-dealer, unless the broker-dealer has
made arrangements with the Transfer Agent for reinvestment.
Prior to purchasing Shares of the Fund, the impact of dividends or capital
gain distributions which have been declared but not yet paid should be
carefully considered. Any dividend or capital gain distribution paid shortly
after a purchase by a Shareholder prior to the record date will have the
effect of reducing the per Share net asset value of the Shares by the amount
of the dividend or distribution. All or a portion of such dividend or
distribution, although in effect a return of capital, will generally be
subject to tax.
Checks are forwarded by first-class mail to the address of record. The
proceeds of any such checks which are not accepted by the addressee and
returned to the Fund will be reinvested for the Shareholder's account in whole
or fractional Shares at net asset value next computed after the check has been
received by the Transfer Agent. Subsequent distributions will be reinvested
automatically at net asset value as of the ex-dividend date in additional
whole or fractional Shares.
FEDERAL TAX INFORMATION. The Fund intends to elect to be treated and to
qualify each year as a regulated investment company under Subchapter M of the
Code. See the SAI for a summary of the requirements that must be satisfied to
so qualify. A regulated investment company generally is not subject to Federal
income tax on income and gains distributed in a timely manner to its
shareholders. The Fund intends to distribute to Shareholders substantially all
of its net investment income and realized capital gains, which generally will
be taxable income or capital gains in their hands. Distributions declared in
October, November or December to Shareholders of record on a date in such
month and paid during the following January will be treated as having been
received by Shareholders on December 31 in the year such distributions were
declared. The Fund will inform Shareholders each year of the amount and nature
of such income or gains. A more detailed description of tax consequences to
Shareholders is contained in the SAI under the heading "Tax Status."
The Fund may be required to withhold Federal income tax at the rate of 31%
of all taxable distributions (including redemptions) paid to Shareholders who
fail to provide the Fund with their correct taxpayer identification number or
to make required certifications or where the Fund or the Shareholder has been
notified by the Internal Revenue Service that the Shareholder is subject to
backup withholding. Corporate Shareholders and certain other Shareholders
specified in the Code are exempt from backup withholding. Backup withholding
is not an additional tax. Any amounts withheld may be credited against the
Shareholder's Federal income tax liability.
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<PAGE>
INQUIRIES. Shareholders' inquiries will be answered promptly. They should be
addressed to Franklin Templeton Investor Services, Inc., 700 Central Avenue,
P.O. Box 33030, St. Petersburg, Florida 33733-8030 -- telephone 1-800-354-9191
or 813-823-8712. Transcripts of Shareholder accounts less than three years old
are provided on request without charge; requests for transcripts going back
more than three years from the date the request is received by the Transfer
Agent are subject to a fee of up to $15 per account.
PERFORMANCE INFORMATION. The Fund may include its total return in
advertisements or reports to Shareholders or prospective investors. Quotations
of average annual total return will be expressed in terms of the average
annual compounded rate of return on a hypothetical investment in the Fund over
a period of 1, 5 and 10 years (or up to the life of the Fund), will reflect
the deduction of the maximum initial sales charge and deduction of a
proportional share of Fund expenses (on an annual basis), and will assume that
all dividends and distributions are reinvested when paid. Total return may be
expressed in terms of the cumulative value of an investment in the Fund at the
end of a defined period of time. For a description of the methods used to
determine total return for the Fund, see the SAI.
STATEMENTS AND REPORTS. The Fund's fiscal year ends on August 31. Annual
reports (containing financial statements audited by independent auditors and
additional information regarding the Fund's performance) and semi-annual
reports (containing unaudited financial statements) are sent to Shareholders
each year. Additional copies may be obtained, without charge, upon request to
the Account Services Department. The Fund also sends to each Shareholder a
confirmation statement after every transaction that affects the Shareholder's
account and a year-end historical confirmation statement.
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<PAGE>
INSTRUCTIONS AND IMPORTANT NOTICE
SUBSTITUTE W-9 INSTRUCTIONS INFORMATION
GENERAL. Backup withholding is not an additional tax. Rather, the tax
liability of persons subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the IRS.
OBTAINING A NUMBER. If you do not have a Social Security Number/Taxpayer
Identification Number, you must obtain Form SS-5 or Form SS-4 from your local
Social Security or IRS office and apply for one. If you have checked the
"Awaiting TIN" box and signed the certification, withholding will apply to
payments relating to your account unless you provide a certified TIN within 60
days.
