Registration No. 33-9981
As filed with the Securities and Exchange Commission on December 29, 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. 12 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 / X /
Amendment No. 14
(Check appropriate box or boxes)
TEMPLETON GROWTH FUND, INC.
(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) (Zip Code)
Registrant's Telephone Number, including Area Code: (813) 823-8712
Thomas M. Mistele, Esq.
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, 1996 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 its
Common Stock, $1.00 par value per Share, pursuant to Rule 24f-2 under the
Investment Company Act of 1940. Registrant filed
<PAGE>
its most recent Notice pursuant to Rule 24f-2 on October 30, 1995.
<PAGE>
TEMPLETON GROWTH FUND, INC.
CROSS-REFERENCE SHEET
Item No. Caption
Part A
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 B
10 Cover Page
11 Table of Contents
12 General Information
and History
13 Investment Objective
and Policies
14 Management of the Fund
15 Principal Shareholders
16 Investment Management
and Other Services
<PAGE>
17 Brokerage Allocation
18 Description of Shares
19 Purchase, Redemption
and Pricing of Shares
20 Tax Status
21 Principal Underwriter
22 Performance
Information
23 Financial Statements
<PAGE>
TEMPLETON GROWTH FUND, INC.
PROSPECTUS -- JANUARY 1, 1996
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INVESTMENT Templeton Growth Fund, Inc. (the "Fund") seeks long-term
OBJECTIVE capital growth through a flexible policy of investing in
AND POLICIES stocks and debt obligations of companies and governments of
any nation.
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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 Growth Fund -- Class I ("Class I")
and Templeton Growth 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
INFORMATION This Prospectus sets forth concisely information about the
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 (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.. 4
Investment Objective
and Policies........ 4
INVESTMENT
TECHNIQUES.......... 5
Repurchase
Agreements.......... 5
Options on Indices... 5
Stock Index Futures
Contracts........... 5
Loans of Portfolio
Securities.......... 6
Depositary Receipts.. 6
RISK FACTORS......... 6
HOW TO BUY SHARES OF
THE FUND 8
Differences Between
Class I and Class
II.................. 8
Deciding Which Class
to Purchase......... 9
Offering Price --
Class I............ 10
Offering Price --
Class II........... 12
Net Asset Value
Purchases (Both
Classes)............ 12
Description of
Special Net Asset
Value Purchases..... 13
Additional Dealer
Compensation (Both
Classes)............ 14
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Purchasing Class I
and Class II Shares. 14
Automatic Investment
Plan................ 15
Institutional
Accounts............ 15
Account Statements... 15
Templeton STAR
Service............. 15
Retirement Plans..... 15
Net Asset Value...... 15
EXCHANGE PRIVILEGE... 16
Exchanges of Class I
Shares.............. 17
Exchanges of Class II
Shares.............. 17
Transfers............ 18
Conversion Rights.... 18
Exchanges by Timing
Accounts............ 18
HOW TO SELL SHARES OF
THE FUND 18
Reinstatement
Privilege........... 20
Systematic Withdrawal
Plan................ 21
Redemptions by
Telephone........... 22
Contingent Deferred
Sales Charge........ 22
TELEPHONE
TRANSACTIONS........ 23
Verification
Procedures.......... 23
Restricted Accounts.. 23
General.............. 23
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
MANAGEMENT OF THE
FUND................ 23
Investment Manager... 24
Business Manager..... 25
Transfer Agent....... 25
Custodian............ 25
Plans of
Distribution........ 25
Expenses............. 26
Brokerage
Commissions......... 26
GENERAL INFORMATION.. 26
Description of
Shares/Share
Certificates........ 26
Voting Rights........ 26
Meetings of
Shareholders........ 26
Dividends and
Distributions....... 26
Federal Tax
Information......... 27
Inquiries............ 27
Performance
Information......... 27
Statements and
Reports............. 28
WITHHOLDING
INFORMATION......... 29
CORPORATE RESOLUTION. 30
AUTHORIZATION
AGREEMENT........... 31
THE FRANKLIN
TEMPLETON GROUP..... 32
</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)........................................ 5.75% 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............................................ 0.62% 0.62%
Rule 12b-1 Fees/5/......................................... 0.22% 1.00%
Other Expenses (audit, legal, business management, transfer
agent and custodian)...................................... 0.26% 0.26%
Total Fund Operating Expenses.............................. 1.10% 1.88%
</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 1% 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 bank 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>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
Class I.......................... $68 $90 $115 $184
Class II......................... $39 $68 $111 $228
You would pay the following ex-
penses on the same investment in
Class II Shares, assuming no re-
demption........................ $29 $68 $111 $228
</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>
PER SHARE
OPERATING YEAR ENDED AUGUST 31,
PERFORMANCE ----------------------------------------------------------------------------------------------
(for a Share
outstanding
throughout the period) 1995 1994 1993 1992 1991 1990 1989 1988
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 18.95 $ 17.47 $ 15.81 $ 16.14 $ 15.23 $ 16.62 $ 13.65 $ 17.13
- -------------------------------------------------------------------------------------------------------------------------
Income from
investment
operations
Net investment
income .39 0.29 0.32 0.41 0.45 0.57 0.58 0.45
Net realized and
unrealized gain (loss) 1.20 2.58 2.97 0.92 1.68 (0.87) 3.12 (2.41)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total from
investment
operations 1.59 2.87 3.29 1.33 2.13 (0.30) 3.70 (1.96)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Less
distributions
Dividends from
net investment income (.29) (0.27) (0.36) (0.44) (0.54) (0.62) (0.48) (0.44)
Distributions
from net
realized gains (1.29) (1.12) (1.27) (1.22) (0.68) (0.47) (0.25) (1.08)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total
distributions (1.58) (1.39) (1.63) (1.66) (1.22) (1.09) (0.73) (1.52)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Change in net
asset value
for the year .01 1.48 1.66 (0.33) 0.91 (1.39) 2.97 (3.48)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $ 18.96 $ 18.95 $ 17.47 $ 15.81 $ 16.14 $ 15.23 $ 16.62 $ 13.65
- -------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN++ 9.51% 17.47% 23.57% 9.22% 15.95% (2.01)% 28.38% (9.86)%
RATIOS/SUPPLEMENTAL
DATA
Net assets, end
of year (000) $6,964,298 $5,611,560 $4,033,911 $3,268,644 $2,895,684 $2,466,684 $2,355,306 $1,572,112
Ratio to average
net
assets of:
Expenses 1.12% 1.10% 1.03% 0.88% 0.75% 0.67% 0.66% 0.69%
Net investment
income 2.40% 1.76% 2.10% 2.62% 3.09% 3.70% 4.20% 3.50%
Portfolio
turnover rate 35.21% 27.35% 28.89% 29.46% 30.28% 18.47% 11.55% 11.44%
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<CAPTION>
PRO FORMA*
-------------------------
PER SHARE
OPERATING EIGHT EIGHT
PERFORMANCE MONTHS MONTHS
(for a Share ENDED ENDED YEAR ENDED
outstanding AUGUST 31, DECEMBER 31, APRIL 30,
throughout the period) 1987 1986 1986
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<S> <C> <C> <C>
Net asset value,
beginning of period $ 12.87 $ 13.33 $ 10.14
- -------------------------------------------------------------------------------------------------------------------------
Income from
investment
operations
Net investment
income 0.29 0.14 0.19
Net realized and
unrealized gain (loss) 3.97 0.28 3.72
------------ ------------- -----------
Total from
investment
operations 4.26 0.42 3.91
------------ ------------- -----------
Less
distributions
Dividends from
net investment income -- (0.40) (0.24)
Distributions
from net
realized gains -- (0.48) (0.48)
------------ ------------- -----------
Total
distributions -- (0.88) (0.72)
------------ ------------- -----------
Change in net
asset value
for the year 4.26 (0.46) 3.19
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Net asset value,
end of period $ 17.13 $ 12.87 $ 13.33
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TOTAL RETURN++ 33.10% 3.32% 40.92%
RATIOS/SUPPLEMENTAL
DATA
Net assets, end
of year (000) $1,633,909 $1,132,570 $2,397,926
Ratio to average
net
assets of:
Expenses 0.66%+ 2.40%+ 2.50%
Net investment
income 2.99%+ 1.76%+ 2.11%
Portfolio
turnover rate 17.55% 9.50% 23.00%
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</TABLE>
* The Fund commenced operations on December 31, 1986 as successor in interest
to 58% of Templeton Growth Fund, Ltd. (the "Canadian Fund") which
reorganized into two funds on that date. In accordance with the terms of
the reorganization, the Canadian shareholders, representing 42% of the
shares outstanding, remained shareholders of the Canadian Fund and the non-
Canadian shareholders, representing 58% of the shares outstanding, became
Shareholders of the Fund. The per share table is presented as if the
reorganization took place as of the inception of the Canadian Fund, 58% of
the net assets and Shares outstanding were allocated to the Fund and the
Fund continued to operate in Canada subject to Canadian federal and
provincial taxes until December 31, 1986. No other pro forma adjustments
have been made for any changes in operating costs had the reorganization
taken place at that date. Since the table is on the basis of a single Share
outstanding throughout the period, the results illustrated, except for the
number of Shares outstanding at the end of each year, are the same as those
shown for the Canadian Fund.
+ Annualized.
++ Total return does not reflect sales charges.
3
<PAGE>
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
CLASS II
---------------
FOR THE PERIOD
MAY 1, 1995+
THROUGH
AUGUST 31, 1995
---------------
<S> <C>
Net asset value, beginning of period............................ $ 17.48
-------
Income from investment operations:
Net investment income........................................... .04
Net realized and unrealized gain................................ 1.38
-------
Total from investment operations................................ 1.42
-------
Net asset value, end of period.................................. $ 18.90
=======
TOTAL RETURN* 8.12%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000)................................. $42,548
Ratio of expenses to average net assets......................... 1.86%**
Ratio of net investment income to average net assets............ 1.61%**
</TABLE>
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* Total return does not reflect sales commissions or the deferred contingent
sales charge. Not annualized for periods of less than one year.
** Annualized.
+ Commencement of offering of Shares.
GENERAL DESCRIPTION
Templeton Growth Fund, Inc. (the "Fund") was incorporated under the laws of
Maryland on November 10, 1986 and is a successor to Templeton Growth Fund,
Ltd. The Fund is registered under the Investment Company Act of 1940, as
amended (the "1940 Act") as an open-end, diversified management investment
company. The Fund has two classes of Shares of Common Stock with a par value
of $.01 per Share: Templeton Growth Fund -- Class I and Templeton Growth
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 5.75% 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 Fund's investment objective is long-
term capital growth, which it seeks to achieve through a flexible policy of
investing in stocks and debt obligations of companies and governments of any
nation. Any income realized will be incidental. There can be no assurance that
the Fund's investment objective will be achieved.
Although the Fund generally invests in common stock, it may also invest in
preferred stocks and certain debt securities (which may include structured
investments, as described in the SAI under "Investment Objectives and
Policies--Structured Investments"), rated or unrated, such as convertible
bonds and bonds selling at a discount. Whenever, in the judgment of the
Investment Manager, market or economic conditions warrant, the Fund may, for
temporary defensive purposes, invest without limit in U.S. Government
4
<PAGE>
securities, bank time deposits in the currency of any major nation and
commercial paper meeting the quality ratings set forth under "Investment
Objective and Policies" in the SAI, and purchase from banks or broker-dealers
Canadian or U.S. Government securities with a simultaneous agreement by the
seller to repurchase them within no more than seven days at the original
purchase price plus accrued interest.
The Fund may invest no more than 5% of its total assets in securities issued
by any one company or government, exclusive of U.S. Government securities.
Although the Fund may invest up to 25% of its assets in a single industry, it
has no present intention of doing so. The Fund may not invest more than 5% of
its assets in warrants (exclusive of warrants acquired in units or attached to
securities) nor more than 10% of its assets in securities with a limited
trading market. The Investment Objective and Policies described above, as well
as most of the Investment Restrictions described in the SAI, cannot be changed
without Shareholder approval. The Fund invests for long-term growth of capital
and does not intend to place emphasis upon short-term trading profits.
Accordingly, the Fund expects to have a portfolio turnover rate of less than
50%.
The Fund may also purchase and sell stock index futures contracts up to an
aggregate amount not exceeding 20% of its total assets. In addition, in order
to increase its return or to hedge all or a portion of its portfolio
investments, the Fund may purchase and sell put and call options on securities
indices. These investment techniques are described below and under the heading
"Investment Objective and Policies" in the SAI.
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 INDICES. The Fund may purchase and write (i.e., sell) put and
call options on securities indices that are traded on United States and
foreign exchanges or in the over-the-counter markets. 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 put or call option only if the option is
"covered." This means that so long as the Fund is obligated as the writer of
an option, it will maintain with its custodian cash or cash equivalents equal
to the contract value (in the case of call options) or exercise price (in the
case of put options). The Fund will not purchase put or call options if the
aggregate premium paid for such options would exceed 5% of its total assets.
STOCK INDEX FUTURES CONTRACTS. For hedging purposes only, the Fund may
purchase and sell stock index futures contracts up to an aggregate amount not
exceeding 20% of its total assets. A stock index futures contract is an
agreement under which two parties agree to take or make delivery of an amount
of cash based on the difference between the value of a stock index at the
beginning and at the end of the contract period. When the Fund enters into a
stock index futures contract, it must make an initial deposit, known as
5
<PAGE>
"initial margin," as a partial guarantee of its performance under the
contract. As the value of the stock index fluctuates, either party to the
contract is required to make additional margin deposits, 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 Objective and Policies -- Stock Index Futures Contracts" in the
SAI. The Fund may not at any time commit more than 5% of its total assets to
initial margin deposits on futures contracts.
LOANS OF PORTFOLIO SECURITIES. The Fund may lend to banks and broker-dealers
portfolio securities with an aggregate market value of up to one-third of its
total assets to generate income. 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 five business days. The Fund will continue to receive
any interest or dividends paid on the loaned securities and will continue to
retain any voting rights with respect to the securities.
DEPOSITARY RECEIPTS. The Fund may purchase sponsored or unsponsored American
Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs") and Global
Depositary Receipts ("GDRs") (collectively, "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.
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
currency valuations will also affect the price of Shares of the Fund. History
reflects both decreases and increases in worldwide stock markets and currency
valuations, and these may reoccur unpredictably in the future. The value of
debt securities held by the Fund generally will vary inversely with changes in
prevailing interest rates. 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.
6
<PAGE>
Successful use of stock index futures contracts and options on securities
indices by the Fund is subject to certain special risk considerations. A
liquid stock index option or futures market may not be available when the Fund
seeks to offset adverse market movements. In addition, there may be an
imperfect correlation between movements in the securities included in the
index and movements in the securities in the Fund's portfolio. Successful use
of stock index futures contracts and options on securities indices is further
dependent on the Investment Manager's ability to predict correctly movements
in the direction of the stock markets and no assurance can be given that its
judgment in this respect will be correct. Risks in the purchase and sale of
stock index futures and options are further referred to in the SAI.
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 imposed 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 investment
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, auditing and financial
reporting standards, and auditing practices 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
investment 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.
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.
7
<PAGE>
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 is authorized to invest in medium quality or high-risk, lower
quality debt securities that are rated between BBB and as low as CCC by
Standard & Poor's Corporation ("S&P") and between Baa and as low as Caa by
Moody's Investors Service, Inc. ("Moody's") or, if unrated, are of equivalent
investment quality as determined by the Investment Manager. As an operating
policy, which may be changed by the Board of Directors 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.
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 transactions (to cover service
charges) will be incurred when the Fund converts assets from one currency to
another. 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 the Shares of the Fund, or directly
from FTD upon receipt by FTD of a 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
8
<PAGE>
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 1% per annum of average daily net assets of such
Shares, 0.75% 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 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 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.
9
<PAGE>
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 under below "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 5.75% of the Offering Price (equivalent to 6.10% 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 OF THE NET ASSET VALUE OF THE OFFERING PRICE
AT OFFERING PRICE SHARES PURCHASED SHARES PURCHASED RETAINED BY DEALERS/1/,/3/
----------------- --------------------- ---------------------- --------------------------
<S> <C> <C> <C>
Less than $50,000....... 5.75% 6.10% 5.00%
$50,000 but less than
$100,000............... 4.50% 4.71% 3.75%
$100,000 but less than
$250,000............... 3.50% 3.63% 2.80%
$250,000 but less than
$500,000............... 2.50% 2.56% 2.00%
$500,000 but less than
$1,000,000............. 2.00% 2.04% 1.60%
$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: 1% on sales of $1 million but less than $2 million, plus
0.80% on sales of $2 million but less than $3 million, plus 0.50% on sales
of $3 million but less than $50 million, plus 0.25% on sales of $50 million
but less than $100 million, plus 0.15% on sales of $100 million or more.
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 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 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 (as defined below)
(excluding IRA and IRA rollovers), certain non-designated 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.
10
<PAGE>
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 charge 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 their
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 $40,000 (or, if
valued at less than $40,000, had been purchased for $40,000) and purchased an
additional $20,000 of the Fund's Class I Shares, the sales charge for the
$20,000 purchase would be at the rate of 4.50%. 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.
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 $80,000 of Class I Shares and now were
investing $25,000, 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,
11
<PAGE>
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 OF THE NET ASSET VALUE OF THE OFFERING PRICE
AT OFFERING PRICE SHARES PURCHASED 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 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.
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.
12
<PAGE>
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 on 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 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.
13
<PAGE>
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 asset value of the Fund Shares 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 the 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.
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 made 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 U.S. and, if over $100,000, may not
be deemed to have been received until the proceeds have been collected unless
the check is certified or issued by such bank. Any subscription may be
rejected by FTD or by the Fund.
The Fund may impose a $10 charge against a Shareholder account in the event
that a check or draft submitted for the purchase of Fund Shares is returned
unpaid to the Fund.
Investors should promptly check the confirmation advice that is mailed after
each purchase (or redemption) in order to insure that it has been accurately
recorded in the investor's account.
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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 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 101 and 201, 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.
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 that 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
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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 Directors. 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 Directors.
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 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
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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 sales 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,
$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.
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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. 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.
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 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
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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
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
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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 Shareholder'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 will
also 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.
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
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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 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.
21
<PAGE>
REDEMPTIONS BY TELEPHONE. Shareholders who file a Telephone Redemption
Authorization Agreement (the "Agreement") (a copy of which is included in this
Prospectus) may redeem Shares of the Fund by telephone, subject to the
Restricted Account exception noted under "Telephone Transactions -- Restricted
Accounts." The Fund and the Transfer Agent will employ reasonable procedures
to confirm that instructions given by telephone are genuine. Shareholders,
however, bear the risk of loss in certain cases as described under "Telephone
Transactions -- Verification Procedures."
For Shareholder accounts with a completed Agreement on file, redemptions of
uncertificated Shares or Shares which have previously been deposited with the
Fund or the Transfer Agent may be made for up to $50,000 per day per Fund
account. Telephone redemption requests received before 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 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.
22
<PAGE>
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. 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.
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 Fund is managed by its Board of Directors and all powers are exercised
by or under authority of the Board. Information relating to the Directors and
Executive Officers is set forth under the heading "Management of the Fund" 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.
23
<PAGE>
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. The Investment Manager of the Fund is Templeton Global
Advisors Limited, Nassau, Bahamas. The Investment Manager manages the
investment and reinvestment of the Fund's assets. The Investment Manager is an
indirect wholly owned subsidiary of Franklin Resources, Inc. ("Franklin").
Through its subsidiaries, Franklin is engaged in various aspects of the
financial services industry. The Investment Manager and its affiliates serve
as advisers for a wide variety of public investment mutual funds and private
clients in many nations. The Templeton organization has been investing
globally over the past 52 years and, with its affiliates, provides investment
management and advisory services to a worldwide client base, including over
4.3 million mutual fund shareholders, foundations, endowments, employee
benefit plans and individuals. The Investment Manager and its affiliates have
approximately 4,100 employees in the United States, Australia, Scotland,
Germany, Hong Kong, Luxembourg, Bahamas, Singapore, Canada and Russia.
The Investment Manager uses a disciplined, long-term approach to value-
oriented global and international investing. It has an extensive global
network of investment research sources. Securities are selected for the Fund's
portfolio on the basis of fundamental company-by-company analysis. Many
different selection methods are used for different funds and clients and these
methods are changed and improved by the Investment Manager's research on
superior selection methods.
The Investment Manager 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
Directors of the Fund 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 Fund's Code
of Ethics. Please see "Investment Management and Other Services--Investment
Management Agreement" in the SAI for further information on securities
transactions and a summary of the Fund'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 0.62% of its average daily net assets.
The lead portfolio manager for the Fund is Mark G. Holowesko. Mr. Holowesko
holds a BA from the College of Holy Cross and an MBA from Babson College. He
joined the Templeton organization in 1985, and is responsible for coordinating
equity research worldwide for the Investment Manager. Prior to joining the
Templeton organization, Mr. Holowesko worked with Roy West Trust Corporation
(Bahamas) Limited as an investment administrator. His duties at Roy West
included managing trust and individual accounts, as well as conducting
research of worldwide equity markets. Dorian B. Foyil and Jeffrey A. Everett
exercise secondary portfolio management responsibilities with respect to the
Fund. Mr. Foyil holds a BBA in Accounting and Computer Science from Temple
University and an MBA in Finance from the Wharton School of Business. He is
Vice President of the Investment Manager and head of the Investment Manager's
research technology group. Prior to joining the Templeton organization,
Mr. Foyil was a research analyst for four years with UBS Phillips & Drew in
London, England. Mr. Everett holds a BS in Finance from Pennsylvania State
University. He joined the Templeton organization in 1989 and is Vice
President, Portfolio Management/Research, of the Investment Manager. Prior to
joining the Templeton organization, Mr. Everett was an investment officer at
First Pennsylvania Investment Research, a division of First Pennsylvania
Corporation, where he analyzed equity and convertible securities. Mr. Everett
was also responsible for coordinating research for Centre Square Investment
Group, the pension management subsidiary of First Pennsylvania Corporation.
