Registration No. 33-6510
As filed with the Securities and Exchange Commission on
December 28, 1995
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No. _____
Post-Effective Amendment No. 17 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 20 X
TEMPLETON INCOME TRUST
(Exact Name of Registrant as Specified in Charter)
700 Central Avenue, P.O. Box 33030
St. Petersburg, Florida 33733-8030
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (813) 823-8712
Thomas M. Mistele, Esq.
For Thomas Mistele use 700 Central Avenue, St.Petersburg,FL 33701
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check
appropriate box)
immediately upon filing pursuant to paragraph (b)
X on January 1, 1995 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)
on (date) pursuant to paragraph (a) of Rule 485
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
Registrant has elected to register an indefinite number of Shares of
beneficial interest pursuant to Rule 24f-2 under the Investment Company Act of
1940. A Rule 24f-2 Notice for the Registrant's fiscal year ended August 31, 1995
was filed with the Commission on October 30, 1995.
<PAGE>
TEMPLETON INCOME TRUST
CROSS-REFERENCE SHEET
TEM NO. CAPTION
Part A - Templeton Income Fund
1 Cover Page
2 Expense Table
3 Financial Highlights
4 General Description;
Investment Techniques
5 Management of the Fund
5A See Annual Report to
Shareholders
6 General Information
7 How to Buy Shares of
the Fund
8 How to Sell Shares of
the Fund
9 Not Applicable
Part A - Templeton Money Fund
ITEM NO. CAPTION
1 Cover Page
2 Expense Table
3 Financial Highlights
4 General Description;
Investment Techniques
5 Management of the Fund
<PAGE>
ITEM NO. CAPTION
5A See Annual Report to
Shareholders
6 General Information
7 How to Buy Shares of
the Fund
8 How to Sell Shares of
the Fund
9 Not Applicable
Part B
10 Cover Page
11 Table of Contents
12 General Information
and History
13 Investment Objectives
and Policies
14 Management of the
Trust
15 Principal Shareholders
16 Investment Management
and Other Services
Brokerage Allocation
18 Description of Shares;
Part A
19 Purchase, Redemption
and Pricing of Shares
20 Tax Status
21 Principal Underwriter
22 Performance
Information
23 Financial Statements
<PAGE>
TEMPLETON INCOME FUND PROSPECTUS -- JANUARY 1, 1996
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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
Shareholder Services Department. The Fund offers two classes to
its investors: Templeton Income Fund--Class I ("Class I") and
Templeton Income Fund--Class II ("Class II"). Investors can
choose between Class I Shares, which generally bear a higher
front-end sales charge and lower ongoing Rule 12b-1
distribution fees ("Rule 12b-1 fees"), and Class II Shares,
which generally have a lower front-end sales charge and higher
ongoing Rule 12b-1 fees. Investors should consider the
differences between the two classes, including the impact of
sales charges and distribution fees, in choosing the more
suitable class given their anticipated investment amount and
time horizon. See "How to Buy Shares of the Fund--Differences
Between Class I and Class II." The minimum initial investment
is $100 ($25 minimum for subsequent investments).
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PROSPECTUS This Prospectus sets forth concisely information about the Fund
INFORMATION that a prospective investor ought to know before investing.
Investors are advised to read and retain this Prospectus for
future reference. A Statement of Additional Information ("SAI")
dated January 1, 1996, has been filed with the Securities and
Exchange Commission (the "SEC") and is incorporated in its
entirety by reference in and made a part of this Prospectus.
This SAI is available without charge upon request to Franklin
Templeton Distributors, Inc., P.O. Box 33030 , St. Petersburg,
Florida 33733-8030 or by calling the Fund Information
Department.
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FUND INFORMATION DEPARTMENT -- 1-800/DIAL BEN
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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
<TABLE>
<CAPTION>
Page
----
<S> <C>
EXPENSE TABLE............................. 2
FINANCIAL HIGHLIGHTS...................... 3
GENERAL DESCRIPTION....................... 5
Investment Objective and Policies......... 5
INVESTMENT TECHNIQUES..................... 6
Repurchase Agreements..................... 6
Options on Securities, Indices
and Futures Contracts.................... 6
Forward Foreign Currency Contracts
and Options on Foreign Currencies........ 6
Futures Contracts......................... 7
When-issued Securities.................... 7
Borrowing................................. 7
Loans of Portfolio Securities............. 7
Depositary Receipts....................... 8
Collateralized Mortgage Obligations
("CMOs")................................. 8
U.S. Government Securities................ 8
Commercial Paper.......................... 8
RISK FACTORS.............................. 8
HOW TO BUY SHARES OF THE FUND............. 10
Differences Between Class I and Class II.. 11
Deciding Which Class to Purchase.......... 11
Offering Price--Class I................... 12
Offering Price--Class II.................. 14
Net Asset Value Purchases (Both Classes).. 14
Description of Special Net Asset
Value Purchases.......................... 15
Additional Dealer Compensation
(Both Classes)........................... 16
Purchasing Class I and Class II Shares.... 16
Automatic Investment Plan................. 17
Institutional Accounts.................... 17
Account Statements........................ 17
Templeton STAR Service.................... 17
Retirement Plans.......................... 18
Net Asset Value........................... 18
EXCHANGE PRIVILEGE........................ 18
Exchanges of Class I Shares............... 19
Exchanges of Class II Shares.............. 19
Transfers................................. 20
Conversion Rights......................... 20
Exchanges by Timing Accounts.............. 20
HOW TO SELL SHARES OF THE FUND............ 21
Reinstatement Privilege................... 23
Systematic Withdrawal Plan................ 23
Redemptions by Telephone.................. 24
Contingent Deferred Sales Charge.......... 24
TELEPHONE TRANSACTIONS.................... 25
Verification Procedures................... 25
Restricted Accounts....................... 25
General................................... 25
MANAGEMENT OF THE FUND.................... 26
Investment Manager........................ 26
Business Manager.......................... 27
Transfer Agent............................ 27
Custodian................................. 27
Plans of Distribution..................... 27
Expenses.................................. 28
Brokerage Commissions..................... 28
GENERAL INFORMATION....................... 28
Description of Shares/Share Certificates.. 28
Voting Rights............................. 29
Meetings of Shareholders.................. 29
Dividends and Distributions............... 29
Federal Tax Information................... 29
Inquiries................................. 30
Performance Information................... 30
Statements and Reports.................... 30
WITHHOLDING INFORMATION................... 31
CORPORATE RESOLUTION...................... 32
AUTHORIZATION AGREEMENT................... 33
THE FRANKLIN TEMPLETON GROUP.............. 34
</TABLE>
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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. SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF CAPITAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>
EXPENSE TABLE
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a Shareholder will bear directly or indirectly
in connection with an investment in the Fund. The figures are estimates of the
Fund's expenses for the current fiscal year, restated to reflect current sales
charges and Rule 12b-1 fees for each class.
<TABLE>
<CAPTION>
CLASS I CLASS II
------- --------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a percentage
of Offering Price)........................................ 4.25% 1.00%/1/
Deferred Sales Charge...................................... None/2/ 1.00%/3/
Exchange Fee (per transaction)............................. $5.00/4/ $5.00/4/
ANNUAL FUND OPERATING EXPENSES (as a percentage of average
net assets)
Management Fees............................................ 0.50% 0.50%
Rule 12b-1 Fees/5/......................................... 0.23% 0.65%
Other Expenses (audit, legal, business management, transfer
agent and custodian)...................................... 0.45% 0.42%
Total Fund Operating Expenses.............................. 1.18% 1.57%/1/
</TABLE>
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/1/ Although Class II has a lower front-end sales charge than Class I, over time
the higher Rule 12b-1 fees for Class II may cause Shareholders to pay more
for Class II Shares than for Class I Shares. Given the maximum front-end
sales charge and the rate of Rule 12b-1 fees for each class, it is estimated
that this would take less than six years for Shareholders who maintain total
Shares valued at less than $50,000 in the Franklin Templeton Funds.
Shareholders with larger investments in the Franklin Templeton Funds will
reach the cross-over point more quickly. (See "How to Buy Shares of the
Fund.")
/2/ Class I investments of $1 million or more are not subject to a front-end
sales charge; however, a contingent deferred sales charge of 1%, is
generally imposed on certain redemptions within a "contingency period" of 12
months of the calendar month of such investments. See "How to Sell Shares of
the Fund--Contingent Deferred Sales Charge."
/3/ Class II Shares redeemed within a "contingency period" of 18 months of the
calendar month of such investments are subject to a 1% contingent deferred
sales charge. See "How to Sell Shares of the Fund--Contingent Deferred Sales
Charge."
/4/ $5.00 fee imposed only on Timing Accounts as described under "Exchange
Privilege." All other exchanges are processed without a fee.
/5/ Annual Rule 12b-1 fees may not exceed 0.25% of the Fund's average net assets
attributable to Class I Shares and .65% of the Fund's average net assets
attributable to Class II Shares. Consistent with the National Association of
Securities Dealers, Inc.'s rules, it is possible that the combination of
front-end sales charges and Rule 12b-1 fees could cause long-term
Shareholders to pay more than the economic equivalent of the maximum front-
end sales charges permitted under those same rules.
Investors should be aware that the above table is not intended to reflect in
precise detail the fees and expenses associated with an individual's own
investment in the Fund. Rather, the table has been provided only to assist
investors in gaining a more complete understanding of fees, charges and
expenses. The information in this 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 account. For a more detailed
discussion of these matters, investors should refer to the appropriate
sections of this Prospectus.
EXAMPLE
As required by SEC regulations, the following example illustrates the
expenses, including the maximum front-end sales charge and applicable
contingent deferred sales charge, that apply to a $1,000 investment in the
Fund over various time periods assuming (1) a 5% annual rate of return and (2)
redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class I:..................................... $54 $78 $105 $180
Class II:.................................... $36 $59 $ 95 $195
You would pay the following expenses on the
same investment in Class II Shares, assuming
no redemption............................... $26 $59 $ 95 $195
</TABLE>
For the purpose of this example, it is assumed that a contingent deferred
sales charge will not apply to Class I Shares.
THIS EXAMPLE IS BASED ON THE ESTIMATED ANNUAL OPERATING EXPENSES, INCLUDING
FEES SET BY CONTRACT, SHOWN ABOVE AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES, WHICH MAY BE MORE OR LESS THAN
THOSE SHOWN. The operating expenses are borne by the Fund and only indirectly
by Shareholders as a result of their investment in the Fund. In addition,
federal securities regulations require the example to assume an annual rate of
return of 5%, but the Fund's actual return may be more or less than 5%.
2
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables of selected financial information have been audited by
McGladrey & Pullen, LLP, independent certified public accountants, for the
periods indicated in their report, which is incorporated by reference and
which appears in the Fund's 1995 Annual Report to Shareholders. This statement
should be read in conjunction with the other financial statements and notes
thereto included in the Fund's 1995 Annual Report to Shareholders, which
contains further information about the Fund's performance, and which is
available to Shareholders upon request and without charge.
<TABLE>
<CAPTION>
CLASS I
----------------------------------------------------------------------------------------------
PERIOD FROM
SEPTEMBER 24,
PER SHARE OPERATING YEAR ENDED AUGUST 31, 1986**
PERFORMANCE ------------------------------------------------------------------------------- TO AUGUST 31,
(for a Share outstanding 1995 1994++ 1993 1992 1991 1990 1989 1988 1987
throughout the period) -------- -------- -------- -------- -------- -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year...... $ 9.05 $ 9.96 $ 10.55 $ 9.81 $ 9.95 $ 10.18 $ 9.89 $ 10.53 $10.00
-------- -------- -------- -------- -------- -------- -------- -------- --------
Income from investment
operations
Net investment income... 0.73 0.72 0.82 0.83 0.91 0.94 0.88 0.74 0.61
Net realized and
unrealized gain (loss). 0.17 (0.91) (0.35) 0.75 (0.11) (0.18) 0.26 (0.51) 0.55
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations............. 0.90 (0.19) 0.47 1.58 0.80 0.78 1.14 0.23 1.16
-------- -------- -------- -------- -------- -------- -------- -------- --------
Less distributions
Dividends from net
investment income...... (0.54) (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................ (0.09) (0.12) -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total distributions..... (0.63) (0.72) (1.06) (0.84) (0.94) (0.99) (0.85) (0.87) (0.63)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Change in net asset
value for the year..... 0.27 (0.91) (0.59) 0.74 (0.14) (0.23) 0.29 (0.64) 0.53
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of
year................... $ 9.32 $ 9.05 $ 9.96 $ 10.55 $ 9.81 $ 9.95 $ 10.18 $ 9.89 $ 10.53
-------- -------- -------- -------- -------- -------- -------- -------- --------
TOTAL RETURN+........... 10.43% (2.01)% 5.00% 16.75% 8.43% 8.08% 11.92% 2.25% 11.86%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year
(000).................. $191,301 $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% 1.18% 1.01% 0.98% 1.05% 1.04% 1.10% 1.10% 1.00%*
Net investment income.. 7.99% 7.50% 8.45% 8.14% 9.23% 9.50% 8.63% 7.12% 6.68%*
Portfolio turnover rate. 101.12% 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
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
CLASS II
--------------------
FOR THE PERIOD
MAY 1, 1995+ THROUGH
PER SHARE OPERATING PERFORMANCE AUGUST 31, 1995
(for a Share outstanding throughout the period) --------------------
<S> <C>
Net asset value, beginning of period....................... $ 9.05
Income from investment operations
Net investment income...................................... 0.21
Net realized and unrealized gain (loss).................... 0.24
------
Total from investment operations........................... 0.45
------
Less distributions
Dividends from net investment income....................... (0.15)
Tax basis return of capital................................ (0.04)
------
Total distributions........................................ (0.19)
------
Change in net asset value for the period................... 0.26
------
Net asset value, end of period............................. $ 9.31
------
TOTAL RETURN*.............................................. 5.03%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000)............................ $2,043
Ratio to average net assets of:
Expenses.................................................. 1.57%**
Net investment income..................................... 7.47%**
</TABLE>
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*Total return does not reflect sales commissions. Not annualized.
**Annualized.
+Commencement of offering of sales.
4
<PAGE>
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. The Fund has two classes of
Common Shares of beneficial interest with a par value of $0.01 per Share:
Templeton Income Fund--Class I and Templeton Income Fund--Class II. All Fund
Shares outstanding before May 1, 1995 have been redesignated as Class I
Shares, and will retain their previous rights and privileges, except for
legally required modifications to Shareholder voting procedures, as discussed
in "General Information--Voting Rights."
Shares of the Fund may be purchased (minimum investment of $100 initially
and $25 thereafter) at the current public Offering Price. The current public
Offering Price of the Class I Shares is equal to the net asset value per Share
(see "How to Buy Shares of the Fund--Net Asset Value"), plus a variable sales
charge not exceeding 4.25% of the Offering Price depending upon the amount
invested. The current public Offering Price of the Class II Shares is equal to
the net asset value per Share, plus a sales charge of 1% of the amount
invested. (See "How to Buy Shares of the Fund.")
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, income-producing securities which are convertible into common
stock of such companies and sponsored and unsponsored American Depositary
Receipts ("ADR's"), European Depositary Receipts ("EDR's"), and Global
Depositary Receipts ("GDR's") (collectively, "Depositary Receipts"). 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. There can be no
assurance that the Fund's investment objective will be achieved.
The Fund may invest in any debt security (which may include structured
investments, as described in the SAI under "Investment Objectives and
Policies--Structured Investments"), 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. As an
operating policy, the Fund will not invest more than 5% of its total assets in
debt securities rated lower than BBB by S&P or Baa by Moody's. The 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. See "Investment Objectives and Policies--Debt Securities" in the
SAI for descriptions of debt securities rated BBB by S&P and Baa by Moody's.
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). The Fund may also invest in repurchase agreements. 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
5
<PAGE>
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
The Fund is authorized to use the various investment techniques described
below. Although these strategies are regularly used by some investment
companies and other institutional investors in various markets, some of these
strategies cannot at the present time be used to a significant extent by the
Fund in some of the markets in which the Fund will invest and may not be
available for extensive use in the future.
REPURCHASE AGREEMENTS. When the Fund acquires a security from a U.S. bank or
a registered broker-dealer, it may simultaneously enter into a repurchase
agreement, wherein the seller agrees to repurchase the security at a specified
time and price. The repurchase price is in excess of the purchase price by an
amount which reflects an agreed-upon rate of return, which is not tied to the
coupon rate of the underlying security. Under the 1940 Act, repurchase
agreements are considered to be loans collateralized by the underlying
security and therefore will be fully collateralized. However, if the seller
should default on its obligation to repurchase the underlying security, the
Fund may experience delay or difficulty in exercising its rights to realize
upon the security and might incur a loss if the value of the security
declines, as well as incur disposition costs in liquidating the security.
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 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
6
<PAGE>
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 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
7
<PAGE>
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.
DEPOSITARY RECEIPTS. ADRs are Depositary Receipts typically used by a U.S.
bank or trust company which evidence ownership of underlying securities issued
by a foreign corporation. EDRs and GDRs are typically issued by foreign banks
or trust companies, although they also may be issued by U.S. banks or trust
companies, and evidence ownership of underlying securities issued by either a
foreign or a United States corporation. Generally, Depositary Receipts in
registered form are designed for use in the U.S. securities market and
Depositary Receipts in bearer form are designed for use in securities markets
outside the United States. Depositary Receipts may not necessarily be
denominated in the same currency as the underlying securities into which they
may be converted. Depositary Receipts may be issued pursuant to sponsored or
unsponsored programs. In sponsored programs, an issuer has made arrangements
to have its securities traded in the form of Depositary Receipts. In
unsponsored programs, the issuer may not be directly involved in the creation
of the program. Although regulatory requirements with respect to sponsored and
unsponsored programs are generally similar, in some cases it may be easier to
obtain financial information from an issuer that has participated in the
creation of a sponsored program. Accordingly, there may be less information
available regarding issuers of securities underlying unsponsored programs and
there may not be a correlation between such information and the market value
of the Depositary Receipts. Depositary Receipts also involve the risks of
other investments in foreign securities, as discussed below. For purposes of
the Fund's investment policies, the Fund's investments in Depositary Receipts
will be deemed to be investments in the underlying securities.
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.
RISK FACTORS
Shareholders should understand that all investments involve risk and there
can be no guarantee against loss resulting from an investment in the Fund nor
can there be any assurance that the Fund's investment objective will be
attained. As with any investment in securities, the value of, and income from,
an investment in the Fund can decrease as well as increase, depending on a
variety of factors which may affect the values and income generated by the
Fund's portfolio securities, including general economic conditions and market
factors. In addition to the factors which affect the value of individual
securities, a Shareholder may anticipate that the value of the Shares of the
Fund will fluctuate with movements in the broader equity and bond markets. A
decline in the stock market of any country in which the Fund is invested may
also be reflected in declines in the price of Shares of the Fund. Changes in
the prevailing rates of interest in any of the countries in which the Fund is
invested in fixed income securities will likely affect the value of such
8
<PAGE>
holdings and thus the value of Fund Shares. Increased rates of interest, which
frequently accompany inflation and/or a growing economy, are likely to have a
negative effect on the value of Fund Shares. The value of debt securities held
by the Fund generally will vary inversely with changes in prevailing interest
rates. In addition, changes in currency valuations will affect the price of
Shares of the Fund. History reflects both decreases and increases in stock
markets and interest rates in individual countries and throughout the world,
and in 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 developing. Investors should consider carefully the substantial
risks involved in investing in securities issued by companies and governments
of foreign nations, which are in addition to the usual risks inherent in
domestic investments. There is the possibility of expropriation,
nationalization or confiscatory taxation, taxation of income earned in foreign
nations or other taxes with respect to investments in foreign nations, foreign
exchange controls (which may include suspension of the ability to transfer
currency from a given country), foreign investment controls on daily stock
market movements, default in foreign government securities, political or
social instability, or diplomatic developments which could affect investments
in securities of issuers in foreign nations. Some countries may withhold
portions of interest and dividends at the source. In addition, in many
countries there is less publicly available information about issuers than is
available in reports about companies in the United States. Foreign companies
are not generally subject to uniform accounting and auditing and financial
reporting standards, and auditing practice and requirements may not be
comparable to those applicable to United States companies. The Fund may
encounter difficulties or be unable to vote proxies, exercise shareholder
rights, pursue legal remedies, and obtain judgments in foreign courts.
Brokerage commissions, custodial services, and other costs relating to
investments in foreign countries are generally more expensive than in the
United States. Foreign securities markets also have different clearance and
settlement procedures, and in certain markets there have been times when
settlements have been unable to keep pace with the volume of securities
transactions, making it difficult to conduct such transactions. Delays in
settlement could result in temporary periods when assets of the Fund are
uninvested and no return is earned thereon. The inability of the Fund to make
intended security purchases due to settlement problems could cause the Fund to
miss attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result either in losses to the
Fund due to subsequent declines in value of the portfolio security or, if the
Fund has entered into a contract to sell the security, could result in
possible liability to the purchaser.
In many foreign countries, there is less government supervision and
regulation of business and industry practices, stock exchanges, brokers and
listed companies than in the United States. There is an increased risk,
therefore, of uninsured loss due to lost, stolen, or counterfeit stock
certificates. In addition, the foreign securities markets of many of the
countries in which the Fund may invest may also be smaller, less liquid, and
subject to greater price volatility than those in the United States. The Fund
may invest in Eastern European countries, which involves special risks that
are described under "Risk Factors" in the SAI.
9
<PAGE>
Prior governmental approval of foreign investments may be required under
certain circumstances in some developing countries, and the extent of foreign
investment in domestic companies may be subject to limitation in other
developing countries. Foreign ownership limitations also may be imposed by the
charters of individual companies in developing countries to prevent, among
other concerns, violation of foreign investment limitations.
Repatriation of investment income, capital and proceeds of sales by foreign
investors may require governmental registration and/or approval in some
developing countries. The Fund could be adversely affected by delays in or a
refusal to grant any required governmental registration or approval for such
repatriation.
Further, the economies of developing countries generally are heavily
dependent upon international trade and, accordingly, have been and may
continue to be adversely affected by trade barriers, exchange controls,
managed adjustments in relative currency values and other protectionist
measures imposed or negotiated by the countries with which they trade. These
economies also have been and may continue to be adversely affected by economic
conditions in the countries with which they trade.
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 lower than BBB by S&P or Baa
by Moody's. The Board may consider a change in this operating policy if, in
its judgment, economic conditions change such that a higher level of
investment in high-risk, lower quality debt securities would be consistent
with the interests of the Fund and its Shareholders. High-risk, lower quality
debt securities, commonly referred to as "junk bonds," are regarded, on
balance, as predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with the terms of the
obligation and may be in default. Unrated debt securities are not necessarily
of lower quality than rated securities but they may not be attractive to as
many buyers. Regardless of rating levels, all debt securities considered for
purchase (whether rated or unrated) will be carefully analyzed by the
Investment Manager to insure, to the extent possible, that the planned
investment is sound. The Fund may, from time to time, purchase defaulted debt
securities if, in the opinion of the Investment Manager, the issuer may resume
interest payments in the near future. The Fund will not invest more than 10%
of its total assets in defaulted debt securities, which may be illiquid.
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 for Shares of the Fund, or directly from
FTD upon receipt by FTD of a
10
<PAGE>
completed Shareholder Application and check payable in U.S. currency. Shares
of both classes of the Fund are offered at their respective public Offering
Prices, which are determined by adding the net asset value per Share plus a
front-end sales charge, next computed (i) after the Shareholder's securities
dealer receives the order which is promptly transmitted to the Fund or (ii)
after receipt of an order by mail from the Shareholder directly in proper form
(which generally means a completed Shareholder Application accompanied by a
negotiable check). The minimum initial investment is $100, and subsequent
investments must be $25 or more. These minimums may be waived when the Shares
are being purchased through retirement plans providing for regular periodic
investments, as described below under "Retirement Plans."
DIFFERENCES BETWEEN CLASS I AND CLASS II. The differences between Class I
and Class II Shares lie primarily in their front-end and contingent deferred
sales charges and Rule 12b-1 fees as described below.
Class I. All Fund Shares outstanding before the implementation of the
multiclass structure have been redesignated as Class I Shares, and will retain
their previous rights and privileges. Voting rights of each class will be the
same on matters affecting the Fund as a whole, but each will vote separately
on matters affecting its class. Class I Shares are generally subject to a
variable sales charge upon purchase and not subject to any sales charge upon
redemption. Class I Shares are subject to Rule 12b-1 fees of up to an annual
maximum of 0.25% of average daily net assets of such Shares. With this
multiclass structure, Class I Shares have higher front-end sales charges than
Class II Shares and comparatively lower Rule 12b-1 fees. Class I Shares may be
purchased at reduced front-end sales charges, or at net asset value if certain
conditions are met. In most circumstances, contingent deferred sales charges
will not be assessed against redemptions of Class I Shares. See "Management of
the Fund" and "How to Sell Shares of the Fund" for more information.
Class II. The current public Offering Price of Class II Shares is equal to
the net asset value per Share, plus a front-end sales charge of 1% of the
amount invested. Class II Shares are also subject to a contingent deferred
sales charge of 1% if Shares are redeemed within 18 months of the calendar
month of the purchase. In addition, Class II Shares are subject to Rule 12b-1
fees of up to a maximum of 0.65% per annum of average daily net assets of such
Shares, 0.50% of which will be retained by FTD during the first year of
investment. Class II Shares have lower front-end sales charges than Class I
Shares and comparatively higher Rule 12b-1 fees. See "How to Sell Shares of
the Fund--Contingent Deferred Sales Charge."
Purchases of Class II Shares are limited to purchases below $1 million. Any
purchases of $1 million or more will automatically be invested in Class I
Shares, since that is more beneficial to investors. Such purchases, however,
may be subject to a contingent deferred sales charge. Investors may exceed $1
million in Class II Shares by cumulative purchases over a period of time.
Investors who intend to make investments exceeding $1 million, however, should
consider purchasing Class I Shares through a Letter of Intent instead of
purchasing Class II Shares.
DECIDING WHICH CLASS TO PURCHASE. Investors should carefully evaluate their
anticipated investment amount and time horizon prior to determining which
class of Shares to purchase. Generally, an investor who expects to invest less
than $50,000 in the Franklin Templeton Funds and who expects to make
substantial redemptions within approximately six years or less of investment
should consider purchasing Class II Shares. However, the higher annual Rule
12b-1 fees on the Class II Shares will result in higher operating expenses,
which will accumulate over time to outweigh the difference in front-end sales
charges, and will lower income dividends for Class II Shares. For this reason,
Class I Shares may be more attractive to long-term investors even if no sales
charge reductions are available to them.
Investors who qualify to purchase Class I Shares at reduced sales charges
definitely should consider purchasing Class I Shares, especially if they
intend to hold their Shares approximately six years or more. Investors who
qualify to purchase Class I Shares at reduced sales charges but who intend to
hold their Shares less than approximately six years should evaluate whether it
is more economical to purchase Class I Shares through a Letter of Intent or
under the cumulative quantity discount rather than purchasing
11
<PAGE>
Class II Shares. INVESTORS INVESTING $1 MILLION OR MORE IN A SINGLE PAYMENT
AND OTHER INVESTORS WHO QUALIFY TO PURCHASE CLASS I SHARES AT NET ASSET VALUE
WILL BE PRECLUDED FROM PURCHASING CLASS II SHARES.
Each class represents the same interest in the investment portfolio of the
Fund and has the same rights, except that each class has a different sales
charge, bears the separate expenses of its Rule 12b-1 distribution plan, and
has exclusive voting rights with respect to such plan. The two classes also
have separate exchange privileges.
Each class also has a separate schedule for compensating securities dealers
for selling Fund Shares. Investors should take all of the factors regarding an
investment in each class into account before deciding which class of Shares to
purchase.
OFFERING PRICE--CLASS I. The sales charge for Class I Shares is a variable
percentage of the Offering Price depending upon the amount of the sale. The
method of calculating net asset value per Share is described below under "Net
Asset Value".
The price to the public on purchases of Class I Shares made by a single
purchaser, by an individual together with his or her spouse, and their
children under age 21 and their grandchildren under age 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 PORTION OF TOTAL
AMOUNT OF SALE OFFERING PRICE NET ASSET VALUE OFFERING PRICE
AT OFFERING PRICE OF THE SHARES PURCHASED OF THE SHARES PURCHASED RETAINED BY DEALERS/1/,/3/
- ----------------- ----------------------- ----------------------- --------------------------
<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)/2/
</TABLE>
- -------
/1/ Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages set forth above.
/2/ The following commissions will be paid by FTD, from its own resources, to
securities dealers who initiate and are responsible for purchases of $1
million or more: 0.75% on sales of $1 million but less than $2 million, plus
0.60% on sales of $2 million but less than $3 million, plus 0.50% on sales
of $3 million but less than $50 million, plus 0.25% on sales of $50 million
but less than $100 million, plus 0.15% on sales of $100 million or more.
Dealer concession breakpoints are reset every 12 months for purposes of
additional purchases.
/3/ At the discretion of FTD, all sales charges may at times be reallowed to the
securities dealer. If 90% or more of the sales commission is reallowed, such
securities dealer may be deemed to be an underwriter as that term is defined
in the Securities Act of 1933.
No front-end sales charge applies to investments of $1 million or more, but
a contingent deferred sales charge of 1% is imposed on certain redemptions of
all or a portion of investments of $1 million or more within 12 months of the
calendar month of such investments ("contingency period"). See "How to Sell
Shares of the Fund--Contingent Deferred Sales Charge."
The size of a transaction which determines the applicable sales charge on
the purchase of Class I Shares is determined by adding the amount of the
Shareholder's current purchase plus the cost or current value (whichever is
higher) of a Shareholder's existing investment in one or more of the funds in
the Franklin Group of Funds(R) and the Templeton Family of Funds. Included for
these aggregation purposes are (i) the mutual funds in the Franklin Group of
Funds(R) except Franklin Valuemark Funds and Franklin
12
<PAGE>
Government Securities Trust (the "Franklin Funds"); (ii) other investment
products underwritten by FTD or its affiliates (although certain investments
may not have the same schedule of sales charges and/or may not be subject to
reduction); and (iii) the U.S.-registered mutual funds in the Templeton Family
of Funds except Templeton Capital Accumulator Fund, Inc., Templeton Variable
Annuity Fund, and Templeton Variable Products Series Fund (the "Templeton
Funds"). (Franklin Funds and Templeton Funds are collectively referred to as
the "Franklin Templeton Funds.") Sales charge reductions based upon aggregate
holdings of (i), (ii) and (iii) above ("Franklin Templeton Investments") may
be effective only after notification to FTD that the investment qualifies for
a discount.
Other Payments to Securities Dealers. FTD, or one of its affiliates, may
make payments, from its own resources, of up to .75% of the amount purchased
to securities dealers who initiate and are responsible for purchases made at
net asset value by certain non-designated retirement plans (as defined below),
and up to 1% of the amount purchased to securities dealers who initiate and
are responsible for purchases made at net asset value by certain designated
retirement plans (excluding IRA and IRA rollovers) nondesignated plans (as
defined below), certain trust companies and trust departments of banks and
certain retirement plans of organizations with collective retirement plan
assets of $10 million or more. See definitions under "Description of Special
Net Asset Value Purchases" below and as set forth in the SAI.
A sales charge of 4% of the Offering Price (4.17% of the net asset value) is
applicable to all purchases of Shares made for any qualified or non-qualified
employee benefit plan account which is a Shareholder in the Fund on or before
February 1, 1995. Of the 4% sales commission applicable to such purchases,
3.20% of the Offering Price will be retained by dealers.
Cumulative Quantity Discount. The schedule of reduced sales charges also may
be applied to qualifying sales of Class I Shares on a cumulative basis. For
this purpose, the dollar amount of the sale is added to the higher of (i) the
value (calculated at the applicable Offering Price) or (ii) the purchase
price, of Franklin Templeton Investments. The cumulative quantity discount
applies to Franklin Templeton Investments owned at the time of purchase by the
purchaser, his or her spouse, their children under age 21 and grandchildren
under age 21. In addition, the aggregate investments of a trustee or other
fiduciary account (for an account under exclusive investment authority) may be
considered in determining whether a reduced sales charge is available, even
though there may be a number of beneficiaries of the account. For example, if
the investor held Class I Shares valued at $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 Class I 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 Class I
Shares to be registered in "street name," FTD will accept the dealer's
instructions with respect to the applicable sales charge rate to be applied.
The cumulative quantity discount may be amended or terminated at any time.
Letter of Intent. An investor may be eligible for reduced sales charges on
all investments in Class I Shares by means of a Letter of Intent ("LOI") which
expresses the investor's intention to invest a certain amount within a 13-
month period in Class I Shares of the Fund or any other Franklin Templeton
Fund. See the Shareholder Application. Except for certain employee benefit
plans, the minimum initial investment under an LOI is 5% of the total LOI
amount. Except for Shares purchased by certain employee benefit plans, Shares
purchased with the first 5% of such amount will be held in escrow to secure
payment of the higher sales charge applicable to the Shares actually purchased
if the full amount indicated is not purchased, and such escrowed Shares will
be involuntarily redeemed to pay the additional sales charge, if necessary. A
purchase not originally made pursuant to an LOI may be included under a
subsequent LOI executed within 90 days of the purchase. Any redemptions made
by Shareholders, other than by certain employee benefit plans, during the 13-
month period will be subtracted from the amount of the purchases for purposes
of determining whether the terms of the LOI have been completed. For a further
description of the LOI, see "Purchase, Redemption and Pricing of Shares--
Letter of Intent" in the SAI.
13
<PAGE>
Group Purchases. An individual who is a member of a qualified group may also
purchase Class I Shares of the Fund at the reduced sales charge applicable to
the group as a whole. The sales charge is based upon the aggregate dollar
value of Class I Shares previously purchased and still owned by the group,
plus the amount of the current purchase. For example, if members of the group
had previously invested and still held $90,000 of Class I 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.
OFFERING PRICE--CLASS II. Unlike Class I Shares, the front-end sales charges
and dealer concessions for Class II Shares do not vary depending on the amount
of purchase. The total sales charges or underwriting commissions and dealer
concessions for Class II Shares are set forth below.
<TABLE>
<CAPTION>
TOTAL SALES CHARGE
-----------------------------------------------
AS A PERCENTAGE OF AS A PERCENTAGE OF PORTION OF TOTAL
AMOUNT OF SALE OFFERING PRICE NET ASSET VALUE OFFERING PRICE
AT OFFERING PRICE OF THE SHARES PURCHASED OF THE SHARES PURCHASED RETAINED BY DEALERS*
- ----------------- ----------------------- ----------------------- --------------------
<S> <C> <C> <C>
any amount (less than $1
million)............... 1.00% 1.01% 1.00%
</TABLE>
- -------
* FTD, or one of its affiliates, may make additional payments to securities
dealers, from its own resources, of up to 1% of the amount invested. During
the first year following a purchase of Class II Shares, FTD will keep a
portion of the Rule 12b-1 fees assessed on those Shares to partially recoup
fees FTD pays to securities dealers.
Class II Shares redeemed within 18 months of their purchase will be assessed
a contingent deferred sales charge of 1% on the lesser of the then-current net
asset value or the net asset value of such Shares at the time of purchase,
unless such charge is waived as described under "How To Sell Shares of the
Fund--Contingent Deferred Sales Charge."
NET ASSET VALUE PURCHASES (BOTH CLASSES). Class I Shares may be purchased
without the imposition of either a front-end sales charge ("net asset value")
or a contingent deferred sales charge by (i) officers, trustees, directors,
and full-time employees of the Fund, any of the Franklin Templeton Funds, or
Franklin Resources, Inc. and its subsidiaries (the "Franklin Templeton
Group"), and their spouses and family members, including any subsequent
payments made by such parties after cessation of employment; (ii) companies
exchanging Shares with or selling assets pursuant to a merger, acquisition or
exchange offer; (iii) insurance company separate accounts for pension plan
contracts; (iv) accounts managed by the Franklin Templeton Group; (v)
shareholders of Templeton Institutional Funds, Inc. reinvesting redemption
proceeds from that fund under an employee benefit plan qualified under Section
401 of the Internal Revenue Code of 1986, as amended (the "Code"), in Shares
of the Fund; (vi) certain unit investment trusts and unit holders of such
trusts reinvesting their distributions from the trusts in the Fund; (vii)
registered securities dealers and their affiliates, for their investment
account only; and (viii) registered personnel and employees of securities
dealers and their affiliates, and by their spouses and family members, in
accordance with the internal policies and procedures of the employing
securities dealer.
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<PAGE>
For either Class I or Class II, the same class of Shares of the Fund may be
purchased at net asset value with the proceeds from (i) a redemption of Shares
of the Fund or shares of any other Franklin Templeton Fund, except any of the
Franklin Templeton money market funds (unless the redemption proceeds are from
Class I shares of a fund with a lower initial sales charge than that charged
by the Fund and have been held in that fund for less than six months), or (ii)
a dividend or distribution paid by any of the Franklin Templeton Funds, within
365 days after the date of the redemption or dividend or distribution. See
"How to Sell Shares of the Fund--Reinstatement Privilege." Class II
Shareholders may also invest such distributions at net asset value in a Class
I Franklin Templeton Fund.
Class I Shares may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by investors who have, within
the past 60 days, redeemed an investment in a mutual fund which is not part of
the Franklin Templeton Funds, which was subject to a front-end sales charge or
a contingent deferred sales charge and which has investment objectives similar
to those of the Fund.
Class I Shares may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by broker-dealers who have
entered into a supplemental agreement with FTD, or by registered investment
advisers affiliated with such broker-dealers, on behalf of their clients who
are participating in a comprehensive fee program (also known as a wrap fee
program).
Class I Shares may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by anyone who has taken a
distribution from an existing retirement plan already invested in the Franklin
Templeton Funds (including former
participants of the Franklin Templeton Profit Sharing 401(k) plan), to the
extent of such distribution. In order to exercise this privilege, a written
order for the purchase of Shares of the Fund must be received by Franklin
Templeton Trust Company ("FTTC"), the Fund, or Franklin Templeton Investor
Services, Inc. (the "Transfer Agent") within 365 days after the plan
distribution.
Class I Shares may also be purchased at net asset value and without the
imposition of a contingent deferred sales charge by any state, county or city,
or any instrumentality, department, authority or agency thereof which has
determined that the Fund is a legally permissible investment and which is
prohibited by applicable investment laws from paying a sales charge or
commission in connection with the purchase of shares of any registered
management investment company (an "eligible governmental authority"). SUCH
INVESTORS SHOULD CONSULT THEIR OWN LEGAL 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 or arbitrage
rebate calculations. If an investment by an eligible governmental authority at
net asset value is made through a securities dealer who has executed a dealer
agreement with FTD, FTD or one of its affiliates may make a payment, out of
its own resources, to such securities dealer in an amount not to exceed 0.25%
of the amount invested. Contact Franklin Templeton Institutional Services for
additional information.
DESCRIPTION OF SPECIAL NET ASSET VALUE PURCHASES. Class I Shares may also be
purchased at net asset value and without the imposition of a contingent
deferred sales charge by certain designated retirement plans, including
profit-sharing, pension, 401(k) and simplified employee pension plans
("designated plans"), subject to minimum requirements with respect to number
of employees or amount of purchase, which may be established by FTD.
Currently, those criteria require that the employer establishing the plan have
200 or more employees or that the amount invested or to be invested during the
subsequent 13-month period in the Fund or in any of the Franklin Templeton
Investments totals at least $1 million. Employee benefit plans not designated
above or qualified under Section 401 of the Code ("non-designated plans") may
be afforded the same privilege if they meet the above requirements as well as
the uniform criteria for qualified groups previously described under "Group
Purchases," which enable FTD to realize economies of scale in its sales
efforts and sales-related expenses.
Class I Shares may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by trust companies and bank
trust departments for funds over which they exercise exclusive discretionary
investment authority and which are
15
<PAGE>
held in a fiduciary, agency, advisory, custodial or similar capacity. Such
purchases are subject to minimum requirements with respect to amount of
purchase, which may be established by FTD. Currently, those criteria require
that the amount invested or to be invested during the subsequent 13-month
period in the Fund or any of the Franklin Templeton Investments must total at
least $1 million. Orders for such accounts will be accepted by mail
accompanied by a check, or by telephone or other means of electronic data
transfer directly from the bank or trust company, with payment by federal
funds received by the close of business on the next business day following
such order.
Class I Shares may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by trustees or other
fiduciaries purchasing securities for certain retirement plans of
organizations with collective retirement plan assets of $10 million or more,
without regard to where such assets are currently invested.
Refer to the SAI for further information regarding net asset value purchases
of Class I Shares.
ADDITIONAL DEALER COMPENSATION (BOTH CLASSES). FTD, or one of its
affiliates, from its own resources, may also provide additional compensation
to securities dealers in connection with sales of shares of the Franklin
Templeton Funds. Compensation may include financial assistance to securities
dealers in connection with conferences, sales or training programs for their
employees, seminars for the public, advertising, sales campaigns and/or
shareholder services and programs regarding one or more of the Franklin
Templeton Funds and other dealer-sponsored programs or events. In some
instances, this compensation may be made available only to certain securities
dealers whose representatives have sold or are expected to sell significant
amounts of shares of the Franklin Templeton Funds. Compensation may include
payment for travel expenses, including lodging, incurred in connection with
trips taken by invited registered representatives and members of their
families to locations within or outside of the United States for meetings or
seminars of a business nature. Securities dealers may not use sales of the
Fund's Shares to qualify for this compensation to the extent such may be
prohibited by the laws of any state or any self-regulatory agency, such as the
National Association of Securities Dealers, Inc. In addition, FTD or its
affiliates may make ongoing payments to brokerage firms, financial
institutions (including banks) and others to facilitate the administration and
servicing of Shareholder accounts. None of the aforementioned additional
compensation is paid for by the Fund or its Shareholders.
Ongoing payments will be made to qualifying dealers at the annual rate of
0.25% of the average daily net asset value of Class I Shares (annual rate of
0.15% of the average daily net assets of Class I Shares purchased prior to
January 1, 1993), and 1% of the average daily net asset value of Class II
Shares, registered in the name of that broker-dealer as nominee or held in a
Shareholder account that designates that broker-dealer as dealer of record.
These payments are made in order to promote selling efforts and to compensate
dealers for providing certain services, including processing purchase and
redemption transactions, establishing Shareholder accounts and providing
certain information and assistance with respect to the Fund. For purchases of
Class I Shares on or after February 1, 1995 for which FTD advanced a
commission to a securities dealer, the dealer will receive ongoing payments
beginning in the thirteenth month after the date of purchase. For all
purchases of Class II Shares, the dealer will receive payments representing a
service fee (0.25% of average daily net asset value of the Shares) beginning
in the first month after the date of the purchase, and will receive additional
payments representing compensation for distribution (0.75% of average daily
net asset value of the Shares) beginning in the thirteenth month after the
date of the purchase, and beginning May 1, 1997 for exchanges from Templeton
American Trust, Inc., if the exchanged shares were purchased prior to May 1,
1995.
PURCHASING CLASS I AND CLASS II SHARES. When placing purchase orders,
investors should clearly indicate which class of Shares they intend to
purchase. A purchase order that fails to specify a class will automatically be
invested in Class I Shares. Purchases of $1 million or more in a single
payment will be invested in Class I Shares. There are no conversion features
attached to either class of Shares.
Investors who qualify to purchase Class I Shares at net asset value should
purchase Class I rather than Class II Shares. See the section "Net Asset Value
Purchases (Both Classes)" and "Description of Special Net Asset Value
Purchases" above for a discussion of when Shares may be purchased at net asset
value.
16
<PAGE>
As to telephone orders placed with FTD by dealers, the dealer must receive
the investor's order before the close of the New York Stock Exchange ("NYSE")
and transmit it to FTD by 5:00 p.m., New York time, for the investor to
receive that day's Offering Price. Payment for such orders must be by check in
U.S. currency and must be promptly submitted to FTD. Orders mailed to FTD by
dealers or individual investors are effected at the net asset value of the
Fund's Shares next computed after the purchase order accompanied by payment
has been received by FTD. Such payment must be by check in U.S. currency drawn
on a commercial bank in the United States 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 ensure that it has been accurately
recorded in the investor's account.
AUTOMATIC INVESTMENT PLAN. Investors may accumulate Fund Shares regularly
each month by means of automatic debits to their checking accounts ($25
minimum). Forms for this purpose are in the Shareholder Application in this
Prospectus. Such a plan is voluntary and may be discontinued by written notice
to FTD, which must be received 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 be additional methods
of opening accounts and 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. From a touch-tone phone, Templeton and Franklin
shareholders may access an automated system (day or night) which offers the
following features:
By calling the Templeton STAR Service, shareholders may obtain current price
and yield information specific to a Templeton Fund, regardless of class;
obtain account information; and request duplicate confirmation or year-end
statements and money fund checks, if applicable.
By calling the Franklin TeleFACTS(R) system, Class I shareholders may obtain
current price, yield or other performance information specific to a Class I
Franklin Fund; process an exchange into an identically registered Class I
Franklin account; obtain account information; and request duplicate
confirmation or year-end statements, money fund checks, if applicable, and
deposit slips.
Share prices and account information specific to Templeton Class I or II
shares and Franklin Class II shares may also be accessed on TeleFACTS by
Franklin and Templeton Class I and Class II shareholders.
The Templeton STAR Service is accessible by calling 1-800-654-0123. The
TeleFACTS system is accessible by calling 1-800-247-1753. Templeton Class I
and Class II Share codes for the Fund, which will be needed to access system
information, are 406 and 506, respectively. The system's automated operator
will prompt the caller with easy to follow step-by-step instructions from the
main menu. Other features may be added in the future.
17
<PAGE>
RETIREMENT PLANS. Shares of the Fund may be purchased through various
retirement plans including the following plans for which FTTC or its affiliate
acts as trustee or custodian: IRAs, Simplified Employee Pensions, 403(b)
plans, qualified plans for corporations, self-employed individuals and
partnerships, and 401(k) plans. A plan document must be adopted in order for a
retirement plan to be in existence. For further information about any of the
plans, agreements, applications and annual fees, contact FTD. To determine
which retirement plan is appropriate, an investor should contact his or her
tax adviser.
NET ASSET VALUE. The net asset value per Share of each class of the Fund is
determined as of the scheduled closing time of the NYSE (generally 4:00 p.m.,
New York time) each day the NYSE is open for trading, by dividing the value of
the Fund's securities plus any cash and other assets (including accrued
interest and dividends receivable) less all liabilities (including accrued
expenses) by the number of Shares outstanding, adjusted to the nearest whole
cent. A security listed or traded on a recognized stock exchange or NASDAQ is
valued at its last sale price on the principal exchange on which the security
is traded. The value of a foreign security is determined in its national
currency as of the close of trading on the foreign exchange on which it is
traded, or as of the scheduled closing time of the NYSE (generally 4:00 p.m.,
New York time), if that is earlier, and that value is then converted into its
U.S. dollar equivalent at the foreign exchange rate in effect at noon, New
York time, on the day the value of the foreign security is determined. If no
sale is reported at that time, the mean between the current bid and asked
price is used. Occasionally, events which affect the values of such securities
and such exchange rates may occur between the times at which they are
determined and the close of the NYSE, and will therefore not be reflected in
the computation of the Fund's net asset value. If events materially affecting
the value of such securities occur during such period, then these securities
will be valued at fair value as determined by the management and approved in
good faith by the Board of 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.
Each of the Fund's classes will bear, pro-rata, all of the common expenses
of the Fund. The net asset value of all outstanding Shares of each class of
the Fund will be computed on a pro-rata basis for each outstanding Share based
on the proportionate participation in the Fund represented by the value of
Shares of such classes, except that the Class I and Class II Shares will bear
the Rule 12b-1 expenses payable under their respective plans. Due to the
specific distribution expenses and other costs that will be allocable to each
class, the dividends paid to each class of the Fund may vary.
EXCHANGE PRIVILEGE
A Shareholder may exchange Shares for the same class of shares of other
Franklin Templeton Funds which are eligible for sale in the Shareholder's
state of residence and in conformity with such fund's stated eligibility
requirements and investment minimums. Some funds, however, may not offer Class
II shares. Class I Shares may be exchanged for Class I shares of any Franklin
Templeton Funds. Class II Shares may be exchanged for Class II shares of any
Franklin Templeton Funds. No exchanges between different classes of shares
will be allowed. A contingent deferred sales charge will not be imposed on
exchanges. If the exchanged Shares were subject to a contingent deferred sales
charge in the original fund purchased, and Shares are subsequently redeemed
within 12 months (Class I Shares) or 18 months (Class II Shares) of the
calendar month of the original purchase date, a contingent deferred sales
charge will be imposed. The period will be tolled (or stopped) for the period
Class I Shares are exchanged into and held in a Franklin Templeton money
market fund. See also "How to Sell Shares of the Fund--Contingent Deferred
Sales Charge."
Exchange purchases are subject to the minimum investment requirements of the
fund purchased and no sales charge generally applies. Exchanges of the same
class of shares are made on the basis of the net asset values of the class
involved, except as set forth below. Exchanges of shares of a class which were
originally purchased without a sales charge will be charged a sales charge in
accordance with the terms of the prospectus of the fund and the class of
shares being purchased, unless the original investment on
18
<PAGE>
which no sales charge was paid was transferred in from a fund on which the
investor paid a sales charge. Exchanges of shares from the Franklin Templeton
money market funds are subject to applicable sales charges on the funds being
purchased, unless the Franklin Templeton money market fund shares were
acquired by an exchange from a fund having a sales charge, or by reinvestment
of dividends or capital gain distributions. Exchanges of Class I Shares of the
Fund which were purchased with a lower sales charge to a fund which has a
higher sales charge will be charged the difference, unless the shares were
held in the original fund for at least six months prior to executing the
exchange. All exchanges are permitted only after at least 15 days have elapsed
from the date of the purchase of the Shares to be exchanged.
A Shareholder may exchange Shares by writing to the Transfer Agent (see "How
to Sell Shares of the Fund"), by contacting his or her investment dealer or--
if the Shareholder Application indicates that the Shareholder has not declined
the option--by telephoning 1-800-632-2301. Telephone exchange instructions
must be received by FTD by the scheduled closing time of the NYSE (generally
4:00 p.m., New York time). Telephonic exchanges can involve only Shares in
non-certificated form. Shares held in certificate form are not eligible, but
may be returned and qualify for these services. All accounts involved in a
telephonic exchange must have the same registration and dividend option as the
account from which the Shares are being exchanged. The Fund and the Transfer
Agent will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. Please refer to "Telephone
Transactions--Verification Procedures." Forms for declining the telephone
exchange privilege and prospectuses of the other funds in
the Franklin Templeton Group may be obtained from FTD. Exchange redemptions
and purchases are processed simultaneously at the share prices next determined
after the exchange order is received. (See "How to Buy Shares of the Fund--
Offering Price.") A gain or loss for tax purposes generally will be realized
upon the exchange, depending on the tax basis of the Shares redeemed.
This exchange privilege is available only in states where shares of the fund
being acquired may legally be sold and may be modified, limited or terminated
at any time by the Fund upon 60 days' written notice. A Shareholder who wishes
to make an exchange should first obtain and review a current prospectus of the
fund into which he or she wishes to exchange. Broker-dealers who process
exchange orders on behalf of their customers may charge a fee for their
services. Such fee may be avoided by making requests for exchange directly to
the Transfer Agent.
If a substantial portion of the Fund's Shareholders should, within a short
period, elect to redeem their Shares of the Fund pursuant to the exchange
privilege, the Fund might have to liquidate portfolio securities it might
otherwise hold and incur the additional costs related to such transactions. On
the other hand, increased use of the exchange privilege may result in periodic
large inflows of money. If this should occur, it is the general policy of the
Fund to initially invest this money in short-term, interest-bearing money
market instruments, unless it is felt that attractive investment opportunities
consistent with the Fund's investment objectives exist immediately.
Subsequently, this money will be withdrawn from such short-term money market
instruments and invested in portfolio securities in as orderly a manner as is
possible when attractive investment opportunities arise.
EXCHANGES OF CLASS I SHARES. The contingency period of Class I Shares will
be tolled (or stopped) for the period such Shares are exchanged into and held
in a Franklin Templeton Class I money market fund. If a Class I account has
Shares subject to a contingent deferred sale charge, Class I Shares will be
exchanged into the new account on a "first-in, first-out" basis. See also "How
to Sell Shares of the Fund--Contingent Deferred Sales Charge."
EXCHANGES OF CLASS II SHARES. When an account is composed of Class II Shares
subject to the contingent deferred sales charge, and Shares that are not, the
Shares will be transferred proportionately into the new fund. Shares received
from reinvestment of dividends and capital gains are referred to as "free
Shares," Shares which were originally subject to a contingent deferred sales
charge but to which the contingent deferred sales charge no longer applies are
called "matured Shares," and Shares still subject to the contingent deferred
sales charge are referred to as "CDSC liable Shares." CDSC liable Shares held
for different periods of time are considered different types of CDSC liable
Shares. For instance, if a Shareholder has $1,000 in free Shares, $2,000 in
matured Shares, and $3,000 in CDSC liable Shares, and the Shareholder
exchanges $3,000 into a new fund, $500 will be exchanged from free Shares,
19
<PAGE>
$1,000 from matured Shares, and $1,500 from CDSC liable Shares. Similarly, if
CDSC liable Shares have been purchased at different periods, a proportionate
amount will be taken from Shares held for each period. If, for example, the
Shareholder holds $1,000 in Shares bought three months ago, $1,000 bought six
months ago, and $1,000 bought nine months ago, and the Shareholder exchanges
$1,500 into a new fund, $500 from each of these Shares will be exchanged into
the new fund.
The only money market fund exchange option available to Class II
Shareholders is the Franklin Templeton Money Fund II ("Money Fund II"), a
series of the Franklin Templeton Money Fund Trust. No drafts (checks) may be
written on Money Fund II accounts, nor may Shareholders purchase shares of
Money Fund II directly. Class II Shares exchanged for shares of Money Fund II
will continue to age and a contingent deferred sales charge will be assessed
if CDSC liable Shares are redeemed. No other money market funds are available
for Class II Shareholders for exchange purposes. Class I Shares may be
exchanged for shares of any of the money market funds in the Franklin
Templeton Funds except Money Fund II. Draft writing privileges and direct
purchases are allowed on these money market funds as described in their
respective prospectuses.
To the extent Shares are exchanged proportionately, as opposed to another
method, such as "first-in, first-out," or free Shares followed by CDSC liable
Shares, the exchanged Shares may, in some instances, be CDSC liable even
though a redemption of such Shares, as discussed elsewhere herein, may no
longer be subject to a CDSC. The proportional method is believed by management
to
more closely meet and reflect the expectations of Class II Shareholders in the
event Shares are redeemed during the contingency period. For federal income
tax purposes, the cost basis of Shares redeemed or exchanged is determined
under the Code without regard to the method of transferring Shares chosen by
the Fund for purposes of exchanging or redeeming Shares.
TRANSFERS. Transfers between identically registered accounts in the same
fund and class are treated as non-monetary and non-taxable events, and are not
subject to a contingent deferred sales charge. The transferred Shares will
continue to age from the date of original purchase. Shares of each class will
be transferred on the same basis as described above for exchanges.
CONVERSION RIGHTS. It is not presently anticipated that Class II Shares will
be converted to Class I Shares at this time. A Shareholder may, however, sell
Class II Shares and use the proceeds to purchase Class I Shares, subject to
all applicable sales charges.
EXCHANGES BY TIMING ACCOUNTS. In the case of market timing or allocation
services ("Timing Accounts"), FTD will deduct an administrative service fee of
$5.00 per exchange. Timing Accounts generally include accounts administered so
as to redeem or purchase Shares based upon certain predetermined market
indicators. In accordance with the terms of their respective prospectuses,
certain funds in the Franklin Templeton Group do not accept or may place
differing limitations than those described below on exchanges by Timing
Accounts.
The Fund reserves the right to temporarily or permanently terminate the
exchange privilege or reject any specific purchase order for any Timing
Account or any person whose transactions seem to follow a timing pattern who:
(i) makes an exchange request out of the Fund within two weeks of an earlier
exchange request out of the Fund, (ii) makes more than two exchanges out of
the Fund per calendar quarter, or (iii) exchanges Shares equal in value to at
least $5 million, or more than 1% of the Fund's net assets. Accounts under
common ownership or control, including accounts administered so as to redeem
or purchase Shares based upon certain predetermined market indicators, will be
aggregated for purposes of the exchange limits.
In addition, the Fund reserves the right to refuse the purchase side of
exchange requests by any Timing Account, person, or group if, in the
Investment Manager's judgment, the Fund would be unable to invest effectively
in accordance with its investment objective and policies, or would otherwise
potentially be adversely affected. A Shareholder's exchanges into the Fund may
be restricted or refused if the Fund receives or anticipates simultaneous
orders affecting significant portions of the Fund's assets. In particular, a
pattern of exchanges that coincides with a "market timing" strategy may be
disruptive to the Fund and therefore may be refused.
20
<PAGE>
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 (a) national or state banks, savings
associations, savings and loan associations, trust companies, savings banks,
industrial loan companies and credit unions; (b) national securities
exchanges, registered securities associations and clearing agencies; (c)
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 (d)
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 (i) the current address of one or more joint
owners of an account cannot be confirmed; (ii) multiple owners have a dispute
or give inconsistent instructions to the Fund; (iii) the Fund has been
notified of an adverse claim; (iv) the instructions received by the Fund are
given by an agent, not the actual registered owner; (v) the Fund determines
that joint owners who are married to each other are separated or may be the
subject of divorce proceedings; or (vi) the authority of a representative of a
corporation, partnership, association, or other entity has not been
established to the satisfaction of the Fund;
3. Any outstanding certificates must accompany the request together with a
stock power signed by the Shareholder(s), with signature(s) guaranteed as
described in Item 2 above;
4. Liquidation requests of corporate, partnership, trust and custodianship
accounts, and accounts under court jurisdiction, require the following
documentation to be in proper form:
. Corporation--(i) Signature guaranteed letter of instruction from the
authorized officer(s) of the corporation, and (ii) a corporate
resolution in a form satisfactory to the Transfer Agent;
. 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
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5. Redemption of Shares held in a retirement plan for which FTTC or its
affiliate acts as trustee or custodian, must conform to the distribution
requirements of the plan and the Fund's redemption requirements above.
Distributions from such plans are subject to additional requirements under the
Code, and certain documents (available from the Transfer Agent) must be
completed before the distribution may be made. For example, distributions from
retirement plans are subject to withholding requirements under the Code, and
the IRS Form W-4P (available from the Transfer Agent) may be required to be
submitted to the Transfer Agent with the distribution request, or the
distribution will be delayed. Franklin Templeton Investor Services, Inc. and
its affiliates assume no responsibility to determine whether a distribution
satisfies the conditions of applicable tax laws and will not be responsible
for any penalties assessed.
To avoid delay in redemption or transfer, Shareholders having questions
about these requirements should contact the Shareholder Services Department by
calling 1-800-632-2301.
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. A gain or loss for tax purposes generally will be realized upon the
redemption, depending on the tax basis of the Shares redeemed. Payment of the
redemption price ordinarily will be made by check (or by wire at the sole
discretion of the Transfer Agent if wire transfer is requested, including name
and address of the bank and the Shareholder's account number to which payment
of the redemption proceeds is to be wired) within seven days after receipt of
the redemption request in Proper Order. However, if Shares have been purchased
by check, the Fund will make redemption proceeds available when a
Shareholder's check received for the Shares purchased has been cleared for
payment by the Shareholder's bank, which, depending upon the location of the
Shareholder's bank, could take up to 15 days or more. The check will be mailed
by first-class mail to the Shareholder's registered address (or as otherwise
directed). Remittance by wire (to a commercial bank account in the same
name(s) as the Shares are registered) or express mail, if requested, are
subject to a handling charge of up to $15, which will be deducted from the
redemption proceeds.
The Fund, through FTD, also repurchases Shares (whether in certificate or
book-entry form) through securities dealers. The Fund normally will accept
orders to repurchase such Shares by wire or telephone from dealers for their
customers at the net asset value next computed after the dealer has received
the certificate holder's request for repurchase, if the dealer received such
request before closing time of the NYSE on that day. Dealers have the
responsibility of submitting such repurchase requests by calling not later
than 5:00 p.m., New York time, on such day in order to obtain that day's
applicable redemption price. Repurchase of Shares is for the convenience of
Shareholders and does not involve a charge by the Fund; however, securities
dealers may impose a charge on the Shareholder for transmitting the notice of
repurchase to the Fund. The Fund reserves the right to reject any order for
repurchase, which right of rejection might adversely affect Shareholders
seeking redemption through the repurchase procedure. Ordinarily, payment will
be made to the securities dealer within seven days after receipt of a
repurchase order and Share certificate (if any) in "Proper Order" as set forth
above. The Fund also will accept, from member firms of the NYSE, orders to
repurchase Shares for which no certificates have been issued by wire or
telephone without a redemption request signed by the Shareholder, provided the
member firm indemnifies the Fund and FTD from any liability resulting from the
absence of the Shareholder's signature. Forms for such indemnity agreement can
be obtained from FTD.
The Fund may involuntarily redeem an investor's Shares if the net asset
value of such Shares is less than $100, except that involuntary redemptions
will not result from fluctuations in the value of an investor's Shares. In
addition, the Fund may involuntarily redeem the Shares of any investor who has
failed to provide the Fund with a certified taxpayer identification number or
such other tax-related certifications as the Fund may require. A notice of
redemption, sent by first-class mail to the investor's address of record, will
fix a date not less than 30 days after the mailing date, and Shares will be
redeemed at net asset value at the close of business on that date, unless
sufficient additional Shares are purchased to bring the aggregate account
value up to $100 or more, or unless a certified taxpayer identification number
(or such other information as the Fund has requested) has been provided, as
the case may be. A check for the redemption proceeds will be mailed to the
investor at the address of record.
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REINSTATEMENT PRIVILEGE. For either Class I or Class II, the same class of
Shares of the Fund may be purchased at net asset value with the proceeds from
(i) a redemption of Shares of the Fund or shares of any other Franklin
Templeton Fund except any of the Franklin Templeton money market funds (unless
the redemption proceeds are from Class I shares of a fund with a lower initial
sales charge than that charged by the Fund and have been held in that fund for
less than six months), or (ii) a dividend or distribution paid by any of the
Franklin Templeton Funds, within 365 days after the date of the redemption or
dividend or distribution. Class II Shareholders may also invest such
distributions at net asset value in a Class I Franklin Templeton Fund.