WHAT SSN/TIN TO GIVE. Please refer to the following guidelines:
<TABLE>
<CAPTION>
ACCOUNT TYPE GIVE SSN OF ACCOUNT TYPE GIVE TAXPAYER ID # OF
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
. Individual Individual . Trust, Estate, or Trust, Estate, or
Pension Plan Trust Pension Plan Trust
- ------------------------------------------------------------------------------------------------
. Joint Actual owner of . Corporation, Corporation,
Individual account, or if Partnership, or other Partnership, or other
combined funds, the organization organization
first-named
individual
- ------------------------------------------------------------------------------------------------
. Unif. Minor . Broker nominee Broker nominee
Gift/Transfer
to Minor
- ------------------------------------------------------------------------------------------------
. Sole Owner of business
Proprietor
- ------------------------------------------------------------------------------------------------
. Legal Ward, Minor, or
Guardian Incompetent
- ------------------------------------------------------------------------------------------------
</TABLE>
EXEMPT RECIPIENTS. Please provide your TIN and check the "Exempt Recipient"
box if you are an exempt recipient. Exempt recipients generally include:
A corporation A real estate investment trust
A financial institution A common trust fund operated by a bank
under section 584(a)
An organization exempt from tax
under section 501(a), or an An entity registered at all times
individual retirement plan under the Investment Company Act of
1940
A registered dealer in securities or
commodities registered in the U.S.
or a U.S. possession
IRS PENALTIES. If you do not supply us with your SSN/TIN, you will be subject
to an IRS $50 penalty unless your failure is due to reasonable cause and not
willful neglect. If you fail to report certain income on your federal income
tax return, you will be treated as negligent and subject to an IRS 20% penalty
on any underpayment of tax attributable to such negligence, unless there was
reasonable cause for the resulting underpayment and you acted in good faith.
If you falsify information on this form or make any other false statement
resulting in no backup withholding on an account which should be subject to
backup withholding, you may be subject to an IRS $500 penalty and certain
criminal penalties including fines and imprisonment.
SUBSTITUTE W-8 INSTRUCTIONS INFORMATION
EXEMPT FOREIGN PERSON. Check the "Exempt Foreign Person" box if you qualify as
a non-resident alien or foreign entity that is not subject to certain U.S.
information return reporting or to backup withholding rules. Dividends paid to
your account may be subject to withholding of up to 30%. Generally, you are an
"Exempt Foreign Person" if you are not (1) a citizen or resident of the U.S.,
or (2) a U.S. corporation, partnership, estate, or trust. In the case of an
individual, an "Exempt Foreign Person" is one who has been physically present
in the U.S. for less than 31 days during the current calendar year. An
individual who is physically present in the U.S. for at least 31 days during
the current calendar year will still be treated as an "Exempt Foreign Person,"
provided that the total number of days physically present in the current
calendar year and the two preceding calendar years does not equal or exceed
183 days (counting all of the days in the current calendar year, only one-
third of the days in the first preceding calendar year and only one-sixth of
the days in the second preceding calendar year). In addition, lawful permanent
residents or green card holders may not be treated as "Exempt Foreign
Persons." If you are an individual or an entity, you must not now be, or at
this time expect to be, engaged in a U.S. trade or business with respect to
which any gain derived from transactions effected by the Fund/Payer during the
calendar year is effectively connected to the U.S.
PERMANENT ADDRESS. The Shareholder Application must contain your permanent
address if you are an "Exempt Foreign Person." If you are an individual,
provide your permanent address. If you are a partnership or corporation,
provide the address of your principal office. If you are an estate or trust,
provide the address of your permanent residence or the principal office of any
fiduciary.
NOTICE OF CHANGE IN STATUS. If you become a U.S. citizen or resident after you
have provided certification of your foreign status, or if you cease to be an
"Exempt Foreign Person," you must notify the Fund/Payer within 30 days of your
change in status. Reporting will then begin on the account(s) listed, and
backup withholding may also begin unless you certify to the Fund/Payer that
(1) the tax payer identification number you have given is correct, and (2) the
Internal Revenue Service has not notified you that you are subject to backup
withholding because you failed to report certain interest or dividend income.
You may use Form W-9, "Payer's Request for Taxpayer Identification Number and
Certification," to make these certifications. If an account is no longer
active, you do not have to notify a Fund/Payer or broker of your change in
status unless you also have another account with the same Fund/Payer that is
still active. If you receive interest from more than one Fund/Payer or have
dealings with more than one broker or barter exchange, file a certificate with
each. If you have more than one account with the same Fund/Payer, the
Fund/Payer may require you to file a separate certificate for each account.
WHEN TO FILE. File these certifications with the Fund before a payment is made
to you, unless you have already done this in either of the two preceding
calendar years. Only certifications that are in proper order will be treated
as having been filed with the Fund.