Further information concerning the Investment Manager is included under the
heading "Investment Management and Other Services" in the SAI.
24
<PAGE>
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 and financial reports, monitoring compliance with
regulatory requirements and monitoring tax-deferred retirement plans. For its
services, the Business Manager receives a fee equivalent on an annual basis to
0.15% of the average daily net assets of the Fund, reduced to 0.135% of such
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.
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
under 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 0.75%
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 0.25% per annum of Class II's average daily net 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 0.75% 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.
25
<PAGE>
EXPENSES. For the fiscal year ended August 31, 1995, expenses borne by Class
I Shares of the Fund amounted to 1.12% of the Fund's average net assets of
such class, and expenses borne by Class II Shares of the Fund amounted to
1.86% (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 sale of Shares by a broker is one factor among others to be
taken into account in allocating securities transactions to that broker,
provided that the prices and execution provided by such broker equal the best
available within the scope of the Fund's brokerage policies.
GENERAL INFORMATION
DESCRIPTION OF SHARES/SHARE CERTIFICATES. The Fund's authorized capital
consists of 1,400,000,000 Common Shares, par value $0.01 per Share, of which
800,000,000 shares are classified as Class I Shares and 600,000,000 are
classified as Class II Shares. The Board of Directors is authorized, in its
discretion, to classify and allocate the unissued Shares of the Fund. 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.
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 Fund is not required to hold annual meetings
of Shareholders and may elect not to do so. The Fund will call a special
meeting of Shareholders when requested to do so by Shareholders holding at
least 10% of the Fund's outstanding Shares. In addition, the Fund is required
to assist Shareholder communications in connection with the calling of
Shareholder meetings to consider removal of a Director or Directors.
DIVIDENDS AND DISTRIBUTIONS. The Fund intends to pay a dividend at least
annually representing substantially all of its net investment income and 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
26
<PAGE>
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 that
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, generally will 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
Shareholders. The Fund intends to distribute substantially all of its net
investment income and net realized capital gains to Shareholders, which 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
27
<PAGE>
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.
28
<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 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 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.
29
<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 and that the following is a
TYPE OF ORGANIZATION STATE
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 authorized to
sign any share assignment on
NUMBER
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)
30
<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 of Funds (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
Templeton 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.
31
<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.
32
<PAGE>
NOTES
-----
33
<PAGE>
NOTES
-----
34
<PAGE>
NOTES
-----
35
<PAGE>
- -----------------------------
TEMPLETON GROWTH FUND, INC.
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] TL101 P 01/96
TEMPLETON
GROWTH
FUND, INC.
Prospectus
January 1, 1996
[LOGO OF FRANKLIN TEMPLETON 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 TEMPLETON I II TEMPLETON
<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 TEMPLETON 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 GROWTH FUND, INC.
THIS STATEMENT OF ADDITIONAL INFORMATION
DATED JANUARY 1, 1996,
IS NOT A PROSPECTUS. IT SHOULD BE READ IN
CONJUNCTION WITH THE PROSPECTUS OF
TEMPLETON GROWTH FUND, INC. DATED
JANUARY 1, 1996, AS AMENDED FROM TIME TO TIME,
WHICH CAN 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 Objective and Policies........................2
-Investment Policies....................................2
-Repurchase Agreements..................................2
-Loans of Portfolio Securities..........................2
-Debt Securities........................................2
-Structured Investments.................................4
-Stock Index Futures Contracts..........................4
-Stock Index Options....................................6
-Investment Restrictions................................8
-Risk Factors..........................................10
-Trading Policies......................................15
-Personal Securities Transactions......................15
Management of the Fund..................................16
Director Compensation...................................22
Principal Shareholders..................................23
Investment Management and Other
Services............................................. 23
-Investment Management Agreement.......................23
-Management Fees.......................................25
-Templeton Global Advisors Limited.....................25
-Business Manager......................................26
-Custodian and Transfer Agent..........................27
-Legal Counsel.........................................28
-Independent Accountants...............................28
-Reports to Shareholders...............................28
Brokerage Allocation....................................28
Purchase, Redemption and Pricing
of Shares..............................................31
-Ownership and Authority
Disputes..............................................32
-Tax-Deferred Retirement Plans.........................32
-Letter of Intent......................................34
-Special Net Asset Value Purchases.....................35
-Redemptions in Kind. . . . . . . .....................36
Tax Status..............................................36
Principal Underwriter...................................43
Description of Shares...................................45
Performance Information.................................45
Financial Statements....................................49
GENERAL INFORMATION AND HISTORY
Templeton Growth Fund, Inc. (the "Fund") was incorporated in Maryland
on November 10, 1986 and is registered under the Investment Company Act of 1940
(the "1940 Act") as an open-end diversified management investment company. The
Fund is the successor in interest to approximately 58% of Templeton Growth Fund,
Ltd., a Canadian corporation organized on September 1, 1954 (the "Canadian
Fund"), which was reorganized on December 31, 1986 into two mutual funds. Under
the reorganization, the Canadian Shareholders of the Canadian Fund, representing
42% of the Shares outstanding, remained Shareholders of the Canadian Fund and
the non-Canadian Shareholders, representing 58% of the Shares outstanding,
became Shareholders of the Fund. Accordingly, 58% of the portfolio and other
assets of the Canadian Fund were transferred to the Fund for Shares of the Fund,
which were immediately transferred, on a Share for Share basis, to the
non-Canadian Shareholders in redemption of their holdings in the Canadian Fund.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT POLICIES. The Fund's investment objective and policies are
described in the Prospectus under the heading "General Description--Investment
Objective and Policies." The Fund may invest for defensive purposes in
commercial paper which, at the date of investment, must be rated A-1 by Standard
& Poor's Corporation ("S&P") or Prime-1 by Moody's Investors Service, Inc.
("Moody's") or, if not rated, issued by a company which, at the date of
investment, has an outstanding debt issue rated AAA or AA by S&P or Aaa or Aa by
Moody's.
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. Templeton Global
Advisors Limited (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 the
Fund's ability to dispose of the underlying securities. The Fund will enter into
repurchase agreements only with parties who meet creditworthiness standards
approved by the Fund's Board of Directors, 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.
LOANS OF PORTFOLIO SECURITIES. The Fund may lend to banks and
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 retains all or a portion of the interest received on investment of the
cash collateral or receives a fee from the borrower. The Fund may terminate the
loans at any time and obtain the return of the securities loaned within five
business days. 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. However, as with other extensions of credit, there are risks of
delay in recovery or even loss of rights in collateral should the borrower fail.
DEBT SECURITIES. The Fund may invest in debt securities
which are rated at least Caa by Moody's or CCC by S&P or deemed
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<PAGE>
to be of comparable quality by the Investment Manager. As an operating policy,
the Fund will not invest 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 the Fund's net asset value.
Bonds rated Caa by Moody's 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 rated CCC by S&P are regarded, on balance, as speculative.
Such securities will have some quality and protective characteristics, but these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
Although they may offer higher yields than do higher rated securities,
low rated 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 securities are traded. The existence of limited
markets for particular securities may diminish the 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 the 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 the Fund to
achieve its investment objective may, to the extent of investment in low rated
debt securities, be more dependent upon such credit-worthiness analysis than
would be the case if the Fund were investing in higher rated securities.
- 3 -
<PAGE>
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, the Fund may incur additional expenses to
seek recovery.
The Fund may accrue and report interest on high yield bonds structured
as zero coupon bonds or pay-in-kind securities as income 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,
the Fund must distribute substantially all of its income to Shareholders (see
"Tax Status"). Thus, the Fund may have to dispose of its portfolio securities
under disadvantageous circumstances to generate cash in order to satisfy the
distribution requirement.
Recent legislation, which requires federally insured savings and loan
associations to divest their investments in low rated debt securities, may have
a material adverse effect on the Fund's net asset value and investment
practices.
STRUCTURED INVESTMENTS. Included among the issuers of debt securities
in which the 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
purchases 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
the Fund anticipates investing
- 4 -
<PAGE>
typically involve no credit enhancement, their credit risk will generally be
equivalent to that of the underlying instruments.
The 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, the 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.
STOCK INDEX FUTURES CONTRACTS. The Fund's investment policies also
permit it to buy and sell stock index futures contracts with respect to any
stock index traded on a recognized stock exchange or board of trade, to an
aggregate amount not exceeding 20% of the Fund's total assets at the time when
such contracts are entered into. Successful use of stock index futures is
subject to the Investment Manager's ability to predict correctly movements in
the direction of the stock markets. No assurance can be given that the
Investment Manager's judgment in this respect will be correct.
A stock index futures contract is a contract to buy or sell units of a
stock index at a specified future date at a price agreed upon when the contract
is made. The value of a unit is the current value of the stock index. For
example, the Standard & Poor's 500 Stock Index (the "S&P 500 Index") is composed
of 500 selected common stocks, most of which are listed on the New York Stock
Exchange ("NYSE"). The S&P 500 Index assigns relative weightings to the value of
one share of each of these 500 common stocks included in the Index, and the
Index fluctuates with changes in the market values of the shares of those common
stocks. In the case of the S&P 500 Index, contracts are to buy or sell 500
units. Thus, if the value of the S&P 500 Index were $150, one contract would be
worth $75,000 (500 units x $150). The stock index futures contract specifies
that no delivery of the actual stocks making up the index will take place.
Instead,
- 5 -
<PAGE>
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. For example, if the Fund
enters into a futures contract to BUY 500 units of the S&P 500 Index at a
specified future date at a contract price of $150 and the S&P 500 Index is at
$154 on that future date, the Fund will gain $2,000 (500 units x gain of $4). If
the Fund enters into a futures contract to SELL 500 units of the stock index at
a specified future date at a contract price of $150 and the S&P 500 Index is at
$154 on that future date, the Fund will lose $2,000 (500 units x loss of $4).
During or in anticipation of a period of market appreciation, the Fund
may enter into a "long hedge" of common stock which it proposes to add to its
portfolio by purchasing stock index futures for the purpose of reducing the
effective purchase price of such common stock. To the extent that the securities
which the Fund proposes to purchase change in value in correlation with the
stock index contracted for, the purchase of futures contracts on that index
would result in gains to the Fund which could be offset against rising prices of
such common stock.
During or in anticipation of a period of market decline, the Fund may
"hedge" common stock in its portfolio by selling stock index futures for the
purpose of limiting the exposure of its portfolio to such decline. To the extent
that the Fund's portfolio of securities changes in value in correlation with a
given stock index, the sale of futures contracts on that index could
substantially reduce the risk to the portfolio of a market decline and, by so
doing, provide an alternative to the liquidation of securities positions in the
portfolio with resultant transaction costs.
Parties to an index futures contract must make initial margin deposits
to secure performance of the contract, which currently range from 1-1/2% to 5%
of the contract amount. Initial margin requirements are determined by the
respective exchanges on which the futures contracts are traded. There also are
requirements to make variation margin deposits as the value of the futures
contract fluctuates.
At the time the Fund purchases a stock index 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 the Fund's custodian. When selling a stock index futures
contract, the 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
- 6 -
<PAGE>
the instruments underlying the contract. Alternatively, the Fund may "cover" its
position by 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 the Fund to purchase the same futures contract at a price no higher
than the price of the contract written by the Fund (or at a higher price if the
difference is maintained in liquid assets with the Fund's custodian).
STOCK INDEX OPTIONS. The Fund may purchase and sell put and call
options on securities indices in standardized contracts traded on national
securities exchanges, boards of trade, or similar entities, or quoted on NASDAQ.
An option on a securities index is a contract that gives the purchaser of the
option, in return for the premium paid, the right to receive from the writer of
the option, cash equal to the difference between the closing price of the index
and the exercise price of the option, expressed in dollars, times a specified
multiplier for the index option. An index is designed to reflect specified
facets of a particular financial or securities market, a specific group of
financial instruments or securities, or certain indicators.
The Fund may write call options and put options only if they are
"covered." A call option on an index is covered if the Fund maintains with its
custodian cash or cash equivalents equal to the contract value. A call option is
also covered if the Fund holds a call on the same index as the call written
where the exercise price of the call held is (i) equal to or less than the
exercise price of the call written, or (ii) greater than the exercise price of
the call written, provided the difference is maintained by the Fund in cash or
cash equivalents in a segregated account with its custodian. A put option on an
index is covered if the Fund maintains cash or cash equivalents equal to the
exercise price in a segregated account with its custodian. A put option is also
covered if the Fund holds a put on the same index as the put written where the
exercise price of the put held is (i) equal to or greater than the exercise
price of the put written, or (ii) less than the exercise price of the put
written, provided the difference is maintained by the Fund in cash or cash
equivalents in a segregated account with its custodian.
If an option written by the Fund expires, the Fund will realize a
capital gain equal to the premium received at the time the option was written.
If an option purchased by the Fund expires unexercised, the Fund will realize a
capital loss equal to the premium paid.
Prior to the earlier of exercise or expiration, an option may be closed
out by an offsetting purchase or sale of an option of the same series (type,
exchange, index, exercise price, and
- 7 -
<PAGE>
expiration). There can be no assurance, however, that a closing
purchase or sale transaction can be effected when the Fund
desires.
INVESTMENT RESTRICTIONS. The Fund has imposed upon itself certain
Investment Restrictions, which together with the Investment Objective and
Policies are fundamental policies except as otherwise indicated. No changes in
the Fund's Investment Objective and Policies or Investment Restrictions (except
those which are not fundamental policies) can be made without approval of the
Shareholders. For this purpose, the provisions of the 1940 Act require the
affirmative vote of the lesser of either (A) 67% or more of the Shares present
at a Shareholders' meeting at which more than 50% of the outstanding Shares are
present or represented by proxy or (B) more than 50% of the outstanding Shares
of the Fund.
In accordance with these Restrictions, the Fund will not:
1. Invest in real estate or mortgages on real estate
(although the Fund may invest in marketable securities
secured by real estate or interests therein or issued
by companies or investment trusts which invest in real
estate or interests therein); invest in interests
(other than debentures or equity stock interests) in
oil, gas or other mineral exploration or development
programs; purchase or sell commodity contracts except
stock index futures contracts; invest in other open-end
investment companies or, as an operating policy
approved by the Board of Directors, invest in
closed-end investment companies.
2. Purchase or retain securities of any company in which
Directors or Officers of the Fund or of its 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. Purchase more than 10% of any class of securities of any one
company, including more than 10% of its outstanding voting
securities, or invest in any company for the purpose of
exercising control or management.
4. Act as an underwriter; issue senior securities;
purchase on margin or sell short; write, buy or sell
puts, calls, straddles or spreads (but the Fund may
make margin payments in connection with, and purchase
- 8 -
<PAGE>
and sell, stock index futures contracts and options on
securities indices).
5. Loan money, apart from the purchase of a portion of an issue
of publicly distributed bonds, debentures, notes and other
evidences of indebtedness, although the Fund may buy Canadian
and United States Government obligations with a simultaneous
agreement by the seller to repurchase them within no more than
seven days at the original purchase price plus accrued
interest.
6. Borrow money for any purpose other than redeeming its
Shares or purchasing its Shares for cancellation, and
then only as a temporary measure to an amount not
exceeding 5% of the value of its total assets, or
pledge, mortgage, or hypothecate its assets other than
to secure such temporary borrowings, and then only to
such extent not exceeding 10% of the value of its total
assets as the Board of Directors may by resolution
approve. (For the purposes of this Restriction,
collateral arrangements with respect to margin for a
stock index futures contract are not deemed to be a
pledge of assets.)
7. Invest more than 5% of the value of the Fund's total assets in
securities of issuers which have been in continuous operation
less than three years.
8. Invest more than 5% of the Fund's total assets in
warrants, whether or not listed on the New York or
American Stock Exchange, including no more than 2% of
its total assets which may be invested in warrants that
are not listed on those exchanges. Warrants acquired
by the Fund in units or attached to securities are not
included in this Restriction. This Restriction does
not apply to options on securities indices.
9. Invest more than 15% of the Fund's total assets in
securities of foreign issuers that are not listed on a
recognized United States or foreign securities
exchange, including no more than 10% of its total
assets (including warrants) which may be invested in
securities with a limited trading market. The Fund's
position in the latter type of securities may be of
such size as to affect adversely their liquidity and
marketability and the Fund may not be able to dispose
of its holdings in these securities at the current
market price.
- 9 -
<PAGE>
10. Invest more than 25% of the Fund's total assets in a
single industry.
11. Invest in "letter stocks" or securities on which there
are sales restrictions under a purchase agreement.
12. Participate on a joint or a joint and several basis in
any trading account in securities.
Whenever any Investment Policy or Investment Restriction states a
maximum percentage of the 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 the Fund's acquisition of such
security or property. The value of the Fund's assets is calculated as described
in the Prospectus under the heading "How to Buy Shares of the Fund." Nothing in
the Investment Policies or Investment Restrictions (except Restrictions 9 and
10) shall be deemed to prohibit the Fund from purchasing securities pursuant to
subscription rights distributed to the Fund by any issuer of securities held at
the time in its portfolio (as long as such purchase is not contrary to the
Fund's status as a diversified investment company under the 1940 Act).
RISK FACTORS. The Fund has an unlimited right to purchase securities in
any foreign country, developed or developing, if they are listed on a stock
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. The 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 NYSE and
securities of some foreign companies are less liquid and more volatile than
securities of comparable United States companies. Although the Fund may invest
up to 15% of its total assets in unlisted foreign securities, including not more
than 10% of its total assets in securities with a limited trading market, in the
opinion of management such securities with a limited trading market do not
present a significant liquidity problem. Commission rates in foreign countries,
which are
- 10 -
<PAGE>
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 liqui-dity and in
greater price volatility; (iii) certain national policies which may restrict the
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 legal 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 Eastern Europe may be slowed or
reversed by unanticipated political or social events in such countries.
In addition, many countries in which the 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, the 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 United States
dollars, the conversion rates may be artificial to the actual market values and
may be adverse to Fund Shareholders.
- 11 -
<PAGE>
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 the 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 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 the 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 the Fund to
- 12 -
<PAGE>
lose its registration through fraud, negligence or even mere oversight. While
the 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 the 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 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 the 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 the Fund if a potential purchaser is deemed
unsuitable, which may expose the Fund to potential loss on the investment.
The Fund's management 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 the 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 that could affect investments in
securities of issuers in foreign nations.
The 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
- 13 -
<PAGE>
and by indigenous economic and political developments. Some countries in which
the Fund may invest may also have fixed or managed currencies that are not
free-floating against the U.S. dollar. Further, certain currencies may not be
internationally traded. Certain of these currencies have experienced a steady
devaluation relative to the U.S. dollar. Any devaluations in the currencies in
which the Fund's portfolio securities are denominated may have a detrimental
impact on the Fund. Through the 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 the 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.
The Directors consider at least annually the likelihood of the
imposition by any foreign government of exchange control restrictions which
would affect the liquidity of the 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 Directors 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 the 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 Directors'
appraisal of the risks will always be correct or that such exchange control
restrictions or political acts of foreign governments might not occur.
There are additional risks involved in stock index futures
transactions. These risks relate to the Fund's ability to reduce or eliminate
its futures positions, which will depend upon the liquidity of the secondary
markets for such futures. The Fund intends to purchase or sell futures 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 stock index futures
for hedging may involve risks because of imperfect correlations between
movements in the prices of the
- 14 -
<PAGE>
stock index futures on the one hand and movements in the prices of the
securities being hedged or of the underlying stock index on the other.
Successful use of stock index futures by the 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.
There are several risks associated with transactions in options on
securities indices. For example, there are significant differences between the
securities and options markets that could result in an imperfect correlation
between these markets, causing a given transaction not to achieve its
objectives. A decision as to whether, when and how to use options involves the
exercise of skill and judgment, and even a well-conceived transaction may be
unsuccessful to some degree because of market behavior or unexpected events.
There can be no assurance that a liquid market will exist when the Fund seeks to
close out an option position. If the Fund were unable to close out an option
that it had purchased on a securities index, it would have to exercise the
option in order to realize any profit or the option may expire worthless. If
trading were suspended in an option purchased by the Fund, it would not be able
to close out the option. If restrictions on exercise were imposed, the Fund
might be unable to exercise an option it has purchased. Except to the extent
that a call option on an index written by the Fund is covered by an option on
the same index purchased by the Fund, movements in the index may result in a
loss to the Fund; however, such losses may be mitigated by changes in the value
of the Fund's securities during the period the option was outstanding.
TRADING POLICIES. The Investment Manager and its affiliated companies
serve as investment manager 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
of the security and/or the quantity which may be bought or sold for each party.
If the transaction is large enough, brokerage commissions 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.
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<PAGE>
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 FUND
The name, address, principal occupation during the past five years and
other information with respect to each of the Directors and Principal Executive
Officers of the Fund are as follows:
NAME, ADDRESS AND PRINCIPAL OCCUPATION
OFFICES WITH FUND DURING PAST FIVE YEARS
HARRIS J. ASHTON
Metro Center
1 Station Place
Stamford, Connecticut
Director
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.
- 16 -
<PAGE>
NAME, ADDRESS AND PRINCIPAL OCCUPATION
OFFICES WITH FUND DURING PAST FIVE YEARS
NICHOLAS F. BRADY*
The Bullitt House
102 East Dover Street
Easton, Maryland
Director 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 Dillion, Read & Co. Inc.
(investment banking) prior thereto. Age 65.
F. BRUCE CLARKE
19 Vista View Blvd.
Thornhill, Ontario
Director
Retired; formerly, credit
adviser, National Bank of
Canada, Toronto. Age 85.
HASSO-G VON DIERGARDT-NAGLO
R.R. 3
Stouffville, Ontario
Director
Farmer; and president of
Clairhaven Investments, Ltd.
and other private investment
companies. Age 79.
S. JOSEPH FORTUNATO
200 Campus Drive
Florham Park, New Jersey
Director Member of the law firm of Pitney, Hardin, Kipp & Szuch; and a
director of General Host Corporation. Age 63.