However, if a Shareholder's original investment was in Class I shares of a
fund with a lower sales charge, or no sales charge, the Shareholder must pay
the difference. An investor may reinvest an amount not exceeding the proceeds
of the redemption or the dividend or distribution. While credit will be given
for any contingent deferred sales charge paid on the Shares redeemed, a new
contingency period will begin. Matured Shares will be reinvested at net asset
value and will not be subject to a new contingent deferred sales charge.
Shares of the Fund redeemed in connection with an exchange into another fund
(see "Exchange Privilege") are not considered "redeemed" for this privilege.
In order to exercise this privilege, a written order for the purchase of
Shares of the Fund must be received by the Fund or the Fund's Transfer Agent
within 365 days after the redemption or the payment date of the distribution.
The 365 days, however, do not begin to run on redemption proceeds placed
immediately after redemption in a Franklin Bank Certificate of Deposit ("CD")
until the CD (including any rollover) matures. Reinvestment at net asset value
may also be handled by a securities dealer or other financial institution, who
may charge the Shareholder a fee for this service. The redemption is a taxable
transaction but reinvestment without a sales charge may affect the tax basis
of the Shares reinvested, and the amount of gain or loss resulting from a
redemption may be affected by exercise of the reinstatement privilege if the
Shares redeemed were held for 90 days or less, or if a Shareholder reinvests
in the same fund within 30 days. Reinvestment will be at the next calculated
net asset value after receipt.
SYSTEMATIC WITHDRAWAL PLAN. A Shareholder may establish a Systematic
Withdrawal Plan ("Plan") and receive periodic payments from the account
provided that the net asset value of the Shares held by the Shareholder is at
least $5,000. There are no service charges for establishing or maintaining a
Plan. The minimum amount which the Shareholder may withdraw is $50 per
withdrawal transaction although this is merely the minimum amount allowed
under the Plan and should not be mistaken for a recommended amount. Retirement
plans subject to mandatory distribution requirements are not subject to the
$50 minimum. The Plan may be established on a monthly, quarterly, semiannual
or annual basis. If the Shareholder establishes a Plan, any capital gain
distributions and income dividends paid by the Fund to the Shareholder's
account must be reinvested for the Shareholder's account in additional Shares
at net asset value. Payments are then made from the liquidation of Shares at
net asset value on the day of the liquidation (which is generally on or about
the 25th of the month) to meet the specified withdrawals. Payments are
generally received three to five days after the date of liquidation. By
completing the "Special Payment Instructions for Distributions" section of the
Shareholder Application included with this Prospectus, a Shareholder may
direct the selected withdrawals to another of the Franklin Templeton Funds, to
another person, or directly to a checking account. Liquidation of Shares may
reduce or possibly exhaust the Shares in the Shareholder's account, to the
extent withdrawals exceed Shares earned through dividends and distributions,
particularly in the event of a market decline. If the withdrawal amount
exceeds the total Plan balance, the account will be closed and the remaining
balance will be sent to the Shareholder. As with other redemptions, a
liquidation to make a withdrawal payment is a sale for federal income tax
purposes. Because the amount withdrawn under the Plan may be more than the
Shareholder's actual yield or income, part of such a Plan payment may be a
return of the Shareholder's investment.
Maintaining a Plan concurrently with purchases of additional Shares of the
Fund would be disadvantageous because of the sales charge on the additional
purchases. Also, redemptions of Class I Shares and Class II Shares may be
subject to a contingent deferred sales charge if the Shares are redeemed
within 12 months (Class I Shares) or 18 months (Class II Shares) of the
calendar month of the original purchase date. The Shareholder should
ordinarily not make additional investments of less than $5,000 or three times
the annual withdrawals under the Plan during the time such a Plan is in
effect.
With respect to Class I Shares, the contingent deferred sales charge is
waived for redemptions through a Systematic Withdrawal Plan set up prior to
February 1, 1995. With respect to Systematic Withdrawal Plans set up on or
after February 1, 1995, the applicable
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contingent deferred sales charge is waived for Class I and Class II Share
redemptions of up to 1% monthly of an account's net asset value (12% annually,
6% semiannually, 3% quarterly). For example, if a Class I account maintained
an annual balance of $1,000,000, only $120,000 could be withdrawn through a
once-yearly Systematic Withdrawal Plan free of charge; any amount over that
$120,000 would be assessed a 1% (or applicable) contingent deferred sales
charge. Likewise, if a Class II account maintained an annual balance of
$10,000, only $1,200 could be withdrawn through a once-yearly Systematic
Withdrawal Plan free of charge.
A Plan may be terminated on written notice by the Shareholder or the Fund,
and it will terminate automatically if all Shares are liquidated or withdrawn
from the account, or upon the Fund's receipt of notification of the death or
incapacity of the Shareholder. Shareholders may change the amount (but not
below $50) and schedule of withdrawal payments or suspend one such payment by
giving written notice to the Transfer Agent at least seven business days prior
to the end of the month preceding a scheduled payment. Share certificates may
not be issued while a Plan is in effect.
REDEMPTIONS BY TELEPHONE. Shareholders who file a Telephone Redemption
Authorization Agreement (the "Agreement") (a copy of which is included in this
Prospectus) may redeem Shares of the Fund by telephone, subject to the
Restricted Account exception noted under "Telephone Transactions--Restricted
Accounts." The Fund and the Transfer Agent will employ reasonable procedures
to confirm that instructions given by telephone are genuine. Shareholders,
however, bear the risk of loss in certain cases as described under "Telephone
Transactions--Verification Procedures."
For Shareholder accounts with a completed Agreement on file, redemptions of
uncertificated Shares or Shares which have previously been deposited with the
Fund or the Transfer Agent may be made for up to $50,000 per day per Fund
account. Telephone redemption request received before the scheduled closing
time of the NYSE (generally 4:00 p.m., New York time) on any business day will
be processed that same day. The redemption check will be sent within seven
days, made payable to all the registered owners on the account, and will be
sent only to the address of record. Redemption requests by telephone will not
be accepted within 30 days following an address change by telephone. In that
case, a Shareholder should follow the other redemption procedures set forth in
this
Prospectus. Institutional accounts which wish to execute redemptions in excess
of $50,000 must complete an Institutional Telephone Privileges Agreement which
is available from Franklin Templeton Institutional Services by telephoning 1-
800-321-8563.
CONTINGENT DEFERRED SALES CHARGE. In order to recover commissions paid to
securities dealers, Class I investments of $1 million or more, and any Class
II investments, redeemed within the contingency period of 12 months (Class I)
or 18 months (Class II) of the calendar month of their purchase will be
assessed a contingent deferred sales charge, unless one of the exceptions
described below applies. The charge is 1% of the lesser of the net asset value
of the Shares redeemed (exclusive of reinvested dividends and capital gain
distributions) or the net asset value at the time of purchase of such Shares,
and is retained by FTD. The contingent deferred sales charge is waived in
certain instances. See below.
In determining if a contingent deferred sales charge applies, Shares not
subject to a contingent deferred sales charge are deemed to be redeemed first,
in the following order: (i) a calculated number of Shares representing amounts
attributable to capital appreciation of those Shares held less than the
contingency period (12 months in the case of Class I Shares and 18 months in
the case of Class II Shares); (ii) Shares purchased with reinvested dividends
and capital gain distributions; and (iii) other Shares held longer than the
contingency period, and followed by any Shares held less than the contingency
period, on a "first in, first out" basis. For tax purposes, a contingent
deferred sales charge is treated as either a reduction in redemption proceeds
or an adjustment to the cost basis of the Shares redeemed.
The contingent deferred sales charge on each class of Shares is waived, as
applicable, for: exchanges; any account fees; distributions from an individual
retirement plan account due to death or disability, or upon periodic
distributions based on life expectancy; tax-free returns of excess
contributions from employee benefit plans; distributions from employee benefit
plans, including those due to plan termination or plan transfer; redemptions
through a Systematic Withdrawal Plan set up for Shares prior to February
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1, 1995 and, for Systematic Withdrawal Plans set up thereafter, redemptions of
up to 1% monthly of an account's net asset value (3% quarterly, 6%
semiannually or 12% annually); redemptions initiated by the Fund due to a
Shareholder's account falling below the minimum specified account size; and
redemptions following the death of the Shareholder or the beneficial owner.
All investments made during a calendar month, regardless of when during the
month the investment occurred, will age one month on the last day of that
month and each subsequent month.
Requests for redemptions for a SPECIFIED DOLLAR amount, unless otherwise
specified, will result in additional Shares being redeemed to cover any
applicable contingent deferred sales charge, while requests for redemption of
a SPECIFIC NUMBER of Shares will result in the applicable contingent deferred
sales charge being deducted from the total dollar amount redeemed.
TELEPHONE TRANSACTIONS
Shareholders of the Fund and their investment representative of record, if
any, may be able to execute various transactions by calling Shareholder
Services at 1-800-632-2301.
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; (iv) request the issuance of certificates (to be sent to the address of
record only); and (v) 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.
RESTRICTED ACCOUNTS. Telephone redemptions and dividend option changes may
not be accepted on Franklin Templeton retirement accounts. To assure
compliance with all applicable regulations, special forms are required for any
distribution, redemption, or dividend payment. While the telephone exchange
privilege is extended to Franklin Templeton IRA and 403(b) retirement
accounts, certain restrictions may apply to other types of retirement plans.
Changes to dividend options must also be made in writing.
To obtain further information regarding distribution or transfer procedures,
including any required forms, retirement account Shareholders may call to
speak to a Retirement Plan Specialist at 1-800-527-2020.
GENERAL. During periods of drastic economic or market changes, it is
possible that the telephone transaction 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.
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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.
The Board has carefully reviewed the multiclass structure to ensure that no
material conflict exists between the two classes of Shares. Although the Board
does not expect to encounter material conflicts in the future, the Board will
continue to monitor the Fund and will take appropriate action to resolve such
conflicts if any should later arise.
In developing the multiclass structure, the Fund has retained the authority
to establish additional classes of Shares. It is the Fund's present intention
to offer only two classes of Shares, but new classes may be offered in the
future.
INVESTMENT MANAGER. 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 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 performs similar services for other funds and
accounts and there may be times when the actions taken with respect to the
Fund's portfolio will differ from those taken by the Investment Manager on
behalf of other funds and accounts. Neither the Investment Manager and its
affiliates, its officers, directors or employees, nor the officers and
Trustees of the Trust are prohibited from investing in securities held by the
Fund or other funds and accounts which are managed or administered by the
Investment Manager to the extent such transactions comply with the Trust's
Code of Ethics. Please see "Investment Management and Other Services--
Investment Management Agreement" and "General Information" in the SAI for
further information on securities transactions and a summary of the Trust's
Code of Ethics.
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.
The lead portfolio manager for the Fund is Thomas Latta. Mr. Latta attended
the University of Missouri and New York University. Prior to joining the
Templeton organization in 1991, Mr. Latta, a Vice President of the Investment
Manager, worked as a portfolio
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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. Neil S. Devlin and Tom Wilkinson
also exercise secondary portfolio management responsibilities with respect to
the Fund. Mr. Devlin, a Senior Vice President of the Investment Manager holds
a BA in Economics and Philosophy from Brandeis University. Prior to joining
the Templeton organization in 1987, he 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. Mr. Wilkinson, a Vice President
of the Investment Manager, holds a BS in Computer Science from Southern
Methodist University and an MS in Computer Science from the University of
Southern California. He joined the Templeton organization in 1985 as Director
of Information Services and later as a securities analyst. 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.
PLANS OF DISTRIBUTION. A separate Plan of Distribution has been approved and
adopted for each class ("Class I Plan" and "Class II Plan," respectively, or
"Plans") pursuant to Rule 12b-1 under the 1940 Act. The Rule 12b-1 fees
charged to each class will be based solely on the distribution and servicing
fees attributable to that particular class. Any portion of fees remaining from
either Plan after distribution to securities dealers of up to the maximum
amount permitted under each Plan may be used by the class to reimburse FTD for
routine ongoing promotion and distribution expenses incurred with respect to
such class. Such expenses may include, but are not limited to, the printing of
prospectuses and reports used for sales purposes, expenses, of preparing and
distributing sales literature and related expenses, advertisements, and other
distribution-related expenses, including a prorated portion of FTD's overhead
expenses attributable to the distribution of Fund Shares, as well as any
distribution or service fees paid to securities dealers or their firms or
others who have executed a servicing agreement with the Fund, FTD or its
affiliates.
The maximum amount which the Fund may pay to FTD or others under the Class I
Plan for such distribution expenses is 0.25% per annum of Class I's average
daily net assets, payable on a quarterly basis. All expenses of distribution
and marketing in excess of 0.25% per annum will be borne by FTD, or others who
have incurred them, without reimbursement from the Fund. Under the Class I
Plan, costs and expenses not reimbursed in any one given quarter (including
costs and expenses not reimbursed because they exceed the applicable limit of
the Plan) may be reimbursed in subsequent quarters or years, subject to
applicable law. FTD has informed the Fund that it had no unreimbursed expenses
under the Class I Plan at August 31, 1995.
Under the Class II Plan, the maximum amount which the Fund is permitted to
pay to FTD or others for distribution expenses and related expenses is 0.50%
per annum of Class II's average daily net assets, payable quarterly. All
expenses of distribution, marketing and related services over that amount will
be borne by FTD, or others who have incurred them, without reimbursement by
the Fund. In addition, the Class II Plan provides for an additional payment by
the Fund of up to 0.15% per annum of Class II's average daily net
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assets as a servicing fee, payable quarterly. This fee will be used to pay
securities dealers or others for, among other things, assisting in
establishing and maintaining customer accounts and records; assisting with
purchase and redemption requests; receiving and answering correspondence;
monitoring dividend payments from the Fund on behalf of the customers; or
similar activities related to furnishing personal services and/or maintaining
Shareholder accounts.
During the first year following the purchase of Class II Shares, FTD will
retain 0.50% per annum of Class II's average daily net assets to partially
recoup fees FTD pays to securities dealers. FTD, or its affiliates, may pay,
from its own resources, a commission of up to 1% of the amount invested to
securities dealers who initiate and are responsible for purchases of Class II
Shares.
Both Plans also cover any payments to or by the Fund, the Investment
Manager, FTD, or other parties on behalf of the Fund, the Investment Manager
or FTD, to the extent such payments are deemed to be for the financing of any
activity primarily intended to result in the sale of Shares issued by the Fund
within the context of Rule 12b-1. The payments under the Plans are included in
the maximum operating expenses which may be borne by each class of the Fund.
For more information including a discussion of the Board's policies with
regard to the amount of each Plan's fees, please see the SAI.
EXPENSES. For the fiscal year ended August 31, 1995, expenses borne by Class
I Shares of the Fund amounted to 1.18% of the average net assets of such
class, and expenses borne by Class II Shares of the Fund amounted to 1.57%
(annualized) of the average net assets of such class. See the Expense Table
for information regarding estimated expenses of both classes of Shares for the
current fiscal year.
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 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 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.
Shares for an initial investment, as well as subsequent investments,
including the reinvestment of dividends and capital gain distributions, are
generally credited to an account in the name of an investor on the books of
the Fund, without the issuance of a share certificate. Maintaining shares in
uncertificated form (also known as "plan balance") minimizes the risk of loss
or theft of a share certificate. No charge is made for the issuance of one
certificate for all or some of the Shares purchased in a single order. A lost,
stolen or destroyed certificate cannot be replaced without obtaining a
sufficient indemnity bond. The cost of such a bond, which is generally borne
by the shareholder, can be 2% or more of the value of the lost, stolen or
destroyed certificate. A certificate will be issued if requested by the
shareholder or by the securities dealer.
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VOTING RIGHTS. Shares of each class represent proportionate interests in the
assets of the Fund and have the same voting and other rights and preferences
as the other class of the Fund for matters that affect the Fund as a whole.
For matters that only affect a certain class of the Fund's Shares, however,
only Shareholders of that class will be entitled to vote. Therefore, each
class of Shares will vote separately on matters (1) affecting only that class,
(2) expressly required to be voted on separately by state law, or (3) required
to be voted on separately by the 1940 Act or the rules adopted thereunder. For
instance, if a change to the Rule 12b-1 plan relating to Class I Shares
requires Shareholder approval, only Shareholders of Class I may vote on
changes to the Rule 12b-1 plan affecting that class. Similarly, if a change to
the Rule 12b-1 plan relating to Class II Shares requires Shareholder approval,
only Shareholders of Class II may vote on the change to such plan. On the
other hand, if there is a proposed change to the investment objective of the
Fund, this affects all Shareholders, regardless of which class of Shares they
hold, and therefore, each Share has the same voting rights.
MEETINGS OF SHAREHOLDERS. The 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 substantially all of its net investment income and to
distribute annually any net realized capital gains. According to the
requirements of the Code, dividends and capital gains will be calculated and
distributed in the same manner for Class I and Class II Shares. The per share
amount of any income dividends will generally differ only to the extent that
each class is subject to different Rule 12b-1 fees. Unless otherwise
requested, income dividends and capital gain distributions paid by the Fund,
other than on those Shares whose owners keep them registered in the name of a
broker-dealer, are automatically reinvested on the payment date in whole or
fractional Shares at net asset value as of the ex-dividend date, unless a
Shareholder makes a written or telephonic request for payments in cash. By
completing the "Special Payment Instructions for Distributions" section of the
Shareholder Application Class I Shareholders may direct that their dividends
and/or capital gain distributions be reinvested in Class I Shares of the Fund
or Class I shares of any other Franklin Templeton Fund, and Class II
Shareholders may direct that their dividends and/or capital gain distributions
be reinvested in either Class I or Class II Shares of the Fund or any other
Franklin Templeton Fund. Shareholders may also direct the payment of their
dividends or capital gain distributions to another person. The processing date
for the reinvestment of dividends may vary from time to time, 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 in the Shareholder's account in whole
or fractional Shares at net asset value next computed after the check has been
received by the Transfer Agent. Subsequent distributions 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
29
<PAGE>
shareholders. The Fund intends to distribute to Shareholders substantially all
of its net investment income and net 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. Sales or other dispositions of Fund Shares generally
will give rise to taxable gain or loss. A more detailed description of tax
consequences to Shareholders is contained in the SAI under the heading "Tax
Status."
The Fund may be required to withhold Federal income tax at the rate of 31%
of all taxable distributions (including redemptions) paid to Shareholders who
fail to provide the Fund with their correct taxpayer identification number or
to make required certifications or where the Fund or the Shareholder has been
notified by the Internal Revenue Service that the Shareholder is subject to
backup withholding. Corporate Shareholders and certain other Shareholders
specified in the Code are exempt from backup withholding. Backup withholding
is not an additional tax. Any amounts withheld may be credited against the
Shareholder's federal income tax liability.
INQUIRIES. Shareholders' inquiries will be answered promptly. They should be
addressed to Franklin Templeton Investor Services, Inc., P.O. Box 33030, St.
Petersburg, Florida 33733-8030 -- telephone 1-800-632-2301. 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.
Because Class II Shares were not offered prior to May 1, 1995, no
performance data is available for these Shares. After a sufficient period of
time has passed, Class II performance data will be available.
STATEMENTS AND REPORTS. The Fund's fiscal year ends on August 31. Annual
reports (containing financial statements audited by independent auditors and
additional information regarding the Fund's performance) and semiannual
reports (containing unaudited financial statements) are sent to Shareholders
each year. To reduce the volume of mail sent to one household as well as to
reduce Fund expenses, the Transfer Agent will attempt to identify related
shareholders within a household and send only one copy of the report.
Additional copies may be obtained, without charge, upon request to the Fund
Information Department--telephone 1-800/DIAL BEN. 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.
30
<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.
31
<PAGE>
FOR CORPORATE SHAREHOLDERS--FORM OF RESOLUTION
It will be necessary for corporate shareholders to provide a certified copy of
a resolution or other certificate of authority to authorize the purchase as
well as sale (redemption) of shares and withdrawals by checks or drafts. You
may use the following form of resolution or you may prefer to use your own. It
is understood that the Fund, Franklin Templeton Distributors, Inc., Franklin
Templeton Investor Services, Inc., the custodian bank and their affiliates may
rely upon these authorizations until revoked or amended by written notice
delivered by registered or certified mail to the Fund.
CERTIFIED COPY OF RESOLUTION (Corporation or Association)
The undersigned hereby certifies and affirms that he/she is the duly elected
___________________________________ of ______________________________________
TITLE CORPORATE NAME
a _______________________ organized under the laws of the State of ___________
TYPE OF ORGANIZATION STATE
the following is a and that 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)
32
<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.
33
<PAGE>
The Franklin Templeton Group
Literature Request -- Call today for a free descriptive brochure and
prospectus on any of the funds listed below. The prospectus contains more
complete information, including fees, charges and expenses, and should be read
carefully before investing or sending money.
<TABLE>
<S> <C> <C>
TEMPLETON FUNDS Maryland FRANKLIN FUNDS SEEKING
American Trust Massachusetts*** HIGH CURRENT INCOME
Americas Government Securities Fund Michigan*** AGE High Income Fund
Developing Markets Trust Minnesota*** German Government Bond Fund
Foreign Fund Missouri Global Government Income Fund
Global Infrastructure Fund New Jersey Investment Grade Income Fund
Global Opportunities Trust New York* U.S. Government Securities Fund
Greater European Fund North Carolina
Growth Fund Ohio*** FRANKLIN FUNDS SEEKING HIGH CURRENT
Growth and Income Fund Oregon INCOME AND STABILITY OF PRINCIPAL
Income Fund Pennsylvania Adjustable Rate Securities Fund
Japan Fund Tennessee** Adjustable U.S. Government Securities Fund
Latin America Fund Texas Short-Intermediate U.S. Government Securities Fund
Money Fund Virginia
Real Estate Securities Fund Washington** FRANKLIN FUNDS FOR NON-U.S. INVESTORS
Smaller Companies Growth Fund Tax-Advantaged High Yield Securities Fund
World Fund FRANKLIN FUNDS Tax-Advantaged International Bond Fund
SEEKING CAPITAL GROWTH Tax-Advantaged U.S. Government Securities Fund
FRANKLIN FUNDS California Growth Fund
SEEKING TAX-FREE INCOME DynaTech Fund FRANKLIN TEMPLETON INTERNATIONAL
Federal Intermediate Term Equity Fund CURRENCY FUNDS
Tax-Free Income Fund Global Health Care Fund Global Currency Fund
Federal Tax-Free Income Fund Gold Fund Hard Currency Fund
High Yield Tax-Free Income Growth Fund High Income Currency Fund
Fund International Equity Fund
Insured Tax-Free Income Fund*** Pacific Growth Fund FRANKLIN MONEY MARKET FUNDS
Puerto Rico Tax-Free Income Fund Real Estate Securities Fund California Tax-Exempt Money Fund
FRANKLIN STATE-SPECIFIC FUNDS Small Cap Growth Fund Federal Money Fund
SEEKING TAX-FREE INCOME IFT U.S. Treasury Money Market Portfolio
Alabama FRANKLIN FUNDS SEEKING Money Fund
Arizona* GROWTH AND INCOME New York Tax-Exempt Money Fund
Arkansas** Balance Sheet Investment Fund Tax-Exempt Money Fund
California* Convertible Securities Fund
Colorado Equity Income Fund FRANKLIN FUND FOR CORPORATIONS
Connecticut Global Utilities Fund Corporate Qualified Dividend Fund
Florida* Income Fund
Georgia Premier Return Fund FRANKLIN TEMPLETON VARIABLE ANNUITIES
Hawaii** Rising Dividends Fund Franklin Valuemark
Indiana Strategic Income Fund Franklin Templeton Valuemark Income
Kentucky Utilities Fund Plus (an immediate annuity)
Louisiana
</TABLE>
Toll-free 1-800-DIAL BEN (1-800-342-5236)
* Two or more fund options available: long-term portfolio, intermediate-term
portfolio, a portfolio of municipal securities, and a high yield portfolio
(CA).
** The fund may invest up to 100% of its assets in bonds that pay interest
subject to the federal alternative minimum tax.
*** Portfolio of insured municipal securities.
34
<PAGE>
NOTES
----
35
<PAGE>
- --------------------------------------------------------------------------------
TEMPLETON INCOME FUND
PRINCIPAL UNDERWRITER:
Franklin Templeton
Distributors, Inc.
700 Central Avenue
St. Petersburg,
Florida 33701-3628
Shareholder Services
1-800-632-2301
Fund Information
1-800/DIAL BEN
Institutional Services
1-800-321-8563
Dealer Services
1-800-524-4040
Retirement Plan Services
1-800-527-2020
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]
TL406 P 1/96
TEMPLETON
INCOME
FUND
Prospectus
January 1, 1996
[FRANKLIN TEMPLETON LOGO APPEARS HERE]
<PAGE>
[LOGO OF FRANKLIN TEMPLETON APPEARS HERE]
Mail to: FRANKLIN TEMPLETON
P.O. Box 33031 St. Petersburg, Florida 33733-8031 (800) 393-3001
Please do not use this form for any Retirement Plan for which Franklin Templeton
Trust Company serves as custodian or trustee, or for Templeton Money Fund,
Templeton Institutional Funds or Templeton Capital Accumulator Fund. Request
separate Applications and/or Prospectuses.
- --------------------------------------------------------------------------------
SHAREHOLDER APPLICATION OR REVISION
[_] Please check the box if this is a revision and see Section 8
- --------------------------------------------------------------------------------
Please check Class I or Class II, if applicable, next to your Fund selection.
Class I and Class II shares have different sales charges and operating expenses,
among other differences, as described in each Fund's prospectus.
Date __________________
<TABLE>
<CAPTION>
CLASS CLASS
I II I II
<S> <C> <C> <C>
[_] [_]$______ AMERICAN TRUST [_] [_]$______ GLOBAL OPPORTUNITIES TRUST
[_] ______ AMERICAS GOVERNMENT SECURITIES FUND [_] [_] ______ GREATER EUROPEAN FUND
[_] [_] ______ DEVELOPING MARKETS TRUST [_] [_] ______ GROWTH FUND
[_] [_] ______ FOREIGN FUND [_] [_] ______ GROWTH AND INCOME FUND
[_] [_] ______ GLOBAL INFRASTRUCTURE FUND [_] [_] ______ INCOME FUND
<CAPTION>
CLASS CLASS
I II I II
<S> <C> <C>
[_] $______ JAPAN FUND [_] [_] OTHER: $___________
[_] [_] ______ LATIN AMERICA FUND (Except for Class II Money Fund)
[_] [_] ______ REAL ESTATE SECURITIES FUND _______________________________
[_] [_] ______ SMALLER COMPANIES GROWTH FUND _______________________________
[_] [_] ______ WORLD FUND _______________________________
</TABLE>
- --------------------------------------------------------------------------------
1 ACCOUNT REGISTRATION (PLEASE PRINT)
- --------------------------------------------------------------------------------
[_] INDIVIDUAL OR JOINT ACCOUNT
__________________________________________________ ________-________-__________
First Name Middle Initial Last Name Social Security Number (SSN)
__________________________________________________ ________-________-__________
Joint Owner(s) (Joint ownership means "Joint Social Security Number (SSN)
Tenants With Rights of Survivorship" unless
otherwise specified) All owners must sign Section 4.
- --------------------------------------------------------------------------------
[_] GIFT/TRANSFER TO A MINOR
_______________________________ As Custodian For________________________________
Name of Custodian (one only) Minor's Name (one only)
_____________Uniform Gifts/Transfers to Minors Act________-________-____________
State of Residence Minor's Social Security Number
Please Note: Custodian's Signature, not Minor's, is required in Section 4.
- --------------------------------------------------------------------------------
[_] TRUST, CORPORATION, PARTNERSHIP, RETIREMENT PLAN, OR OTHER ENTITY
__________________________________________ ____________-_______________________
Name Taxpayer Identification Number (TIN)
__________________________________________ ____________________________________
Name of Beneficiary (if to be included in Date of Trust Document (must be
the Registration) completed for registration)
________________________________________________________________________________
Name of Each Trustee (if to be included in the Registration)
- --------------------------------------------------------------------------------
2 ADDRESS
- --------------------------------------------------------------------------------
___________________________________________ Daytime Phone (___)________________
Street Address Area Code
____________________________________-______ Evening Phone (___)________________
City State Zip Code Area Code
I am a Citizen of: [_] U.S. or [_]______________________________
Country of Residence
- --------------------------------------------------------------------------------
3 INITIAL INVESTMENT ($100 minimum initial investment)
- --------------------------------------------------------------------------------
Check(s) enclosed for $___________________ . (Payable to the Fund(s)
indicated above.)
- --------------------------------------------------------------------------------
4 SIGNATURE AND TAX CERTIFICATIONS
(All registered owners must sign application)
- --------------------------------------------------------------------------------
See "Important Notice Regarding Taxpayer IRS Certifications" in back of
prospectus. 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
- ---------------------------------------- ---------------------------------------
- --------------------------------------------------------------------------------
5 BROKER/DEALER USE ONLY (PLEASE PRINT)
- --------------------------------------------------------------------------------
-----------------------
We hereby submit this application for the purchase of Templeton Dealer Number
shares of the Fund indicated above in accordance with
the terms of our selling agreement with Franklin -----------------------
Templeton Distributors, Inc. ("FTD"), and with the
Prospectus for the Fund. We agree to notify FTD of any
purchases of Class I shares which may be eligible for
reduced or eliminated sales charges.
-----------------------------------------------------------------------------
WIRE ORDER ONLY: The attached check for $_______ should be applied against
Wire Order
Confirmation Number ___________ Dated___________ For__________ Shares
-----------------------------------------------------------------------------
Securities Dealer Name__________________________________________________________
Main Office Address________________ Main Office Telephone Number (___)__________
Branch Number________ Representative Number ________ Representative Name________
Branch Address_________________________ Branch Telephone Number (___)___________
Authorized Signature, Securities Dealer______________________ Title_____________
- --------------------------------------------------------------------------------
ACCEPTED: Franklin Templeton Distributors, Inc. By___________ Date______________
- --------------------------------------------------------------------------------
Please see reverse side for Shareholder Account Privileges:
[_] Distribution Options [_] Special Instructions for Distributions
[_] Systematic Withdrawal Plan [_] Automatic Investment Plan
[_] Telephone Exchange Service [_] Letter of Intent
[_] Cumulative Quantity Discount
This application must be preceded or accompanied by a prospectus for
the Fund(s) being purchased.
<PAGE>
- --------------------------------------------------------------------------------
6 DISTRIBUTION OPTIONS (Check one)
- --------------------------------------------------------------------------------
Check one - if no box is checked, all dividends and capital gains will be
reinvested in additional shares of the Fund.
[_] Reinvest all dividends [_] Pay all dividends in cash
and capital gains. and reinvest capital gains.
[_] Pay capital gains in cash [_] Pay all dividends and
and reinvest dividends. capital gains in cash.
- --------------------------------------------------------------------------------
7 OPTIONAL SHAREHOLDER PRIVILEGES
- --------------------------------------------------------------------------------
A. SPECIAL PAYMENT INSTRUCTIONS FOR DISTRIBUTIONS (Check one box)
[_] Invest Distributions, as noted in Section 6, or [_] withdrawals, as noted
in section 7(B), in another Franklin or Templeton Fund.
Restrictions may apply to purchases of shares of a different class. See
the prospectus for details.
Fund Name______________________ Existing Account Number___________________
[_] Send my Distributions to the person, named below, instead of as registered
and addressed in Sections 1 and 2.
Name___________________________ Street Address____________________________
City___________________________ State____________________Zip Code_________
- --------------------------------------------------------------------------------
B. SYSTEMATIC WITHDRAWAL PLAN
Please withdraw from my Franklin Templeton account $_____($50 minimum)
[_]Monthly [_]Quarterly [_]Semi-Annually or [_]Annually as set forth in the
Prospectus, starting in ______________(Month). The net asset value of the
shares held must be at least $5,000 at the time the plan is established.
Additional restrictions may apply to Class II or other shares subject to
contingent deferred sales charge, as described in the prospectus. Send the
withdrawals 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 Franklin Templeton
Trust Company and their agents will not be liable for any loss, injury,
damage or expense as a result of acting upon instructions communicated by
telephone reasonably believed to be genuine. The shareholder agrees to hold
the Fund and its agents harmless from any loss, claims, or liability arising
from its or their compliance with such instructions. The shareholder
understands that this option is subject to the terms and conditions set forth
in the prospectus of the fund to be acquired.
[_]No, I do NOT wish to participate in the Telephone Exchange Privilege or
authorize the Fund or its agents, including FTI or Templeton Funds Trust
Company, to act upon instructions received by telephone to exchange shares
for shares of any other account(s) within the Franklin Templeton Group of
Funds.
Telephone Redemption Privilege: This is available to shareholders who
-------------------------------
specifically request it and who complete the Franklin Templeton Telephone
Redemption Authorization Agreement in the back of the Fund's prospectus.
- --------------------------------------------------------------------------------
D. AUTOMATIC INVESTMENT PLAN
IMPORTANT: ATTACH AN UNSIGNED, VOIDED CHECK (FOR CHECKING ACCOUNTS) OR A
SAVINGS ACCOUNT DEPOSIT SLIP HERE, AND COMPLETE THE INFORMATION BELOW. I(We)
would like to establish an Automatic Investment Plan (the "Plan") as
described in the Prospectus. I(We) agree to reimburse FTI and/or FTD for any
expenses or losses that they may incur in connection with my(our) plan,
including any caused by my(our) bank's failure to act in accordance with
my(our) request. If my(our) bank makes any erroneous payment or fails to make
a payment after shares are purchased on my(our) behalf, any such purchase may
be cancelled and I(we) hereby authorize redemptions and/or deductions from
my(our) account for that purpose.
Debit my (circle one) savings, checking, other ________ 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)_______
INSTRUCTIONS TO BANK - AUTOMATIC INVESTMENT PLAN AUTHORIZATION
To:__________________________________ ______________________________________
Name of Your Bank ABA Number
___________________________ _________________ ____________ ______________
Street Address City State Zip Code
I(We) authorize you to charge my(our) Checking/Savings Account and to make
payment to FTD, upon instructions from FTD. I(We) agree that in making payment
for such charges your rights shall be the same as if each were a charge made and
signed personally by me(us). This authority shall remain in effect until you
receive written notice from me(us) changing its terms or revoking it. Until you
actually receive such notice, I(we) agree that you shall be fully protected in
paying any charge under this authority. I(we) further agree that if any such
charge is not made, whether with or without cause and whether intentionally or
inadvertently, you shall be under no liability whatsoever.
X_________________________________________________ ___________________________
Signature(s) EXACTLY as shown on your bank records Date
______________________________________ _______________________________________
Print Name(s) Account Number
______________________________ _________________ ____________ ______________
Your Street Address City State Zip Code
- --------------------------------------------------------------------------------
E. LETTER OF INTENT (LOI) -- Not Applicable to Purchases of Class II
[_]I(We) agree to the terms of the LOI and provisions for reservations of
Class I 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 Class I and/or Class II 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. I understand that reduced sales charges will apply
only to purchases of Class I shares.
<TABLE>
<S> <C> <C> <C> <C>
[_]$50,000-99,999 (except for Income Fund [_]$100,000-249,999 [_]$250,000-499,999 [_]$500,000-999,999 [_]$1,000,0000 or more
and Americas Government Securities Fund)
</TABLE>
Purchases of Class I Shares under LOI of $1,000,000 or more are made at net
asset value and may be subject to a contingent deferred sales charge as
described in the prospectus.
Purchases made within the last 90 days will be included as part of your LOI.
Please write in your Account Number(s)____________ ____________ ____________
- --------------------------------------------------------------------------------
F. CUMULATIVE QUANTITY DISCOUNT -- Not Applicable to Purchases of Class II
Class I shares may be purchased at the offering price applicable to the total
of (a) the dollar amount then being purchased plus (b) the amount equal to
the cost or current value (whichever is higher) of the combined holdings of
the purchaser, his or her spouse, and their children or grandchildren under
age 21, of Class I and/or Class II shares of funds in the Franklin Templeton
Group, as well as other holdings of Franklin Templeton Investments, as that
term is defined 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 understand that reduced sales charges
will apply only to purchases of Class I shares.
[_]I(We) own shares of more than one Fund in the Franklin Templeton Group and
qualify for the Cumulative Quantity Discount described above and in the
Prospectus.
My(Our) other Account Number(s) are ___________ ___________ _______________
- --------------------------------------------------------------------------------
8 ACCOUNT REVISION (If Applicable)
- --------------------------------------------------------------------------------
If you are using this application to revise your Account Registration, or wish
to have Distributions sent to an address other than the address on your existing
Account's Registration, a Signature Guarantee is required. Signatures of all
registered owners must be guaranteed by an "eligible guarantor" as defined in
the "How to Sell Shares of the Fund" section in the Fund's Prospectus. A Notary
Public is not an acceptable guarantor.
X________________________________________ ____________________________________
Signature(s) of Registered Account Owners Account Number(s)
X________________________________________ ____________________________________
X________________________________________
X________________________________________ ____________________________________
Signature Guarantee Stamp
NOTE: For any change in registration, please send us any outstanding
Certificates by Registered Mail.
- --------------------------------------------------------------------------------
TLGOF APP 12/95
<PAGE>
TEMPLETON MONEY FUND
PROSPECTUS -- JANUARY 1, 1996
- -------------------------------------------------------------------------------
INVESTMENT Templeton Money Fund (the "Fund") seeks current income,
OBJECTIVE stability of principal and liquidity by investing in high
AND POLICIES quality money market instruments with maturities not exceeding
397 days, consisting primarily of short-term U.S. Government
securities, bank certificates of deposit, time deposits,
bankers' acceptances, commercial paper and repurchase
agreements. The Fund is a series of Templeton Income Trust.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY
THE U.S. GOVERNMENT. WHILE THE FUND SEEKS TO MAINTAIN A STABLE
NET ASSET VALUE OF $1.00 PER SHARE, THERE CAN BE NO ASSURANCE
THAT THE FUND WILL BE ABLE TO DO SO.
- -------------------------------------------------------------------------------
PURCHASE OF Please complete and return the Shareholder Application. If you
SHARES need assistance in completing this form, please call our
Shareholder Services Department. The Fund's Shares may be
purchased at a price equal to their net asset value. The
minimum initial investment is $500 ($25 minimum for subsequent
investments).
- -------------------------------------------------------------------------------
PROSPECTUS This Prospectus sets forth concisely information about the
INFORMATION Fund that a prospective investor ought to know before
investing. Investors are advised to read and retain this
Prospectus for future reference. A Statement of Additional
Information ("SAI") dated January 1, 1996, 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., P.O. Box 33030,
St. Petersburg, Florida 33733-8030 or by calling the Fund
Information Department.
- -------------------------------------------------------------------------------
FUND INFORMATION DEPARTMENT -- 1-800/DIAL BEN
- -------------------------------------------------------------------------------
TEMPLETON "STAR" SERVICE (24 hours, seven days a week access to current
prices, shareholder account balances/values, last transaction and duplicate
account statements) -- 1-800-654-0123
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
EXPENSE TABLE........ 2
FINANCIAL HIGHLIGHTS. 3
GENERAL DESCRIPTION.. 3
Investment Objective
and Policies........ 3
INVESTMENT
TECHNIQUES.......... 4
U.S. Government
Securities.......... 4
Loans of Portfolio
Securities.......... 4
Bank Obligations..... 4
Commercial Paper..... 4
Repurchase
Agreements.......... 5
Eurodollar and Yankee
Obligations......... 5
HOW TO BUY SHARES OF
THE FUND............ 5
Cumulative Quantity
Discount............ 5
Dealer Compensation.. 6
Automatic Investment
Plan................ 6
Institutional
Accounts............ 6
Account Statements... 6
Templeton STAR
Service............. 6
Retirement Plans..... 7
EXCHANGE PRIVILEGE... 7
Exchanges By
Telephone........... 7
Exchanges Through
Securities Dealers.. 8
Additional
Information
Regarding Exchanges. 8
Retirement Plan
Accounts............ 8
Timing Accounts...... 8
Restrictions on
Exchanges........... 8
HOW TO SELL SHARES OF
THE FUND............ 9
Check Writing........ 10
Expedited Redemption. 10
Contingent Deferred
Sales Charge........ 11
TELEPHONE
TRANSACTIONS........ 11
Verification
Procedures.......... 11
Restricted Accounts.. 11
General.............. 12
MANAGEMENT OF THE
FUND................ 12
Investment Manager... 12
Business Manager..... 12
Transfer Agent....... 12
Custodian............ 12
Plan of Distribution. 12
Expenses............. 13
Brokerage
Commissions......... 13
GENERAL INFORMATION.. 13
Description of
Shares/Share
Certificates........ 13
Meetings of
Shareholders........ 13
Dividends and
Distributions....... 13
Federal Tax
Information......... 14
Inquiries............ 14
Performance
Information......... 14
Statements and
Reports............. 14
WITHHOLDING
INFORMATION......... 15
CORPORATE RESOLUTION. 16
THE FRANKLIN
TEMPLETON GROUP..... 17
</TABLE>
- -------------------------------------------------------------------------------
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK; FURTHER, SUCH SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY. SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE
-------------------------------------------------------------------
LOSS OF CAPITAL.
- ----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>
EXPENSE TABLE
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a Shareholder will bear directly or indirectly
in connection with an investment in the Fund. The figures are estimates based
upon the Fund's expenses for the current fiscal year.
<TABLE>
<S> <C>
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees (after fee waiver)....................................... 0.15%
12b-1 Fees............................................................... 0.15%
Other Expenses (audit, legal, business management, transfer agent and
custodian).............................................................. 0.49%
Total Fund Operating Expenses (after fee waiver)......................... 0.79%
</TABLE>
Investors should be aware that the above table is not intended to reflect in
precise detail the fees and expenses associated with an individual's own
investment in the Fund. Rather, the table has been provided only to assist
investors in gaining a more complete understanding of fees, charges and
expenses. The information in this 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. For a more detailed
discussion of these matters, investors should refer to the appropriate
sections of this Prospectus.
The Fund's investment manager, Templeton Global Bond Managers, a division of
Templeton Investment Counsel, Inc., has voluntarily agreed to temporarily
reduce its investment management fees by 0.20%. If this policy were not in
effect, the Fund's management fee would be 0.35% and the Fund's "Total Fund
Operating Expenses" would be .99%. As long as this temporary expense
limitation continues, it may lower the Fund's expenses and increase its yield.
The expense limitation may be terminated or revised at any time, at which time
the Fund's expenses may increase and its yield may be reduced, depending on
the total assets of the Fund.
EXAMPLE
As required by SEC regulations, the following example illustrates the
expenses that apply to a $1,000 investment, assuming (1) 5% annual rate of
return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
without waiver................... $10 $32 $55 $121
with waiver...................... $ 8 $25 $44 $ 98
</TABLE>
THIS EXAMPLE IS BASED ON THE ESTIMATED ANNUAL OPERATING EXPENSES, INCLUDING
FEES SET BY CONTRACT, SHOWN ABOVE AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES, WHICH MAY BE MORE OR LESS THAN
THOSE SHOWN. The operating expenses are borne by the Fund and only indirectly
by Shareholders as a result of their investment in the Fund. In addition,
federal securities regulations require the example to assume an annual rate of
return of 5%, but the Fund's actual return may be more or less than 5%.
2
<PAGE>
FINANCIAL HIGHLIGHTS
The following table of selected financial information has been audited by
McGladrey & Pullen, LLP, independent certified public accountants, for the
periods indicated in their report which is incorporated by reference and which
appears in the Fund's 1995 Annual Report to Shareholders. This statement
should be read in conjunction with the other financial statements and notes
thereto included in the Fund's 1995 Annual Report to Shareholders, which
contains further information about the Fund's performance, and which is
available to Shareholders upon request and without charge.
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED AUGUST 31, OCTOBER 3,
(A) PER SHARE OPERATING PERFORMANCE ------------------------------------------------------------------- 1987** TO
(For a share outstanding throughout the AUGUST 31,
period) 1995 1994 1993 1992 1991 1990 1989 1988
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations .046 0.026 0.021 0.036 0.061 0.078 0.085 0.058
Less distributions
Dividends from net investment income (.046) (0.026) (0.021) (0.036) (0.061) (0.078) (0.085) (0.058)
-------- -------- ------- -------- -------- -------- -------- --------
Change in net asset value for the period (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- --------------------------------------------------------------------------------------------------------------------------
(B) TOTAL RETURN 4.73% 2.66% 2.10% 3.62% 6.23% 8.00% 8.74% 6.51%
(C) RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000) $137,245 $144,415 $81,874 $125,445 $174,265 $256,965 $136,329 $100,071
Ratio to average net assets of:
Expenses .99% 0.90% 1.14% 1.04% 0.89% 0.83% 0.80% 0.92%*
Net investment income 4.62% 2.77% 2.07% 3.65% 6.18% 7.71% 8.50% 6.38%*
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations
GENERAL DESCRIPTION
Templeton Money 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 Money Fund, a diversified fund, and Templeton Income Fund. A
prospectus for Templeton Income 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, stability of principal and liquidity, which it seeks to
achieve by investing in high-grade "money market" instruments with maturities
not exceeding 397 days, consisting primarily of short-term U.S. Government
securities, certificates of deposit, time deposits, bankers' acceptances,
commercial paper and repurchase agreements with banks or broker-dealers with
respect to these securities. As a fundamental policy, the Fund invests at
least 80% of its total assets in these securities. There can be no assurance
that the investment objective of the Fund will be attained.
The Fund intends to use its best efforts to maintain its net asset value at
$1.00 per Share. To do so, the Fund uses the amortized cost method of valuing
the Fund's securities pursuant to Rule 2a-7 under the 1940 Act, certain
requirements of which are summarized below.
3
<PAGE>
In accordance with Rule 2a-7, the Fund is required to (i) maintain a dollar-
weighted average portfolio maturity of 90 days or less; (ii) purchase only
instruments having remaining maturities of 397 days or less; and (iii) invest
only in U.S. dollar-denominated securities determined in accordance with
procedures established by the Board of Trustees to present minimal credit
risks which are rated in one of the two highest rating categories for debt
obligations by at least two nationally recognized statistical rating
organizations (or one rating organization if the instrument was rated by only
one such organization, subject to ratification of the investment by the Board
of Trustees). If a security is unrated, it must be of comparable quality as
determined in accordance with procedures established by the Board of Trustees,
including approval or ratification of the security by the Board except in the
case of U.S. Government securities.
In addition, the Fund will not invest more than 5% of its total assets in
the securities (including the securities collateralizing a repurchase
agreement) of, or subject to puts issued by, a single issuer, except that (i)
the Fund may invest in U.S. Government securities or repurchase agreements
that are fully collateralized by U.S. Government securities without any such
limitation, and (ii) the limitation with respect to puts does not apply to
unconditional puts if no more than 10% of the Fund's total assets is invested
in securities issued or guaranteed by the issuer of the unconditional put.
Investments in rated securities not rated in the highest category by at least
two rating organizations (or one rating organization if the instrument was
rated by only one such organization), and unrated securities not determined by
the Board of Trustees to be comparable to those rated in the highest category,
will be limited to 5% of the Fund's total assets, with the investment in any
one such issuer being limited to no more than the greater of 1% of the Fund's
total assets or $1,000,000. See "Purchase, Redemption and Pricing of Shares"
in the SAI for further information regarding amortized cost valuation. There
can be no assurance that the Fund will be able to maintain a $1.00 per Share
net asset value.
Commercial paper must be issued by domestic corporations or foreign
corporations affiliated with domestic corporations. The Fund also may enter
into repurchase agreements and may lend its portfolio securities. These
techniques are described below.
INVESTMENT TECHNIQUES
U.S. GOVERNMENT SECURITIES. U.S. Government securities are obligations
issued 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.
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 loaned within one
business day. 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.
BANK OBLIGATIONS. Certificates of deposit are negotiable certificates issued
against funds deposited in a commercial bank for a definite period of time and
earning a specified return. Bankers' acceptances are negotiable drafts or
bills of exchange, normally drawn by an importer or exporter to pay for
specific merchandise, which are "accepted" by a bank, meaning, in effect, that
the bank unconditionally agrees to pay the face value of the instrument on
maturity. The Fund may invest in dollar-denominated certificates of deposit
and bankers' acceptances of foreign and domestic banks having total assets in
excess of $1 billion. The Fund also may invest in certificates of deposit of
federally insured savings and loan associations having total assets in excess
of $1 billion.
COMMERCIAL PAPER. Investments in commercial paper are limited to obligations
rated Prime-1 or Prime-2 by Moody's Investors Service, Inc. ("Moody's") or A-1
or A-2 by Standard & Poor's Corporation ("S&P") or, if not rated by Moody's or
S&P, issued by
4
<PAGE>
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.
REPURCHASE AGREEMENTS. When the Fund acquires a security from a bank or a
registered broker-dealer, it may simultaneously enter into a repurchase
agreement, wherein the seller agrees to repurchase the security at a specified
time and price. The repurchase price is in excess of the purchase price by an
amount which reflects an agreed-upon rate of return, which is not tied to the
coupon rate on the underlying security. Under the 1940 Act, repurchase
agreements are considered to be loans collateralized by the underlying
security and therefore will be fully collateralized. However, if the seller
should default on its obligation to repurchase the underlying security, the
Fund may experience delay or difficulty in exercising its rights to realize
upon the security and might incur a loss if the value of the security should
decline, as well as incur disposition costs in liquidating the security.
EURODOLLAR AND YANKEE OBLIGATIONS. The Fund may invest in dollar-denominated
obligations of foreign branches of domestic banks ("Eurodollar obligations")
and dollar-denominated obligations of domestic branches of foreign banks
("Yankee obligations"). These investments may involve risks that are different
in some respects from investments in obligations of domestic branches of
domestic banks. Such investment risks may include future political and
economic developments, the possible imposition of withholding taxes on
interest income payable on the Eurodollar and Yankee obligations held by the
Fund, possible seizure or nationalization and the possible establishment of
exchange controls or the adoption of other foreign government laws and
restrictions applicable to the payment of Eurodollar and Yankee obligations,
which might adversely affect the payment of principal and interest.
HOW TO BUY SHARES OF THE FUND
Shares of the Fund may be purchased at net asset value without a sales
charge through any broker which has a dealer agreement with Franklin Templeton
Distributors, Inc. ("FTD"), the Principal Underwriter of Shares of the Fund,
or directly from FTD upon receipt by FTD of a completed Shareholder
Application and check payable in U.S. currency. The minimum initial purchase
order for Fund Shares is $500. Subsequent purchases of Fund Shares must be in
amounts of $25 or more. These minimums may be waived when the Shares are being
purchased through retirement plans providing for regular periodic investments,
as described below under "Retirement Plans."
An investment will be made at the next determined net asset value per Share
after (1) FTD has received a purchase order, and (2) the Fund has received
Federal Funds from the purchase payment. 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. Shares of the Fund
will begin to earn dividends on the next business day following the date of
purchase. Purchases made by Federal Funds wire and payments made by Federal
Reserve draft received by FTD will be invested and begin earning dividends on
the next business day after receipt by FTD. Any subscription may be rejected
by FTD. Instruments drawn on other investment companies may not be accepted.
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 value of the Shares in the Fund will be
included in determining the sales charge discount to which an investor may be
entitled when purchasing shares in one or more of the funds in the Franklin
Group of Funds(R) and the Templeton Family of Funds, which are sold with a
sales charge. Included for these aggregation purposes are (i) the mutual funds
in the Franklin Group of Funds except Franklin Valuemark Funds and Franklin
Government Securities Trust (the "Franklin Funds"), (ii) other investment
products underwritten by FTD or its affiliates (although certain investments
may not have the same schedule of sales charges and/or may not be subject to
reduction) and (iii) the U.S.-registered mutual funds in the Templeton Family
of Funds except Templeton Capital Accumulator Fund, Inc., Templeton Variable
Annuity Fund, and Templeton Variable Products Series Fund (the "Templeton
Funds"). (Franklin Funds and Templeton Funds are collectively referred to as
the "Franklin Templeton Funds.") Sales charge reductions based upon aggregate
holdings of (i), (ii) and (iii) above ("Franklin Templeton Investments") may
be effective only after notification to FTD that the investment qualifies for
a discount.
5
<PAGE>
Purchases of Fund Shares will also be included toward the completion of a
Letter of Intent with respect to any of the Franklin Templeton Funds which are
sold with a sales charge.
DEALER COMPENSATION. Ongoing payments will be made to qualifying dealers at
the annual rate of 0.15% of the average daily net asset value of Shares
registered in the name of that broker-dealer as nominee or held in a
Shareholder account that designates that broker-dealer as dealer of record.
These payments are made in order to promote selling efforts and to compensate
dealers for providing certain services, including processing purchase and
redemption transactions, establishing Shareholder accounts and providing
certain information and assistance with respect to the Fund. Effective
February 1, 1995, for Shares acquired from an exchange into the Fund of shares
of another of the Franklin Templeton Funds which would have assessed a
contingent deferred sales charge upon redemption, dealers will be paid
distribution fees beginning in the thirteenth month after the date of the
original purchase of the exchanged Shares.
FTD, or one of its affiliates, from its own resources, may also provide
additional compensation to securities dealers in connection with sales of
shares of the Franklin Templeton Funds. Compensation may include financial
assistance to securities dealers in connection with conferences, sales or
training programs for their employees, seminars for the public, advertising,
sales campaigns and/or shareholder services and programs regarding one or more
of the Franklin Templeton Funds and other dealer-sponsored programs or events.
In some instances, this compensation may be made available only to certain
securities dealers whose representatives have sold or are expected to sell
significant amounts of shares of the Franklin Templeton Funds. Compensation
may include payment for travel expenses, including lodging, incurred in
connection with trips taken by invited registered representatives and members
of their families to locations within or outside of the United States for
meetings or seminars of a business nature. Securities dealers may not use
sales of the Fund's Shares to qualify for this compensation to the extent such
may be prohibited by the laws of any state or any self-regulatory agency, such
as the National Association of Securities Dealers, Inc. In addition, FTD or
its affiliates may make ongoing payments to brokerage firms, financial
institutions (including banks) and others to facilitate the administration and
servicing of Shareholder accounts. None of the aforementioned additional
compensation is paid for by the Fund or its Shareholders.
INSTITUTIONAL ACCOUNTS. Institutional investors will likely be required to
complete an institutional account application. There may be additional methods
of opening accounts and 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 Franklin Templeton Investor Services,
Inc. (the "Transfer Agent").
TEMPLETON STAR SERVICE. From a touch-tone phone, Templeton and Franklin
shareholders may access an automated system (day or night) which offers the
following features:
By calling the Templeton STAR Service, shareholders may obtain current price
and yield information specific to a Templeton Fund, regardless of class;
obtain account information; and request duplicate confirmation or year-end
statements and money fund checks, if applicable.
By calling the Franklin TeleFACTS system, Class I shareholders may obtain
current price, yield or other performance information specific to a Class I
Franklin Fund; process an exchange into an identically registered Class I
Franklin account; obtain account information; and request duplicate
confirmation or year-end statements, money fund checks, if applicable, and
deposit slips.
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Share prices and account information specific to Templeton Class I or II
shares and Franklin Class II shares may also be accessed on TeleFACTS by
Franklin and Templeton Class I and Class II shareholders.
The Templeton STAR Service is accessible by calling 1-800-654-0123. The
TeleFACTS system is accessible by calling 1-800-247-1753. The Share code for
the Fund, which will be needed to access system information, is 407. The
system's automated operator will prompt the caller with easy to follow step-
by-step instructions from the main menu. Other features may be added in the
future.
RETIREMENT PLANS. Shares of the Fund may be purchased through various
retirement plans including the following plans for which Franklin Templeton
Trust Company ("FTTC") or its affiliate acts as trustee or custodian: IRAs,
Simplified Employee Pensions, 403(b) plans, qualified plans for corporations,
self-employed individuals and partnerships, and 401(k) plans. A plan document
must be adopted in order for a retirement plan to be in existence. For further
information about any of the plans, agreements, applications and annual fees,
contact FTD. To determine which retirement plan is appropriate, an investor
should contact his or her tax adviser.
EXCHANGE PRIVILEGE
The Franklin Templeton Funds consist of a number of mutual funds with
various investment objectives and policies. The shares of most of these mutual
funds are generally offered to the public with a sales charge (which may have
more than one option, depending on whether the fund offers one or more classes
of shares). If a Shareholder's investment objective or outlook for the
securities markets changes, Fund Shares may be exchanged for Class I shares of
other Franklin Templeton Funds (as defined in "Cumulative Quantity Discount"
above) which are eligible for sale in the Shareholder's state of residence and
in conformity with such fund's stated eligibility requirements and investment
minimums. No exchanges between different classes of Shares are allowed and,
therefore, Shares of the Fund may not be exchanged for Class II shares of
other Franklin Templeton Funds. Shareholders of Class II Franklin Templeton
Funds may, however, elect to direct their dividends and capital gain
distributions to the Fund, or to another Franklin Templeton money market fund.
Shareholders may choose to redeem Shares of the Fund and purchase Class II
shares of other Franklin Templeton Funds but such purchase generally will be
subject to that fund's front end and contingent deferred sales charges for the
contingency period of 18 months.
Investors should review the prospectus of the fund they wish to exchange
from and the fund they wish to exchange into for all specific requirements or
limitations on exercising the exchange privilege including, for example,
minimum holding periods or applicable sales charges. Exchanges may be made in
any of the following ways:
EXCHANGES BY TELEPHONE. Shareholders, or their investment representative of
record, if any, may exchange Shares of the Fund by telephone by calling the
Transfer Agent at 1-800-632-2301. If the Shareholder does not wish this
privilege extended to a particular account, the Fund or the Transfer Agent
should be notified.
The Telephone Exchange Privilege allows a Shareholder to effect exchanges
from the Fund into an identically registered account in one of the other
available Franklin Templeton Funds. The Telephone Exchange Privilege is
available only for uncertificated Shares or Shares for which the certificates
have previously been deposited in the Shareholder's account. 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."
During periods of drastic economic or market changes, it is possible that
the Telephone Exchange Privilege may be difficult to implement and the
Templeton STAR Service may not be available. In this event, Shareholders
should follow the procedures for processing exchanges through securities
dealers.
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EXCHANGES THROUGH SECURITIES DEALERS. As is the case with all purchases and
redemptions of the Fund's Shares, the Transfer Agent will accept exchange
orders from securities dealers who execute a dealer or similar agreement with
FTD. See also "Exchanges By Telephone" above. Such a dealer-ordered exchange
will be effective only for uncertificated Shares or Shares for which
certificates have previously been deposited. A securities dealer may charge a
fee for handling an exchange.
ADDITIONAL INFORMATION REGARDING EXCHANGES. Shares of the Fund acquired
other than pursuant to the Exchange Privilege or the reinvestment of dividends
may be exchanged at the offering price of other Class I shares of the Franklin
Templeton Funds. Such offering price includes the applicable sales charge of
the fund into which the Shares are being exchanged. Exchanges will be effected
at the respective net asset values or offering prices of the funds involved as
next determined after the request is received in proper form.
There are differences among Franklin Templeton Funds. Before making an
exchange, a Shareholder should obtain and review a current prospectus of the
fund into which the Shareholder wishes to exchange.
The Exchange Privilege may be modified or discontinued by the Fund at any
time upon 60 days' written notice to Shareholders.
RETIREMENT PLAN ACCOUNTS. Franklin Templeton IRA and 403(b) retirement plan
accounts may accomplish exchanges directly. Certain restrictions may apply,
however, to other types of retirement plans. See "Restricted Accounts" under
"Telephone Transactions."
In situations where assets from retirement plan accounts are temporarily
invested in the Fund while awaiting final allocation or investment
instructions from the plan participant, and where such final allocation or
investment instructions involve Class II shares, Fund shares may be exchanged
for available Class II shares of the Franklin Templeton Funds (as such term is
defined in the Prospectus). The time period during which the assets were
invested in the Fund will not, however, count toward the contingency period
for purpose of the contingent deferred sales charge associated with Class II
shares. Assets previously subject to a commission by the Franklin Templeton
Funds will be precluded from using this limited exchange privilege.
TIMING ACCOUNTS. Accounts which are administered by allocation or market
timing services to purchase or redeem Shares based on predetermined market
indicators ("Timing Accounts") will be charged a $5.00 administrative service
fee per each such exchange. All other exchanges are without charge.
RESTRICTIONS ON EXCHANGES. In accordance with the terms of their respective
prospectuses, certain funds do not accept or may place differing limitations
than those below on exchanges by Timing Accounts.
The Fund reserves the right to temporarily or permanently terminate the
exchange privilege or reject any specific purchase order for any Timing
Account or any person whose transactions seem to follow a timing pattern who:
(i) makes an exchange request out of the Fund within two weeks of an earlier
exchange request out of the Fund, or (ii) makes more than two exchanges out of
the Fund per calendar quarter, or (iii) exchanges Shares equal in value to at
least $5 million, or more than 1% of the Fund's net assets. Accounts under
common ownership or control, including accounts administered so as to redeem
or purchase Shares based upon certain predetermined market indicators, will be
aggregated for purposes of the exchange limits.
The Fund reserves the right to refuse the purchase side of exchange requests
by any Timing Account, person, or group if, in the Investment Manager's
judgment, the Fund would be unable to invest effectively in accordance with
its investment objective and policies, or would otherwise potentially be
adversely affected. A Shareholder's purchase exchanges may be restricted or
refused if the Fund receives or anticipates simultaneous orders affecting
significant portions of the Fund's assets. In particular, a pattern of
exchanges that coincide with a "market timing" strategy may be disruptive to
the Fund and therefore may be refused.
The Fund and FTD reserve the right to refuse any order for the purchase of
Shares, as indicated in "How to Buy Shares of the Fund."