HOW OFTEN YOU MUST FILE. This certificate generally remains in effect for
three calendar years. A Fund/Payer or broker, however, may require that a new
certificate be filed each time a payment is made. On joint accounts for which
each joint owner is a foreign person, each must provide a certification of
foreign status.
1/94
22
<PAGE>
FOR CORPORATE SHAREHOLDERS--FORM OF RESOLUTION
It will be necessary for corporate shareholders to provide a certified copy of
a resolution or other certificate of authority to authorize the purchase as
well as sale (redemption) of shares and withdrawals by checks or drafts. You
may use the following form of resolution or you may prefer to use your own. It
is understood that the Fund, Franklin Templeton Distributors, Inc., Franklin
Templeton Investor Services, Inc., the custodian bank and their affiliates may
rely upon these authorizations until revoked or amended by written notice
delivered by registered or certified mail to the Fund.
CERTIFIED COPY OF RESOLUTION (Corporation or Association)
The undersigned hereby certifies and affirms that he/she is the duly elected
________________________ of _________________________ a ________________________
TITLE CORPORATE NAME TYPE OF ORGANIZATION
organized under the laws of the State of _______________________ and that the
STATE
following is a true and correct copy of a resolution adopted by the Board of
Directors at a meeting duly called and held on ________________________
DATE
RESOLVED, that the _________________________________________________ of this
OFFICERS' TITLES
Corporation or Association are authorized to open an account in the name of
the Corporation or Association with one or more of the Franklin Group of
Funds (R) or Templeton Family of Funds (collectively, the "Funds") and to
deposit such funds of this Corporation or Association in this account as
they deem necessary or desirable; that the persons authorized below may
endorse checks and other instruments for deposit to said account or
accounts; and
FURTHER RESOLVED, that any of the following ___________________ officers are
NUMBER
authorized to sign any share assignment on behalf of this Corporation or
Association and to take any other actions as may be necessary to sell or
redeem its shares in the Funds or to sign checks or drafts withdrawing funds
from the account; and
FURTHER RESOLVED, that this Corporation or Association shall hold harmless,
indemnify, and defend the Funds, their custodian bank, Franklin Templeton
Distributors, Inc., Franklin Templeton Investor Services, Inc., and their
affiliates, from any claim, loss or liability resulting in whole or in
part, directly or indirectly, from their reliance from time to time upon
any certifications by the secretary or any assistant secretary of this
Corporation or Association as to the names of the individuals occupying
such offices and their acting in reliance upon these resolutions until
actual receipt by them of a certified copy of a resolution of the Board of
Directors of the Corporation or Association modifying or revoking any or
all such resolutions.
The undersigned further certifies that the below named persons, whose
signatures appear opposite their names and office titles, are duly elected
officers of the Corporation or Association. (Attach additional list if
necessary)
- -------------------------------------- ---------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- ---------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- ---------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- ---------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- ---------------------------------------
NAME OF CORPORATION OR ASSOCIATION DATE
Certified from minutes ________________________________________________________
NAME AND TITLE
CORPORATE SEAL (if appropriate)
23
<PAGE>
THE FRANKLIN TEMPLETON TELEPHONE REDEMPTION AUTHORIZATION AGREEMENT
You may use Franklin Templeton's telephone redemption privilege to redeem
uncertificated Franklin Templeton Fund shares for up to $50,000 (or your
Shareholder account balance, whichever is less) per day, per fund account in
accordance with the terms of the Fund's Prospectus.
The telephone redemption privilege is available only to Shareholders who
specifically request it. If you would like to add this redemption privilege to
the other telephone transaction privileges automatically available to Franklin
Templeton Fund shareholders, please sign and return this authorization to
Franklin Templeton Investor Services, Inc. ("Services"), transfer agent and
shareholder servicing agent for the Franklin Templeton Funds.