JOHN Wm. GALBRAITH
360 Central Avenue
Suite 1300
St. Petersburg, Florida
Director
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.
- 17 -
<PAGE>
NAME, ADDRESS AND PRINCIPAL OCCUPATION
OFFICES WITH FUND DURING PAST FIVE YEARS
ANDREW H. HINES, JR.
150 2nd Avenue N.
St. Petersburg, Florida
Director Consultant for 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
Director Director or trustee of various civic associations; formerly, economic
analyst, U.S.
Government. Age 66.
- 18 -
<PAGE>
NAME, ADDRESS AND PRINCIPAL OCCUPATION
OFFICES WITH FUND DURING PAST FIVE YEARS
GORDON S. MACKLIN
8212 Burning Tree Road
Bethesda, Maryland
Director
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.; formerly, 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
Director
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 director of various other business and nonprofit organizations.
Age 66.
MARK G. HOLOWESKO
Lyford Cay
Nassau, Bahamas
President President and director of Templeton Global Advisors Limited;
director of global equity research for Templeton Worldwide, Inc.; president or
vice president of the Templeton Funds; formerly, investment administrator with
Roy West Trust Corporation (Bahamas) Limited (1984-1985).
Age 35.
- 19 -
<PAGE>
NAME, ADDRESS AND PRINCIPAL OCCUPATION
OFFICES WITH FUND DURING PAST FIVE YEARS
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
various Templeton Funds; accountant, 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,
the Keystone Group, Inc. Age
55.
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.
- 20 -
<PAGE>
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, Ernst &
Young (certified public accountants) (1977-1989). Age 42.
JEFFREY L. STEELE
1500 K Street, N.W.
Washington, D.C.
Assistant Secretary
Partner, Dechert Price &
Rhoads. Age 50.
- -------------------------
* These are Directors who are "interested persons" of the Fund
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 Global Advisor Limited are limited partners of
Darby Emerging Markets Fund, L.P.
There are no family relationships between any of the Directors.
- 21 -
<PAGE>
DIRECTOR COMPENSATION
All of the Fund's Officers and Directors also hold positions with other
investment companies in the Franklin Templeton Group. No compensation is paid by
the Fund to any officer or Director 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 Fund currently pays the
independent Directors and Mr. Brady an annual retainer of $10,000 and a fee of
$800 per meeting attended of the Board and its Committees. The independent
Directors 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 Fund expenses.
The following table shows the total compensation paid to the Directors
by the Fund 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
DIRECTOR FROM THE FUND* DIRECTOR SERVES GROUP**
<S> <C> <C> <C>
Harris J. Ashton $10,900 57 $327,925
Nicholas F. Brady 10,900 24 98,225
F. Bruce Clarke 11,900 20 83,350
Hasso-G von Diergardt-Naglo 10,900 20 77,350
S. Joseph Fortunato 10,900 59 344,745
John Wm. Galbraith 3,300 24 70,100
Andrew H. Hines, Jr. 11,900 24 106,325
Betty P. Krahmer 10,900 24 93,475
Gordon S. Macklin 10,900 54 321,525
Fred R. Millsaps 11,900 24 104,325
</TABLE>
- ---------------
* For the fiscal year ended August 31, 1995.
** For the calendar year ended December 31, 1995.
- 22 -
<PAGE>
PRINCIPAL SHAREHOLDERS
As of December 1, 1995, there were 414,319,951 Shares of the Fund
outstanding, of which 448,931 Shares (0.108%) were owned beneficially, directly
or indirectly, by all the Directors and officers of the Fund as a group. As of
December 1 , 1995, to the knowledge of management, no person owned beneficially
or of record5% or more of the outstanding Shares of Class I, and no persons
owned beneficially or of record 5% or more of the outstanding shares of Class
II, except Merrill Lynch Pierce Fenner & Smith, Inc., Mutual Funds Operations,
4800 Deer Lake Dr., E., 3rd Floor, Jacksonville, Florida 32246-6484 owned of
record 457,753 Sahres (9% of the oustanding Shares).
INVESTMENT MANAGEMENT AND OTHER SERVICES
INVESTMENT MANAGEMENT AGREEMENT. The Investment Manager of the Fund is
Templeton Global Advisors Limited, a Bahamian corporation with offices in
Nassau, Bahamas. On October 30, 1992, the Investment Manager assumed the
investment management duties of Templeton, Galbraith & Hansberger Ltd. ("Old
TGH"), a Cayman Islands corporation, with respect to the Fund in connection with
the merger of the business of Old TGH with that of Franklin Resources, Inc.
("Franklin"). The Investment Management Agreement, dated October 30, 1992,
amended and restated December 6, 1994 was approved by the Shareholders of the
Fund on October 30, 1992, was last approved by the Board of Directors, including
a majority of the Directors who were not parties to the Agreement or interested
persons of any such party, at a meeting on December 5, 1995, and will continue
through December 31, 1996. The Investment Management Agreement continues from
year to year, subject to approval annually by the Board of Directors or by vote
of a majority of the outstanding Shares of the Fund (as defined in the 1940 Act)
and also, in either event, with the approval of a majority of those Directors
who are not parties to the Investment Management Agreement or interested persons
of any such party in person at a meeting called for the purpose of voting on
such approval.
The Investment Management Agreement requires the Investment Manager to
manage the investment and reinvestment of the Fund's assets. The Investment
Manager is not required to furnish any personnel, overhead items or facilities
for the Fund, including daily pricing or trading desk facilities, although such
expenses are paid by investment advisers of some other investment companies.
The Investment Management Agreement provides that the Investment
Manager will select brokers and dealers for execution
- 23 -
<PAGE>
of the Fund's portfolio transactions consistent with the Fund'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 Fund, the value of such services is indeterminable and the
Investment Manager's fee is not reduced by any offset arrangement by reason
thereof.
The Investment Manager renders its services to the Fund from outside
the United States. When the Investment Manager determines to buy or sell the
same securities for the Fund that the Investment Manager or certain of its
affiliates have recommended for one or more of the Investment Manager's other
clients or for clients of its affiliates, the orders for all such securities
trades may be placed for execution by methods determined by the Investment
Manager, with approval by the Fund's Board of Directors, to be impartial and
fair, in order to seek good results for all parties (see "Investment Objective
and Policies -- Trading Policies" above). Records of securities transactions of
persons who know when orders are placed by the Fund are available for inspection
at least four times annually by the compliance officer of the Fund so that the
non-interested Directors (as defined in the 1940 Act) can be satisfied that the
procedures are generally fair and equitable for all parties.
The Investment Manager also provides management services to munerous
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 own account, which may differ from action taken by the Investment
Manager on behalf of the Fund. Similary, with respect to the Fund, the
Investment Manager is not obligated to recommend, purchase or sell, or to
refraim from recommending, purchasing or selling any security that the
Investment Manager and access persons, as defined by the 1940 Act, may purchase
and sell for its own and their own account or for the accounts of any other fund
or account. Furthermoree, the Investment Manager is not obligated to refrain
from investing in securities held by the Fund or other funds or accounts which
it manages or administers. Any transactions for the accounts of the Investment
Manager and Code of Ethics as described in the section "Investment Objectives
and Policies--Personal Securities Transactions."
The Investment Management Agreement provides that the Investment
Manager shall have no 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
- 24 -
<PAGE>
omission in the performance by the Investment Manager of its duties under the
Investment Management Agreement, or for any loss or damage resulting from the
imposition by any government of exchange control restrictions which might affect
the liquidity of the Fund's assets, or from acts or omissions of custodians or
security depositories, or from any wars or political acts of any foreign
governments to which such assets might be exposed, except for any liability,
loss or damage resulting from willful misfeasance, bad faith or gross negligence
on the Investment Manager's part or reckless disregard of its duties under the
Investment Management Agreement. The Investment Management Agreement will
terminate automatically in the event of its assignment, and may be terminated by
the Fund at any time without payment of any penalty on 60 days' written notice,
with the approval of a majority of the Directors of the Fund in office at the
time or by vote of a majority of the outstanding Shares of the Fund (as defined
in the 1940 Act).
MANAGEMENT FEES. For its services, the Fund pays the Investment Manager
a monthly fee equal on an annual basis to 0.75% of its average daily net assets
up to $200,000,000, reduced to a fee of 0.675% of such net assets in excess of
$200,000,000, and further reduced to a fee of 0.60% 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 the Fund in the event that the Fund's
aggregate operating expenses, including the management fee, but generally
excluding interest, taxes, brokerage commissions and extraordinary expenses, are
in excess of specific applicable limitations. The strictest rule currently
applicable to the 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 ^ received from the Fund fees of $37,081,820,$29,634,284, and
$22,294,296, respectively, pursuant to the Agreement^.
TEMPLETON GLOBAL ADVISORS LIMITED. The Investment Manager
is an indirect wholly owned subsidiary of Franklin, a publicly
traded company whose shares are listed on the NYSE. Charles B.
Johnson (a Director and officer of the Fund) 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.
- 25 -
<PAGE>
BUSINESS MANAGER. Templeton Global Investors, Inc. performs
certain administrative functions as Business Manager for the
Fund, including:
o providing office space, telephone, office equipment and
supplies for the Fund;
o paying compensation of the Fund's officers for services
rendered as such;
o authorizing expenditures and approving bills for
payment on behalf of the Fund;
o supervising preparation of annual and semiannual reports to
Shareholders, notices of dividends, capital gain distributions
and tax credits, and attending to routine correspondence and
other communications with individual Shareholders;
o daily pricing of the Fund's investment portfolio and preparing
and supervising publication of daily quotations of the bid and
asked prices of the Fund's Shares, earnings reports and other
financial data;
o monitoring relationships with organizations serving the
Fund, including the Custodian and printers;
o providing trading desk facilities to the Fund;
o supervising compliance by the Fund with recordkeeping
requirements under the 1940 Act and the rules and regulations
thereunder, with state regulatory requirements, maintaining
books and records for the Fund (other than those maintained by
the Custodian and Transfer Agent), and preparing and filing
tax reports other than the Fund's income tax returns;
o monitoring the qualifications of tax-deferred
retirement plans providing for investment in Shares of
the Fund; 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 Fund's average daily
net assets, reduced to 0.135% annually of such 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
- 26 -
<PAGE>
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. Since the
Business Manager's fee covers services often provided by investment advisers to
other funds, the 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) received business management fees of $5,069,519,
$4,138,659, and $3,221,160, respectively.
The Business Manager is relieved of liability to the Fund 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 the 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 Directors
of the Fund in office at the time or by vote of a majority of the outstanding
voting securities of the Fund, and shall terminate automatically and immediately
in the event of its assignment.
Templeton Global Investors, Inc. is an indirect wholly owned
subsidiary of Franklin.
CUSTODIAN AND TRANSFER AGENT. The Chase Manhattan Bank, N.A. serves as
Custodian of the Fund'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 Directors 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 Fund's
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 the Fund an annual fee of $13.74
per Shareholder account plus out-of-pocket
- 27 -
<PAGE>
expenses, such fee to be 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 Fund.
INDEPENDENT ACCOUNTANTS. The firm of McGladrey & Pullen, LLP, 555 Fifth
Avenue, New York, New York 10017, serves as independent accountants for the
Fund. Its audit services comprise examination of the Fund's financial statements
and review of the Fund's filings with the Securities and Exchange Commission
("SEC") and the Internal Revenue Service ("IRS").
REPORTS TO SHAREHOLDERS. The Fund's fiscal year ends on August 31.
Shareholders are provided at least semiannually with reports showing the Fund's
portfolio 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 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 the Fund's
portfolio transactions consistent with the Fund's brokerage policy 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" shall mean 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 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
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<PAGE>
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 past experience
as to brokers qualified to achieve "best 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) of the Securities Exchange Act
of 1934 (the "1934 Act"), for the 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 as
to which fixed minimum commission rates are not
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 effecting
that transaction, if the Investment Manager 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 Fund 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 Fund's brokerage policy; that the research services
provided lawful and appropriate assistance to the
Investment Manager in the performance of its investment
decision-making responsibilities, and that commissions
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 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
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price than to pay the lowest commission; and (ii) the quality,
comprehensiveness, and frequency of research studies which are
provided for the Fund and the Investment Manager are useful to
the Investment Manager in performing its advisory services
under its Investment Management Agreement with the Fund.
Research services provided by brokers 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 Agreement. Research furnished by brokers through
whom the 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 the
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.
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.
5. Sales of the Fund's 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 recommending
and 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 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.
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Insofar as known to management, no Director or officer of the Fund, nor
the Investment Manager or Principal Underwriter or any person affiliated with
either of them, has any material direct or indirect interest in any broker
employed by or on behalf of the Fund. Neither the Principal Underwriter nor
Templeton Global Strategic Services S.A. (see "Principal Underwriter") has ever
executed any purchase or sale transactions for the Fund's portfolio or
participated in commissions on any such transactions, and neither has any
intention of doing so in the future. The total brokerage commissions on the
portfolio transactions for the Fund during the fiscal years ended August 31,
1995, 1994, and 1993 (not including any spreads or concessions on principal
transactions) were $8,559,000, $6,914,000, and $4,154,000, respectively. All
portfolio transactions are allocated to broker-dealers only when their prices
and execution, in the good faith judgment of the Investment Manager, are equal
to the best available within the scope of the Fund'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
The Prospectus describes the manner in which the 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 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 Fund'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 the Fund's net asset value is not calculated. The 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
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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 Directors.
The Board of Directors may establish procedures under which the 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 the Fund is not
reasonably practicable or it is not reasonably practicable for the 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 the 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,
the 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, the 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,
other special purchase plans also are available:
TAX-DEFERRED RETIREMENT PLANS. The Fund offers its
Shareholders the opportunity to participate in the following
types of retirement plans:
o For individuals whether or not covered by other
qualified plans;
o For simplified employee pensions;
o For employees of tax-exempt organizations; and
o 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
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
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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 the Fund pursuant to an IRA. 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 the 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
the 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 the 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 the master plan
and related material which is available from the Principal Underwriter.
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<PAGE>
LETTER OF INTENT. Purchasers who intend to invest $50,000 or more in
Class I Shares of the Fund or 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 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
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<PAGE>
Asset Value Purchases (Both Classes)" in the 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 the
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.
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 million, plus 0.80% on
sales of $2 million but less than $3 million, plus 0.50% on sales of $3 million
but less than $50 million, plus 0.25% on sales of $50 million but less than $100
million, plus 0.15% on sales of $100 million or more; and (ii) purchases of most
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 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.
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Under agreements with certain banks in Taiwan, Republic of China, the
Fund's Shares are available to such banks' discretionary trust funds at net
asset value. The banks may charge service fees to their customers who
participate in the discretionary trusts. Pursuant to agreements, a portion of
such service fees may be paid to 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, the 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 applicable rules of the SEC. In such circumstances, the
securities distributed would be valued at the price used to compute the Fund's
net assets 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
The Fund intends normally to pay a dividend at least once annually
representing substantially all of its net investment income (which includes,
among other items, dividends and interest) and to distribute at least annually
any realized capital gains. By so doing and meeting certain diversification of
assets and other requirements of the Code, the Fund intends to qualify annually
as a regulated investment company under the Code. The status of the 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, the Fund generally will be relieved of liability for United States
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
also are subject to a nondeductible 4% excise tax. To prevent application of the
excise tax, the Fund intends to make distributions in accordance with the
calendar year distribution requirement.
Dividends of net investment income and net short-term capital gains are
taxable to Shareholders as ordinary income. Distributions of net investment
income may be eligible for the corporate dividends-received deduction to the
extent attributable
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<PAGE>
to the Fund's qualifying dividend income. However, the alternative minimum tax
applicable to corporations may reduce the benefit of the dividends-received
deduction. Distributions of net capital gains (the excess of net long-term
capital gains over net short-term capital losses) designated by the Fund as
capital gain dividends are taxable to Shareholders as long-term capital gains,
regardless of the length of time the 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 the Fund. Any distributions that are
not from the 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 receive and any tax withheld thereon.
Distributions by the Fund reduce the net asset value of the Fund
Shares. Should a distribution reduce the net asset value below a Shareholder's
cost basis, the distribution nevertheless would be taxable to the Shareholder as
ordinary income or capital gain as described above, even though, from an
investment standpoint, it may constitute a partial return of capital. In
particular, investors should be careful to consider the tax implication of
buying Shares just prior to a distribution by the Fund. The price of Shares
purchased at that time includes the amount of the forthcoming distribution, but
the distribution will generally be taxable to them.
The Fund may invest in stocks of foreign companies that are classified
under the Code as passive foreign investment companies ("PFICs"). In general, a
foreign company is classified as a PFIC if at least one-half of its assets
constitute investment-type assets or 75% or more of its gross income is
investment-type income. Under the PFIC rules, an "excess distribution" received
with respect to PFIC stock is treated as having been realized ratably over the
period during which the Fund held the PFIC stock. The Fund itself will be
subject to tax on the portion, if any, of the excess distribution that is
allocated to the Fund's holding period in prior taxable years (and an interest
factor will be added to the tax, as if the tax had actually been payable in such
prior taxable years) even though the Fund distributes the corresponding income
to Shareholders. Excess distributions include any gain from the sale of PFIC
stock as well as certain distributions from a PFIC. All excess distributions are
taxable as ordinary income.
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<PAGE>
The Fund may be able to elect alternative tax treatment with respect to
PFIC stock. Under an election that currently may be available, 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 any distributions
are received from the PFIC. 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 the 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 the Fund
could, in limited circumstances, incur nondeductible interest charges. The
Fund's intention to qualify annually as a regulated investment company may limit
its elections with respect to PFIC shares.
Because the application of the PFIC rules may affect, among other
things, the character of gains, the amount of gain or loss and the timing of the
recognition of income with respect to PFIC stock, as well as subject the Fund
itself to tax on certain income from PFIC stock, the amount that 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 substantially as
compared to a fund that did not invest in PFIC stock.
Income received by the Fund from sources within foreign countries may
be subject to withholding and other income or similar taxes imposed by such
countries. If more than 50% of the value of the Fund's total assets at the close
of its taxable year consists of securities of foreign corporations, the Fund
will be eligible and intends to elect to "pass through" to the Fund's
Shareholders the amount of foreign taxes paid by the Fund. Pursuant to this
election, 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 the Fund, and will be entitled either to deduct (as an itemized
deduction) his pro rata share of foreign income and similar taxes in computing
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 the Fund's
taxable year whether the foreign taxes paid by the 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 the Fund's income flows through to its Shareholders. With respect to
the 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 the Fund. Shareholders may be unable to claim a
credit for the full amount of their proportionate share of the foreign taxes
paid by the Fund. Foreign taxes may not be deducted in computing alternative
minimum taxable income and the foreign tax credit can be used to offset only 90%
of the alternative minimum tax (as computed under the Code for purposes of this
limitation) imposed on corporations and individuals. If the Fund is not eligible
to make the election to "pass through" to its Shareholders its foreign taxes,
the foreign income taxes it pays generally will reduce investment company
taxable income and the distributions by the Fund will be treated as United
States source income.
Certain options and futures contracts in which the 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 the Fund at the end of each taxable
year (and on certain other dates as prescribed pursuant to the Code) 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 the 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 the Fund. In addition,
losses realized by a Fund on positions that are part of the 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 the Fund of hedging transactions are
not entirely clear. The hedging transactions may increase the amount of
short-term
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<PAGE>
capital gain realized by a Fund which is taxed as ordinary income when
distributed to Shareholders.
The Fund may make one or more of the elections available under the Code
which are applicable to straddles. If the 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 election(s) 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 the Fund's tax status as a regulated
investment company may limit the extent to which the Fund will be able to engage
in transactions in options and futures contracts.
The Fund may accrue and report interest income on discount bonds such
as zero coupon bonds or pay-in-kind securities, even though the Fund 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
generally be relieved of Federal tax liabilities, the Fund must distribute
substantially all of its net investment income and gains to Shareholders on an
annual basis. Thus, the 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.
Some of the debt securities may be purchased by the Fund at a discount
which exceeds the original issue discount on such debt securities, if any. This
additional discount represents market discount for Federal income tax purposes.
The gain realized on the disposition of any taxable debt security having market
discount will be treated as ordinary income to the extent it does not exceed the
accrued market discount on such debt security. Generally, market discount
accrues on a daily basis for each day the debt security is held by the Fund at a
constant rate over the time remaining to the debt security's maturity or, at the
election of the Fund, at a constant yield to maturity which takes into account
the semiannual compounding of interest.
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Under the Code, gains or losses attributable to fluctuations in foreign
currency exchange rates which occur between the time the Fund accrues income or
other receivables or accrues expenses or other liabilities denominated in a
foreign currency and the time the 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
the 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, the 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.
Upon the sale or exchange of his Shares, a Shareholder generally will
realize a taxable gain or loss depending upon his basis in the Shares. Such gain
or loss will be treated as capital gain or loss if the Shares are capital assets
in the Shareholder's hands, and generally 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 the 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 Fund Shares held by the Shareholder for six months or less will
be treated for Federal income tax purposes as a long-term capital loss to the
extent of any distributions of long-term capital gains received by the
Shareholder with respect to such Shares.
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<PAGE>
In some cases, Shareholders will not be permitted to take sales charges
into account for purposes of determining the 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 shares of stock. In that case, the gain or
loss recognized will be determined by excluding from the tax basis of the Shares
exchanged all or a portion of the sales charge incurred in acquiring those
Shares. This exclusion applies to the extent that the otherwise applicable sales
charge with respect to the newly acquired Shares is reduced as a result of
having incurred a sales charge initially. 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 shares of stock.
The Fund 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 to Shareholders if (1) the Shareholder
fails to furnish the Fund with the Shareholder's correct taxpayer identification
number or social security number and to make such certifications as the Fund may
require, (2) the IRS notifies the Shareholder or the 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. Any
amounts withheld may be credited against the Shareholder's Federal income tax
liability.
Ordinary dividends and taxable capital gain distributions declared in
October, November, or December with a record date in such month and paid during
the following January will be treated as having been paid by the 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.