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HOW TO SELL SHARES OF THE FUND
Shares of the Fund 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 "Expedited Redemption," 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 and a completed
purchase application must have been received by FTD before any redemption
request will be honored;
2. The signature(s) of the redeeming Shareholder(s) must be guaranteed by an
"eligible guarantor," including (a) national or state banks, savings
associations, savings and loan associations, trust companies, savings banks,
industrial loan companies and credit unions; (b) national securities
exchanges, registered securities associations and clearing agencies; (c)
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 (d)
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 (i) the current address of one or more joint owners of an
account cannot be confirmed; (ii) multiple owners have a dispute or give
inconsistent instructions to the Fund; (iii) the Fund has been notified of an
adverse claim; (iv) the instructions received by the Fund are given by an
agent, not the actual registered owner; (v) the Fund determines that joint
owners who are married to each other are separated or may be the subject of
divorce proceedings; or (vi) the authority of a representative of a
corporation, partnership, association, or other entity has not been
established to the satisfaction of the Fund;
3. Any outstanding certificates must accompany the request together with a
stock power signed by the Shareholder(s), with signature(s) guaranteed as
described in Item 2 above;
4. Liquidation requests of corporate, partnership, trust and custodianship
accounts, and accounts under court jurisdiction, require the following
documentation to be in proper form:
. Corporation--(i) Signature guaranteed letter of instruction from the
authorized officer(s) of the corporation, and (ii) a corporate
resolution in a form satisfactory to the Transfer Agent;
. Partnership--(i) Signature guaranteed letter of instruction from a
general partner and, if necessary, (ii) pertinent pages from the
partnership agreement identifying the general partners or other
documentation in a form satisfactory to the Transfer Agent;
. Trust--(i) Signature guaranteed letter of instruction from the
trustee(s), and (ii) a copy of the pertinent pages of the trust document
listing the trustee(s) or a certificate of incumbency if the trustee(s)
are not listed on the account registration;
. Custodial (other than a retirement account)--Signature guaranteed
letter of instruction from the custodian;
. Accounts under court jurisdiction--Check court documents and the
applicable state law since these accounts have varying requirements,
depending upon the state of residence; and
5. Redemption of Shares held in a retirement plan for which FTTC or its
affiliate acts as trustee or custodian must conform to the distribution
requirements of the plan and the Fund's redemption requirements above.
Distributions from such plans are subject to additional requirements under the
Internal Revenue Code of 1986, as amended (the "Code"), and certain documents
(available from
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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 Shareholder Services Department by
calling 1-800-632-2301.
Neither the Trust, the Fund nor the Transfer Agent will be responsible for
acting upon any instructions believed by them to be genuine. The redemption
price will be the net asset value of the Shares next computed after the
redemption request in Proper Order is received by the Transfer Agent. Payment
of the redemption price ordinarily will be made by check (or by wire at the
sole discretion of the Transfer Agent if wire transfer is requested including
name and address of the bank and the Shareholder's account number to which
payment of the redemption proceeds is to be wired) within seven days after
receipt of the redemption request in Proper Order. However, if Shares have
been purchased by check, the Fund will make redemption proceeds available when
a Shareholder's check received for the Shares purchased has been cleared for
payment by the Shareholder's bank, which, depending upon the location of the
Shareholder's bank, could take up to 15 days or more. The check will be mailed
by first-class mail to the Shareholder's registered address (or as otherwise
directed). Remittance by wire (to a commercial bank account in the same
name(s) as the Shares are registered) that has been in existence for more than
six (6) months) 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 may involuntarily redeem an investor's Shares if the net asset
value of such Shares is less than $500, except 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 $500 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.
CHECK WRITING. The Fund has established special check writing services for
its Shareholders whose Shares are held on deposit by the Transfer Agent. Upon
request, Shareholders may obtain a supply of checks without charge.
Shareholders may write checks payable to the order of any person in any amount
not less than $500 but not more than $500,000. THESE CHECKS CANNOT BE
CERTIFIED NOR CAN THESE CHECKS BE NEGOTIATED FOR CASH AT THE OFFICES OF FTD OR
FIRST UNION NATIONAL BANK OF FLORIDA. Checks are not returned to Shareholders
after payment, although copies of checks will be available on request to the
Transfer Agent at no charge. Shareholders who are interested in the check
writing service should complete the appropriate section of the Shareholder
Application. The check writing service is not available in any of the
Templeton Tax Deferred Retirement Plans.
When a check is presented for payment, the Fund redeems a sufficient number
of Shares to cover the amount of the check. Checks written on accounts with
insufficient Shares will be returned to the payee marked "non-sufficient
funds." Checks written in amounts less than $500 also will be returned.
Because the aggregate amount owned by a Shareholder may change each day,
Shareholders should not attempt to redeem all Shares held in their account by
using the check redemption procedure.
EXPEDITED REDEMPTION. Shares may be redeemed by calling the Transfer Agent
toll free, 1-800-632-2301. A redemption authorization which is contained in
the Shareholder Application, or a separate authorization form must be filed
with the Fund before a Shareholder may redeem in this manner. All telephone
requests for redemptions must be received before the close of the New York
Stock Exchange each business day.
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Shareholders may request that proceeds of $1,000 or more be wired directly
to a commercial bank account. There is a fee of $15 for each wire redemption.
CONTINGENT DEFERRED SALES CHARGE. The Fund does not impose either an initial
sales charge or a contingent deferred sales charge. If, however, a Shareholder
redeemed Shares acquired from an exchange into the Fund of Class I shares of
another of the Franklin Templeton Funds which would have assessed a contingent
deferred sales charge upon redemption, such charge will be made by the Fund,
as described below. The 12-month contingency period will be tolled (or
stopped) for the period such Shares are exchanged into and held in the Fund.
In certain Franklin Templeton Funds, in order to recover commissions paid to
dealers on investments of $1 million or more, a contingent deferred sales
charge of 1% applies to certain redemptions made by those investors within 12
months of the calendar month of such investments. 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, Shares not subject to a
contingent deferred sales charge are deemed to be redeemed first, in the
following order: (i) Shares representing amounts attributable to capital
appreciation; (ii) Shares purchased with reinvested dividends and capital
gains distributions; and (iii) other Shares held longer than 12 months,
followed by any Shares held less than 12 months, on a "first in, first out"
basis.
TELEPHONE TRANSACTIONS
Shareholders of the Fund and their investment representative of record, if
any, may be able to execute various transactions by calling Shareholder
Services at 1-800-632-2301.
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; (iv) request the issuance of certificates (to be sent to
the address of record only); and (v) exchange Fund Shares by telephone as
described in this Prospectus.
VERIFICATION PROCEDURES. The Fund and the Transfer Agent will employ
reasonable procedures to confirm that instructions communicated by telephone
are genuine. These will include: recording all telephone calls requesting
account activity by telephone, requiring that the caller provide certain
personal and/or account information requested by the telephone service agent
at the time of the call for the purpose of establishing the caller's
identification, and sending a confirmation statement on redemptions to the
address of record each time account activity is initiated by telephone. So
long as the Fund and the Transfer Agent follow instructions communicated by
telephone which were reasonably believed to be genuine at the time of their
receipt, neither they nor their affiliates will be liable for any loss to the
Shareholder caused by an unauthorized transaction. The Fund and the Transfer
Agent may be liable for any losses due to unauthorized or fraudulent
instructions in the event such reasonable procedures are not followed.
Shareholders are, of course, under no obligation to apply for or accept
telephone transaction privileges. In any instance where the Fund or the
Transfer Agent is not reasonably satisfied that instructions received by
telephone are genuine, the requested transaction will not be executed, and
neither the Fund, the Transfer Agent, nor their affiliates will be liable for
any losses which may occur because of a delay in implementing a transaction.
RESTRICTED ACCOUNTS. Telephone redemptions and dividend option changes may
not be accepted on Franklin Templeton retirement accounts. To assure
compliance with all applicable regulations, special forms are required for any
distribution, redemption, or dividend payment. While the telephone exchange
privilege is extended to Franklin Templeton IRA and 403(b) retirement
accounts, certain restrictions may apply to other types of retirement plans.
Changes to dividend options must also be made in writing.
To obtain further information regarding distribution or transfer procedures,
including any required forms, retirement account Shareholders may call to
speak to a Retirement Plan Specialist at 1-800/527-2020.
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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 the Board of Trustees and all powers are exercised
by or under authority of the Board. Information relating to the Trustees and
Executive Officers of the Trust is set forth under the heading "Management of
the Trust" in the SAI.
INVESTMENT MANAGER. The Investment Manager of the Fund is Templeton Global
Bond Managers, a division of Templeton Investment Counsel, Inc., Broward
Financial Centre, Fort Lauderdale, Florida 33394-3091. 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 has an extensive global network of investment
research sources. 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 0.35% of its average daily net assets. 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, supervision of the 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 Income Fund), reduced to 0.135% of such combined
net assets in excess of $200 million, to 0.10% of such assets in excess of
$700 million and to 0.075% of such assets in excess of $1,200 million.
TRANSFER AGENT. Franklin Templeton Investor Services, Inc. serves as
transfer agent and dividend disbursing agent for the Fund.
CUSTODIAN. The Chase Manhattan Bank, N.A. serves as custodian of the Fund's
assets.
PLAN OF DISTRIBUTION. The Fund has a plan of distribution or "12b-1 Plan"
under which it may reimburse FTD for its costs and expenses for activities
primarily intended to result in the sale of Fund Shares. Expenditures by the
Fund under the plan may not exceed 0.15% annually of the Fund's average daily
net assets. Under the plan, costs and expenses not reimbursed in any one given
quarter
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(including costs and expenses not reimbursed because they exceeded the limit
of 0.15% per annum of the Fund's average daily net assets) may be reimbursed
in subsequent quarters or years, subject to applicable law. FTD has informed
the Fund that the costs and expenses that may be reimbursable in future
quarters or years were $13,173 (0.01% of its net assets) at August 31, 1995.
EXPENSES. For the fiscal year ended August 31, 1995, expenses amounted to
0.99% of the Fund's average daily net assets. See the Expense Table for
information regarding estimated expenses for the current fiscal year.
BROKERAGE COMMISSIONS. The Investment Manager will place all orders for the
purchase and sale of securities. 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 Share entitles
the holder to one vote.
Shares for an initial investment, as well as subsequent investments,
including the reinvestment of dividends and capital gain distributions, are
generally credited to an account in the name of an investor on the books of
the Fund, without the issuance of a share certificate. Maintaining shares in
uncertificated form (also known as "plan balance") minimizes the risk of loss
or theft of a share certificate. No charge is made for the issuance of one
certificate for all or some of the Shares purchased in a single order. A lost,
stolen or destroyed certificate cannot be replaced without obtaining a
sufficient indemnity bond. The cost of such a bond, which is generally borne
by the shareholder, can be 2% or more of the value of the lost, stolen or
destroyed certificate. A certificate will be issued if requested by the
shareholder or by the securities dealer.
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.
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 and
officers of the Trust for acts or obligations of 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.
DIVIDENDS AND DISTRIBUTIONS. The Fund's net investment income (consisting of
interest accrued or discount earned less amortization of premium and estimated
expenses) and net realized short-term gains is declared as a dividend daily,
including weekends and holidays, immediately prior to the determination of net
asset value, and is paid to Shareholders monthly. Dividends are declared and
reinvested starting on the day after (whether or not a business day) the
Shares are issued and including the day on which Shares are redeemed.
Income dividends paid by the Fund on its Shares are automatically reinvested
on the payable date in whole or fractional Shares of the Fund at net asset
value as of the ex-dividend date, unless a Shareholder makes a written or
telephonic request for payments in
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cash. Shareholders will receive a monthly summary of their accounts, including
information as to dividends paid during the month and the Shares credited to
the account through reinvestment of dividends.
Distribution checks are forwarded by first-class mail to the address of
record. The proceeds of any such checks which are not accepted by the
addressee and returned to the Fund will be reinvested in the Shareholder's
account in whole or fractional Shares at net asset value next computed after
the check has been received by the Transfer Agent. Subsequent distributions
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 net realized capital gains, which are
expected to be treated as ordinary income 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 of the year in which such
distributions were declared. The Fund will inform Shareholders each year of
the amount and nature of income or gains distributed to them. Sales or other
dispositions of Fund Shares generally will give rise to taxable gain or loss.
A more detailed description of tax consequences to Shareholders is contained
in the SAI under the heading "Tax Status."
The Fund may be required to withhold Federal income tax at the rate of 31%
of all taxable distributions (including redemptions) paid to Shareholders who
fail to provide the Fund with their correct taxpayer identification number or
to make required certifications or where the Fund or the Shareholder has been
notified by the Internal Revenue Service that the Shareholder is subject to
backup withholding. Corporate Shareholders and certain other Shareholders
specified in the Code are exempt from backup withholding. Backup withholding
is not an additional tax. Any amounts withheld may be credited against the
Shareholder's federal income tax liability.
INQUIRIES. Shareholders' inquiries will be answered promptly. They should be
addressed to Franklin Templeton Investor Services, Inc., P.O. Box 33030, St.
Petersburg, Florida 33733-8030--telephone 1-800-632-2301. 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 yield, effective yield
and/or total return in advertisements or reports to Shareholders or
prospective investors. The Fund calculates current yield by annualizing the
dividend for the most recent seven-day period and dividing by the net asset
value on the last day of the period for which yield is presented. The Fund's
effective yield is calculated similarly but assumes that income earned from
the investment is reinvested. The Fund's effective yield will be slightly
higher than its yield because of the compounding effect of this assumed
reinvestment. 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 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 yield,
effective yield and total return for the Fund, see "Yield and Performance
Information" in 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 semiannual
reports (containing unaudited financial statements) are sent to Shareholders
each year. To reduce the volume of mail sent to one household as well as to
reduce Fund expenses, the Transfer Agent will attempt to identify related
Shareholders within a household and send only one copy of the report.
Additional copies may be obtained, without charge, upon request to the Fund
Information Department--telephone 1-800/DIAL BEN. 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.
14
<PAGE>
INSTRUCTIONS AND IMPORTANT NOTICE
SUBSTITUTE W-9 INSTRUCTIONS INFORMATION
GENERAL. Backup withholding is not an additional tax. Rather, the tax
liability of persons subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the Internal Revenue Service ("IRS").
OBTAINING A NUMBER. If you do not have a Social Security Number/Taxpayer
Identification Number ("SSN/TIN"), you must obtain Form SS-5 or Form SS-4 from
your local Social Security or IRS office and apply for one. If you have
checked the "Awaiting TIN" box and signed the certification, withholding will
apply to payments relating to your account unless you provide a certified TIN
within 60 days.
WHAT SSN/TIN TO GIVE. Please refer to the following guidelines:
<TABLE>
<CAPTION>
ACCOUNT TYPE GIVE SSN OF ACCOUNT TYPE GIVE TAXPAYER ID # OF
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
. Individual Individual . Trust, Estate, or Pension Plan Trust Trust, Estate, or Pension Plan Trust
- ------------------------------------------------------------------------------------------------------------------------------------
. Joint Individual Actual owner of account, . Corporation, Partnership, or other Corporation, Partnership, or other
or if combined funds, organization organization
the first-named individual
- ------------------------------------------------------------------------------------------------------------------------------------
. Unif. Gift/Transfer Minor . Broker nominee Broker nominee
to Minor
- ------------------------------------------------------------------------------------------------------------------------------------
. Sole Proprietor Owner of business
- ------------------------------------------------------------------------------------------------------------------------------------
. Legal Guardian Ward, Minor, or Incompetent
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
EXEMPT RECIPIENTS. Please provide your TIN and check the "Exempt Recipient"
box if you are an exempt recipient. Exempt recipients generally include:
A corporation A real estate investment trust
A financial institution A common trust fund operated by a bank
under section 584(a)
An organization exempt from tax An entity registered at all times
under section 501(a), or an under the Investment Company
individual retirement plan Act of 1940
A registered dealer in securities or
commodities registered in the U.S.
or a U.S. possession
IRS PENALTIES. If you do not supply us with your SSN/TIN, you will be subject
to an IRS $50 penalty unless your failure is due to reasonable cause and not
willful neglect. If you fail to report certain income on your Federal income
tax return, you will be treated as negligent and subject to an IRS 20% penalty
on any underpayment of tax attributable to such negligence, unless there was
reasonable cause for the resulting underpayment and you acted in good faith.
If you falsify information on this form or make any other false statement
resulting in no backup withholding on an account which should be subject to
backup withholding, you may be subject to an IRS $500 penalty and certain
criminal penalties including fines and imprisonment.
SUBSTITUTE W-8 INSTRUCTIONS INFORMATION
EXEMPT FOREIGN PERSON. Check the "Exempt Foreign Person" box if you qualify as
a non-resident alien or foreign entity that is not subject to certain U.S.
information return reporting or to backup withholding rules. Dividends paid to
your account may be subject to withholding of up to 30%. Generally, you are an
"Exempt Foreign Person" if you are not (1) a citizen or resident of the U.S.,
or (2) a U.S. corporation, partnership, estate, or trust. In the case of an
individual, an "Exempt Foreign Person" is one who has been physically present
in the U.S. for less than 31 days during the current calendar year. An
individual who is physically present in the U.S. for at least 31 days during
the current calendar year will still be treated as an "Exempt Foreign Person,"
provided that the total number of days physically present in the current
calendar year and the two preceding calendar years does not equal or exceed
183 days (counting all of the days in the current calendar year, only one-
third of the days in the first preceding calendar year and only one-sixth of
the days in the second preceding calendar year). In addition, lawful permanent
residents or green card holders may not be treated as "Exempt Foreign
Persons." If you are an individual or an entity, you must not now be, or at
this time expect to be, engaged in a U.S. trade or business with respect to
which any gain derived from transactions effected by the Fund/Payer during the
calendar year is effectively connected to the U.S.
PERMANENT ADDRESS. The Shareholder Application must contain your permanent
address if you are an "Exempt Foreign Person." If you are an individual,
provide your permanent address. If you are a partnership or corporation,
provide the address of your principal office. If you are an estate or trust,
provide the address of your permanent residence or the principal office of any
fiduciary.
NOTICE OF CHANGE IN STATUS. If you become a U.S. citizen or resident after you
have provided certification of your foreign status, or if you cease to be an
"Exempt Foreign Person," you must notify the Fund/Payer within 30 days of your
change in status. Reporting will then begin on the account(s) listed, and
backup withholding may also begin unless you certify to the Fund/Payer that
(1) the taxpayer identification number you have given is correct, and (2) the
IRS has not notified you that you are subject to backup withholding because
you failed to report certain interest or dividend income. You may use Form W-
9, "Payer's Request for Taxpayer Identification Number and Certification," to
make these certifications. If an account is no longer active, you do not have
to notify a Fund/Payer or broker of your change in status unless you also have
another account with the same Fund/Payer that is still active. If you receive
interest from more than one Fund/Payer or have dealings with more than one
broker or barter exchange, file a certificate with each. If you have more than
one account with the same Fund/Payer, the Fund/Payer may require you to file a
separate certificate for each account.
WHEN TO FILE. File these certifications with the Fund before a payment is made
to you, unless you have already done this in either of the two preceding
calendar years. Only certifications that are in proper order will be treated
as having been filed with the Fund.
HOW OFTEN YOU MUST FILE. This certificate generally remains in effect for
three calendar years. A Fund/Payer or broker, however, may require that a new
certificate be filed each time a payment is made. On joint accounts for which
each joint owner is a foreign person, each must provide a certification of
foreign status.
15
<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 each 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 a Fund.
CERTIFIED COPY OF RESOLUTION (Corporation or Association)
The undersigned hereby certifies and affirms that he/she is the duly elected
___________________________ of _______________________________________________
TITLE CORPORATE NAME
a _________________________ organized under the laws of the State of ___________
TYPE OF ORGANIZATION STATE
and that the following is a true and correct copy of a resolution adopted by the
Board of Directors at a meeting duly called and held on ________________________
DATE
RESOLVED, that the ________________________________________________ of this
OFFICERS' TITLES
Corporation or Association are authorized to open an account in the name of
the Corporation or Association with one or more of the Franklin Group of
Funds (R) or Templeton Family of Funds (collectively, the "Funds") and to
deposit such funds of this Corporation or Association in this account as
they deem necessary or desirable; that the persons authorized below may
endorse checks and other instruments for deposit to said account or
accounts; and
FURTHER RESOLVED, that any of the following _______________ officers are
NUMBER
authorized to sign any share assignment on behalf of this Corporation or
Association and to take any other actions as may be necessary to sell or
redeem its shares in the Funds or to sign checks or drafts withdrawing funds
from the account; and
FURTHER RESOLVED, that this Corporation or Association shall hold harmless,
indemnify, and defend the Funds, their custodian bank, Franklin Templeton
Distributors, Inc., Franklin Templeton Investor Services, Inc., and their
affiliates, from any claim, loss or liability resulting in whole or in
part, directly or indirectly, from their reliance from time to time upon
any certifications by the secretary or any assistant secretary of this
Corporation or Association as to the names of the individuals occupying
such offices and their acting in reliance upon these resolutions until
actual receipt by them of a certified copy of a resolution of the Board of
Directors of the Corporation or Association modifying or revoking any or
all such resolutions.
The undersigned further certifies that the below named persons, whose
signatures appear opposite their names and office titles, are duly elected
officers of the Corporation or Association. (Attach additional list if
necessary.)
- -------------------------------------- ---------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- ---------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- ---------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- ---------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- ---------------------------------------
NAME OF CORPORATION OR ASSOCIATION DATE
Certified from minutes ___________________________________________________
NAME AND TITLE
CORPORATE SEAL (if appropriate)
16
<PAGE>
The Franklin Templeton Group
Literature Request -- Call today for a free descriptive brochure and prospectus
on any of the funds listed below. The prospectus contains more complete
information, including fees, charges and expenses, and should be read carefully
before investing or sending money.
<TABLE>
<S> <C> <C>
TEMPLETON FUNDS Maryland FRANKLIN FUNDS SEEKING
American Trust Massachusetts*** HIGH CURRENT INCOME
Americas Government Securities Fund Michigan*** AGE High Income Fund
Developing Markets Trust Minnesota*** German Government Bond Fund
Foreign Fund Missouri Global Government Income Fund
Global Infrastructure Fund New Jersey Investment Grade Income Fund
Global Opportunities Trust New York* U.S. Government Securities Fund
Greater European Fund North Carolina
Growth Fund Ohio*** FRANKLIN FUNDS SEEKING HIGH CURRENT
Growth and Income Fund Oregon INCOME AND STABILITY OF PRINCIPAL
Income Fund Pennsylvania Adjustable Rate Securities Fund
Japan Fund Tennessee** Adjustable U.S. Government Securities Fund
Latin America Fund Texas Short-Intermediate U.S. Government Securities Fund
Money Fund Virginia
Real Estate Securities Fund Washington** FRANKLIN FUNDS FOR NON-U.S. INVESTORS
Smaller Companies Growth Fund Tax-Advantaged High Yield Securities Fund
World Fund FRANKLIN FUNDS Tax-Advantaged International Bond Fund
SEEKING CAPITAL GROWTH Tax-Advantaged U.S. Government Securities Fund
FRANKLIN FUNDS California Growth Fund
SEEKING TAX-FREE INCOME DynaTech Fund FRANKLIN TEMPLETON INTERNATIONAL
Federal Intermediate Term Equity Fund FUNDS CURRENCY
Tax-Free Income Fund Global Health Care Fund Global Currency Fund
Federal Tax-Free Income Fund Gold Fund Hard Currency Fund
High Yield Tax-Free Income Fund Growth Fund High Income Currency Fund
Insured Tax-Free Income Fund*** International Equity Fund
Puerto Rico Tax-Free Income Fund Pacific Growth Fund FRANKLIN MONEY MARKET FUNDS
Real Estate Securities Fund California Tax-Exempt Money Fund
FRANKLIN STATE-SPECIFIC FUNDS Small Cap Growth Fund Federal Money Fund
SEEKING TAX-FREE INCOME IFT U.S. Treasury Money Market Portfolio
Alabama FRANKLIN FUNDS SEEKING Money Fund
Arizona* GROWTH AND INCOME New York Tax-Exempt Money Fund
Arkansas** Balance Sheet Investment Fund Tax-Exempt Money Fund
California* Convertible Securities Fund
Colorado Equity Income Fund FRANKLIN FUND FOR CORPORATIONS
Connecticut Global Utilities Fund Corporate Qualified Dividend Fund
Florida* Income Fund
Georgia Premier Return Fund FRANKLIN TEMPLETON VARIABLE ANNUITIES
Hawaii** Rising Dividends Fund Franklin Valuemark
Indiana Strategic Income Fund Franklin Templeton Valuemark Income
Kentucky Utilities Fund Plus (an immediate annuity)
Louisiana
</TABLE>
Toll-free 1-800-DIAL BEN (1-800-342-5236)
* Two or more fund options available: long-term portfolio, intermediate-term
portfolio, a portfolio of municipal securities, and a high yield portfolio
(CA).
** The fund may invest up to 100% of its assets in bonds that pay interest
subject to the federal alternative minimum tax.
*** Portfolio of insured municipal securities.
17
<PAGE>
NOTES
----
18
<PAGE>
NOTES
----
19
<PAGE>
- --------------------------------------------------------------------------------
TEMPLETON MONEY FUND
PRINCIPAL UNDERWRITER:
Franklin Templeton
Distributors, Inc.
700 Central Avenue
St. Petersburg,
Florida 33701-3628
Shareholder Services
1-800-632-2301
Fund Information
1-800/DIAL BEN
Institutional Services
1-800-321-8563
Dealer Services
1-800-524-4040
Retirement Plan Services
1-800-527-2020
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.
- --------------------------------------------------------------------------------
[RECYCLING LOGO APPEARS HERE]
TL407 P 1/96
TEMPLETON
MONEY
FUND
Prospectus
January 1, 1996
[LOGO OF FRANKLIN TEMPLETON APPEARS HERE]
<PAGE>
REGISTRATION--PLEASE PRINT
INSTRUCTIONS FOR COMPLETING APPLICATION
- -------------------------------------------------------------------------------
Please follow these instructions to establish your account. If you have a
question please call toll free 1-800-354-9191.
Please note that you are required to send a completed application, including
the appropriate tax identification number, and that the application must be
received before withdrawal instructions can be accepted.
TWO WAYS TO INVEST
1) By Mail -- Complete the application and mail it with your check to:
Templeton Money Fund
P.O. Box 33031
St. Petersburg, FL 33733-8031
2) By Wire -- If your initial investment is being made by wire, please call us
at our toll free number for instructions. Federal Funds should be wired to:
Chase Manhattan Bank, New York , NY
Account No 910-2-581015
Re: Templeton Money Fund
Account of: (your account as it will be registered)
<TABLE>
<CAPTION>
====================================================================================================================================
<S> <C> <C>
TEMPLETON MONEY FUND (FTD USE ONLY)
700 CENTRAL AVENUE/P.O. BOX 33031, ST. PETERSBURG, FLORIDA 33733-8031 ======================================================
NEW ACCOUNT APPLICATION
For initial investment only (DO NOT USE FOR TEMPLETON
PROTOTYPE KEOGH OR IRA PLANS. REQUEST SEPARATE
PLEASE FILL OUT AND SIGN BOTH SIDES OF THIS FORM APPLICATIONS.)
====================================================================================================================================
IF YOU NEED ASSISTANCE IN COMPLETING THIS APPLICATION, PLEASE CALL TOLL FREE, 1-800-354-9191.
- ------------------------------------------------------------------------------------------------------------------------------------
Enclosed is my check, payable to Templeton Money Fund, for $ ____________________ ($500 minimum for initial investment and $25
minimum for subsequent investments) to purchase shares of the Fund.
====================================================================================================================================
FOR WIRED
FUNDS ONLY Amount $________ Date of wired investment from your bank _______________________________________________, 19__
====================================================================================================================================
INDIVIDUAL 1. Individual [_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_] [_][_][_][_][_][_][_][_][_]
USE LINE 1 First Name Initial Last Name Soc. Sec. No.
JOINT TENANTS 2. Joint Tenants [_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_] [_][_][_][_][_][_][_][_][_]
USE LINES 1 & 2 First Name Initial Last Name Soc. Sec. No.
"Joint Tenants with Right of Survivorship and not as Tenants in Common" (Unless Otherwise Specified)
GIFTS/TRANSFERS 3. Gifts/Transfers [_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_] [_][_][_][_][_][_][_][_][_]
TO MINORS to Minors Custodian's Name (Only One Can Be Named) Minor's Soc. Sec. No.
USE LINE 3
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
Minor's Name (Only One)
Under the __________________________________ Uniform Gifts/Transfers to Minors Act
State of Residence
====================================================================================================================================
CITIZEN OF United States [_] Yes [_] No [_] Resident of: ___________________________________________
====================================================================================================================================
CORPORATIONS,
TRUSTS, 4. Corporations, Trusts, etc. [_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
OR OTHER
FIDUCIARIES ________________________________ [_][_][-][_][_][_][_][_][_][_][_] [_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
USE LINE 4 Date of Trust Instrument Tax I.D. No. Name of Beneficiary (If to Be Included in
Registration)
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
Name of Trustees (If to Be Included in Registration)
====================================================================================================================================
ADDRESS
____________________________________________________________ (________) ________________________________________
Street Area Code Business Hours Phone
__________________________________________________________________________________________________________________
City, State, Zip
====================================================================================================================================
</TABLE>
<PAGE>
DIVIDENDS All dividends to be paid in additional shares, credited monthly.
================================================================================
SYSTEMATIC To receive fixed payments [_] Monthly [_] Quarterly [_] Semi-
WITHDRAWAL Annually [_] Annually of $50 or more, check one box and indicate
PLAN dollar amount $____________________. (For accounts with balance of
$10,000 or more.)
================================================================================
- - - - - - - - - - - - - - - - - - - - - - - - - - -
SIGNATURE CARD Account Number TEMPLETON MONEY FUND Signature
FOR CHECK WRITING SERVICE First Union National Card
(See reverse side for Bank of Florida
terms and conditions) =====================================================
Account Name(s) -- same as Shareholder Account
Registration
-----------------------------------------------------
AUTHORIZED 1. ___________________________________
SIGNATURE(S): 2. ___________________________________
Please fill out this card 3. ___________________________________
if you elect the 4. ___________________________________
Check-Writing Service.
It is similar to the [_] Check if all parties to the
card you must complete account must sign the check.
when opening a checking [_] Check if combination of [_]
account with any bank. signatures is required and
Please make certain that specify number in box.
all authorized persons
have signed.
IMPORTANT! In signing this signature card, the signature(s)
signifies his/her or their agreement to be
PLEASE COMPLETE REVERSE subject to the rules and regulations of First
SIDE FOR THE TELEPHONE Union National Bank of Florida pertaining thereto
REDEMPTION SERVICE AND and as amended from time to time.
ALL SIGNATURES.
- ---
SUBJECT TO CONDITIONS PRINTED ON THE REVERSE SIDE
Rev. 3/94
<PAGE>
================================================================================
TELEPHONE EXCHANGE SERVICE
- -------------------------------------------------------------------------------
I/We accept Telephone Exchange Privileges between all Franklin Templeton Funds
so qualified for all accounts with the identical registration/ownership. I/We
acknowledge that I/we are subject to certain specific restrictions, complete
details of which are described in the Fund's Prospectus, which I/we have
received and read. I/We DO NOT want Telephone Exchange Privileges -- please
check box [_]
================================================================================
EXPEDITED TELEPHONE REDEMPTION -- COMMERCIAL BANK WIRE INSTRUCTIONS (MINIMUM,
$1,000)
- -------------------------------------------------------------------------------
If this service is requested the Fund will, upon receipt of telephone or
telegraph instructions, redeem shares and wire the proceeds of the redemption as
indicated. The shareholder agrees that the Transfer Agent will forward the
proceeds of an expedited redemption in accordance with the Fund's Prospectus.
Deposit to COMMERCIAL BANK ACCOUNT ONLY with the identical registration of this
account (Bank Wires are subject to a $15.00 bank fee).
- -------------------------------------- ---------------------------------------
Name on Bank Account Address of Bank
- -------------------------------------- ---------------------------------------
Bank Account Number City State Zip
- -------------------------------------- ABA Routing
Name of Bank Number _______________________
+ IMPORTANT -- A NEW FORM MUST BE EXECUTED IF THESE INSTRUCTIONS ARE CHANGED +
================================================================================
CHECK WRITING SERVICE -- TERMS AND CONDITIONS
- -------------------------------------------------------------------------------
Pursuant to this request, the Agent will establish a checking account for the
shareholder. Upon presentation of a check to the Agent for payment, the Fund
will redeem shares from the shareholder's account sufficient to cover the amount
of the check. Checks in amounts less than $500 or more than $500,000 will not be
honored. The shareholder agrees that: 1) the Agent will return unpaid and marked
"Non-Sufficient Funds" any check the amount of which exceeds the value of the
shareholder's account at the time of presentation; 2) the Agent will not make
payment on any check if the shares being redeemed to make such payment had been
purchased by check within the previous 15 days and that any such check drawn on
such uncollected funds will be returned marked "Non-Sufficient Funds"; 3) the
Fund and/or its agents will not be liable for any loss, expense or cost arising
out of check redemptions; and 4) the account will be subject to the Agent's
rules and regulations governing checking accounts. In addition, if there is more
than one shareholder owning an interest in the account, and if the shareholders
authorize, in signing the signature card, checks to be signed by less than all
of the owners of such account, then all shareholders owning an interest in the
account agree that shares sufficient to cover the amount of such check may be
redeemed upon presentation of a check signed by such authorized owners.
The Agent has reserved the right to change, modify or terminate this
checking account privilege at any time.
================================================================================
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 to your liability
to qualify for treaty withholding rules.
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
Line 3.
[_] 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 County 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
for the Fund 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.
X X
______________________________________ _______________________________________
Signature Signature
X X
______________________________________ _______________________________________
Signature Signature
Please make a photocopy of this application for your records
================================================================================
BROKER/DEALER USE ONLY (PLEASE PRINT)
- --------------------------------------------------------------------------------
We hereby submit this application for the purchase Templeton Dealer #
of shares of the Fund indicated in accordance with the
terms of our selling agreement with Franklin Templeton ---------------------
Distributors, Inc., and with the Prospectus for the Fund.
WIRE ORDER ONLY: The attached check for $ ___________ should be applied against
wire order
Confirmation Number ________ Dated _________ For _____ Shares.
Securities Dealer Name _________________________________________________________
Main Office Address ____________________________________________________________
Branch # ___________ Rep # ______________ Representative Name _______________
Branch Address _________________________________ Telephone Number (___) _______
Authorized Signature, Securities Dealer _______________ Title _________________
- --------------------------------------------------------------------------------
ACCEPTED: Franklin Templeton Distributors, Inc.
By ______________________________ Date ____________
================================================================================
<PAGE>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
THE PAYMENT OF FUNDS IS AUTHORIZED BY THE SIGNATURE(S) APPEARING ON THE
REVERSE SIDE.
If this card is signed by more than one person, all checks will require only
one of the signatures appearing exactly as on the reverse side unless
otherwise indicated. Each signator guarantees the genuineness of the other's
signature. The Powers of Attorney granted hereby shall not be affected by any
subsequent disability or incapacity on the part of any Depositor. Checks may
not be for less than $500 or more than $500,000.
First Union National Bank of Florida is hereby appointed agent by the
person(s) signing this card (the "Depositor(s)") and as agent, is authorized
and directed to present checks drawn on this checking account to the Fund
("Account") or its redemption agent as requests to redeem shares of the
Account registered in the name of the Depositor(s) in the amount of such
checks and to deposit the proceeds of such redemptions in this checking
account. The Agent shall be liable only for its own negligence.
Depositor(s) hereby authorizes the Account or its redemption agent to honor
redemption requests presented in the above manner by the Agent. The Account
and its redemption agent will not be liable for any loss, expense, cost or
damage arising out of check redemptions. Shares of the Account which were
purchased by check within fifteen (15) calendar days will not be redeemed. The
Agent has the right not to honor checks in amounts exceeding the value of the
Depositor(s) shareholder account at the time the check is presented for
payment.
The Agent reserves the right to change, modify or terminate this checking
account at any time upon notification mailed to the address of record of the
Depositor(s).
<PAGE>
TEMPLETON INCOME TRUST
THIS STATEMENT OF ADDITIONAL INFORMATION DATED JANUARY 1, 1996,
IS NOT A PROSPECTUS. IT SHOULD BE READ IN CONJUNCTION WITH THE
PROSPECTUSES OF TEMPLETON INCOME FUND DATED JANUARY 1, 1996,
AND TEMPLETON MONEY FUND DATED JANUARY 1, 1996,
EACH AS AMENDED FROM TIME TO TIME, WHICH MAY BE
OBTAINED WITHOUT CHARGE UPON REQUEST TO THE
PRINCIPAL UNDERWRITER, FRANKLIN TEMPLETON DISTRIBUTORS, INC.,
700 CENTRAL AVENUE, P.O. BOX 33030
ST. PETERSBURG, FLORIDA 33733-8030
TOLL FREE TELEPHONE: 800/DIAL BEN
TABLE OF CONTENTS
General Information and History.......................1
Investment Objectives and Policies....................2
-Investment Policies.................................2
-Repurchase Agreements...............................2
-Debt Securities.....................................2
-Structured Investments..............................4
-Futures Contracts...................................5
-Options on Securities, Indices
and Futures.......................................5
-Foreign Currency Hedging Transactions...............8
-Investment Restrictions.............................9
-Risk Factors.......................................12
-Trading Policies...................................16
-Personal Securities Transactions...................17
Management of the Trust..............................17
Trustee Compensation.................................23
Principal Shareholders...............................24
Investment Management and Other
Services...........................................24
-Investment Management Agreements...................24
-Management Fees....................................26
-The Templeton Global Bond Managers
Division of Templeton Investment
Counsel, Inc.......................................27
Business Manager....................................27
-Custodian and Transfer Agent.......................29
-Legal Counsel......................................29
-Independent Accountants............................29
-Reports to Shareholders............................30
Brokerage Allocation.................................30
Purchase, Redemption and Pricing of
Shares.............................................33
-Ownership and Authority
Disputes.........................................35
-Tax-Deferred Retirement Plans......................35
-Letter of Intent...................................36
-Special Net Asset Value Purchases..................38
-Redemptions in Kind................................39
Tax Status...........................................39
Principal Underwriter................................45
Yield and Performance Information....................48
Description of Shares................................52
Financial Statements.................................53
Appendix
Corporate Bond and Commercial
Paper Ratings.....................................i
GENERAL INFORMATION AND HISTORY
Templeton Income 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 ("Income
Fund") and Templeton Money Fund, a diversified fund ("Money Fund")
(collectively, the "Funds").
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INVESTMENT OBJECTIVES AND POLICIES
INVESTMENT POLICIES. The investment objective and policies
of each Fund are described in each Fund's Prospectus under the
heading "General Description--Investment Objective and
Policies."
REPURCHASE AGREEMENTS. Repurchase agreements are contracts under which
the buyer of a security simultaneously commits to resell the security to the
seller at an agreed upon price and date. Under a repurchase agreement, the
seller is required to maintain the value of the securities subject to the
repurchase agreement at not less than their repurchase price. The Templeton
Global Bond Managers Division of Templeton Investment Counsel, Inc. (the
"Investment Manager") will monitor the value of such securities daily to
determine that the value equals or exceeds the repurchase price. Repurchase
agreements may involve risks in the event of default or insolvency of the
seller, including possible delays or restrictions upon a Fund's ability to
dispose of the underlying securities. A Fund will enter into repurchase
agreements only with parties who meet creditworthiness standards approved by the
Board of Trustees, I.E., banks or broker-dealers which have been determined by
the Investment Manager to present no serious risk of becoming involved in
bankruptcy proceedings within the time frame contemplated by the repurchase
transaction.
DEBT SECURITIES. Income Fund may invest in debt securities which are
rated in any category by Standard & Poor's Corporation ("S&P") or Moody's
Investors Service, Inc. ("Moody's"). See the Appendix for a description of the
S&P and Moody's ratings. As an operating policy, Income Fund will invest no more
than 5% of its assets in debt securities rated lower than Baa by Moody's or BBB
by S&P. The market value of debt securities generally varies in response to
changes in interest rates and the financial condition of each issuer. During
periods of declining interest rates, the value of debt securities generally
increases. Conversely, during periods of rising interest rates, the value of
such securities generally declines. These changes in market value will be
reflected in Income Fund's net asset value.
Although they may offer higher yields than do higher rated securities,
high risk, low rated debt securities (commonly referred to as "junk bonds") and
unrated debt securities generally involve greater volatility of price and risk
of principal and income, including the possibility of default by, or bankruptcy
of, the issuers of the securities. In addition, the markets in which low rated
and unrated debt securities are traded are more limited than those in which
higher rated
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securities are traded. The existence of limited markets for particular
securities may diminish Income Fund's ability to sell the securities at fair
value either to meet redemption requests or to respond to a specific economic
event such as a deterioration in the creditworthiness of the issuer. Reduced
secondary market liquidity for certain low rated or unrated debt securities may
also make it more difficult for each Fund to obtain accurate market quotations
for the purposes of valuing the Fund's portfolio. Market quotations are
generally available on many low rated or unrated securities only from a limited
number of dealers and may not necessarily represent firm bids of such dealers or
prices for actual sales.
Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the values and liquidity of low rated debt
securities, especially in a thinly traded market. Analysis of the
creditworthiness of issuers of low rated debt securities may be more complex
than for issuers of higher rated securities, and the ability of Income Fund to
achieve its investment objective may, to the extent of investment in low rated
debt securities, be more dependent upon such creditworthiness analysis than
would be the case if Income Fund were investing in higher rated securities.
Low rated debt securities may be more susceptible to real or perceived
adverse economic and competitive industry conditions than investment grade
securities. The prices of low rated debt securities have been found to be less
sensitive to interest rate changes than higher rated investments, but more
sensitive to adverse economic downturns or individual corporate developments. A
projection of an economic downturn or of a period of rising interest rates, for
example, could cause a decline in low rated debt securities prices because the
advent of a recession could lessen the ability of a highly leveraged company to
make principal and interest payments on its debt securities. If the issuer of
low rated debt securities defaults, Income Fund may incur additional expenses
seeking recovery.
Income Fund may accrue and report interest income on high yield bonds,
such as zero coupon bonds or pay-in-kind securities, even though it receives no
cash interest until the security's maturity or payment date. In order to qualify
for beneficial tax treatment afforded regulated investment companies, and to be
relieved of federal tax liabilities, Income Fund must distribute substantially
all of its net income and gains to Shareholders (see "Tax Status") generally on
an annual basis. Income Fund may have to dispose of portfolio securities under
disadvantageous circumstances to generate cash or leverage itself by borrowing
cash in order to satisfy the distribution requirement.
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STRUCTURED INVESTMENTS. Included among the issuers of debt securities
in which Income Fund may invest are entities organized and operated solely for
the purpose of restructuring the investment characteristics of various
securities. These entities are typically organized by investment banking firms
which receive fees in connection with establishing each entity and arranging for
the placement of its securities. This type of restructuring involves the deposit
with or purchase by an entity, such as a corporation or trust, of specified
instruments and the issuance by that entity of one or more classes of securities
("Structured Investments") backed by, or representing interests in, the
underlying instruments. The cash flow on the underlying instruments may be
apportioned among the newly issued Structured Investments to create securities
with different investment characteristics such as varying maturities, payment
priorities or interest rate provisions; the extent of the payments made with
respect to Structured Investments is dependent on the extent of the cash flow on
the underlying instruments. Because Structured Investments of the type in which
Income Fund anticipates investing typically involve no credit enhancement, their
credit risk will generally be equivalent to that of the underlying instruments.
Income Fund is permitted to invest in a class of Structured Investments
that is either subordinated or unsubordinated to the right of payment of another
class. Subordinated Structured Investments typically have higher yields and
present greater risks than unsubordinated Structured Investments. Although the
Fund's purchase of subordinated Structured Investments would have a similar
economic effect to that of borrowing against the underlying securities, the
purchase will not be deemed to be leverage for purposes of the limitations
placed on the extent of the Fund's assets that may be used for borrowing
activities.
Certain issuers of Structured Investments may be deemed to be
"investment companies" as defined in the 1940 Act. As a result, Income Fund's
investment in these Structured Investments may be limited by the restrictions
contained in the 1940 Act. Structured Investments are typically sold in private
placement transactions, and there currently is no active trading market for
Structured Investments. To the extent such investments are illiquid, they will
be subject to the Fund's restrictions on investments in illiquid securities.
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<PAGE>
FUTURES CONTRACTS. Income Fund may purchase and sell
financial futures contracts. Currently, futures contracts are
available on several types of fixed-income securities including:
U.S. Treasury bonds, notes and bills, commercial paper and
certificates of deposit.
Although some financial futures contracts call for making or taking
delivery of the underlying securities, in most cases these obligations are
closed out before the settlement date. The closing of a contractual obligation
is accomplished by purchasing or selling an identical offsetting futures
contract. Other financial futures contracts by their terms call for cash
settlements.
Income Fund may also buy and sell index futures contracts with respect
to any stock or bond index traded on a recognized stock exchange or board of
trade. An index futures contract is a contract to buy or sell units of an index
at a specified future date at a price agreed upon when the contract is made. The
stock index futures contract specifies that no delivery of the actual stocks
making up the index will take place. Instead, settlement in cash must occur upon
the termination of the contract, with the settlement being the difference
between the contract price and the actual level of the stock index at the
expiration of the contract.
At the time Income Fund purchases a futures contract, an amount of
cash, U.S. Government securities, or other highly liquid debt securities equal
to the market value of the contract will be deposited in a segregated account
with Income Fund's custodian. When selling a stock index futures contract,
Income Fund will maintain with its custodian liquid assets that, when added to
the amounts deposited with a futures commission merchant or broker as margin,
are equal to the market value of the instruments underlying the contract.
Alternatively, Income Fund may "cover" its position by owning the instruments
underlying the contract or, in the case of a stock index futures contract,
owning a portfolio with a volatility substantially similar to that of the index
on which the futures contract is based, or holding a call option permitting
Income Fund to purchase the same futures contract at a price no higher than the
price of the contract written by Income Fund (or at a higher price if the
difference is maintained in liquid assets with Income Fund's custodian).
OPTIONS ON SECURITIES, INDICES AND FUTURES. Income Fund may write
covered put and call options and purchase put and call options on securities,
securities indices and futures contracts that are traded on United States and
foreign exchanges and in the over-the-counter markets.
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<PAGE>
An option on a security or a futures contract is a contract that gives
the purchaser of the option, in return 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 gives 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.
Income Fund may write a call or put option only if the option is
"covered." A call option on a security or futures contract written by Income
Fund is "covered" if Income Fund owns the underlying security or futures
contract covered by the call or has an absolute and immediate right to acquire
that security without additional cash consideration (or for additional cash
consideration held in a segregated account by its custodian) upon conversion or
exchange of other securities held in its portfolio. A call option on a security
or futures contract is also covered if Income Fund holds a call on the same
security or futures contract and in the same principal amount as the call
written where the exercise price of the call held (a) is equal to or less than
the exercise price of the call written or (b) is greater than the exercise price
of the call written if the difference is maintained by Income Fund in cash or
high grade U.S. Government securities in a segregated account with its
custodian. A put option on a security or futures contract written by Income Fund
is "covered" if Income Fund maintains cash or fixed income securities with a
value equal to the exercise price in a segregated account with its custodian, or
else holds a put on the same security or futures contract and in the same
principal amount as the put written where the exercise price of the put held is
equal to or greater than the exercise price of the put written.
Income Fund will cover call options on securities indices that it
writes by owning securities whose price changes, in the opinion of the
Investment Manager, are expected to be similar to those of the index, or in such
other manner as may be in accordance with the rules of the exchange on which the
option is traded and applicable laws and regulations. Nevertheless, where Income
Fund covers a call option on a securities index through ownership of securities,
such securities may not match the composition of the index. In that event,
Income Fund will not be fully covered and could be subject to risk of loss in
the event of adverse changes in the value of the index. Income Fund will cover
put options on securities indices that it writes by segregating assets equal to
the option's exercise price, or in
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<PAGE>
such other manner as may be in accordance with the rules of the exchange on
which the option is traded and applicable laws and regulations.
Income Fund will receive a premium from writing a put or call option,
which increases its gross income in the event the option expires unexercised or
is closed out at a profit. If the value of a security, index or futures contract
on which Income Fund has written a call option falls or remains the same, Income
Fund will realize a profit in the form of the premium received (less transaction
costs) that could offset all or a portion of any decline in the value of the
portfolio securities being hedged. If the value of the underlying security,
index or futures contract rises, however, Income Fund will realize a loss in its
call option position, which will reduce the benefit of any unrealized
appreciation in its investments. By writing a put option, Income Fund assumes
the risk of a decline in the underlying security, index or futures contract. To
the extent that the price changes of the portfolio securities being hedged
correlate with changes in the value of the underlying security, index or futures
contract, writing covered put options will increase Income Fund's losses in the
event of a market decline, although such losses will be offset in part by the
premium received for writing the option.
Income Fund may also purchase put options to hedge its investments
against a decline in value. By purchasing a put option, Income Fund will seek to
offset a decline in the value of the portfolio securities being hedged through
appreciation of the put option. If the value of Income Fund's investments does
not decline as anticipated, or if the value of the option does not increase, its
loss will be limited to the premium paid for the option plus related transaction
costs. The success of this strategy will depend, in part, on the accuracy of the
correlation between the changes in value of the underlying security, index or
futures contract and the changes in value of Income Fund's security holdings
being hedged.
Income Fund may purchase call options on individual securities or
futures contracts to hedge against an increase in the price of securities or
futures contracts that it anticipates purchasing in the future. Similarly,
Income Fund may purchase call options on a securities index to attempt to reduce
the risk of missing a broad market advance, or an advance in an industry or
market segment, at a time when Income Fund holds uninvested cash or short-term
debt securities awaiting investment. When purchasing call options, Income Fund
will bear the risk of losing all or a portion of the premium paid if the value
of the underlying security, index or futures contract does not rise.
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<PAGE>
There can be no assurance that a liquid market will exist when Income
Fund seeks to close out an option position. Trading could be interrupted, for
example, because of supply and demand imbalances arising from a lack of either
buyers or sellers, or the options exchange could suspend trading after the price
has risen or fallen more than the maximum specified by the exchange. Although
Income Fund may be able to offset to some extent any adverse effects of being
unable to liquidate an option position, it may experience losses in some cases
as a result of such inability. The value of over-the-counter options purchased
by Income Fund, as well as the cover for options written by Income Fund, are
considered not readily marketable and are subject to the Trust's limitation on
investments in securities that are not readily marketable. See "Investment
Objectives and Policies --Investment Restrictions."
FOREIGN CURRENCY HEDGING TRANSACTIONS. In order to hedge against
foreign currency exchange rate risks, Income Fund may enter into forward foreign
currency exchange contracts and foreign currency futures contracts, as well as
purchase put or call options on foreign currencies, as described below. Income
Fund may also conduct its foreign currency exchange transactions on a spot
(I.E., cash) basis at the spot rate prevailing in the foreign currency exchange
market.
Income Fund may enter into forward foreign currency exchange contracts
("forward contracts") to attempt to minimize the risk to Income Fund from
adverse changes in the relationship between the U.S. dollar and foreign
currencies. 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. Income Fund may
enter into a forward contract, for example, when it enters into a contract for
the purchase or sale of a security denominated in a foreign currency in order to
"lock in" the U.S. dollar price of the security. In addition, for example, when
Income Fund believes that a foreign currency may suffer or enjoy a substantial
movement against another currency, it may enter into a forward contract to sell
an amount of the former foreign currency approximating the value of some or all
of its portfolio securities denominated in such foreign currency. This second
investment practice is generally referred to as "cross-hedging." Because in
connection with Income Fund's forward foreign currency transactions, an amount
of its assets equal to the amount of the purchase will be held aside or
segregated to be used to pay for the commitment, Income Fund will always have
cash, cash equivalents or high quality debt securities available in an amount
sufficient to cover any commitments under these contracts or to limit any
potential risk. The segregated account will be marked-to-market on a daily
basis. While these
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<PAGE>
contracts are not presently regulated by the Commodity Futures Trading
Commission ("CFTC"), the CFTC may in the future assert authority to regulate
forward contracts. In such event, Income Fund's ability to utilize forward
contracts in the manner set forth above may be restricted. Forward contracts may
limit potential gain from a positive change in the relationship between the U.S.
dollar and foreign currencies. Unanticipated changes in currency prices may
result in poorer overall performance for Income Fund than if it had not engaged
in such contracts.
Income Fund may purchase and write put and call options on foreign
currencies for the purpose of protecting against declines in the dollar value of
foreign portfolio securities and against increases in the dollar cost of foreign
securities to be acquired. As is the case with other kinds of options, however,
the writing of an option on foreign currency will constitute only a partial
hedge up to the amount of the premium received, and Income Fund could be
required to purchase or sell foreign currencies at disadvantageous exchange
rates, thereby incurring losses. The purchase of an option on foreign currency
may constitute an effective hedge against fluctuation in exchange rates,
although, in the event of rate movements adverse to its position, Income Fund
may forfeit the entire amount of the premium plus related transaction costs.
Options on foreign currencies to be written or purchased by Income Fund will be
traded on U.S. and foreign exchanges or over-the-counter.
Income Fund may enter into exchange-traded contracts for the purchase
or sale for future delivery of foreign currencies ("foreign currency futures").
This investment technique will be used only to hedge against anticipated future
changes in exchange rates which otherwise might adversely affect the value of
Income Fund's portfolio securities or adversely affect the prices of securities
that Income Fund intends to purchase at a later date. The successful use of
foreign currency futures will usually depend on the Investment Manager's ability
to forecast currency exchange rate movements correctly. Should exchange rates
move in an unexpected manner, Income Fund may not achieve the anticipated
benefits of foreign currency futures or may realize losses.
INVESTMENT RESTRICTIONS. The Funds have imposed upon themselves certain
investment restrictions which, together with their investment objectives, are
fundamental policies except as otherwise indicated. No changes in a Fund's
investment objectives or investment restrictions (except those which are not
fundamental policies) can be made without the approval of the Shareholders of
that Fund. For this purpose, the provisions of the 1940 Act require the
affirmative vote of the lesser of
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<PAGE>
either (1) 67% or more of that Fund's Shares present at a Shareholders' meeting
at which more than 50% of the outstanding Shares are present or represented by
proxy or (2) more than 50% of the outstanding Shares of that Fund.
In accordance with these restrictions, each Fund will not:
1. Invest in real estate or mortgages on real estate
(although the Funds may invest in marketable securities
secured by real estate or interests therein); invest in
other open-end investment companies (except in
connection with a merger, consolidation, acquisition or
reorganization); invest in interests (other than
publicly issued debentures or equity stock interests)
in oil, gas or other mineral exploration or development
programs; purchase or sell commodity contracts (except
futures contracts as described in Income Fund's
Prospectus)
.
2. Purchase or retain securities of any company in which Trustees
or officers of the Trust or of the Investment Manager,
individually owning more than 1/2 of 1% of the securities of
such company, in the aggregate own more than 5% of the
securities of such company.
3. Invest in any company for the purpose of exercising
control or management.
4. Act as an underwriter; issue senior securities; or purchase on
margin or sell short, except that Income Fund may make margin
payments in connection with futures, options and currency
transactions. Money Fund may not write or buy puts, calls,
straddles or spreads.
5. Loan money, except that a Fund may purchase a portion of an
issue of publicly distributed bonds, debentures, notes and
other evidences of indebtedness.
6. Invest more than 5% of the value of its total assets in
securities of issuers which have been in continuous operation
less than three years.
7. Invest more than 15% of its total assets in securities of
foreign companies that are not listed on a recognized United
States or foreign securities exchange, including no more than
5% of its total assets in restricted securities and no more
than 10% of its total assets in restricted securities and other
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<PAGE>
securities (including repurchase agreements having more than
seven days remaining to maturity) 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).
8. Invest more than 25% of its total assets in a single industry,
except that Money Fund may invest in obligations issued by
domestic banks (including certificates of deposit, bankers'
acceptances and commercial paper) without regard to this
limitation.
9. Borrow money, except that Income Fund may borrow money
in amounts up to 30% of the value of that Fund's net
assets. In addition, neither Fund may pledge, mortgage
or hypothecate its assets for any purpose, except that
Income Fund may do so to secure such borrowings and
then only to an extent not greater than 15% of its
total assets. Arrangements with respect to margin for
futures contracts are not deemed to be a pledge of
assets.
10. Participate on a joint or a joint and several basis in any
trading account in securities. (See "Investment Objectives and
Policies -- Trading Policies" as to transactions in the same
securities for the Funds and other Templeton Funds and
clients.)
11. Invest more than 5% of its net assets in warrants whether or
not listed on the New York or American Stock Exchanges, and
more than 2% of its net assets in warrants that are not listed
on those exchanges. Warrants acquired in units or attached to
securities are not included in this restriction.
In addition to the above restrictions, Money Fund will not invest more
than 5% of its total assets in the securities of any one issuer (exclusive of
U.S. Government securities) or purchase more than 10% of any class of securities
of any one company, including more than 10% of its outstanding voting
securities.
Whenever any investment restriction states a maximum percentage of a
Fund's assets which may be invested in any security or other property, it is
intended that such maximum percentage limitation be determined immediately after
and as a result of a Fund's acquisition of such security or property. The
investment restrictions do not preclude either Fund from
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<PAGE>
purchasing the securities of any issuer pursuant to the exercise of subscription
rights distributed to a Fund by the issuer, unless such purchase would result in
a violation of restrictions 7 or 8.
RISK FACTORS. Income Fund has an unlimited right to purchase securities
in any foreign country, developed or developing, if they are listed on an
exchange, as well as a limited right to purchase such securities if they are
unlisted. Investors should consider carefully the substantial risks involved in
securities of companies and governments of foreign nations, which are in
addition to the usual risks inherent in domestic investments.
There may be less publicly available information about foreign
companies comparable to the reports and ratings published about companies in the
United States. Foreign companies are not generally subject to uniform
accounting, auditing and financial reporting standards, and auditing practices
and requirements may not be comparable to those applicable to United States
companies. Income Fund, therefore, may encounter difficulty in obtaining market
quotations for purposes of valuing its portfolio and calculating its net asset
value. Foreign markets have substantially less volume than the New York Stock
Exchange ("NYSE") and securities of some foreign companies are less liquid and
more volatile than securities of comparable United States companies. Commission
rates in foreign countries, which are generally fixed rather than subject to
negotiation as in the United States, are likely to be higher. In many foreign
countries there is less government supervision and regulation of stock
exchanges, brokers and listed companies than in the United States.
Investments in companies domiciled in developing countries may be
subject to potentially higher risks than investments in developed countries.
These risks include (i) less social, political and economic stability; (ii) the
small current size of the markets for such securities and the currently low or
nonexistent volume of trading, which result in a lack of liquidity and in
greater price volatility; (iii) certain national policies which may restrict
Income Fund's investment opportunities, including restrictions on investment in
issuers or industries deemed sensitive to national interests; (iv) foreign
taxation; (v) the absence of developed structures governing private or foreign
investment or allowing for judicial redress for injury to private property; (vi)
the absence, until recently in certain Eastern European countries, of a capital
market structure or market-oriented economy; and (vii) the possibility that
recent favorable economic developments in
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<PAGE>
Eastern Europe may be slowed or reversed by unanticipated political or social
events in such countries.
In addition, many countries in which Income Fund may invest have
experienced substantial, and in some periods extremely high, rates of inflation
for many years. Inflation and rapid fluctuations in inflation rates have had and
may continue to have negative effects on the economies and securities markets of
certain countries. Moreover, the economies of some developing countries may
differ favorably or unfavorably from the United States economy in such respects
as growth of gross domestic product, rate of inflation, currency depreciation,
capital reinvestment, resource self-sufficiency and balance of payments
position.
Investments in Eastern European countries may involve risks of
nationalization, expropriation and confiscatory taxation. The Communist
governments of a number of Eastern European countries expropriated large amounts
of private property in the past, in many cases without adequate compensation,
and there can be no assurance that such expropriation will not occur in the
future. In the event of such expropriation, Income Fund could lose a substantial
portion of any investments it has made in the affected countries. Further, no
accounting standards exist in Eastern European countries. Finally, even though
certain Eastern European currencies may be convertible into U.S. dollars, the
conversion rates may be artificial to the actual market values and may be
adverse to Income Fund Shareholders.
Investing in Russian companies involves a high degree of risk and
special considerations not typically associated with investing in the United
States securities markets, and should be considered highly speculative. Such
risks include: (a) delays in settling portfolio transactions and risk of loss
arising out of Russia's system of share registration and custody; (b) the risk
that it may be impossible or more difficult than in other countries to obtain
and/or enforce a judgment; (c) pervasiveness of corruption and crime in the
Russian economic system; (d) currency exchange rate volatility and the lack of
available currency hedging instruments; (e) higher rates of inflation (including
the risk of social unrest associated with periods of hyper-inflation); (f)
controls on foreign investment and local practices disfavoring foreign investors
and limitations on repatriation of invested capital, profits and dividends, and
on Income Fund's ability to exchange local currencies for U.S. dollars; (g) the
risk that the government of Russia or other executive or legislative bodies may
decide not to continue to support the economic reform programs implemented since
the dissolution of the Soviet Union and could follow radically different
political and/or economic policies to the detriment of
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<PAGE>
investors, including non-market-oriented policies such as the support of certain
industries at the expense of other sectors or investors, or a return to the
centrally planned economy that existed prior to the dissolution of the Soviet
Union; (h) the financial condition of Russian companies, including large amounts
of inter-company debt which may create a payments crisis on a national scale;
(i) dependency on exports and the corresponding importance of international
trade; (j) the risk that the Russian tax system will not be reformed to prevent
inconsistent, retroactive and/or exorbitant taxation; and (k) possible
difficulty in identifying a purchaser of securities held by Income Fund due to
the underdeveloped nature of the securities markets.
There is little historical data on Russian securities markets because
they are relatively new and a substantial proportion of securities transactions
in Russia are privately negotiated outside of stock exchanges. Because of the
recent formation of the securities markets as well as the underdeveloped state
of the banking and telecommunications systems, settlement, clearing and
registration of securities transactions are subject to significant risks.
Ownership of shares (except where shares are held through depositories that meet
the requirements of the 1940 Act) is defined according to entries in the
company's share register and normally evidenced by extracts from the register or
by formal share certificates. However, there is no central registration system
for shareholders and these services are carried out by the companies themselves
or by registrars located throughout Russia. These registrars are not necessarily
subject to effective state supervision and it is possible for Income Fund to
lose its registration through fraud, negligence or even mere oversight. While
Income Fund will endeavor to ensure that its interest continues to be
appropriately recorded either itself or through a custodian or other agent
inspecting the share register and by obtaining extracts of share registers
through regular confirmations, these extracts have no legal enforceability and
it is possible that subsequent illegal amendment or other fraudulent act may
deprive the Fund of its ownership rights or improperly dilute its interests. In
addition, while applicable Russian regulations impose liability on registrars
for losses resulting from their errors, it may be difficult for Income Fund to
enforce any rights it may have against the registrar or issuer of the securities
in the event of loss of share registration. Furthermore, although a Russian
public enterprise with more than 1,000 shareholders is required by law to
contract out the maintenance of its shareholder register to an independent
entity that meets certain criteria, in practice this regulation has not always
been strictly enforced. Because of this lack of independence, management of a
company may be able
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<PAGE>
to exert considerable influence over who can purchase and sell the company's
shares by illegally instructing the registrar to refuse to record transactions
in the share register. This practice may prevent Income Fund from investing in
the securities of certain Russian companies deemed suitable by the Investment
Manager. Further, this also could cause a delay in the sale of Russian company
securities by Income Fund if a potential purchaser is deemed unsuitable, which
may expose the Fund to potential loss on the investment.