SHAREHOLDER AUTHORIZATION: I/We request the telephone redemption privilege
under the terms described below and in the prospectus for each investment
company in the Franklin Templeton Group (a "Franklin Templeton Fund" or a
"Fund"), now opened or opened at a later date, holding shares registered as
follows:
- ------------------------------------- ---------------------------------------
PRINT NAME(S) AS SHOWN IN YOUR ACCOUNT REGISTRATION ("SHAREHOLDER")
- ------------------------------------- ---------------------------------------
ACCOUNT NUMBER(S)
I/We authorize each Fund and Services to honor and act upon telephone requests
given as provided in this agreement to redeem shares from any
Shareholder account:
- ------------------------------------- ---------------------------------------
SIGNATURE(S) AND DATE
- ------------------------------------- ---------------------------------------
PRINT NAME(S) (AND TITLE/CAPACITY, IF APPLICABLE)
VERIFICATION PROCEDURES: I/We understand and agree that: (1) each Fund and
Services will employ reasonable procedures to confirm that redemption
instructions communicated by telephone are genuine and that if these
confirmation procedures are not followed, the Fund or Services may be liable
for any losses due to unauthorized or fraudulent telephone instructions; (2)
the confirmation procedures will include the recording of telephone calls
requesting redemptions, requiring that the caller provide certain personal
and/or account information requested by the telephone service agent at the
time of the call for the purpose of establishing the caller's identification,
and the sending of confirmation statements to the address of record each time
a redemption is initiated by telephone; and (3) so long as the Fund and
Services follow the confirmation procedures in acting on instructions
communicated by telephone which were reasonably believed to be genuine at the
time of receipt, neither they, nor their parent or affiliates, will be liable
for any loss, damages or expenses caused by an unauthorized or fraudulent
redemption request.
JOINTLY OWNED/CO-TRUSTEE ACCOUNTS: Each of us signing this agreement as either
joint owners or co-trustees authorizes each Fund and Services to honor
telephone redemption requests given by ANY ONE of the signers, or our
investment representative of record, if any, ACTING ALONE.
APPOINTMENT OF ATTORNEY-IN-FACT: In order to issue telephone redemption
requests acting alone, each of us individually makes the following
appointment: I hereby appoint the other joint owner(s)/co-trustee(s) as my
agent(s) (attorney[s]-in-fact) with full power and authority to individually
act for me in any lawful way with respect to the issuance of instructions to a
Fund or Services in accordance with the telephone redemption privilege we have
requested by signing this agreement. This appointment shall not be affected by
my subsequent disability or incompetency and shall remain in effect until it
is revoked by either written notice from any one of us delivered to a Fund or
Services by registered mail, return receipt requested or by a Fund or Services
upon receipt of any information that causes a Fund or Services to believe in
good faith that there is or that there may be a dispute among any of us with
respect to the Franklin Templeton Fund account(s) covered by this agreement.
Each of us agrees to notify the Fund or Services immediately upon the death of
any of the signers.
CORPORATE/PARTNERSHIP/TRUST/RETIREMENT ACCOUNTS: The Shareholder and each of
us signing this agreement on behalf of the Shareholder represent and warrant
to each Franklin Templeton Fund and Services that the Shareholder has the
authority to enter into this agreement and that each of us is duly authorized
to execute this agreement on behalf of the Shareholder. The Shareholder agrees
that its election of the telephone redemption privilege means that a Fund or
Services may honor a telephone redemption request given by ANY
officer/partner/member/administrator/or agent of the Shareholder ACTING ALONE.
RESTRICTED ACCOUNTS: Telephone redemptions may not be accepted on Franklin
Trust Company or Templeton Funds Trust Company retirement accounts.
PLEASE RETURN THIS FORM TO:
Franklin Templeton Investor Services, Inc., Attn.: Telephone Redemptions
Dept., 700 Central Avenue, St. Petersburg, Florida 33701-3628.
24
<PAGE>
THE FRANKLIN TEMPLETON GROUP
To receive a free brochure and prospectus, which contain more complete
information, including charges and expenses on each of the funds listed below,
call Franklin Fund Information, toll free, at 1-800-DIAL-BEN (1-800-342-5236)
or Templeton Fund Information at 1-800-292-9293. Please read the prospectus
carefully before you invest or send money.