Distributions also may be subject to state, local and
foreign taxes. Shareholders are advised to consult their own tax
advisers for details with respect to the particular tax
consequences to them of an investment in either Fund. U.S. tax
rules applicable to foreign investors may differ significantly
from those outlined above. In particular, Shareholders of the
Fund who are citizens or residents of Germany, the Netherlands,
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<PAGE>
Luxembourg or other countries are specifically advised to consult their tax
advisers with respect to the U.S. and foreign tax consequences of an investment
in the 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 the Fund's Shares. FTD is a wholly owned
subsidiary of Franklin.
The 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
Plan adopted with respect to Class I Shares, the Fund may reimburse the
Principal Underwriter or others quarterly (subject to a limit of 0.25% per annum
of the 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 Fund Shares. Under the Plan adopted
with respect to Class II Shares, the Fund will pay FTD or others quarterly
(subject to a limit of 1.00% per annum of the Fund's average daily assets
attributable to Class II Shares of which up to 0.25% 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 the 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 Fund
Shares and interest or carrying charges in connection therewith; and (6) such
other similar services as the Fund's Board of Directors determines to be
reasonably calculated to result in the sale of Shares. Under the Plan adopted
with respect to Class I Shares, the costs and expenses not reimbursed in any one
given quarter (including costs and expenses not reimbursed because they exceed
0.25% of the Fund's average daily net assets attributable to Class I Shares) may
be reimbursed in subsequent quarters or years.
- 43 -
<PAGE>
During the fiscal year ended August 31, 1995, FTD incurred costs and
expenses of $13,939,769 in connection with distribution of Class I Shares of the
Fund, which amount was reimbursed by the Fund pursuant to the Plan and costs and
expenses of $230,790 in connection with distribution of Class II Shares of the
Fund, which amount was reimbursed by the Fund pursuant to the Plan. FTD has
informed the Fund that it had no unreimbursed expenses for Class I Shares of the
Fund under the Plan at August 31, 1995. In the event that the Plan adopted with
respect to Class I Shares is terminated, the Fund will not be liable to FTD for
any 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 Class I Shares the following amounts on: compensation to
dealers, $11,336,949; sales promotion, $284,760; printing, $655,526;
advertising, $1,396,358; and wholesale costs and expenses, $266,176; and with
respect to Class II Shares the following amounts on: compensation to dealers,
$16,410; sales promotion, $212; printing, $500; advertising, $680; and wholesale
costs and expenses, $212,988.
The Distribution Agreement provides that the Principal Underwriter will
use its best efforts to maintain a broad distribution of the Fund's Shares among
bona fide investors and may sign selling contracts with responsible dealers as
well as sell to individual investors. The Shares are sold to the public only at
the Offering Price in effect at the time of sale, and the 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 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
$5,685,601, $5,682,478, and $3,162,262, or approximately 14.66%, 16.12%, and
22.30% of the gross sales commissions, respectively.
The Distribution Agreement provides that the 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 securities laws of the
jurisdictions in which the Principal Underwriter desires to distribute the
Shares, and for preparing, printing and distributing prospectuses and reports to
Shareholders. The Principal Underwriter is responsible for the cost of printing
additional copies of prospectuses and reports to Shareholders used for selling
purposes. (The Fund pays costs of preparation, set-up and initial supply of the
Fund's prospectus for existing Shareholders.)
- 44 -
<PAGE>
The Distribution 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 Distribution Agreement may be terminated
without penalty by either party on 60 days' written notice to the other,
provided termination by the Fund shall be approved by the Board of Directors 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 Distribution Agreement, in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations.
The Distribution Agreement provides that FTD shall be Principal
Underwriter of the Shares of the Fund throughout the world, except for Europe
and such other countries or territories as it might hereafter relinquish to
another principal underwriter. Templeton Global Strategic Services S.A.
("Templeton Strategic Services"), whose office address is Centre Neuberg, 30
Grand Rue, L-1660 Luxembourg, is principal underwriter for sale of the Shares in
all countries in Europe. The terms of the underwriting agreements with Templeton
Strategic Services are substantially similar to those of the Distribution
Agreement with FTD. Templeton Strategic Services is an indirect wholly owned
subsidiary of Franklin. During the fiscal year ended August 31, 1995, Templeton
Strategic Services retained $
in sales commissions in connection with sales in Europe.
Franklin Templeton Distributors, Inc. is the principal
underwriter for the other Templeton Funds.
DESCRIPTION OF SHARES
The Shares have non-cumulative voting rights so that the holders of a
plurality of the Shares voting for the election of Directors at a meeting at
which 50% of the outstanding Shares are present can elect all the Directors and,
in such event, the holders of the remaining Shares voting for the election of
Directors will not be able to elect any person or persons to the Board of
Directors.
PERFORMANCE INFORMATION
The Fund may, from time to time, include its total return in
advertisements or reports to Shareholders or prospective investors. Quotations
of average annual total return for the Fund 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 Fund over periods of one, five and ten years,
- 45 -
<PAGE>
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. The
average annual total return for the one-, five- and ten-year periods ended
August 31, 1995 was 3.21%, 13.67% and 14.22%, respectively.
Performance information for the Fund may be compared, in reports and
promotional literature, to: (i) the Standard & Poor's 500 Stock Index, Dow Jones
Industrial Average, or other 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 the 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 the Fund reflects only the performance of a
hypothetical investment in the Fund during the particular time period on which
the calculations are based. Performance information should be considered in
light of the Fund's 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, the 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
- 46 -
<PAGE>
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, the 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) The Fund's portfolio turnover rate and its ranking
relative to industry standards as published by Lipper
Analytical Services, Inc. or Morningstar, Inc.
(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.
- 47 -
<PAGE>
(12) Quotations from the Templeton organization's founder, Sir John
Templeton,* advocating the virtues of diversification and
long-term investing, including the following:
o "Never follow the crowd. Superior performance is
possible only if you invest differently from the
crowd."
o "Diversify by company, by industry and by
country."
o "Always maintain a long-term perspective."
o "Invest for maximum total real return."
o "Invest - don't trade or speculate."
o "Remain flexible and open-minded about types of
investment."
o "Buy low."
o "When buying stocks, search for bargains among
quality stocks."
o "Buy value, not market trends or the economic
outlook."
o "Diversify. In stocks and bonds, as in much else,
there is safety in numbers."
o "Do your homework or hire wise experts to help
you."
o "Aggressively monitor your investments."
o "Don't panic."
o "Learn from your mistakes."
o "Outperforming the market is a difficult task."
- --------
* Sir John Templeton sold the Templeton organization to
Franklin Resources, Inc. in October, 1992 and resigned from
the Fund's Board on April 16, 1995. He is no longer
involved with the investment management process.
- 48 -
<PAGE>
o "An investor who has all the answers doesn't even
understand all the questions."
o "There's no free lunch."
o "And now the last principle: Do not be fearful or
negative too often."
In addition, the 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.
FINANCIAL STATEMENTS
The financial statements included in the Fund's Annual Report to
Shareholders dated August 31, 1995 are incorporated herein by reference.
- 49 -
<PAGE>
TL101 STMT 01/96
- 50 -
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements: Incorporated by
reference from the 1995 Annual Reports:
Independent Auditors' Report
Investment Portfolios as of August 31, 1995
Statements of Assets and Liabilities as of
August 31, 1995
Statements 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) Articles of Incorporation
(B) Articles Supplementary dated April 13,
1995*
(C) Articles of Amendment dated April 17, 1995*
(2) (A) By-laws
(3) Not Applicable
(4) (A) Specimen of certificate
countersigned by Securities Fund
Investors, Inc. (predecessor of
Templeton Funds Trust Company) as
Transfer Agent for U.S.
Shareholders*
(B) Specimen of certificate
countersigned by The Bank of New
York as Transfer Agent for U.S.
Shareholders*
- 51 -
<PAGE>
(5) Amended and Restated Investment Management
Agreement*
(6) (A) Distribution Agreement
(B) Non-Exclusive Underwriting Agreement
(C) Dealer Agreement
(7) Not Applicable
(8) Custody Agreement
(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
(E) Paying Agent Agreement*
(10) Opinion and consent of counsel (filed with
Rule 24f-2 Notice)
(11) Consent of Independent Public Accountants
(12) Not Applicable
(13) Investment Letter*
(14) Retirement plans*
(15) (A)(1) Distribution Plan -- Class I Shares*
(2) Distribution Plan -- Class II Shares*
(16) Schedule showing computation of performance
quotations provided in response to Item 22
(17) Assistant Secretary's Certificate
pursuant to Rule 483(b)
(18) Form of Multiclass Plan*
- 52 -
<PAGE>
(27) Financial Data Schedule
* Previously filed with Registration Statement No.
33-9981 and incorporated by reference herein.
Item 25. Persons Controlled by or Under Common Control with
Registrant
None.
Item 26. Number of Record Holders
Title of Class Number of Record Holders
Common Stock-Class I 384,569 as of November 30, 1995
Common Stock-Class II 7,518 as of November 30, 1995
Item 27. Indemnification
Reference is made to Article 5.2 of the
Registrant's By-Laws, which was previously
filed with Post-Effective Amendment No. 9 on
December 23, 19943.
Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may
be permitted to directors, officers, and
controlling persons of the Registrant by the
Registrant pursuant to the By-Laws 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 directors, officers or controlling
persons of the Registrant in connection with
the successful defense of any act, suit or
proceeding) is asserted by such directors,
officers or controlling person in connection
- 53 -
<PAGE>
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
The business and other connections of Registrant's
investment manager, Templeton Global Advisors Limited
are described in Parts A and B.
For information relating to the investment manager's
officers and directors, reference is made to Form ADV
filed under the Investment Advisers Act of 1940 by
Templeton Global Advisors Limited.
Item 29. Principal Underwriters
(a) Franklin Templeton Distributors, Inc. also acts as
principal underwriter of shares of:
Templeton Funds, Inc.
Templeton Smaller Companies Growth Fund, Inc.
Templeton Income Trust
Templeton Real Estate Securities Fund
Templeton Capital Accumulator Fund, Inc.
Templeton Developing Markets Trust
Templeton American Trust, Inc.
Templeton Institutional Funds, Inc.
Templeton Global Opportunities Trust
Templeton Variable Products Series Fund
Templeton Global Investment Trust
Templeton Variable Annuity Fund
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
Franklin Federal Tax-Free Income Fund
- 54 -
<PAGE>
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 Fund
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 Japan Fund
Institutional Fiduciary Trust
Franklin Templeton Money Fund
Franklin Templeton Global Trust
(b) The directors and officers of FTD
are identified below. Except as
otherwise indicated, the address of
each director and officer is 777
Mariners Island Blvd., San Mateo, CA
94404:
Positions and Positions and
Offices with Offices with
Name Underwriter Registrant
Charles B. Johnson Chairman of the Board Chairman of the Board
and Director and Vice President
Gregory E. Johnson President None
Rupert H. Johnson, Jr. Executive Vice President Director
and Director
Harmon E. Burns Executive Vice President None
and Director
Edward V. McVey Senior Vice President None
- 55 -
<PAGE>
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
500 East Broward Blvd.
Ft. Lauderdale, FL 33394
Deborah R. Gatzek Senior Vice President None
and Assistant Secretary
James K. Blinn Vice President None
Richard O. Conboy Vice President None
James A. Escobedo Vice President None
Loretta Fry Vice President None
Robert N. Geppner Asst. Vice President None
Mike Hackett Vice President None
Peter Jones Vice President None
700 Central Avenue
St. Petersburg, FL 33701
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
700 Central Avenue
St. Petersburg, Fl 33701
Harry G. Mumford Vice President None
Vivian J. Palmieri Vice President None
John R. Kay Asst. Vice President Vice President
500 East Broward Blvd.
Ft. Lauderdale, FL 33394
Kenneth A. Lewis Treasurer None
Karen DeBellis Asst. Treasurer None
700 Central Avenue
- 56 -
<PAGE>
St. Petersburg, FL 33701
Kent P. Strazza Vice President None
Leslie M. Kratter Secretary None
Philip A. Scatena Asst. Treasurer None
The directors and officers of Templeton Global Strategic
Services S.A. are as follows:
Positions and Positions and
Offices with Offices with
Name Underwriter Registrant
William Lockwood General Manager None
Charles E. Johnson Chairman None
Martin L. Flanagan Managing Director Vice President
Gregory E. McGowan Managing Director None
Dickson B. Anderson Managing Director None
Douglas W. Adams Managing Director None
(c) Not applicable.
Item 30. Location of Accounts and Records
Originals of all 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 maintained at the
offices 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.
- 57 -
<PAGE>
(c) Registrant undertakes to furnish to each person to
whom a Prospectus for Growth Fund
is provided a copy of such Fund's latest Annual
Report, upon request and without charge.
- 58 -
<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 its Registration Statement to be signed onits behalf by the
undersigned, thereunto duly authorized, in city of St. Petersburg, Florida, on
the 29th day of December, 1995.
Templeton Growth Fund, Inc.
By:___________________________
Mark G. Holowesko*
President
*By: /S/THOMAS M. MISTELE
Thomas M. Mistele
as attorney-in-fact**
Pursuant to the requirements of the
Securities Act of
1933, this Post-Effective Amendment to the Registration
Statement
has been signed below by the following persons in the
capacities
and on the dates indicated:
Signature Title Date
_________________________ Director December 29, 1995
F. Bruce Clarke*
_________________________ Director December 29, 1995
Betty P. Krahmer*
_________________________ Director December 29, 1995
Fred R. Millsaps*
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<PAGE>
_________________________ Director December 29, 1995
John Wm. Galbraith*
_________________________ Director December 29, 1995
Hasso-G von Diergardt-Naglo*
_________________________ Director December 29, 1995
Charles B. Johnson*
_________________________ Director December 29, 1995
Harris J. Ashton*
_________________________ Director December 29, 1995
S. Joseph Fortunato*
_________________________ Director December 29, 1995
Andrew H. Hines, Jr.*
_________________________ Director December 29, 1995
Gordon S. Macklin*
_________________________ Director December 29, 1995
Nicholas F. Brady*
_________________________ President December 29, 1995
Mark G. Holowesko* (Chief Executive
Officer)
_________________________ Treasurer December 29, 1995
James R. Baio* (Chief Financial
and Accounting Officer)
*By:/S/THOMAS M. MISTELE
Thomas M. Mistele
as attorney-in-fact**
- 60 -
<PAGE>
** Powers of Attorney are contained in Post-Effective
Amendment No. 7 to this Registration Statement
filed on October 30, 1992, Post-Effective
Amendment No. 8 to the Registration Statement
filed on November 2, 1993, Post-Effective
Amendment No. 9 to the Registration Statement
filed on December 23, 1993, and Post-Effective
Amendment No. 10 to the Registration Statement on
December 30, 1994 or filed herewith.
- 61 -
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, being a duly
elected Director of Templeton Growth Fund, Inc. (the "Fund"), constitutes and
appoints Allan S. Mostoff, Jeffrey L. Steele, William J. Kotapish and Thomas M.
Mistele, and each of them, his true and lawful attorney-in-fact and agents with
full power of substitution and resubstitution for him in his name, place and
stead, in any and all capacities, to sign the Fund's registration statement 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 purposes as he might or could
do in person, hereby ratifying 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 virtue hereof.
Dated: August 31, 1995
/s/JOHN WM. GALBRAITH
John Wm. Galbraith
- 62 -
<PAGE>
EXHIBIT LIST
Exhibit List Name of Exhibit
(1) (A) Articles of Incorporation
(2) By-laws
(6) (A) Distribution Agreement
(B) Non-Exclusive Underwriting
Agreement
(C) Dealer Agreement
(8) Custody Agreement
(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
(11) Consent of Independent Public
Accountants
(16) Schedule showing computation of
performance quotations
provided in response to Item 22
(17) Assistant Secretary's Certificate
pursuant to Rule 483(b)
(27) Financial Data Schedule
- 63 -
ARTICLES OF RESTATEMENT
OF
THE ARTICLES OF INCORPORATION
OF
TEMPLETON GROWTH FUND, INC.
Under Section 2-608 of the
General Corporation Law of Maryland
THE UNDERSIGNED, DANIEL CALABRIA, being the Vice
President of TEMPLETON GROWTH FUND, INC. (hereinafter, the
"Corporation"), hereby certifies:
FIRST: That the Articles of Incorporation of the
Corporation were filed with the State Department of Assessments and
Taxation on November 10, 1986.
SECOND: That this restatement of the Corporation's
Articles of Incorporation has been approved by a majority of the
Board of Directors.
THIRD: That the provisions set forth in the articles of
restatement are all the provisions of the charter currently in
effect and the charter is not amended by the articles of
restatement.
FOURTH: That the current principal office of the
Corporation is 700 Central Avenue, St. Petersburg, Florida 33733.
<PAGE>
FIFTH: That the current directors of the Corporation are
as follows:
John M. Templeton
John M. Templeton, Jr.
James W. Bradshaw
F. Bruce Clarke
William F. James
Harry G. Kuch
James I. McCord
LeRoy C. Paslay
Hasso-G von Diergardt
Nancy S. DeMoss
The Articles of Incorporation of the Corporation are hereby
restated as follows:
FIRST: The undersigned, KEITH W. VANDIVORT, whose post office
address is 1730 Pennsylvania Avenue, N.W., Washington, D.C. 20006, being of full
legal age, under and by virtue of the General Laws of the State of Maryland
authorized the formation of corporations, is acting as sole incorporator with
the intention of forming a corporation.
SECOND: The name of the Corporation is TEMPLETON GROWTH
FUND, INC.
THIRD: The purposes for which the Corporation is formed
are as follows:
(1) To hold, invest and reinvest its funds, and in
connection therewith to hold part or all of its funds
in cash, and to purchase, subscribe for or otherwise
acquire, hold for investment or other-wise, to trade
and deal in, write, sell, assign, negotiate,
transfer, exchange, lend, pledge or
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otherwise dispose of or turn to account or realize
upon, securities (which term "securities" shall for
the purposes of these Articles of Incorporation,
without limitation of the generality thereof, be
deemed to include any stocks, shares, bonds,
debentures, bills, notes, mortgages or other
obligations or evidences of indebtedness, and any
options, certificates, receipts, warrants, futures
contracts or other instruments representing rights to
receive, purchase or subscribe for the same, or
evidencing or representing any other rights or
interests therein or in any property or assets; and
any negotiable or non-negotiable instruments and
money market instruments, including bank certificates
of deposit, finance paper, commercial paper, bankers'
acceptances and all kinds of repurchase or reverse
repurchase agreements) created or issued by any
United States or foreign issuer (which term "issuer"
shall, for the purposes of these Articles of
Incorporation, without limiting the generality
thereof, be deemed to include any persons, firms,
associations, partnerships, corporations, syndicates,
combinations, organizations, governments or
subdivisions, agencies or instrumentalities of any
government); and to exercise, as owner or holder of
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any securities, all rights, powers and privileges in
respect thereof; and to do any and all acts and
things for the preservation, protection, improvement
and enhancement in value of any and all such
securities.
(2) To acquire all or any part of the goodwill, rights,
property and business of any person, firm,
association or corporation heretofore or hereafter
engaged in any business similar to any business
which the Corporation has the power to conduct, and
to hold, utilize, enjoy and in any manner dispose
of the whole or any part of the rights, property
and business so acquired, and to assume in
connection therewith any liabilities of any such
person, firm, association or corporation.
(3) To apply for, obtain, purchase or otherwise
acquire, any patents, copyrights, licenses,
trademarks, trade names and the like, which may
seem capable of being used for any of the purposes
of the Corporation; and to use, exercise, develop,
grant licenses in respect of, sell and otherwise
turn to account, the same.
(4) To issue and sell shares of its own capital stock and
securities convertible into such capital stock in
such amounts and on such terms and conditions, for
such purposes and for such amount or kind of
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consideration (including without limitation thereto,
securities) now or hereafter permitted by the laws of
Maryland, by the Investment Company Act of 1940 and
by these Articles of Incorporation, as its Board of
Directors may determine.
(5) To purchase or otherwise acquire, hold, dispose of,
resell, transfer, reissue or cancel (all without
the vote or consent of the stockholders of the
Corporation) shares of its capital stock in any
manner and to the extent now or hereafter permitted
by the laws of Maryland, by the Investment Company
Act of 1940 and by these Articles of Incorporation.
(6) To conduct its business in all its branches at one or
more offices in Maryland and elsewhere in any part of
the world, without restriction or limit as to extent.
(7) To exercise and enjoy, in Maryland and in any other
states, territories, districts and United States
dependencies and in foreign countries, all of the
powers, rights and privileges granted to, or
conferred upon, corporations by the General Laws of
the State of Maryland now or hereafter in force,
and the enumeration of the foregoing powers shall
not be deemed to exclude any powers, rights or
privileges so granted or conferred.
(8) In general to carry on any other business in
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connection with or incidental to its corporate
purposes, to do everything necessary, suitable or
proper for the accomplishment of such purposes or for
the attainment of any object or the furtherance of
any power hereinbefore set forth, either alone or in
association with others, to do every other act or
thing incidental or appurtenant to or growing out of
or connected with its business or purposes, objects
or powers, and, subject to the foregoing, to have and
exercise all the powers, rights and privileges
conferred upon corporations by the laws of the State
of Maryland as in force from time to time.
The foregoing objects and purposes shall, except as otherwise expressly
provided, be in no way limited or restricted by reference to, or inference from,
the terms of any other clause of this or any other Article of these Articles of
Incorporation, and shall each be regarded as independent and construed as a
power as well as an object and a purpose, and the enumeration of specific
purposes, objects and powers shall not be construed to limit or restrict in any
manner the meaning of general terms or the general powers of the Corporation now
or hereafter conferred by the laws of Maryland, nor shall the expression of one
thing be deemed to exclude another though it be of like nature, not expressed;
provided however, that the Corporation shall not have power to carry on within
the State of Maryland any business
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whatsoever the carrying on of which would preclude it from being classified as
an ordinary business corporation under the laws of said State; nor shall it
carry on any business, or exercise any powers, in any other state, territory,
district or country except to the extent that the same may lawfully be carried
on or exercised under the laws thereof.