Income Fund endeavors to buy and sell foreign currencies on as
favorable a basis as practicable. Some price spread on currency exchange (to
cover service charges) may be incurred, particularly when the Fund changes
investments from one country to another or when proceeds of the sale of Shares
in U.S. dollars are used for the purchase of securities in foreign countries.
Also, some countries may adopt policies which would prevent Income Fund from
transferring cash out of the country or withhold portions of interest and
dividends at the source. There is the possibility of cessation of trading on
national exchanges, expropriation, nationalization or confiscatory taxation,
withholding and other foreign taxes on income or other amounts, foreign exchange
controls (which may include suspension of the ability to transfer currency from
a given country), default in foreign government securities, political or social
instability, or diplomatic developments which could affect investments in
securities of issuers in foreign nations.
Income Fund may be affected either unfavorably or favorably by
fluctuations in the relative rates of exchange between the currencies of
different nations, by exchange control regulations and by indigenous economic
and political developments. Some countries in which a Fund may invest may also
have fixed or managed currencies that are not free-floating against the U.S.
dollar. Further, certain currencies have experienced a steady devaluation
relative to the U.S. dollar. Any devaluations in the currencies in which a
Fund's portfolio securities are denominated may have a detrimental impact on
that Fund. Through Income Fund's flexible policy, management endeavors to avoid
unfavorable consequences and to take advantage of favorable developments in
particular nations where from time to time it places Income Fund's investments.
The exercise of this flexible policy may include decisions to purchase
securities with substantial risk characteristics and other decisions such as
changing the emphasis on investments from one nation to another and from one
type of security to another. Some of these decisions may later prove profitable
and others may not. No assurance can be given that profits, if any, will exceed
losses.
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<PAGE>
The Trustees consider at least annually the likelihood of the
imposition by any foreign government of exchange control restrictions which
would affect the liquidity of Income Fund's assets maintained with custodians in
foreign countries, as well as the degree of risk from political acts of foreign
governments to which such assets may be exposed. ^The Trustees also consider the
degree of risk involved through the holding of portfolio securities in domestic
and foreign securities depositories (see "Investment Management and Other
Services --Custodian and Transfer Agent"). However, in the absence of willful
misfeasance, bad faith or gross negligence on the part of the Investment
Manager, any losses resulting from the holding of Income Fund's portfolio
securities in foreign countries and/or with securities depositories will be at
the risk of the Shareholders. No assurance can be given that the Trustees'
appraisal of the risks will always be correct or that such exchange control
restrictions or political acts of foreign governments might not occur.
Income Fund's ability to reduce or eliminate its futures and related
options positions will depend upon the liquidity of the secondary markets for
such futures and options. Income Fund intends to purchase or sell futures and
related options only on exchanges or boards of trade where there appears to be
an active secondary market, but there is no assurance that a liquid secondary
market will exist for any particular contract or at any particular time. Use of
futures and options for hedging may involve risks because of imperfect
correlations between movements in the prices of the futures or options and
movements in the prices of the securities being hedged. Successful use of
futures and related options by Income Fund for hedging purposes also depends
upon the Investment Manager's ability to predict correctly movements in the
direction of the market, as to which no assurance can be given.
Additional risks may be involved with Income Fund's special investment
techniques, including loans of portfolio securities and borrowing for investment
purposes. These risks are described under the heading "Investment Techniques" in
the Prospectus.
TRADING POLICIES. The Investment Manager and its affiliated companies
serve as investment adviser to other investment companies and private clients.
Accordingly, the respective portfolios of certain of these funds and clients may
contain many or some of the same securities. When certain funds or clients are
engaged simultaneously in the purchase or sale of the same security, the trades
may be aggregated for execution and then allocated in a manner designed to be
equitable to each party. The larger size of the transaction may affect the price
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<PAGE>
of the security and/or the quantity which may be bought or sold for each party.
If the transaction is large enough, brokerage commissions in certain countries
may be negotiated below those otherwise chargeable.
Sale or purchase of securities, without payment of brokerage
commissions, fees (except customary transfer fees) or other remuneration in
connection therewith, may be effected between any of these funds, or between
funds and private clients, under procedures adopted pursuant to Rule 17a-7 under
the 1940 Act.
PERSONAL SECURITIES TRANSACTIONS. Access persons of the Franklin
Templeton Group, as defined in SEC Rule 17(j) under the 1940 Act, who are
employees of Franklin Resources, Inc. or their subsidiaries, are permitted to
engage in personal securities transactions subject to the following general
restrictions and procedures: (1) The trade must receive advance clearance from a
Compliance Officer and must be completed within 24 hours after this clearance;
(2) Copies of all brokerage confirmations must be sent to the Compliance Officer
and within 10 days after the end of each calendar quarter, a report of all
securities transactions must be provided to the Compliance Officer; (3) In
addition to items (1) and (2), access persons involved in preparing and making
investment decisions must file annual reports of their securities holdings each
January and also inform the Compliance Officer (or other designated personnel)
if they own a security that is being considered for a fund or other client
transaction or if they are recommending a security in which they have an
ownership interest for purchase or sale by a fund or other client.
MANAGEMENT OF THE TRUST
The name, address, principal occupation during the past five years and
other information with respect to each of the Trustees and Principal Executive
Officers of the Trust are as follows:
NAME, ADDRESS AND PRINCIPAL OCCUPATION
OFFICES WITH TRUST DURING PAST FIVE
HARRIS J. ASHTON
Metro Center, 1 Station
Place
Stamford, Connecticut
Trustee
Chairman of the Board, president
and chief executive officer of
General Host Corporation (nursery
and craft centers); and a director
of RBC Holdings (U.S.A.) Inc. (a
bank holding company) and Bar-S
Foods. Age 63.
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<PAGE>
NAME, ADDRESS AND PRINCIPAL OCCUPATION
OFFICES WITH TRUST DURING PAST FIVE YEARS
NICHOLAS F. BRADY*
The Bullitt House
102 East Dover Street
Easton, Maryland
Trustee
Chairman of Templeton Emerging Markets Investment Trust PLC; chairman of
Templeton Latin America Investment Trust PLC; chairman of Darby Overseas
Investments, Ltd. (an investment firm) (1994- present); director of the Amerada
Hess Corporation, Capital Cities/ABC, Inc., Christiana Companies, and the H.J.
Heinz Company; Secretary of the United States Department of the Treasury
(1988-January 1993); and chairman of the board of Dillon, Read & Co. Inc.
(investment banking) prior thereto. Age 65.
F. BRUCE CLARKE
19 Vista View Blvd.
Thornhill, Ontario
Trustee
Retired; formerly, credit adviser,
National Bank of Canada, Toronto.
Age 85.
HASSO-G VON DIERGARDT-NAGLO
R.R. 3
Stouffville, Ontario
Trustee
Farmer; and president of Clairhaven
Investments, Ltd. and other private
investment companies. Age 79.
S. JOSEPH FORTUNATO
200 Campus Drive
Florham Park, New Jersey
Trustee
Member of the law firm of Pitney,
Hardin, Kipp & Szuch; and a
director of General Host
Corporation. Age 63.
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<PAGE>
NAME, ADDRESS AND PRINCIPAL OCCUPATION
OFFICES WITH TRUST DURING PAST FIVE YEARS
JOHN Wm. GALBRAITH
360 Central Avenue
Suite 1300
St. Petersburg, Florida
Trustee
President of Galbraith Properties,
Inc. (personal investment company);
director of Gulfwest Banks, Inc.
(bank holding company) (1995-
present) and Mercantile Bank (1991-
present); vice chairman of
Templeton, Galbraith & Hansberger
Ltd. (1986-1992); and chairman of
Templeton Funds Management, Inc.
(1974-1991). Age 74.
ANDREW H. HINES, JR.
150 2nd Avenue N.
St. Petersburg, Florida
Trustee Consultant of the Triangle Consulting Group; chairman of the board and
chief executive officer of Florida Progress Corporation (1982-February 1990) and
director of various of its subsidiaries; chairman and director of Precise Power
Corporation; executive-in-
residence of Eckerd College (1991- present); and a director of Checkers Drive-In
Restaurants, Inc.
Age 72.
CHARLES B. JOHNSON*
777 Mariners Island Blvd.
San Mateo, California
Chairman of the Board
and Vice President
President, chief executive officer, and director of Franklin Resources, Inc.;
chairman of the board and director of Franklin Advisers, Inc. and Franklin
Templeton Distributors, Inc.; director of Franklin Administrative Services,
Inc., General Host Corporation and Templeton Global Investors, Inc.; and officer
and director, trustee or managing general partner, as the case may be, of most
other subsidiaries of Franklin and of 55 of the investment companies in the
Franklin Templeton Group. Age 62.
BETTY P. KRAHMER
2201 Kentmere Parkway
Wilmington, Delaware
Trustee
Director or trustee of various
civic associations; formerly,
economic analyst, U.S. Government.
Age 66.
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<PAGE>
NAME, ADDRESS AND PRINCIPAL OCCUPATION
OFFICES WITH TRUST DURING PAST FIVE YEARS
GORDON S. MACKLIN
8212 Burning Tree Road
Bethesda, Maryland
Trustee
Chairman of White River Corporation (information services); director of Fund
America Enterprises Holdings, Inc., Lockheed Martin Corporation, MCI
Communications Corporation, Fusion Systems Corporation, Infovest Corporation,
and Medimmune, Inc.; and formerly held the following position: chairman of
Hambrecht and Quist Group; director of H&Q Healthcare Investors; and president
of the National Association of Securities Dealers, Inc. Age 67.
FRED R. MILLSAPS
2665 NE 37th Drive
Fort Lauderdale, Florida
Trustee
Manager of personal investments (1978-present); chairman and chief executive
officer of Landmark Banking Corporation (1969-1978); financial vice president of
Florida Power and Light (1965-1969); vice president of The Federal Reserve Bank
of Atlanta (1958-1965); and a director of various other business and nonprofit
organizations.
Age 66.
SAMUEL J. FORESTER, JR.
500 East Broward Blvd.
Fort Lauderdale, Florida
President
President of the Templeton Global Bond Managers Division of Templeton Investment
Counsel, Inc.; president or vice president of other Templeton Funds; founder and
partner of Forester, Hairston Investment Management (1989-1990); managing
director (Mid-East Region) of Merrill Lynch, Pierce, Fenner & Smith Inc.
(1987-1988); and an advisor for Saudi Arabian Monetary Agency (1982-1987). Age
47.
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<PAGE>
NAME, ADDRESS AND PRINCIPAL OCCUPATION
OFFICES WITH TRUST DURING PAST FIVE YEARS
MARK G. HOLOWESKO
Lyford Cay
Nassau, Bahamas
Vice President
President and director of
Templeton Global Advisors Limited; director of global equity research for
Templeton Worldwide, Inc.; vice president of the Templeton Funds; formerly,
investment administrator with Roy West Trust Corporation (Bahamas) Limited
(1984-1985). Age 35.
MARTIN L. FLANAGAN
777 Mariners Island Blvd.
San Mateo, California
Vice President Senior vice president, treasurer and chief financial officer of
Franklin Resources, Inc.; director and executive vice president of Templeton
Investment Counsel, Inc.; director, president, and chief executive officer of
Templeton Global Investors, Inc.; director or trustee and president or vice
president of the Templeton Funds; accountant with Arthur Andersen & Company
(1982-1983); and a member of the International Society of Financial Analysts and
the American Institute of Certified Public Accountants. Age 35.
JOHN R. KAY
500 East Broward Blvd.
Fort Lauderdale, Florida
Vice President Vice president of the Templeton Funds; vice president and
treasurer of Templeton Global Investors, Inc. and Templeton Worldwide, Inc.;
assistant vice president of Franklin Templeton Distributors, Inc.; formerly,
vice president and controller of the Keystone Group, Inc. Age 55.
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<PAGE>
NAME, ADDRESS AND PRINCIPAL OCCUPATION
OFFICES WITH TRUST DURING PAST FIVE YEARS
NEIL S. DEVLIN
500 East Broward Blvd.
Fort Lauderdale, Florida
Vice President Senior vice president, Portfolio Management/Research, of the
Templeton Global Bond Managers division of Templeton Investment Counsel, Inc.;
formerly, portfolio manager and bond analyst for Constitutional Capital
Management (1985-1987); bond trader and research analyst for Bank of New England
(1982-1985). Age 38.
THOMAS J. LATTA
500 East Broward Blvd.
Fort Lauderdale, Florida
Vice President Vice president of the Templeton Global Bond Managers division of
Templeton Investment Counsel, Inc.; vice president of various Templeton Funds;
formerly, portfolio manager, Forester & Hairston (1988-1991); investment
adviser, Merrill Lynch, Pierce, Fenner & Smith Incorporated (1981-1988). Age 35.
THOMAS M. MISTELE
700 Central Avenue
St. Petersburg, Florida
Secretary
Senior vice president of Templeton Global Investors, Inc.; vice president of
Franklin Templeton Distributors, Inc.; secretary of the Templeton Funds;
formerly, attorney, Dechert Price & Rhoads (1985-1988) and Freehill, Hollingdale
& Page (1988); and judicial clerk, U.S. District Court (Eastern District of
Virginia) (1984-1985). Age 42.
JAMES R. BAIO
500 East Broward Blvd.
Fort Lauderdale, Florida
Treasurer Certified public accountant; treasurer of the Templeton Funds;
senior vice president of Templeton Worldwide, Inc., Templeton Global Investors,
Inc., and Templeton Funds Trust Company; formerly, senior tax manager with Ernst
& Young (certified public accountants) (1977-1989). Age 41.
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<PAGE>
NAME, ADDRESS AND PRINCIPAL OCCUPATION
OFFICES WITH TRUST DURING PAST FIVE YEARS
JEFFREY L. STEELE
1500 K Street, N.W.
Washington, D.C.
Assistant Secretary
Partner, Dechert Price & Rhoads.
Age 50.
- --------------------
* These Trustees are "interested persons" of the Trust as that
term is defined in the 1940 Act. Mr. Brady and Franklin
Resources, Inc. are limited partners of Darby Overseas
Partners, L.P. ("Darby Overseas"). Mr. Brady established
Darby Overseas in February, 1994, and is Chairman and a
shareholder of the corporate general partner of Darby
Overseas. In addition, Darby Overseas and Templeton,
Galbraith & Hansberger, Ltd. are limited partners of Darby
Emerging Markets Fund, L.P.^
There are no family relationships between any of the Trustees.
TRUSTEE COMPENSATION
All of the Trust's Officers and Trustees also hold positions with other
investment companies in the Franklin Templeton Group. No compensation is paid by
the Trust to any officer or Trustee who is an officer, trustee or employee of
the Investment Manager or its affiliates. Each Templeton Fund pays its
independent directors and trustees and Mr. Brady an annual retainer and/or fees
for attendance at Board and Committee meetings, the amount of which is based on
the level of assets in each fund. Accordingly, ^the Trust currently pays the
independent Trustees and Mr. Brady an annual retainer of $2,500 and a fee of
$200 per meeting attended of the Board and its Committees. The independent
Trustees and Mr. Brady are reimbursed for any expenses incurred in attending
meetings, paid pro rata by each Franklin Templeton Fund in which they serve. No
pension or retirement benefits are accrued as part of Trust expenses.
- 23 -
<PAGE>
The following table shows the total compensation paid to the
Trustees by the Trust and by all investment companies in the
Franklin Templeton Group^:
<TABLE>
<CAPTION>
Number of Total Compensation
Aggregate Franklin Templeton from all Funds in
Name of Compensation Fund Boards on which Franklin Templeton
TRUSTEE FROM THE FUND* TRUSTEE SERVES GROUP**
<S> <C> <C> <C>
Harris J. Ashton $ 2,975 57 $ 327,925
Nicholas F. Brady 2,975 24 98,225
F. Bruce Clarke 2,975 20 83,350
Hasso-G von Diergardt-Naglo 2,975 20 77,350
S. Joseph Fortunato 2,975 59 344,745
John Wm. Galbraith 825 3 70,100
Andrew H. Hines, Jr. 2,975 24 106,325
Betty P. Krahmer 2,975 24 93,475
Gordon S. Macklin 2,975 54 321,525
Fred R. Millsaps 2,975 24 104,325
</TABLE>
* For the fiscal year ended August 31, 1995.
** For the calendar year ended December 31, 1995.
PRINCIPAL SHAREHOLDERS
As of December 1, 1995, there were 20,479,601 Shares of Income Fund
outstanding, of which 1,494 Shares (0.007%) were owned beneficially by all the
Trustees and officers of the Trust as a group As of December 1, 1995, there were
179,674,450 Shares of Money Fund outstanding, of which 364,954 Shares (0.203%)
were owned beneficially by all the Trustees and officers of the Trust as a
group. As of December 1, 1995, to the knowledge of management, no person
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<PAGE>
owned beneficially, directly or indirectly, 5% or more of either Fund's
outstanding Shares, except Madhatter, c/o Security Trust, owned 19,118,387
Shares of Money Fund (10% of Money Fund's outstanding Shares).
INVESTMENT MANAGEMENT AND OTHER SERVICES
INVESTMENT MANAGEMENT AGREEMENTS. The Investment Manager of each Fund
is the Templeton Global Bond Managers division of Templeton Investment Counsel,
Inc., a Florida corporation with offices located at Broward Financial Centre,
Fort Lauderdale, Florida 33394-3091. The Investment Management Agreements, dated
October 30, 1992, relating to Income Fund and Money Fund were approved by the
Shareholders of each Fund on October 30, 1992, were last approved by the Board
of Trustees, including a majority of the Trustees who were not parties to the
Agreements or interested persons of any such party, at a meeting on December 5,
1995, and will run through December 31, 1996. The Investment Management
Agreements continues from year to year subject to approval annually by the Board
of Trustees or by vote of a majority of the outstanding Shares of each Fund (as
defined in the 1940 Act) and also, in either event, with the approval of a
majority of those Trustees who are not parties to the Agreements or interested
persons of any such party in person at a meeting called for the purpose of
voting on such approval.
Each Investment Management Agreement requires the Investment Manager to
manage the investment and reinvestment of each Fund's assets. The Investment
Manager is not required to furnish any personnel, overhead items or facilities
for the Funds, including daily pricing or trading desk facilities, although such
expenses are paid by investment advisers of some other investment companies.
Each Investment Management Agreement provides that the Investment
Manager will select brokers and dealers for execution of each Fund's portfolio
transactions consistent with the Trust's brokerage policies (see "Brokerage
Allocation"). Although the services provided by broker-dealers in accordance
with the brokerage policies incidentally may help reduce the expenses of or
otherwise benefit the Investment Manager and other investment advisory clients
of the Investment Manager and of its affiliates, as well as the Funds, the value
of such services is indeterminable and the Investment Manager's fee is not
reduced by any offset arrangement by reason thereof.
When the Investment Manager determines to buy or sell the same security
for a Fund that the Investment Manager or certain of its affiliates have
selected for one or more of the Investment Manager's other clients or for
clients of its affiliates, the
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<PAGE>
orders for all such securities trades may be placed for execution by methods
determined by the Investment Manager, with approval by the Board of Trustees, to
be impartial and fair, in order to seek good results for all parties. See
"Investment Objectives and Policies -- Trading Policies." Records of securities
transactions of persons who know when orders are placed by a Fund are available
for inspection at least four times annually by the Compliance Officer of the
Trust so that the non-interested Trustees (as defined in the 1940 Act) can be
satisfied that the procedures are generally fair and equitable to all parties.
The Investment Manager also provides management services to numerous
other investment companies or funds and accounts pursuant to management
agreements with each fund or account. The Investment Manager may give advice and
take action with respect to any of the other funds and accounts it manages, or
for its accounts, which may differ from action taken by the Investment Manager
on behalf of a Fund. Similarly, with respect to a Fund, the Investment Manager
is not obligated to recommend, purchase or sell, or to refrain from
recommending, purchasing or selling any security that the Investment Manager and
access persons, as defined by the 1940 Act, may purchase or sell for its or
their own account or for the accounts of any other fund or account. Furthermore,
the Investment Manager is not obligated to refrain from investing in securities
held by a Fund or other funds or accounts which it manages or administers. Of
course, any transactions for the accounts of the Investment Manager and other
access persons will be made in compliance with the Trust's Code of Ethics.
Each Investment Management Agreement provides that the Investment
Manager shall have no liability to the Trust, a Fund or any Shareholder of a
Fund for any error of judgment, mistake of law, or any loss arising out of any
investment or other act or omission in the performance by the Investment Manager
of its duties under the Agreement, except liability resulting from willful
misfeasance, bad faith or gross negligence on the Investment Manager's part or
reckless disregard of its duties under the Agreement. Each Investment Management
Agreement will terminate automatically in the event of its assignment, and may
be terminated by the Trust on behalf of a Fund at any time without payment of
any penalty on 60 days' written notice, with the approval of a majority of the
Trustees in office at the time or by vote of a majority of the outstanding
voting securities of that Fund (as defined in the 1940 Act).
MANAGEMENT FEES. For its services, Income Fund pays the Investment
Manager a monthly fee equal on an annual basis to 0.50% of its average daily net
assets, reduced to 0.45% of such net assets in excess of $200,000,000 and
further reduced to 0.40%
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<PAGE>
of such net assets in excess of $1,300,000,000. Money Fund pays the Investment
Manager a monthly fee equal on an annual basis to 0.35% of its average daily net
assets, reduced to 0.30% of such net assets in excess of $200,000,000 and
further reduced to 0.25% of such net assets in excess of $1,300,000,000. Each
class of Shares pays a portion of the fee, determined by the proportion of the
Fund that it represents.
The Investment Manager will comply with any applicable state
regulations which may require the Investment Manager to make reimbursements to
either Fund in the event that a Fund's aggregate operating expenses, including
the advisory fee, but generally excluding interest, taxes, brokerage commissions
and extraordinary expenses, are in excess of specific applicable limitations.
The strictest rule currently applicable to a Fund is 2.5% of the first
$30,000,000 of net assets, 2% of the next $70,000,000 of net assets and 1.5% of
the remainder.
During the fiscal years ended August 31, 1995, 1994, and 1993, the
Investment Manager (and, prior to April 1, 1993, Templeton Global Bond Managers,
Inc., the Trust's previous investment manager) received fees from Income Fund of
$989,493, $1,040,324, and $950,197, respectively. During the fiscal years ended
August 31, 1995, 1994, and 1993, the Investment Manager (and, prior to April 1,
1993, Templeton Global Bond Managers, Inc.) received fees from Money Fund of
$713,915, $486,625, and $346,737 respectively.
THE TEMPLETON GLOBAL BOND MANAGERS DIVISION OF TEMPLETON
INVESTMENT COUNSEL, INC. The Investment Manager is an indirect
wholly owned subsidiary of Franklin Resources, Inc. ("Franklin"),
a publicly traded company whose shares are listed on the New York
Stock Exchange. Charles B. Johnson (a Trustee and Officer of the
Trust) and Rupert H. Johnson, Jr. are principal shareholders of
Franklin and own, respectively, approximately 20% and 16% of its
outstanding shares. Messrs. Charles B. Johnson and Rupert H.
Johnson, Jr. are brothers.
BUSINESS MANAGER. Templeton Global Investors, Inc. performs
certain administrative functions as Business Manager for the
Funds, including:
o providing office space, telephone, office equipment and
supplies for the Trust;
o paying compensation of the Trust's officers for
services rendered as such;
o authorizing expenditures and approving bills for
payment on behalf of the Funds;
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<PAGE>
o supervising preparation of annual and semiannual reports to
Shareholders, notices of dividends, capital gain distributions
and tax credits, and attending to correspondence and other
special communications with individual Shareholders;
o daily pricing of each Fund's investment portfolio and preparing
and supervising publication of daily quotations of the bid and
asked prices of each Fund's Shares, earnings reports and other
financial data;
o monitoring relationships with organizations serving the
Funds, including the custodian and printers;
o providing trading desk facilities for the Funds;
o supervising compliance by the Funds with recordkeeping
requirements under the 1940 Act and regulations thereunder,
with state regulatory requirements, maintaining books and
records for the Funds (other than those maintained by the
custodian and transfer agent), and preparing and filing tax
reports other than the Funds' income tax returns;
o monitoring the qualifications of tax-deferred
retirement plans providing for investment in Shares of
the Funds; and
o providing executive, clerical and secretarial help
needed to carry out these responsibilities.
For its services, the Business Manager receives a monthly fee equal on
an annual basis to 0.15% of the first $200,000,000 of the Trust's aggregate
average daily net assets (I.E., total of both Funds), reduced to 0.135% annually
of the Trust's aggregate net assets in excess of $200,000,000, further reduced
to 0.1% annually of such net assets in excess of $700,000,000, and further
reduced to 0.075% annually of such net assets in excess of $1,200,000,000. Each
class of Shares pays a portion of the fee, determined by the proportion of the
Fund that it represents. The fee is allocated between the Funds according to
their respective average daily net assets. Since the Business Manager's fee
covers services often provided by investment advisors to other funds, each
Fund's combined expenses for advisory and administrative services together may
be higher than those of some other investment companies.
During the fiscal years ended August 31, 1995, 1994, and 1993, the
Business Manager (and, prior to April 1, 1993, Templeton Funds Management, Inc.,
the previous business manager)
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<PAGE>
received business management fees of $575,302, $499,794, and
$420,292 respectively.
The Business Manager is relieved of liability to the Trust for any act
or omission in the course of its performance under the Business Management
Agreement, in the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of its duties and obligations under the Agreement. The
Business Management Agreement may be terminated by a Fund at any time on 60
days' written notice without payment of penalty, provided that such termination
by the Fund shall be directed or approved by vote of a majority of the Trustees
of the Trust in office at the time or by vote of a majority of the outstanding
voting securities of that Fund, and shall terminate automatically and
immediately in the event of its assignment.
Templeton Global Investors, Inc. is a wholly owned
subsidiary of Franklin.
CUSTODIAN AND TRANSFER AGENT. The Chase Manhattan Bank, N.A. serves as
Custodian of the Trust's assets, which are maintained at the Custodian's
principal office, MetroTech Center, Brooklyn, New York 11245, and at the offices
of its branches and agencies throughout the world. The Custodian has entered
into agreements with foreign sub-custodians approved by the Trustees pursuant to
Rule 17f-5 under the 1940 Act. The Custodian, its branches and sub-custodians
generally domestically, and frequently abroad, do not actually hold certificates
for the securities in their custody, but instead have book records with domestic
and foreign securities depositories, which in turn have book records with the
transfer agents of the issuers of the securities. Compensation for the services
of the Custodian is based on a schedule of charges agreed on from time to time.
Franklin Templeton Investor Services, Inc. serves as the Funds'
Transfer Agent. Services performed by the Transfer Agent include processing
purchase, transfer and redemption orders; making dividend payments, capital gain
distributions and reinvestments; and handling routine communications with
Shareholders. The Transfer Agent receives from Income Fund an annual fee of
$14.77 per Shareholder account plus out-of-pocket expenses and from Money Fund
an annual fee of $22.91 per Shareholder account plus out-of-pocket expenses.
These fees are adjusted each year to reflect changes in the Department of Labor
Consumer Price Index.
LEGAL COUNSEL. Dechert Price & Rhoads, 1500 K Street, N.W.,
Washington, D.C. 20005, is legal counsel for the Trust.
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INDEPENDENT ACCOUNTANTS. The firm of McGladrey & Pullen, LLP, 555 Fifth
Avenue, New York, New York 10017, serves as independent accountants for the
Trust. Its audit services comprise examination of the Funds' financial
statements and review of the Funds' filings with the Securities and Exchange
Commission ("SEC") and the Internal Revenue Service ("IRS").
REPORTS TO SHAREHOLDERS. The Funds' fiscal years end on August 31.
Shareholders are provided at least semiannually with reports showing the Funds'
portfolios and other information, including an annual report with financial
statements audited by the independent accountants. Shareholders who would like
to receive an interim quarterly report may phone the Fund Information Department
at 1-800/DIAL BEN.
BROKERAGE ALLOCATION
The Investment Management Agreements provide that the Investment
Manager is responsible for selecting members of securities exchanges, brokers
and dealers (such members, brokers and dealers being hereinafter referred to as
"brokers") for the execution of a Fund's portfolio transactions and, when
applicable, the negotiation of commissions in connection therewith. All
decisions and placements are made in accordance with the following principles:
1. Purchase and sale orders are usually placed with
brokers who are selected by the Investment Manager as
able to achieve "best execution" of such orders. "Best
execution" means prompt and reliable execution at the
most favorable securities price, taking into account
the other provisions hereinafter set forth. The
determination of what may constitute best execution and
price in the execution of a securities transaction by a
broker involves a number of considerations, including,
without limitation, the overall direct net economic
result to a Fund (involving both price paid or received
and any commissions and other costs paid), the
efficiency with which the transaction is effected, the
ability to effect the transaction at all where a large
block is involved, availability of the broker to stand
ready to execute possibly difficult transactions in the
future, and the financial strength and stability of the
broker. Such considerations are judgmental and are
weighed by the Investment Manager in determining the
overall reasonableness of brokerage commissions.
2. In selecting brokers for portfolio transactions, the
Investment Manager takes into account its past
experience as to brokers qualified to achieve "best
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execution," including brokers who specialize in any
foreign securities held by Income Fund.
3. The Investment Manager is authorized to allocate
brokerage business to brokers who have provided
brokerage and research services, as such services are
defined in Section 28(e) of the Securities Exchange Act
of 1934 (the "1934 Act"), for a Fund and/or other
accounts, if any, for which the Investment Manager
exercises investment discretion (as defined in Section
3(a)(35) of the 1934 Act) and, as to transactions to
which fixed minimum commission rates are not
applicable, to cause a Fund to pay a commission for
effecting a securities transaction in excess of the
amount another broker would have charged for effecting
that transaction, if the Investment Manager in making
the selection in question determines in good faith that
such amount of commission is reasonable in relation to
the value of the brokerage and research services
provided by such broker, viewed in terms of either that
particular transaction or the Investment Manager's
overall responsibilities with respect to the Funds and
the other accounts, if any, as to which it exercises
investment discretion. In reaching such determination,
the Investment Manager is not required to place or
attempt to place a specific dollar value on the
research or execution services of a broker or on the
portion of any commission reflecting either of said
services. In demonstrating that such determinations
were made in good faith, the Investment Manager shall
be prepared to show that all commissions were allocated
and paid for purposes contemplated by the Trust's
brokerage policy; that the research services provide
lawful and appropriate assistance to the Investment
Manager in the performance of its investment decision-
making responsibilities; and that the commissions paid
were within a reasonable range. The determination that
commissions were within a reasonable range shall be
based on any available information as to the level of
commissions known to be charged by other brokers on
comparable transactions, but there shall be taken into
account the Trust's policies that (i) obtaining a low
commission is deemed secondary to obtaining a favorable
securities price, since it is recognized that usually
it is more beneficial to a Fund to obtain a favorable
price than to pay the lowest commission; and (ii) the
quality, comprehensiveness and frequency of research
studies which are provided for the Investment Manager
are useful to the Investment Manager in performing its
advisory services under its Investment Management
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Agreements with the Funds. Research services provided by
brokers to the Investment Manager are considered to be in
addition to, and not in lieu of, services required to be
performed by the Investment Manager under its Investment
Management Agreements with the Funds. Research furnished by
brokers through whom a Fund effects securities transactions may
be used by the Investment Manager for any of its accounts, and
not all such research may be used by the Investment Manager for
that Fund. When execution of portfolio transactions is
allocated to brokers trading on exchanges with fixed brokerage
commission rates, account may be taken of various services
provided by the broker, including quotations outside the United
States for daily pricing of foreign securities held in a Fund's
portfolio.
4. Purchases and sales of portfolio securities within the United
States other than on a securities exchange are executed with
primary market makers acting as principal, except where, in the
judgment of the Investment Manager, better prices and execution
may be obtained on a commission basis or from other sources.
5. Sales of the Funds' Shares (which shall be deemed to
include also shares of other companies registered under
the 1940 Act which have either the same investment
adviser or an investment adviser affiliated with the
Investment Manager) made by a broker are one factor
among others to be taken into account in deciding to
allocate portfolio transactions (including agency
transactions, principal transactions, purchases in
underwritings or tenders in response to tender offers)
for the account of a Fund to that broker; provided that
the broker shall furnish "best execution," as defined
in paragraph 1 above, and that such allocation shall be
within the scope of that Fund's other policies as
stated above; and provided further, that in every
allocation made to a broker in which the sale of Shares
is taken into account there shall be no increase in the
amount of the commissions or other compensation paid to
such broker beyond a reasonable commission or other
compensation determined, as set forth in paragraph 3
above, on the basis of best execution alone or best
execution plus research services, without taking
account of or placing any value upon such sale of
Shares.
Insofar as known to management, no Trustee or officer of the Trust, nor
the Investment Manager or Principal Underwriter or any person affiliated with
either of them, has any material direct or
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indirect interest in any broker employed by or on behalf of the Trust. Franklin
Templeton Distributors, Inc., the Trust's Principal Underwriter, is a registered
broker-dealer, but it has never executed any purchase or sale transactions for
the Funds' portfolios or participated in any commissions on any such
transactions, and has no intention of doing so in the future. During the fiscal
years ended August 31, 1995, 1994, and 1993, Income Fund paid total brokerage
commissions of $0, $32,000, and $5,363, , respectively. Money Fund paid no
brokerage commissions during those years. All portfolio transactions are
allocated to broker-dealers only when their prices and execution, in the
judgment of the Investment Manager, are equal to the best available within the
scope of the Trust's policies. There is no fixed method used in determining
which broker-dealers receive which order or how many orders.
PURCHASE, REDEMPTION AND PRICING OF SHARES
Each Fund's Prospectus describes the manner in which a
Fund's Shares may be purchased and redeemed. See "How to Buy
Shares of the Fund" and "How to Sell Shares of the Fund."
Net asset value per Share is calculated separately for each Fund. Net
asset value per Share is determined as of the scheduled closing of the NYSE
(generally 4:00 p.m., New York time), every Monday through Friday (exclusive of
national business holidays). The Trust's offices will be closed, and net asset
value will not be calculated, on those days on which the NYSE is closed, which
currently are: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Trading in securities on European and Far Eastern securities exchanges
and over-the-counter markets is normally completed well before the close of
business in New York on each day on which the NYSE is open. Trading of European
or Far Eastern securities generally, or in a particular country or countries,
may not take place on every New York business day. Furthermore, trading takes
place in various foreign markets on days which are not business days in New York
and on which each Fund's net asset value is not calculated. Income Fund
calculates net asset value per Share, and therefore effects sales, redemptions
and repurchases of its Shares, as of the close of the NYSE once on each day on
which that Exchange is open. Such calculation does not take place
contemporaneously with the determination of the prices of many of the portfolio
securities used in such calculation and if events occur which materially affect
the value of those foreign securities, they will be valued at fair market value
as determined by the management and approved in good faith by the Board of
Trustees.
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Money Fund uses the amortized cost method to determine the value of its
portfolio securities pursuant to Rule 2a-7 under the 1940 Act. The amortized
cost method involves valuing a security at its cost and amortizing any discount
or premium over the period until maturity, regardless of the impact of
fluctuating interest rates on the market value of the security. While this
method provides certainty in valuation, it may result in periods during which
the value, as determined by amortized cost, is higher or lower than the price
which Money Fund would receive if the security were sold. During these periods
the yield to a Shareholder may differ somewhat from that which could be obtained
from a similar fund which utilizes a method of valuation based upon market
prices. Thus, during periods of declining interest rates, if the use of the
amortized cost method resulted in a lower value of Money Fund's portfolio on a
particular day, a prospective investor in Money Fund would be able to obtain a
somewhat higher yield than would result from investment in a fund utilizing
solely market values, and existing Money Fund Shareholders would receive
correspondingly less income. The converse would apply during periods of rising
interest rates.
Rule 2a-7 provides that in order to value its portfolio using the
amortized cost method, Money Fund must (i) maintain a dollar-weighted average
portfolio maturity of 90 days or less; (ii) purchase securities having remaining
maturities of 397 days or less; and (iii) invest only in U.S. dollar denominated
securities determined in accordance with procedures established by the Board of
Trustees to present minimal credit risks and which are rated in one of the two
highest rating categories for debt obligations by at least two nationally
recognized statistical rating organizations (or one rating organization if the
instrument is rated by only one such organization, subject to ratification of
the investment by the Board of Trustees). If a security is unrated, it must be
of comparable quality as determined in accordance with procedures established by
the Board of Trustees, including approval or ratification of the security by the
Board except in the case of U.S. Government securities.
Pursuant to Rule 2a-7, the Board is required to establish procedures
designed to stabilize, to the extent reasonably possible, Money Fund's price per
Share as computed for the purpose of sales and redemptions at $1.00. Such
procedures will include review of Money Fund's portfolio holdings by the Board
of Trustees, at such intervals as it may deem appropriate, to determine whether
Money Fund's net asset value calculated by using available market quotations
deviates from $1.00 per Share based on amortized cost. The extent of any
deviation will be examined by the Board of Trustees. If such deviation exceeds
1/2 of 1%, the Board will promptly consider what action, if any, will be
initiated. In the event the Board determines that a deviation
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exists which may result in material dilution or other unfair results to
investors or existing Shareholders, the Board will take such corrective action
as it regards as necessary and appropriate, including the sale of portfolio
instruments prior to maturity to realize capital gains or losses or to shorten
average portfolio maturity, withholding dividends or establishing a net asset
value per Share by using available market quotations.
The Board of Trustees may establish procedures under which a Fund may
suspend the determination of net asset value for the whole or any part of any
period during which (1) the NYSE is closed other than for customary weekend and
holiday closings, (2) trading on the NYSE is restricted, (3) an emergency exists
as a result of which disposal of securities owned by a Fund is not reasonably
practicable or it is not reasonably practicable for a Fund fairly to determine
the value of its net assets, or (4) for such other period as the SEC may by
order permit for the protection of the holders of a Fund's Shares.
OWNERSHIP AND AUTHORITY DISPUTES. In the event of disputes involving
multiple claims of ownership or authority to control a Shareholder's account,
each Fund has the right (but has no obligation) to: (1) freeze the account and
require the written agreement of all persons deemed by the Fund to have a
potential property interest in the account, prior to executing instructions
regarding the account; or (2) interplead disputed funds or accounts with a court
of competent jurisdiction. Moreover, a Fund may surrender ownership of all or a
portion of an account to the IRS in response to a Notice of Levy.
In addition to the special purchase plans described in the Prospectus,
the following special purchase plans also are available:
TAX-DEFERRED RETIREMENT PLANS. The Trust offers its
Shareholders the opportunity to participate in the following
types of retirement plans:
. For individuals whether or not covered by other
qualified plans;
. For simplified employee pensions;
. For employees of tax-exempt organizations; and
. For corporations, self-employed individuals and
partnerships.
Capital gains and income received by the foregoing plans generally are
exempt from taxation until distribution from the
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plans. Investors considering participation in any such plan should review
specific tax laws relating thereto and should consult their attorneys or tax
advisers with respect to the establishment and maintenance of any such plan.
Additional information, including the fees and charges with respect to all of
these plans, is available upon request to the Principal Underwriter. No
distribution under a retirement plan will be made until Franklin Templeton Trust
Company ("FTTC") receives the participant's election on IRS Form W-4P (available
on request from FTTC) and such other documentation as it deems necessary, as to
whether or not U.S. income tax is to be withheld from such distribution.
INDIVIDUAL RETIREMENT ACCOUNT (IRA). All individuals (whether or not
covered by qualified private or governmental retirement plans) may purchase
Shares of a Fund pursuant to an IRAs. However, contributions to an IRA by an
individual who is covered by a qualified private or governmental plan may not be
tax-deductible depending on the individual's income. Custodial services for IRAs
are available through FTTC. Disclosure statements summarizing certain aspects of
IRAs are furnished to all persons investing in such accounts, in accordance with
IRS regulations.
SIMPLIFIED EMPLOYEE PENSIONS (SEP-IRA). For employers who wish to
establish a simplified form of employee retirement program investing in Shares
of a Fund, there are available Simplified Employee Pensions invested in IRA
Plans. Details and materials relating to these plans will be furnished upon
request to the Principal Underwriter.
RETIREMENT PLAN FOR EMPLOYEES OF TAX-EXEMPT ORGANIZATIONS (403(B)).
Employees of public school systems and certain types of charitable organizations
may enter into a deferred compensation arrangement for the purchase of Shares of
a Fund without being taxed currently on the investment. Contributions which are
made by the employer through salary reduction are excludable from the gross
income of the employee. Such deferred compensation plans, which are intended to
qualify under Section 403(b) of the Internal Revenue Code of 1986, as amended
(the "Code"), are available through the Principal Underwriter.
Custodial services are provided by FTTC.
QUALIFIED PLAN FOR CORPORATIONS, SELF-EMPLOYED INDIVIDUALS AND
PARTNERSHIPS. For employers who wish to purchase Shares of a Fund in conjunction
with employee retirement plans, there is a prototype master plan which has been
approved by the IRS. A "Section 401(k) plan" is also available. FTTC furnishes
custodial services for these plans. For further details, including custodian
fees and plan administration services, see
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<PAGE>
the master plan and related material which is available from the
Principal Underwriter.
LETTER OF INTENT. Purchasers who intend to invest $100,000 or more in
Class I Shares of Templeton Income Fund or Class I Shares of any other fund in
the Franklin Group of Funds and the Templeton Family of Funds, except Templeton
Capital Accumulator Fund, Inc., Templeton Variable Annuity Fund, Templeton
Variable Products Series Fund, Franklin Valuemark Funds and Franklin Government
Securities Trust (the "Franklin Templeton Funds") within 13 months (whether in
one lump sum or in installments, the first of which may not be less than 5% of
the total intended amount and each subsequent installment not less than $25
unless the investor is a qualifying employee benefit plan (the "Benefit Plan"),
including automatic investment and payroll deduction plans), and to beneficially
hold the total amount of such Class I Shares fully paid for and outstanding
simultaneously for at least one full business day before the expiration of that
period, should execute a Letter of Intent ("LOI") on the form provided in the
Shareholder Application in the Prospectus. Payment for not less than 5% of the
total intended amount must accompany the executed LOI unless the investor is a
Benefit Plan. Except for purchases of Shares by a Benefit Plan, those Class I
Shares purchased with the first 5% of the intended amount stated in the LOI will
be held as "Escrowed Shares" for as long as the LOI remains unfulfilled.
Although the Escrowed Shares are registered in the investor's name, his full
ownership of them is conditional upon fulfillment of the LOI. No Escrowed Shares
can be redeemed by the investor for any purpose until the LOI is fulfilled or
terminated. If the LOI is terminated for any reason other than fulfillment, the
Transfer Agent will redeem that portion of the Escrowed Shares required and
apply the proceeds to pay any adjustment that may be appropriate to the sales
commission on all Class I Shares (including the Escrowed Shares) already
purchased under the LOI and apply any unused balance to the investor's account.
The LOI is not a binding obligation to purchase any amount of Shares, but its
execution will result in the purchaser paying a lower sales charge at the
appropriate quantity purchase level. A purchase not originally made pursuant to
an LOI may be included under a subsequent LOI executed within 90 days of such
purchase. In this case, an adjustment will be made at the end of 13 months from
the effective date of the LOI at the net asset value per Share then in effect,
unless the investor makes an earlier written request to the Principal
Underwriter upon fulfilling the purchase of Shares under the LOI. In addition,
the aggregate value of any Shares, including Class II Shares, purchased prior to
the 90-day period referred to above may be applied to purchases under a current
LOI in fulfilling the total intended purchases under the LOI. However, no
adjustment of
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sales charges previously paid on purchases prior to the 90-day period will be
made.
If an LOI is executed on behalf of a benefit plan (such plans are
described under "How to Buy Shares of the Fund -- Net Asset Value Purchases
(Both Classes)" in the Templeton Income Fund Prospectus), the level and any
reduction in sales charge for these employee benefit plans will be based on
actual plan participation and the projected investments in the Franklin
Templeton Funds^ under the LOI. Benefit Plans are not subject to the requirement
to reserve 5% of the total intended purchase, or to any penalty as a result of
the early termination of a plan, nor are Benefit Plans entitled to receive
retroactive adjustments in price for investments made before executing LOIs.
SPECIAL NET ASSET VALUE PURCHASES. As discussed in the Prospectus under
"How to Buy Shares of the Fund - Description of Special Net Asset Value
Purchases," certain categories of investors may purchase Class I Shares of
Income Fund at net asset value (without a front-end or contingent deferred sales
charge). Franklin Templeton Distributors, Inc. ("FTD") or one of its affiliates
may make payments, out of its own resources, to securities dealers who initiate
and are responsible for such purchases, as indicated below. FTD may make these
payments in the form of contingent advance payments, which may require
reimbursement from the securities dealers with respect to certain redemptions
made within 12 months of the calendar month following purchase, as well as other
conditions, all of which may be imposed by an agreement between FTD, or its
affiliates, and the securities dealer.
Except for Money Fund, the following amounts will be paid by FTD or one
of its affiliates, out of its own resources, to securities dealers who initiate
and are responsible for (i) purchases of most equity and fixed-income Franklin
Templeton Funds made at net asset value by certain designated retirement plans
(excluding IRA and IRA rollovers): 1.00% on sales of $1 million but less than $2
millon, plus 0.80% on sales of $2 million but less than $3 million, plus 0.50%
on sales of $3 million but less than $50 million, plus 0.25% on sales of $50
million but less than $100 million, plus 0.15% on sales of $100 million or more;
and (ii) purchases of most fixed-income Franklin Templeton Funds made at net
asset value by non-designated retirement plans: 0.75% on sales of $1 million but
less than $2 million, plus 0.60% on sales of $2 million but less than $3
million, plus 0.50% on sales of $3 million but less than $50 million, plus 0.25%
on sales of $50 million but less than $100 million, plus 0.15% on sales of $100
million or more. These payment breakpoints are reset every 12 months for
purposes of additional purchases. With respect to purchases made at net
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asset value by certain trust companies and trust departments of banks and
certain retirement plans of organizations with collective retirement plan assets
of $10 million or more, FTD, or one of its affiliates, out of its own resources,
may pay up to 1% of the amount invested.
Under agreements with certain banks in Taiwan, Republic of China, the
Funds' Shares are available to such banks' discretionary trust funds at net
asset value. The banks may charge service fees to their customers who
participate in the discretionary trusts. Pursuant to agreements, a portion of
such service fees may be paid to FTD, or an affiliate of FTD to help defray
expenses of maintaining a service office in Taiwan, including expenses related
to local literature fulfillment and communication facilities.
REDEMPTIONS IN KIND. Redemption proceeds are normally paid in cash;
however, a Fund may pay the redemption price in whole or in part by a
distribution in kind of securities from the portfolio of the Fund, in lieu of
cash, in conformity with rules of the SEC. In such circumstances, the securities
distributed would be valued at the price used to compute the Fund's net asset
value. If Shares are redeemed in kind, the redeeming Shareholder might incur
brokerage costs in converting the assets into cash. A Fund is obligated to
redeem Shares solely in cash up to the lesser of $250,000 or 1% of its net
assets during any 90-day period for any one Shareholder.
TAX STATUS
Income Fund intends normally to pay a monthly dividend representing its
net investment income and to distribute at least annually any net realized
capital gain. Money Fund intends to declare dividends daily and to pay dividends
monthly. By so doing and meeting certain diversification of assets and other
requirements of the Code, each Fund intends to qualify as a regulated investment
company under the Code. The status of a Fund as a regulated investment company
does not involve government supervision of management or of its investment
practices or policies. As a regulated investment company, a Fund generally will
be relieved of liability for U.S. federal income tax on that portion of its net
investment income and net realized capital gains which it distributes to its
Shareholders. Amounts not distributed on a timely basis in accordance with a
calendar year distribution requirement are also subject to a nondeductible 4%
excise tax. To avoid application of the excise tax, each Fund intends to
distribute in accordance with the calendar year distribution requirement.
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Dividends from net investment income and distributions from short-term
capital gains (the excess of net short-term capital gains over net long-term
capital losses) are taxable to Shareholders as ordinary income. Distributions
from net investment income may be eligible for the corporate dividends received
deduction to the extent attributable to Income Fund's qualifying dividend
income. However, the alternative minimum tax applicable to corporations may
reduce the benefit of the dividends received deduction. Distributions from net
long-term capital gains (the excess of net long-term capital gains over net
short-term capital losses) designated by a Fund as capital gain dividends are
taxable to Shareholders as long-term capital gains, regardless of the length of
time a Fund's Shares have been held by a Shareholder, and are not eligible for
the dividends received deduction. Generally, dividends and distributions are
taxable to Shareholders, whether received in cash or reinvested in Shares of
either Fund. Any distributions that are not from a Fund's investment company
taxable income or net capital gain may be characterized as a return of capital
to Shareholders or, in some cases, as capital gain. Shareholders will be
notified annually as to the Federal tax status of dividends and distributions
they received and any tax withheld thereon.
Debt securities purchased by a Fund may be treated for federal income
tax purposes as having original issue discount. Original issue discount
essentially represents interest for federal tax purposes and can be defined
generally as the excess of the stated redemption price at maturity over the
issue price. Original issue discount, whether or not any income is actually
received by a Fund, is treated for U.S. federal income tax purposes as income
earned by the Fund, and therefore is subject to the distribution requirements of
the Code. Generally, the amount of original issue discount included in the
income of a Fund each year is determined on the basis of a constant yield to
maturity which takes into account the compounding of accrued but unpaid
interest.
In addition, debt securities may be purchased by a Fund at a discount
which exceeds the original issue discount remaining on the securities, if any,
at the time the Fund purchased the securities. This additional discount
represents market discount for federal income tax purposes. In the case of any
debt security having a fixed maturity date of more than one year from the date
of issue and having market discount, the gain realized on disposition will be
treated as interest for most purposes of the Code to the extent it does not
exceed the accrued market discount on the security (unless a Fund elects for all
its debt securities having a fixed maturity date of more than one year from the
date of issue to include market discount in income in tax years to which it is
attributable). Generally, market
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discount accrues on a daily basis. In the case of any debt security having a
fixed maturity date of not more than one year from the date of issue, the gain
realized on disposition will be treated as short-term capital gain. Market
discount on securities with a fixed maturity date not exceeding one year from
the date of issue generally is included in income on a ratable basis.
Income Fund may invest in shares of foreign corporations which may be
classified under the Code as passive foreign investment companies ("PFICs"). In
general, a foreign corporation is classified as a PFIC for a taxable year if at
least one-half of its assets constitute investment-type assets or 75% or more of
its gross income is investment-type income. If Income Fund receives a so-called
"excess distribution" with respect to PFIC stock, Income Fund itself may be
subject to a tax on a portion of the excess distribution, whether or not the
corresponding income is distributed by Income Fund to Shareholders. In general,
under the PFIC rules, an excess distribution is treated as having been realized
ratably over the period during which Income Fund held the PFIC shares. Income
Fund itself will be subject to tax on the portion, if any, of an excess
distribution that is so allocated to prior Fund taxable years and an interest
factor will be added to the tax, as if the tax had been payable in such prior
taxable years. Certain distributions from a PFIC as well as gain from the sale
of PFIC shares are treated as excess distributions. Excess distributions are
characterized as ordinary income even though, absent application of the PFIC
rules, certain excess distributions might have been classified as capital gain.
Income Fund may be eligible to elect alternative tax treatment with
respect to PFIC shares. Under an election that currently is available in some
circumstances, the Fund generally would be required to include in its gross
income its share of the earnings of a PFIC on a current basis, regardless of
whether distributions are received from the PFIC in a given year. If this
election were made, the special rules, discussed above, relating to the taxation
of excess distributions, would not apply. In addition, another election may be
available that would involve marking to market Income Fund's PFIC shares at the
end of each taxable year (and on certain other dates prescribed in the Code),
with the result that unrealized gains are treated as though they were realized.
If this election were made, tax at the fund level under the PFIC rules would
generally be eliminated, but Income Fund could, in limited circumstances, incur
nondeductible interest charges. Income Fund's intention to qualify annually as a
regulated investment company may limit its elections with respect to PFIC
shares.
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Certain of the options, futures contracts and forward contracts in
which Income Fund may invest are "section 1256 contracts." Gains or losses on
section 1256 contracts generally are considered 60% long-term and 40% short-term
capital gains or losses ("60/40"); however, foreign currency gains or losses (as
discussed below) arising from certain section 1256 contracts may be treated as
ordinary income or loss. Also, section 1256 contracts held by Income Fund at the
end of each taxable year (and, with certain exceptions, for purposes of the 4%
excise tax, on October 31 of each year) are "marked-to-market" with the result
that unrealized gains or losses are treated as though they were realized.
Generally, the hedging transactions undertaken by Income Fund may
result in "straddles" for U.S. federal income tax purposes. The straddle rules
may affect the character of gains (or losses) realized by Income Fund. In
addition, losses realized by Income Fund on positions that are part of a
straddle may be deferred under the straddle rules, rather than being taken into
account in calculating the taxable income for the taxable year in which the
losses are realized. Because only a few regulations implementing the straddle
rules have been promulgated, the tax consequences to Income Fund of hedging
transactions are not entirely clear. The hedging transactions may increase the
amount of short-term capital gain realized by Income Fund which is taxed as
ordinary income when distributed to Shareholders.
Income Fund may make one or more of the elections available under the
Code which are applicable to straddles. If Income Fund makes any of the
elections, the amount, character, and timing of the recognition of gains or
losses from the affected straddle positions will be determined under rules that
vary according to the elections made. The rules applicable under certain of the
elections may operate to accelerate the recognition of gains or losses from the
affected straddle positions.
Because application of the straddle rules may affect the character of
gains or losses, defer losses and/or accelerate the recognition of gains or
losses from the affected straddle positions, the amount which must be
distributed to Shareholders and which will be taxed to Shareholders as ordinary
income or long-term capital gain may be increased or decreased as compared to a
fund that did not engage in such hedging transactions.
Requirements relating to Income Fund's tax status as a regulated
investment company may limit the extent to which Income Fund will be able to
engage in such transactions in options, futures and forward contracts.
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Under the Code, gains or losses attributable to fluctuations in
exchange rates which occur between the time a Fund accrues income or other
receivables or accrues expenses or other liabilities denominated in a foreign
currency and the time a Fund actually collects such receivables or pays such
liabilities generally are treated as ordinary income or ordinary loss.
Similarly, on disposition of debt securities denominated in a foreign currency
and on disposition of certain financial contracts and options, gains or losses
attributable to fluctuations in the value of foreign currency between the date
of acquisition of the security or contract and the date of disposition also are
treated as ordinary gain or loss. These gains and losses, referred to under the
Code as "section 988" gains and losses, may increase or decrease the amount of a
Fund's net investment income to be distributed to its Shareholders as ordinary
income. For example, fluctuations in exchange rates may increase the amount of
income that a Fund must distribute in order to qualify for treatment as a
regulated investment company and to prevent application of an excise tax on
undistributed income. Alternatively, fluctuations in exchange rates may decrease
or eliminate income available for distribution. If section 988 losses exceed
other net investment income during a taxable year, a Fund would not be able to
make ordinary dividend distributions, or distributions made before the losses
were realized would be recharacterized as a return of capital to Shareholders
for federal income tax purposes, rather than as an ordinary dividend, reducing
each Shareholder's basis in his Fund Shares, or as a capital gain.
Income received by the Funds from sources within foreign countries may
be subject to withholding and other income or similar taxes imposed by such
countries. If more than 50% of the value of Income Fund's total assets at the
close of its taxable year consists of securities of foreign corporations, Income
Fund will be eligible and intends to elect to "pass through" to Income Fund's
Shareholders the amount of foreign taxes paid by Income Fund. Pursuant to this
election, a Shareholder will be required to include in gross income (in addition
to taxable dividends actually received) his pro rata share of the foreign taxes
paid by Income Fund, and will be entitled either to deduct (as an itemized
deduction) his pro rata share of foreign income and similar taxes in computing
his taxable income or to use it as a foreign tax credit against his U.S. federal
income tax liability, subject to limitations. No deduction for foreign taxes may
be claimed by a Shareholder who does not itemize deductions, but such a
Shareholder may be eligible to claim the foreign tax credit (see below). Each
Shareholder will be notified within 60 days after the close of Income Fund's
taxable year whether the foreign taxes paid by Income Fund will "pass through"
for that year.
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<PAGE>
Generally, a credit for foreign taxes is subject to the limitation that
it may not exceed the Shareholder's U.S. tax attributable to his foreign source
taxable income. For this purpose, if the pass-through election is made, the
source of Income Fund's income flows through to its Shareholders. With respect
to Income Fund, gains from the sale of securities will be treated as derived
from U.S. sources and certain currency fluctuation gains, including fluctuation
gains from foreign currency denominated debt securities, receivables and
payables, will be treated as ordinary income derived from U.S. sources. The
limitation on the foreign tax credit is applied separately to foreign source
passive income (as defined for purposes of the foreign tax credit), including
the foreign source passive income passed through by Income Fund. Shareholders
may be unable to claim a credit for the full amount of their proportionate share
of the foreign taxes paid by Income Fund. Foreign taxes may not be deducted in
computing alternative minimum taxable income and the foreign tax credit can be
used to offset only 90% of the alternative minimum tax (as computed under the
Code for purposes of this limitation) imposed on corporations and individuals.
If Income Fund is not eligible to make the election to "pass through" to its
Shareholders its foreign taxes, the foreign income taxes it pays generally will
reduce investment company taxable income and the distributions by Income Fund
will be treated as United States source income.
Upon the sale or exchange of Income Fund Shares, a Shareholder will
realize a taxable gain or loss depending upon his basis in the Shares. Such gain
or loss generally will be treated as capital gain or loss if the Shares are
capital assets in the Shareholder's hands, and will be long-term if the
Shareholder's holding period for the Shares is more than one year and generally
otherwise will be short-term. Any loss realized on a sale or exchange will be
disallowed to the extent that the Shares disposed of are replaced (including
replacement through the reinvesting of dividends and capital gain distributions
in Income Fund) within a period of 61 days beginning 30 days before and ending
30 days after the disposition of the Shares. In such a case, the basis of the
Shares acquired will be adjusted to reflect the disallowed loss. Any loss
realized by a Shareholder on the sale of Income Fund Shares held by the
Shareholder for 6 months or less will be treated for federal income tax purposes
as a long-term capital loss to the extent of any distributions of capital gain
dividends received by the Shareholder with respect to such Shares. It is not
anticipated that gain or loss will be realized from a disposition of Money Fund
Shares since that Fund intends to maintain a share price of $1.
In some cases, Shareholders will not be permitted to take sales charges
into account for purposes of determining the
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<PAGE>
amount of gain or loss realized on the disposition of their Shares. This
prohibition generally applies where (1) the Shareholder incurs a sales charge in
acquiring the stock of a regulated investment company, (2) the stock is disposed
of before the 91st day after the date on which it was acquired, and (3) the
Shareholder subsequently acquires shares of the same or another regulated
investment company and the otherwise applicable sales charge is reduced or
eliminated under a "reinvestment right" received upon the initial purchase of
stock. Sales charges affected by this rule are treated as if they were incurred
with respect to the stock acquired under the reinvestment right. This provision
may be applied to successive acquisitions of stock.
The Funds generally will be required to withhold federal income tax at
a rate of 31% ("backup withholding") from dividends paid, capital gain
distributions and redemption proceeds (except redemptions from Money Fund), to a
Shareholder if (1) the Shareholder fails to furnish a Fund with the
Shareholder's correct taxpayer identification number or social security number,
(2) the IRS notifies the Shareholder or a Fund that the Shareholder has failed
to report properly certain interest and dividend income to the IRS and to
respond to notices to that effect, or (3) when required to do so, the
Shareholder fails to certify that he is not subject to backup withholding.
Ordinary dividends and taxable capital gain distributions declared in
October, November, or December with a record date in such a month and paid
during the following January will be treated as having been paid by a Fund and
received by Shareholders on December 31 of the calendar year in which declared,
rather than the calendar year in which the dividends are actually received.
U.S. tax rules applicable to foreign investors may differ
significantly from those outlined above. Distributions also may
be subject to state, local and foreign taxes. Shareholders
should consult their own tax advisers with respect to the
particular tax consequences to them of an investment in a Fund.
PRINCIPAL UNDERWRITER
Franklin Templeton Distributors, Inc. ("FTD" or the
"Principal Underwriter"), P.O. Box 33030, St. Petersburg, Florida
33733-8030, toll free telephone (800) 237-0738, is the Principal
Underwriter of each Fund's Shares. FTD is a wholly owned
subsidiary of Franklin.
Each Fund, pursuant to Rule 12b-1 under the 1940 Act, has adopted a
Distribution Plan with respect to each class of Shares (the "Plans"). Under the
Plans adopted with respect to Class I
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Shares (including all Shares issued by Money Fund), each Fund may reimburse FTD
or others quarterly (subject to a limit of 0.15% per annum of Money Fund's
average daily net assets and 0.25% per annum of Income Fund's average daily net
assets attributable to Class I Shares) for costs and expenses incurred by FTD or
others in connection with any activity which is primarily intended to result in
the sale of the Funds' Shares. Income Fund also has a second class of Shares,
designated Class II Shares. Under the Plan adopted with respect to Class II
Shares, Income Fund will pay FTD or others quarterly (subject to a limit of
0.65% per annum of the Fund's average daily assets attributable to Class II
Shares of which up to 0.15% of such net assets may be paid to dealers for
personal service and/or maintenance of Shareholder accounts) for costs and
expenses incurred by FTD or others in connection with any activity which is
primarily intended to result in the sale of the Fund's Shares. Payments to FTD
or others could be for various types of activities, including (1) payments to
broker-dealers who provide certain services of value to each Fund's Shareholders
(sometimes referred to as a "trail fee"); (2) reimbursement of expenses relating
to selling and servicing efforts or of organizing and conducting sales seminars;
(3) payments to employees or agents of the Principal Underwriter who engage in
or support distribution of Shares; (4) payments of the costs of preparing,
printing and distributing Prospectuses and reports to prospective investors and
of printing and advertising expenses; (5) payment of dealer commissions and
wholesaler compensation in connection with sales of the Funds' Shares exceeding
$1 million (on which Income Fund imposes no initial sales charge) and interest
or carrying charges in connection therewith; and (6) such other similar services
as the Trust's Board of Trustees determines to be reasonably calculated to
result in the sale of Shares. Under the Plans, the costs and expenses not
reimbursed in any one given quarter (including costs and expenses not reimbursed
because they exceed the percentage limit applicable to either class of Shares)
may be reimbursed in subsequent quarters or years.
