Registration No. 33-9981
As filed with the Securities and Exchange Commission on April 28,
1995
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
Pre-Effective Amendment No. _____ / /
Post-Effective Amendment No. 11 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 / X /
Amendment No. 13
(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
Jeffrey L. Steele, Esq. Thomas M. Mistele, Esq.
Dechert Price & Rhoads Templeton Global Investors, Inc.
1500 K Street, N.W. 500 East Broward Blvd.
Washington, D.C. 20005 Fort Lauderdale, FL 33394
(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 May 1, 1995 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)
on (date) pursuant to paragraph (a) of Rule 485
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
Registrant has elected to register an indefinite number of
Shares of its Common Stock, $1.00 par value per Share, pursuant
to Rule 24f-2 under the Investment Company Act of 1940.
Registrant filed its most recent Notice pursuant to Rule 24f-2 on
October 28, 1994.
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
17 Brokerage Allocation
18 Description of Shares; Part A
Item No. Caption
Part B
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 -- MAY 1, 1995
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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
Account 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--Alternative
Purchase Arrangements." The minimum initial investment is $100
($25 minimum for subsequent investments).
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PROSPECTUS This Prospectus sets forth concisely information about the
INFORMATION Fund that a prospective investor ought to know before
investing. Investors are advised to read and retain this
Prospectus for future reference. A Statement of Additional
Information ("SAI") dated May 1, 1995, 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 -- 1-800-292-9293
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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. 4
Repurchase Agreements. 5
Options on Indices.... 5
Stock Index Futures
Contracts............ 5
Loans of Portfolio
Securities........... 5
Depositary Receipts... 5
RISK FACTORS.......... 6
HOW TO BUY SHARES OF
THE FUND 7
Alternative Purchase
Arrangements......... 8
Deciding Which Class
to Purchase.......... 8
Offering Price........ 9
Class I............... 9
Cumulative Quantity
Discount............. 10
Letter of Intent...... 10
Group Purchases....... 10
Class II.............. 11
Net Asset Value
Purchases (Both
Classes)............. 11
Description of Special
Net Asset Value
Purchases............ 13
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Additional Dealer
Compensation (Both
Classes)............ 13
Purchasing Class I
and Class II Shares. 14
Automatic Investment
Plan................ 14
Institutional
Accounts............ 14
Account Statements... 14
Templeton STAR
Service............. 14
Retirement Plans..... 15
Net Asset Value...... 15
EXCHANGE PRIVILEGE... 15
Exchanges of Class I
Shares.............. 16
Exchanges of Class II
Shares.............. 16
Transfers............ 17
Conversion Rights.... 17
Exchanges by Timing
Accounts............ 17
HOW TO SELL SHARES OF
THE FUND 18
Reinstatement
Privilege........... 20
Systematic Withdrawal
Plan................ 20
Redemptions by
Telephone........... 21
Contingent Deferred
Sales Charges....... 21
TELEPHONE
TRANSACTIONS........ 22
Verification
Procedures.......... 22
Restricted Accounts.. 22
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
General.............. 22
MANAGEMENT OF THE
FUND................ 23
Investment Manager... 23
Business Manager..... 24
Transfer Agent....... 24
Custodian............ 24
Plans of
Distribution........ 24
Expenses............. 25
Brokerage
Commissions......... 25
GENERAL INFORMATION.. 25
Description of
Shares/Share
Certificates........ 25
Voting Rights........ 25
Meetings of
Shareholders........ 25
Dividends and
Distributions....... 25
Federal Tax
Information......... 26
Inquiries............ 26
Performance
Information......... 26
Statements and
Reports............. 27
WITHHOLDING
INFORMATION......... 28
CORPORATE RESOLUTION. 29
AUTHORIZATION
AGREEMENT........... 30
THE FRANKLIN
TEMPLETON GROUP..... 31
</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.
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>
- -------
/1/ Although Class II has a lower front-end sales charge than Class I, over time
the higher Rule 12b-1 fee 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.
/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%, which has
not been reflected in the Example below, is generally imposed on certain
redemptions within a "contingency period" of 12 months of the calendar month
following 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 following 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 1.00% 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. 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
</TABLE>
THIS EXAMPLE IS BASED ON THE ESTIMATED ANNUAL OPERATING EXPENSES, INCLUDING
FEES SET BY CONTRACT, SHOWN ABOVE AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES, WHICH MAY BE MORE OR LESS THAN
THOSE SHOWN. The operating expenses are borne by the Fund and only indirectly
by Shareholders as a result of their investment in the Fund. (See "Management
of the Fund" for a description of the Fund's expenses.) In addition, federal
securities regulations require the example to assume an annual return of 5%,
but the Fund's actual return may be more or less than 5%.