Incident to meeting the purposes specified above, the Corporation also
shall have the power:
(1) To acquire (by purchase, lease or otherwise) and to
hold, use, maintain, develop and dispose (by sale or
otherwise) of any property, real or personal, and any
interest therein.
(2) To borrow money and, in this connection, issue
notes or other evidence of indebtedness.
(3) Subject to any applicable provisions of law, to
buy, hold, sell, and otherwise deal in and with
foreign exchange.
FOURTH: The post office address of the principal office of the
Corporation in the State of Maryland is c/o The Corporation Trust Incorporated,
32 South Street, Baltimore, Maryland 21202. The name of the resident agent of
the Corporation is The Corporation Trust Incorporated, a corporation of the
State of Maryland, and the post office address of the resident agent is 32 South
Street, Baltimore, Maryland 21202.
FIFTH:
(1) The total number of shares of stock which the
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Corporation shall have the authority to issue is
THREE HUNDRED MILLION (300,000,000) Common Shares of
the par value of ONE CENT ($0.01) each and of the
aggregate par value of THREE MILLION DOLLARS
($3,000,000).
(2) At all meetings of stockholders, each stock- holder
of the Corporation shall be entitled to one vote
for each share of stock standing in his name on the
books of the Corporation on the date fixed in
accordance with the By-Laws for determination of
stockholders entitled to vote at such meeting. Any
fractional share shall carry proportionately all
the rights of a whole share, including the right to
vote and the right to receive dividends and
distributions.
(3) Each holder of the capital stock of the Corporation
upon proper written request (including signature
guarantees if required by the Board of Directors)
to the Corporation accompanied, when stock
certificates representing such shares are
outstanding, by surrender of the appropriate stock
certificate or certificates in proper form for
transfer (or such other form as the Board of
Directors may provide) shall be entitled to require
the Corporation to redeem all or any part of the
shares of capital stock standing in the name of
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such holder on the books of the Corporation, at the
net asset value of such shares, less any redemption
fee fixed by the Board of Directors and payable to
the Corporation not exceeding 1% of the net asset
value of the shares redeemed. Any such redemption fee
may be applied in such cases as may be determined by
the Board. The method of computing such net asset
value, the time as of which such net asset value
shall be computed and the time within which the
Corporation shall make payment therefore, shall be
determined as hereinafter provided in Article SEVENTH
of these Articles of Incorporation. Notwithstanding
the foregoing, the Board of Directors of the
Corporation may suspend the right of the holders of
the capital stock of the Corporation to require the
Corporation to redeem shares of such capital stock
when permitted or required to do so by the Investment
Company Act of 1940, as from time to time amended and
any rule, regulation or order thereunder.
(4) All shares of the capital stock of the Corporation
now or hereafter authorized shall be subject to
redemption and are redeemable at the option of the
stockholder, in the sense used in the General Laws of
the State of Maryland authorizing the formation of
corporations, at the redemption price for any
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such shares, determined in the manner set out in
these Articles of Incorporation or in any amendment
thereto. In the absence of any specification as to
the purposes for which shares of the capital stock of
the Corporation are redeemed or repurchased by it,
all shares so redeemed or repurchased shall be deemed
to be acquired for retirement in the sense
contemplated by the laws of the State of Maryland and
the number of the authorized shares of the capital
stock of the Corporation shall not be reduced by the
number of any shares redeemed or repurchased by it.
(5) Notwithstanding any provision of law requiring any
action to be taken or authorized by the affirmative
vote of the holders of a majority, or other
designated proportion of the shares, or to be
otherwise taken or authorized by a vote of the
stockholders, such action shall be effective and
valid if taken or authorized by the affirmative
vote of the holders of a majority of the total
number of shares outstanding and entitled to vote
thereon pursuant to the provisions of these
Articles of Incorporation.
(6) No holder of stock of the Corporation shall, as
such holder, have any right to purchase or
subscribe for any shares of the capital stock of
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the Corporation of any class or any other security of
the Corporation which it may issue or sell (whether
out of the number of shares authorized by these
Articles of Incorporation, or out of any shares of
the capital stock of the Corporation acquired by it
after the issue thereof, or otherwise) other than
such right, if any, as the Board of Directors, in its
discretion, may determine.
(7) All persons who shall acquire stock in the
Corporation shall acquire the same subject to the
provisions of these Articles of Incorporation.
SIXTH: The number of Directors of the Corporation shall be
fixed by the By-Laws and shall initially be three. The names of those who shall
act as such until the next annual meeting or until their successors are duly
chosen and qualified are as follows:
JOHN M. TEMPLETON
JOHN M. TEMPLETON, JR.
JAMES W. BRADSHAW
However, the By-Laws of the Corporation may fix the number of
Directors at a number other than that named in these Articles of Incorporation
and may authorize the Board of Directors, by the vote of a majority of the
entire Board of Directors, to increase or decrease the number of Directors fixed
by these Articles of Incorporation or in the By-Laws, within the limits
specified in the By-Laws, provided that in no case shall the number of Directors
be less than three, and to fill the vacancies created
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by any such increase in the number of Directors. Unless otherwise
provided by the By-Laws of the Corporation, the Directors of the
Corporation need not be stockholders therein.
SEVENTH: The following provisions are hereby
adopted for the purpose of defining, limiting and regulating the
powers of the Corporation and the Directors and stockholders.
(1) The By-Laws of the Corporation may divide the
Directors of the Corporation into classes and
prescribe the tenure of office of the several
classes, but no class shall be elected for a period
shorter than that from the time of the election
following the division into classes until the next
annual meeting and thereafter for a period shorter
than the interval between annual meetings or for a
period longer than five years, and the term of
office of at least one class shall expire each
year. Notwithstanding the foregoing, no such
division into classes shall be made prior to the
first annual meeting of stockholders of the
Corporation.
(2) The holders of shares of the capital stock of the
Corporation shall have only such rights to inspect
the records, documents, accounts and books of the
Corporation as are provided by the laws of Maryland,
subject to reasonable regulations of the
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Board of Directors, not contrary to the laws of
Maryland, as to whether and to what extent, and at
what times and places, and under what conditions and
regulations, such rights shall be exercised.
(3) Any Director, or any officer elected or appointed by
the Board of Directors or by any committee of said
Board or by the stockholders or otherwise, may be
removed at any time, with or without cause, in such
lawful manner as may be provided in the By-Laws of
the Corporation.
(4) If the By-Laws so provide, both the stockholders
and the Board of Directors of the Corporation shall
have power to hold their meetings, to have an
office or offices and, subject to the provisions of
the laws of Maryland, to keep the books of the
Corporation outside of said State at such places as
may from time to time be designated by them.
(5) The Board of Directors shall have power from time to
time to authorize payment of compensation to the
Directors for services to the Corporation, as
provided in the By-Laws, including fees for
attendance at meetings of the Board of Directors and
of Committees.
(6) In addition to the powers and authority
hereinbefore or by statute expressly conferred upon
them, the Board of Directors may exercise all such
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powers and do all such acts and things as may be
exercised or done by the Corporation, subject,
nevertheless, to the express provisions of the laws
of Maryland, of these Articles of Incorporation and
of the By-Laws of the Corporation.
(7) Shares of stock in other corporations shall be
voted in person or by proxy by the President or a
Vice-President, or such officer or officers of the
Corporation as the Board of Directors shall
designate for the purpose, or by a proxy or proxies
thereunto duly authorized by the Board of
Directors, except as otherwise ordered by vote of
the holders of a majority of the shares of the
capital stock of the Corporation outstanding and
entitled to vote in respect thereto.
(8) Subject to the provisions of the Investment Company
Act of 1940, any director, officer or employee
individually, or any partnership of which any
director, officer or employee may be a member, or
any corporation or association of which any
director, officer or employee may be an officer,
director, trustee, employee or stockholder, may be
a party to, or may be pecuniarily or otherwise
interested in, any contract or transaction of the
Corporation, and in the absence of fraud no
contract or other transaction shall be thereby
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affected or invalidated; provided that in case a
director, or a partnership, corporation or
association of which a director is a member, officer,
director, trustee, employee or stockholder is so
interested, such fact shall be disclosed or shall
have been known to the Board of Directors or a
majority thereof; and any director of the Corporation
who is so interested, or who is also a director,
officer, trustee, employee or stockholder of such
other corporation or association or a member of such
partnership which is so interested, may be counted in
determining the existence of a quorum at any meeting
of the Board of Directors of the Corporation which
shall authorize any such contract or transaction, and
may vote thereat on any such contract or transaction,
with like force and effect as if he were not such
director, officer, trustee, employee or stockholder
of such other corporation or association or not so
interested or a member of a partnership so
interested.
(9) The computation of the net asset value of each share
of capital stock referred to in these Articles of
Incorporation shall be
determined as required by the Investment Company Act
of 1940 and, except as so required, shall be computed
in accordance with the following rules:
(a) The net asset value of each share of
capital stock of the Corporation duly
surrendered to the Corporation for
redemption pursuant to the provisions of
paragraph (3)of Article FIFTH of these
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Articles of Incorporation shall be
determined as of the close of business
on the New York Stock Exchange next
succeeding the time when such capital
(b) The net asset value of each share of
the capital stock of the Corporation
for the purpose of the issue of such
capital the stock shall be determined
as of the close of business on the New
New Stock Exchange next succeeding the
receipt of an order to purchase such
share.
(c) Unless and until otherwiese determined by
the Board of Directors, the net asset
value of the shares shall be computed as
of the close of trading on each day the
New Stock Stock Exchange is open for
trading, by dividing the value of the
Corporation's securities plus any cash
and other assets (including accrued
dividends and interest) liabilities
less all liabilities less all
(including accrued expenses) by the
number of shares outstanding, the result
being adjusted to the nearest whole cent.
A security listed or traded on any
United States or foreign stock exchange
which the Board of Directors may from
time to time
approve for that purpose shall be valued
at its last sale price on that exchange
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prior to the time when assets are valued.
All other securities for which over-the-
market
available shall be valued at the mean
between the last current bid and asked
price. Securities for which market
(d) In addition to the foregoing, the Board of
Directors is empowerd, in its absolute,
to
establish other bases or times, or both,
for determining the net assets value of
each share of stock of the Corporation
in
accordance with the Investment Company Act
of 1940 and to authorize the voluntary
purchase by the Corporation either directly
or through an agent, of shares of capital
stock of the Corporation upon such terms
as the Board of Directors.
(e) Except as otherwise permitted by the
Investment Company Act of 1940, payment
of the net asset value of shares of capital
stock of the Corporation properly
surrendered to it for redemption (less any
redemption fee) shall be made by the
<PAGE>
Corporation within seven days after tender
which the right of the holders of the
shares of capital stock of the Corporation
to redeem such capital stock has been
suspended. Any such payment may be made
in
portfolio securities of the Corporation
and/or in cash, as the Board of Directors
shall deem advisable, any no shareholder
shall have a right, other than as
determined by the Board of Directors, to
have his shares redeemed in kind.
(f) The Board of Directors is empowered to cause the redemption of the shares
held in any account if the aggregate net asset value of such shares (taken at
cost or value, as determined by the Board) is less than such amount as the Board
may fix, and the holder of such account, upon notice, does not comply with such
other terms and conditions as may be fixed by the Board of Directors.
(g) Whenever any action is taken under this paragraph (9) of this Article
SEVENTH of these Articles of Incorporation under any authorization to take
action which is permitted by the Investment Company Act of 1940, such action
shall be deemed to have been properly
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taken if such action is in accordance with the construction of that Act then in
effect as expressed in "no-action" letters of the staff of the Securities and
Exchange Commission or any release, rule, regulation or order under that Act or
any decision of a court of competent jurisdiction notwithstanding that any of
the foregoing shall later be found to be invalid or otherwise reversed or
modified by any of the foregoing.
(h) Any action which may be taken by the Board of Directors of the Corporation
under this paragraph (9) of this Article SEVENTH of these Articles of
Incorporation may be taken by the description thereof in the then effective
prospectus relating to the Corporation's shares under the Securities Act of 1933
rather than by formal resolution of the Board.
(i) Whenever under this paragraph (9) of this Article SEVENTH of these Articles
of Incorporation the Board of Directors of the Corporation is permitted or
required to place a value on assets of the Corporation, such action may be
delegated by the Board, and/or determined in accordance with a formula
determined by the Board, to the extent permitted by the Investment Company Act
of 1940.
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<PAGE>
(10) In the event that any person advances the organizational expenses of the
Corporation, such advances shall become an obligation of the Corporation,
subject to such terms and conditions as may be fixed by, and on a date fixed by,
or determined in accordance with criteria fixed by the Board of Directors, to be
amortized over a period or periods to be fixed by the Board.
EIGHTH: The duration of the Corporation shall be perpetual.
NINTH: From time to time any of the provisions of these Articles of
Incorporation may be amended, altered or repealed, upon the vote of the holders
of a majority of the shares of capital stock of the Corporation at the time
outstanding and entitled to vote, and other provisions which might under the
statutes of the State of Maryland at the time in force be lawfully contained in
these Articles of Incorporation may be added or inserted upon the vote of the
holders of a majority of the shares of capital stock of the Corporation at the
time outstanding and entitled to vote, and all rights at any time conferred upon
the stockholders of the Corporation by these Articles of Incorporation are
granted subject to the provisions of this Article NINTH.
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The term "these Articles of Incorporation" as used herein and in the By-Laws of
the Corporation shall be deemed to mean these Articles of Incorporation as from
time to time amended and restated.
TENTH: No Director or officer shall have
liability to the Corporation or its stockholders for monetary
damages except:
(1) To the extent that it is proved that the person actually received an
improper benefit or profit in money, property or services, for the amount of the
benefit or profit in money, property or services actually received.
(2) To the extent that a judgment or other final adjudication adverse to the
person is entered in a proceeding based on a finding in the proceeding that
the person's action, or failure to act, was the result of active and deliberate
dishonesty and was material to the cause of action adjudicated in the
proceeding.
Nothing in this Article TENTH shall protect
any Director or officer of the Corporation against any
liability to the Corporation or its stockholders to which he
would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office.
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No amendment, modification or repeal of this
Article TENTH shall adversely affect any right or protection
of a Director or officer that exists at the time of such
amendment, modification or repeal.
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IN WITNESS WHEREOF, TEMPLETON GROWTH FUND,
INC. has caused these Articles of Restatement to be signed in
its name and on its behalf by its duly authorized officers who
acknowledge that these Articles of Restatement are the act of
the Corporation, that to the best of their knowledge,
information and belief, the matters and facts set forth herein
as to authorization and approval are true in all material
respects and that this statement is made under the penalty of
perjury.
TEMPLETON GROWTH FUND, INC.
[Corporate Seal]
By:/s/ DANIEL CALABRIA
Daniel Calabria
Vice President
Attest:
By:/s/THOMAS M. MISTELE
Thomas M. Mistele
Secretary
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P
BY-LAWS
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TEMPLETON GROWTH FUND, INC.
(As amended and restated March 1, 1991)
ARTICLE I
NAME OF COMPANY, LOCATION OF OFFICES AND SEAL.
SECTION 1. NAME. The name of the Company is Templeton
Growth Fund, Inc.
SECTION 2. PRINCIPAL OFFICES. The principal office of the
Company in the State of Maryland shall be located in Baltimore, Maryland. The
Company may, in addition, establish and maintain such other offices and places
of business within or outside the State of Maryland as the Board of Directors
may from time to time determine.
SECTION 3. SEAL. The corporate seal of the Company shall be
circular in form and shall bear the name of the Company, the year of its
incorporation and the words "Corporate Seal, Maryland." The form of the seal
shall be subject to alteration by the Board of Directors and the seal may be
used by causing it or a facsimile to be impressed or affixed or printed or
otherwise reproduced. Any officer or Director of the Company shall have
authority to affix the corporate seal of the Corporation to any document
requiring the same.
<PAGE>
ARTICLE II
STOCKHOLDERS
SECTION 1. PLACE OF MEETINGS. All meetings of the Stockholders
shall be held at such place within the United States, whether within or outside
the State of Maryland as the Board of Directors shall determine, which shall be
stated in the notice of the meeting or in a duly executed waiver of notice
thereof.
SECTION 2. ANNUAL MEETINGS. The Company shall not be required
to hold an annual meeting of Stockholders in any year in which the election of
Directors is not required to be acted upon under the Investment Company Act of
1940. Otherwise, annual meetings of Stockholders for the election of Directors
and the transaction of such other business as may properly come before the
meeting shall be held at such time and place within the United States as the
Board of Directors shall select.
SECTION 3. SPECIAL MEETINGS. Special meetings of the
Stockholders for any purpose or purposes, unless otherwise prescribed by statute
or by the Articles of Incorporation, may be called by resolution of the Board of
Directors or by the President, and shall be called by the President or Secretary
at the request in writing of a majority of the Board of Directors or at the
request in writing by Stockholders owning 10% in amount of the entire capital
stock of the Company issued and outstanding at the time of the call, provided
that (1) such request shall state
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the purpose of such meeting and the matters proposed to be acted on, and (2) the
Stockholders requesting such meeting shall have paid to the Company the
reasonably estimated cost of preparing and mailing the notice thereof, which the
Secretary shall determine and specify to such Stockholders. No special meeting
shall be called upon the request of Stockholders to consider any matter which is
substantially the same as a matter voted upon at any special meeting of the
Stockholders held during the preceding 12 months, unless requested by the
holders of a majority of all shares entitled to be voted at such meeting.
SECTION 4. NOTICE. Written notice of every meeting of
Stockholders, stating the purpose or purposes for which the meeting is called,
the time when and the place where it is to be held, shall be served, either
personally or by mail, not less than ten nor more than ninety days before the
meeting, upon each Stockholder as of the record date fixed for the meeting and
who is entitled to vote at such meeting. If mailed (1) such notice shall be
directed to a Stockholder at his address as it shall appear on the books of the
Company (unless he shall have filed with the Transfer Agent of the Company a
written request that notices intended for him be mailed to some other address,
in which case it shall be mailed to the address designated in such request) and
(2) such notice shall be deemed to have been given as of the date when it is
deposited in the United States mail with first class postage thereon prepaid.
Irregularities in the
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notice or in the giving thereof, as well as the accidental omission to give
notice of any meeting to, or the non-receipt of any such notice by, any of the
Stockholders shall not invalidate any action otherwise properly taken by or at
any such meeting. Notice of any Stockholders' meeting need not be given to any
Stockholder who shall sign a written waiver of such notice either before or
after the time of such meeting, which waiver shall be filed with the records of
such meeting, or to any Stockholder who is present at such meeting in person or
by proxy.
SECTION 5. QUORUM, ADJOURNMENT OF MEETINGS. The presence at
any Stockholders' meeting, in person or by proxy, of Stockholders entitled to
cast a majority of the votes entitled to be cast shall be necessary and
sufficient to constitute a quorum for the transaction of business. The holders
of a majority of shares entitled to vote at the meeting and present in person or
by proxy, whether or not sufficient to constitute a quorum, or, any officer
present entitled to preside or act as Secretary of such meeting may adjourn the
meeting without determining the date of the new meeting or from time to time
without further notice to a date not more than 120 days after the original
record date. Any business that might have been transacted at the meeting
originally called may be transacted at such adjourned meeting at which a quorum
is present.
SECTION 6. VOTE OF THE MEETING. When a quorum is
present or represented at any meeting, the vote of the holders of
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a majority of the stock entitled to vote thereat present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provisions of applicable
statutes, of the Articles of Incorporation, or of these By-Laws, a different
vote is required, in which case such express provisions shall govern and control
the decision of such question.
SECTION 7. VOTING RIGHTS OF STOCKHOLDERS. Each Stockholder of
record having the right to vote shall be entitled at every meeting of the
Stockholders of the Company to one vote for each share of stock having voting
power standing in the name of such Stockholder on the books of the Company on
the record date fixed in accordance with Section 5 of Article VII of these
By-Laws, with pro-rata voting rights for any fractional shares, and such votes
may be cast either in person or by written proxy.
SECTION 8. PROXIES. Every proxy must be executed in writing by
the Stockholder or by his duly authorized attorney-in-fact. No proxy shall be
valid after the expiration of eleven months from the date of its execution
unless it shall have specified therein its duration. Every proxy shall be
revocable at the pleasure of the person executing it or of his personal
representatives or assigns. Proxies shall be delivered prior to the meeting to
the Secretary of the Company or to the person acting as Secretary of the meeting
before being voted. A proxy with respect to stock held in the name of two or
more persons
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<PAGE>
shall be valid if executed by one of them unless at or prior to exercise of such
proxy the Company receives a specific written notice to the contrary from any
one of them. A proxy purporting to be executed by or on behalf of a Stockholder
shall be deemed valid unless challenged at or prior to its exercise.
SECTION 9. STOCK LEDGER AND LIST OF STOCKHOLDERS. It shall be
the duty of the Secretary or Assistant Secretary of the Company to cause an
original or duplicate stock ledger to be maintained at the office of the
Company's transfer agent.
SECTION 10. ACTION WITHOUT MEETING. Any action to be taken by
Stockholders may be taken without a meeting if (1) all Stockholders entitled to
vote on the matter consent to the action in writing, (2) all Stockholders
entitled to notice of the meeting but not entitled to vote at it sign a written
waiver of any right to dissent and (3) said consents and waivers are filed with
the records of the meetings of Stockholders. Such consent shall be treated for
all purposes as a vote of the meeting.