TEMPLETON
FAMILY OF FUNDS
Franklin Templeton Japan Fund
Templeton American Trust
Templeton Americas Government
Securities Fund
Templeton Developing
Markets Trust
Templeton Foreign Fund
Templeton Global
Infrastructure Fund
Templeton Global
Opportunities Trust
Templeton Global Rising
Dividends Fund
Templeton Growth Fund
Templeton Income Fund
Templeton Money Fund
Templeton Real Estate
Securities Fund
Templeton Smaller
Companies Growth Fund
Templeton World Fund
FRANKLIN GROUP
OF FUNDS(R)
FRANKLIN GLOBAL/
INTERNATIONAL FUNDS
Franklin Global Health Care Fund
Franklin Global Government
Income Fund
Franklin Global Utilities Fund
Franklin International Equity Fund
Franklin Pacific Growth Fund
FUNDS SEEKING CAPITAL GROWTH
Franklin California Growth Fund
Franklin DynaTech Fund
Franklin Equity Fund
Franklin Gold Fund
Franklin Growth Fund
Franklin Rising Dividends Fund
Franklin Small Cap Growth Fund
FUNDS SEEKING GROWTH AND
INCOME
Franklin Balance Sheet
Investment Fund
Franklin Convertible
Securities Fund
Franklin Income Fund
Franklin Equity Income Fund
Franklin Utilities Fund
FUNDS SEEKING HIGH CURRENT
INCOME
Franklin's AGE High Income Fund
Franklin Investment Grade
Income Fund
Franklin Premier Return Fund
Franklin U.S. Government
Securities Fund
FUNDS SEEKING TAX-FREE
INCOME
Franklin Federal Tax-Free
Income Fund
Franklin High Yield Tax-Free
Income Fund
Franklin California High Yield
Municipal Fund
Franklin Alabama Tax-Free
Income Fund
Franklin Arizona Tax-Free
Income Fund
Franklin California Tax-Free
Income Fund
Franklin Colorado Tax-Free
Income Fund
Franklin Connecticut Tax-Free
Income Fund
Franklin Florida Tax-Free
Income Fund
Franklin Georgia Tax-Free
Income Fund
Franklin Hawaii Municipal
Bond Fund
Franklin Indiana Tax-Free
Income Fund
Franklin Kentucky Tax-Free
Income Fund
Franklin Louisiana Tax-Free
Income Fund
Franklin Maryland Tax-Free
Income Fund
Franklin Missouri Tax-Free
Income Fund
Franklin New Jersey Tax-Free
Income Fund
Franklin New York Tax-Free
Income Fund
Franklin North Carolina Tax-Free
Income Fund
Franklin Oregon Tax-Free
Income Fund
Franklin Pennsylvania Tax-Free
Income Fund
Franklin Puerto Rico Tax-Free
Income Fund
Franklin Texas Tax-Free
Income Fund
Franklin Virginia Tax-Free
Income Fund
Franklin Washington Municipal
Bond Fund
FUNDS SEEKING TAX-FREE
INCOME THROUGH INSURED
PORTFOLIOS
Franklin Insured Tax-Free
Income Fund
Franklin Arizona Insured Tax-
Free Income Fund
Franklin California Insured Tax-
Free Income Fund
Franklin Florida Insured Tax-Free
Income Fund
Franklin Massachusetts Insured Tax-
Free Income Fund
Franklin Michigan Insured Tax-Free
Income Fund
Franklin Minnesota Insured Tax-
Free Income Fund
Franklin New York Insured Tax-Free
Income Fund
Franklin Ohio Insured Tax-Free
Income Fund
FUNDS SEEKING HIGH CURRENT
INCOME AND STABILITY OF
PRINCIPAL
Franklin Adjustable Rate
Securities Fund
Franklin Adjustable U.S.
Government Securities Fund
Franklin Short-Intermediate U.S.
Government Securities Fund
FUND SEEKING HIGH AFTER-TAX
INCOME FOR CORPORATIONS
Franklin Corporate Qualified
Dividend Fund
MONEY MARKET FUNDS SEEKING
SAFETY OF PRINCIPAL AND INCOME
Franklin Money Fund
Franklin Federal Money Fund
Franklin Tax-Exempt Money
Fund
Franklin California Tax-Exempt
Money Fund
Franklin New York Tax-Exempt
Money Fund
IFT Franklin U.S. Treasury
Money Market Portfolio
FUNDS FOR
NON-U.S. INVESTORS
FRANKLIN PARTNERS FUNDS(R)
Franklin Tax-Advantaged
High Yield Securities Fund
Franklin Tax-Advantaged
International Bond Fund
Franklin Tax-Advantaged U.S.
Government Securities Fund
25
<PAGE>
NOTES
----
26
<PAGE>
NOTES
----
27
<PAGE>
TEMPLETON INCOME FUND
PRINCIPAL UNDERWRITER:
Franklin Templeton
Distributors, Inc.
700 Central Avenue
St. Petersburg,
Florida 33701-3628
Account Services
1-800-354-9191
Sales Information
1-800-292-9293
Institutional Services
1-800-321-8563
This Prospectus is not an offering of
the securities herein described in any
state in which the offering is not
authorized. No sales representative,
dealer, or other person is authorized
to give any information or make any
representations other than those
contained in this Prospectus. Further
information may be obtained from the
Principal Underwriter.
[RECYCLED PAPER LOGO APPEARS HERE]
TL06 P 1/95
TEMPLETON
INCOME
FUND
Prospectus
January 1, 1995
[LOGO OF FRANKLIN TEMPLETON APPEARS HERE]
<PAGE>
[LOGO OF TEMPLETON APPEARS HERE]
Mail to: Franklin Templeton Distributors, Inc.