2
<PAGE>
FINANCIAL HIGHLIGHTS
The following statement of selected financial information has been audited
by McGladrey & Pullen, LLP, independent certified public accountants, for the
periods indicated in their report which is incorporated by reference and which
appears in the Fund's 1994 Annual Report to Shareholders. This statement
should be read in conjunction with the other financial statements and notes
thereto included in the Fund's 1994 Annual Report to Shareholders, which
contains further information about the Fund's performance, and which is
available to Shareholders upon request and without charge. Information
regarding Class II Shares will be included in this table after they have been
offered to the public for a reasonable period of time.
<TABLE>
<CAPTION>
PER SHARE
OPERATING YEAR ENDED AUGUST 31, EIGHT
PERFORMANCE ---------------------------------------------------------------------------------- MONTHS
(For a Share ENDED
outstanding AUGUST 31,
throughout the period) 1994 1993 1992 1991 1990 1989 1988 1987
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 17.47 $ 15.81 $ 16.14 $ 15.23 $ 16.62 $ 13.65 $ 17.13 $ 12.87
- --------------------------------------------------------------------------------------------------------------------------
Income from
investment
operations
Net investment
income 0.29 0.32 0.41 0.45 0.57 0.58 0.45 0.29
Net realized and
unrealized gain (loss) 2.58 2.97 0.92 1.68 (0.87) 3.12 (2.41) 3.97
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total from
investment
operations 2.87 3.29 1.33 2.13 (0.30) 3.70 (1.96) 4.26
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Less
distributions
Dividends from
net investment income (0.27) (0.36) (0.44) (0.54) (0.62) (0.48) (0.44) --
Distributions
from net
realized gains (1.12) (1.27) (1.22) (0.68) (0.47) (0.25) (1.08) --
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total
distributions (1.39) (1.63) (1.66) (1.22) (1.09) (0.73) (1.52) --
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Change in net
asset value
for the year 1.48 1.66 (0.33) 0.91 (1.39) 2.97 (3.48) 4.26
- --------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $ 18.95 $ 17.47 $ 15.81 $ 16.14 $ 15.23 $ 16.62 $ 13.65 $ 17.13
- --------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN++ 17.47% 23.57% 9.22% 15.95% (2.01)% 28.38% (9.86)% 33.10%
RATIOS/SUPPLEMENTAL
DATA
Net assets, end
of year (000) $5,611,560 $4,033,911 $3,268,644 $2,895,684 $2,466,684 $2,355,306 $1,572,112 $1,633,909
Ratio to average
net
assets of:
Expenses 1.10% 1.03% 0.88% 0.75% 0.67% 0.66% 0.69% 0.66%+
Net investment
income 1.76% 2.10% 2.62% 3.09% 3.70% 4.20% 3.50% 2.99%+
Portfolio
turnover rate 27.35% 28.89% 29.46% 30.28% 18.47% 11.55% 11.44% 17.55%
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
PRO FORMA*
-------------------------------------
PER SHARE
OPERATING EIGHT YEAR ENDED APRIL 30,
PERFORMANCE MONTHS -----------------------
(For a Share ENDED
outstanding DECEMBER 31,
throughout the period) 1986 1986 1985
- --------------------------------------------------------------
<S> <C> <C> <C>
Net asset value,
beginning of period $ 13.33 $ 10.14 $ 9.56
- --------------------------------------------------------------
Income from
investment
operations
Net investment
income 0.14 0.19 0.23
Net realized and
unrealized gain (loss) 0.28 3.72 0.83
------------- ----------- -----------
Total from
investment
operations 0.42 3.91 1.06
------------- ----------- -----------
Less
distributions
Dividends from
net investment income (0.40) (0.24) (0.19)
Distributions
from net
realized gains (0.48) (0.48) (0.29)
------------- ----------- -----------
Total
distributions (0.88) (0.72) (0.48)
------------- ----------- -----------
Change in net
asset value
for the year (0.46) 3.19 0.58
- --------------------------------------------------------------
Net asset value,
end of period $ 12.87 $ 13.33 $ 10.14
- --------------------------------------------------------------
TOTAL RETURN++ 3.32% 40.92% 11.89%
RATIOS/SUPPLEMENTAL
DATA
Net assets, end
of year (000) $1,132,570 $2,397,926 $1,402,265
Ratio to average
net
assets of:
Expenses 2.40%+ 2.50% 2.97%
Net investment
income 1.76%+ 2.11% 2.66%
Portfolio
turnover rate 9.50% 23.00% 20.41%
- --------------------------------------------------------------
</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.
++ Does not reflect sales charges.
3
<PAGE>
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 (the
"1940 Act") as an open-end, diversified management investment company.