During the fiscal year ended August 31, 1995, FTD incurred costs and
expenses of $447,469 in connection with distribution of Shares of Income Fund,
$1,893 in connection with distribution of Class II Shares of Income Fund, and
$306,623 in connection with distribution of Shares of Money Fund. During the
same period, the Trust made reimbursements pursuant to the Plans in the amount
of $457,562 on behalf of Income Fund and $311,237 on behalf of Money Fund. As
indicated above, unreimbursed expenses, which amount to $4,614 for Shares of
Money Fund, may be reimbursed by the Trust during the fiscal year ending August
31, 1996 or in subsequent years. In the event that a Plan is terminated, the
Trust will not be liable to FTD for any
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<PAGE>
unreimbursed expenses that had been carried forward from previous months or
years. During the fiscal year ended August 31, 1995, FTD spent, pursuant to the
Plans, with respect to Income Fund, the following amounts on: compensation to
dealers, $350,328 (Class I) and $354 (Class II); sales promotion, $1,299 (Class
I); wholesale costs and expenses,$4,935 (Class I) and $1,492 (Class II);
advertising, $$12,360 (Class I); and printing, $78,547 (Class I) and $47 (Class
II); and, with respect to Money Fund, the following amounts on: compensation to
dealers, $278,765; printing, $24,313; wholesale costs and expenses, $8,159; and
advertising, $0.
The Underwriting Agreement provides that the Principal Underwriter will
use its best efforts to maintain a broad and continuous distribution of each
Fund's Shares among bona fide investors and may sign selling agreements with
responsible dealers, as well as sell to individual investors. The Shares are
sold only at the Offering Price in effect at the time of sale, and each Fund
receives not less than the full net asset value of the Shares sold. The discount
between the Offering Price and the net asset value of Income Fund Shares may be
retained by the Principal Underwriter or it may reallow all or any part of such
discount to dealers. During the fiscal years ended August 31, 1995, 1994, and
1993, FTD (and, prior to June 1, 1993, Templeton Funds Distributor, Inc.)
retained of such discount $0 , $277,670 and $326,584 or approximately 0%, 18.16%
and 19.54%, of the gross commissions on sales of Income Fund Shares,
respectively. The Principal Underwriter in all cases buys Shares from a Fund
acting as principal for its own account. Dealers generally act as principal for
their own account in buying Shares from the Principal Underwriter. No agency
relationship exists between any dealer and a Fund or the Principal Underwriter.
The Underwriting Agreement provides that each Fund shall pay the costs
and expenses incident to registering and qualifying its Shares for sale under
the Securities Act of 1933 and under the applicable blue sky laws of the
jurisdictions in which the Principal Underwriter desires to distribute such
Shares, and for preparing, printing and distributing Prospectuses and reports to
Shareholders. The Principal Underwriter pays the cost of printing additional
copies of Prospectuses and reports to Shareholders used for selling purposes.
(The Funds pay costs of preparation, set-up and initial supply of the Funds'
Prospectuses for existing Shareholders.)
The Underwriting Agreement is subject to renewal from year
to year in accordance with the provisions of the 1940 Act and
terminates automatically in the event of its assignment. The
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<PAGE>
Underwriting Agreement may be terminated without penalty by either party upon 60
days' written notice to the other, provided termination by the Trust shall be
approved by the Board of Trustees or a majority (as defined in the 1940 Act) of
the Shareholders. The Principal Underwriter is relieved of liability for any act
or omission in the course of its performance of the Underwriting Agreement, in
the absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations.
FTD is the principal underwriter for the other Franklin Templeton
Funds.
YIELD AND PERFORMANCE INFORMATION
Money Fund may, from time to time, include its yield and effective
yield in advertisements or reports to Shareholders or prospective investors.
Current yield for Money Fund will be based on the change in the value of a
hypothetical investment (exclusive of capital changes) over a particular
seven-day period, less a pro-rata share of Money Fund expenses accrued over that
period (the "base period"), and stated as a percentage of the investment at the
start of the base period (the "base period return"). The base period return is
then annualized by multiplying by 365/7, with the resulting yield figure carried
to at least the nearest hundredth of one percent. "Effective Yield" for Money
Fund assumes that all dividends received during an annual period have been
reinvested. Calculation of "effective yield" begins with the same "base period
return" used in the calculation of yield, which is then annualized to reflect
weekly compounding pursuant to the following formula:
EFFECTIVE YIELD = (1 + Base Period Return)365/7 - 1
YIELD = 2[(1 + A-B)6 - 1]
cd
where a = dividend and interest earned during the period,
b = expenses accrued for the period (net of
reimbursements),
c = the average daily number of Shares outstanding
during the period that were entitled to receive
dividends, and
d = the maximum offering price per Share on the last
day of the period.
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<PAGE>
For the seven-day period ending August 31, 1995, the yield of Money
Fund was 4.79% and the effective yield of Money Fund was 4.91%.
The Funds may, from time to time, include their total return in
advertisements or reports to Shareholders or prospective investors. Quotations
of average annual total return for the Funds will be expressed in terms of the
average annual compounded rate of return for periods in excess of one year or
the total return for periods less than one year of a hypothetical investment in
the Funds over periods of one, five, or ten years (up to the life of a Fund)
calculated pursuant to the following formula: P(1 + T)n = ERV (where P = a
hypothetical initial payment of $1,000, T = the average annual total return for
periods of one year or more or the total return for periods of less than one
year, n = the number of years, and ERV = the ending redeemable value of a
hypothetical $1,000 payment made at the beginning of the period). All total
return figures reflect the deduction of the maximum initial sales charge and
deduction of a proportional share of Fund expenses on an annual basis, and
assume that all dividends and distributions are reinvested when paid. Income
Fund's average annual total return for the one- and five-year periods ended
August 31, 1995 and from inception on September 24, 1986 through August 31,
1995, was 5.74%, 6.61%, and 7.48%, respectively, for Class I Shares. Money
Fund's average annual total return for the one- and five-year periods ended
August 31, 1995 and from inception on October 3, 1987 through August 31, 1995,
was 4.72%, 3.85% and 5.21%, respectively.
Performance information for either Fund may be compared, in reports and
promotional literature, to: (i) unmanaged indices so that investors may compare
the Fund's results with those of a group of unmanaged securities widely regarded
by investors as representative of the securities market in general; (ii) other
groups of mutual funds tracked by Lipper Analytical Services, Inc., a widely
used independent research firm which ranks mutual funds by overall performance,
investment objectives and assets, or tracked by other services, companies,
publications, or persons who rank mutual funds on overall performance or other
criteria; and (iii) the Consumer Price Index (measure for inflation) to assess
the real rate of return from an investment in a Fund. Unmanaged indices may
assume the reinvestment of dividends but generally do not reflect deductions for
administrative and management costs and expenses.
Performance information for a Fund reflects only the performance of a
hypothetical investment in a Fund during the particular time period on which the
calculations are based. Performance information should be considered in light of
a Fund's
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<PAGE>
investment objective and policies, characteristics and quality of the portfolio
and the market conditions during the given time period, and should not be
considered as a representation of what may be achieved in the future.
From time to time, each Fund and the Investment Manager may also refer
to the following information:
(1) The Investment Manager's and its affiliates' market share of
international equities managed in mutual funds prepared or published by
Strategic Insight or a similar statistical organization.
(2) The performance of U.S. equity and debt markets relative to
foreign markets prepared or published by Morgan Stanley
Capital International or a similar financial organization.
(3) The capitalization of U.S. and foreign stock markets as
prepared or published by the International Finance
Corporation, Morgan Stanley Capital International or a similar
financial organization.
(4) The geographic and industry distribution of the Fund's
portfolio and the Fund's top ten holdings.
(5) The gross national product and populations, including age
characteristics, literacy rates, foreign investment improvements due to
a liberalization of securities laws and a reduction of foreign exchange
controls, and improving communication technology, of various countries
as published by various statistical organizations.
(6) To assist investors in understanding the different returns
and risk characteristics of various investments, Fund
may show historical returns of various investments and
published indices (E.G., Ibbotson Associates, Inc. Charts
and Morgan Stanley EAFE - Index).
(7) The major industries located in various jurisdictions as
published by the Morgan Stanley Index.
(8) Rankings by DALBAR Surveys, Inc. with respect to mutual fund
shareholder services.
(9) Allegorical stories illustrating the importance of
persistent long-term investing.
(10) Fund's portfolio turnover rate and its ranking relative
to industry standards as published by Lipper Analytical
Services, Inc. or Morningstar, Inc.
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<PAGE>
(11) A description of the Templeton organization's investment management
philosophy and approach, including its worldwide search for undervalued
or "bargain" securities and its diversification by industry, nation and
type of stocks or other securities.
(12) Quotations from the Templeton organization's founder, Sir John
Templeton,* advocating the virtues of diversification and long-term
investing, including the following:
. "Never follow the crowd. Superior performance is
possible only if you invest differently from the
crowd."
. "Diversify by company, by industry and by
country."
. "Always maintain a long-term perspective."
. "Invest for maximum total real return."
. "Invest - don't trade or speculate."
. "Remain flexible and open-minded about types of
investment."
. "Buy low."
. "When buying stocks, search for bargains among
quality stocks."
. "Buy value, not market trends or the economic
outlook."
. "Diversify. In stocks and bonds, as in much else,
there is safety in numbers."
. "Do your homework or hire wise experts to help
you."
. "Aggressively monitor your investments."
. "Don't panic."
- --------
* Sir John Templeton sold the Templeton organization to
Franklin Resources, Inc. in October, 1992 and resigned from
the Trust's Board on April 16, 1995. He is no longer
involved with the investment management process.
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<PAGE>
. "Learn from your mistakes."
. "Outperforming the market is a difficult task."
. "An investor who has all the answers doesn't even
understand all the questions."
. "There's no free lunch."
. "And now the last principle: Do not be fearful or
negative too often."
In addition, each Fund and the Investment Manager may also refer to the
number of Shareholders in the Fund or the aggregate number of shareholders of
the Franklin Templeton Funds or the dollar amount of fund and private account
assets under management in advertising materials.
DESCRIPTION OF SHARES
The Shares of each Fund have the same preferences, conversion and other
rights, voting powers, restrictions and limitations as to dividends,
qualifications and terms and conditions of redemption, except as follows: all
consideration received from the sale of Shares of a Fund, together with all
income, earnings, profits and proceeds thereof, belongs to that Fund and is
charged with liabilities in respect to that Fund and of that Fund's part of
general liabilities of the Trust in the proportion that the total net assets of
the Fund bear to the total net assets of both Funds. The net asset value of a
Share of a Fund is based on the assets belonging to that Fund less the
liabilities charged to that Fund, and dividends are paid on Shares of a Fund
only out of lawfully available assets belonging to that Fund. In the event of
liquidation or dissolution of the Trust, the Shareholders of each Fund will be
entitled, out of assets of the Trust available for distribution, to the assets
belonging to that particular Fund.
The Declaration of Trust provides that the holders of not less than
two-thirds of the outstanding Shares of the Funds may remove a person serving as
Trustee either by declaration in writing or at a meeting called for such
purpose. The Trustees are required to call a meeting for the purpose of
considering the removal of a person serving as Trustee if requested in writing
to do so by the holders of not less than 10% of the outstanding Shares of the
Trust.
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
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<PAGE>
of the Shareholders, Trustees or officers of the Trust for acts or obligations
of 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 expenses 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 Shares have non-cumulative voting rights so that the holders of a
plurality of the Shares voting for the election of Trustees at a meeting at
which 50% of the outstanding Shares are present can elect all the Trustees and
in such event, the holders of the remaining Shares voting for the election of
Trustees will not be able to elect any person or persons to the Board of
Trustees.
FINANCIAL STATEMENTS
The financial statements contained in the Annual Reports to
Shareholders of Templeton Income Fund and Templeton Money Fund dated August 31,
1995 are incorporated herein by reference.
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APPENDIX
CORPORATE BOND AND COMMERCIAL PAPER RATINGS
CORPORATE BONDS. Bonds rated Aa by Moody's Investors Service, Inc.
("Moody's") are judged by Moody's to be of high quality by all standards.
Together with bonds rated Aaa (Moody's highest rating), they comprise what are
generally known as high-grade bonds. Aa bonds are rated lower than Aaa bonds
because margins of protection may not be as large as those of Aaa bonds, or
fluctuations of protective elements may be of greater amplitude, or there may be
other elements present which make the long-term risks appear somewhat larger
than those applicable to Aaa securities. Bonds which are rated A by Moody's
possess many favorable investment attributes and are to be considered as upper
medium-grade obligations. Factors giving security to principal and interest are
considered adequate, but elements may be present which suggest a susceptibility
to impairment sometime in the future.
Moody's Baa rated bonds are considered as medium-grade obligations,
I.E., they are neither highly protected nor poorly secured. Interest payment and
principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Bonds which are rated Ba are judged to have speculative elements
because their future cannot be considered as well assured. Uncertainty of
position characterizes bonds in this class, because the protection of interest
and principal payments often may be very moderate and not well safeguarded.
Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the security over any long period of time may be small. Bonds
which are rated Caa are of poor standing. Such securities may be in default or
there may be present elements of danger with respect to principal or interest.
Bonds which are rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
Bonds rated AAA by Standard & Poor's Corporation ("S&P") are considered
by S&P to be the highest grade obligations and possess the ultimate degree of
protection as to principal and interest. Bonds rated AA are judged by S&P to be
high-grade obligations and in the majority of instances differ only in small
degree from issues rated AAA (S&P's highest rating). Bonds rated A by S&P
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<PAGE>
have a strong capacity to pay principal and interest, although they are somewhat
more susceptible to the adverse effects of changes in circumstances and economic
conditions.
S&P's BBB rated bonds, or medium-grade category bonds, are between
sound obligations and those where the speculative elements begin to predominate.
Although these bonds have adequate asset coverage and normally are protected by
satisfactory earnings, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and principal.
Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and principal in accordance with the terms of the obligation. While such bonds
may have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions.
COMMERCIAL PAPER. The Prime rating is the highest commercial paper
rating assigned by Moody's. Among the factors considered by Moody's in assigning
ratings are the following: (1) evaluation of the management of the issuer; (2)
economic evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and customer acceptance; (4)
liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over
a period of ten years; (7) financial strength of a parent company and the
relationships which exist with the issuer; and (8) recognition by management of
obligations which may be present or may arise as a result of public interest
questions and preparations to meet such obligations. Issuers within this Prime
category may be given ratings 1, 2 or 3, depending on the relative strengths of
these factors.
Commercial paper rated A by S&P has the following characteristics: (i)
liquidity ratios are adequate to meet cash requirements; (ii) long-term senior
debt rating should be A or better, although in some cases BBB credits may be
allowed if other factors outweigh the BBB; (iii) the issuer should have access
to at least two additional channels of borrowing; (iv) basic earnings and cash
flow should have an upward trend with allowances made for unusual circumstances;
and (v) typically the issuer's industry should be well established and the
issuer should have a strong position within its industry and the reliability and
quality of management should be unquestioned. Issuers rated A are further
referred to by use of numbers 1, 2 and 3 to denote relative strength within this
highest classification.
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TL STMT2 01/96
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements: Incorporated by Reference
from the 1995 Annual Reports to Shareholders of
Templeton Income Fund and Templeton Money Fund:
Independent Auditors' Report
Investment Portfolio as of August 31, 1995
Statement of Assets and Liabilities as of August
31, 1995
Statement of Operations for the year ended August
31, 1995
Statements of Changes in Net Assets for the years
ended August 31, 1995 and 1994
Notes to Financial Statements
(b) Exhibits:
(1) (A) Amended and Restated Declaration of
Trust
(B)Establishment and Designation of Series of
Shares of Beneficial Interest*
(C) First Amendment to Declaration of Trust
(D) Second Amendment to Declaration of
Trust*
(E) Establishment and Designation of
Classes*
(2) By-Laws
(3) Not applicable
(4) (A)Specimen security of Templeton
Income Fund*
(B) Specimen security of Templeton
Money Fund*
(5) (A) Amended and Restated Investment
Management Agreement - Templeton
Income Fund*
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<PAGE>
(B) Amended and Restated Investment
Management Agreement - Templeton Money
Fund
(6) (A) Distribution Agreement
(B) Dealer Agreement
(7) Not applicable
(8) (A)Custody Agreement - Templeton Income
Fund
(B) Custody Agreement - Templeton Money
Fund*
(9) (A) Business Management Agreement
(B) Form of Transfer Agent Agreement
(C) Form of Sub-Transfer Agent Services
Agreement
(D) Form of Sub-Accounting Services
Agreement
(10) Opinion and consent of counsel
(Included in Rule 24f-2 notice)
(11) Consent of independent public
accountants
(12) Not applicable
(13) Initial capital agreement*
(14) Model retirement plans*
(15) (A) (1) Distribution Plan -- Templeton
Income Fund Class I Shares*
(2) Distribution Plan -- Templeton
Income Fund Class II Shares*
(B) Distribution Plan - Templeton Money Fund
(16)
Not applicable
- v -
<PAGE>
(17) Assistant Secretary's Certificate pursuant to
Rule 483(b)
(18) Form of Multiclass Plan*
(27) Financial Data Schedule
-----------------
* Previously filed with Registration No. 33-6510 and
incorporated by reference herein.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT
None.
ITEM 26. NUMBER OF RECORD HOLDERS
Number of
RECORDHOLDERS DATE TITLE OF CLASS
11,208 November 30, 1995 Templeton Income
Fund - Shares of
Beneficial
Interest
(Class I)
211 November 30, 1995 Templeton Income
Fund - Shares of
Beneficial
Interest
(Class II)
11,140 November 30, 1995 Templeton Money
Fund - Shares of
Beneficial
Interest
ITEM 27. INDEMNIFICATION
Reference is made to Article IV of the Registrant's
Declaration of Trust, which is filed herewith.
- vi -
<PAGE>
Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to
trustees, officers and controlling persons of the
Registrant by the Registrant pursuant to the
Declaration of Trust or otherwise, the Registrant is
aware that in the opinion of the Securities and
Exchange Commission, such indemnification is against
public policy as expressed in the Act and, therefore,
is unenforceable. In the event that a claim for
indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or
paid by trustees, officers or controlling persons of
the Registrant in connectionwith the successful
defense of any act, suit or proceeding) is asserted by
such trustees, officers or controlling persons in
connection with the shares being registered, the
Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against
public policy as expressed in the Act and will be
governed by the final adjudication of such issues.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT
ADVISER AND ITS OFFICERS AND DIRECTORS
The business and other connections of Registrant's
investment adviser, the Templeton Global Bond Managers
Division of Templeton Investment Counsel, Inc., are
described in Parts A and B.
For information relating to the investment adviser's
officers and directors, reference is made to Form ADV
filed under the Investment Advisers Act of 1940 by
Templeton Investment
Counsel, Inc.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Franklin Templeton Distributors, Inc. also acts as
principal underwriter of shares of:
AGE High Income Fund, Inc.
Franklin Balance Sheet Investment Fund
Franklin California Tax-Free Income Fund, Inc.
Franklin California Tax-Free Trust
Franklin Custodian Funds, Inc.
Franklin Equity Fund
Franklin Federal Money Fund
- vii -
<PAGE>
Franklin Federal Tax-Free Income Fund
Franklin Gold Fund
Franklin International Trust
Franklin Investors Securities Trust
Franklin Managed Trust
Franklin Money Fund
Franklin Municipal Securities Trust
Franklin New York Tax-Free Income Fund
Franklin New York Tax-Free Trust
Franklin Premier Return Fund
Franklin Real Estate Securities Trust
Franklin Strategic Series
Franklin Tax-Advantaged High Yield Securities Fund
Franklin Tax-Advantaged International Bond Fund
Franklin Tax-Advantaged U.S. Government Securities
Fund
Franklin Tax Exempt Money Fund
Franklin Tax-Free Trust
Franklin Templeton Global Trust
Franklin Templeton Japan Fund
Franklin Templeton Money Fund Trust
Franklin Value Investors Trust
Institutional Fiduciary Trust
Templeton American Trust, Inc.
Templeton Capital Accumulator Fund, Inc.
Templeton Developing Markets Trust
Templeton Funds, Inc.
Templeton Global Investment Trust
Templeton Global Opportunities Trust
Templeton Growth Fund, Inc.
Templeton Institutional Funds, Inc.
Templeton Real Estate Securities Fund
Templeton Smaller Companies Growth, Inc.
Templeton Variable Annuity Fund
Templeton Variable Products Series Fund
(b) The directors and officers of FTD, located at 700
Central Avenue, St. Petersburg, Florida
33733-9926, are as follows:
<TABLE>
<CAPTION>
POSITIONS AND POSITIONS AND
OFFICES WITH OFFICES WITH
NAME UNDERWRITER REGISTRANT
<S> <C> <C>
Charles B. Johnson Chairman of the Board Vice President
and Director and Trustee
Gregory E. Johnson President None
Rupert H. Johnson, Jr. Executive Vice President None
and Director
Harmon E. Burns Executive Vice President None
and Director
- viii -
<PAGE>
Edward V. McVey Senior Vice President None
Kenneth V. Domingues Senior Vice President None
William J. Lippman Senior Vice President None
Richard C. Stoker Senior Vice President None
Charles E. Johnson Senior Vice President None
Deborah R. Gatzek Senior Vice President None
and Assistant Secretary
James K. Blinn Vice President None
</TABLE>
<TABLE>
<CAPTION>
POSITIONS AND POSITIONS AND
OFFICES WITH OFFICES WITH
NAME UNDERWRITER REGISTRANT
<S> <C> <C>
Richard O. Conboy Vice President None
James A. Escobedo Vice President None
Loretta Fry Vice President None
Robert N. Geppner Vice President None
- ix -
<PAGE>
Mike Hackett Vice President None
Peter Jones Vice President None
Philip J. Kearns Vice President None
Ken Leder Vice President None
Jack Lemein Vice President None
John R. McGee Vice President None
Thomas M. Mistele Vice President Secretary
Harry G. Mumford Vice President None
Vivian J. Palmieri Vice President None
</TABLE>
<TABLE>
<CAPTION>
POSITIONS AND POSITIONS AND
OFFICES WITH OFFICES WITH
NAME UNDERWRITER REGISTRANT
<S> <C> <C>
Kent P. Strazza Vice President None
- x -
<PAGE>
John R. Kay Assistant Vice President Vice President
Leslie M. Kratter Secretary None
Kenneth A. Lewis Treasurer None
Philip A. Scatena Assistant Treasurer None
Karen DeBellis Assistant Treasurer None
</TABLE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The accounts, books and other documents required
to be maintained by Registrant pursuant to Section 31(a)
of the Investment Company Act of 1940 and rules
promulgated thereunder are in the possession of
Templeton Global Investors, Inc., 500 East Broward
Blvd., Fort Lauderdale, Florida 33394.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
(a) Not applicable.
(b) Not applicable.
(c) Registrant undertakes to furnish to each
person to whom a Prospectus for Templeton Income
Fund or Templeton Money Fund is provided a copy
of such Fund's latest Annual Report, upon request
and without charge.
- xi -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness of the Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Post-Effective
Amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of St. Petersburg, FL, on
the ___ day of December, 1995.
Templeton Income Trust
By: _________________________
Samuel J. Forester, Jr.*
President
*By: /S/ THOMAS M. MISTELE
Thomas M. Mistele
as attorney-in-fact**
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registrant's Registration Statement has been signed below by
the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
_____________________ President (Chief
Samuel J. Forester, Jr.* Executive Officer) December 28, 1995
_____________________ Trustee
F. Bruce Clarke* December 28, 1995
_____________________ Trustee
Betty P. Krahmer* December 28, 1995
_____________________ Trustee
Hasso-G von Diergardt-Naglo* December 28, 1995
- xii -
<PAGE>
_____________________ Trustee
Fred R. Millsaps* December 28, 1995
- xiii -
<PAGE>
SIGNATURE TITLE DATE
______________________ Trustee
John Wm. Galbraith* December 28, 1995
_____________________ Trustee
Charles B. Johnson* December 28, 1995
_____________________ Trustee
Andrew H. Hines, Jr.* December 28, 1995
_____________________ Trustee
arris J. Ashton* December 28, 1995
_____________________ Trustee
S. Joseph Fortunato* December 28, 1995
_____________________ Trustee
Gordon S. Macklin* December 28, 1995
_____________________ Trustee
Nicholas F. Brady* December 28, 1995
_____________________ Treasurer(Chief
James R. Baio* Financial Officer) December 28, 1995
*By: /S/ THOMAS M. MISTELE
Thomas M. Mistele
** Powers of Attorney are contained in Post-Effective Amendment No. 10
to this Registration Statement filed on August 19, 1992, Post-Effective
Amendment No. 12 to this Registration Statement filed on November 2, 1993,
Post-Effective Amendment No. 13 to this Registration Statement filed on December
23, 1993, and Post-Effective Amendment No. 15 to this Registration Statement
filed on December 30, 1994, or filed herewith.
- xiv -
<PAGE>
POOWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, being a duly elected
Trustee of Templeton Income Trust ( the "Trust"), constitutes and appoints
Allan S. Mostoff, Jeffrey L. Steele, William J. Kotapish and Thomas M. Mistele,
and each of them, his substitution and resubstituion for him in his name, place
and stead, in any and all capacities, to sign the Trust's registration
statements and any and all amendments thereto, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and act
and thing requisite and necessary to be done, as fully to all intents and
conforming all that said attorneys-in-fact and agents, or any of the, or his
substitute or substitutes, may lawfully do or cause to be done by virture
hereof.
Dated: August 31, 1995
/s/JOHN WM. GALBRAITH
John Wm. Galbraith
TEMPLETON INCOME FUND
DECLARATION OF TRUST
DATED JUNE 16, 1986
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I -- NAME AND DEFINITIONS 1
Section 1.1 Name............................... 1
Section 1.2 Definitions........................ 2
ARTICLE II -- TRUSTEES 4
Section 2.1 General Powers..................... 4
Section 2.2 Investments........................ 5
Section 2.3 Legal Title........................ 7
Section 2.4 Issuance and Repurchase of
Securities............ 8
Section 2.5 Delegation; Committees............. 8
Section 2.6 Collection and Payment............. 9
Section 2.7 Expenses........................... 9
Section 2.8 Manner of Acting; By-Laws.......... 9
Section 2.9 Miscellaneous Powers............... 10
Section 2.10 Principal Transactions............. 11
Section 2.11 Number of Trustees................. 12
Section 2.12 Election and Term.................. 12
Section 2.13 Resignation and Removal............ 12
Section 2.14 Vacancies.......................... 13
Section 2.15 Delegation of Power to Other
Trustees.............. 14
ARTICLE III -- CONTRACTS 14
Section 3.1 Underwriting Contract.............. 14
Section 3.2 Advisory, Management or
Administrative Contracts........... 15
Section 3.3 Other Service Contracts............ 16
Section 3.4 Affiliations of Trustees or
Officers, Etc.................... 16
Section 3.5 Compliance with 1940 Act........... 17
ARTICLE IV -- LIMITATIONS OF LIABILITY OF SHARE-
HOLDERS, TRUSTEES AND OTHERS 17
Section 4.1 No Personal Liability of Share-
holders, Trustees, Etc........... 17
Section 4.2 Non-Liability of Trustees, Etc..... 18
Section 4.3 Mandatory Indemnification.......... 19
Section 4.4 No Bond Required of Trustees....... 22
Section 4.5 No Duty of Investigation; Notice
in Trust Instruments, Etc........ 22
Section 4.6 Reliance on Experts, Etc........... 23
<PAGE>
PAGE
ARTICLE V -- SHARES OF BENEFICIAL INTEREST 24
Section 5.1 Beneficial Interest............... 24
Section 5.2 Rights of Shareholders............ 24
Section 5.3 Trust Only........................ 25
Section 5.4 Issuance of Shares................ 25
Section 5.5 Register of Shares................ 26
Section 5.6 Transfer of Shares................ 26
Section 5.7 Notices........................... 27
Section 5.8 Treasury Shares................... 27
Section 5.9 Voting Powers..................... 28
Section 5.10 Meetings of Shareholders.......... 29
Section 5.11 Series Designation................ 29
Section 5.12 Power of Trustees to Change
Provisions Relating to Shares... 33
ARTICLE VI -- REDEMPTION AND REPURCHASE OF SHARES 35
Section 6.1 Redemption of Shares.............. 35
Section 6.2 Price............................. 36
Section 6.3 Payment........................... 36
Section 6.4 Effect of Suspension of
Determination of Net
Asset Value..................... 36
Section 6.5 Repurchase by Agreement........... 37
Section 6.6 Redemption of Shareholder's
Interest........................ 37
Section 6.7 Redemption of Shares in Order
to Qualify as Regulated
Investment Company;
Disclosure of Holding........... 37
Section 6.8 Reductions in Number of Out-
standing Shares Pursuant
to Net Asset Value Formula...... 38
Section 6.9 Suspension of Right of Redemption. 39
ARTICLE VII -- DETERMINATION OF NET ASSET VALUE, NET
INCOME AND DISTRIBUTIONS 40
Section 7.1 Net Asset Value................... 40
Section 7.2 Distributions to Shareholders..... 41
Section 7.3 Determination of Net Income....... 42
Section 7.4 Allocation Between Principal and
Income.......................... 44
Section 7.5 Power to Modify Foregoing
Procedures...................... 44
ARTICLE VIII -- DURATION, TERMINATION OF TRUST;
AMENDMENT; MERGERS, ETC. 44
Section 8.1 Duration.......................... 44
<PAGE>
PAGE
Section 8.2 Termination of Trust or
Series of the Trust............. 44
Section 8.3 Amendment Procedure............... 46
Section 8.4 Merger, Consolidation and Sale
of Assets....................... 48
Section 8.5 Incorporation..................... 48
ARTICLE IX -- REPORTS TO SHAREHOLDERS 50
ARTICLE X -- MISCELLANEOUS 50
Section 10.1 Filing............................ 50
Section 10.2 Governing Law..................... 51
Section 10.3 Counterparts...................... 51
Section 10.4 Reliance by Third Parties......... 51
Section 10.5 Provisions in Conflict with Law
or Regulations.................. 52
Section l0.6 Name Reservation.................. 52
<PAGE>
DECLARATION OF TRUST
OF
TEMPLETON INCOME FUND
Dated June 16, 1986
DECLARATION OF TRUST made June 16, 1986 by (together with all other
persons from time to time duly elected, qualified and serving as Trustees in
accordance with the provisions of Article II hereof, the "Trustees");
WHEREAS, the Trustees desire to establish a trust for the
investment and reinvestment of funds contributed thereto; and
WHEREAS, the Trustees desire that the beneficial interest in the
trust assets be divided into transferable shares of beneficial interest, as
hereinafter provided;
NOW, THEREFORE, the Trustees declare that all money and property
contributed to the trust established hereunder shall be held and managed in
trust for the benefit of the holders, from time to time, of the shares of
beneficial interest issued hereunder and subject to the provisions hereof.
ARTICLE I
NAME AND DEFINITIONS
SECTION 1.1. NAME. The name of the trust created hereby,
until and unless changed by the Trustees as provided in Section
8.3(a) hereof, is "Templeton Income Fund."
SECTION 1.2. DEFINITIONS. Wherever they are used herein,
the following terms have the following respective meanings:
<PAGE>
(a) "BY-LAWS" means the By-laws referred to in
Section 2.8 hereof, as from time to time amended.
(b) The terms "COMMISSION" and "INTERESTED PERSON,"
have the meanings given them in the 1940 Act. Except as otherwise defined by the
Trustees in conjunction with the establishment of any series of Shares, the term
"VOTE OF A MAJORITY OF THE SHARES OUTSTANDING AND ENTITLED TO VOTE" shall have
the same meaning as the term "VOTE OF A MAJORITY OF THE OUTSTANDING VOTING
SECURITIES" given it in the 1940 Act.
(c) "CUSTODIAN" means any Person other than the
Trust who has custody of any Trust Property as required by Section 17(f) of the
1940 Act, but does not include a system for the central handling of securities
described in said Section 17(f).
(d) "DECLARATION" means this Declaration of Trust as
amended from time to time. Reference in this Declaration of Trust to
"DECLARATION", "HEREOF," and "HEREUNDER" shall be deemed to refer to this
Declaration rather than exclusively to the article or section in which such
words appear.
(e) "DISTRIBUTOR" means a party, other than the
Trust, to a contract described in Section 3.1 hereof.
(f) "HIS" shall include the feminine and neuter, as
well as the masculine, genders, and the plural as well as the singular number,
in accordance with the context.
(g) The "1940 ACT" means the Investment Company Act
of 1940, as amended from time to time.
(h) "PERSON" means and includes individuals,
corporations, partnerships, trusts, associations, joint ventures
<PAGE>
and other entities, whether or not legal entities, and governments and agencies
and political subdivisions thereof.
(i) "SHAREHOLDER" means a record owner of
Outstanding Shares.
(j) "SHARES" means the equal proportionate units of
interest into which the beneficial interest in the Trust shall be divided from
time to time, including the Shares of any and all series which may be
established by the Trustees, and includes fractions of Shares as well as whole
Shares. "OUTSTANDING SHARES" means those Shares shown from time to time on the
books of the Trust or its Transfer Agent as then issued and outstand-ing, but
shall not include Shares which have been redeemed or repurchased by the Trust
and which are at the time held in the Treasury of the Trust.
(k) "TRANSFER AGENT" means any Person other than the
Trust who maintains the Shareholder records of the Trust, such as the list of
Shareholders, the number of Shares credited to each account, and the like.
(l) The "TRUST" means Templeton Income Fund.
(m) The "TRUST PROPERTY" means any and all
property, real or personal, tangible or intangible, which is owned or held by or
for the account of the Trust, including any series of the Trust, or the Trustees
in their capacity as such.
(n) The "TRUSTEES" means any Person who has signed
this Declaration, so long as he shall continue in office in accordance with the
terms hereof, and any other Person who may from time to time be duly elected,
qualified and serving as Trustees in accordance with the provisions of Article
II hereof,
<PAGE>
and reference herein to a Trustee or the Trustees shall refer to such Person or
Persons in this capacity or their capacities as Trustees hereunder.
ARTICLE II
TRUSTEES
SECTION 2.1. GENERAL POWERS. The Trustees shall have exclusive and
absolute control over the Trust Property and over the business of the Trust to
the same extent as if the Trustees were the sole owners of the Trust Property
and business in their own right, but with such powers of delegation as may be
permitted, and such obligations and duties as may be prescribed, by this
Declaration. The Trustees shall have power to conduct the business of the Trust
and carry on its operations in any and all of its branches and maintain offices
both within and without the Commonwealth of Massachusetts, in any and all states
of the United States of America, in the District of Columbia, and in any and all
commonwealths, territories, dependencies, colonies, possessions, agencies or
instrumentalities of the United States of America and of foreign governments,
and to do all such other things and execute all such instruments as they may
deem neces-sary, proper or desirable in order to promote the interests of the
Trust, including such things as may not be herein specifi-cally mentioned. Any
determination as to what is in the interests of the Trust made by the Trustees
in good faith shall be conclusive. In construing the provisions of this
Declaration, the presumption shall be in favor of a grant of power to the
Trustees.
<PAGE>
The enumeration of any specific power herein shall not be construed
as limiting the aforesaid power. Such powers of the Trustees may be executed
without order of or resort to any court.
SECTION 2.2. INVESTMENTS. The Trustees shall have the
power:
(a) To operate as and carry on the business of an
open-end, management investment company, as defined in the 1940 Act, and
exercise all the powers necessary and appropriate to the conduct of such
operations.
(b) To invest in, hold for investment, or reinvest
in, securities (which term "securities" shall include common and preferred
stocks; warrants; bonds, debentures, bills, time notes and all other evidences
of indebtedness; negotiable or non-negotiable instruments; government
securities, including securities of any state, municipality or other political
subdivision thereof, or any government or quasi-governmental agency or
instrumentality; and money market instruments including bank certificates of
deposit, finance paper, commercial paper, bankers' acceptances and all kinds of
repurchase agreements, of any corporation, company, trust, association, firm or
other business organization however established, and of any country, state,
municipality or other political subdivision, or any governmental or
quasi-governmental agency or instrumentality).
(c) To acquire (by purchase, subscription or
otherwise), to hold, to trade in and deal in, to acquire or sell any rights,
options, futures contracts or other instruments to purchase or sell, and to sell
or otherwise dispose of, to lend, and to pledge any securities, property or
other assets.
<PAGE>
(d) To exercise all rights, powers and privileges of
ownership or interest in all securities and repurchase agreements included in
the Trust Property, including the right to vote thereon and otherwise act with
respect thereto and to do all acts for the preservation, protection, improvement
and enhancement in value of all such securities and repurchase agreements.
(e) To acquire (by purchase, lease or otherwise) and
to hold, use, maintain, develop and dispose of (by sale or otherwise) any
property, real or personal, including cash, and any interest therein.
(f) To borrow money and in this connection issue
notes or other evidence of indebtedness; to secure borrowings by mortgaging,
pledging or otherwise subjecting as security the Trust Property; to endorse,
guarantee, or undertake the performance of any obligation or engagement of any
other Person and to lend Trust Property.
(g) To aid by further investment any corporation,
company, trust, association or firm, any obligation of or interest in which is
included in the Trust Property or in the affairs of which the Trustees have any
direct or indirect interest; to do all acts and things designed to protect,
preserve, improve or enhance the value of such obligation or interest.
(h) In general to carry on any other business in
connection with or incidental to any of the foregoing powers, to do everything
necessary, suitable or proper for the accomplishment of any purpose or the
attainment of any object or the furtherance of any power hereinbefore set forth,
either alone
<PAGE>
or in association with others, and to do every other act or thing incidental or
appurtenant to or growing out of or connected with the aforesaid business or
purposes, objects or powers.
The foregoing clauses shall be construed both as objects and
powers, and the foregoing enumeration of specific powers shall not be held to
limit or restrict in any manner the general powers of the Trustees.
The Trustees shall not be limited to investing in obligations
maturing before the possible termination of the Trust, nor shall the Trustees be
limited by any law limiting the investments which may be made by fiduciaries.
SECTION 2.3. LEGAL TITLE. Legal title to all the Trust Property
shall be vested in the Trustees as joint tenants except that the Trustees shall
have power to cause legal title to any Trust Property to be held by or in the
name of one or more of the Trustees, or in the name of the Trust, or in the name
of any other Person as nominee, on such terms as the Trustees may determine,
provided that the interest of the Trust therein is deemed appropriately
protected. The right, title and interest of the Trustees in the Trust Property
and the property of each series of the Trust shall vest automatically in each
Person who may hereafter become a Trustee. Upon the termination of the term of
office, resignation, removal or death of a Trustee he shall automatically cease
to have any right, title or interest in any of the Trust Property and the right,
title and interest of such Trustee in all such property shall vest automatically
in the remaining Trustees. Such vesting and cessation of title shall be
<PAGE>
effective whether or not conveying documents have been executed
and delivered.
SECTION 2.4. ISSUANCE AND REPURCHASE OF SECURITIES. The Trustees
shall have the power to issue, sell, repurchase, redeem, retire, cancel,
acquire, hold, resell, reissue, dispose of, transfer, and otherwise deal in
Shares and, subject to the provisions set forth in Articles VI and VII and
Section 5.11 hereof, to apply to any such repurchase, redemption, retirement,
cancellation or acquisition of Shares any funds or property of the particular
series of the Trust with respect to which such Shares are issued, whether
capital or surplus or otherwise, to the full extent now or hereafter permitted
by the laws of the Commonwealth of Massachusetts governing business
corporations.
SECTION 2.5. DELEGATION; COMMITTEES. The Trustees shall have power
to delegate from time to time to such of their number or to officers, employees
or agents of the Trust the doing of such things and the execution of such
instruments either in the name of the Trust or the names of the Trustees or
otherwise as the Trustees may deem expedient, to the same extent as such
delegation is permitted by the 1940 Act.
SECTION 2.6. COLLECTION AND PAYMENT. The Trustees shall have power
to collect all property due to the Trust; to pay all claims, including taxes,
against the Trust Property; to prosecute, defend, compromise or abandon any
claims relating to the Trust Property; to foreclose any security interest
securing any obligations, by virtue of which any property is owed to the Trust;
and, without need for any court order, to enter into releases, agreements and
other instruments.
<PAGE>
SECTION 2.7. EXPENSES. The Trustees shall have the power to incur
and pay any expenses which in the opinion of the Trustees are necessary or
incidental to carrying out any of the purposes of this Declaration, and to pay
reasonable compensation from the Trust and/or its series to themselves as
Trustees. The Trustees shall fix the compensation of all officers, employees and
Trustees.
SECTION 2.8. MANNER OF ACTING; BY-LAWS. Except as otherwise
provided herein or in the By-laws, any action to be taken by the Trustees may be
taken by a majority of the Trustees present at a meeting of Trustees (a quorum
being present), including any meeting held by means of a conference telephone
circuit or similar communications equipment by means of which all persons
participating in the meeting can hear each other, or by written consents of the
entire number of Trustees then in office. The Trustees may adopt By-laws not
inconsistent with this Declaration to provide for the conduct of the business of
the Trust and may amend or repeal such By-laws to the extent such power is not
reserved to the Shareholders.
Notwithstanding the foregoing provisions of this Section 2.8 and in
addition to such provisions or any other provision of this Declaration or of the
By-laws, the Trustees may by resolution appoint a committee consisting of one or
more Trustees and less than the whole number of Trustees then in office, which
committee may be empowered to act for and bind the Trustees and the Trust, as if
the acts of such committee were the acts of all the Trustees then in office,
with respect to the institution, prosecution, dismissal, settlement, review or
investigation of
<PAGE>
any action, suit or proceeding which shall be pending or threatened to be
brought before any court, administrative agency or other adjudicatory body.
SECTION 2.9. MISCELLANEOUS POWERS. The Trustees shall have the
power to: (a) employ or contract with such Persons as the Trustees may deem
desirable for the transaction of the business of the Trust; (b) enter into joint
ventures, partnerships and any other combinations or associations, to the extent
permitted by law; (c) remove Trustees or fill vacancies in or add to their
number, elect and remove such officers and appoint and terminate such agents or
employees as they consider appropriate, and appoint from their own number, and
terminate, any one or more committees which may exercise some or all of the
power and authority of the Trustees as the Trustees may determine; (d) to the
extent permitted by law, purchase, and pay for out of Trust Property, insurance
policies insuring the Shareholders, Trustees, officers, employees, agents,
investment advisers, administrators, distributors, selected dealers or
independent contractors of the Trust against all claims arising by reason of
holding any such position or by reason of any action taken or omitted by any
such Person in such capacity; (e) establish pension, profit-sharing, Share
purchase, and other retirement, incentive and benefit plans for any Trustees,
officers, employees and agents of the Trust; (f) to the extent permitted by law,
indemnify any person with whom the Trust has dealings, including persons
referred to in subparagraph (d), above, to such extent as the Trustees shall
determine;
<PAGE>
(g) determine and change the fiscal year of the Trust and the method by which
its accounts shall be kept; and (h) adopt a seal for the Trust, but the absence
of such seal shall not impair the validity of any instrument executed on behalf
of the Trust.
SECTION 2.10. PRINCIPAL TRANSACTIONS. Except in transactions not
permitted by the 1940 Act or rules and regulations adopted by the Commission,
the Trustees may, on behalf of the Trust, buy any securities from or sell any
securities to, or lend any assets of the Trust to, any Trustee or officer of the
Trust or any firm of which any such Trustee or officer is a member acting as
principal, or have any such dealings with persons acting as investment adviser,
administrator, Distributor or Transfer Agent or with any Interested Person of
such Person; and the Trust may employ any such Person, or firm or company in
which such Person is an Interested Person, as broker, legal counsel, registrar,
Transfer Agent, dividend disbursing agent or Custodian upon customary terms.
SECTION 2.11. NUMBER OF TRUSTEES. The number of Trustees shall
initially be one (1), and thereafter shall be such number as shall be fixed from
time to time by a written instrument signed by a majority of the Trustees,
provided, however, that the number of Trustees shall in no event be less than
one (1) nor more than fifteen (15).
SECTION 2.12. ELECTION AND TERM. Except for the Trustees
named herein, designated by such Trustees prior to the issuance
of Shares, or appointed to fill vacancies pursuant to Section
2.14 hereof, the Trustees shall be elected by the Shareholders
<PAGE>
owning of record a plurality of the Shares voting at a meeting of Shareholders
called for that purpose. Except in the event of resignation or removal pursuant
to Section 2.13 hereof, each Trustee shall hold office until the next such
meeting of Shareholders and until his successor is duly elected and qualified.
SECTION 2.13. RESIGNATION AND REMOVAL. Any Trustee may resign his
trust (without need for prior or subsequent accounting) by an instrument in
writing signed by him and delivered to the other Trustees and such resignation
shall be effective upon such delivery, or at a later date according to the terms
of the instrument. Any of the Trustees may be removed (i) with cause, by the
action of two-thirds of the remaining Trustees (provided the aggregate number of
Trustees after such removal shall not be less than three) or (ii) by vote of
holders of two-thirds of the outstanding Shares of the Trust, either by
declaration in writing or at a meeting called for such purpose. A meeting for
the purpose of considering the removal of a person serving as Trustee shall be
called by the Trustees if requested in writing to do so by holders of not less
than 10% of the outstanding Shares of the Trust. Upon the resignation or removal
of a Trustee, or his otherwise ceasing to be a Trustee, he shall execute and
deliver such documents as the remaining Trustees shall require for the purpose
of conveying to the Trust or the remaining Trustees any Trust Property held in
the name of the resigning or removed Trustee. Upon the incapacity or death of
any Trustee, his legal representative shall execute and deliver
<PAGE>
on his behalf such documents as the remaining Trustee shall require as provided
in the preceding sentence.
SECTION 2.14. VACANCIES. The term of office of a Trustee shall
terminate and a vacancy shall occur in the event of the death, resignation,
removal, bankruptcy, adjudicated incompetence or other incapacity to perform the
duties of the office of a Trustee. No such vacancy shall operate to annul the
Declaration or to revoke any existing vacancy, including a vacancy existing by
reason of an increase in the number of Trustees. Subject to the provisions of
Section 16(a) of the 1940 Act, the remaining Trustees shall fill such vacancy by
the appointment of such other person as they in their discretion shall see fit,
made by a written instrument signed by a majority of the Trustees then in
office. Any such appointment shall not become effective, however, until the
person named in the written instrument of appointment shall have accepted in
writing such appointment and agreed in writing to be bound by the terms of the
Declaration. An appointment of a Trustee may be made in anticipation of a
vacancy to occur at a later date by reason of retirement, resignation or
increase in the number of Trustees, provided that such appointment shall not
become effective prior to such retirement, resignation or increase in the number
of Trustees. Whenever a vacancy in the number of Trustees shall occur, until
such vacancy is filled as provided in this Section 2.14, the Trustees in office,
regardless of their number, shall have all the powers granted to the Trustees
and shall discharge all the duties imposed upon the Trustees by the Declaration.
A written instrument certifying the existence of such vacancy signed by a
<PAGE>
majority of the Trustees in office shall be conclusive evidence
of the existence of such vacancy.
SECTION 2.15. DELEGATION OF POWER TO OTHER TRUSTEES. Any Trustee
may, by power of attorney, delegate his power for a period not exceeding six (6)
months at any one time to any other Trustee or Trustees; provided that in no
case shall less than two (2) Trustees personally exercise the powers granted to
the Trustees under this Declaration, except as herein otherwise expressly
provided.
ARTICLE III
CONTRACTS
SECTION 3.1. UNDERWRITING CONTRACT. The Trustees may in their
discretion from time to time enter into an exclusive or non-exclusive
underwriting contract or contracts providing for the sale of the Shares to net
the Trust not less than the amount provided for in Section 7.1 of Article VII
hereof, whereby the Trustees may either agree to sell the Shares to the other
party to the contract or appoint such other party their sales agent for the
Shares, and in either case on such terms and conditions as may be prescribed in
the By-laws, if any, and such further terms and conditions as the Trustees may
in their discretion determine not inconsistent with the provisions of this
Article III or of the By-laws; and such contract may also provide for the
repurchase of the Shares by such other party as agent of the Trustees.
SECTION 3.2. ADVISORY, MANAGEMENT OR ADMINISTRATIVE
CONTRACTS. The Trustees may in their discretion from time to time
enter into one or more investment advisory, management or
<PAGE>
administrative contracts whereby the other party(ies) to such contract(s) shall
undertake to furnish to the Trust or to one or more of its series such
management, investment advisory, administrative, statistical and research
facilities and services and such other facilities and services, if any, and all
upon such terms and conditions as the Trustees may in their discretion
determine, including the grant of authority to such other party to recommend or
to determine what securities shall be purchased or sold by the Trust or a series
and what portion of assets shall be uninvested, which authority shall include
the power to make changes in investments, and to recommend or to select the
brokers or dealers to be used for such transactions.
SECTION 3.3. OTHER SERVICE CONTRACTS. The Trustees are also
empowered, at any time and from time to time, to contract with any corporations,
trusts, associations, or other organizations, appointing it or them the Business
Manager, Custodian(s), Transfer Agent(s) and/or shareholder servicing agent(s)
and/or other agents for the Trust or one or more of the series. Every such
contract shall comply with such requirements and restrictions as may be set
forth in the By-laws or stipulated by resolution of the Trustees.
SECTION 3.4. AFFILIATIONS OF TRUSTEES OR OFFICERS, ETC.
The fact that:
(i) any of the Shareholders, Trustees or officers of
the Trust is a shareholder, director, officer,
partner, trustee, employee, manager, adviser or
distributor of or for any partnership,
corporation, trust, association or other
<PAGE>
organization or of or for any parent or affiliate
of any organization, with which a contract of the
character described in Sections 3.1, 3.2 or 3.3
above may have been or may hereafter be made, or
that any such organization, or any parent or
affiliate thereof, is a Shareholder of or has an
interest in the Trust, or that
(ii) any partnership, corporation, trust, association
or other organization with which a contract of
the character described in Sections 3.1, 3.2 or
3.3 above may have been or may hereafter be made
also has any one or more of such contracts with
one or more other partnerships, corporations,
trusts, associations or other organizations, or
has other businesses or interests,
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing the
same or create any liability or accountability to the Trust or its Shareholders.
SECTION 3.5. COMPLIANCE WITH 1940 ACT. Any contract entered into by
the Trust shall be consistent with applicable requirements of the 1940 Act or
other applicable law.
<PAGE>
ARTICLE IV
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS
SECTION 4.1. NO PERSONAL LIABILITY OF SHAREHOLDERS, TRUSTEES, ETC.
No Shareholder shall be subject to any personal liability whatsoever to any
Person in connection with Trust Property or the acts, obligations or affairs of
the Trust. No Trustee, officer, employee or agent of the Trust shall be subject
to any personal liability whatsoever to any Person, other than to the Trust or
its Shareholders, in connection with Trust Property or the affairs of the Trust,
save only that arising from bad faith, willful misfeasance, gross negligence or
reckless disregard of his duties with respect to such Person; and all such
Persons shall look solely to the Trust Property for satisfaction of claims of
any nature arising in connection with the affairs of the Trust. If any
Shareholder, Trustee, officer, employee, or agent, as such, of the Trust is made
a party to any suit or proceeding to enforce any such liability of the Trust, he
shall not, on account thereof, be held to any personal liability. The Trust
shall indemnify and hold each Shareholder harmless from and against all claims
and liabilities, to which such Shareholder may become subject by reason of his
being or having been a Shareholder, and shall reimburse such Shareholder for all
legal and other expenses reasonably incurred by him in connection with any such
claim or liability, provided that any such expenses shall be paid solely out of
the funds and property of the series of the Trust with respect to which such
Shareholder's Shares are issued. The rights accruing to a Shareholder under this
Section
<PAGE>
4.1 shall not exclude any other right to which such Shareholder may be lawfully
entitled, nor shall anything herein contained restrict the right of the Trust to
indemnify or reimburse a Shareholder in any appropriate situation even though
not specifically provided for herein.
SECTION 4.2. NON-LIABILITY OF TRUSTEES, ETC. No Trustee, officer,
employee or agent of the Trust shall be liable to the Trust, its Shareholders,
or to any Shareholder, Trustee, officer, employee, agent or service provider
thereof for any action or failure to act by him (her) or any other such Trustee,
officer, employee, agent or service provider (including without limitation the
failure to compel in any way any former or acting Trustee to redress any breach
of trust) except for his own bad faith, willful misfeasance, gross negligence or
reckless disregard of the duties involved in the conduct of his office. The term
"service provider," as used in this Section 4.2, shall include any investment
adviser, principal underwriter, transfer agent, business manager or other person
with whom the Trust has an agreement for provision of services.
SECTION 4.3. MANDATORY INDEMNIFICATION.
(a) Subject to the exceptions and limitations contained in
paragraph (b) below:
(i) every person who is, or has been, a Trustee or officer
of the Trust shall be indemnified by the Trust to the fullest
extent permitted by law against all liability and against all
expenses reasonably incurred or paid by him in connection with any
claim, action, suit or proceeding in which he becomes involved as a
party or
<PAGE>
otherwise by virtue of his being or having been a Trustee
or officer and against amounts paid or incurred by him in
the settlement thereof;
(ii) the words "claim", "action", "suit", or "proceeding"
shall apply to all claims, actions, suits or proceedings (civil,
criminal, or other, including appeals), actual or threatened; and
the words "liability" and "expenses" shall include, without
limitation, attorneys' fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a
Trustee or officer:
(i) against any liability to the Trust or the Shareholders
by reason of a final adjudication by the court or other body before
which the proceeding was brought that he engaged in willful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office;
(ii) with respect to any matter as to which he shall have
been finally adjudicated not to have acted in good faith in the
reasonable belief that his action was in the best interest of the
Trust;
(iii) in the event of a settlement or other disposition
not involving a final adjudication as provided in paragraph (b)(i)
resulting in a payment by a Trustee or officer, unless there has
been a determination that such Trustee or officer did not engage in
willful misfeasance,
<PAGE>
bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office:
(A) by the court or other body approving the
settlement or other disposition; or
(B) based upon a review of readily available facts
(as opposed to a full trial-type inquiry) by (1) vote of a
majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested
Trustees then in office act on the matter) or (2) written
opinion of independent legal counsel.
(c) To the extent permitted by law, the rights of indemnification herein
provided may be insured against by policies maintained by the Trust, shall be
severable, shall not affect any other rights to which any Trustee or officer may
now or hereafter be entitled, shall continue as to a person who has ceased to be
such Trustee or officer and shall inure to the benefit of the heirs, executors,
administrators and assigns of such a person. Nothing contained herein shall
affect any rights to indemnification to which personnel of the Trust other than
Trustees and officers may be entitled by contract or otherwise under law.
(d) Expenses of preparation and presentation of a defense to any claim,
action, suit or proceeding of the character described in paragraph (a) of this
Section 4.3 may be advanced by the Trust prior to final disposition thereof upon
receipt of an undertaking by or on behalf of the recipient to repay such amount
if it is
<PAGE>
ultimately determined that he is not entitled to indemnification under this
Section 4.3, provided that either:
(i) such undertaking is secured by a surety bond or some
other appropriate security provided by the recipient, or the Trust
shall be insured against losses arising out of any such advances;
or
(ii) a majority of the Disinterested Trustees acting on the matter (provided
that a majority of the Disinterested Trustees act on the matter) or an
independent legal counsel in a written opinion shall determine, based upon a
review of readily available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the recipient ultimately will be found
entitled to indemnification.
As used in this Section 4.3, a "Disinterested
Trustee" is one who is not (i) an "Interested Person" of
the Trust (including anyone who has been exempted from
being an "Interested Person" by any rule, regulation or
order of the Commission), or (ii) involved in the claim,
action, suit or proceeding.
SECTION 4.4. NO BOND REQUIRED OF TRUSTEES. No Trustee
shall be obligated to give any bond or other security for the
performance of any of his duties hereunder.
SECTION 4.5. NO DUTY OF INVESTIGATION; NOTICE IN TRUST INSTRUMENTS,
ETC. No purchaser, lender, transfer agent or other Person dealing with the
Trustees or any officer, employee or agent of the Trust shall be bound to make
any inquiry concerning the validity of any transaction purporting to be made by
the Trustees or by said officer, employee or agent or be liable for
<PAGE>
the application of money or property paid, loaned, or delivered to or on the
order of the Trustees or of said officer, employee or agent. Every obligation,
contract, instrument, certificate, Share, other security of the Trust or
undertaking, and every other act or thing whatsoever executed in connection with
the Trust shall be conclusively presumed to have been executed or done by the
executors thereof only in their capacity as Trustees under this Declaration or
in their capacity as officers, employees or agents of the Trust. Every written
obligation, contract, instrument, certificate, Share, other security of the
Trust or undertaking made or issued by the Trustees may recite that the same is
executed or made by them not individually, but as Trustees under the
Declaration, and that the obligations of the Trust under any such instrument are
not binding upon any of the Trustees or Shareholders individually, but bind only
the estate of the Trust or series, as applicable, and may contain any further
recital which they or he may deem appropriate, but the omission of such recital
shall not operate to bind the Trustees individually. The Trustees may maintain
insurance for the protection of the Trust Property, its Shareholders, Trustees,
officers, employees and agents in such amount as the Trustees shall deem
adequate to cover possible tort liability, and such other insurance as the
Trustees in their sole judgment shall deem advisable.
SECTION 4.6. RELIANCE ON EXPERTS, ETC. Each Trustee and
officer or employee of the Trust shall, in the performance of his
duties, be fully and completely justified and protected with
regard to any act or any failure to act resulting from reliance
<PAGE>
in good faith upon the books of account or other records of the Trust, upon an
opinion of counsel, or upon reports made to the Trust by any of its officers or
employees or by the Investment Adviser, the Distributor, Business Manager,
Transfer Agent, selected dealers, accountants, appraisers or other experts or
consultants selected with reasonable care by the Trustees, officers or employees
of the Trust, regardless of whether such counsel or expert may also be a
Trustee.
ARTICLE V
SHARES OF BENEFICIAL INTEREST
SECTION 5.1. BENEFICIAL INTEREST. The interest of the beneficiaries
hereunder shall be divided into transferable Shares of beneficial interest of
$0.01 par value per share. All Shares shall be of one class, except as provided
in Section 5.11 hereof. The number of shares of beneficial interest authorized
hereunder is unlimited. All Shares issued hereunder including, without
limitation, Shares issued in connection with a dividend in Shares or a split of
Shares, shall be fully paid and non-assessable.
SECTION 5.2. RIGHTS OF SHAREHOLDERS. The ownership of the Trust
Property and the property of each series of the Trust of every description and
the right to conduct any business hereinbefore described are vested exclusively
in the Trustees, and the Shareholders shall have no interest therein other than
the beneficial interest conferred by their Shares, and they shall have no right
to call for any partition or division of any property, profits, rights or
interests of the Trust nor can they be called upon to share or assume any losses
of the Trust or suffer an assessment of any kind by virtue of their ownership of
<PAGE>
Shares. The Shares shall be personal property giving only the rights in this
Declaration specifically set forth. The Shares shall not entitle the holder to
preference, preemptive, appraisal, conversion or exchange rights, except as the
Trustees may determine with respect to any series of Shares.
SECTION 5.3. TRUST ONLY. It is the intention of the Trustees to
create only the relationship of trustee and beneficiary between the Trustees and
each Shareholder from time to time. It is not the intention of the Trustees to
create a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than a trust.
Nothing in this Declaration of Trust shall be construed to make the
Shareholders, either by themselves or with the Trustees, partners or members of
a joint stock association.
SECTION 5.4. ISSUANCE OF SHARES. The Trustees in their discretion
may, from time to time without vote of the Shareholders, issue Shares, in
addition to the then issued and outstanding Shares and Shares held in the
treasury, to such party or parties and for such amount and type of
consideration, including cash or property, at such time or times and on such
terms as the Trustees may deem best, and may in such manner acquire other assets
(including the acquisition of assets subject to, and in connection with the
assumption of liabilities) and businesses. In connection with any issuance of
Shares, the Trustees may issue fractional Shares and Shares held in the
treasury, and Shares may be issued in separate series as provided in Section
5.11 hereof. The Trustees may from time to time divide
<PAGE>
or combine the Shares into a greater or lesser number without thereby changing
the proportionate beneficial interests in the Trust or any series. Contributions
to the Trust may be accepted for, and Shares shall be redeemed as, whole Shares
and/or 1/1,000ths of a Share or integral multiples thereof. The Trustees, the
Distributor or any other person the Trustees may authorize for the purpose may,
in their discretion, reject any application for the issuance of Shares.
SECTION 5.5. REGISTER OF SHARES. A register shall be kept at the
principal office of the Trust or an office of the Transfer Agent which shall
contain the names and addresses of the Shareholders and the number of Shares
held by them respectively and a record of all transfers thereof. Such register
shall be conclusive as to who are the holders of the Shares and who shall be
entitled to receive dividends or distributions or otherwise to exercise or enjoy
the rights of Shareholders. No Shareholder shall be entitled to receive payment
of any dividend or distribution, nor to have notice given to him as herein or in
the By-laws provided, until he has given his address to the Transfer Agent or
such other officer or agent of the Trustees as shall keep the said register for
entry thereon. It is not contemplated that certificates will be issued for the
Shares; however, the Trustees, in their discretion, may authorize the issuance
of share certificates and promulgate appropriate rules and regulations as to
their use.
SECTION 5.6. TRANSFER OF SHARES. Shares shall be
transferable on the records of the Trust only by the record
holder thereof or by his agent thereunto duly authorized in
<PAGE>
writing, upon delivery to the Trustees or the Transfer Agent of a duly executed
instrument of transfer, together with such evidence of the genuineness of each
such execution and authorization and of other matters as may reasonably be
required. Upon such delivery the transfer shall be recorded on the register of
the Trust. Until such record is made, the Shareholder of record shall be deemed
to be the holder of such Shares for all purposes hereunder and neither the
Trustees nor any Transfer Agent or registrar nor any officer, employee or agent
of the Trust shall be affected by any notice of the proposed transfer.