P.O. Box 33031 St. Petersburg, Florida 33733-8031
(800) 393-3001
Please do not use this form for any Retirement Plan for which Templeton Funds
Trust Company or its affiliate serves as custodian or trustee or any of the
following Templeton Funds: Templeton American Trust: Templeton Money Fund;
Templeton Institutional Funds or Templeton Capital Accumulator Fund. Please
request separate Applications and/or Prospectuses.
================================================================================
SHAREHOLDER APPLICATION OR REVISION [_] Please check the box if this is a
revision and see Section 8
================================================================================
<TABLE>
<S> <C> <C>
Date ___________________ [_] Real Estate Securities Fund $______ [_] Global Opportunities Trust $______
[_] Growth Fund $_______ [_] Smaller Companies Growth Fund ______ [_] Americas Government Securities Fund ______
[_] World Fund _________ [_] Income Fund ______ [_] Japan Fund ______
[_] Foreign Fund _______ [_] Global Infrastructure Fund ______ [_] Other ______
[_] Global Rising Dividends Fund ______ [_] Developing Markets Trust ______
</TABLE>
================================================================================
1 ACCOUNT REGISTRATION (PLEASE PRINT)
================================================================================
[_] INDIVIDUAL OR JOINT ACCOUNT
__________________________________________________________ _____-_______-______
First Name Middle Initial Last Name Social Security
Number (SSN)
__________________________________________________________ _____-_______-______
Joint Owner(s) (Joint ownership means "Joint Tenants Social Security
With Rights of Survivorship" unless otherwise specified) Number (SSN)
================================================================================
[_] GIFT/TRANSFER TO A MINOR
__________________ As Custodian For ____________________________________________
Minor's Name (one only)
_____________________ Uniform Gifts/Transfers to Minors Act _____-______-_______
State of Residence Minor's Social
Security Number
Please Note: Custodian's Signature, not Minor's, is required in Section 4.
================================================================================
[_] TRUST, CORPORATION, PARTNERSHIP, OR OTHER ENTITY
______________________________________________________________-_________________
Name Taxpayer Identification Number (TIN)
________________________________________________________________________________
Name of Beneficiary (if to be included Date of Trust Document (must be
in the Registration) completed for registration)
________________________________________________________________________________
Name of Each Trustee (if to be included in the Registration)
================================================================================
2 ADDRESS
================================================================================
__________________________________________________ Daytime Phone (___)_________
Street Address Area Code
____________________________________________-_____ Evening Phone (___)_________
City State Zip Code Area Code
I am a Citizen of: [_] U.S. [_] _____________________________
Country of Residence
================================================================================
3 INITIAL INVESTMENT ($100 minimum initial investment)
================================================================================
Check(s) enclosed for $____________ (Payable to Franklin Templeton Distributors,
Inc. or the Fund(s) indicated above.)
================================================================================
4 SIGNATURE AND TAX CERTIFICATIONS (All registered owners must sign
application)
================================================================================
The Fund reserves the right to refuse to open an account without either a
certified Taxpayer Identification Number ("TIN") or a certification of foreign
status. Failure to provide tax certifications in this section may result in
backup withholding on payments relating to your account and/or in your inability
to qualify for treaty withholding rates.
I am(We are) not subject to backup withholding because I(we) have not been
notified by the IRS that I am(we are) subject to backup withholding as a result
of a failure to report all interest or dividends or because the IRS has notified
me(us) that I am(we are) no longer subject to backup withholding. (If you are
currently subject to backup withholding as a result of a failure to report all
interest or dividends, please cross out the preceding statement.)
[_] The number shown above is my(our) correct TIN, or that of the Minor named in
Section 1.
[_] Awaiting TIN. I am(We are) waiting for a number to be issued to me(us).
I(We) understand that if I(we) do not provide a TIN to the Fund within 60
days, the Fund is required to commence 31% backup withholding until I(we)
provide a certified TIN.
[_] Exempt Recipient. Individuals cannot be exempt. Check this box only after
reading the instructions to see whether you qualify as an exempt recipient.
(You should still provide a TIN.)
[_] Exempt Foreign Person. Check this box only if the following statement
applies: "I am(we are) neither a citizen nor a resident of the United
States. I(we) certify to the best of my(our) knowledge and belief, I(we)
qualify as an exempt foreign person and/or entity as described in the
instructions."
Permanent address for tax purposes:
________________________________________________________________________________
Street Address City State Country Postal Code
PLEASE NOTE: The IRS only allows one TIN to be listed on an account. On joint
accounts, it is preferred that the primary account owner (or person listed first
on the account) list his/her number as requested above.