ARTICLE III
DIRECTORS
SECTION 1. BOARD OF 3 TO 15 DIRECTORS. The Board of Directors
shall consist of not less than three (3) nor more than fifteen (15) Directors,
all of whom shall be of full age and at least 40% of whom shall be persons who
are not interested persons of the Company as defined in the Investment Company
Act of 1940,
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provided that prior to the issuance of stock by the Company, the Board of
Directors may consist of less than three (3) Directors, subject to the
provisions of Maryland law. Directors shall be elected at the annual meeting of
the Stockholders, if held, and each Director shall be elected to serve for one
year and until his successor shall be elected and shall qualify or until his
earlier death, resignation or removal. Directors need not be Stockholders. The
Directors shall have power from time to time, and at any time when the
Stockholders as such are not assembled in a meeting, regular or special, to
increase or decrease their own number. If the number of Directors be increased,
the additional Directors may be elected by a majority of the Directors in office
at the time of the increase. If such additional Directors are not so elected by
the Directors in office at the time they increase the number of places on the
Board, or if the additional Directors are elected by the existing Directors,
prior to the first meeting of the Stockholders of the Company, then in either of
such events the additional Directors shall be elected or reelected by the
Stockholders at their next annual meeting or at an earlier special meeting
called for that purpose.
The number of Directors may also be increased or decreased by
vote of the Stockholders at any regular or special meeting called for that
purpose. In the event the Stockholders should vote a decrease in the number of
Directors, they shall
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determine by a majority vote at such meeting which of the Directors shall be
removed and which of the then existing vacancies on the Board shall be
eliminated. If the Stockholders vote an increase in the Board they shall by
plurality vote elect Directors to the newly created places as well as fill any
then existing vacancies on the Board.
The Board of Directors may elect, but shall not be required to
elect, a Chairman of the Board who must be Director.
SECTION 2. VACANCIES. If the office of any Director or
Directors becomes vacant for any reason (other than an increase in the number of
places on the Board as provided in Section 1 of Article III), the Directors in
office, although less than a quorum, shall continue to act and may, by a
majority vote, choose a successor or successors, who shall hold office for the
unexpired term in respect to which such vacancy occurred or until the next
election of Directors (if immediately after filling any such vacancy at least
two-thirds of the Directors then holding office shall have been elected by the
Stockholders), or any vacancy may be filled by the Stockholders at any meeting
thereof.
SECTION 3. MAJORITY TO BE ELECTED BY STOCKHOLDERS. If at any
time, less than a majority of the Directors in office shall consist of Directors
elected by Stockholder, a meeting of the stockholders shall be called within 60
days for the purpose of electing Directors to fill any vacancies in the Board of
Directors (unless the Securities and Exchange Commission or any
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court of competent jurisdiction shall by order extend such
period).
SECTION 4. REMOVAL. At any meeting of Stockholders duly called
and at which a quorum is present, the Stockholders may, by the affirmative vote
of the holders of a majority of the votes entitled to be cast thereon, remove
any Director or Directors from office, with or without cause, and may elect a
successor or successors to fill any resulting vacancies for the unexpired terms
of the removed Directors.
SECTION 5. POWERS OF THE BOARD. The business of this Company
shall be managed under the direction of its Board of Directors, which may
exercise or give authority to exercise all powers of the Company and do all such
lawful acts and things as are not by statute, by the Articles of Incorporation
or by these By-Laws required to be exercised or done by the Stockholders.
SECTION 6. PLACE OF MEETINGS. The Directors may hold their
meetings at the principal office of the Company or at such other places, either
within or without the State of Maryland, as they may front time to time
determine.
SECTION 7. REGULAR MEETINGS. Regular meetings of the
Board may be held at such date and time as shall from time to
time be determined by resolution of the Board.
SECTION 8. SPECIAL MEETINGS. Special meetings of the
Board may be called by order of the President on one day's notice
given to each Director either in person or by mail, telephone,
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telegram, telefax, telex, cable or wireless to each Director at his residence or
regular place of business. Special meetings will be called by the President or
Secretary in a like manner on the written request of a majority of the
Directors.
SECTION 9. WAIVER OF NOTICE. No notice of any meting of the
Board of Directors or a committee of the Board need be given to any Director who
is present at the meeting or who waives notice of such meeting in writing (which
waiver shall be filed with the records of such meeting), either before or after
the time of the meeting.
SECTION 10. QUORUM OF ONE-THIRD. At all meetings of the Board
the presence of one-third of the entire number of Directors then in office (but
not less than two Directors) shall be necessary to constitute a quorum and
sufficient for the transaction of business, and any act of a majority present at
a meeting at which there is a quorum shall be the act of the Board of Directors,
except as may be otherwise specifically provided by statute, by the Articles of
Incorporation or by these By-Laws. If a quorum shall not be present at any
meeting of Directors, the Directors present thereat may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present.
SECTION 11. INFORMAL ACTION BY DIRECTORS AND
COMMITTEES. Any action required or permitted to be taken at any
meeting of the Board of Directors or of any committee thereof
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may, except as otherwise required by statute, be taken without a meeting if a
written consent to such action is signed by all members of the Board, or of such
committee, as the case may be and filed with the minutes of the proceedings of
the Board or committee. Subject to the Investment Company Act of 1940, members
of the Board of Directors or a committee thereof may participate in a meeting by
means of a conference telephone or similar communications equipment if all
persons participating in the meeting can hear each other at the same time.
SECTION 12. EXECUTIVE COMMITTEE. There may be an Executive
Committee of two or more Directors appointed by the Board who may meet at stated
times or on notice to all by any of their own number. The Executive Committee
shall consult with and advise the Officers of the Company in the management of
its business and exercise such powers of the Board of Directors as may be
lawfully delegated by the Board of the Directors. Vacancies shall be filled by
the Board of Directors at any regular or special meeting. The Executive
Committee shall keep regular minutes of its proceedings and report the same to
the Board when required.
SECTION 13. OTHER COMMITTEES. The Board of Directors, by the
affirmative vote of a majority of the entire Board, may appoint other committees
which shall in each case consist of such number of members (not less than two)
and shall have and may exercise, to the extent permitted by law, such powers as
the
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Board may determine in the resolution appointing them. A majority of all members
of any such committee may determine its action, and fix the time and place of
its meetings, unless the Board of Directors shall otherwise provide. The Board
of Directors shall have power at any time to change the members and, to the
extent permitted by law, the powers of any such committee, to fill vacancies,
and to discharge any such committee.
SECTION 14. ADVISORY BOARD. There may be an Advisory Board of
any number of individuals appointed by the Board of Directors who may meet at
stated times or on notice to all by any of their own number or by the President.
The Advisory Board shall be composed of Stockholders or representatives of
Stockholders. The Advisory Board will have no power to require the Company to
take any specific action. Its purpose shall be solely to consider matters of
general policy and to represent the Stockholders in all matters except those
involving the purchase or sale of specific securities. A majority of the
Advisory Board, if appointed, must consist of Stockholders who are not otherwise
affiliated or interested persons of the Company or of any affiliate of the
Company as those terms are defined in the Investment Company Act of 1940.
SECTION 15. COMPENSATION OF DIRECTORS. The Board may,
by resolution, determine what compensation and reimbursement of
expenses of attendance at meetings, if any, shall be paid to
Directors in connection with their service on the Board. Nothing
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herein contained shall be construed to preclude any Director from serving the
Company in any other capacity or from receiving compensation therefor.
ARTICLE IV
OFFICERS
SECTION 1. OFFICERS. The Officers of the Company shall be
fixed by the Board of Directors and shall include a President, a Vice-President,
a Secretary and a Treasurer. Any two of the aforesaid offices, except those of
President and Vice President, may be held by the same person.
SECTION 2. APPOINTMENT OF OFFICERS. The Directors, at their
first meeting after each annual meeting of Stockholders, shall appoint a
President and the other Officers who need not be members of the Board.
SECTION 3. ADDITIONAL OFFICERS. The Board, at any regular or
special meeting, may appoint such other Officers and agents as it shall deem
necessary who shall exercise such powers and perform such duties as shall be
determined from time to time by the Board.
SECTION 4. SALARIES OF OFFICERS. The salaries of all
Officers of the Company shall be fixed by the Board of Directors.
SECTION 5. TERM, REMOVAL, VACANCIES. The Officers of
the Company shall hold office for one year and until their
successors are chosen and qualify in their stead. Any Officer
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elected or appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the Directors. If the office of any Officer
becomes vacant for any reason, the vacancy shall be filled by the Board of
Directors.
SECTION 6. PRESIDENT. The President shall be the chief
executive officer of the Company; he shall, subject to the supervision of the
Board of Directors, have general responsi-bility for the management of the
business of the Company and shall see that all orders and resolutions of the
Board are carried into effect.
SECTION 7. VICE-PRESIDENT. The Vice-President (senior in
service), at the request or in the absence or disability of the President shall
perform the duties and exercise the powers of the President and shall perform
such other duties as the Board of Directors shall prescribe.
SECTION 8. TREASURER. The Treasurer shall have the custody of
the corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Company and shall deposit
all moneys and other valuable effects in the name and to the credit of the
Company in such depositories as may be designated by the Board of Directors. He
shall disburse the funds of the Company as may be ordered by the Board, taking
proper vouchers for such disbursements, and shall render to the President and
Directors at the regular meetings of the Board, or whenever they may require it,
an
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account of all his transactions as Treasurer and of the financial
condition of the Company.
Any Assistant Treasurer may perform such duties of the
Treasurer as the Treasurer of the Board of Directors may assign, and, in the
absence of the Treasurer, he may perform all the duties of the Treasurer.
SECTION 9. SECRETARY. The Secretary shall attend meetings of
the Board and meetings of the Stockholders and record all votes and the minutes
of all proceedings in books to be kept for that purpose. He shall give or cause
to be given notice of all meetings of Stockholders and special meetings of the
Board of Directors and shall perform such other duties as may be prescribed by
the Board of Directors. He shall keep in safe custody the seal of the Company
and affix it to any instrument when authorized by the Board of Directors.
Any Assistant Secretary may perform such duties of the
Secretary as the Secretary or the Board of Directors may assign, and, in the
absence of the Secretary, may perform all the duties of the Secretary.
SECTION 10. SUBORDINATE OFFICERS. The Board of Directors from
time to time may appoint such other officers or agents as it may deem advisable,
each of whom shall have such title, hold office for such period, have such
authority and perform such duties as the Board of Directors may determine. The
Board of Directors from time to time may delegate to one or more
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officers or agents the power to appoint any such subordinate officers or agents
and to prescribe their respective rights, terms of office, authorities and
duties.
SECTION 11. SURETY BONDS. The Board of Directors may require
any officer or agent of the Company to execute a bond (including, without
limitation, any bond required by the Investment Company Act of 1940, as amended,
and the rules and regulations of the Securities and Exchange Commission) to the
company in such sum and with such surety or sureties as the Board of Directors
may determine, conditioned upon the faithful performance of his duties to the
Company, including responsibility for negligence and for the accounting of any
of the Company's property, funds or securities that may come into his hands.
ARTICLE V
INDEMNIFICATION
SECTION 1. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The
Company shall indemnify its Directors to the fullest extent that indemnification
of directors is permitted by the Maryland General Corporation Law. The Company
shall indemnify its Officers to the same extent as its Directors and to such
further extent as is consistent with law. The Company shall indemnify its
Directors and Officers who while serving as Directors or Officers also serve at
the request of the Company as a director,
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officer, partner, trustee, employee, agent or fiduciary of another corporation,
partnership, joint venture, trust, other enterprise or employee benefit plan to
the fullest extent consistent with law. The indemnification and other rights
provided by this Article shall continue as to a person who has ceased to be a
director or officer and shall inure to the benefit of the heirs, executors and
administrators of such a person. This Article shall not protect any such person
against any liability to the Company or any Stockholder thereof to which such
person would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office ("disabling conduct").
SECTION 2. ADVANCES. Any current or former director or officer
of the Company seeking indemnification within the scope of this Article shall be
entitled to advances from the Company for payment of the reasonable expenses
incurred by him in connection with the matter as to which he is seeking
indemnification in the manner and to the fullest extent permissible under the
Maryland General Corporation Law. The person seeking indemnification shall
provide to the Company a written affirmation of his good faith belief that the
standard of conduct necessary for indemnification by the Company has been met
and a written undertaking to repay any such advance if it should ultimately be
determined that the standard of conduct has not
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been met. In addition, at least one of the following additional conditions shall
be met: (a) the person seeking indemnification shall provide a security in form
and amount acceptable to the company for his undertaking; (b) the Company is
insured against losses arising by reason of the advance; or (c) a majority of a
quorum of Directors of the Company who are neither interested persons as defined
in the Investment Company Act of 1940, nor parties to the proceeding
("disinterested non-party Directors"), or independent legal counsel, in a
written opinion, shall have determined, based on a review of facts readily
available to the Company at the time the advance is proposed to be made, that
there is reason to believe that the person seeking indemnification will
ultimately be found to be entitled to indemnification.
SECTION 3. PROCEDURE. At the request of any person claiming
indemnification under this Article, the Board of Directors shall determine, or
cause to be determined, in a manner consistent with the Maryland General
Corporation Law, whether the standards required by this Article have been met.
Indemnification shall be made only following: (a) a final decision on the merits
by a court or other body before whom the proceeding was brought that the person
to be indemnified was not liable by reason of disabling conduct or (b) in the
absence of such a decision, a reasonable determination, based upon a review of
the facts, that the person to be indemnified was not liable by
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reason of disabling conduct by (i) the vote of a majority of a quorum of
disinterested non-party Directors or (ii) an independent legal counsel in a
written opinion.
SECTION 4. INDEMNIFICATION OF EMPLOYEES AND AGENTS. Employees
and agents who are not Officers or Directors of the Company may be indemnified,
and reasonable expenses may be advanced to such employees or agents, as may be
provided by action of the Board of Directors or by contract, subject to any
limitations imposed by the Investment Company Act of 1940.
SECTION 5. OTHER RIGHTS. The Board of Directors may make
further provision consistent with law for indemnification and advance of
expenses to Directors, officers, employees and agents by resolution, agreement
or otherwise. The indemnification provided by this Article shall not be deemed
exclusive of any other right, with respect to indemnification or otherwise, to
which those seeking indemnification may be entitled under any insurance or other
agreement or resolution of Stockholders or disinterested Directors or otherwise.
The rights provided to any person by this Article shall be enforceable against
the Company by such person who shall be presumed to have relied upon it in
serving or continuing to serve as a director, officer, employee, or agent as
provided above.
SECTION 6. AMENDMENTS. References in this Article are
to the Maryland General Corporation Law and to the Investment
Company Act of 1940 as from time to time amended. No amendment
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of these By-laws shall effect any right of any person under this Article based
on any event, omission or proceeding prior to the amendment.
SECTION 7. INSURANCE. The Company may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee,
or agent of the Company or who, while a director, officer, employee, or agent of
the Company, is or was serving at the request of the Company as a director,
officer, partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, other enterprise, or employee
benefit plan against any liability asserted against and incurred by such person
in any such capacity or arising out of such person's position; provided, that no
insurance may be purchased which would indemnify any Director or officer of the
Company against any liability to the Company or to its security holders to which
he would otherwise be subject by reason of disabling conduct.
SECTION 1. WAIVER OF NOTICE. Whenever by statute, the provisions of the
Articles of Incorporation or these ByLaws, the Stockholders or the Board of
Directors are authorized to take any action at any meeting after notice, such
notice may be waived, in writing, before or after the holding of the meeting, by
the
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person or persons entitled to such notice, or, in the case of a Stockholder, by
his attorney thereunto authorized.
SECTION 2. CHECKS. All checks or demands for money and notes
of the Company shall be signed by such officer or officers or such other person
or persons as the Board of Directors may from time to time designate.
SECTION 3. FISCAL YEAR. The fiscal year of the
Company shall be determined by resolution of the Board of
Directors.
SECTION 4. ACCOUNTANT. The Company shall employ an independent
public accountant or a firm of independent public accountants as its Accountant
to examine the accounts of the company and to sign and certify financial
statements filed by the Company. The employment of the Accountant shall be
conditioned upon the right of the Company to terminate the employment forthwith
without any penalty by vote of a majority of the outstanding voting securities
at any Stockholders' meeting called for that purpose.
ARTICLE VII
CAPITAL STOCK
SECTION 1. CERTIFICATE OF STOCK. The interest of each
Stockholder of the Company may be evidenced by certificates for
shares of stock in such form as the Board of Directors may from
time to time prescribe. The certificates shall be numbered and
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entered in the books of the Company as they are issued. They shall exhibit the
holder's name and the number of shares and no certificate shall be valid unless
it has been signed by the President or a Vice-President and the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary and bears the
corporate seal. Such seal may be a facsimile, engraved or printed. Where any
such certificate is signed by a Transfer Agent or by a Registrar, the signatures
of any such officer may be facsimile, engraved or printed. In case any of the
Officers of the Company whose manual or facsimile signature appears on any stock
certificate delivered to a Transfer Agent of the Company shall cease to be such
Officer prior to the issuance of such certificate, the Transfer Agent may
nevertheless countersign and deliver such certificate as though the person
signing the same or whose facsimile signature appears thereon had not ceased to
be such officer, unless written instructions of the Company to the contrary are
delivered to the Transfer Agent.
SECTION 2. LOST, STOLEN OR DESTROYED CERTIFICATES. The Board
of Directors, or the President together with the Treasurer or Secretary, may
direct a new certificate to be issued in place of any certificate theretofore
issued by the Company, alleged to have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming the certificate of
stock to be lost, stolen or destroyed, or by his legal representative. When
authorizing such issue of a new
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certificate, the Board of Directors, or the President and Treasurer or
Secretary, may, in its or their discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to advertise the same in such manner
as it or they shall require and/or give the Company a bond in such sum and with
such surety or sureties as it or they may direct as indemnity against any claim
that may be made against the Company with respect to the certificate alleged to
have been lost, stolen or destroyed or such newly issued certificate.
SECTION 3. TRANSFER OF STOCK. Shares of the Company shall be
transferable on the books of the Company by the holder thereof in-person or by
his duly authorized attorney or legal representative upon surrender and
cancellation of a certificate or certificates for the same number of shares of
the same class, duly endorsed or accompanied by proper evidence of succession,
assignment or authority to transfer, with such proof of the authenticity of the
signature as the Company or its agents may reasonably require. The Board of
Directors may, from time to time, adopt rules and regulations with reference to
the method of transfer of the shares of stock of the Company.
SECTION 4. REGISTERED HOLDER. The Company shall be
entitled to treat the holder of record of any share or shares of
stock as the holder in fact thereof and, accordingly, shall not
be bound to recognize any equitable or other claim to or interest
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in such share or shares on the part of any other person whether or not it shall
have express or other notice thereof, except as expressly provided by statute.
SECTION 5. RECORD DATE. The Board of Directors may fix a time
not less than 10 nor more than 90 days prior to the date of any meeting of
Stockholders or prior to the last day on which the consent or dissent of
Stockholders may be effectively expressed for any purpose without a meeting, as
the time as of which Stockholders entitled to notice of and to vote at such a
meeting or whose consent or dissent is required or may be expressed for any
purpose, as the case may be, shall be determined; and all persons who were
holders of record of voting stock at such time and no other shall be entitled to
notice of and to vote at such meeting or to express their consent or dissent, as
the case may be. If no record date has been fixed, the record date for the
determination of Stockholders entitled to notice of or to vote at a meeting of
Stockholders shall be the later of the close of business on the day on which
notice of the meeting is mailed or the thirtieth day before the meeting, or, if
notice is waived by all Stockholders, at the close of business on the tenth day
next preceding the day on which the meeting is held. The Board of Directors may
also fix a time not exceeding 90 days preceding the date fixed for the payment
of any dividend or the making of any distribution, or for the delivery of
evidences of rights, or evidences of interests arising out of any
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change, conversion or exchange of capital stock, as a record time for the
determination of the Stockholder entitled to receive any such dividend,
distribution, rights or interests.
SECTION 6. STOCK LEDGERS. The stock ledgers of the Company,
containing the names and addresses of the Stockholders and the number of shares
held by them respectively, shall be kept at the principal offices of the Company
or at the offices of the transfer agent of the Company or at such other location
as may be authorized by the Board of Directors from time to time.
SECTION 7. TRANSFER AGENTS AND REGISTRARS. The Board of
Directors may from time to time appoint or remove transfer agents and/or
registrars of transfers (if any) of shares of stock of the Company, and it may
appoint the same person as both transfer agent and registrar. Upon any such
appointment being made, all certificates representing shares of capital stock
thereafter issued shall be countersigned by one of such transfer agents or by
one of such registrars of transfers (if any) or by both and shall not be valid
unless so countersigned. If the same person shall be both transfer agent and
registrar, only one countersignature by such person shall be required.
SECTION 8. DIVIDENDS. Dividends upon the capital stock of the
Company, subject to any provisions of the Articles of Incorporation relating
thereto, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law.
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SECTION 9. RESERVE BEFORE DIVIDENDS. Before payment of any
dividend, there may be set aside out of the net profits of the Company available
for dividends such sum or sums as the Directors from time to time in their
absolute discretion think proper as a reserve fund to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
Company, or for such other purpose as the Directors shall think conducive to the
interests of the Company, and the Directors may modify or abolish any such
reserve in the manner in which it was created.
SECTION 10. NO PRE-EMPTIVE RIGHTS. Shares of stock
shall not possess pre-emptive rights to purchase additional
shares of stock when offered.
SECTION 11. FRACTIONAL SHARES. Fractional shares
entitle the holder to the same voting and other rights and
privileges as whole shares on a pro-rata basis.
ARTICLE VIII
AMENDMENTS
SECTION 1. BY STOCKHOLDERS. By-Laws may be adopted,
amended or repealed, by vote of the holders of a majority of the
Company's stock, as defined by the Investment Company Act of
1940, at any annual or special meeting of the Stockholders at
which a quorum is present or represented, provided notice of the
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proposed amendment shall have been contained in the notice of the
meeting.
SECTION 2. BY DIRECTORS. The Directors may adopt, amend or
repeal any By-Law (which is not inconsistent with any By-Law adopted, amended or
repealed by the Company's Stockholders in accordance with Section 1 of this
Article VIII) by majority vote of all of the Directors in office at any regular
meeting, or at any special meeting, in accordance with the requirements of
applicable law.