Any Person becoming entitled to any Shares in consequence of the
death, bankruptcy, or incompetence of any Shareholder, or otherwise by operation
of law, shall be recorded on the register of Shares as the holder of such Shares
upon production of the proper evidence thereof to the Trustees or the Transfer
Agent, but until such record is made, the Shareholder of record shall be deemed
to be the holder of such Shares for all purposes hereunder and neither the
Trustees nor any Transfer Agent or registrar nor any officer or agent of the
Trust shall be affected by any notice of such death, bankruptcy or incompetence,
or other operation of law.
SECTION 5.7. NOTICES. Any and all notices to which any Shareholder
may be entitled and any and all communications shall be deemed duly served or
given if mailed, postage pre-paid, addressed to any Shareholder of record at his
last known address as recorded on the register of the Trust.
SECTION 5.8. TREASURY SHARES. Shares held in the
treasury shall, until reissued pursuant to Section 5.4, not
<PAGE>
confer any voting rights on the Trustees, nor shall such Shares be entitled to
any dividends or other distributions declared with respect to the Shares.
SECTION 5.9. VOTING POWERS. The Shareholders shall have power to
vote only (i) for the election of Trustees as provided in Section 2.12; (ii)
with respect to any investment advisory or investment management contract
entered into pursuant to Section 3.2; (iii) with respect to termination of the
Trust as provided in Section 8.2; (iv) with respect to any amendment of this
Declaration to the extent and as provided in Section 8.3; (v) with respect to
any merger, consolidation or sale of assets as provided in Section 8.4; (vi)
with respect to incorporation of the Trust to the extent and as provided in
Section 8.5; (vii) to the same extent as the stockholders of a Massachusetts
business corporation as to whether or not a court action, proceeding or claim
should or should not be brought or maintained derivatively or as a class action
on behalf of the Trust or the Shareholders; and (viii) with respect to such
additional matters relating to the Trust as may be required by this Declaration,
the By-laws or any registration of the Trust as an investment company under the
1940 Act with the Commission (or any successor agency) or as the Trustees may
consider necessary or desirable. Each whole Share shall be entitled to one vote
as to any matter on which it is entitled to vote and each fractional Share shall
be entitled to a proportionate fractional vote, except that the Trustees may, in
conjunction with the establishment of any series of Shares, establish conditions
under which the several series shall have separate voting rights or no voting
rights. There shall be no
<PAGE>
cumulative voting in the election of Trustees. Until Shares are issued, the
Trustees may exercise all rights of Shareholders and may take any action
required by law, this Declaration or the By-laws to be taken by Shareholders.
The By-laws may include further provisions for Shareholders' votes and meetings
and related matters.
SECTION 5.10. MEETINGS OF SHAREHOLDERS. A meeting of the
Shareholders shall be held at such times, on such day and at such hour as the
Trustees may from time to time determine, either at the principal office of the
Trust, or at such other place as may be designated by the Trustees, for the
purposes specified in Section 2.12 or 2.13 and for such other purposes as may be
specified by the Trustees.
SECTION 5.11. SERIES DESIGNATION. The Trustees, in their
discretion, may authorize the division of Shares into two or more series, and
the different series shall be established and designated, and the variations in
the relative rights and preferences as between the different series shall be
fixed and determined, by the Trustees; provided, that all Shares shall be
identical except for such variations as shall be fixed and determined by the
Trustees and set forth in the Trust's then current registration statement, and
the reasonable consequences of such variations. All references to Shares in this
Declaration shall be deemed to be Shares of any or all series as the context may
require.
If the Trustees shall divide the Shares of the Trust into two or
more series, the following provisions shall be applicable:
<PAGE>
(a) All provisions herein relating to the Trust shall apply equally
to each series of the Trust except as the context requires otherwise.
(b) The number of authorized Shares and the number of Shares of
each series that may be issued shall be unlimited. The Trustees may classify or
reclassify any unissued Shares or any Shares previously issued and reacquired of
any series into one or more series that may be established and designated from
time to time. The Trustees may hold as treasury shares (of the same or some
other series), reissue for such consideration and on such terms as they may
determine, or cancel any Shares of any series reacquired by the Trust at their
discretion from time to time.
(c) All consideration received by the Trust for the issue or sale
of Shares of a particular series, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that series for all purposes, subject only to the rights
of creditors of such series and except as may otherwise be required by
applicable tax laws, and shall be so recorded upon the books of account of the
Trust. In the event that there are any assets, income, earnings, profits, and
proceeds thereof, funds, or payments which are not readily identifiable as
belonging to any particular series, the Trustees shall allocate them among any
one or more of the series
<PAGE>
established and designated from time to time in such manner and on such basis as
they, in their sole discretion, deem fair and equitable. Each such allocation by
the Trustees shall be conclusive and binding upon all persons for all purposes.
(d) The assets belonging to each particular series shall be charged
with the liabilities of the Trust in respect of that series and all expenses,
costs, charges and reserves attributable to that series, and any general
liabilities, expenses, costs, charges or reserves of the Trust which are not
readily identifiable as belonging to any particular series shall be allocated
and charged by the Trustees to and among any one or more of the series
established and designated from time to time in such manner and on such basis as
the Trustees in their sole discretion deem fair and equitable and no series
shall be liable to any person except for its allocated share. Each allocation of
liabilities, expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon all persons for all purposes. The Trustees shall
have full discretion, to the extent not inconsistent with the 1940 Act, to
determine which items are capital; and each such determination and allocation
shall be conclusive and binding upon all persons. All persons extending credit
to, or contracting with or having any claim against a particular series of the
Trust shall look only to the assets of that particular series for payment of
such credit, contract or claim.
(e) Each Share of a series of the Trust shall represent a
beneficial interest in the net assets of such series. Each
holder of Shares of a series shall be entitled to receive his pro
<PAGE>
rata share of distributions of income and capital gains made with respect to
such series. Upon redemption of his Shares or indemnification for liabilities
incurred by reason of his being or having been a Shareholder of a series, such
Shareholder shall be paid solely out of the funds and property of such series of
the Trust. Upon liquidation or termination of a series of the Trust,
Shareholders of such series shall be entitled to receive a pro rata share of the
net assets of such series. A Shareholder of a particular series of the Trust
shall not be entitled to participate in a derivative or class action on behalf
of any other series or the Shareholders of any other series of the Trust.
(f) Notwithstanding any other provision hereof, on any matter
submitted to a vote of Shareholders of the Trust, all Shares then entitled to
vote shall be voted by individual series, except that (1) when required by the
1940 Act, Shares shall be voted in the aggregate and not by individual series,
and (2) when the Trustees have determined that the matter affects only the
interests of Shareholders of a limited number of series, then only the
Shareholders of such series shall be entitled to vote thereon.
The establishment and designation of any series of Shares shall be
effective upon the execution by a majority of the Trustees of an instrument
setting forth such establishment and designation and the relative rights and
preferences of such series, or as otherwise provided in such instrument. At any
time that there are no Shares outstanding of any particular series previously
established and designated, the Trustees may by an
<PAGE>
instrument executed by a majority of their number abolish that series and the
establishment and designation thereof. Each instrument referred to in this
paragraph shall have the status of an amendment to this Declaration.
SECTION 5.12. POWER OF TRUSTEES TO CHANGE PROVISIONS RELATING TO
SHARES. Notwithstanding any other provision of this Declaration of Trust and
without limiting the power of the Trustees to amend the Declaration of Trust as
provided elsewhere herein, the Trustees shall have the power to amend this
Declaration of Trust, at any time and from time to time, in such manner as the
Trustees may determine in their sole discretion, without the need for
Shareholder action, so as to add to, delete, replace or otherwise modify any
provisions relating to the Shares contained in this Declaration of Trust,
provided that before adopting any such amendment without Shareholder approval
the Trustees shall determine that it is consistent with the fair and equitable
treatment of all Shareholders or that Shareholder approval is not otherwise
required by the 1940 Act or other applicable law.
Without limiting the generality of the foregoing, the Trustees may,
for the above-stated purposes, amend the Declaration of Trust to:
(a) create one or more Series of Shares (in addition to
any Series already existing or otherwise) with such rights and
preferences and such eligibility requirements for investment
therein as the Trustees shall determine and reclassify any or all
outstanding Shares as shares of
<PAGE>
particular Series in accordance with such eligibility
requirements;
(b) amend any of the provisions set forth in Section
5.11 of this Article V;
(c) combine one or more Series of Shares into a
single Series on such terms and conditions as the Trustees
shall determine;
(d) change or eliminate any eligibility requirements for
investment in Shares of any Series, including without limitation,
to provide for the issue of Shares of any Series in connection with
any merger or consolidation of the Trust with another Trust or
company or any acquisition by the Trust of part or all of the
assets of another trust or investment company;
(e) change the designation of any Series of Shares;
(f) change the method of allocating dividends among
the various Series of Shares;
(g) allocate any specific assets or liabilities of
the Trust or any specific items of income or expense of
the Trust to one or more Series of Shares;
(h) specifically allocate assets to any or all Series of
Shares or create one or more additional Series of Shares which are
preferred over all other Series of Shares in respect of assets
specifically allocated thereto or any dividends paid by the Trust
with respect to any net income, however determined, earned from the
investment and reinvestment of any assets so allocated or otherwise
and
<PAGE>
provide for any special voting or other rights with
respect to such Series.
ARTICLE VI
REDEMPTION AND REPURCHASE OF SHARES
SECTION 6.1. REDEMPTION OF SHARES. All Shares of the
Trust shall be redeemable at the redemption price determined in
the manner set out in this Declaration. Redeemed or repurchased
Shares may be resold by the Trust.
The Trust shall redeem the Shares at the price determined as
hereinafter set forth, upon the appropriately verified written application of
the record holder thereof (or upon such other form of request as the Trustees
may determine) at such office or agency as may be designated from time to time
for that purpose by the Trustees. The Trustees may from time to time specify
additional conditions, not inconsistent with the 1940 Act, regarding the
redemption of Shares in the Trust's then effective registration statement or
prospectus under the Securities Act of 1933.
SECTION 6.2. PRICE. Shares will be redeemed at their net asset
value determined as set forth in Section 7.1 hereof as of such time as the
Trustees shall have theretofore prescribed by resolution. In the absence of such
resolution, the redemption price of Shares deposited shall be the net asset
value of such Shares next determined as set forth in Section 7.1 hereof after
receipt of such application.
SECTION 6.3. PAYMENT. Payment for such Shares shall be
made in cash or in property out of the assets of the relevant
series of the Trust to the Shareholder of record at such time and
<PAGE>
in the manner, not inconsistent with the 1940 Act or other applicable laws, as
may be specified from time to time in the Trust's then effective registration
statement or prospectus under the Securities Act of 1933, subject to the
provisions of Section 6.4 hereof.
SECTION 6.4. EFFECT OF SUSPENSION OF DETERMINATION OF NET ASSET
VALUE. If, pursuant to Section 6.9 hereof, the Trustees shall declare a
suspension of the determination of net asset value, the rights of Shareholders
(including those who shall have applied for redemption pursuant to Section 6.1
hereof but who shall not yet have received payment) to have Shares redeemed and
paid for by the Trust shall be suspended until the termination of such
suspension is declared. Any record holder who shall have his redemption right so
suspended may, during the period of such suspension, by appropriate written
notice of revocation at the office or agency where application was made, revoke
any application for redemption not honored and withdraw any certificates on
deposit. The redemption price of Shares for which redemption applications have
not been revoked shall be the net asset value of such Shares next determined as
set forth in Section 7.1 after the termination of such suspension, and payment
shall be made within seven (7) days after the date upon which the application
was made plus the period after such application during which the determination
of net asset value was suspended.
SECTION 6.5. REPURCHASE BY AGREEMENT. The Trust may
repurchase Shares directly, or through the Distributor or another
agent designated for the purpose, by agreement with the owner
thereof at a price not exceeding the net asset value per share
<PAGE>
determined as of the time when the purchase or contract of purchase is made or
the net asset value as of any time which may be later determined pursuant to
Section 7.1 hereof, provided payment is not made for the Shares prior to the
time as of which such net asset value is determined.
SECTION 6.6. REDEMPTION OF SHAREHOLDER'S INTEREST. The Trust shall
have the right at any time to redeem Shares of any Shareholder for their then
current net asset value per Share if at such time the aggregate purchase price
of the Shares owned by the Shareholder is less than $500, subject to such terms
and conditions as the Trustees may approve.
SECTION 6.7. REDEMPTION OF SHARES IN ORDER TO QUALIFY AS REGULATED
INVESTMENT COMPANY; DISCLOSURE OF HOLDING. If the Trustees shall, at any time
and in good faith, be of the opinion that direct or indirect ownership of Shares
or other securities of the Trust has or may become concentrated in any Person to
an extent which would disqualify any series of the Trust as a regulated
investment company under the Internal Revenue Code, then the Trustees shall have
the power by lot or other means deemed equitable by them (i) to call for
redemption by any such Person of a number, or principal amount, of Shares or
other securities of the Trust sufficient to maintain or bring the direct or
indirect ownership of Shares or other securities of the Trust into conformity
with the requirements for such qualification and (ii) to refuse to transfer or
issue Shares or other securities of the Trust to any Person whose acquisition of
the Shares or other securities of the Trust in question would result in such
disqualification. The redemption shall be
<PAGE>
effected at the redemption price and in the manner provided in
Section 6.1.
The holders of Shares of the Trust shall upon demand disclose to
the Trustees in writing such information with respect to direct and indirect
ownership of Shares of the Trust as the Trustees may deem necessary to comply
with the provisions of the Internal Revenue Code, or to comply with the
requirements of any other taxing authority.
SECTION 6.8. REDUCTIONS IN NUMBER OF OUTSTANDING SHARES PURSUANT TO
NET ASSET VALUE FORMULA. The Trust may also reduce the number of outstanding
Shares pursuant to the provisions of Section 7.3.
SECTION 6.9. SUSPENSION OF RIGHT OF REDEMPTION. The Trustees may
adopt procedures under which the Trust may declare a suspension of the right of
redemption or postpone the date of payment or redemption for the whole or any
part of any period (i) during which the New York Stock Exchange is closed other
than customary weekend and holiday closings, (ii) during which trading on the
New York Stock Exchange is restricted, (iii) during which an emergency exists as
a result of which disposal by the Trust of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the Trust fairly
to determine the value of its net assets, or (iv) during any other period when
the Commission may for the protection of security holders of the Trust by order
permit suspension of the right of redemption or postponement of the date of
payment or redemption; provided that applicable rules and regulations of the
Commission shall govern as to whether the conditions prescribed in (ii), (iii),
or (iv)
<PAGE>
exist. To the extent permitted by the Commission, (i) and (ii) above may be
expanded to include other securities exchanges. Such suspension shall take
effect at such time as the Trust shall specify and there shall be no right of
redemption or payment on redemption until the Trust shall declare the suspension
at an end.
ARTICLE VII
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS
SECTION 7.1. NET ASSET VALUE. The value of the assets of any series
of the Trust shall be determined by appraisal of the securities allocated to
such series, such appraisal to be on the basis of the market value of such
securities or, consistent with the rules and regulations of the Commission, by
such other method as shall be deemed to reflect the fair value thereof,
determined in good faith by or under the direction of the Trustees. Money market
instruments with remaining maturities of less than sixty days shall be valued on
an amortized cost basis. From the total value of said assets, there shall be
deducted all indebtedness, interest, taxes, payable or accrued, including
estimated taxes on unrealized book profits, expenses and management charges
accrued to the appraisal date, net income determined and declared as a
distribution and all other items in the nature of liabilities attributable to
such series which shall be deemed appropriate. The resulting amount which shall
represent the total net assets of the series shall be divided by the number of
Shares of such series outstanding at the time and the quotient so obtained shall
<PAGE>
be deemed to be the net asset value of the Shares of such series (which may be
rounded to the nearest whole cent). The net asset value of the Shares shall be
determined at least once daily on such days and in accordance with the
requirements provided for in applicable rules of the Commission, at such time or
times as the Trustees shall determine. The power and duty to make the daily
calculations may be delegated by the Trustees to the Investment Adviser, the
Custodian, the Business Manager, the Transfer Agent or such other Person as the
Trustees may determine. The Trustees may suspend the daily determination of net
asset value to the extent permitted by the 1940 Act.
SECTION 7.2. DISTRIBUTIONS TO SHAREHOLDERS. The Trustees shall from
time to time distribute ratably among the Shareholders of a series such
proportion of the net profits, surplus (including paid-in surplus), capital, or
assets of such series held by the Trustees as they may deem proper. Such
distributions may be made in cash or property (including without limitation any
type of obligations of such series or any assets thereof), and the Trustees may
distribute ratably among the Shareholders additional Shares of such series
issuable hereunder in such manner, at such times, and on such terms as the
Trustees may deem proper. Such distributions may be among the Shareholders of
record at the time of declaring a distribution or among the Shareholders of
record at such other date or time or dates or times as the Trustees shall
determine. The Trustees may in their discretion determine that, solely for the
purposes of such distributions, Outstanding Shares shall exclude Shares for
which orders have been placed subsequent to a specified time on the
<PAGE>
date the distribution is declared or on the next preceding day if the
distribution is declared as of a day on which the Transfer Agent for the Trust
or applicable series is not open for business. The Trustees may always retain
from the net profits such amount as they may deem necessary to pay the debts or
expenses of the series or to meet obligations of the series, or as they may deem
desirable to use in the conduct of its affairs or to retain for future
requirements or extensions of the business.
Inasmuch as the computation of net income and gains for Federal
income tax purposes may vary from the computation thereof on the books, the
above provisions shall be interpreted to give the Trustees the power in their
discretion to distribute for any fiscal year as ordinary dividends and as
capital gains distributions, respectively, additional or lesser amounts
sufficient to enable the Trust or the series to avoid or reduce liability for
taxes.
SECTION 7.3. DETERMINATION OF NET INCOME. The net income of any
series may consist of (i) all dividend and interest income accrued on portfolio
assets of the series, less (ii) all actual and accrued liabilities determined in
accordance with generally accepted accounting principles and plus or minus (iii)
net realized or net unrealized gains and losses on the assets of the series.
Interest income may include discount earned (including both original issue and
market discount) on discount paper accrued ratably to the date of maturity or
determined in such other manner as the Trustees may determine. Expenses of the
series, including the advisory or management fee, shall be
<PAGE>
accrued each day. Such net income may be determined by or under the direction of
the Trustees as of such time or times as the Trustees shall determine, and all
the net income of the series, so determined, may be declared as a dividend on
the Outstanding Shares of such series. If, for any reason, the net income of the
series determined at any time is a negative amount, the Trustees shall have the
power (i) to offset each Shareholder's pro rata share of such negative amount
from the accrued dividend account of such Shareholder, or (ii) to reduce the
number of Outstanding Shares of the series by reducing the number of Shares in
the account of such Shareholder by that number of full and fractional Shares
which represents the amount of such excess negative net income, or (iii) to
cause to be recorded on the books of the series an asset account in the amount
of such negative net income, which account may be reduced by the amount,
provided that the same shall thereupon become the property of the series and
shall not be paid to any Shareholder, of dividends declared thereafter upon the
Outstanding Shares on the day such negative net income is experienced, until
such asset account is reduced to zero; or (iv) to combine the methods described
in clauses (i) and (ii) and (iii) of this sentence, in order to cause the net
asset value per Share of the series to remain at a constant amount per
Outstanding Share immediately after each such determination and declaration. The
Trustees shall also have the power to omit to declare a dividend out of net
income for the purpose of causing the net asset value per Share of the series to
be increased to a constant amount. The Trustees shall not be required to adopt,
but may at any time adopt, discontinue or amend a practice of
<PAGE>
maintaining the net asset value per Share of a series at a constant amount, in
accordance with applicable rules under the 1940 Act.
SECTION 7.4. ALLOCATION BETWEEN PRINCIPAL AND INCOME. The Trustees
shall have full discretion to determine whether any cash or property received
shall be treated as income or as principal and whether any item of expense shall
be charged to the income or the principal account, and their determination made
in good faith shall be conclusive. In the case of stock dividends received, the
Trustees shall have full discretion to determine, in the light of the particular
circumstances, how much if any of the value thereof shall be treated as income,
the balance, if any, to be treated as principal.
SECTION 7.5. POWER TO MODIFY FOREGOING PROCEDURES. Notwithstanding
any of the foregoing provisions of this Article VII, the Trustees may prescribe,
in their absolute discretion, such other bases and times for determining the per
Share net asset value of the series' Shares or net income, or the declaration
and payment of dividends and distributions as they may deem necessary or
desirable.
ARTICLE VIII
DURATION; TERMINATION OF TRUST;
AMENDMENT; MERGERS, ETC.
SECTION 8.1. DURATION. The Trust or any series of the
Trust shall continue without limitation of time but subject to
the provisions of this Article VIII.
SECTION 8.2. TERMINATION OF TRUST OR SERIES OF THE TRUST.
(a) The Trust or any series of the Trust may be terminated by
<PAGE>
the affirmative vote of the holders of not less than two-thirds of the Shares
outstanding and entitled to vote, at any meeting of Shareholders or by an
instrument in writing, without a meeting, signed by a majority of the Trustees
and consented to by the holders of not less than two-thirds of such Shares, or
by such other vote as may be established by the Trustees with respect to any
series of Shares. Upon the termination of the Trust or any series of the Trust,
(i) The Trust or the series of the Trust shall carry on no
business except for the purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of
the Trust or the series of the Trust and all of the powers of the
Trustees under this Declaration shall continue until the affairs of
the Trust or the series of the Trust shall have been wound up,
including the power to fulfill or discharge the contracts of the
Trustees on behalf of the Trust or any series of the Trust, collect
its assets, sell, convey, assign, exchange, transfer or otherwise
dispose of all or any part of the remaining Trust Property or
property of the series of the Trust to one or more persons at
public or private sale for consideration which may consist in whole
or in part of cash, securities or other property of any kind,
discharge or pay its liabilities, and do all other acts appropriate
to liquidate its business; provided that any sale, conveyance,
assignment, exchange, transfer or other disposition of all or
substantially all the Trust Property
<PAGE>
or property of the series of the Trust shall require Shareholder
approval in accordance with Section 8.4 hereof.
(iii) After paying or adequately providing for the payment
of all liabilities, and upon receipt of such releases, indemnities
and refunding agreements as they deem necessary for their
protection, the Trustees may distribute the remaining Trust
Property, in cash or in kind or partly each, among the Shareholders
according to their respective rights.
(b) After termination of the Trust or any series of
the Trust and distribution to the Shareholders as herein provided, a majority of
the Trustees shall execute and lodge among the records of the Trust or the
series of the Trust an instrument in writing setting forth the fact of such
termination, and the Trustees shall thereupon be discharged from all further
liabilities and duties hereunder, and the rights and interests of all
Shareholders shall thereupon cease.
SECTION 8.3. AMENDMENT PROCEDURE. (a) This Declaration may be
amended by a vote of the holders of a majority of the Shares outstanding and
entitled to vote or by any instrument in writing, without a meeting, signed by a
majority of the Trustees and consented to by the holders of a majority of the
Shares outstanding and entitled to vote. The Trustees may also amend this
Declaration without the vote or consent of Shareholders to change the name of
the Trust, to supply any omission, to cure, correct or supplement any ambiguous,
defective or inconsistent provision hereof, or if they deem it necessary to
conform this
<PAGE>
Declaration to the requirements of applicable federal laws or regulations or the
requirements of the regulated investment company provisions of the Internal
Revenue Code, but the Trustees shall not be liable for failing so to do.
(b) No amendment may be made under this Section 8.3
which would change any rights with respect to any Shares of the Trust by
reducing the amount payable thereon upon liquidation of the Trust or by
diminishing or eliminating any voting rights pertaining thereto, except with the
vote or consent of the holders of two-thirds of the Shares outstanding and
entitled to vote, or by such other vote as may be established by the Trustees
with respect to any series of Shares. Nothing contained in this Declaration
shall permit the amendment of this Declaration to impair the exemption from
personal liability of the Shareholders, Trustees, officers, employees and agents
of the Trust or to permit assessments upon Shareholders.
(c) A certificate signed by a majority of the
Trustees setting forth an amendment and reciting that it was duly adopted by the
Shareholders or by the Trustees as aforesaid or a copy of the Declaration, as
amended, and executed by a majority of the Trustees, shall be conclusive
evidence of such amendment when lodged among the records of the Trust.
Notwithstanding any other provision hereof, until such time as a
Registration Statement under the Securities Act of 1933, as amended, covering
the first public offering of securities of the Trust shall become effective,
this Declaration may be terminated or amended in any respect by the affirmative
<PAGE>
vote of a majority of the Trustees or by an instrument signed by
a majority of the Trustees.
SECTION 8.4. MERGER, CONSOLIDATION AND SALE OF ASSETS. The Trust
may merge or consolidate with any other corporation, association, trust or other
organization or may sell, lease or exchange all or substantially all of the
Trust Property, including its good will, upon such terms and conditions and for
such consideration when and as authorized at any meeting of Shareholders called
for the purpose by the affirmative vote of the holders of two-thirds of the
Shares outstanding and entitled to vote, or by an instrument or instruments in
writing without a meeting, consented to by the holders of two-thirds of the
Shares or by such other vote as may be established by the Trustees with respect
to any series of Shares; provided, however, that, if such merger, consolidation,
sale, lease or exchange is recommended by the Trustees, the vote or written
consent of the holders of a majority of the Shares outstanding and entitled to
vote, or such other vote or written consent as may be established by the
Trustees with respect to any series of Shares, shall be sufficient
authorization; and any such merger, consolidation, sale, lease or exchange shall
be deemed for all purposes to have been accomplished under and pursuant to the
statutes of the Commonwealth of Massachusetts.
SECTION 8.5. INCORPORATION. With the approval of the
holders of a majority of the Shares outstanding and entitled to
vote, or by such other vote as may be established by the Trustees
with respect to any series of Shares, the Trustees may cause to
be organized or assist in organizing a corporation or
<PAGE>
corporations under the laws of any jurisdiction or any other trust, partnership,
association or other organization to take over all of the Trust Property or to
carry on any business in which the Trust shall directly or indirectly have any
interest, and to sell, convey and transfer the Trust Property to any such
corporation, trust, association or organization in exchange for the Shares or
securities thereof or otherwise, and to lend money to, subscribe for the Shares
or securities of, and enter into any contracts with any such corporation, trust,
partnership, association or organization, or any corporation, partnership,
trust, association or organization in which the Trust holds or is about to
acquire shares or any other interest. The Trustees may also cause a merger or
consolidation between the Trust or any successor thereto and any such
corporation, trust, partnership, association or other organization if and to the
extent permitted by law, as provided under the law then in effect. Nothing
contained herein shall be construed as requiring approval of Shareholders for
the Trustees to organize or assist in organizing one or more corporations,
trusts, partnerships, associations or other organizations and selling, conveying
or transferring a portion of the Trust Property for value to such organizations
or entities.
ARTICLE IX
REPORTS TO SHAREHOLDERS
The Trustees shall at least semi-annually submit to the
Shareholders a written financial report, which may be included in the Trust's
prospectus, of the transactions of the Trust,
<PAGE>
including financial statements which shall at least annually be certified by
independent public accountants.
ARTICLE X
MISCELLANEOUS
mendment hereto
SECTION 10.1. FILING. This Declaration and any amendment hereto
shall be filed in the office of the Secretary of the Commonwealth of
Massachusetts and in such other places as may be required under the laws of
Massachusetts and may also be filed or recorded in such other places as the
Trustees deem appropriate. Each amendment so filed shall be accompanied by a
certificate signed and acknowledged by a Trustee stating that such action was
duly taken in a manner provided herein, and unless such amendment or such
certificate sets forth some later time for the effectiveness of such amendment,
such amendment shall be effective upon its filing. A restated Declaration,
integrating into a single instrument all of the provisions of the Declaration
which are then in effect and operative, may be executed from time to time by a
majority of the Trustees and shall, upon filing with the Secretary of the
Commonwealth of Massachusetts, be conclusive evidence of all amendments
contained therein and may hereafter be referred to in lieu of the original
Declaration and the various amendments thereto.
SECTION 10.2. GOVERNING LAW. This Declaration is executed by the
Trustees and delivered in the Commonwealth of Massachusetts and with reference
to the laws thereof, and the rights of all parties and the validity and
construction of every provision hereof shall be subject to and construed
according to the laws of said State.
<PAGE>
SECTION 10.3. COUNTERPARTS. This Declaration may be simultaneously
executed in several counterparts, each of which shall be deemed to be an
original, and such counterparts, together, shall constitute one and the same
instrument, which shall be sufficiently evidenced by any such original
counterpart.
SECTION 10.4. RELIANCE BY THIRD PARTIES. Any certificate executed
by an individual who, according to the records of the Trust appears to be a
Trustee hereunder, certifying to: (a) the number or identity of Trustees or
Shareholders, (b) the due authorization of the execution of any instrument or
writing, (c) the form of any vote passed at a meeting of Trustees or
Shareholders, (d) the fact that the number of Trustees or Shareholders present
at any meeting or executing any written instrument satisfies the requirements of
this Declaration, (e) the form of any By-laws adopted by or the identity of any
officers elected by the Trustees, or (f) the existence of any fact or facts
which in any manner relate to the affairs of the Trust, shall be conclusive
evidence as to the matters so certified in favor of any Person entitled to rely
upon such certificates in dealing with the Trustees and their successors.
SECTION 10.5. PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS. (a)
The provisions of this Declaration are severable, and if the Trustees shall
determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the Internal Revenue Code or with other applicable
laws and regulations, the conflicting provision shall be deemed never to have
constituted a part of this Declaration; provided, however, that such
determination shall not affect any of the
<PAGE>
remaining provisions of this Declaration or render invalid or improper any
action taken or omitted prior to such determination.
(b) If any provision of this Declaration shall be
held invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision in such jurisdiction and
shall not in any manner affect such provisions in any other jurisdiction or any
other provision of this Declaration in any jurisdiction.
SECTION 10.6. NAME RESERVATION. The Trustees on behalf of the Trust
acknowledge that Templeton Investment Counsel, Inc. ("TICI") licensed to the
Trust the non-exclusive right to use the name "Templeton" as part of the name of
the Trust, and has reserved the right to grant the non-exclusive use of the name
"Templeton" or any derivative thereof to any other party. In addition, TICI
reserves the right to grant the non-exclusive use of the name Templeton to, and
to withdraw such right from, any other business or other enterprise. TICI
reserves the right to withdraw from the Trust the right to use said name
Templeton and will withdraw such right if the Trust ceases to employ, for any
reason, TICI, an affiliate or any successor as adviser of the Trust.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this
instrument this 16th day of June, 1986.
-----------------------------
On this _____ day of _____________, in the year 1986, before me,
___________________, a notary public, personally appeared
___________________________________________ (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to this
instrument, and acknowledged that he executed it.
-----------------------------
Notary Public
SEAL
My commission expires:
<PAGE>
IBM/PC DOCUMENT COVER SHEET
FINAL NO: 1
TITLE: DECLARATION OF TRUST
DOCUMENT NAME: PCTIN011.TXT
DISK NAME: TEMPLETON INCOME FUND #1
DATE: 06/12/86
ORIGINATING ATTORNEY: KWVandivort
OPERATOR NAME: Lori Micken
<PAGE>
FIRST AMENDMENT TO
DECLARATION OF TRUST
OF
TEMPLETON INCOME FUND
This First Amendment to the Declaration of Trust
("Declaration") of Templeton Income Fund (the "Trust") is made this 30th day of
September, 1987 by the parties signatory hereto, as Trustees of the Trust (the
"Trustees").
WITNESSETH
WHEREAS, the Declaration was made on June 16, 1986 and the
Trustees now desire to amend the Declaration and change the name of the Trust;
and
WHEREAS, Article VIII, Section 8.3(a) of the Declaration
provides that the Trustees may amend the Declaration without the vote or consent
of Shareholders to change the name of the Trust by an instrument signed by a
majority of the Trustees;
NOW, THEREFORE, the Trustees hereby declare that Article I,
Section 1.1 and Article I, Section 1.2(l) be amended to read as follows:
SECTION 1.1. NAME. The name of the trust
created hereby, unless and until changed by
the Trustees as provided in Section 8.3(a)
<PAGE>
hereof, is "Templeton Income Trust."
SECTION 1.2. DEFINITIONS.
(l) The "TRUST" means Templeton Income Trust.
IN WITNESS WHEREOF, the undersigned have executed this
instrument this 30th day of September, 1987.
/s/JOHN M. TEMPLETON, JR.
John M. Templeton, Jr.
/s/HASSO-G VON DIERGARDT
Hasso-G von Diergardt
/s/JOHN WM. GALBRAITH
John Wm. Galbraith
/s/F. BRUCE CLARKE
F. Bruce Clarke
/s/JAMES I. MCCORD
James I. McCord
/s/LEROY C. PASLAY
LeRoy C. Paslay
<PAGE>
CERTIFICATE
Pursuant to Section 10.1 of the Declaration, the undersigned
Trustees hereby acknowledge and certify that this First Amendment of the
Declaration of Trust of Templeton Income Fund is made in accordance with the
provisions of the Declaration, and shall be effective upon its filing with the
Secretary of the Commonwealth of Massachusetts.
/s/JOHN M. TEMPLETON, JR.
John M. Templeton, Jr.
/s/JOHN WM. GALBRAITH
John Wm. Galbraith
/s/F. BRUCE CLARKE
F. Bruce Clarke
/s/JAMES I. MCCORD
James I. McCord
/s/LEROY C. PASLAY
LeRoy C. Paslay
/s/HASSO-G VON DIERGARDT
Hasso-G von Diergardt
<PAGE>
State of Florida :
:
County of :
September 30, 1987
There personally appeared before me John M. Templeton, Jr.,
who acknowledged the foregoing instrument to be his free act and deed.
------------------------------
Notary Public
My Commission expires:
<PAGE>
State of Florida :
:
County of :
September 30, 1987
There personally appeared before me John Wm. Galbraith who
acknowledged the foregoing instrument to be his free act and deed.
------------------------------
Notary Public
My Commission expires:
<PAGE>
State of Florida :
:
County of :
September 30, 1987
There personally appeared before me F. Bruce Clarke who
acknowledged the foregoing instrument to be his free act and deed.
------------------------------
Notary Public
My Commission expires:
<PAGE>
State of Florida :
:
County of :
September 30, 1987
There personally appeared before me James I. McCord who
acknowledged the foregoing instrument to be his free act and deed.
------------------------------
Notary Public
My Commission expires:
<PAGE>
State of Florida :
:
County of :
September 30, 1987
There personally appeared before me LeRoy C. Paslay who
acknowledged the foregoing instrument to be his free act and deed.
------------------------------
Notary Public
My Commission expires:
<PAGE>
State of Florida :
:
County of :
September 30, 1987
There personally appeared before me Hasso-G von Diergardt who
acknowledged the foregoing instrument to be his free act and deed.
------------------------------
Notary Public
My Commission expires:
BY-LAWS
OF
TEMPLETON INCOME TRUST
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TABLE OF CONTENTS
PAGE
ARTICLE I - DEFINITIONS 1
ARTICLE II - OFFICES 1
Section 1. Resident Agent 1
Section 2. Offices 1
ARTICLE III - SHAREHOLDERS 2
Section 1. Meetings 2
Section 2. Notice of Meetings 2
Section 3. Record Date for Meetings
and Other Purposes 2
Section 4. Proxies 3
Section 5. Action without Meeting 4
ARTICLE IV - TRUSTEES 5
Section 1. Meetings of the Trustees 5
Section 2. Quorum and Manner of Acting 6
ARTICLE V - COMMITTEES 6
Section 1. Executive and Other Committees 6
Section 2. Meetings, Quorum and Manner of Acting 7
ARTICLE VI - OFFICERS 8
Section 1. General Provisions 8
Section 2. Term of Office and Qualifications 8
Section 3. Removal 9
Section 4. Powers and Duties of the President 9
Section 5. Powers and Duties of Vice Presidents 10
Section 6. Powers and Duties of the Treasurer 10
Section 7. Powers and Duties of the Secretary 10
Section 8. Powers and Duties of Assistant
Treasurers 11
Section 9. Powers and Duties of Assistant
Secretaries 11
Section 10. Compensation of Officers and Trustees
and Members of the Advisory Board 11
ARTICLE VII - FISCAL YEAR 12
ARTICLE VIII - SEAL 12
ARTICLE IX - WAIVERS OF NOTICE 12
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TABLE OF CONTENTS (continued)
PAGE
ARTICLE X - CUSTODY OF SECURITIES 13
Section 1. Employment of a Custodian 13
Section 2. Action Upon Termination of
Custodian Agreement 13
Section 3. Provisions of Custodian Agreement 14
Section 4. Central Certificate System 15
Section 5. Acceptance of Receipts in Lieu of
Certificates 16
ARTICLE XI - AMENDMENTS 16
ARTICLE XII - INSPECTION OF BOOKS 17
ARTICLE XIII - MISCELLANEOUS 17
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<PAGE>
BY-LAWS
OF
TEMPLETON INCOME TRUST
AMENDED AND RESTATED AS OF JULY 29, 1992
ARTICLE I
DEFINITIONS
Any terms defined in the Declaration of Trust of Templeton
Income Trust dated June 16, 1986, as amended from time to time, shall have the
same meaning when used herein.
ARTICLE II
OFFICES
SECTION 1. RESIDENT AGENT. The Trust shall maintain a resident
agent in the Commonwealth of Massachusetts, which agent shall initially be CT
Corporation System, 2 Oliver Street, Boston, Massachusetts 02109. The Trustees
may designate a successor resident agent, provided, however, that such
appointment shall not become effective until written notice thereof is delivered
to the office of the Secretary of the Commonwealth.
SECTION 2. OFFICES. The Trust may have its principal
office and other offices in such places within as well as without
the Commonwealth as the Trustees may from time to time determine.
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ARTICLE III
SHAREHOLDERS
SECTION 1. MEETINGS. Meetings of the Shareholders shall be
held as provided in the Declaration of Trust at such place within or without the
Commonwealth of Massachusetts as the Trustees shall designate. The holders of a
majority of outstanding Shares present in person or by proxy shall constitute a
quorum at any meeting of the Shareholders.
SECTION 2. NOTICE OF MEETINGS. Notice of all meetings of the
Shareholders, stating the time, place and purposes of the meeting, shall be
given by the Trustees by mail to each Shareholder at his address as recorded on
the register of the Trust mailed at least ten (10) days and not more than sixty
(60) days before the meeting. Only the business stated in the notice of the
meeting shall be considered at such meeting. Any adjourned meeting may be held
as adjourned without further notice. No notice need be given to any Shareholder
who shall have failed to inform the Trust of his current address or if a written
waiver of notice, executed before or after the meeting by the Shareholder or his
attorney thereunto authorized, is filed with the records of the meeting.
SECTION 3. RECORD DATE FOR MEETINGS AND OTHER
PURPOSES. For the purpose of determining the Shareholders who
are entitled to notice of and to vote at any meeting, or to
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participate in any distribution, or for the purpose of any other action, the
Trustees may from time to time close the transfer books for such period, not
exceeding thirty (30) days, as the Trustees may determine; or without closing
the transfer books the Trustees may fix a date not more than ninety (90) days
prior to the date of any meeting of Shareholders or distribution or other action
as a record date for the determinations of the persons to be treated as
Shareholders of record for such purposes, subject to the provisions of the
Declaration.
SECTION 4. PROXIES. At any meeting of Shareholders, any holder
of Shares entitled to vote thereat may vote by proxy, provided that no proxy
shall be voted at any meeting unless it shall have been placed on file with the
Secretary, or with such other officer or agent of the Trust as the Secretary may
direct, for verification prior to the time at which such vote shall be taken.
Proxies may be solicited in the name of one or more Trustees or one or more of
the officers of the Trust. Only Shareholders of record shall be entitled to
vote. Each whole share shall be entitled to one vote as to any matter on which
it is entitled by the Declaration to vote, and each fractional Share shall be
entitled to a proportionate fractional vote. When any Share is held jointly by
several persons, any one of them may vote at any meeting in person or by proxy
in respect of such Share, but if more than one of them shall be present at such
meeting in person or by proxy, and such joint owners or their
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proxies so present disagree as to any vote to be cast, such vote shall not be
received in respect of such Share. A proxy purporting to be executed by or on
behalf of a Shareholder shall be deemed valid unless challenged at or prior to
its exercise, and the burden of proving invalidity shall rest on the challenger.
If the holder of any such Share is a minor or legally incompetent, and subject
to guardianship or the legal control of any other person as regards the charge
or management of such Share, he may vote by his guardian or such other person
appointed or having such control, and such vote may be given in person or by
proxy.
SECTION 5. ACTION WITHOUT MEETING. Any action which may be taken by
Shareholders may be taken without a meeting if a majority of Shareholders
entitled to vote on the matter (or such larger proportion thereof as shall be
required by law, the Declaration or these By-Laws for approval of such matter)
consent to the action in writing and the written consents are filed with the
records of the meetings of Shareholders. Such consents shall be treated for all
purposes as a vote taken at a meeting of Shareholders.
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ARTICLE IV
TRUSTEES
SECTION 1. MEETINGS OF THE TRUSTEES. The Trustees may in their
discretion provide for regular or stated meetings of the Trustees. Notice of
regular or stated meetings need not be given. Meetings of the Trustees other
than regular or stated meetings shall be held whenever called by the President,
or by any one of the Trustees, at the time being in office. Notice of the time
and place of each meeting other than regular or stated meetings shall be given
by the Secretary or an Assistant Secretary or by the officer or Trustee calling
the meeting and shall be mailed to each Trustee at least two days before the
meeting, or shall be telegraphed, cabled, or wirelessed to each Trustee at his
business address, or personally delivered to him at least one day before the
meeting. Such notice may, however, be waived by any Trustee. Notice of a meeting
need not be given to any Trustee if a written waiver of notice, executed by him
before or after the meeting, is filed with the records of the meeting, or to any
Trustee who attends the meeting without protesting prior thereto or at its
commencement the lack of notice to him. A notice or waiver of notice need not
specify the purpose of any meeting. The Trustees may meet by means of a
telephone conference circuit or similar communications equipment by means of
which all persons participating in the meeting shall
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be deemed to have been held at a place designated by the Trustees at the
meeting. Participation in a telephone conference meeting shall constitute
presence in person at such meeting. Any action required or permitted to be taken
at any meeting of the Trustees may be taken by the Trustees without a meeting if
all the Trustees consent to the action in writing and the written consents are
filed with the records of the Trustees' meetings. Such consents shall be treated
as a vote for all purposes.
SECTION 2. QUORUM AND MANNER OF ACTING. A majority of the
Trustees shall be present in person at any regular or special meeting of the
Trustees in order to constitute a quorum for the transaction of business at such
meeting and (except as otherwise required by law, the Declaration or these
By-Laws) the act of a majority of the Trustees present at any such meeting, at
which a quorum is present, shall be the act of the Trustees. In the absence of a
quorum, a majority of the Trustees present may adjourn the meeting from time to
time until a quorum shall be present. Notice of an adjourned meeting need not be
given.
ARTICLE V
COMMITTEES
SECTION 1. EXECUTIVE AND OTHER COMMITTEES. The
Trustees by vote of a majority of all the Trustees may elect from
their own number an Executive Committee to consist of not less
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than three (3) to hold office at the pleasure of the Trustees, which shall have
the power to conduct the current and ordinary business of the Trust while the
Trustees are not in session, including the purchase and sale of securities and
the designation of securities to be delivered upon redemption of Shares of the
Trust, and such other powers of the Trustees as the Trustees may, from time to
time, delegate to them except those powers which by law, the Declaration or
these By-Laws they are prohibited from delegating. The Trustees may also elect
from their own number other Committees from time to time, the number composing
such Committees, the powers conferred upon the same (subject to the same
limitations as with respect to the Executive Committee) and the term of
membership on such Committees to be determined by the Trustees. The Trustees may
designate a chairman of any such Committee. In the absence of such designation,
the Committee may elect its own Chairman.
SECTION 2. MEETINGS, QUORUM AND MANNER OF ACTING. The Trustees
may (1) provide for stated meetings of any Committee, (2) specify the manner of
calling and notice required for special meetings of any Committee, (3) specify
the number of members of a Committee required to constitute a quorum and the
number of members of a Committee required to exercise specified powers delegated
to such Committee, (4) authorize the making of decisions to exercise specified
powers by written assent of the requisite number of members of a Committee
without a meeting, and
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(5) authorize the members of a Committee to meet by means of a
telephone conference circuit.
The Executive Committee shall keep regular minutes of its
meetings and records of decisions taken without a meeting and cause them to be
recorded in a book designated for that purpose and kept in the Office of the
Trust.
ARTICLE VI
OFFICERS
SECTION 1. GENERAL PROVISIONS. The officers of the Trust shall
be a President, a Treasurer and a Secretary, who shall be elected by the
Trustees. The Trustees may elect or appoint such other officers or agents as the
business of the Trust may require, including one or more Executive Vice
Presidents, one or more Vice Presidents, one or more Assistant Secretaries, and
one or more Assistant Treasurers. The Trustees may delegate to any officer or
Committee the power to appoint any subordinate officers or agents.
SECTION 2. TERM OF OFFICE AND QUALIFICATIONS. Except as
otherwise provided by law, the Declaration or these By-Laws, the President, the
Treasurer and the Secretary shall each hold office until his successor shall
have been duly elected and qualified, and all other officers shall hold office
at the pleasure of the Trustees. The Secretary and Treasurer may be the
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same person. A Vice President and the Treasurer or Assistant Treasurer or a Vice
President and the Secretary or Assistant Secretary may be the same person, but
the offices of Vice President and Secretary and Treasurer shall not be held by
the same person. The President shall hold no other office. Except as above
provided, any two offices may be held by the same person. Any officer may be,
but none need be, a Trustee or Shareholder.
SECTION 3. REMOVAL. The Trustees, at any regular or special
meeting of the Trustees, may remove any officer without cause, by a vote of a
majority of the Trustees then in office. Any officer or agent appointed by an
officer or Committee may be removed with or without cause by such appointing
officer or Committee.
SECTION 4. POWERS AND DUTIES OF THE PRESIDENT. The President
may call meetings of the Trustees and of any Committee thereof when he deems it
necessary and shall preside at all meetings of the Shareholders. Subject to the
control of the Trustees and to the control of any Committees of the Trustees,
within their respective spheres, as provided by the Trustees, he shall at all
times exercise a general supervision and direction over the affairs of the
Trust. He shall have the power to employ attorneys and counsel for the Trust and
to employ such subordinate officers, agents, clerks and employees as he may find
necessary to transact the business of the Trust. He shall also
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have the power to grant, issue, execute or sign such powers of attorney, proxies
or other documents as may be deemed advisable or necessary in furtherance of the
interests of the Trust. The President shall have such other powers and duties as
from time to time may be conferred upon or assigned to him by the Trustees.
SECTION 5. POWERS AND DUTIES OF VICE PRESIDENTS. In the
absence or disability of the President, any Vice President designated by the
Trustees shall perform all the duties and may exercise any of the powers of the
President, subject to the control of the Trustees. Each Vice President shall
perform such other duties as may be assigned to him from time to time by the
Trustees and the President.
SECTION 6. POWERS AND DUTIES OF THE TREASURER. The Treasurer
shall be the principal financial and accounting officer of the Trust. He shall
deliver all funds of the Trust which may come into his hands to such Custodian
as the Trustees may employ pursuant to Article X of these By-Laws. He shall in
general perform all the duties incident to the office of Treasurer and such
other duties as from time to time may be assigned to him by the Trustees.
SECTION 7. POWERS AND DUTIES OF THE SECRETARY. The Secretary
shall keep the minutes of all meetings of the Trustees and of the Shareholders
in proper books provided for that purpose; he shall have custody of the seal of
the Trust; he shall have charge of the Share transfer books, lists and records
unless
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the same are in the charge of the Transfer Agent. He shall attend to the giving
and serving of all notices by the Trust in accordance with the provisions of
these By-Laws and as required by law; and subject to these By-Laws, he shall in
general perform all duties incident to the office of Secretary and such other
duties as from time to time may be assigned to him by the Trustees.
SECTION 8. POWERS AND DUTIES OF ASSISTANT TREASURERS. In the
absence or disability of the Treasurer, any Assistant Treasurer designated by
the Trustees shall perform all the duties, and may exercise any of the powers,
of the Treasurer. Each Assistant Treasurer shall perform such other duties as
from time to time may be assigned to him by the Trustees.
SECTION 9. POWERS AND DUTIES OF ASSISTANT SECRETARIES. In the
absence or disability of the Secretary, any Assistant Secretary designated by
the Trustees shall perform all the duties, and may exercise any of the powers,
of the Secretary. Each Assistant Secretary shall perform such other duties as
from time to time may be assigned to him by the Trustees.
SECTION 10. COMPENSATION OF OFFICERS AND TRUSTEES AND MEMBERS
OF THE ADVISORY BOARD. Subject to any applicable provisions of the Declaration,
the compensation of the officers and Trustees and members of any Advisory Board
shall be fixed from time to time by the Trustees or, in the case of officers, by
any Committee or officer upon whom such power may be conferred by
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the Trustees. No officer shall be prevented from receiving such compensation as
such officer by reason of the fact that he is also a Trustee.
ARTICLE VII
FISCAL YEAR
The fiscal year of the Trust shall begin on the first day of
May in each year and shall end on the 30th day of April in each year, provided,
however, that the Trustees may from time to time change the fiscal year.
ARTICLE VIII
SEAL
The Trustees may adopt a seal which shall be in such form and
shall have such inscription thereon as the Trustees may from time to time
prescribe.
ARTICLE IX
WAIVERS OF NOTICE
Whenever any notice is required to be given by law, the
Declaration or these By-Laws, a waiver thereof in writing, signed by the person
or persons entitled to said notice, whether before
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or after the time stated therein, shall be deemed equivalent thereto. A notice
shall be deemed to have been telegraphed, cabled or wirelessed for the purposes
of these By-Laws when it has been delivered to a representative of any
telegraph, cable or wireless company with instructions that it be telegraphed,
cabled or wirelessed.
ARTICLE X
CUSTODY OF SECURITIES
SECTION 1. EMPLOYMENT OF A CUSTODIAN. The Trust shall place
and at all times maintain in the custody of a Custodian (including any
sub-custodian for the Custodian, which may be a foreign bank which meets
applicable requirements of law) all funds, securities and similar investments
included in the Trust Property. The Custodian (and any sub-custodian) shall be a
bank having not less than $2,000,000 aggregate capital, surplus and undivided
profits and shall be appointed from time to time by the Trustees, who shall fix
its remuneration.
SECTION 2. ACTION UPON TERMINATION OF CUSTODIAN AGREEMENT.
Upon termination of a Custodian Agreement or inability of the Custodian to
continue to serve, the Trustees shall promptly appoint a successor custodian,
but in the event that no successor custodian can be found who has the required
qualifications and is willing to serve, the Trustees shall call
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as promptly as possible a special meeting of the Shareholders to determine
whether the Trust shall function without a custodian or shall be liquidated. If
so directed by vote of the holders of a majority of the outstanding voting
securities, the Custodian shall deliver and pay over all Trust Property held by
it as specified in such vote.
SECTION 3. PROVISIONS OF CUSTODIAN AGREEMENT. The following
provisions shall apply to the employment of a Custodian and to any contract
entered into with the Custodian so employed:
The Trustees shall cause to be delivered to the Custodian all
securities included in the Trust Property or to which the
Trust may become entitled, and shall order the same to be
delivered by the Custodian only in completion of a sale,
exchange, transfer, pledge, loan of portfolio securities to
another person, or other disposition thereof, all as the
Trustees may generally or from time to time require or approve
or to a successor Custodian; and the Trustees shall cause all
funds included in the Trust Property or to which it may become
entitled to be paid to the Custodian, and shall order the same
disbursed only for investment against delivery of the
securities acquired, or the return of cash held as collateral
for loans of portfolio securi-ties, or in payment of expenses,
including management compensation, and liabilities of the
Trust, including
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distributions to shareholders, or to a successor
Custodian. In connection with the Trust's purchase or
sale of futures contracts, the Custodian shall trans-
mit, prior to receipt on behalf of the Trust of any
securities or other property, funds from the Trust's
custodian account in order to furnish to and maintain
funds with brokers as margin to guarantee the perform-
ance of the Trust's futures obligations in accordance
with the applicable requirements of commodities
exchanges and brokers.
SECTION 4. CENTRAL CERTIFICATE SYSTEM. Subject
to such rules, regulations and orders as the Commission may adopt, the Trustees
may direct the Custodian to deposit all or any part of the securities owned by
the Trust in a system for the central handling of securities established by a
national securities exchange or a national securities association registered
with the Commission under the Securities Exchange Act of 1934, or such other
person as may be permitted by the Commission, or otherwise in accordance with
the 1940 Act, pursuant to which system all securities of any particular class or
series of any issuer deposited within the system are treated as fungible and may
be transferred or pledged by bookkeeping entry without physical delivery of such
securities, provided that all such deposits shall be subject to withdrawal only
upon the order of the Trust.
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SECTION 5. ACCEPTANCE OF RECEIPTS IN LIEU OF CERTIFICATES.
Subject to such rules, regulations and orders as the Commission may adopt, the
Trustees may direct the Custodian to accept written receipts or other written
evidences indicating purchases of securities held in book-entry form in the
Federal Reserve System in accordance with regulations promulgated by the Board
of Governors of the Federal Reserve System and the local Federal Reserve Banks
in lieu of receipt of certificates representing such securities.
ARTICLE XI
AMENDMENTS
These By-Laws, or any of them, may be altered, amended or
repealed, or new By-Laws may be adopted by (a) vote of a majority of the Shares
outstanding and entitled to vote or (b) the Trustees, provided, however, that no
By-Law may be amended, adopted or repealed by the Trustees if such amendment,
adoption or repeal requires, pursuant to law, the Declaration or these By-Laws,
a vote of the Shareholders.
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ARTICLE XII
INSPECTION OF BOOKS
The Trustees shall from time to time determine whether and to
what extent, and at what times and places, and under what conditions and
regulations the accounts and books of the Trust or any of them shall be open to
the inspection of the shareholders; and no shareholder shall have any right of
inspecting any account or book or document of the Trust except as conferred by
laws or authorized by the Trustees or by resolution of the shareholders.
ARTICLE XIII
MISCELLANEOUS
(A) Except as hereinafter provided, no officer or Trustee of
the Trust and no partner, officer, director or shareholder of the Investment
Adviser of the Trust or of the Distributor of the Trust, and no Investment
Adviser or Distributor of the Trust, shall take long or short positions in the
securities issued by the Trust.
(1) The foregoing provisions shall not prevent the
Distributor from purchasing Shares from the Trust if such
purchases are limited (except for reasonable allowances for
clerical errors, delays and errors of transmission and
cancellation of orders) to purchases
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for the purpose of filling orders for such Shares received by
the Distributor, and provided that orders to purchase from the
Trust are entered with the Trust or the Custodian promptly
upon receipt by the Distributor of purchase orders for such
Shares, unless the Distributor is otherwise instructed by its
customer.
(2) The foregoing provision shall not prevent the
Distributor from purchasing Shares of the Trust as agent for
the account of the Trust.
(3) The foregoing provision shall not prevent the
purchase from the Trust or from the Distributor of Shares
issued by the Trust, by any officer, or Trustee of the Trust
or by any partner, officer, director or shareholder of the
Investment Adviser of the Trust or of the Distributor of the
Trust at the price available to the public generally at the
moment of such purchase, or as described in the then currently
effective Prospectus of the Trust.
(4) The foregoing shall not prevent the Distributor,
or any affiliate thereof, of the Trust from purchasing Shares
prior to the effectiveness of the first registration statement
relating to the Shares under the Securities Act of 1933.
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(B) The Trust shall not lend assets of the Trust to any
officer or Trustee of the Trust, or to any partner, officer, director or
shareholder of, or person financially interested in, the Investment Adviser of
the Trust, or the Distributor of the Trust, or to the Investment Adviser of the
Trust or to the Distributor of the Trust.
(C) The Trust shall not impose any restrictions upon the
transfer of the Shares of the Trust except as provided in the Declaration, but
this requirement shall not prevent the charging of customary transfer agent
fees.
(D) The Trust shall not permit any officer or Trustee of the
Trust, or any partner, officer or director of the Investment Adviser or
Distributor of the Trust to deal for or on behalf of the Trust with himself as
principal or agent, or with any partnership, association or corporation in which
he has a financial interest; provided that the foregoing provisions shall not
prevent (a) officers and Trustees of the Trust or partners, officers or
directors of the Investment Adviser or Distributor of the Trust from buying,
holding or selling shares in the Trust, or from being partners, officers or
directors or otherwise financially interested in the Investment Adviser or
Distributor of the Trust; (b) purchases or sales of securities or other property
by the Trust from or to an affiliated person or to the Investment Adviser or
Distributor of the Trust if such transaction is exempt from the applicable
provisions of the 1940
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Act; (c) purchases of investments for the portfolio of the Trust or sales of
investments owned by the Trust through a security dealer who is, or one or more
of whose partners, shareholders, officers or directors is, an officer or Trustee
of the Trust, or a partner, officer or director of the Investment Adviser or
Distributor of the Trust, if such transactions are handled in the capacity of
broker only and commissions charged do not exceed customary brokerage charges
for such services; (d) employment of legal counsel, registrar, Transfer Agent,
dividend disbursing agent or Custodian who is, or has a partner, shareholder,
officer, or director who is, an officer or Trustee of the Trust, or a partner,
officer or director of the Investment Adviser or Distributor of the Trust, if
only customary fees are charged for services to the Trust; (e) sharing
statistical research, legal and management expenses and office hire and expenses
with any other investment company in which an officer or Trustee of the Trust,
or a partner, officer or director of the Investment Adviser or Distributor of
the Trust, is an officer or director or otherwise financially interested.
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INVESTMENT MANAGEMENT CONTRACT
AGREEMENT made as of the 30th day of October, 1992, and
amended and restated as of the 1st day of April, 1993, and the 6th day of
December, 1994, and the 5th day of December, 1995 between TEMPLETON INCOME
TRUST, a Massachusetts business trust (the "Trust"), on behalf of its series of
shares called TEMPLETON MONEY FUND (the "Fund") and TEMPLETON INVESTMENT
COUNSEL, INC., a Florida corporation (the "Investment Manager").
WHEREAS, this Contract was originally made between the Trust
on behalf of the Fund and Templeton Global Bond Managers, Inc. ("TGBM");
WHEREAS, TGBM is being merged with and into the Investment
Manager in a transaction that will not result in a change of actual control or
management with respect to the Fund's investment management arrangements;
WHEREAS, the purpose of this amendment and restatement is to
identify the Investment Manager as the investment manager hereunder as a result
of said transaction;
NOW THEREFORE, in consideration of the mutual agreements
herein made, the parties hereto understand and agree as follows:
(1) The Investment Manager agrees, during the life of this
Contract, to manage the investment and reinvestment of the Fund's assets
consistent with the provisions of the Trust's Declaration of Trust and the
investment policies adopted and declared by the Trust's Board of Trustees. In
pursuance of the foregoing, the Investment Manager shall make all determinations
with respect to the investment of the Fund's assets and the purchase and sale of
its investment securities, and shall take all such steps as may be necessary to
implement those determinations.
(2) The Investment Manager is not required to furnish any
personnel, overhead items or facilities for the Fund.
(3) The Investment Manager shall be responsible for selecting
members of securities exchanges, brokers and dealers (such members, brokers and
dealers being hereinafter referred to as "brokers") for the execution of the
Fund's portfolio transactions and, when applicable, the negotiation of
commissions in connection therewith.
All recommendations, decisions and placements shall be made in
accordance with the following principles:
1. Purchase and sale orders will usually be placed with
brokers which are selected by the Investment Manager as able
to achieve "best execution" of such orders. "Best execution"
shall mean prompt and reliable execution at the most favorable
security price, taking into account the other provisions as
hereinafter set forth. The determination of what may
constitute best execution and price in the execution of a
securities transaction by a broker involves a number of
considerations, including, without limitation, the overall
direct net economic result to the Fund (involving both price
paid or received and any commissions and other costs paid),
the efficiency with which the transaction is effected, the
ability to effect the transaction at all where a large block
is involved, availability of the broker to stand ready to
execute possibly difficult transactions in the future, and the
financial strength and stability of the broker. Such
considerations are judgmental and are weighed by the
Investment Manager in determining the overall reasonableness
of brokerage commissions; 2. In selecting brokers for
portfolio transactions, the Investment Manager shall take into
account its experience as to brokers qualified to achieve
"execution," including brokers who specialize in any foreign
securities held by the Fund; 3. The Investment Manager is
authorized to allocate brokerage business to brokers who have
provided brokerage and research services, as such services are
defined in Section 28(e)(3) of the Securities Exchange Act of
1934 (the "1934 Act"), for the Fund and/or other accounts, if
any, for which the Investment exercises investment discretion
(as defined in Section 3(a)(35) of the 1934 Act) and, as to
transactions as to which fixed minimum commission rates are
applicable, to cause the Fund to pay a commission for
effecting a securities transaction in excess of the amount
another broker would have charged for that transaction, if the
Investment Manager in making the selection in question
determines in good faith that such amount of commission is
reasonable in relation to the value of the brokerage and
research services provided by such broker, viewed in terms of
either particular transaction or the Investment overall
responsibilities with respect to the Fund and the other
accounts, if any, as to which it exercises investment
discretion. In reaching such determination, the Investment
Manager will not be required to place or attempt to place a
specific dollar value on research or execution services of a
broker or on the portion of any commission reflecting either
of said services. In demonstrating that such determinations
were made in good faith, the Investment Manager shall be
prepared to show that all commissions were allocated and paid
for purposes contemplated by the Fund's brokerage policy; that
the research services provide lawful and appropriate
assistance to the Investment Manager in the performance of its
investment decision - making responsibilities; and that the
commissions paid were within a reasonable range. The
determination that commissions are within a reasonable range
shall be based on any available information as to the level of
commissions known to be charged by other brokers on comparable
transactions, but there shall be taken into account the Fund's
policies that (i) obtaining a low commission is deemed
secondary to obtaining a favorable securities price, since it
is recognized that usually it is more beneficial to the Fund
to obtain a favorable price than to pay the lowest commission;
and (ii) the quality, comprehensiveness and frequency of
research studies that are provided for the Investment Manager
are useful to the Investment Manager in performing its
advisory services under this Contract. Research services
provided by brokers to the Investment Manager are considered
to be in addition to, and not in lieu of, services required to
be performed by the Investment Manager under this Contract; 4.