CERTIFICATION - Under the penalties of perjury, I(we) certify that (1) the
information provided on this application is true, correct and complete, (2)
I(we) have read the prospectus(es) for the Fund(s) in which I am(we are)
investing and agree to the terms thereof, and (3) I am(we are) of legal age or
an emancipated minor. I(we) acknowledge that Shares of the Fund(s) are not
insured or guaranteed by any agency or institution and that an investment in the
Shares involves risks, including the possible loss of principal.
X_____________________________________ X________________________________________
Signature Signature
X_____________________________________ X________________________________________
Signature Signature
Please make a photocopy of this application for your records.
================================================================================
5 BROKER/DEALER USE ONLY (PLEASE PRINT)
================================================================================
+ +
+ We hereby submit this application for the purchase of shares of the Fund +
+ indicated above in accordance with the terms of our selling agreement with +
+ Franklin Templeton Distributors, Inc. ("FTD"), and with the Prospectus for +
+ the Fund. We agree to notify FTD of any purchases made under a Letter of +
+ Intent or Cumulative Quantity Discount. +
+ +------------------------------+ +
+ +Templeton Dealer Number + +
+ + + +
+ +------------------------------+ +
+ +
+ +--------------------------------------------------------------------------+ +
+ + WIRE ORDER ONLY: The attached check for $_____ should be applied against + +
+ + Wire Order + +
+ + + +
+ + Confirmation Number ______________ Dated ___________ For ________ Shares + +
+ +--------------------------------------------------------------------------+ +
+ +
+ Securities Dealer Name _____________________________________________________ +
+ +
+ Main Office Address _____________ Main Office Telephone Number(___)_________ +
+ +
+ Branch Number _____ Representative Number _____ Representative Name ________ +
+ +
+ Branch Address _______________________ Branch Telephone Number(___)_________ +
+ +
+ Authorized Signature, Securities Dealer _______________ Title ______________ +
+==============================================================================+
+ +
+ ACCEPTED: Franklin Templeton Distributors, Inc. By ____________ Date _______ +
+==============================================================================+
Please see reverse side for Shareholder Account Privileges:
<TABLE>
<S> <C> <C> <C>
[X] Distribution Options [X] Special Instructions for Distributions [X] Telephone Exchange Service [X] Letter of Intent
[X] Systematic Withdrawal Plan [X] Automatic Investment Plan [X] Cumulative Quantity Discount
</TABLE>
This application must be preceded or accompanied by a prospectus for the Fund(s)
being purchased.
<PAGE>
================================================================================
6. DISTRIBUTION OPTIONS (Check one)
================================================================================
Check one - if no box is checked, all dividends and capital gains will be
reinvested in additional shares of the Fund.
[_] Reinvest all dividends and capital gains.
[_] Pay capital gains in cash and reinvest dividends.
[_] Pay all dividends in cash and reinvest capital gains.
[_] Pay all dividends and capital gains in cash.
================================================================================
7. OPTIONAL SHAREHOLDER PRIVILEGES
================================================================================
A. SPECIAL PAYMENT INSTRUCTIONS FOR DISTRIBUTIONS (Check one box)
[_] Pay Distributions, as noted in Section 6, to another Franklin or Templeton
Fund.
Fund Name ____________________________ Existing Account Number ____________
[_] Send my Distributions to the person, named below, instead of as registered
in Section 1.
Name ___________________________ Street Address ___________________________
City ___________________________ State _________________ Zip Code _________
================================================================================
B. SYSTEMATIC WITHDRAWAL PLAN
Please withdraw from my Franklin Templeton account $_______($50 minimum)
[_] Monthly [_] Quarterly [_] Semi-Annually or [_] Annually as set forth in
the Prospectus, starting in __________________(Month).
Send the proceeds to: [_] Address of Record OR [_] the Franklin Templeton
Fund or person specified in Section 7(A) - Special Payment Instructions for
Distributions.
================================================================================
C. TELEPHONE TRANSACTIONS
Telephone Exchange Privilege: If the Fund does not receive specific
instructions from the shareholder, either in writing or by telephone, the
Telephone Exchange Privilege (see the prospectus) is automatically extended
to each account. The shareholder should understand, however, that the Fund
and Franklin Templeton Investor Services, Inc. ("FTI") or Templeton Funds
Trust Company and their agents will not be liable for any loss, injury,
damage or expense as a result of acting upon instructions communicated by
telephone reasonably believed to be genuine. The shareholder agrees to hold
the Fund and its agents harmless from any loss, claims, or liability arising
from its or their compliance with such instructions. The shareholder
understands that this option is subject to the terms and conditions set
forth in the prospectus of the fund to be acquired.
[_] No, I do NOT wish to participate in the Telephone Exchange Privilege or
authorize the Fund or its agents, including FTI or Templeton Funds Trust
Company, to act upon instructions received by telephone to exchange shares
for shares of any other account(s) within the Franklin Templeton Group of
Funds.