ARTICLE IX
CUSTODY OF SECURITIES
SECTION 1. EMPLOYMENT OF A CUSTODIAN. The Company 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
owned by the Company. The Custodian (and any sub-custodian) shall be a bank
having not less than $2,000,000 aggregate capital, surplus and undivided profits
or such other financial institution as shall be permitted by rule or order of
the United States Securities and Exchange Commission. The Custodian shall be
appointed from time to time by the Directors, who shall fix its remuneration.
SECTION 2. ACTION UPON TERMINATION OF CUSTODIAN
AGREEMENT. Upon termination of a Custodian Agreement or
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inability of the Custodian to continue to serve, the Directors 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
Directors shall call as promptly as possible a special meeting of the
Shareholders to determine whether the Company 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
funds, securities and similar investments 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 Directors shall cause to be delivered to the Custodian all
securities owned by the Company or to which it 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 Directors may generally
or from time to time require or approve or to a successor
Custodian; and the Directors shall cause all funds owned by
the Company 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
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securities acquired, or the return of cash held as collateral
for loans of portfolio securities, or in payment of expenses,
including management compensation, and-liabilities of the
Company, including distributions to shareholders, or to a
successor Custodian. In connection with the Company's purchase
or sale of futures contracts, the Custodian shall transmit,
prior to receipt on behalf of the Company of any securities or
other property, funds from the Company's custodian account in
order to furnish to and maintain funds with brokers as margin
to guarantee the performance of the Company's futures
obligations in accordance with the applicable requirements of
commodities exchanges and brokers.
ARTICLE X
MISCELLANEOUS
SECTION 1. MISCELLANEOUS.
(a) Except as hereinafter provided, no Officer or Director of the
Company and no partner, officer, director or shareholder of the Investment
Adviser of the Company or of the Distributor of the Company, and no Investment
Adviser or Distributor of the Company, shall take long or short positions in the
securities issued by the Company.
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(1) The foregoing provisions shall not prevent
the Distributor from purchasing Shares from the Company if such purchases are
limited (except for reasonable allowances for clerical errors, delays and errors
of transmission and cancellation of orders) to purchases for the purpose of
filling orders for such Shares received by the Distributor, and provided that
orders to purchase from the Company are entered with the Company 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 Company as agent for the account of
the Company.
(3) The foregoing provision shall not prevent the
purchase from the Company or from the Distributor of Shares issued by the
Company, by any officer, or Director of the Company or by any partner, officer,
director or shareholder of the Investment Adviser of the Company or of the
Distributor of the Company 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 Company.
(4) The foregoing shall not prevent the
Distributor, or any affiliate thereof, of the Company from
purchasing Shares prior to the effectiveness of the first
- 30 -
<PAGE>
registration statement relating to the Shares under the
Securities Act of 1933.
(b) The Company shall not lend assets of the Company to any
officer or Director of the Company, or to any partner, officer, director or
shareholder of, or person financially interested in, the Investment Adviser of
the Company, or the Distributor of the Company, or to the Investment Adviser of
the Company or to the Distributor of the Company.
(c) The Company shall not impose any restrictions upon the
transfer of the Shares of the Company except as provided in the Articles of
Incorporation, but this requirement shall not prevent the charging of customary
transfer agent fees.
(d) The Company shall not permit any officer or Director of
the Company, or any partner, officer or director of the Investment Adviser or
Distributor of the Company, to deal for or on behalf of the Company 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 Directors of the Company or partners, officers or
directors of the Investment Adviser or Distributor of the Company from buying,
holding or selling Shares in the Company, or from being partners, officers or
directors or otherwise financially interested in the Investment Adviser or
Distributor of the Company; (b) purchases or sales of securities or other
property by the Company from or to an affiliated person
- 31 -
<PAGE>
or to the Investment Adviser or Distributor of the Company if such transaction
is exempt from the applicable provisions of the 1940 Act; (c) purchases of
investments for the portfolio of the Company or sales of investments owned by
the Company through a security dealer who is, or one or more of whose partners,
shareholders, officers or directors is, an Officer or Director of the Company,
or a partner, officer or director of the Investment Adviser or Distributor of
the Company, 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, share-holder, officer, or director
who is, an officer or Director of the Company, or a partner, officer or director
of the Investment Adviser or Distributor of the Company, if only customary fees
are charged for services to the Company; (e) sharing statistical research, legal
and management expenses and office hire and expenses with any other investment
company in which an officer or Director of the Company, or a partner, officer or
director of the Investment Adviser or Distributor of the Company, is an officer
or director or otherwise financially interested.
- 32 -
TEMPLETON GROWTH FUND, INC.
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 GROWTH FUND, INC., (the "Fund") are a Maryland corporation
operating as an open-end management investment company or "mutual fund", which
is registered under the Investment Company Act of 1940 (the "1940 Act") and
whose shares are registered under the Securities Act of 1933 (the "1933 Act").
We desire to issue one or more series or classes of our authorized but unissued
shares of capital stock or beneficial interest (the "Shares") to authorized
persons in accordance with applicable Federal and State securities laws. The
Fund's Shares may be made available in one or more separate series, each of
which may have one or more classes.
You have informed us that your company is registered as a broker-dealer under
the provisions of the Securities Exchange Act of 1934 and that your company is a
member of the National Association of Securities Dealers, Inc. You have
indicated your desire to act as the exclusive selling agent and distributor for
the Shares. We have been authorized to execute and deliver this Distribution
Agreement ("Agreement") to you by a resolution of our Board of Directors
("Board") passed at a meeting at which a majority of Board members, including a
majority who are not otherwise interested persons of the Fund and who are not
interested persons of our investment adviser, its related organizations or with
you or your related organizations, were present and voted in favor of the said
resolution approving this Agreement.
1. APPOINTMENT OF UNDERWRITER. Upon the execution of this Agreement and
in consideration of the agreements on your part herein expressed and upon the
terms and conditions set forth herein, we hereby appoint you as the exclusive
sales agent for our Shares and agree that we will deliver such Shares as you may
sell. You agree to use your best efforts to promote the sale of Shares, but are
not obligated to sell any specific number of Shares.
However, the Fund and each series retain the right to make direct sales
of its Shares without sales charges consistent with the terms of the then
current prospectus and applicable law, and to engage in other legally authorized
transactions in its Shares which do not involve the sale of Shares to the
general public. Such other transactions may include, without limitation,
transactions between the Fund or any series or class and its shareholders only,
transactions involving the reorganization of the Fund or any series, and
transactions involving the merger or combination of the Fund or any series with
another corporation or trust.
2. INDEPENDENT CONTRACTOR. You will undertake and discharge your
obligations hereunder as an independent contractor and shall have no authority
or power to obligate or bind us by your actions, conduct or contracts except
that you are authorized to promote the sale of Shares. You may appoint
sub-agents or distribute through dealers or otherwise as you may determine from
time to time, but this Agreement shall not be construed as authorizing any
dealer or other person to accept orders for sale or repurchase on our behalf or
otherwise act as our agent for any purpose.
3. OFFERING PRICE. Shares shall be offered for sale at a price
equivalent to the net asset value per share of that series and class plus any
applicable percentage of the public offering price as sales commission or as
otherwise set forth in our then current prospectus. On each business day on
which the New York Stock Exchange is open for business, we will furnish you with
the net asset value of the Shares of each available series and class which shall
be determined in accordance with our then effective prospectus. All Shares will
be sold in the manner set forth in our then effective prospectus and statement
of additional information, and in compliance with applicable law.
4. COMPENSATION.
A. SALES COMMISSION. You shall be entitled to charge a sales
commission on the sale or redemption, as appropriate, of each series and class
of each Fund's Shares in the amount of any initial, deferred or contingent
deferred sales charge as set forth in our then effective prospectus. You may
allow any sub-agents or dealers such commissions or discounts from and not
exceeding the total sales commission as you shall deem advisable, so long as any
such commissions or discounts are set forth in our current prospectus to the
extent required by the applicable Federal and State securities laws. You may
also make payments to sub-agents or dealers from your own resources, subject to
the following conditions: (a) any such payments shall not create any obligation
for or recourse against the Fund or any series or class, and (b) the terms and
conditions of any such payments are consistent with our prospectus and
applicable federal and state securities laws and are disclosed in our prospectus
or statement of additional information to the extent such laws may require.
B. DISTRIBUTION PLANS. You shall also be entitled
to compensation for your services as provided in any Distribution Plan adopted
as to any series and class of any Fund's Shares pursuant to Rule 12b-1 under
the 1940 Act.
5. TERMS AND CONDITIONS OF SALES. Shares shall be offered for sale only
in those jurisdictions where they have been properly registered or are exempt
from registration, and only to those groups of people which the Board may from
time to time determine to be eligible to purchase such shares.
6. ORDERS AND PAYMENT FOR SHARES. Orders for Shares shall be directed
to the Fund's shareholder services agent, for acceptance on behalf of the Fund.
At or prior to the time of delivery of any of our Shares you will pay or cause
to be paid to the custodian of the Fund's assets, for our account, an amount in
cash equal to the net asset value of such Shares. Sales of Shares shall be
deemed to be made when and where accepted by the Fund's shareholder services
agent. The Fund's custodian and shareholder services agent shall be identified
in its prospectus.
7. PURCHASES FOR YOUR OWN ACCOUNT. You shall not purchase our Shares
for your own account for purposes of resale to the public, but you may purchase
Shares for your own investment account upon your written assurance that the
purchase is for investment purposes and that the Shares will not be resold
except through redemption by us.
8. SALE OF SHARES TO AFFILIATES. You may sell our Shares at net asset
value to certain of your and our affiliated persons pursuant to the applicable
provisions of the federal securities statutes and rules or regulations
thereunder (the "Rules and Regulations"), including Rule 22d-1 under the 1940
Act, as amended from time to time.
9. ALLOCATION OF EXPENSES. We will pay the expenses:
(a) Of the preparation of the audited and certified
financial statements of our company to be included in
any Post-Effective Amendments ("Amendments") to our
Registration Statement under the 1933 Act or 1940
Act, including the prospectus and statement of
additional information included therein;
(b) Of the preparation, including legal fees, and
printing of all Amendments or supplements filed with
the Securities and Exchange Commission, including the
copies of the prospectuses included in the Amendments
and the first 10 copies of the definitive
prospectuses or supplements thereto, other than those
necessitated by your (including your "Parent's")
activities or Rules and Regulations related to your
activities where such Amendments or supplements
result in expenses which we would not otherwise have
incurred;
(c) Of the preparation, printing and distribution of any
reports or communications which
we send to our existing shareholders; and
(d) Of filing and other fees to Federal and State
securities regulatory authorities necessary to
continue offering our Shares.
You will pay the expenses:
(a) Of printing the copies of the prospectuses and any
supplements thereto and statements of additional
information which are necessary to continue to offer
our Shares;
(b) Of the preparation, excluding legal fees, and
printing of all Amendments and supplements to our
prospectuses and statements of additional information
if the Amendment or supplement arises from your
(including your "Parent's") activities or Rules and
Regulations related to your activities and those
expenses would not otherwise have been incurred by
us;
(c) Of printing additional copies, for use by you as
sales literature, of reports or other communications
which we have prepared for distribution to our
existing shareholders; and
(d) Incurred by you in advertising, promoting and
selling our Shares.
10. FURNISHING OF INFORMATION. We will furnish to you such information
with respect to each series and class of Shares, in such form and signed by such
of our officers as you may reasonably request, and we warrant that the
statements therein contained, when so signed, will be true and correct. We will
also furnish you with such information and will take such action as you may
reasonably request in order to qualify our Shares for sale to the public under
the Blue Sky Laws of jurisdictions in which you may wish to offer them. We will
furnish you with annual audited financial statements of our books and accounts
certified by independent public accountants, with semi-annual financial
statements prepared by us, with registration statements and, from time to time,
with such additional information regarding our financial condition as you may
reasonably request.
11. CONDUCT OF BUSINESS. Other than our currently effective prospectus,
you will not issue any sales material or statements except literature or
advertising which conforms to the requirements of Federal and State securities
laws and regulations and which have been filed, where necessary, with the
appropriate regulatory authorities. You will furnish us with copies of all such
materials prior to their use and no such material shall be published if we shall
reasonably and promptly object.
You shall comply with the applicable Federal and State laws
and regulations where our Shares are offered for sale and conduct your affairs
with us and with dealers, brokers or investors in accordance with the Rules of
Fair Practice of the National Association of Securities Dealers, Inc.
12. REDEMPTION OR REPURCHASE WITHIN SEVEN DAYS. If Shares are tendered
to us for redemption or repurchase by us within seven business days after your
acceptance of the original purchase order for such Shares, you will immediately
refund to us the full sales commission (net of allowances to dealers or brokers)
allowed to you on the original sale, and will promptly, upon receipt thereof,
pay to us any refunds from dealers or brokers of the balance of sales
commissions reallowed by you. We shall notify you of such tender for redemption
within 10 days of the day on which notice of such tender for redemption is
received by us.
13. OTHER ACTIVITIES. Your services pursuant to this Agreement
shall not be deemed to be exclusive, and you may render similar services and
act as an underwriter, distributor or dealer for other investment companies in
the offering of their shares.
14. TERM OF AGREEMENT. This Agreement shall become effective on the
date of its execution, and shall remain in effect for a period of two (2) years.
The Agreement is renewable annually thereafter, with respect to the Fund or, if
the Fund has more than one series, with respect to each series, for successive
periods not to exceed one year (i) by a vote of (a) a majority of the
outstanding voting securities of the Fund or, if the Fund has more than one
series, of each series, or (b) by a vote of the Board, AND (ii) by a vote of a
majority of the members of the Board who are not parties to the Agreement or
interested persons of any parties to the Agreement (other than as members of the
Board), cast in person at a meeting called for the purpose of voting on the
Agreement.
This Agreement may at any time be terminated by the Fund or by
any series without the payment of any penalty, (i) either by vote of the Board
or by vote of a majority of the outstanding voting securities of the Fund or any
series on 90 days' written notice to you; or (ii) by you on 90 days' written
notice to the Fund; and shall immediately terminate with respect to the Fund and
each series in the event of its assignment.
15. SUSPENSION OF SALES. We reserve the right at all times to
suspend or limit the public offering of Shares upon two days' written notice to
you.
16. MISCELLANEOUS. This Agreement shall be subject to the laws of the
State of California and shall be interpreted and construed to further promote
the operation of the Fund as an open-end investment company. This Agreement
shall supersede all Distribution Agreements and Amendments previously in effect
between the parties. As used herein, the terms "Net Asset Value," "Offering
Price," "Investment Company," "Open-End Investment Company," "Assignment,"
"Principal Underwriter," "Interested Person," "Parent," "Affiliated Person," and
"Majority of the Outstanding Voting Securities" shall have the meanings set
forth in the 1933 Act or the 1940 Act and the Rules and Regulations thereunder.
Nothing herein shall be deemed to protect you against any liability to us or to
our securities holders to which you would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of your
duties hereunder, or by reason of your reckless disregard of your obligations
and duties hereunder.
If the foregoing meets with your approval, please acknowledge your acceptance by
signing each of the enclosed copies, whereupon this will become a binding
agreement as of the date set forth below.
Very truly yours,
Templeton Growth Fund, Inc.
By:/s/THOMAS M. MISTELE
Thomas M. Mistele
Accepted:
Franklin Templeton Distributors, Inc.
By: /s/ PETER D. JONES
Peter D. Jones
DATED: May 1, 1995
NON-EXCLUSIVE UNDERWRITING AGREEMENT
AGREEMENT made as of the 31st day of October 1995, between TEMPLETON
GROWTH FUND, INC., a Maryland corporation (herein referred to as the "Fund"),
and TEMPLETON GLOBAL STRATEGIC SERVICES (DEUTSCHLAND) GmbH, a corporation
organized and existing under the laws of Germany, office address Taunusanlage
11, 60329 Frankfurt am Main, Germany (herein referred to as the "Selling
Company").
FIRST: The Selling Company shall be a non-exclusive underwriter of
shares of capital stock of the Fund (the "Shares") in Europe (the "Territory")
with the functions hereinafter stated, and agrees to use its best efforts to
bring about and maintain a broad distribution of the Shares among bona fide
investors in the Territory (except United States citizens) (the "Investors").
SECOND: The Selling Company shall solicit responsible dealers for
orders to purchase the Shares as principal, and may sign selling contracts with
any such dealer, the forms of such contracts to be as mutually agreed upon
between the Fund and the Selling Company. The Selling Company also may sell
Shares directly to Investors. While this Agreement is in force, the Fund through
its principal underwriter, Franklin Templeton Distributors, Inc., may solicit
sales or sell the Shares to any person in the Territory, including Shares sold
by dealers who are member firms of the United States National Association of
Securities Dealers, Inc., ("NASD") and may retain the sales commission on such
sales.
THIRD: All of the Shares sold under this Agreement shall be sold only
at the Offering Price in effect at the time of such sale (as described in the
then current prospectus or prospectuses and statements of additional
information, effective under the applicable laws of a country or jurisdiction
within the Territory, and approved by the Fund) and the Fund shall receive not
less than the full net asset value thereof, as defined in the Fund's Articles of
Incorporation ("Charter") or By-Laws. The difference between Offering Price and
net asset value shall be retained by the Selling Company, it being understood
that such amounts will not exceed those that are set forth in the then current
prospectus or prospectuses approved by the Fund (the "Sales Commission"). The
Selling Company agrees to return the Sales Commission to the Fund when an
Investor revokes his/her purchase pursuant to any applicable foreign investment
laws.
FOURTH: The Fund shall pay all costs and expenses incidental to
registering and qualifying, and maintaining the registration and qualification
of, the Shares for sale under the laws of the countries within the Territory as
well as, insofar as applicable, the laws of the United States (including the
cost of preparing, setting-up, printing and distributing to the existing
Shareholders residing in each country within the Territory an initial and annual
supply of the respective prospectuses effective under the laws of each such
country, and for preparing, setting-up, printing and distributing an initial and
annual supply of reports in the appropriate language for existing Shareholders
in the Territory or in the English language where appropriate). The Selling
Company is liable for the cost of printing and delivering copies of prospectuses
and reports for selling purposes to dealers and prospective new Investors in
countries within the Territory. The Selling Company is also liable for the cost
of the preparation, excluding legal fees, and printing of all post-effective
amendments and supplements to the Fund's prospectuses and statement of
additional information if the post-effective amendment or supplement arises from
the Selling Company (including its parent's) activities or rules and regulations
under the U.S. Investment Company Act of 1940 related to the Selling Company's
activities and those expenses would not otherwise have been incurred by the
Fund. In addition, the Selling Company is liable for the cost of printing
additional copies, for its use as sales literature, or reports or other
communications which the Fund has prepared for distribution to its existing
shareholders.
FIFTH: The Selling Company may re-allow to dealers all or any part
of the discount it is allowed.
SIXTH: The Selling Company shall be entitled to receive a contingent
deferred sales charge or distribution fee from the proceeds of redemption of
Shares of the Fund on such terms and in such amounts as are set forth in the
then current prospectus of the Fund. In addition, the Selling Company may retain
any amounts authorized for payment to the Selling Company under the Fund's
Distribution Plan.
SEVENTH: If Shares are tendered to the Fund for redemption or
repurchase by the Fund within seven business days after the Selling Company's
acceptance of the original purchase order for such Shares, the Selling Company
will immediately refund to the Fund the full sales commission (net of allowances
to dealers or brokers) allowed to the Selling Company on the original sale, and
will promptly, upon receipt thereof, pay to the Fund any refunds from dealers or
brokers of the balance of sales commissions reallowed by the Selling Company.
The Fund shall notify the Selling Company of such tender for redemption within
10 days of the day on which notice of such tender for redemption is received by
the Fund.
EIGHTH: The Selling Company will conduct its business in strict
accordance with the applicable requirements of the Charter and the By-Laws of
the Fund as from time to time amended, and in strict accordance with all
applicable laws, rules and regulations, including the Rules of Fair Practice of
the NASD. The Selling Company shall endeavor to see that dealers buying Shares
resell the same only to bona fide Investors and that the methods and materials
used in selling Shares are sound and conservative, and in accordance with the
Fund's current prospectus.
Advertisements with respect to the Fund prepared by the Selling Company
shall not contain any untrue statements of material fact or omit to state a
material fact required to be stated therein or necessary to make such statements
not misleading and will conform to the U.S. Investment Company Act of 1940, as
amended, and the regulations thereunder, and to the Rules of Fair Practice of
the NASD pertaining to the content of such material.
No person is authorized to make any representations concerning shares
of the Fund except those contained in the current prospectus, statement of
additional information, and printed information issued by the Fund.
NINTH: The Selling Company shall at all times use reasonable care and
act in good faith in performing its duties hereunder. The Selling Company shall
not be liable or responsible for delays or errors occurring by reason of
circumstances beyond its control, including acts of civil or military authority,
national emergencies, fire, flood or other catastrophes, acts of God,
insurrection, war or riots.
TENTH: This Agreement shall be effective from the date hereof, subject
to registration of the Shares under the laws of the respective countries within
the Territory and other applicable laws as provided in Article FOURTH above. If
the number of Shareholders in any country is not sufficient in the opinion of
the Fund, then such registration may be discontinued, including its obligations
under Article FOURTH above.
ELEVENTH: Either party shall have the right to terminate this Agreement
without the payment of any penalty upon sixty (60) days' notice in writing to
the other, provided, however, that such termination on the part of the Fund
shall be directed or approved either by the affirmative vote of a majority of
the Board of Directors in office at the time or by the affirmative vote of a
majority (as defined in Section 2(a)(42) of the U.S. Investment Company Act of
1940) of the outstanding Shares. This Agreement shall continue in effect from
the date hereof until December 31, 1993, and from year to year thereafter,
provided that such continuance is specifically approved at least annually by the
Board of Directors or by a vote of a majority of the outstanding Shares (as
defined in the U.S. Investment Company Act of 1940) and also, in either event,
approved by a majority of those Directors who are not parties to the Agreement
or interested persons of any such party, in person at a meeting called for the
purpose of voting on such approval.