The Fund has two classes of Common Shares 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 (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, plus a sales charge of 1.0% 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.
Although the Fund generally invests in common stock, it may also invest in
preferred stocks and certain debt securities, 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
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.
4
<PAGE>
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 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
"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
5
<PAGE>
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. 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.
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 pursue legal remedies and obtain judgments in
foreign courts. The Fund may encounter difficulties or be unable to vote
proxies, exercise shareholder rights, pursue legal remedies, and obtain
judgments in foreign courts. Commission rates in foreign countries, which are
sometimes fixed rather than subject to negotiation as in the United States,
are likely to be higher. Foreign securities markets also have different
clearance and settlement procedures, and in certain markets there have been
times when settlements have been unable to keep pace with the volume of
securities transactions, making it difficult to conduct such transactions.
Delays in settlement could result in temporary periods when assets of the Fund
are uninvested and no return is earned thereon. The inability of the Fund to
make intended security purchases due to settlement problems could cause the
Fund to miss attractive investment opportunities. Inability to dispose of
portfolio securities due to settlement problems could result either in losses
to the Fund due to subsequent declines in value of the portfolio security or,
if the Fund has entered into a contract to sell the security, could result in
6
<PAGE>
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.
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 (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.
The minimum initial investment is $100, and subsequent investments must be $25
or
7
<PAGE>
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."
ALTERNATIVE PURCHASE ARRANGEMENTS. The difference between Class I and Class
II Shares lies 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. Class I Shares are generally subject to
a variable sales charge upon purchase and not subject to any sales charge upon
redemption. Class I Shares are subject to Rule 12b-1 fees of up to an annual
maximum of 0.25% of average daily net assets of such Shares. With this
multiclass structure, Class I Shares have higher front-end sales charges than
Class II Shares and comparatively lower Rule 12b-1 fees. Class I Shares may be
purchased at reduced front-end sales charges, or at net asset value if certain
conditions are met. In most circumstances, contingent deferred sales charges
will not be assessed against redemptions of Class I Shares. See "Management of
the Fund" and "How to Sell Shares of the Fund" for more information.
Class II. The current public Offering Price of Class II Shares is equal to
the net asset value, plus a front-end sales charge of 1.0% of the amount
invested. Class II Shares are also subject to a contingent deferred sales
charge of 1.0% if Shares are redeemed within 18 months of the calendar month
following purchase. In addition, Class II Shares are subject to Rule 12b-1
fees of up to a maximum of 1.0% of average daily net assets of such Shares.
Class II Shares have lower front-end sales charges than Class I Shares and
comparatively higher Rule 12b-1 fees. See "How to Sell Shares of the Fund--
Contingent Deferred Sales Charge."
Purchases of Class II Shares are limited to purchases below $1 million. Any
purchases of $1 million or more will automatically be invested in Class I
Shares, since that is more beneficial to investors. Such purchases, however,
may be subject to a contingent deferred sales charge. Investors may exceed $1
million in Class II Shares by cumulative purchases over a period of time.
Investors who intend to make investments exceeding $1 million, however, should
consider purchasing Class I Shares through a Letter of Intent instead of
purchasing Class II Shares.
DECIDING WHICH CLASS TO PURCHASE. Investors should carefully evaluate their
anticipated investment amount and time horizon prior to determining which
class of Shares to purchase. Generally, an investor who expects to invest less
than $50,000 in the Franklin Templeton Funds and who expects to make
substantial redemptions within approximately six years or less of investment
should consider purchasing Class II Shares. However, the higher annual Rule
12b-1 fees on the Class II Shares will result in slightly higher operating
expenses and lower income dividends for Class II Shares, which will accumulate
over time to outweigh the difference in front-end sales charges. 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 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.
8
<PAGE>
In determining which Shares are more appropriate for a Shareholder's
investment objectives and income needs, a Shareholder should also consider
that the higher Rule 12b-1 fees for Class II will generally result in lower
dividends and consequently lower yields for Class II Shares as compared to
Class I Shares.
OFFERING PRICE. 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).
CLASS I. The sales charge for Class I Shares is a variable percentage of the
Offering Price depending upon the amount of the sale. A description of the
method of calculating net asset value per share is included under the caption
"Net Asset Value" below.
The price to the public on purchases of Class I Shares made by a single
purchaser, by an individual, his or her spouse and their children under the
age of 21, or by a single trust or fiduciary account other than an employee
benefit plan holding Shares of the Fund on or before February 1, 1995, is the
net asset value per Share plus a sales charge not exceeding 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 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 allowed, 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 on 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 following 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 (a) the mutual funds in the Franklin Group of
Funds except Franklin Valuemark Funds and Franklin Government Securities Trust
(the "Franklin Funds"); (b) 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 (c) the U.S.-
registered
9
<PAGE>
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 (a), (b) and
(c) 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.