Telephone Redemption Privilege: This is available to shareholders who
specifically request it and who complete the Franklin Templeton Telephone
Redemption Authorization Agreement in the back of the Fund's prospectus.
================================================================================
D. AUTOMATIC INVESTMENT PLAN
Important: Attach an unassigned, voided check (for Checking Accounts) or a
Savings Account deposit slip here, and complete the information below.
I(We) would like to establish an Automatic Investment Plan (the "Plan") as
described in the Prospectus. I(We) agree to reimburse FTI and/or FTD for any
expenses or losses that they may incur in connection with my(our) Plan,
including any caused by my(our) bank's failure to act in accordance with
my(our) request. If my(our) bank makes any erroneous payment or fails to
make a payment after shares are purchased on my(our) behalf, any such
purchase may be cancelled and I(we) hereby authorize redemptions and/or
deductions from my(our) account for that purpose.
Debit my(our) bank account monthly for $______($25 minimum) on or about
the [_] 1st [_] 5th [_] 15th or [_] 20th day starting _____________ (month),
to be invested in (name of Fund)__________________________ Account Number
(if known)_____________________
================================================================================
E. INSTRUCTIONS TO BANK - AUTOMATIC INVESTMENT PLAN AUTHORIZATION
To: __________________________________ __________________________________
Name of Your Bank ABA Number
_______________________________ __________________ ___________ ___________
Street Address City State Zip Code
I(we) authorize you to charge my(our) Checking/Savings Account and to make
payment to FTD, upon instructions from FTD. I(We) agree that in making
payment for such charges your rights shall be the same as if each were a
charge made and signed personally by me(us). This authority shall remain in
effect until you receive written notice from me(us) changing its terms or
revoking it. Until you actually receive such notice, I(we) agree that you
shall be fully protected in paying any charges under this authority. I(we)
further agree that if any such charge is not made, whether with or with out
cause and whether intentionally or inadvertently, you shall be under no
liability whatsoever.
X_____________________________________________________ ___________________
Signature(s) EXACTLY as shown on your bank records Date
________________________________________________ _________________________
Print Name(s) Account Number
_______________________________ __________________ ___________ ___________
Your Street Address City State Zip Code
================================================================================
F. LETTER OF INTENT (LOI)
[_] I(We) agree to the terms of the LOI and provisions for reservations of
shares and grant FTD the security interest set forth in the Prospectus.
Although I am (we are) not obligated to do so, it is my(our) intention to
invest over a 13 month period in shares of one or more Franklin or Templeton
Funds (including all Money Market Funds in the Franklin Templeton Group) an
aggregate amount at least equal to that which is checked below:
[_] $50,000-99,999 (except for Income Fund)
[_] $100,000-249,999
[_] $250,000-499,999
[_] $500,000-999,999
[_] $1,000,000 or more
Purchases made within the last 90 days will be included as part of your LOI.
Please write in your Account Number(s) ___________ ___________ __________
================================================================================
G. CUMULATIVE QUANTITY DISCOUNT
Shares may be purchased at the Offering Price applicable to the dollar
amount of the sale added to the higher of (1) the value (calculated at the
applicable Offering Price) or (2) the purchase price, of any other Shares of
the Fund and/or other Funds in the Franklin Templeton Group owned at that
time by the purchaser, his or her spouse, and their children under age 21,
including all Money Market Funds in the Franklin Templeton Group as stated
in the Prospectus. In order for this Cumulative Quantity Discount to be made
available, the Shareholder or his or her Securities Dealer must notify FTI
or FTD of the total holdings in the Franklin Templeton Group each time an
order is placed.
[_] I(We) own shares of more than one Fund in the Franklin Templeton Group and
qualify for the Cumulative Quantity Discount described above and in the
Prospectus.
My(Our) other Account Number(s) are ____________ ____________ ____________
================================================================================
8. ACCOUNT REVISION (If Applicable)
If you are using this application to revise your Account Registration, or
wish to have Distributions sent to an address other than the address on your
existing Account's Registration, a Signature Guarantee is required.
Signatures of all registered owners must be guaranteed by an "eligible
guarantor" as defined in the "How to Sell Shares of the Fund" section in the
Fund's Prospectus. A Notary Public is not an acceptable guarantor.
X__________________________________________ ______________________________
Signature(s) of Registered Account Owners Account Number(s)
X__________________________________________ ______________________________
X__________________________________________
X__________________________________________ ______________________________
Signature Guarantee Stamp
NOTE: For any change in registration, please send us any outstanding
Certificates by Registered Mail.
================================================================================