Purchases and sales of portfolio securities within the United
States other than on a securities exchange shall be executed
with primary market makers acting as principal except where,
in the judgment of the Investment Manager, better prices and
execution may be obtained on a commission basis or from other
sources; and 5. Sales of the Fund's shares (which shall be
deemed to include also shares of other companies registered
under the Investment Company Act of 1940 (the "1940 Act")
which have either the same investment manager or an investment
manager affiliated with the Investment Manager) made by a
broker are one factor among others to be taken into account in
deciding to allocate portfolio transactions (including agency
transactions, principal transactions, purchases in
underwritings or tenders in response to tender offers) for the
account of the Fund to that broker; provided that the broker
shall furnish "best execution," as defined in paragraph 1
above, and that such allocation shall be within the scope of
the Fund's other policies as stated above; and provided
further, that in every allocation made to a broker in which
the sale of Fund shares is taken into account, there shall be
no increase in the amount of the commissions or other
compensation paid to such broker beyond a reasonable
commission or other compensation determined, as set forth in
paragraph 3 above, on the basis of best execution plus
research services, without taking account of or placing any
value upon such sale of the Fund's shares. (4) The Fund agrees
during the term of this Contract to pay to the Investment
Manager the
monthly pro-rated portion of an annual fee equivalent 0.35% of the first
$200,000,000 of the Fund's average daily net assets, reduced for such assets
over $200,000,000 to 0.30%, and further reduced for such assets in excess of
$1,300,000,000 to 0.25%, the monthly portion in each case to be based on the
Fund's average daily net assets during the preceding month. The Investment
Manager may waive all or a portion of its fees provided for hereunder and such
waiver shall be treated as a reduction in purchase price of its services. The
Investment Manager shall be contractually bound hereunder by the terms of any
publicly announced waiver of its fee, or any limitation of the Fund's expenses,
as if such waiver or limitation were fully set forth herein.
If the total expenses of the Fund (including the fee to the
Investment Manager) in any fiscal year of the Fund exceed any expense limitation
imposed by applicable State law, the Investment Manager shall reimburse the Fund
for such excess in the manner and to the extent required by applicable State
law.
The term "total expenses," as used in this paragraph, does not
include interest, taxes, litigation expenses, brokerage commissions or other
costs of acquiring or disposing of any of the Fund's portfolio securities or any
costs or expenses incurred or arising other than in the ordinary and necessary
course of the Fund's business.
(5) This Contract shall continue in effect until December 31,
1996. If not sooner terminated, this Contract shall continue in effect for
successive periods of 12 months each thereafter, provided that each such
continuance shall be specifically approved annually by the vote of a majority of
the Trust's Board of Trustees who are not parties to this Contract or interested
persons (as such term is defined in the 1940 Act) of any such party, cast in
person at a meeting called for the purpose of voting on such approval, and (a)
either the vote of a majority of the outstanding voting securities of the Fund,
or (b) a majority of the Trust's Board of Trustees as a whole.
(6) Notwithstanding the foregoing, this Contract may be
terminated at any time by the Fund, without the payment of any penalty, upon
vote of a majority of the Trust's Board of Trustees or a majority of the
outstanding voting securities of the Fund, or by the Investment Manager, on
sixty (60) days' written notice to the other party.
(7) This Contract shall automatically and immediately
terminate in the event of its assignment (as such term is defined in the 1940
Act).
(8) In the event this Contract is terminated and the
Investment Manager no longer acts as Investment Manager to the Fund, the
Investment Manager reserves the right to withdraw from the Fund the use of the
name "Templeton" or any name misleadingly implying a continuing relationship
between the Fund and the Investment Manager or any of its affiliates.
(9) The Fund may purchase and/or sell securities which are
also purchased or sold by the Investment Manager or its owners or their
affiliates or other investment advisory clients of theirs.
(10) The Investment Manager may rely on the information
reasonably believed by it to be accurate and reliable. Except as may otherwise
be provided by the 1940 Act, neither the Investment Manager nor its officers,
directors, employees or agents shall be subject to any liability to the Fund or
any Shareholder of the Fund for any error of judgment, mistake of law or any
loss arising out of any investment or other act or omission in the course of,
connected with or arising out of any service to be rendered hereunder, except by
reason of willful misfeasance, bad faith or gross negligence in the performance
of the Investment Manager's duties or by reason of reckless disregard of the
Investment Manager's obligations and duties under this Contract.
(11) It is understood that the services of the Investment
Manager are not deemed to be exclusive, and nothing in this Contract shall
prevent the Investment Manager, or any affiliate thereof, from providing similar
services to other investment companies and other clients (whether or not their
investment objectives and policies are similar to those of the Fund) or from
engaging in other activities. When other clients of the Investment Manager
desire to purchase or sell a security at the same time such security is
purchased or sold for the Fund, it is understood that such purchases and sales
will be made in a manner designed to be fair to all parties.
(12) This Contract shall be construed in accordance with the
laws of the State of Florida, provided that nothing herein shall be construed as
being inconsistent with applicable Federal and state securities laws and any
rules, regulations and orders thereunder.
(13) If any provision of this Contract shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Contract shall not be affected thereby and, to this extent, the provisions of
this Contract shall be deemed to be severable.
(14) Nothing herein shall be construed as constituting the
Investment Manager an agent of the Fund or Trust.
(15) It is understood and expressly stipulated that neither
the holders of shares of the Fund nor any Trustee, officer, agent or employee of
the Trust shall be personally liable hereunder, nor shall any resort be had to
other private property for the satisfaction of any claim or obligation
hereunder, but the Trust only shall be liable.
IN WITNESS WHEREOF, the parties hereto have cuased this
Agreement to be duly executed by their duly authorized officers and their
respective corporate seals to be hereunto duly affixed and attested.
TEMPLETON INCOME TRUST
on behalf of Templeton Money Fund
By:/s/THOMAS M. MISTELE
Thomas M. Mistele
Secretary
TEMPLETON INVESTMENT COUNSEL, INC.
By:/s/DONALD F. REED
Donald F. Reed
President
TEMPLETON INCOME TRUST
700 Central Avenue
St. Petersburg, Florida 33701-3628
Franklin Templeton Distributors, Inc.
700 Central Avenue
St. Petersburg, Florida 33701-3628
Re: Amended and Restated Distribution Agreement
Gentlemen:
We, TEMPLETON INCOME TRUST, (the "Trust") comprised of TEMPLETON INCOME FUND and
TEMPLETON MONEY FUND (each a "Fund" and collectively the "Funds") are a
Massachusetts business trust operating as an open-end management investment
company or "mutual fund", which is registered under the Investment Company Act
of 1940 (the "1940 Act") and whose shares are registered under the Securities
Act of 1933 (the "1933 Act"). We desire to issue one or more series or classes
of our authorized but unissued shares of capital stock or beneficial interest
(the "Shares") to authorized persons in accordance with applicable Federal and
State securities laws. The Funds' Shares may be made available in one or more
separate series, each of which may have one or more classes.
You have informed us that your company is registered as a broker-dealer under
the provisions of the Securities Exchange Act of 1934 and that your company is a
member of the National Association of Securities Dealers, Inc. You have
indicated your desire to act as the exclusive selling agent and distributor for
the Shares. We have been authorized to execute and deliver this Distribution
Agreement ("Agreement") to you by a resolution of our Board of Trustees
("Board") passed at a meeting at which a majority of Board members, including a
majority who are not otherwise interested persons of the Trust and who are not
interested persons of our investment adviser, its related organizations or with
you or your related organizations, were present and voted in favor of the said
resolution approving this Agreement.
1. APPOINTMENT OF UNDERWRITER. Upon the execution of this Agreement and
in consideration of the agreements on your part herein expressed and upon the
terms and conditions set forth herein, we hereby appoint you as the exclusive
sales agent for our Shares and agree that we will deliver such Shares as you may
sell. You agree to use your best efforts to promote the sale of Shares, but are
not obligated to sell any specific number of Shares.
However, the Trust and each series retain the right to make direct
sales of its Shares without sales charges consistent with the terms of the then
current prospectus and applicable law, and to engage in other legally authorized
transactions in its Shares which do not involve the sale of Shares to the
general public. Such other transactions may include, without limitation,
transactions between the Trust or any series or class and its shareholders only,
transactions involving the reorganization of the Trust or any series, and
transactions involving the merger or combination of the Trust or any series with
another corporation or trust.
2. INDEPENDENT CONTRACTOR. You will undertake and discharge your
obligations hereunder as an independent contractor and shall have no authority
or power to obligate or bind us by your actions, conduct or contracts except
that you are authorized to promote the sale of Shares. You may appoint
sub-agents or distribute through dealers or otherwise as you may determine from
time to time, but this Agreement shall not be construed as authorizing any
dealer or other person to accept orders for sale or repurchase on our behalf or
otherwise act as our agent for any purpose.
3. OFFERING PRICE. Shares shall be offered for sale at a price
equivalent to the net asset value per share of that series and class plus any
applicable percentage of the public offering price as sales commission or as
otherwise set forth in our then current prospectus. On each business day on
which the New York Stock Exchange is open for business, we will furnish you with
the net asset value of the Shares of each available series and class which shall
be determined in accordance with our then effective prospectus. All Shares will
be sold in the manner set forth in our then effective prospectus and statement
of additional information, and in compliance with applicable law.
4. COMPENSATION.
A. SALES COMMISSION. You shall be entitled to charge a sales
commission on the sale or redemption, as appropriate, of each series and class
of each Fund's Shares in the amount of any initial, deferred or contingent
deferred sales charge as set forth in our then effective prospectus. You may
allow any sub-agents or dealers such commissions or discounts from and not
exceeding the total sales commission as you shall deem advisable, so long as any
such commissions or discounts are set forth in our current prospectus to the
extent required by the applicable Federal and State securities laws. You may
also make payments to sub-agents or dealers from your own resources, subject to
the following conditions: (a) any such payments shall not create any obligation
for or recourse against a Fund or any series or class, and (b) the terms and
conditions of any such payments are consistent with our prospectus and
applicable federal and state securities laws and are disclosed in our prospectus
or statement of additional information to the extent such laws may require.
B. DISTRIBUTION PLANS. You shall also be entitled to
compensation for your services as provided in any Distribution Plan adopted as
to any series and class of any Fund's Shares pursuant to Rule 12b-1 under the
1940 Act.
5. TERMS AND CONDITIONS OF SALES. Shares shall be offered for sale only
in those jurisdictions where they have been properly registered or are exempt
from registration, and only to those groups of people which the Board may from
time to time determine to be eligible to purchase such Shares.
6. ORDERS AND PAYMENT FOR SHARES. Orders for Shares shall be directed
to the Trust's shareholder services agent, for acceptance on behalf of the
Trust. At or prior to the time of delivery of any of our Shares you will pay or
cause to be paid to the custodian of the Trust's assets, for our account, an
amount in cash equal to the net asset value of such Shares. Sales of Shares
shall be deemed to be made when and where accepted by the Trust's shareholder
services agent. The Trust's custodian and shareholder services agent shall be
identified in its prospectus.
7. PURCHASES FOR YOUR OWN ACCOUNT. You shall not purchase our Shares
for your own account for purposes of resale to the public, but you may purchase
Shares for your own investment account upon your written assurance that the
purchase is for investment purposes and that the Shares will not be resold
except through redemption by us.
8. SALE OF SHARES TO AFFILIATES. You may sell our Shares at net asset
value to certain of your and our affiliated persons pursuant to the applicable
provisions of the federal securities statutes and rules or regulations
thereunder (the "Rules and Regulations"), including Rule 22d-1 under the 1940
Act, as amended from time to time.
9. ALLOCATION OF EXPENSES. We will pay the expenses:
(a) Of the preparation of the audited and certified
financial statements of our company to be included in
any Post-Effective Amendments ("Amendments") to our
Registration Statement under the 1933 Act or 1940
Act, including the prospectus and statement of
additional information included therein;
(b) Of the preparation, including legal fees, and
printing of all Amendments or supplements filed with
the Securities and Exchange Commission, including the
copies of the prospectuses included in the Amendments
and the first 10 copies of the definitive
prospectuses or supplements thereto, other than those
necessitated by your (including your "Parent's")
activities or Rules and Regulations related to your
activities where such Amendments or supplements
result in expenses which we would not otherwise have
incurred;
(c) Of the preparation, printing and distribution of any
reports or communications which We send to our
existing shareholders; and
(d) Of filing and other fees to Federal and State
securities regulatory authorities necessary to
continue offering our Shares.
You will pay the expenses:
(a) Of printing the copies of the prospectuses and any
supplements thereto and statements of additional
information which are necessary to continue to offer
our Shares;
(b) Of the preparation, excluding legal fees, and
printing of all Amendments and supplements to our
prospectuses and statements of additional information
if the Amendment or supplement arises from your
(including your "Parent's") activities or Rules and
Regulations related to your activities and those
expenses would not otherwise have been incurred by
us;
(c) Of printing additional copies, for use by you as
sales literature, of reports or other communications
which we have prepared for distribution to our
existing shareholders; and
(d) Incurred by you in advertising, promoting and selling
our Shares.
10. FURNISHING OF INFORMATION. We will furnish to you such information
with respect to each series and class of Shares, in such form and signed by such
of our officers as you may reasonably request, and we warrant that the
statements therein contained, when so signed, will be true and correct. We will
also furnish you with such information and will take such action as you may
reasonably request in order to qualify our Shares for sale to the public under
the Blue Sky Laws of jurisdictions in which you may wish to offer them. We will
furnish you with annual audited financial statements of our books and accounts
certified by independent public accountants, with semi-annual financial
statements prepared by us, with registration statements and, from time to time,
with such additional information regarding our financial condition as you may
reasonably request.
11. CONDUCT OF BUSINESS. Other than our currently effective prospectus,
you will not issue any sales material or statements except literature or
advertising which conforms to the requirements of Federal and State securities
laws and regulations and which have been filed, where necessary, with the
appropriate regulatory authorities. You will furnish us with copies of all such
materials prior to their use and no such material shall be published if we shall
reasonably and promptly object.
You shall comply with the applicable Federal and State laws
and regulations where our Shares are offered for sale and conduct your affairs
with us and with dealers, brokers or investors in accordance with the Rules of
Fair Practice of the National Association of Securities Dealers, Inc.
12. REDEMPTION OR REPURCHASE WITHIN SEVEN DAYS. If Shares are tendered
to us for redemption or repurchase by us within seven business days after your
acceptance of the original purchase order for such Shares, you will immediately
refund to us the full sales commission (net of allowances to dealers or brokers)
allowed to you on the original sale, and will promptly, upon receipt thereof,
pay to us any refunds from dealers or brokers of the balance of sales
commissions reallowed by you. We shall notify you of such tender for redemption
within 10 days of the day on which notice of such tender for redemption is
received by us.
13. OTHER ACTIVITIES. Your services pursuant to this Agreement
shall not be deemed to be exclusive, and you may render similar services and
act as an underwriter, distributor or dealer for other investment companies in
the offering of their shares.
14. TERM OF AGREEMENT. This Agreement shall become effective on the
date of its execution, and shall remain in effect for a period of two (2) years.
The Agreement is renewable annually thereafter, with respect to the Trust or, if
the Trust has more than one series, with respect to each series, for successive
periods not to exceed one year (i) by a vote of (a) a majority of the
outstanding voting securities of the Trust or, if the Trust has more than one
series, of each series, or (b) by a vote of the Board, AND (ii) by a vote of a
majority of the members of the Board who are not parties to the Agreement or
interested persons of any parties to the Agreement (other than as members of the
Board), cast in person at a meeting called for the purpose of voting on the
Agreement.
This Agreement may at any time be terminated by the Trust or
by any series without the payment of any penalty, (i) either by vote of the
Board or by vote of a majority of the outstanding voting securities of the Trust
or any series on 90 days' written notice to you; or (ii) by you on 90 days'
written notice to the Trust; and shall immediately terminate with respect to the
Trust and each series in the event of its assignment.
15. SUSPENSION OF SALES. We reserve the right at all times to
suspend or limit the public offering of Shares upon two days' written notice
to you.
16. MISCELLANEOUS. This Agreement shall be subject to the laws of the
State of California and shall be interpreted and construed to further promote
the operation of the Trust as an open-end investment company. This Agreement
shall supersede all Distribution Agreements and Amendments previously in effect
between the parties. As used herein, the terms "Net Asset Value," "Offering
Price," "Investment Company," "Open-End Investment Company," "Assignment,"
"Principal Underwriter," "Interested Person," "Parent," "Affiliated Person," and
"Majority of the Outstanding Voting Securities" shall have the meanings set
forth in the 1933 Act or the 1940 Act and the Rules and Regulations thereunder.
Nothing herein shall be deemed to protect you against any liability to us or to
our securities holders to which you would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of your
duties hereunder, or by reason of your reckless disregard of your obligations
and duties hereunder.
If the foregoing meets with your approval, please acknowledge your acceptance by
signing each of the enclosed copies, whereupon this will become a binding
agreement as of the date set forth below.
Very truly yours,
Templeton Income Trust
By:/s/THOMAS M. MISTELE
Thomas M. Mistele
Accepted:
Franklin Templeton Distributors, Inc.
By:/s/PETER JONES
Peter Jones
DATED: May 1, 1995
SPECIMEN
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
DEALER AGREEMENT
Effective: XXXXX YY, 1995
Dear Securities Dealer:
Franklin/Templeton Distributors, Inc. ("we" or "us") invites you to
participate in the distribution of shares of the mutual funds in the Franklin
Templeton Group of Funds (the "Funds") for which we now or in the future serve
as principal underwriter, subject to the terms of this Agreement. We will notify
you from time to time of the Funds which are eligible for distribution and the
terms of compensation under this Agreement. This Agreement supersedes any prior
dealer agreements between us, under paragraph 18, below.
1. LICENSING.
(a) You represent that you are a member in good standing of the National
Association of Securities Dealers, Inc. ("NASD") and are presently licensed
to the extent necessary by the appropriate regulatory agency of each state
in which you will offer and sell shares of the Funds. You agree that
termination or suspension of such membership with the NASD, or of your
license to do business by any state or federal regulatory agency, at any
time shall terminate or suspend this Agreement forthwith and shall require
you to notify us in writing of such action. If you are not a member of the
NASD but are a dealer subject to the laws of a foreign country, you agree
to conform to the rules of fair practice of such association. This
Agreement is in all respects subject to Rule 26 of the Rules of Fair
Practice of the NASD which shall control any provision to the contrary in
this Agreement.
(b) You agree to notify us immediately in writing if at any time you are
not a member in good standing of the Securities Investor Protection
Corporation ("SIPC").
2. SALES OF FUND SHARES. You may offer and sell shares of each Fund and class
only at the public offering price which shall be applicable to, and in effect at
the time of, each transaction. The procedures relating to all orders and the
handling of them shall be subject to the terms of the then current prospectus
and statement of additional information (hereafter, the "prospectus") and new
account application, including amendments, for each such Fund, and our written
instructions from time to time. This Agreement is not exclusive, and either
party may enter into similar agreements with third parties.
3. DUTIES OF DEALER: IN GENERAL. You agree:
(a) To act as principal, or as agent on behalf of your
customers, in all transactions in shares of the Funds except as
provided in paragraph 4 hereof. You shall not have any
<PAGE>
SPECIMEN
authority to act as agent for the issuer (the Funds), for the Principal
Underwriter, or for any other dealer in any respect, nor will you represent
to any third party that you have such authority or are acting in such
capacity.
(b) To purchase shares only from us or from your customers.
(c) To enter orders for the purchase of shares of the Funds only from us
and only for the purpose of covering purchase orders you have already
received from your customers or for your own bona fide investment.
(d) To maintain records of all sales and redemptions of shares made through
you and to furnish us with copies of such records on request.
(e) To distribute prospectuses and reports to your customers in compliance
with applicable legal requirements, except to the extent that we expressly
undertake to do so on your behalf.
(f) That you will not withhold placing customers' orders for shares so as
to profit yourself as a result of such withholding or place orders for
shares in amounts just below the point at which sales charges are reduced
so as to benefit from a higher sales charge applicable to an amount below
the breakpoint.
(g) That if any shares confirmed to you hereunder are repurchased or
redeemed by any of the Funds within seven business days after such
confirmation of your original order, you shall forthwith refund to us the
full concession allowed to you on such orders. We shall forthwith pay to
the appropriate Fund our share, if any, of the "charge" on the original
sale and shall also pay to such Fund the refund from you as herein
provided. We shall notify you of such repurchase or redemption within a
reasonable time after settlement. Termination or cancellation of this
Agreement shall not relieve you or us from the requirements of this
subparagraph.
(h) That if payment for the shares purchased is not received within the
time customary or the time required by law for such payment, the sale may
be canceled forthwith without any responsibility or liability on our part
or on the part of the Funds, or at our option, we may sell the shares which
you ordered back to the Funds, in which latter case we may hold you
responsible for any loss to the Fund or loss of profit suffered by us
resulting from your failure to make payment as aforesaid. We shall have no
liability for any check or other item returned unpaid to you after you have
paid us on behalf of a purchaser. We may refuse to liquidate the investment
unless we receive the purchaser's signed authorization for the liquidation.
(i) That you shall assume responsibility for any loss to a Fund(s) caused
by a correction made subsequent to trade date, provided such correction was
not based on any error, omission
<PAGE>
SPECIMEN
or negligence on our part, and that you will immediately pay such loss to
the Fund(s) upon notification.
(j) That if on a redemption which you have ordered, instructions in proper
form, including outstanding certificates are not received within the time
customary or the time required by law, the redemption may be canceled
forthwith without any responsibility or liability on our part or on the
part of any Fund, or at our option, we may buy the shares redeemed on
behalf of the Fund, in which latter case we may hold you responsible for
any loss to the Fund or loss of profit suffered by us resulting from your
failure to settle the redemption.
4. DUTIES OF DEALER: RETIREMENT ACCOUNTS. In connection with orders for the
purchase of shares on behalf of an Individual Retirement Account, Self-Employed
Retirement Plan or other retirement accounts, by mail, telephone, or wire, you
shall act as agent for the custodian or trustee of such plans (solely with
respect to the time of receipt of the application and payments) and shall not
place such order until you have received from your customer payment for such
purchase and, if such purchase represents the first contribution to such a plan,
the completed documents necessary to establish the plan. You agree to indemnify
us and Franklin Templeton Trust Company and/or Templeton Funds Trust Company as
applicable for any claim, loss, or liability resulting from incorrect investment
instructions received from you which cause a tax liability or other tax penalty.
5. CONDITIONAL ORDERS; CERTIFICATES. We will not accept from you any
conditional orders for shares of any of the Funds. Delivery of certificates for
shares purchased shall be made by the Funds only against constructive receipt of
the purchase price, subject to deduction for your concession and our portion of
the sales charge, if any, on such sale. No certificates will be issued unless
specifically requested.
6. DEALER COMPENSATION.
(a) On each purchase of shares by you from us, the total sales charges and
your dealer concessions shall be as stated in each Fund's then current
prospectus, subject to NASD rules and applicable state and federal laws.
Such sales charges and dealer concessions are subject to reductions under a
variety of circumstances as described in the Funds' prospectuses. To obtain
these reductions, we must be notified when the sale takes place which would
qualify for the reduced charge. If you fail to notify us of the
applicability of a reduction in the sales charge at the time the trade is
placed, neither we nor any of the Funds will be liable for amounts
necessary to reimburse any investor for the reduction which should have
been effected.
(b) In accordance with the Funds' prospectuses, we or our
affiliates may, but are not obligated to, make payments to
<PAGE>
SPECIMEN
dealers from our own resources as compensation for certain sales which are
made at net asset value and are not subject to any contingent deferred
sales charges ("Qualifying Sales"). If you notify us of a Qualifying Sale,
we may make a contingent advance payment up to the maximum amount available
for payment on the sale. If any of the shares purchased in a Qualifying
Sale are redeemed within twelve months of the end of the month of purchase,
we shall be entitled to recover any advance payment attributable to the
redeemed shares by reducing any account payable or other monetary
obligation we may owe to you or by making demand upon you for repayment in
cash. We reserve the right to withhold advances to any dealer, if for any
reason we believe that we may not be able to recover unearned advances from
such dealer.
7. REDEMPTIONS. Redemptions or repurchases of shares will be made at the net
asset value of such shares, less any applicable deferred sales or redemption
charges, in accordance with the applicable prospectuses. Except as permitted by
applicable law, you agree not to purchase any shares from your customers at a
price lower than the redemption or repurchase prices then computed by the Funds.
You shall, however, be permitted to sell shares for the account of the record
owner to the Funds at the repurchase price then currently in effect for such
shares and may charge the owner a fair commission for handling the transaction.
8. EXCHANGES. Telephone exchange orders will be effective only for shares in
plan balance (uncertificated shares) or for which share certificates have been
previously deposited and may be subject to any fees or other restrictions set
forth in the applicable prospectuses. You may charge the shareholder a fair
commission for handling an exchange transaction. Exchanges from a Fund sold with
no sales charge to a Fund which carries a sales charge, and exchanges from a
Fund sold with a sales charge to a Fund which carries a higher sales charge may
be subject to a sales charge in accordance with the terms of each Fund's
prospectus. You will be obligated to comply with any additional exchange
policies described in each Fund's prospectus, including without limitation any
policy restricting or prohibiting "Timing Accounts" as therein defined.
9. TRANSACTION PROCESSING. All orders are subject to acceptance by us and by
the Fund or its transfer agent, and become effective only upon confirmation by
us. If required by law, each transaction shall be confirmed in writing on a
fully disclosed basis and if confirmed by us, a copy of each confirmation shall
be sent simultaneously to you if you so request. All sales are made subject to
receipt of shares by us from the Funds. We reserve the right in our discretion,
without notice, to suspend the sale of shares or withdraw the offering of shares
entirely. Telephone orders will be effected at the price(s) next computed on the
day they are received from you if, as set forth in each Fund's current
prospectus, they are received prior to the time the price of its shares is
calculated. Orders received after that time will be
<PAGE>
SPECIMEN
effected at the price(s) computed on the next business day. All
orders must be accompanied by payment in U.S. dollars. Orders
payable by check must be drawn payable in U.S. dollars on a U.S.
bank, for the full amount of the investment.
10. MULTIPLE CLASSES. We may from time to time provide to you written
compliance guidelines or standards relating to the sale or distribution of Funds
offering multiple classes of shares with different sales charges and
distribution-related operating expenses. In addition, you will be bound by any
applicable rules or regulations of government agencies or self-regulatory
organizations generally affecting the sale or distribution of mutual funds
offering multiple classes of shares.
11. RULE 12B-1 PLANS. You are also invited to participate in
all Plans adopted by the Funds (the "Plan Funds") pursuant to Rule
12b-1 under the 1940 Act.
To the extent you provide administrative and other services, including, but
not limited to, furnishing personal and other services and assistance to your
customers who own shares of a Plan Fund, answering routine inquiries regarding a
Fund, assisting in changing account designations and addresses, maintaining such
accounts or such other services as a Fund may require, to the extent permitted
by applicable statutes, rules, or regulations, we shall pay you a Rule 12b-1
servicing fee. To the extent that you participate in the distribution of Fund
shares which are eligible for a Rule 12b-1 distribution fee, we shall also pay
you a Rule 12b-1 distribution fee. All Rule 12b-1 servicing and distribution
fees shall be based on the value of shares attributable to customers of your
firm and eligible for such payment, and shall be calculated on the basis and at
the rates set forth in the compensation schedule then in effect. Without prior
approval by a majority of the outstanding shares of a Fund, the aggregate annual
fees paid to you pursuant to each Plan shall not exceed the amounts stated as
the "annual maximums" in each Fund's prospectus, which amount shall be a
specified percent of the value of the Fund's net assets held in your customers'
accounts which are eligible for payment pursuant to this Agreement (determined
in the same manner as each Fund uses to compute its net assets as set forth in
its effective Prospectus).
You shall furnish us and each Fund with such information as shall reasonably
be requested by the Boards of Directors, Trustees or Managing General Partners
(hereinafter referred to as "Directors") of such Funds with respect to the fees
paid to you pursuant to the Schedule. We shall furnish to the Boards of
Directors of the Plan Funds, for their review on a quarterly
<PAGE>
SPECIMEN
basis, a written report of the amounts expended under the Plans and the purposes
for which such expenditures were made.
The Plans and provisions of any agreement relating to such Plans must be
approved annually by a vote of the Plan Funds' Directors, including such persons
who are not interested persons of the Plan Funds and who have no financial
interest in the Plans or any related agreement ("Rule 12b-1 Directors"). The
Plans or the provisions of this Agreement relating to such Plans may be
terminated at any time by the vote of a majority of the Plan Funds' Boards of
Directors, including Rule 12b-1 Directors, or by a vote of a majority of the
outstanding shares of the Plan Funds, on sixty (60) days' written notice,
without payment of any penalty. The Plans or the provisions of this Agreement
may also be terminated by any act that terminates the Underwriting Agreement
between us and the Plan Funds, and/or the management or administration agreement
between Franklin Advisers, Inc. or Templeton Investment Counsel, Inc. or their
affiliates and the Plan Funds. In the event of the termination of the Plans for
any reason, the provisions of this Agreement relating to the Plans will also
terminate.
Continuation of the Plans and provisions of this Agreement relating to such
Plans are conditioned on Rule 12b-1 Directors being ultimately responsible for
selecting and nominating any new Rule 12b-1 Directors. Under Rule 12b-1,
Directors of any of the Plan Funds have a duty to request and evaluate, and
persons who are party to any agreement related to a Plan have a duty to furnish,
such information as may reasonably be necessary to an informed determination of
whether the Plan or any agreement should be implemented or continued.
Parties to this Agreement who provide services to Plan Funds in the promotion
of shares of such Funds should be aware that under Rule 12b-1 Plan Funds are
permitted to implement or continue Plans or the provisions of this Agreement
relating to such Plans from year-to-year only if, based on certain legal
considerations, the board is able to conclude that the Plans will benefit the
Plan Funds. Absent such yearly determination the Plans and the provisions of
this Agreement relating to the Plans must be terminated as set forth above. In
addition, any obligation assumed by a Fund pursuant to this Agreement shall be
limited in all cases to the assets of such Fund and no person shall seek
satisfaction thereof from shareholders of a Fund.
<PAGE>
SPECIMEN
You agree to waive payment of any amounts payable to you by us under a Fund's
Plan of Distribution pursuant to Rule 12b-1 until such time as we are in receipt
of such fee from the Fund.
The provisions of the Rule 12b-1 Plans between the Plan Funds and us, insofar
as they relate to Plans, shall control over the provisions of this Agreement in
the event of any inconsistency.
12. REGISTRATION OF SHARES. Upon request, we shall notify you of the states
or other jurisdictions in which Fund shares are currently registered or
qualified for sale to the public. We shall have no obligation to register or
qualify, or to maintain registration or qualification of, Fund shares in any
state or other jurisdiction. We shall have no responsibility, under the laws
regulating the sale of securities in any U.S. or foreign jurisdiction, for the
qualification or status of persons selling Fund shares or for the manner of sale
of Fund shares. Except as stated in this paragraph, we shall not, in any event,
be liable or responsible for the issue, form, validity, enforceability and value
of such shares or for any matter in connection therewith, and no obligation not
expressly assumed by us in this Agreement shall be implied. Nothing in this
Agreement, however, shall be deemed to be a condition, stipulation or provision
binding any person acquiring any security to waive compliance with any provision
of the Securities Act of 1933, or of the rules and regulations of the Securities
and Exchange Commission, or to relieve the parties hereto from any liability
arising under the Securities Act of 1933.
13. ADDITIONAL REGISTRATIONS. If it is necessary to register or qualify the
shares in any foreign jurisdictions in which you intend to offer the shares, it
will be your responsibility to arrange for and to pay the costs of such
registration or qualification; prior to any such registration or qualification
you will notify us of your intent and of any limitations that might be imposed
on the Funds and you agree not to proceed with such registration or
qualification without the written consent of the Funds and of ourselves.
14. FUND INFORMATION. No person is authorized to give any
information or make any representations concerning shares of the
Funds except those contained in the current prospectus, or
statement of additional information issued by the Fund or by us
as information supplemental to such prospectus or statement of
additional information. We will supply prospectuses, reasonable
<PAGE>
SPECIMEN
quantities of supplemental sale literature, sales bulletins, and additional
information as issued. You agree not to use other advertising or sales material
relating to the Funds except that which (a) conforms to the requirements of any
applicable laws or regulations of any government or authorized agency in the
U.S. or any other country, having jurisdiction over the offering or sale of
shares of the Funds, and (b) is approved in writing by us in advance of such
use. Such approval may be withdrawn by us in whole or in part upon notice to
you, and you shall, upon receipt of such notice, immediately discontinue the use
of such sales literature, sales material and advertising. You are not authorized
to modify or translate any such materials without our prior written consent.
15. INDEMNIFICATION. You further agree to indemnify, defend and hold harmless
the Principal Underwriter, the Funds, their officers, directors and employees
from any and all losses, claims, liabilities and expenses, whether or not
resulting in any liability to any of the parties indemnified under this
subparagraph, arising out of (1) any alleged violation of any statute or
regulation (including without limitation the securities laws and regulations of
the United States or any state or foreign country) or any alleged tort or breach
of contract, in or related to the offer and sale by you of shares of the Funds
pursuant to this Agreement (except to the extent that our negligence or failure
to follow correct instructions received from you is the cause of such loss,
claim, liability or expense), (2) any redemption or exchange pursuant to
telephone instructions received from you or your agent or employees, or (3) the
breach by you of any of the terms and conditions of this Agreement.
16. TERMINATION; SUCCESSION; AMENDMENT. Each party to this Agreement may
cancel its participation in this Agreement by giving written notice to the other
parties. Such notice shall be deemed to have been given and to be effective on
the date on which it was either delivered personally to the other parties or any
officer or member thereof, or was mailed postpaid or delivered to a telegraph
office for transmission to the other parties' Chief Legal Officers at the
addresses shown herein or in the most recent NASD Manual. This Agreement shall
terminate immediately upon the appointment of a Trustee under the Securities
Investor Protection Act or any other act of insolvency by you. The termination
of this Agreement by any of the foregoing means shall have no effect upon
transactions entered into prior to the effective date of termination. A trade
placed
<PAGE>
SPECIMEN
by you subsequent to your voluntary termination of this Agreement will not serve
to reinstate the Agreement. Reinstatement, except in the case of a temporary
suspension of a dealer will only be effective upon written notification by us.
Unless terminated, this Agreement shall be binding upon each party's successors
or assigns. This Agreement may be amended by us at any time by written notice to
you and your placing of an order or acceptance of payments of any kind after the
effective date and receipt of notice of any such Amendment shall constitute your
acceptance of such Amendment.
17. SETOFF; DISPUTE RESOLUTION. Should any of your concession accounts with
us have a debit balance, we may offset and recover the amount owed from any
other account you have with us, without notice or demand to you. In the event of
a dispute concerning any provision of this Agreement, either party may require
the dispute to be submitted to binding arbitration under the commercial
arbitration rules of the NASD or the American Arbitration Association. Judgment
upon any arbitration award may be entered by any state or federal court having
jurisdiction. This Agreement shall be construed in accordance with the laws of
the State of California, not including any provision which would require the
general application of the law of another jurisdiction.
18. ACCEPTANCE; CUMULATIVE EFFECT. This Agreement is cumulative and
supersedes any agreement previously in effect. It shall be binding upon the
parties hereto when signed by us and accepted by you. If you have a current
dealer agreement with us, your first trade or acceptance of payments from us
after receipt of this Agreement, as it may be amended pursuant to paragraph 16,
above, shall constitute your acceptance of its terms. Otherwise, your signature
below shall constitute your acceptance of its terms.
Date:
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
By:
(Signature)
Name: Greg Johnson
Title: President
<PAGE>
SPECIMEN
777 Mariners Island Blvd.
San Mateo, CA 94404
Attention: Chief Legal Officer (for legal notices only)
700 Central Avenue
St. Petersburg, Florida 33701-3628
KEY PHONE NUMBERS FOR FRANKLIN TEMPLETON FUNDS
DEPARTMENT NAME
TELEPHONE NO.
HOURS OF OPERATION (PACIFIC
TIME) (MONDAY THROUGH
FRIDAY)SHAREHOLDER SERVICES
1-800/632-2301
6:00 A.M. TO 5:00 P.M.DEALER SERVICES
1-800/524-4040
6:00 A.M. TO 5:00 P.M.FUND INFORMATION
1-800/DIAL BEN
6:00 A.M. TO 8:00 P.M., 8:30
A.M. TO 5:00 P.M. (SATURDAY)RETIREMENT PLANS
1-800/527-2020
6:00 A.M. TO 5:00 P.M.TDD (HEARING IMPAIRED)
1-800/851-0637
6:00 A.M. TO 5:00 P.M.
<PAGE>
SPECIMEN
<PAGE>
SPECIMEN
[Note to Graphics: Please put this on a different page with some
marking to indicate that it's part of one agreement. Our idea is
to send only the part above the page break to current dealers,
and to attach a signature page for new dealers.]
[DEALER NAME]
By:
(Signature)
Name:
Title:
Address:
Attention: Chief Legal Officer
Telephone:
NASD CRD #
Franklin Templeton Dealer # _________________________________
(Internal Use Only)
<PAGE>
CUSTODY AGREEMENT
AGREEMENT dated September 15, 1986, between THE CHASE
MANHATTAN BANK, N.A. ("Chase"), having its principal place of
business at 1 Chase Manhattan Plaza, New York, New York 10081, and
TEMPLETON INCOME FUND (the "Fund"), an investment company
registered under the Investment Company Act of 1940 ("Act of
1940"), having its principal place of business at 700 Central
Avenue, P. O. Box 33030, St. Petersburg, Florida 33733-9926.
WHEREAS, the Fund wishes to appoint Chase as custodian of its
securities and assets and Chase is willing to act as custodian under the terms
and conditions hereinafter set forth;
NOW, THEREFORE, the Fund and its successors and assigns and
Chase and its successors and assigns, hereby agree as follows:
1 APPOINTMENT AS CUSTODIAN. Chase agrees to act as custodian
for the Fund, as provided herein, in connection with (a) cash ("Cash") received
from time to time from, or for the account of, the Fund for credit to the Fund's
deposit account or accounts administered by Chase, Chase Branches and Domestic
Securities Depositories (as hereinafter defined), and/or Foreign Banks and
Foreign Securities Depositories (as hereinafter defined) (the "Deposit
Account"); (b) all stocks, shares, bonds, debentures, notes, mortgages, or other
obligations for the payment of money and any certificates, receipts, warrants,
or other instruments representing rights to receive, purchase, or subscribe for
the same
- 1 -
<PAGE>
or evidencing or representing any other rights or interests therein and other
similar property ("Securities") from time to time received by Chase and/or any
Chase Branch, Domestic Securities Depository, Foreign Bank or Foreign Securities
Depository for the account of the Fund (the "Custody Account"); and (c) original
margin and variation margin payments for futures contracts, collateral securing
the Fund's commitments to purchase new issues of debt securities offered on a
when-issued basis, borrowers' collateral securing the Fund's loans of its
portfolio securities, and/or deposits for securing other obligations, deposited
in one or more separate segregated accounts, (the "Segregated Accounts").
All cash held in the Deposit Account or in the Segregated
Accounts in connection with which Chase agrees to act as custodian is hereby
denominated as a special deposit which shall be held in trust for the benefit of
the Fund and to which Chase, Chase Branches and Domestic Securities Depositories
and/or Foreign Banks and Foreign Securities Depositories shall have no ownership
rights, and Chase will so indicate on its books and records pertaining to the
Deposit Account and the Segregated Account. All cash held in auxiliary accounts
that may be carried for the Fund with Chase (including a Money Market Account,
Redemption Account, Distribution Account and Imprest Account) is not so
denominated as a special deposit and title thereto is held by Chase subject to
the claims of creditors.
- 2 -
<PAGE>
2.AUTHORIZATION TO USE BOOK ENTRY SYSTEM, DOMESTIC SECURITIES
DEPOSITORIES, BRANCH OFFICES, FOREIGN BANKS AND FOREIGN SECURITIES DEPOSITORIES.
Chase is hereby authorized to appoint and utilize, subject to the provisions of
Section 4 hereof:
A. The Book Entry System and The Depository Trust
Company; and also such other Domestic Securities Depositories
selected by Chase and as to which Chase has received a
certified copy of a resolution of the Fund's Board of Trustees
authorizing deposits therein;
B. Chase's foreign branch offices in the United
Kingdom, Hong Kong, Singapore, and Tokyo, and such other
foreign branch offices of Chase located in countries approved
by the Board of Directors of the Fund as to which Chase shall
have given prior notice to the Fund;
C. Foreign Banks which Chase shall have selected,
which are located in countries approved by the Board of
Trustees of the Fund, and as to which banks Chase shall
have given prior notice to the Fund; and
D. Foreign Securities Depositories which Chase shall
have selected and as to which Chase has received a certified
copy of a resolution of the Fund's Board of Trustees
authorizing deposits therein; to hold Securities and Cash at
any time owned by the Fund, it being understood that no such
appointment or utilization shall in any way relieve Chase of
its responsibilities as provided for in this Agreement.
Foreign branch offices
- 3 -
<PAGE>
of Chase appointed and utilized by Chase are herein referred
to as "Chase Branches." Unless otherwise agreed to in writing,
(a) each Chase Branch, each Foreign Bank and each Foreign
Securities Depository shall be selected by Chase to hold only
Securities as to which the principal trading market or
principal location as to which such Securities are to be
presented for payment is located outside the United States;
and (b) Chase and each Chase Branch, Foreign Bank and Foreign
Securities Depository will promptly transfer or cause to be
transferred to Chase, to be held in the United States,
Securities and/or Cash that are then being held outside the
United States upon request of the Fund and/or of the
Securities and Exchange Commission. Utilization by Chase of
Chase Branches, Domestic Securities Depositories, Foreign
Banks and Foreign Securities Depositories shall be in
accordance with provisions as from time to time amended, of an
- 4 -
<PAGE>
operating agreement to be entered into between Chase and the
Fund (the "Operating Agreement").
III. DEFINITIONS. As used in this Agreement, the
following terms shall have the following meanings:
A. "Authorized Persons of the Fund" shall mean
such officers or employees of the Fund or any
other person or persons as shall have been
designated by a resolution of the Board of
Trustees of the Fund, a certified copy of
which has been filed with Chase, to act as
Authorized Persons hereunder. Such persons
shall continue to be Authorized Persons of the
Fund, authorized to act either singly or
together with one or more other of such
persons as provided in such resolution, until
such time as the Fund shall have filed with
Chase a written notice of the Fund
supplementing, amending, or revoking the
authority of such persons.
B. "Book-Entry system" shall mean the Federal
Reserve/Treasury book-entry system for United
States and federal agency securities, its
successor or successors and its nominee or
nominees.
C. "Domestic Securities Depository" shall mean
The Depository Trust Company, a clearing
- 5 -
<PAGE>
agency registered with the Securities and
Exchange Commission, its successor or
successors and its nominee or nominees; and
(subject to the receipt by Chase of a
certified copy of a resolution of the Fund's
Board of Trustees specifically approving
deposits therein as provided in Section 2(a)
of this Agreement) any other person
authorized to act as a depository under the
Act of 1940, its successor or successors and
its nominee or nominees.
D. "Foreign Bank" shall mean any banking
institution organized under the laws of a
jurisdiction other than the United States or
of any state thereof.
E. A "Foreign Securities Depository" shall mean
any system for the central handling of
securities abroad where all securities of any
particular class or series of any issuer
deposited within the system are treated as
fungible and may be transferred or pledged by
bookkeeping without physical deliver of the
securities by any Chase Branch or Foreign
Bank.
F. "Written Instructions" shall mean instructions
in writing signed by Authorized Persons of the
- 6 -
<PAGE>
Fund giving such instructions, and/or such
other forms of communications as from time
to time shall be agreed upon in writing
between the Fund and Chase.
IV. SELECTION OF COUNTRIES IN WHICH SECURITIES MAY BE
-------------------------------------------------
HELD. Chase shall not cause Securities and Cash to
----
be held in any country outside the United States
until the Fund has directed the holding of its
assets in such country. Chase represents that it
has been advised by the Fund that in giving such a
direction the Fund may consider, among other
factors, the following:
A. comparative operational efficiencies of
custody;
B. clearance and settlement and the costs
thereof; and
C. political and other risks, other than those
risks specifically assumed by Chase.
V. RESPONSIBILITY OF CHASE TO SELECT CUSTODIANS IN
-----------------------------------------------
INDIVIDUAL FOREIGN COUNTRIES. The responsibility
----------------------------
for selecting the Chase Branch, Foreign Bank or
Foreign Securities Depository to hold the Fund's
Securities and Cash in individual countries
authorized by the Fund shall be that of Chase.
Chase generally shall utilize Chase Branches where
available. In locations where there are no Chase
- 7 -
<PAGE>
Branches providing custodial services, Chase shall
select as its agent a Foreign Bank, which may be an
affiliate or subsidiary of Chase. To facilitate the
clearance and settlement of securities transactions,
Chase represents that, subject to the approval of the
Fund, it may deposit Securities in a Foreign
Securities Depository in which Chase is a
participant. In situations in which Chase is not a
participant in a Foreign Securities Depository, Chase
may, subject to the approval of the Fund, authorize a
Foreign Bank acting as its subcustodian to deposit
the Securities in a Foreign Securities Depository in
which the Foreign Bank is a participant.
Notwithstanding the foregoing, such selection by
Chase of a Foreign Bank or Foreign Securities
Depository shall not become effective until Chase has
been advised by the Fund that a majority of its Board
of Trustees: A. Has approved Chase's selection of the
particular Foreign Bank or Foreign Securities
Depository, as the case may be, as consistent
with the best interests of the Fund and its
Shareholders;
B. Has approved as consistent with the best
interests of the Fund and its Shareholders a
written contract prepared by Chase which will
- 8 -
<PAGE>
govern the manner in which such Foreign Bank
will maintain the Fund's assets.
VI. CONDITIONS ON SELECTION OF FOREIGN BANK OR FOREIGN
SECURITIES DEPOSITORY. Chase shall authorize the
holding of Securities and Cash by a Chase Branch,
Foreign Bank or Foreign Securities Depository only:
A. to the extent that the Securities and Cash are
not subject to any right, charge, security
interest, lien or claim of any kind in favor
of any such Foreign Bank or Foreign
Securities Depository, except for their safe
custody or administration, and
B. to the extent that the beneficial ownership of
Securities is freely transferable without the
payment of money or value other than for safe
custody or administration.
VII. CHASE BRANCHES AND FOREIGN BANKS NOT AGENTS OF THE
--------------------------------------------------
FUND. Chase Branches, Foreign Banks and Foreign
----
Securities Depositories shall be subject to the
instructions of Chase and/or the Foreign Bank, and
not to those of the Fund. Chase warrants and
represents that all such instructions shall afford
protection to the Fund at least equal to that
afforded for Securities held directly by Chase.
Any Chase Branch, Foreign Bank or Foreign
Securities Depository shall act solely as agent of
- 9 -
<PAGE>
Chase or of such Foreign Bank.
VIII. CUSTODY ACCOUNT. Securities held in the
Custody Account shall be physically
segregated at all times from those of any
other person or persons except that (a) with
respect to Securities held by Chase
Branches, such Securities may be placed in
an omnibus account for the customers of
Chase, and Chase shall maintain separate
book entry records for each such omnibus
account, and such Securities shall be deemed
for the purpose of this Agreement to be held
by Chase in the Custody Account; (b) with
respect to Securities deposited by Chase
with a Foreign Bank, a Domestic Securities
Depository or a Foreign Securities
Depository, Chase shall identify on its
books as belonging to the Fund the
Securities shown on Chase's account on the
books of the Foreign Bank, Domestic
Securities Depository or Foreign Securities
Depository; and (c) with respect to
Securities deposited by a Foreign Bank with
a Foreign Securities Depository, Chase shall
cause the Foreign Bank to identify on its
books as belonging to Chase, as agent, the
Securities shown on the Foreign Bank's
account on the books of the
- 10 -
<PAGE>
Foreign Securities Depository. All
Securities of the Fund maintained by Chase
pursuant to this Agreement shall be subject
only to the instructions of Chase, Chase
Branches or their agents. Chase shall only
deposit Securities with a Foreign Bank in
accounts that include only assets held by
Chase for its customers.
8a. SEGREGATED ACCOUNT FOR FUTURES CONTRACTS. With
respect to every futures contract purchased, sold or cleared for
the Custody Account, Chase agrees, pursuant to Written
Instructions, to:
A. deposit original margin and variation margin
payments in a segregated account maintained by
Chase; and
B. perform all other obligations attendant to
transactions or positions in such futures
contracts, as such payments or performance may
be required by law or the executing broker.
8b. SEGREGATED ACCOUNTS FOR DEPOSITS OF COLLATERAL. Chase
agrees, with respect to (i) cash or high quality debt securities to secure the
Fund's commitments to purchase new issues of debt obligations offered on a
when-issued basis; (ii) cash, U.S. government securities, or irrevocable letters
of credit of borrowers of the Fund's portfolio securities to secure the loan to
them of such securities; and/or (iii) cash, securities or any other property
delivered to secure any other obligations;
- 11 -
<PAGE>
(all of such items being hereinafter referred to as "collateral"), pursuant to
written instructions, to:
C. deposit the collateral for each such
obligation in a separate segregated account
maintained by Chase and
D. promptly to show on Chase's records that such
collateral is being held on behalf of the Fund
and deliver to the Fund a written confirmation
to that effect.
IX. DEPOSIT ACCOUNT. Subject to the provisions of this
---------------
Agreement, the Fund authorizes Chase to establish
and maintain in each country or other jurisdiction
in which the principal trading market for any
Securities is located or in which any Securities
are to be presented for payment, an account or
accounts, which may include nostro accounts with
Chase Branches and omnibus accounts of Chase at
Foreign Banks, for receipt of cash in the Deposit
Account, in such currencies as directed by Written
Instructions. For purposes of this Agreement, cash
so held in any such account shall be evidenced by
separate book entries maintained by Chase at its
office in London and shall be deemed to be Cash
held by Chase in the Deposit Account. Unless Chase
receives Written Instructions to the contrary, cash
received or credited by Chase or any other Chase
- 12 -
<PAGE>
Branch, Foreign Bank or Foreign Securities Depository
for the Deposit Account in a currency other than
United States dollars shall be converted promptly
into United States dollars whenever it is practicable
to do so through customary banking channels
(including without limitation the effecting of such
conversions at Chase's preferred rates through Chase,
its affiliates or Chase Branches), and shall be
automatically transmitted back to Chase in the United
States.
X. SETTLEMENT PROCEDURES. Settlement procedures for
---------------------
transactions in Securities delivered to, held in,
or to be delivered from the Custody Account in
Chase Branches, Domestic Securities Depositories,
Foreign Banks and Foreign Securities Depositories,
including receipts and payments of cash held in any
nostro account or omnibus account for the Deposit
Account as described in Section 9, shall be carried
out in accordance with the provisions of the
Operating Agreement. It is understood that such
settlement procedures may vary, as provided in the
Operating Agreement, from securities market to
securities market, to reflect particular settlement
practices in such markets.
Chase shall make or cause the appropriate Chase Branch or
Foreign Bank to move payments of Cash held in the Deposit Account
- 13 -
<PAGE>
only:
A. in connection with the purchase of Securities
for the account of the Fund and only against
the receipt of such Securities by Chase or by
another appropriate Chase Branch, Domestic
Securities Depository, Foreign Bank or Foreign
Securities Depository, or otherwise as
payment to be made at prices confirmed by
Written Instructions, or
B. in connection with any dividend, interim
dividend or other distribution declared by the
Fund, or
C. as directed by the Fund by Written
Instructions setting forth the name and
address of the person to whom the payment is
to be made and the purpose for which the
payment is to be made.
Upon the receipt by Chase of Written Instructions specifying
the Securities to be so transferred or delivered, which instructions shall name
the person or persons to whom transfers or deliveries of such Securities shall
be made and shall indicate the time(s) for such transfers or deliveries,
Securities held in the Custody Account shall be transferred, exchanged, or
delivered by Chase, any Chase Branch, Domestic Securities Depository, Foreign
Bank, or Foreign Securities Depository, as the case may be, against
- 14 -
<PAGE>
payment in Cash or Securities, or otherwise as provided in the
Operating Agreement, only:
D. upon sale of such Securities for the account
of the Fund and receipt of such payment in the
amount shown in a broker's confirmation of
sale of the Securities or other proper
authorization received by Chase before such
payment is made, as confirmed by Written
Instructions;
E. in exchange for or upon conversion into other
Securities alone or other Securities and Cash
pursuant to any plan of merger, consolidation,
reorganization, recapitalization,
readjustment, or tender offer;
F. upon exercise of conversion, subscription,
purchase, or other similar rights represented
by such Securities, or
G. otherwise as directed by the Fund by Written
Instructions which shall set forth the amount
and purpose of such transfer or delivery.
Until Chase receives Written Instructions to the contrary,
Chase shall and shall cause each Chase Branch, Domestic Securities Depository,
Foreign Bank and Foreign Securities Depository holding Securities or Cash to
take the following actions in accordance with procedures established in the
Operating
Agreement:
- 15 -
<PAGE>
H. collect and timely deposit in the Deposit
Account all income due or payable with respect
to any Securities and take any action which
may be necessary and proper in connection with
the collection and receipt of such income;
I. present timely for payment all Securities in
the Custody Account which are called, redeemed
or retired or otherwise become payable and all
coupons and other income items which call for
payment upon presentation and to receive and
credit to the Deposit Account Cash so paid for
the account of the Fund except that, if such
Securities are convertible, such Securities
shall not be presented for payment until two
business days preceding the date on which such
conversion rights would expire unless Chase
previously shall have received Written
Instructions with respect thereto;
J. present for exchange all Securities in the
Custody Account converted pursuant to their
terms into other Securities;
K. in respect of securities in the Custody
Account, execute in the name of the Fund such
ownership and other certificates as may be
required to obtain payments in respect
thereto, provided that Chase shall have
- 16 -
<PAGE>
requested and the Fund shall have furnished to
Chase any information necessary in connection
with such certificates;
L. exchange interim receipts or temporary
Securities in the Custody Account for
definitive Securities; and
M. receive and hold in the Custody Account all
Securities received as a distribution on
Securities held in the Custody Account as a
result of a stock dividend, share split-up
or reorganization, recapitalization,
readjustment or other rearrangement or
distribution of rights or similar Securities
issued with respect to any Securities held
in the Custody Account.
XI. RECORDS. Chase hereby agrees that Chase and any
-------
Chase Branch or Foreign Bank shall create,
maintain, and retain all records relating to their
activities and obligations as custodian for the
Fund under this Agreement in such manner as will
meet the obligations of the Fund under the Act of
1940, particularly Section 31 thereof and Rules
31a-1 and 31a-2 thereunder, and Federal, state and
foreign tax laws and other legal or administrative
rules or procedures, in each case as currently in
effect and applicable to the Fund. All records so
- 17 -
<PAGE>
maintained in connection with the performance of its
duties under this Agreement shall remain the property
of the Fund and, in the event of termination of this
Agreement, shall be delivered in accordance with the
provisions of Section 19.
Chase hereby agrees, subject to restrictions under applicable
laws, that the books and records of Chase and any Chase Branch pertaining to
their actions under this Agreement shall be open to the physical, on-premises
inspection and audit at reasonable times by the independent accountants
("Accountants") employed by, or other representatives of, the Fund. Chase hereby
agrees that, subject to restrictions under applicable laws, access shall be
afforded to the Accountants to such of the books and records of any Foreign
Bank, Domestic Securities Depository or Foreign Securities Depository with
respect to Securities and Cash as shall be required by the Accountants in
connection with their examination of the books and records pertaining to the
affairs of the Fund. Chase also agrees that as the Fund may reasonably request
from time to time, Chase shall provide the Accountants with information with
respect to Chase's and Chase Branches' systems of internal accounting controls
as they relate to the services provided under this Agreement, and Chase shall
use its best efforts to obtain and furnish similar information with respect to
each Domestic Securities Depository, Foreign Bank and Foreign Securities
Depository holding Securities and Cash.
XII. REPORTS. Chase shall supply periodically, upon the
- 18 -
<PAGE>
reasonable request of the Fund, such statements,
reports, and advices with respect to Cash in the
Deposit Account and the Securities in the Custody
Account and transactions in Securities from time to
time received and/or delivered for or from the
Custody Account, as the case may be, as the Fund
shall require. Such statements, reports and advices
shall include an identification of the Chase Branch,
Domestic Securities Depository, Foreign Bank and
Foreign Securities Depository having custody of the
Securities and Cash, and descriptions thereof.
XIII. REGISTRATION OF SECURITIES. Securities in the
--------------------------
Custody Account which are issued or issuable
only in bearer form (except such securities as
are held in the Book-Entry System) shall be
held by Chase, Chase Branches, Domestic
Securities Depositories, Foreign Banks or
Foreign Securities Depositories in that
form.
All other Securities in the Custody Account
shall be held in registered form in the name
of Chase, or any Chase Branch, the Book-Entry
System, Domestic Securities Depository,
Foreign Bank or Foreign Securities Depository
and their nominees, as custodian or nominee.
XIV. STANDARD OF CARE.
- 19 -
<PAGE>
A. GENERAL. Effective June 1, 1987, Chase shall
-------
assume entire responsibility for all
Securities held in the Custody Account, Cash
held in the Deposit Account, Cash or
Securities held in the Segregated Accounts and
any of the Securities and Cash while in the
possession of Chase or any Chase Branch,
Domestic Securities Depository, Foreign Bank
or Foreign Securities Depository, or in the
possession or control of any employees, agents
or other personnel of Chase or any Chase
Branch, Domestic Securities Depository,
Foreign Bank or Foreign Securities Depository;
and shall be liable to the Fund for any loss
to the Fund occasioned by any destruction of
the Securities or Cash so held or while in
such possession, by any robbery, burglary,
larceny, theft or embezzlement by any
employees, agents or personnel of Chase or any
Chase Branch, Domestic Securities Depository,
Foreign Bank or Foreign Securities Depository,
and/or by virtue of the disappearance of any
of the Securities or Cash so held or while in
such possession, with or without any fault
attributable to Chase ("fault attributable to
Chase" for the purposes of this Agreement
- 20 -
<PAGE>
being deemed to mean any negligent act or
omission, robbery, burglary, larceny, theft
or embezzlement by any employees or agents
of Chase or any Chase Branch, Domestic
Securities Depository, Foreign Bank or
Foreign Securities Depository). In the event
of Chase's discovery or notification of any
such loss of Securities or Cash, Chase shall
promptly notify the Fund and shall reimburse
the Fund to the extent of the market value
of the missing Securities or Cash as at the
date of the discovery of such loss. The Fund
shall not be obligated to establish any
negligence, misfeasance or malfeasance on
Chase's part from which such loss resulted,
but Chase shall be obligated hereunder to
make such reimbursement to the Fund after
the discovery or notice of such loss,
destruction or theft of such Securities or
Cash. Chase may at its option insure itself
against loss from any cause but shall be
under no obligation to insure for the
benefit of the Fund.
B. COLLECTIONS. All collections of funds or
other property paid or distributed in respect
of Securities held in the Custody Account
shall be made at the risk of the Fund. Chase
- 21 -
<PAGE>
shall have no liability for any loss
occasioned by delay in the actual receipt of
notice by Chase (or by any Chase Branch or
Foreign Bank in the case of Securities or
Cash held outside of the United States) of
any payment, redemption or other transaction
regarding Securities held in the Custody
Account or Cash held in the Deposit Account
in respect of which Chase has agreed to take
action in the absence of Written
Instructions to the contrary as provided in
Section 10 of this Agreement, which does not
appear in any of the publications referred
to in Section 16 of this Agreement.
C. EXCLUSIONS. Notwithstanding any other
----------
provision in this Agreement to the contrary,
Chase shall not be responsible for (i) losses
resulting from war or from the imposition of
exchange control restrictions, confiscation,
expropriation, or nationalization of any
securities or assets of the issuer of such
securities, or (ii) losses resulting from any
negligent act or omission of the Fund or any
of its affiliates, or any robbery, theft,
embezzlement or fraudulent act by any employee
or agent of the Fund or any of its affiliates.
- 22 -
<PAGE>
Chase shall not be liable for any action
taken in good faith upon Written
Instructions of Authorized Persons of the
Fund or upon any certified copy of any
resolution of the Board of Trustees of the
Fund, and may rely on the genuineness of any
such documents which it may in good faith
believe to be validly executed.
D. LIMITATION ON LIABILITY UNDER SECTION 14(A).
-------------------------------------------
Notwithstanding any other provision in this
Agreement to the contrary, it is agreed that
the extent of Chase's liability to the Fund
under Section 14(a) shall not exceed the
amount of the limitation provided for in
Section 14(e), it being understood and agreed
that the amount of such limitation applies on
an aggregated basis to all losses under
Section 14(a) incurred by the Fund and is
subject to annual adjustment as set forth in
Section 14(e). The Fund agrees that Chase's
sole responsibility with respect to losses
under Section 14(a) shall be to pay the Fund
the amount of any such loss as provided in
Section 14(a) subject to the limitation
provided in Section 14(e). This limitation
does not apply to any liability of Chase under
Section 14(f) of this Agreement.
- 23 -
<PAGE>
E. ANNUAL ADJUSTMENT OF LIMITATION OF LIABILITY.
--------------------------------------------
As soon as practicable after June 1 of every
year (or such other date in any particular
year agreed to by all of the Templeton Funds),
the Fund shall provide Chase with the amount
of its total net assets as of the close of
business on such date (or if the New York
Stock Exchange is closed on such date, then in
that event as of the close of business on the
next day on which the New York Stock Exchange
is open for business).