TWELFTH: The Selling Company agrees at all times to indemnify, save
harmless and defend the Fund from and against all claims for loss, damage or
injury and from and against any suits, actions, or legal proceedings of any kind
brought against the Fund by or on account of any person whosoever arising
directly or indirectly caused by, or incident to, or growing out of this
Agreement for its acts and omissions caused by its willful misfeasance, bad
faith or gross negligence in the performance of its duties or by reckless
disregard of its obligations under this Agreement.
THIRTEENTH: The Selling Company, upon request of the Fund (made at
reasonable times and in a reasonable manner), will provide the Fund with copies
of its books and records relating to the Fund and/or allow inspection of such
books and records by representatives of the Fund.
The Selling Company shall at all times maintain books and records
relating to the Fund at its principal place of business and will comply
substantially with Section 31 of the U.S. Investment Company Act of 1940, as
amended, and the regulations pursuant to such Section.
FOURTEENTH: This Agreement shall automatically and
immediately terminate in the event of its assignment by the Selling
Company. The term "assignment" as used herein includes any transfer of a
controlling block of the voting stock of the Selling Company.
FIFTEENTH: All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand (and duly receipted) or mailed, certified or registered mail,
return receipt requested, as follows:
if to the Fund Templeton Growth Fund, Inc.
700 Central Avenue
St. Petersburg, Florida 33701-3628
Attention: Thomas M. Mistele, Secretary
If to the Company Templeton Global Strategic Services
(Deutschland) GmbH
Taunusanlage 11,
60329 Frankfurt am Main, Germany
Attention: General Manager
or to such other person or address as any party may furnish or designate to the
other in writing in accordance herewith. Notice given by mail shall be deemed to
have been given upon the date shown on the certified or registered postal
receipt showing delivery to the recipient.
SIXTEENTH: The Fund reserves the right at all times to suspend
or limit the public offering of the Shares of the Fund upon two day's written
notice to the Selling Company.
SEVENTEENTH: This Agreement shall be governed by the laws of the
State of California, without reference to principles of conflicts of laws
and the U.S. Securities laws, including the U.S. Investment Company Act
of 1940, as amended from time to time, and the regulations thereunder.
EIGHTEENTH: Any dispute or claim arising out of this Agreement
shall be referred to and resolved by the International Chamber of Commerce
("ICC") in Luxembourg in accordance with the ICC Conciliation and
Arbitration Rules. The ICC shall apply U.S. law, State of California, in
relation to the dispute.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized officers and their respective corporate
seals to be hereunto duly affixed and attested.
TEMPLETON GROWTH FUND, INC.
By:/s/JOHN R. KAY
John R. Kay
Vice President
TEMPLETON GLOBAL STRATEGIC
SERVICES (Deutschland) GmbH
By:
And by:
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 December 31, 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 GROWTH FUND, INC. (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 or evidencing or representing any other rights or interests therein and
other similar property ("Securities") from time to time
<PAGE>
- 2 -
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 in a
segregated account for futures contracts, and U.S. and Canadian government
obligations purchased with a simultaneous agreement by the seller to repurchase
them within 7 days plus accrued interest deposited in a separate segregated
account (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.
<PAGE>
- 3 -
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
Directors 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 of
Chase appointed and utilized
<PAGE>
- 4 -
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 operating
agreement to be entered into between Chase and the Fund (the "Operating
Agreement").
3. 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 Directors 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
<PAGE>
- 5 -
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 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 Directors 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
<PAGE>
- 6 -
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 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.
4. 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.
5. 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 Branches providing custodial services, Chase shall select as
<PAGE>
- 7 -
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 Directors:
(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 govern the manner in which such
Foreign Bank will maintain the Fund's assets.
<PAGE>
- 8 -
6. 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.
7. 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 Chase or of such Foreign Bank.
8. 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
<PAGE>
- 9 -
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 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
<PAGE>
- 10 -
(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 ACCOUNT FOR REPURCHASE AGREEMENTS.
With respect to purchases for the Custody Account from banks (including Chase)
or broker-dealers of United States or Canadian government obligations with a
simultaneous agreement by the seller to repurchase them within no more than 7
days at the original purchase price plus accrued interest, Chase agrees,
pursuant to Written Instructions, to:
(a) deposit such securities and repurchase
agreements in a segregated account maintained by Chase;
and
(b) promptly show on Chase's records that such
securities and repurchase agreements are being held on
behalf of the Fund and deliver to the Fund a written
confirmation to that effect.
9. 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
<PAGE>
- 11 -
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 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.
10. 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.
<PAGE>
- 12 -
Chase shall make or cause the appropriate Chase Branch or
Foreign Bank to move payments of Cash held in the Deposit Account 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 provided in the
Operating Agreement, each such 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 payment in Cash or Securities, or otherwise as provided in the Operating
Agreement, only:
<PAGE>
- 13 -
(a) 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;
(b) 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;
(c) upon exercise of conversion, subscription,
purchase, or other similar rights represented by such
Securities; or
(d) 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:
(a) 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;
<PAGE>
- 14 -
(b) 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;
(c) present for exchange all Securities in the
Custody Account converted pursuant to their terms into
other Securities;
(d) 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 requested and the Fund
shall have furnished to Chase any information necessary in
connection with such certificates;
(e) exchange interim receipts or temporary
Securities in the Custody Account for definitive
Securities; and
(f) receive and hold in the Custody Account all
Securities received as a distribution on Securities held
<PAGE>
- 15 -
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.
11. 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 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
<PAGE>
- 16 -
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.
12. REPORTS. Chase shall supply periodically, upon the 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.
<PAGE>
- 17 -
13. 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.
14. STANDARD OF CARE.
(a) GENERAL. Chase shall assume entire
responsi-bility 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
<PAGE>
- 18 -
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 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
<PAGE>
- 19 -
the Fund. Chase 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. 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 Directors of the Fund, and may rely on the
genuineness of any such documents which it may in good faith
believe to
<PAGE>
- 20 -
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.
(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).
<PAGE>
- 21 -
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 Income Fund; and 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
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
<PAGE>
- 22 -
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 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 for 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
<PAGE>
- 23 -
(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 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
<PAGE>
- 24 -
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 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.
15. 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
<PAGE>
- 25 -
restrictions on the transfer from any foreign jurisdiction of the proceeds of
sale of any Securities or against confiscation, expropriation or nationalization
of 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.
16. 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) 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
<PAGE>
- 26 -
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 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
<PAGE>
- 27 -
publications referred to in the first sentence of this Section 16.
17. 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 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.
18. 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.
19. TERM. This Agreement shall remain in effect until
<PAGE>
- 28 -
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 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 Securities, Chase shall deliver to
the Fund, or such other person as the Fund shall
<PAGE>
- 29 -
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.
20. 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.
21. 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 provided) if addressed and mailed postage prepaid or
delivered to it at its office at the address set forth below:
<PAGE>
- 30 -
If to the Fund, then to
Templeton Growth Fund, Inc.
700 Central Avenue, P.O. Box 33030
St. Petersburg, Florida 33733-9926
Attention: John Wm. Galbraith, Treasurer
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.
22. 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.
<PAGE>
- 31 -
23. GOVERNING LAW. This Agreement shall be governed by
the laws of the State of New York.
THE CHASE MANHATTAN BANK, N.A.
By:_____________________________
Vice President
TEMPLETON GROWTH FUND, INC.
By:/s/JOHN WM. GALBRAITH
John Wm. Galbraith
Secretary
- 3 -
BUSINESS MANAGEMENT AGREEMENT BETWEEN
TEMPLETON GROWTH FUND, INC. AND
TEMPLETON GLOBAL INVESTORS, INC.
AGREEMENT dated as of April 1, 1993, between Templeton Growth
Fund, Inc., a Maryland corporation which is a registered open-end investment
company (the "Fund") 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 Fund;
(b) paying compensation of the Fund's officers for
services rendered as such;
(c) authorizing expenditures and approving bills for
payment on behalf of the Fund;
(d) supervising preparation of 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 Fund's investment portfolio and
preparing and supervising publication of daily
quotations of the bid and asked prices of the Fund's
Shares, earnings reports and other financial data;
(f) monitoring relationships with organizations serving
the Fund, including custodians, transfer agents and
printers;
(g) providing trading desk facilities for the Fund;
(h) supervising compliance by the Fund with recordkeeping
requirements under the Investment Company Act of 1940
(the "1940 Act") and the rules and regulations
thereunder, with state regulatory requirements,
maintenance of books and records for the Fund (other
than those maintained by the custodian and transfer
agent), preparing and filing of tax reports other
than the Fund's income tax returns;
(i) monitoring the qualifications of tax deferred
retirement plans for the Fund; and
(j) providing executive, clerical and secretarial
personnel needed to carry out the above
responsibilities.
(2) The Fund 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 Fund during the month preceding each payment, reduced as follows: on such
net assets in excess of $200 million up to $700 million, a monthly fee equal on
an annual basis to 0.135%; on such net assets in excess of $700 million up to
$1.2 billion, a monthly fee equal on an annual basis to 0.1%; and on such net
assets in excess of $1.2 billion, a monthly fee equal on an annual basis to
0.075%.
(3) This Agreement shall remain in full force and effect
through December 31, 1993 and thereafter from year to year to the extent
continuance is approved annually by the Board of Directors of the Fund.
(4) This Agreement may be terminated by the Fund at any time
on sixty (60) days' written notice without payment of penalty, provided that
such termination by the Fund shall be directed or approved by the vote of a
majority of the Directors of the Fund in office at the time or by the vote of a
majority of the outstanding voting securities of the Fund (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 duties and
obligations hereunder, TGII shall not be subject to liability for any act or
omission in the course of, or connected with, rendering services hereunder.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their duly authorized officers and their
respective corporate seals to be hereunto duly affixed and attested.
TEMPLETON GROWTH FUND, INC.
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. MCGOWAN
Gregory E. McGowan
Secretary
7
TRANSFER AGENT AGREEMENT BETWEEN
TEMPLETON GROWTH FUND, INC. AND
FRANKLIN TEMPLETON INVESTOR SERVICES, INC.
AGREEMENT dated as of September 1, 1993, and amended and restated as of
August 10, 1995, between TEMPLETON GROWTH FUND, INC., a registered open-end
investment company with offices at 700 Central Avenue, St. Petersburg, Florida
33701 (the "Fund") 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 S E T H:
That for and in consideration of the mutual promises hereinafter set
forth, the Fund 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) "Articles of Incorporation" shall mean the Articles
of Incorporation of the Fund 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 Fund, duly
authorized to give Oral Instructions or Written Instructions on behalf of the
Fund 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 Fund 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 common stock, par value
$.20 per share, of the Fund; 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 Fund hereby appoints and constitutes FTIS
as transfer agent for Shares of the Fund and as shareholder servicing agent for
the Fund, and FTIS accepts such appointment and agrees to perform the duties
hereinafter set forth.
3. COMPENSATION.
(a) The Fund 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 Fund separately. FTIS will
bill the Fund as soon as practicable after the end of each calendar month, and
said billings will be detailed in accordance with Schedule A. The Fund 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 Fund.
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 Fund 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 Fund
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, a specimen of the certificate for
Shares of the Fund;
(b) All account application forms and other documents
relating to Shareholder accounts or to any plan, program or service offered by
the Fund;
(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 Fund's Articles of Incorporation, 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 Fund 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 Fund 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 Fund 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 Fund. 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 Fund and the proper countersignature of FTIS.
(b) At any time FTIS may apply to any Authorized Person of the
Fund for Written Instructions and may seek advice at the Fund's expense from
legal counsel for the Fund 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
Fund or for FTIS. Written Instructions requested by FTIS will be provided by the
Fund 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 Fund 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 Fund 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 Fund 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 Fund 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 Fund 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 Fund's current prospectus, when believed by FTIS
to be genuine.
In any case in which the Fund may be asked to indemnify or hold FTIS
harmless, the Fund shall be advised of all pertinent facts concerning the
situation in question and FTIS will use reasonable care to identify and notify
the Fund promptly concerning any situation which presents or appears likely to
present a claim for indemnification against the Fund. The Fund shall have the
option to defend FTIS against any claim which may be the subject of this
indemnification, and, in the event that the Fund so elects, such defense shall
be conducted by counsel chosen by the Fund and satisfactory to FTIS, and
thereupon the Fund 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 Fund will be asked to provide
indemnification, except with the Fund'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 Fund's Board of Directors or (ii) a vote of a "majority" (as defined
in the Investment Company Act of 1940 (the "1940 Act")) of the Fund's
outstanding voting securities, provided that in either event the continuance is
also approved by a majority of the Board of Directors 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 Fund, it shall be accompanied by a
resolution of the Board of Directors of the Fund, certified by the Secretary of
the Fund, designating a successor transfer agent or transfer agents. Upon such
termination and at the expense of the Fund, FTIS will deliver to such successor
a certified list of shareholders of the Fund (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
Fund, and will cooperate in the transfer of such duties and responsibilities,
including provisions for assistance from 's 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 Fund 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 Fund 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 Fund:
Templeton Growth Fund, Inc.
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.
<PAGE>
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 GROWTH FUND, INC.
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>
-A1-
Schedule A
FEES
Shareholder account maintenance $13.74, adjusted as of February 1 of
(per annum, prorated payable each year to reflect changes in
monthly) the Department of Labor Consumer
Price Index.
Cash withdrawal program No charge to the Fund.
Retirement plans No charge to the Fund.
Wire orders or express $15.00 fee may be charged for
mailings of redemptions each wire order and each express
proceeds mailings.
February 1, 1995
<PAGE>
-B1-
Schedule B
OUT-OF-POCKET EXPENSES
The Fund 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 Fund agrees that postage and mailing expenses will be paid on the
day of or prior to mailing as agreed with FTIS. In addition, the Fund will
promptly reimburse FTIS for any other expenses incurred by FTIS as to which the
Fund 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-5
C-1
Schedule C
DUTIES
AS TRANSFER AGENT FOR INVESTORS IN THE FUND, 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 Fund, in such names and for such
number of authorized but hitherto unissued Shares of the Fund
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 FUND, FTIS WILL:
o Receive from the Fund, from the Fund'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 Fund;
o Produce periodic reports reflecting the accounts receivable
and the paid pending (free stock) items;
o Open, maintain and close Shareholder 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 the 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 Fund's office in St. Petersburg, Florida;
o Out of money received in payment for Share sales, pay to the
Fund'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 Pass upon the adequacy of documents submitted by a Shareholder
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 Fund
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 Fund and proxy proofs checked by the Fund,
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 Fund's Semi-Annual Report on Form N-SAR;
o Prepare and mail dealer commission statements and checks;
o Maintain and furnish the Fund and its Shareholders with such
information as the Fund may reasonably request for the purpose
of compliance by the Fund 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 Fund's and/or Shareholder's instructions, provided that:
(a) The Fund 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 Fund 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 Fund;
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
Fund to each Shareholder who requests it, at no cost to the
Shareholder.
In connection with the Fund'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.
In connection with Tax Deferred Retirement Plans involving the Fund,
FTIS will:
o Receive and process applications, accept contributions,
record Shares issued and dividends reinvested;
o Make distributions when properly requested; and
o Furnish reports to regulatory authorities as required.
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 Growth Fund, Inc. referred to therein,
which appears in the 1995 Annual Report to Shareholders and which is
incorporated herein by reference, in Post-Effective Amendment No. 12 to the
Registration Statement on Form N-1A, File No. 33-9981, 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
New York, New York
December 15, 1995
<PAGE>
EXHIBIT 16
COMPUTATION OF PERFORMANCE QUOTATIONS
PROVIDED IN RESPONSE TO ITEM 22
(UNAUDITED)
Templeton Growth Fund, Inc.
AVERAGE ANNUAL TOTAL RETURN FOR THE YEAR ENDED 8/31/95
P (1 + T)N = ERV
$1000 (1 + T)1 = $1,032.10
1 + T = 1.0321
T = .0321
T = 3.21%
AVERAGE ANNUAL TOTAL RETURN FOR FIVE YEARS ENDING 8/31/95
$1000 (1 + T)5 = $1,897.71
(1 + T)5 = 1.8977
1 + T = 1.1367
T = .1367
T = 13.67%
ANNUAL TOTAL RETURN FOR TEN YEARS ENDING 8/31/95
$1000 (1 + T)10 = $3,779.39
(1 + T)10 = 3.779
1 + T = 1.1422
T = .1422
T = 14.22%
TEMPLETON GROWTH FUND, INC.
ASSISTANT SECRETARY'S CERTIFICATE
The undersigned, being the duly elected Assistant Secretary of
Templeton Growth Fund, Inc., a Maryland corporation (the "Fund"), hereby
certifies that the following resolution has been duly adopted by the Fund's
Board of Directors, and that said resolution remains in effect on the date
hereof.
RESOLVED, that the officers of the Fund be, and they hereby are,
authorized in the name and on behalf of the Fund 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 Growth Fund, Inc. August 31, 1995 annual report and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000805664
<NAME> TEMPLETON GROWTH FUND, INC.
<SERIES>
<NUMBER> 001
<NAME> CLASS I
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 5894735755
<INVESTMENTS-AT-VALUE> 6989683123
<RECEIVABLES> 81965464
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 295605
<TOTAL-ASSETS> 7071944192
<PAYABLE-FOR-SECURITIES> 51732643
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 13364975
<TOTAL-LIABILITIES> 65097618
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5288575786
<SHARES-COMMON-STOCK> 367396849<F1>
<SHARES-COMMON-PRIOR> 296189758<F1>
<ACCUMULATED-NII-CURRENT> 118129870
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 505193550
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1094947368
<NET-ASSETS> 7006846574
<DIVIDEND-INCOME> 148342810
<INTEREST-INCOME> 62606383
<OTHER-INCOME> 0
<EXPENSES-NET> 67124480
<NET-INVESTMENT-INCOME> 143824713
<REALIZED-GAINS-CURRENT> 536276781
<APPREC-INCREASE-CURRENT> (70834341)
<NET-CHANGE-FROM-OPS> 609267153
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (89841133)
<DISTRIBUTIONS-OF-GAINS> (391713252)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 79757433<F1>
<NUMBER-OF-SHARES-REDEEMED> (33772952)<F1>
<SHARES-REINVESTED> 25222610<F1>
<NET-CHANGE-IN-ASSETS> 1395286194
<ACCUMULATED-NII-PRIOR> 64446971
<ACCUMULATED-GAINS-PRIOR> 362128846
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 37081820
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 67124480
<AVERAGE-NET-ASSETS> 5987299114<F1>
<PER-SHARE-NAV-BEGIN> 18.95<F1>
<PER-SHARE-NII> .39<F1>
<PER-SHARE-GAIN-APPREC> 1.20<F1>
<PER-SHARE-DIVIDEND> (.29)<F1>
<PER-SHARE-DISTRIBUTIONS> (1.29)<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 18.96<F1>
<EXPENSE-RATIO> 1.12<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Effective May 1, 1995, the Fund offered two classes of shares: Class I and
Class II. Information is for Class I shares only.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
The schedule contains summary financial information extracted from the
Templeton Growth Fund, Inc. August 31, 1995 annual report and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000805664
<NAME> TEMPLETON GROWTH FUND, INC.
<SERIES>
<NUMBER> 002
<NAME> CLASS II
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 5894735755
<INVESTMENTS-AT-VALUE> 6989683123
<RECEIVABLES> 81965464
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 295605
<TOTAL-ASSETS> 7071944192
<PAYABLE-FOR-SECURITIES> 51732643
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 13364975
<TOTAL-LIABILITIES> 65097618
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5288575786
<SHARES-COMMON-STOCK> 2251399<F1>
<SHARES-COMMON-PRIOR> 0<F1>
<ACCUMULATED-NII-CURRENT> 118129870
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 505193550
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1094947368
<NET-ASSETS> 7006846574
<DIVIDEND-INCOME> 148342810
<INTEREST-INCOME> 62606383
<OTHER-INCOME> 0
<EXPENSES-NET> 67124480
<NET-INVESTMENT-INCOME> 143824713
<REALIZED-GAINS-CURRENT> 536276781
<APPREC-INCREASE-CURRENT> (70834341)
<NET-CHANGE-FROM-OPS> 609267153
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (89841133)
<DISTRIBUTIONS-OF-GAINS> (391713252)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2265948<F1>
<NUMBER-OF-SHARES-REDEEMED> (14549)<F1>
<SHARES-REINVESTED> 0<F1>
<NET-CHANGE-IN-ASSETS> 1395286194
<ACCUMULATED-NII-PRIOR> 64446971
<ACCUMULATED-GAINS-PRIOR> 362128846
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 37081820
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 67124480
<AVERAGE-NET-ASSETS> 17474576<F1>
<PER-SHARE-NAV-BEGIN> 17.48<F1>
<PER-SHARE-NII> .04<F1>
<PER-SHARE-GAIN-APPREC> 1.38<F1>
<PER-SHARE-DIVIDEND> 0<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 18.90<F1>
<EXPENSE-RATIO> 1.86<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Effective May 1, 1995, the Fund offered two classes of shares: Class I and
Class II. Information is for Class II shares only.
</FN>
</TABLE>
December 29, 1995
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Re: Templeton Growth Fund, Inc.
(File No. 33-9981 and 811-4892)
Dear Sirs:
On behalf of Templeton Growth Fund, Inc. (the "Fund") attached
hereto for electronic filing pursuant to the Securities Act of 1933
is Amendment No. 12 to the Fund's Registration Statement on Form N-
1A, with exhibits, marked to indicate changes from Post-Effective
Amendment No. 11. Also attached is the financial data schedule
required by Rule 483(e) under the 1933 Act.
This amendment is being filed pursuant to Rule 485(b) under the
1933 Act and will become effective on January 1, 1996. This Post-Effective
Amendment does not contain any disclosure that would render it ineligible to
become effective pursuant to Rule 485(b).
Pleas direct any comments or questions regarding this filing to me
at (813) 823-8712.
Sincerely,
/s/ John K. Carter
John K. Carter