It is understood by the parties to this Agreement
that Chase has entered into substantially similar custody
agreements as follows: agreements with Templeton Funds, Inc.
on behalf of Templeton World Fund and on behalf of Templeton
Foreign Fund; agreements with Templeton Global Funds, Inc. on
behalf of Templeton Global I and on behalf of Templeton Global
II; an agreement with Templeton Growth Fund, Ltd., all of
which Funds have as their investment advisers companies which
are the same as, or affiliated with, the Investment Manager of
the Fund; and that Chase may enter into any substantially
similar custody agreements with additional mutual funds under
Templeton management which may hereafter be organized. Each of
such custody agreements with each of such other Templeton
Funds
- 24 -
<PAGE>
contains (or will contain) a "Standard of Care" section
similar to this Section 14, except that the limit of Chase's
liability is in varying amounts for each Fund, with the
aggregate limits of liability in all of such agreements,
including this Agreement, amounting to $150,000,000.
On each June 1 (or other date agreed on for any
particular year), Chase will total the net assets reported by
each one of the Templeton Funds, and will calculate the
percentage of the aggregate net assets of all the Templeton
Funds that is represented by the net asset value of this Fund.
Thereupon Chase shall allocate to this Agreement with this
Fund that proportion of its total of $150,000,000
responsibility undertaking which is substantially equal to the
proportion which this Fund's net assets bears to the total net
assets of all such Templeton Funds, subject to adjustments for
claims paid as follows: all claims previously paid to this
Fund shall first be deducted from its proportionate allocable
share of the $150,000,000 Chase responsibility, and if the
claims paid to this Fund amount to more than its allocable
share of the Chase responsibility, then the excess of such
claims paid to this Fund shall diminish the balance of the
$150,000,000 Chase responsibility available for the
proportionate shares of all of the other Templeton Funds
having similar custody agreements
- 25 -
<PAGE>
with Chase. Based on such calculation, and on such adjustment
for claims paid, if any, Chase thereupon shall notify the Fund
of such limit of liability under Section 14(a) which will be
available to the Fund with respect to (1) losses in excess of
payment allocations or previous years and (2) losses
discovered during the next year this Agreement remains in
effect and until a new determination of such limit of
responsibility is made on the next succeeding June 1 (or other
agreed date).
F. OTHER LIABILITY. Independently of Chase's
---------------
liability to the Fund as provided in Section
14(a) above (it being understood that the
limitations in Sections 14(d) and 14(e) do not
apply to the provisions of this Section
14(f)), Chase shall be responsible for the
performance of only such duties as are set
forth in this Agreement or contained in
express instructions given to Chase which are
not contrary to the provisions of this
Agreement. Chase will use and require the
same care with respect to the safekeeping of
all Securities held in the Custody Account,
Cash held in the Deposit Account, and
Securities or Cash held in the Segregated
Accounts as it uses in respect of its own
similar property, but it need not maintain any
- 26 -
<PAGE>
insurance for the benefit of the Fund. With
respect to Securities and Cash held outside
of the United States, Chase will be liable
to the Fund for any loss to the Fund
resulting from any disappearance or
destruction of such Securities or Cash while
in the possession of Chase or any Chase
Branch, Foreign Bank or Foreign Securities
Depository, to the same extent it would be
liable to the Fund if Chase had retained
physical possession of such Securities and
Cash in New York. It is specifically agreed
that Chase's liability under this Section
14(f) is entirely independent of Chase's
liability under Section 14(a).
Notwithstanding any other provision in this
Agreement to the contrary, in the event of
any loss giving rise to liability under this
Section 14(f) that would also give rise to
liability under Section 14(a), the amount of
such liability shall not be charged against
the amount of the limitation on liability
provided in Sections 14(d) and 14(e).
G. COUNSEL; LEGAL EXPENSES. Chase shall be
entitled to the advice of counsel (who may be
counsel for the Fund) at the expense of the
Fund in connection with carrying out Chase's
duties hereunder and in no event shall Chase
- 27 -
<PAGE>
be liable for any action taken or omitted to
be taken by it in good faith pursuant to
advice of such counsel. If, in the absence
of fault attributable to Chase and in the
course of or in connection with carrying out
its duties and obligations hereunder, any
claims or legal proceedings are instituted
against Chase or any Chase Branch by third
parties, the Fund will hold Chase harmless
against any claims, liabilities, costs,
damages or expenses incurred in connection
therewith and, if the Fund so elects, the
Fund may assume the defense thereof with
counsel satisfactory to Chase, and
thereafter shall not be responsible for any
further legal fees that may be incurred by
Chase, provided, however, that all of the
foregoing is conditioned upon the Fund's
receipt from Chase of prompt and due notice
of any such claim or proceeding.
XV. EXPROPRIATION INSURANCE. Chase represents that it
does not intend to obtain any insurance for the
benefit of the Fund which protects against the
imposition of exchange control restrictions on the
transfer from any foreign jurisdiction of the
proceeds of sale of any Securities or against
confiscation, expropriation or nationalization of
- 28 -
<PAGE>
any securities or the assets of the issuer of such
securities by a government of any foreign country in
which the issuer of such securities is organized or
in which securities are held for safekeeping either
by Chase, or any Chase Branch, Foreign Bank or
Foreign Securities Depository in such country. Chase
has discussed the availability of expropriation
insurance with the Fund, and has advised the Fund as
to its understanding of the position of the staff of
the Securities and Exchange Commission that any
investment company investing in securities of foreign
issuers has the responsibility for reviewing the
possibility of the imposition of exchange control
restrictions which would affect the liquidity of such
investment company's assets and the possibility of
exposure to political risk, including the
appropriateness of insuring against such risk. The
Fund has acknowledged that it has the responsibility
to review the possibility of such risks and what, if
any, action should be taken.
XVI. PROXY, NOTICES, REPORTS, ETC. Chase shall watch
for the dates of expiration of (a) all purchase or
sale rights (including warrants, puts, calls and
the like) attached to or inherent in any of the
Securities held in the Custody Account and (b)
- 29 -
<PAGE>
conversion rights and conversion price changes for
each convertible Security held in the Custody Account
as published in Telstat Services, Inc., Standard &
Poor's Financial Inc. and/or any other publications
listed in the Operating Agreement (it being
understood that Chase may give notice to the Fund as
provided in Section 21 as to any change, addition
and/or omission in the publications watched by Chase
for these purposes). If Chase or any Chase Branch,
Foreign Bank or Foreign Securities Depository shall
receive any proxies, notices, reports, or other
communications relative to any of the Securities held
in the Custody Account, Chase shall, on its behalf or
on behalf of a Chase Branch, Foreign Bank or Foreign
Securities Depository, promptly transmit in writing
any such communication to the Fund. In addition,
Chase shall notify the Fund by person-to-person
collect telephone concerning any such notices
relating to any matters specified in the first
sentence of this Section 16.
As specifically requested by the Fund, Chase shall execute or
deliver or shall cause the nominee in whose name Securities are registered to
execute and deliver to such person as may be designated by the Fund proxies,
consents, authorizations and any other instruments whereby the authority of the
Fund as owner of
- 30 -
<PAGE>
any Securities in the Custody Account registered in the name of Chase or such
nominee, as the case may be, may be exercised. Chase shall vote Securities in
accordance with Written Instructions timely received by Chase, or such other
person or persons as designated in or pursuant to the Operating Agreement.
Chase and any Chase Branch shall have no liability for any
loss or liability occasioned by delay in the actual receipt by them or any
Foreign Bank or Foreign Securities Depository of notice of any payment or
redemption which does not appear in any of the publications referred to in the
first sentence of this Section 16.
XVII. COMPENSATION. The Fund agrees to pay to Chase
------------
from time to time such compensation for its
services pursuant to this Agreement as may be
mutually agreed upon in writing from time to
time and Chase's out-of-pocket or incidental
expenses, as from time to time shall be
mutually agreed upon by Chase and the Fund.
The Fund shall have no responsibility for the
payment of services provided by any Domestic
Securities Depository, Chase Branch, Foreign
Bank or Foreign Securities Depository, such
fees being paid directly by Chase. In the
event of any advance of Cash for any purpose
made by Chase pursuant to any Written
Instruction, or in the event that Chase or any
nominee of Chase shall incur or be assessed
- 31 -
<PAGE>
any taxes in connection with the performance
of this Agreement, the Fund shall indemnify
and reimburse Chase therefor, except such
assessment of taxes as results from the
negligence, fraud, or willful misconduct of
Chase, any Domestic Securities Depository,
Chase Branch, Foreign Bank or Foreign
Securities Depository, or as constitutes a
tax on income, gross receipts or the like of
any one or more of them. Chase shall have a
lien on Securities in the Custody Account
and on Cash in the Deposit Account for any
amount owing to Chase from time to time
under this Agreement upon due notice to the
Fund.
XVIII. AGREEMENT SUBJECT TO APPROVAL OF THE FUND. It
is understood that this Agreement and any
amendments shall be subject to the approval of
the Fund.
XIX. TERM. This Agreement shall remain in effect until
----
June 1, 1987 and shall thereafter remain in effect
until terminated by either party upon 60 days'
written notice to the other, sent by registered
mail. Notwithstanding the preceding sentence,
however, if at any time after the execution of this
Agreement Chase shall provide written notice to the
Fund, by registered mail, of the amount needed to
- 32 -
<PAGE>
meet a substantial increase in the cost of
maintaining its present type and level of bonding and
insurance coverage in connection with Chase's
undertakings in Section 14(a), (d) and (e) of this
Agreement, said Section 14(a), (d) and (e) of this
Agreement shall cease to apply 60 days after the
providing of such notice by Chase, unless prior to
the expiration of such 60 days the Fund agrees in
writing to assume the amount needed for such purpose.
Chase, upon the date this Agreement terminates
pursuant to notice which has been given in a timely
fashion, shall, and/or shall cause each Domestic
Securities Depository, Chase Branch, Foreign Bank and
Foreign Securities Depository to deliver the
Securities in the Custody Account, to pay the Cash in
the Deposit Account, and to deliver and pay
Securities and Cash in the Segregated Accounts to the
Fund, unless Chase has received from the Fund 60 days
prior to the date on which this Agreement is to be
terminated Written Instructions specifying the
name(s) of the person(s) to whom the Securities in
the Custody Account shall be delivered, the Cash in
the Deposit Account shall be paid, and Securities and
Cash in the Segregated Accounts shall be delivered
and paid. Concurrently with the delivery of such
- 33 -
<PAGE>
Securities, Chase shall deliver to the Fund, or such
other person as the Fund shall instruct, the records
referred to in Section 11 which are in the possession
or control of Chase, any Chase Branch, or any
Domestic Securities Depository, or any Foreign Bank
or Foreign Securities Depository, or in the event
that Chase is unable to obtain such records in their
original form Chase shall deliver true copies of such
records.
XX. AUTHORIZATION OF CHASE TO EXECUTE NECESSARY
-------------------------------------------
DOCUMENTS. In connection with the performance of
---------
its duties hereunder, the Fund hereby authorizes
and directs Chase and each Chase Branch acting on
behalf of Chase, and Chase hereby agrees, to
execute and deliver in the name of the Fund, or
cause such other Chase Branch to execute and
deliver in the name of the Fund, such certificates,
instruments, and other documents as shall be
reasonably necessary in connection with such
performance, provided that the Fund shall have
furnished to Chase any information necessary in
connection therewith.
XXI. NOTICES. Any notice or other communication
authorized or required by this Agreement to be
given to the parties shall be sufficiently given
(except to the extent otherwise specifically
- 34 -
<PAGE>
provided) if addressed and mailed postage prepaid
or delivered to it at its office at the address set
forth below:
If to the Fund, then to: Templeton Income Fund
700 Central Avenue,
P.O. Box 33030
St. Petersburg, Florida 33733-9926
Attention: John Wm. Galbraith,
Treasurer
- 35 -
<PAGE>
If to Chase, then to: The Chase Manhattan Bank, N.A.
1211 Avenue of the Americas, 33rd Floor
New York, New York 10036
Attention: David M. Mann, V.P.
or such other person or such other address as any party shall have furnished to
the other party in writing.
XXII. NON-ASSIGNABILITY OF AGREEMENT. This
------------------------------
Agreement shall not be assignable by either
party hereto; provided, however, that any
corporation into which the Fund or Chase, as
the case may be, may be merged or converted or
with which it may be consolidated, or any
corporation succeeding to all or substantially
all of the trust business of Chase, shall
succeed to the respective rights and shall
assume the respective duties of the Fund or of
Chase, as the case may be, hereunder.
XXIII. GOVERNING LAW. This Agreement shall be
governed by the laws of the State of New York.
- 36 -
<PAGE>
XXIV. NO PERSONAL LIABILITY. It is understood and
expressly stipulated that neither the holders
of Shares of the Fund nor any Trustee,
officer, agent or employee of the Fund shall
be personally liable hereunder, nor shall any
resort be had to other private property for
the satisfaction of any claim or obligation
hereunder, but the Fund only shall be liable.
THE CHASE MANHATTAN BANK, N.A.
By:/s/CATHERRINE A. LEE
Vice President
TEMPLETON INCOME FUND
By:/s/ THOMAS L. HANSBERGER
Thomas L. Hansberger
President
-37-
BUSINESS MANAGEMENT AGREEMENT BETWEEN
TEMPLETON INCOME TRUST AND
TEMPLETON GLOBAL INVESTORS, INC.
AGREEMENT as of April 1, 1993, between Templeton Income Trust,
a Massachusetts business trust which is a registered open-end investment company
(the "Trust") comprised of two series (Templeton Income Fund and Templeton Money
Fund) and any additional series that may be created in the future (the "Funds"),
and Templeton Global Investors, Inc. ("TGII").
In consideration of the mutual promises herein made, the
parties hereby agree as follows:
(1) TGII agrees, during the life of this Agreement, to
be responsible for:
(a) providing office space, telephone, office
equipment and supplies for the Trust;
(b) paying compensation of the Trust's officers for
services rendered as such;
(c) authorizing expenditures and approving bills for
payment on behalf of the Trust;
(d) supervising preparation of annual and semiannual
reports to Shareholders, notices of dividends,
capital gains distributions and tax credits, and
attending to routine correspondence and other
communications with individual Shareholders;
(e) daily pricing of the Funds' investment portfolios and
preparing and supervising publication of daily
quotations of the bid and asked prices of the Funds'
Shares, earnings reports and other financial data;
(f) monitoring relationships with organizations
serving the Trust, including custodians, transfer
agents and printers;
(g) providing trading desk facilities for the Funds;
(h) supervising compliance by the Trust with
recordkeeping requirements under the Investment
Company Act of 1940 (the "1940 Act") and the rules
and regulations thereunder, with state regulatory
requirements, maintenance of books and records for
the Trust (other than those maintained by the
custodian and transfer agent), preparing and
<PAGE>
filing of tax reports other than the Trust's
income tax returns;
(i) monitoring the qualifications of tax deferred
retirement plans for the Trust; and
(j) providing executive, clerical and secretarial
personnel needed to carry out the above
responsibilities.
(2) The Trust agrees, during the life of this Agreement, to
pay to TGII as compensation for the foregoing a monthly fee equal on an annual
basis to 0.15% of the first $200 million of the aggregate average daily net
assets of the Funds during the month preceding each payment, reduced as follows:
on such net assets in excess of $200 million up to $700 million, a monthly fee
equal on an annual basis to 0.135%; on such net assets in excess of $700 million
up to $1.2 billion, a monthly fee equal on an annual basis to 0.1%; and on such
net assets in excess of $1.2 billion, a monthly fee equal on an annual basis to
0.075%.
(3) This Agreement shall remain in full force and effect
through December 31, 1993 and thereafter from year to year to the extent such
continuance is approved annually by the Board of Trustees of the Trust.
(4) This Agreement may be terminated by the Trust at any time
on sixty (60) days' written notice without payment of penalty, provided that
such termination by the Trust shall be directed or approved by the vote of a
majority of the Trustees of the Trust in office at the time or by the vote of a
majority of the outstanding voting securities of the Trust (as defined by the
1940 Act); and shall automatically and immediately terminate in the event of its
assignment (as defined by the 1940 Act).
(5) In the absence of willful misfeasance, bad faith or gross
negligence on the part of TGII, or of reckless disregard of its obligations
hereunder, TGII shall not be subject to liability for any act or omission in the
course of, or connected with, rendering services hereunder.
(6) It is understood and expressly stipulated that neither the
holders of Shares of the Trust nor any Trustee, officer, agent or employee of
the Trust shall be personally liable hereunder, nor shall any resort be had to
other private property for the satisfaction of any claim or obligation
hereunder, but the Trust only shall be liable.
IN WITNESS WHEREOF, the parties hereto have caused this
amended Agreement to be duly executed by their duly authorized
- 2 -
<PAGE>
officers and their respective corporate seals to be hereunto duly
affixed and attested.
TEMPLETON INCOME TRUST
By:/s/ HAROLD F. MCELRAFT
Harold F. McElraft
Vice President
ATTEST:
/s/ THOMAS M. MISTELE
Thomas M. Mistele
Secretary
TEMPLETON GLOBAL INVESTORS, INC.
By:/s/ THOMAS L. HANSBERGER
Thomas L. Hansberger
President
ATTEST:
/s/ GREGORY E. MCGOWANGregory E. McGowan
Secretary
- 3 -
1
TRANSFER AGENT AGREEMENT BETWEEN
TEMPLETON INCOME TRUST AND
FRANKLIN TEMPLETON INVESTOR SERVICES, INC.
AGREEMENT dated as of September 1, 1993, and amended and restated as of
August 10, 1995, between TEMPLETON INCOME TRUST, a registered open-end
investment company with offices at 700 Central Avenue, St. Petersburg, Florida
33701 (the "Trust") on behalf of Templeton Income Fund and Templeton Money Fund
(collectively, the "Funds") and FRANKLIN TEMPLETON INVESTOR SERVICES, INC., a
registered transfer agent with offices at 700 Central Avenue, St. Petersburg,
Florida 33701 ("FTIS").
W I T N E S E T H:
That for and in consideration of the mutual promises hereinafter set
forth, the Trust and FTIS agree as follows:
1. DEFINITIONS. Whenever used in this Agreement, the following
words and phrases, unless the context otherwise requires, shall have the
following meanings:
(a) "Declaration of Trust" shall mean the Declaration of
Trust of the Trust as the same may be amended from time to time;
(b) "Authorized Person" shall be deemed to include any person,
whether or not such person is an officer or employee of the Trust, duly
authorized to give Oral Instructions or Written Instructions on behalf of the
Trust as indicated in a certificate furnished to FTIS pursuant to Section 4(c)
hereof as may be received by FTIS from time to time;
(c) "Custodian" refers to the custodian and any sub-custodian
of all securities and other property which the Trust may from time to time
deposit, or cause to be deposited or held under the name or account of such
custodian pursuant to the Custody Agreement;
(d) "Oral Instructions" shall mean instructions, other than
written instructions, actually received by FTIS from a person reasonably
believed by FTIS to be an Authorized Person;
(e) "Shares" refers to shares of beneficial interest, par
value $.01 per share, of the Trust; and
(f) "Written Instructions" shall mean a written communication
signed by a person reasonably believed by FTIS to be an Authorized Person and
actually received by FTIS.
2. APPOINTMENT OF FTIS. The Trust hereby appoints and constitutes FTIS
as transfer agent for Shares of the Trust and as shareholder servicing agent for
the Trust, and FTIS accepts such appointment and agrees to perform the duties
hereinafter set forth.
3. COMPENSATION.
(a) The Trust will compensate or cause FTIS to be compensated
for the performance of its obligations hereunder in accordance with the fees set
forth in the written schedule of fees annexed hereto as Schedule A and
incorporated herein. Schedule A does not include out-of-pocket disbursements of
FTIS for which FTIS shall be entitled to bill the Trust separately. FTIS will
bill the Trust as soon as practicable after the end of each calendar month, and
said billings will be detailed in accordance with Schedule A. The Trust will
promptly pay to FTIS the amount of such billing.
Out-of-pocket disbursements shall include, but shall not be
limited to, the items specified in the written schedule of out-of-pocket
expenses annexed hereto as Schedule B and incorporated herein. Schedule B may be
modified by FTIS upon not less than 30 days' prior written notice to the Trust.
Unspecified out-of-pocket expenses shall be limited to those out-of-pocket
expenses reasonably incurred by FTIS in the performance of its obligations
hereunder. Reimbursement by the Trust for expenses incurred by FTIS in any month
shall be made as soon as practicable after the receipt of an itemized bill from
FTIS.
(b) Any compensation agreed to hereunder may be adjusted from
time to time by attaching to Schedule A of this Agreement a revised Fee
Schedule.
4. DOCUMENTS. In connection with the appointment of FTIS, the Trust
shall, on or before the date this Agreement goes into effect, but in any case,
within a reasonable period of time for FTIS to prepare to perform its duties
hereunder, deliver or cause to be delivered to FTIS the following documents:
(a) If applicable, specimens of the certificates for the
Shares;
(b) All account application forms and other documents
relating to Shareholder accounts or to any plan, program or service offered by
the Trust;
(c) A certificate identifying the Authorized Persons and
specimen signatures of Authorized Persons who will sign Written Instructions;
and
(d) All documents and papers necessary under the laws of
Florida, under the Trust's Declaration of Trust, and as may be required for the
due performance of FTIS's duties under this Agreement or for the due performance
of additional duties as may from time to time be agreed upon between the Trust
and FTIS.
5. DISTRIBUTIONS PAYABLE IN SHARES. In the event that the Board of
Trustees of the Trust shall declare a distribution payable in Shares, the Trust
shall deliver or cause to be delivered to FTIS written notice of such
declaration signed on behalf of the Trust by an officer thereof, upon which FTIS
shall be entitled to rely for all purposes, certifying (i) the number of Shares
involved, and (ii) that all appropriate action has been taken.
6. DUTIES OF THE TRANSFER AGENT. FTIS shall be responsible for
administering and/or performing transfer agent functions; for acting as service
agent in connection with dividend and distribution functions; and for performing
shareholder account and administrative agent functions in connection with the
issuance, transfer and redemption or repurchase (including coordination with the
Custodian) of Shares. The operating standards and procedures to be followed
shall be determined from time to time by agreement between the Trust and FTIS.
Without limiting the generality of the foregoing, FTIS agrees to perform the
specific duties listed on Schedule C.
7. RECORDKEEPING AND OTHER INFORMATION. FTIS shall create and
maintain all necessary records in accordance with all applicable laws, rules
and regulations.
8. OTHER DUTIES. In addition, FTIS shall perform such other duties and
functions, and shall be paid such amounts therefor, as may from time to time be
agreed upon in writing between the Trust and FTIS. Such other duties and
functions shall be reflected in a written amendment to Schedule C, and the
compensation for such other duties and functions shall be reflected in a written
amendment to Schedule A.
9. RELIANCE BY TRANSFER AGENT; INSTRUCTIONS.
(a) FTIS will be protected in acting upon Written or Oral
Instructions reasonably believed to have been executed or orally communicated by
an Authorized Person and will not be held to have any notice of any change of
authority of any person until receipt of a Written Instruction thereof from an
officer of the Trust. FTIS will also be protected in processing Share
certificates which it reasonably believes to bear the proper manual or facsimile
signatures of the officers of the Trust and the proper countersignature of FTIS.
(b) At any time FTIS may apply to any Authorized Person of the
Trust for Written Instructions and may seek advice at the Trust's expense from
legal counsel for the Trust or from its own legal counsel, with respect to any
matter arising in connection with this Agreement, and it shall not be liable for
any action taken or not taken or suffered by it in good faith in accordance with
such Written Instructions or in accordance with the opinion of counsel for the
Trust or for FTIS. Written Instructions requested by FTIS will be provided by
the Trust within a reasonable period of time. In addition, FTIS, or its
officers, agents or employees, shall accept Oral Instructions or Written
Instructions given to them by any person representing or acting on behalf of the
Trust only if said representative is known by FTIS, or its officers, agents or
employees, to be an Authorized Person.
10. ACTS OF GOD, ETC. FTIS will not be liable or responsible for delays
or errors by reason of circumstances beyond its control, including acts of civil
or military authority, national emergencies, labor difficulties, fire,
mechanical breakdown beyond its control, flood or catastrophe, acts of God,
insurrection, war, riots or failure beyond its control of transportation,
communication or power supply.
11. DUTY OF CARE AND INDEMNIFICATION. The Trust will indemnify FTIS
against and hold it harmless from any and all losses, claims, damages,
liabilities or expenses (including reasonable counsel fees and expenses)
resulting from any claim, demand, action or suit not resulting from willful
misfeasance, bad faith or gross negligence on the part of FTIS, and arising out
of, or in connection with, its duties hereunder. In addition, the Trust will
indemnify FTIS against and hold it harmless from any and all losses, claims,
damages, liabilities or expenses (including reasonable counsel fees and
expenses) resulting from any claim, demand, action or suit as a result of: (i)
any action taken in accordance with Written or Oral Instructions, or any other
instructions or Share certificates reasonably believed by FTIS to be genuine and
to be signed, countersigned or executed, or orally communicated by an Authorized
Person; (ii) any action taken in accordance with written or oral advice
reasonably believed by FTIS to have been given by counsel for the Trust or by
its own counsel; (iii) any action taken as a result of any error or omission in
any record (including but not limited to magnetic tapes, computer printouts,
hard copies and microfilm copies) delivered, or caused to be delivered by the
Trust to FTIS in connection with this Agreement; or (iv) any action taken in
accordance with oral instructions given under the Telephone Exchange and
Redemption Privileges, as described in the Trust's current prospectus, when
believed by FTIS to be genuine.
In any case in which the Trust may be asked to indemnify or hold FTIS
harmless, the Trust shall be advised of all pertinent facts concerning the
situation in question and FTIS will use reasonable care to identify and notify
the Trust promptly concerning any situation which presents or appears likely to
present a claim for indemnification against the Trust. The Trust shall have the
option to defend FTIS against any claim which may be the subject of this
indemnification, and, in the event that the Trust so elects, such defense shall
be conducted by counsel chosen by the Trust and satisfactory to FTIS, and
thereupon the Trust shall take over complete defense of the claim and FTIS shall
sustain no further legal or other expenses in such situation for which it seeks
indemnification under this Section 11. FTIS will not confess any claim or make
any compromise in any case in which the Trust will be asked to provide
indemnification, except with the Trust's prior written consent. The obligations
of the parties hereto under this Section shall survive the termination of this
Agreement.
12. TERM AND TERMINATION.
(a) This Agreement shall be effective as of the date first
written above and shall continue through December 31, 1993 and thereafter shall
continue automatically for successive annual periods ending on December 31 of
each year, provided such continuance is specifically approved at least annually
by (i) the Trust's Board of Trustees or (ii) a vote of a "majority" (as defined
in the Investment Company Act of 1940 (the "1940 Act")) of the Trust's
outstanding voting securities taken in accordance with applicable provisions of
the 1940 Act, provided that in either event the continuance is also approved by
a majority of the Board of Trustees who are not "interested persons" (as defined
in the 1940 Act) of any party to this Agreement, by vote cast in person at a
meeting called for the purpose of voting such approval;
(b) Either party hereto may terminate this Agreement by giving
to the other party a notice in writing specifying the date of such termination,
which shall be not less than 60 days after the date of receipt of such notice.
In the event such notice is given by the Trust, it shall be accompanied by a
resolution of the Board of Trustees of the Trust, certified by the Secretary of
the Trust, designating a successor transfer agent or transfer agents. Upon such
termination and at the expense of the Trust, FTIS will deliver to such successor
a certified list of shareholders of the Trust (with names and addresses), an
historical record of the account of each Shareholder and the status thereof, and
all other relevant books, records, correspondence, and other data established or
maintained by FTIS under this Agreement in a form reasonably acceptable to the
Trust, and will cooperate in the transfer of such duties and responsibilities,
including provisions for assistance from FTIS's personnel in the establishment
of books, records and other data by such successor or successors.
13. AMENDMENT. This Agreement may not be amended or modified in
any manner except by a written agreement executed by both parties.
14. SUBCONTRACTING. The Trust agrees that FTIS may, in its
discretion, subcontract for certain of the services described under this
Agreement or the Schedules hereto; provided that the appointment of any such
agent shall not relieve FTIS of its responsibilities hereunder.
15. MISCELLANEOUS.
(a) Any notice or other instrument authorized or required by
this Agreement to be given in writing to the Trust or FTIS shall be sufficiently
given if addressed to that party and received by it at its office set forth
below or at such other place as it may from time to time designate in writing.
To the Trust:
Templeton Income Trust
700 Central Avenue
St. Petersburg, Florida 33701
To FTIS:
Franklin Templeton Investor Services, Inc.
700 Central Avenue
St. Petersburg, Florida 33701
(b) This Agreement shall extend to and shall be binding upon
the parties hereto, and their respective successors and assigns; provided,
however, that this Agreement shall not be assignable without the written consent
of the other party.
(c) This Agreement shall be construed in accordance with
the laws of the State of California.
(d) This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original; but such
counterparts shall, together, constitute only one instrument.
(e) The captions of this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
(f) It is understood and expressly stipulated that neither the
holders of Shares of the Trust nor any Trustee, officer, agent or employee of
the Trust shall be personally liable hereunder, nor shall any resort be had to
other private property for the satisfaction of any claim or obligation
hereunder, but the Trust only shall be liable.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective corporate officers thereunder duly authorized as of
the day and year first above written.
TEMPLETON INCOME TRUST
BY:/s/ JOHN R. KAY
John R. Kay
Vice President
FRANKLIN TEMPLETON INVESTOR SERVICES, INC.
BY: /s/THOMAS M. MISTELE
Thomas M. Mistele
Vice President
<PAGE>
A-1
Schedule A
FEES
Shareholder account maintenance $14.77, adjusted as of
(per annum, prorated payable February 1 of each year
monthly) for Income Fund to reflect changes in the
Department of Labor Consumer
Price Index.
Shareholder account maintenance $22.91, adjusted as of
(per annum, prorated payable February 1 of each year
monthly) for Money Fund to reflect changes in the Department
of Labor Consumer Price Index.
Cash withdrawal program No charge to the Funds.
Retirement plans No charge to the Funds.
Wire orders or express mailings of redemption $15.00 fee may be charged for each
wire order and proceeds each express mailing.
February 1, 1995
<PAGE>
B-1
Schedule B
OUT-OF-POCKET EXPENSES
The Trust shall reimburse FTIS monthly for the following out-of-pocket
expenses:
o postage and mailing
o forms
o outgoing wire charges
o telephone
o Federal Reserve charges for check clearance
o if applicable, magnetic tape and freight
o retention of records
o microfilm/microfiche
o stationary
o insurance
o if applicable, terminals, transmitting lines and any expenses
incurred in connection with such terminals and lines
o all other miscellaneous expenses reasonably incurred by FTIS
The Trust agrees that postage and mailing expenses will be paid on the
day of or prior to mailing as agreed with FTIS. In addition, the Trust will
promptly reimburse FTIS for any other expenses incurred by FTIS as to which the
Trust and FTIS mutually agree that such expenses are not otherwise properly
borne by FTIS as part of its duties and obligations under the Agreement.
<PAGE>
C-3
C-1
Schedule C
DUTIES
AS TRANSFER AGENT FOR INVESTORS IN THE TRUST, FTIS WILL:
o Record in its transfer record, countersign as transfer agent,
and deliver certificates signed manually or by facsimile, by
the President or a Vice-President and by the Secretary or the
Assistant Secretary of the Trust, in such names and for such
number of authorized but hitherto unissued Shares of the Trust
as to which FTIS shall receive instructions; and
o Transfer on its records from time to time, when presented to
it for that purpose, certificates of said Shares, whether now
outstanding or hereafter issued, when countersigned by a duly
authorized transfer agent, and upon the cancellation of the
old certificates, record and countersign new certificates for
a corresponding aggregate number of Shares and deliver said
new certificates.
AS SHAREHOLDER SERVICE AGENT FOR INVESTORS IN THE TRUST, FTIS WILL:
o Receive from the Trust, from the Trust's Principal Underwriter
or from a Shareholder, on a form acceptable to FTIS,
information necessary to record sales and redemptions and to
generate sale and/or redemption confirmations;
o Mail sale and/or redemption confirmations using standard
forms;
o Accept and process cash payments from investors, clear checks
which represent payments for the purchase of Shares;
o Requisition Shares in accordance with instructions of the
Principal Underwriter of the Shares of the Trust;
o Produce periodic reports reflecting the accounts receivable
and the paid pending (free stock) items;
o Open, maintain and close Shareholder accounts, including
check accounts;
o Establish registration of ownership of Shares in accordance
with generally accepted form;
o Maintain monthly records of (i) issued Shares and (ii) number
of Shareholders and their aggregate Shareholdings classified
according to their residence in each State of the United
States or foreign country;
o Accept and process telephone exchanges and redemptions for
Shares in accordance with a Fund's Telephone Exchange and
Redemption Privileges as described in the Fund's current
prospectus.
o Maintain and safeguard records for each Shareholder showing
name(s), address, number of any certificates issued, and
number of Shares registered in such name(s), together with
continuous proof of the outstanding Shares, and dealer
identification, and reflecting all current changes. On
request, provide information as to an investor's qualification
for Cumulative Quantity Discount. Provide all accounts with
confirmation statements reflecting the most recent
transactions, and also provide year-end historical
confirmation statements;
o Provide on request a duplicate set of records for file
maintenance in the Trust's office in St. Petersburg, Florida;
o Out of money received in payment for Share sales, pay to the
Trust's Custodian Account with the Custodian, the net asset
value per Share and pay to the Principal Underwriter its
commission;
o Redeem Shares and prepare and mail (or wire) liquidation
proceeds;
o Process redemption checks and maintain checking account
records;
o Pass upon the adequacy of documents submitted by a Share-
holder or his legal representative to substantiate the
transfer of ownership of Shares from the registered owner
to transferees;
o From time to time, make transfers upon the books of the Trust
in accordance with properly executed transfer instructions
furnished to FTIS and make transfers of certificates for such
Shares as may be surrendered for transfer properly endorsed,
and countersign new certificates issued in lieu thereof;
o Upon receipt of proper documentation, place stop transfers,
obtain necessary insurance forms, and reissue replacement
certificates against lost, stolen or destroyed Share
certificates;
o Check surrendered certificates for stop transfer restrictions.
Although FTIS cannot insure the genuineness of certificates
surrendered for cancellation, it will employ all due
reasonable care in deciding the genuineness of such
certificates and the guarantor of the signature(s) thereon;
o Cancel surrendered certificates and record and countersign new
certificates;
o Certify outstanding Shares to auditors;
o In connection with any meeting of Shareholders, upon receiving
appropriate detailed instructions and written materials
prepared by the Trust and proxy proofs checked by the Trust,
print proxy cards; deliver to Shareholders all reports,
prospectuses, proxy cards and related proxy materials of
suitable design for enclosing; receive and tabulate executed
proxies; and furnish a list of Shareholders for the meeting;
o Answer routine correspondence and telephone inquiries about
individual accounts. Prepare monthly reports for
correspondence volume and correspondence data necessary for
the Trust's Semi-Annual Report on Form N-SAR;
o Prepare and mail dealer commission statements and checks;
o Maintain and furnish the Trust and its Shareholders with such
information as the Trust may reasonably request for the
purpose of compliance by the Trust with the applicable tax and
securities laws of applicable jurisdictions;
o Mail confirmations of transactions to investors and dealers
in a timely fashion;
o Pay or reinvest income dividends and/or capital gains
distributions to Shareholders of record, in accordance with
the Trust's and/or Shareholder's instructions, provided that:
(a) The Trust shall notify FTIS in writing
promptly upon declaration of any such
dividend and/or distribution, and in any
event at least forty-eight (48) hours before
the record date;
(b) Such notification shall include the
declaration date, the record date, the
payable date, the rate, and, if applicable,
the reinvestment date and the reinvestment
price to be used; and
(c) Prior to the payable date, the Trust shall
furnish FTIS with sufficient fully and
finally collected funds to make such
distribution;
o Prepare and file annual United States information returns of
dividends and capital gains distributions (Form 1099) and mail
payee copies to Shareholders; report and pay United States
income taxes withheld from distributions made to nonresidents
of the United States, and prepare and mail to Shareholders the
notice required by the U.S. Internal Revenue Code as to
realized capital gains distributed and/or retained, and their
proportionate share of any foreign taxes paid by the Trust;
o Prepare transfer journals;
o Set up wire order trades on file;
o Receive payment for trades and update the trade file;
o Produce delinquency and other trade file reports;
o Provide dealer commission statements and payments thereof for
the Principal Underwriter;
o Sort and print shareholder information by state, social code,
price break, etc.; and
o Mail promptly the Statement of Additional Information of the
Trust to each Shareholder who requests it, at no cost to the
Shareholder.
In connection with the Trust's Cash Withdrawal Program, FTIS will:
o Make payment of amounts withdrawn periodically by the
Shareholder pursuant to the Program by redeeming Shares, and
confirm such redemptions to the Shareholder; and
o Provide confirmations of all redemptions, reinvestment of
dividends and distributions, and any additional investments in
the Program, including a summary confirmation at the year-end.
SUB-TRANSFER AGENT SERVICES AGREEMENT
AGREEMENT made as of March 1, 1992 by and between (i) each of the investment
companies listed herein (collectively the "FUNDS"); (ii) Templeton Funds Trust
Company ("TFTC"); and (iii) THE SHAREHOLDER SERVICES GROUP, INC. ("TSSG").
WITNESSETH
WHEREAS, the FUNDS are investment companies registered under the
Investment Company Act of 1940, as amended (the "Act"); and
WHEREAS, the FUNDS have engaged TFTC to act as their transfer agent,
dividend disbursing agent and shareholder servicing agent; and
WHEREAS, the FUNDS and TFTC have entered into a separate agreements
pursuant to which TFTC agreed to arrange for the performance of certain
administrative services for shareholders of the FUNDS who maintain shares of
such Funds; and
WHEREAS, TSSG, a transfer agent registered under the Securities
Exchange Act of 1934, has presented to the FUNDS the various shareholder
administrative services that may be performed by TSSG; and
WHEREAS, the FUNDS desire to retain TSSG in a sub-transfer agent
capacity to perform such services and TSSG is willing and able to furnish such
services on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, each party hereto severally agrees, as follows:
1. TSSG agrees to perform the shareholder administrative services and
functions specified in Exhibit A hereto (the "Services") for the benefit of the
shareholders of the FUNDS who maintain shares of any such FUND in brokerage
accounts with Shearson Lehman Brothers (the "Broker"), where the shareholders'
shares are included in the master account referred to in Exhibit A
(collectively, the "Broker Customers").
2. TSSG agrees that it will maintain and preserve all records as
required by law to be maintained and preserved in connection with providing the
services, and will otherwise comply with the law, rules and regulations
applicable to the services. Upon the written authorization of the Broker and the
FUND, TSSG shall provide copies of all the historical records relating to
transactions involving the FUNDS and Broker Customers, data formats for written
communication regarding that FUND to or from such customers and other materials,
in each case as may reasonably be requested to enable the FUND or its
representatives, including without limitation its auditors, investment advisor,
transfer agent
<PAGE>
or successor transfer agent or distributor, to monitor and review the Services,
or to copmly with any request of the board of directors, trustees or general
partners (collectively, the "Directors") of the FUNDS or of a governmental body,
self-regulatory organization or a shareholder. TSSG agrees that it will permit
the FUNDS to have reasonable access to its personnel and records in order to
facilitate the monitoring of the quality of the services. It is understood that
notwithstanding anything herein to the contrary, TSSG shall not be required to
provide the names, addresses and account numbers of Broker Customers to the
TFTC, the FUNDS or their representatives, unless applicable laws or regulations
otherwise require.
3. TSSG may contract with or establish relationships with third
parties, including, without limitation, the Broker, for the provision of
services or activities of TSSG required by the Agreement.
4. TSSG hereby agrees to notify promptly TFTC and the FUNDS if for any
reason TSSG is unable to perform fully and promptly any of its obligations under
this Agreement.
5. The provisions of this Agreement shall in no way limit the authority
of any of the FUNDS to take such actions as it may deem appropriate or advisable
in connection with all matters relating to the operations of such FUND and/or
sale of its shares.
6. In consideration of the performance of the services by TSSG,
hereunder, the FUNDS severally agree to compensate TSSG at the rate specified in
Schedule A, which rate may change pursuant to a written amendment to this
Agreement executed by and among the parties hereto. Payment shall be made
monthly based upon the number of shareholders of a FUND who hold shares of such
FUND in a broker's account for any part of the subject month. This number shall
be certified each year by independent public accountants of TSSG. The FUNDS also
agree to reimburse TSSG or its designated agent for postage and handling
expenses associated with teh distribution of proxies, prospectuses, reports and
other communications to shareholders prepared by the FUNDS or necessitated by
the actions of the FUNDS.
7. TSSG shall indemnify and hold harmless TFTC and the FUNDS from and
against any and all losses or liabilities that any one or more of them may
incur, including without limitation reasonable attorneys' fees, expenses and
cost, arising out of or related to the perofrmance or non-performance of TSSG of
its responsibilities under this Agreement, excluding, however, any such claims,
suits, loss, damage or cost caused by, materially contributed to or arising from
any noncompliance by TFTC or a FUND with its obligations under this Agreement,
as to which TFTC and each of the FUNDS shall indemnify, hold harmless and defend
TSSG on the same basis as set forth above.
8. This Agreement may be terminated at any time by each of
<PAGE>
TSSG, TFTC or by any FUNDS as to itself upon 30 days written notice to TSSG. The
provisions of paragraphs 2 and 7 shall continue in full force and effect after
termination of this Agreement. Notwithstanding the foregoing, this Agreement
shall not require TSSG to preserve any records relating to this Agreement beyond
the time periods otherwise required by the laws to which TSSG is subject.
9. Any other investment company affiliated with the FUNDS may become a
party to this Agreement by giving written notice to TSSG that it has elected to
become a party hereto and by having this Agreement executed on its behalf.
10. TSSG understands and agrees that the obligations of each FUND under
this Agreement are not binding upon any shareholder of the FUND personally, but
bind only each FUND and each FUND'S property; TSSG represents that it has notice
of the provisions of the Declaration of Trust, if applicable, of each FUND
disclaiming shareholder liability for acts or obligations of the FUNDS.
11. The parties agree that they are independent contractors
and not partners or co-venturers.
12. No amendment of any provision of this Agreement shall in any event
be effective unless the same shall be in writing and signed by both parties. Any
failure of any party to comply with any obligation, agreement or condition
hereunder may only be waived in writing by the other party, but such waiver
shall not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure. No failure by any party to take any action against any breach of
this Agreement of default by any other party shall constitute a waiver of such
party's right to enforce any provision hereof or to take such action.
13. All notices, demands and other communications hereunder shall be in
writing and shall be sent by personal delivery or registered or certified mail,
postage prepaid, or by telecopier confirmed in writing within three business
days as follows:
(a) if to the FUNDS:
Templeton Funds Management, Inc.
700 Central Avenue
St. Petersburg, FL 33701
Attention: President
(b) if to TFTC:
Templeton Funds Trust Company
700 Central Avenue
St. Petersburg, FL 33701
Attention: President
(c) if to TSSG:
The Shareholder Services Group, Inc.
One Exchange Place
<PAGE>
Boston, Massachusetts 02109
Attention: President
With a copy to:
The Shareholder Services Group, Inc.
One Exchange Place
Boston, Massachusetts 02109
Attention: General Counsel
Any party may change its address for receiving notices by written notice given
to the others named above. All notices shall be effective upon the earlier of
actual delivery or when deposited in the mail addressed as set forth above.
14. This agreement shall be governed by and construed in accordance
with the law of the State of New York, without regard to its conflicts of laws
doctrine, and the parties hereby consent to the jurisdiction of New York courts
over all matter relating to this Agreement and irrevocably waive any objection,
including without limitation, any objection of the laying of venue or based on
the grounds of forum non conveniens, which they may now have or may hereafter
have to bringing of any action or proceeding in such jurisdiction.
IN WITNESS HEREOF, the parties hereto have executed and delivered this
agreement as of the date first above written.
THE SHAREHOLDER SERVICES GROUP, INC.
By:________________________________
Title:_____________________________
Templeton Funds Trust Company Templeton Income
Templeton Growth Fund, Inc.
Templeton Smaller Companies Growth
Fund, Inc.
Templeton Foreign Fund
Templeton World Fund
Templeton Real Estate Securities Fund
Templeton Global Opportunities Trust
Templeton Insured Tax Free Fund
Templeton Value Fund, Inc.
Templeton American Trust, Inc.
Templeton Developing Markets Trust
By:/s/ HAROLD F. MCELRAFT By:________________________
Print Name: Harold F. McElraft Print Name:________________
Title:____________________ Title:_____________________
<PAGE>
EXHIBIT A
Pursuant to the Agreement by and among the parties hereto, TSSG shall,
upon the effective date of this Agreement, perform or cause to be performed, the
following services, as well as telephonic and personal shareholder services
related to the following services:
1. Transmit to TFTC purchase and redemption order placements and
registration instructions. Collect and remit to TFTC payments for all purchase
orders placed on behalf of Broker Customers.
2. Maintain separate records for each shareholder of any of the FUNDS
who hold shares of a FUND in a brokerage account with Broker Customers, which
records shall reflect shares purchased and redeemed, as well as account and
share balances. Process transactions versus master accounts maintained by TFTC
on behalf of Broker Customers and such account shall be in the name of the
Broker or its nominee as the record owner of the shares owned by such customers.
3. Disburse or credit to the Broker Customers all proceeds of
redemptions of shares of the FUNDS and all dividends and other distributions not
reinvested in shares of the FUNDS.
4. Prepare and transmit to Broker Customers:
(a) Periodic account statements which show the total number of FUND
shares owned by the Broker Customer in that account as of the closing date, as
well as purchases, redemption dividends (cash and reinvested) and other
distributions in the account during the period covered by the statement;
(b) Proxy materials and reports and other information received by TSSG
or its agent from any of the FUNDS and required to be sent to shareholders under
the federal securities laws, and, upon request of TFTC transmit to Broker
Customers material fund communications deemed by the FUND, through its Directors
or other similar governing body, to be necessary and proper for receipt by all
FUND beneficial shareholders.
(c) Provide to TFTC, or the FUNDS, or any of the agents designated by
any of them, such information as shall reasonably conclude is necessary to
enable any of the FUNDS and its distributor to comply with State Blue Sky
requirements.
(d) All tax information reports or statements required to be furnished
to shareholders of the FUNDS with respect to their FUND shares by the Internal
Revenue Code and the Regulations promulgated thereunder.
The following fees shall be billed by TSSG monthly in arrears
<PAGE>
on a prorated basis of 1/12 of the annualized fee for all accounts that are open
during such month.
Upon execution of this Agreement, the FUND shall pay TSSG an annualized
fee of $6.00 for each Broker Customer account in the FUND that is open during
any monthly period effective March 1, 1992.
SHAREHOLDER SUB-ACCOUNTING SERVICES AGREEMENT
Agreement made as of the 1st day of May, 1991 by and between (i) each
of the investment companies listed (collectively the "Templeton Funds"), as such
Schedule may be amended from time to time; (ii) Templeton Funds Trust Company
("Templeton Funds Trust Company"); (iii) Financial Data Service, Inc. ("FDS"), a
New Jersey corporation; and (iv) Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("MLPF&S"), a Delaware corporation.
WITNESSETH:
WHEREAS, the Templeton Funds are investment companies registered under
the Investment Company Act of 1940, as amended (the"Act"); and
WHEREAS, Templeton Funds Trust Company, is the transfer agent, dividend
disbursing agent and shareholder servicing agent for the Templeton Funds; and
WHEREAS, Templeton Funds and Templeton Funds Trust Company have entered
into a separate agreement pursuant to which Templeton Funds Trust Company agreed
to arrange for the performance of certain administrative services for
shareholders of the Templeton Funds who maintain shares of any of such Funds in
a brokerage account with MLPF&S, a broker-dealer affiliated with FDS; and
WHEREAS, Templeton Funds Trust Company desires to retain MLPF&S to
perform such services and MLPF&S is willing and able to furnish such services on
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, each party hereto severally agree, as follows:
1. MLPF&S agrees to perform the administrative services and functions
specified in Exhibit A hereto (the "Services") for the benefit of the
shareholders of the Templeton Funds who maintain shares of any of such Funds in
brokerage accounts with MLPF&S and whose shares are included in the master
account referred to in paragraph 1 of Exhibit A (collectively, the "MLPF&S
customers").
2. MLPF&S agrees that it will maintain and preserve all records as
required by law to be maintained and preserved in connection with providing the
services, and will other wise comply with all law, rules and regulations
applicable to the services. Upon the request of Templeton Funds Trust Company,
MLPF&S shall provide copies of all the historical records relating to
transactions involving any Templeton Fund and MLPF&S customers, written
communication regarding that Fund to or from such customers and other materials,
in each case as amy reasonably be requested to enable any of the Funds or its
representatives, including without limitation its auditors, investment adviser,
Templeton Funds Trust Company or successor transfer agent or distributor, to
monitor and
<PAGE>
review the Services, or to comply with any request of the board of directors,
trustees or general partners (collectively, the "Directors") of Templeton Funds
or of a governmental body, self-regulatory organization or a shareholder. MLPF&S
agrees that it will permit Templeton Funds Trust Company, and any Templeton Fund
or their representatives to have reasonable access to its personnel and records
in order to facilitate the monitoring of the quality of the services. It is
understood that notwithstanding anything herein to the contrary, neither FDS nor
MLPF&S shall be required to provide the names and addresses of MLPF&S customers
to Templeton Funds Trust Company, any Templeton Fund of their representatives,
unless applicable laws otherwise require.
3. MLPF&S may contract with or establish relationships with
FDS or other parties for the provision of services or activities of
MLPF&S required by the Agreement.
4. Each of MLPF&S and FDS hereby agrees to notify promptly Templeton
Funds Trust Company if for any reason either of them is unable to perform fully
and promptly any of its obligations under this Agreement.
5. Each of MLPF&S and FDS hereby represent that neither of them now
owns or holds with power to vote any shares of the Templeton Funds which are
registered in the name of MLPF&S or the name of its nominee and which are
maintained in MLPF&S brokerage accounts.
6. The provisions of the Agreement shall in no way limit the authority
of Templeton Funds Trust Company or any Templeton Fund to take such action as it
may deem appropriate or advisable in connection with all matters relating to the
operations of such Fund and/or sale of its shares.
7. In consideration of the performance of the services by MLPF&S and
FDS, hereunder, each Templeton Fund severally agrees to compensate FDS at the
rate of $6.00 annually per shareholder account which rate may change pursuant to
a written amendment to this Agreement executed by and amount the parties hereto.
Payment shall be made monthly based upon the number of shareholders of a Fund
who hold shares of such Fund in a MLPF&S brokerage account for any part of the
subject month. MLPF&S agrees that, notwithstanding anything herein to the
contrary, it will not request any increase in its compensation hereunder prior
to May 3, 1993. In the event MLPF&S or FDS as it's agent where to mail any such
Fund's proxy materials, reports, prospectuses and other information to
shareholders of any Templeton Fund who are Merrill Lynch customers pursuant to
paragraph 4 of Exhibit A, Templeton Funds Trust Company or any such Templeton
Funds agrees to reimburse MLPF&S or FDS, as the case by be, for postage,
handling fees and reasonable costs of supplies used by it in such mailings in an
amount to be determined in accordance with the rates set forth in Rule 451.90 of
the New York Stock Exchange, Inc.
<PAGE>
The accuracy of the account charges and the expenses for postage, handling fees
and reasonable costs of suppliers billed pursuant to this paragraph shall be
certified once each year by independent public accountants of MLPF&S as of a
month selected by Templeton Funds Trust Company, such certification to be at the
expense of MLPF&S.
8. FDS shall indemnify and hold harmless each Templeton Fund and
Templeton Funds Trust Company, from and against any all losses or liabilities
that any one or more of them may incur, including without limitation reasonable
attorneys' fees, expenses and cost, arising out of or related to the performance
or non-performance of MLPF&S or FDS or its responsibilities under this
Agreement, EXCLUDING, HOWEVER, any such claims, suits, loss, damage or cost
caused by, contributed to or arising from any noncompliance by Templeton Funds
Trust Company or any of the Templeton Funds with its obligations under this
Agreement, as to which Templeton Funds Trust Company and the Templeton Funds
shall indemnify, hold harmless and defend FDS and MLPF&S on the same basis as
set forth above.
9. This Agreement may be terminated at any time by each of MLPF&S, FDS
and Templeton Funds Trust Company or by any Templeton Fund as to itself upon 30
days written notice to FDS. This Agreement may also be terminated at any time
without penalty upon 30 days written notice to FDS that a majority of the
Directors of any Templeton Fund have determined to terminate its agreement(s)
with Templeton Funds Trust Company pertaining to the service hereunder. The
provisions of paragraph 2 and 8 shall continue in full force and effect after
the termination of this Agreement. Notwithstanding the foregoing, this Agreement
shall require MLPF&S to preserve any records relating to this Agreement beyond
the time period otherwise required by the laws to which MLPF&S is subject.
10. Any other Templeton Fund for which Templeton Funds Trust Company
serves as transfer agent may become a party to this Agreement by giving written
notice to MLPF&S or FDS that it has elected to become a party hereto and by
having this Agreement executed on its behalf.
11. Each of MLPF&S and FDS understand and agree that the obligations of
the Templeton Funds under this Agreement are not binding upon any shareholder of
any of the Funds personally, but bind only each Fund and each Fund's property;
each of MLPF&S and FDS represents that it has notice of the provisions of the
Declaration of trust of each of the Templeton Funds disclaiming shareholder
liability for acts or obligations of the Fund.
12. It is understood and agreed that in performing the services under
this Agreement, neither MLPF&S nor FDS shall be acting as an agent for any of
the Templeton Funds.
IN WITNESS HEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
<PAGE>
MERRILL LYNCH, PIERCE, FENNER FINANCIAL DATA SERVICES, INC.
& SMITH INC.
By: /s/ HARRY P. ALLEX By: /s/ ROBERT C. DOAN
Print Name: Harry P. Allex Print Name: Robert C. Doan
Title: Sr. Vice President Title: President
Templeton Funds Trust Company Templeton Income
Templeton Growth Fund, Inc.
Templeton Smaller Companies
Growth Fund
Templeton Foreign Fund
Templeton World Fund
Templeton Real Estate Securities
Fund
Templeton Global Opportunities
Trust
Templeton Tax Free Insured Fund
Templeton Value Fund, Inc.
Templeton American Trust, Inc.
By: /s/DAN CALABRIA By: /s/ DAN CALABRIA
Print Name: Dan Calabria Print Name: Dan Calabria
Title: President Title: Vice President
<PAGE>
EXHIBIT A
Pursuant to the Agreement by and among the parties hereto, MLPF&S shall
perform the following services:
1. Maintain separate records for each shareholder of any of the
Templeton Funds who hold shares of a Fund in a brokerage account with MLPF&S
("MLPF&S customers"), which records shall reflect shares purchased and redeemed
and share balances. MLPF&S customers and such account shall be in the name of
MLPF&S or its nominee as the record owner of the shares owned by such customers.
2. Disburse or credit to MLPF&S customers all proceeds of
redemptions of shares of the Funds and all dividends and other
distributions not reinvested in shares of the Funds.
3. Prepare and transmit to MLPF&S customers periodic account statements
showing the total number of shares owned by the customer as of the statement
closing date, purchases and redemptions of Templeton Fund shares by the customer
during the period covered by the statement and the dividends and other
distributions paid to the customer during the statement period (whether paid in
cash or reinvested in Fund shares).
4. Transmit to MLPF&S customers proxy materials and reports and other
information received by MLPF&S from any of the Templeton Funds and required to
be sent to shareholder under the federal securities laws, and, upon request of
the Fund's transfer agent transmit to MLPF&S customers material fund
communications deemed by the fund, through its Board of Directors or other
similar governing body, to be necessary and proper for receipt by all Fund
beneficial shareholders.
5. Transmit to the Fund's transfer agent purchase and redemption orders
on behalf of Merrill Lynch customers in accordance with the commission schedule
(front and rear end) in the Fund's then current prospectus.
6. Provide to Templeton Funds Trust Company, or the Funds, or any of
the agents designated by any of them, such periodic reports as Templeton Funds
Trust Company shall reasonably conclude is necessary to enable any of the
Templeton Funds and its distributor to comply with State Blue Sky requirements.
7. Prepare and transit to MLPF&S customers annually all tax information
reports or statements required to be furnished to shareholders of the Templeton
Funds with respect to their Fund shares by the Internal Revenue Code and the
Regulations promulgated thereunder.
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use of our report dated September 29, 1995 on
the financial statements of Templeton Income Fund and Templeton Money Fund,
series of Templeton Income Trust, referred to therein, which appears in the 1995
Annual Report to Shareholders and which is incorporated herein by reference, in
Post-Effective Amendment No. 17 to the Registration Statement on Form N-1A, File
No. 33-6510, as filed with the Securities and Exchange Commission.
We also consent to the reference to our firm in the Prospectus under
the caption "Financial Highlights" and in the Statement of Additional
Information under the caption "Independent Accountants".
/s/ MCGLADREY & PULLEN, LLP
McGladrey & PUllen, LLP
New York, New York
December 15, 1995
<PAGE>
TEMPLETON INCOME TRUST
ASSISTANT SECRETARY'S CERTIFICATE
The undersigned, being the duly elected Assistant Secretary of
Templeton Income Trust, a Massachusetts business trust (the "Trust"), hereby
certifies that the following resolution has been duly adopted by the Trust's
Board of Trustees, and that said resolution remains in effect on the date
hereof.
RESOLVED, that the officers of the Trust be, and they hereby are,
authorized in the name and on behalf of the Trust to execute its
Notification of Registration on Form N-8A under the Investment Company
Act of 1940, and its Registration Statement on Form N-1A under the
Securities Act of 1933 and to execute or grant power of attorney to
execute any amendments thereto in such form as may be approved by such
attorney in fact, to file or authorize the filing of such documents
with the Securities and Exchange Commission and to designate agents for
service of process.
Dated: December 29, 1994
/s/JEFFREY L. STEELE
Jeffrey L. Steele
Assistant Secretary
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
TEMPLETON INCOME FUND AUGUST 31, 1995 ANNUAL REPORT AND IS QUALIFIED IN
ITS ENTRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000795402
<NAME> TEMPLETON INCOME FUND
<SERIES>
<NUMBER> 011
<NAME> INCOME FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 197891615
<INVESTMENTS-AT-VALUE> 188804538
<RECEIVABLES> 5518613
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 521350
<TOTAL-ASSETS> 194844501
<PAYABLE-FOR-SECURITIES> 389137
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1111627
<TOTAL-LIABILITIES> 1500764
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 207729499
<SHARES-COMMON-STOCK> 20536570
<SHARES-COMMON-PRIOR> 22716077
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (5288377)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (9097385)
<NET-ASSETS> 193343737
<DIVIDEND-INCOME> 988506
<INTEREST-INCOME> 17171047
<OTHER-INCOME> 0
<EXPENSES-NET> 2343829
<NET-INVESTMENT-INCOME> 15815724
<REALIZED-GAINS-CURRENT> (6288764)
<APPREC-INCREASE-CURRENT> 9899060
<NET-CHANGE-FROM-OPS> 19426020
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 11763904
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 1970755
<NUMBER-OF-SHARES-SOLD> 3800472
<NUMBER-OF-SHARES-REDEEMED> (7025706)
<SHARES-REINVESTED> 1045727
<NET-CHANGE-IN-ASSETS> (12138757)
<ACCUMULATED-NII-PRIOR> 4451
<ACCUMULATED-GAINS-PRIOR> (2972949)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 989493
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2343829
<AVERAGE-NET-ASSETS> 197588278
<PER-SHARE-NAV-BEGIN> 9.05
<PER-SHARE-NII> .73
<PER-SHARE-GAIN-APPREC> .17
<PER-SHARE-DIVIDEND> (.54)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> (.09)
<PER-SHARE-NAV-END> 9.32
<EXPENSE-RATIO> 1.18
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFOMRATION EXTRACTED FROM THE
TEMPLETON INCOME FUND AUGUST 31, 1995 ANNUAL REPORT AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000795402
<NAME> TEMPLETON INCOME FUND
<SERIES>
<NUMBER> 012
<NAME> TEMPLETON INCOME TRUST
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 197891615
<INVESTMENTS-AT-VALUE> 188804538
<RECEIVABLES> 5518613
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 521350
<TOTAL-ASSETS> 194844501
<PAYABLE-FOR-SECURITIES> 389137
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1111627
<TOTAL-LIABILITIES> 1500764
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 207729499
<SHARES-COMMON-STOCK> 219355
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (5288377)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (9097385)
<NET-ASSETS> 193343737
<DIVIDEND-INCOME> 988506
<INTEREST-INCOME> 17171047
<OTHER-INCOME> 0
<EXPENSES-NET> 2343829
<NET-INVESTMENT-INCOME> 15815724
<REALIZED-GAINS-CURRENT> (6288764)
<APPREC-INCREASE-CURRENT> 9899060
<NET-CHANGE-FROM-OPS> 19426020
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 15280
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 4562
<NUMBER-OF-SHARES-SOLD> 243599
<NUMBER-OF-SHARES-REDEEMED> (25855)
<SHARES-REINVESTED> 1611
<NET-CHANGE-IN-ASSETS> (12138757)
<ACCUMULATED-NII-PRIOR> 4451
<ACCUMULATED-GAINS-PRIOR> (2972949)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 989493
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2343829
<AVERAGE-NET-ASSETS> 291038
<PER-SHARE-NAV-BEGIN> 9.05
<PER-SHARE-NII> .21
<PER-SHARE-GAIN-APPREC> .24
<PER-SHARE-DIVIDEND> (.15)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> (.04)
<PER-SHARE-NAV-END> 9.31
<EXPENSE-RATIO> 1.57
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACED FROM THE
TEMPLETON MONEY FUND AUGUST 31, 1995 ANNUAL REPORT AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 020
<NAME> TEMPLETON MONEY FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 144058016
<INVESTMENTS-AT-VALUE> 144058016
<RECEIVABLES> 1928418
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 162169
<TOTAL-ASSETS> 146148603
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 8903195
<TOTAL-LIABILITIES> 8903195
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 137245408
<SHARES-COMMON-STOCK> 137245408
<SHARES-COMMON-PRIOR> 144414901
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 137245408
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 11538869
<OTHER-INCOME> 0
<EXPENSES-NET> 2044061
<NET-INVESTMENT-INCOME> 9494808
<REALIZED-GAINS-CURRENT> (2070)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 9492738
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (9492738)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 508966058
<NUMBER-OF-SHARES-REDEEMED> (524841570)
<SHARES-REINVESTED> 8706019
<NET-CHANGE-IN-ASSETS> (7169493)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 713915
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2044061
<AVERAGE-NET-ASSETS> 205501271
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .046
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.046)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .99
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