A sales charge of 4% of the offering price (4.17% of the net asset value) is
applicable to all purchases of Shares made for any qualified or non-qualified
employee benefit plan which is a Shareholder in the Fund on or before February
1, 1995. Of the 4% sales charge applicable to such purchases, 3.20% of the
offering price will be retained by dealers.
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, and their children under age 21. In addition,
the aggregate investments of a trustee or other fiduciary account (for an
account under exclusive investment authority) may be considered in determining
whether a reduced sales charge is available, even though there may be a number
of beneficiaries of the account. For example, if the investor held 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. Investors may also reduce 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.
10
<PAGE>
A "qualified group" is one which (i) has been in existence for more than six
months, (ii) has a purpose other than acquiring Fund Shares at a discount, and
(iii) satisfies uniform criteria which enable FTD to realize economies of
scale in its costs of distributing Shares. A qualified group must have more
than 10 members, must be available to arrange for group meetings between
representatives of the Fund or FTD and the members, must agree to include
sales and other materials related to the Fund in its publications and mailings
to members at reduced or no cost to FTD, and must seek to arrange for payroll
deduction or other bulk transmission of investments to the Fund.
If an investor selects a payroll deduction plan, subsequent investments will
be automatic and will continue until such time as the investor notifies the
Fund and the investor's employer to discontinue further investments. Due to
the varying procedures to prepare, process and forward the payroll deduction
information to the Fund, there may be a delay between the time of the payroll
deduction and the time the money reaches the Fund. The investment in the Fund
will be made at the Offering Price per Share determined on the day that both
the check and payroll deduction data are received in required form by the
Fund.
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 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 1.0% 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 1.0% 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 of
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 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 by persons who have redeemed, within the previous
120 days, their Shares of the Fund or another of the Franklin Templeton Funds
which were purchased with a front-end sales charge or assessed a contingent
deferred sales charge on redemption. If a different class of Shares is
purchased, the full front-end sales charge must be paid at the time of
purchase of the new Shares. An investor may reinvest an amount not
11
<PAGE>
exceeding the redemption proceeds. While credit will be given for any
contingent deferred sales charge paid on the Shares redeemed and subsequently
repurchased, a new contingency period will begin. Shares of the Fund redeemed
in connection with an exchange into another fund (see "Exchange Privilege")
are not considered "redeemed" for this privilege. In order to exercise this
privilege, a written order for the purchase of Shares of the Fund must be
received by the Fund or the Fund's Transfer Agent within 120 days after the
redemption. The 120 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 amount of gain or loss recognized and the tax basis of the
Shares reinvested. If there has been a loss on the redemption, the loss may be
disallowed if a reinvestment in the same fund is made within a 30-day period.
Information regarding the possible tax consequences of such a reinvestment is
included under "General Information--Federal Tax Information" of this
Prospectus and in the SAI.
For either Class I or Class II, the same class of Shares of the Fund or of
another of the Franklin Templeton Funds may be purchased at net asset value
and without a contingent deferred sales charge by persons who have received
dividends and capital gain distributions in cash from investments in that
class of Shares of the Fund within 120 days of the payment date of such
distribution. To exercise this privilege, a written request to reinvest the
distribution must accompany the purchase order. Additional information may be
obtained from Account Services at 1-800-393-3001. See "General Information--
Dividends and Distributions."
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 and which charged the investor a contingent
deferred sales charge upon redemption, and which has investment objectives
similar to those of the Fund.
Class I Shares may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by broker-dealers who have
entered into a supplemental agreement with FTD, or by registered investment
advisers affiliated with such broker-dealers, on behalf of their clients who
are participating in a comprehensive fee program (also known as a wrap fee
program).
Class I Shares may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by anyone who has taken a
distribution from an existing retirement plan already invested in the Franklin
Templeton Funds (including former participants of the Franklin Templeton
Profit Sharing 401(k) plan), to the extent of such distribution. In order to
exercise this privilege, a written order for the purchase of Shares of the
Fund must be received by Franklin Templeton Trust Company ("FTTC"), the Fund
or Franklin Templeton Investor Services, Inc. (the "Transfer Agent") within
120 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.
12
<PAGE>
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.
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, and 1.00% 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 on or after February 1,
1995 of Class I Shares that are subject to a contingent deferred sales charge,
the dealer will receive ongoing payments beginning in the thirteenth month
after the date of the purchase. For all purchases of Class II Shares that are
subject to a contingent
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deferred sales charge, 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 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.
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.
AUTOMATIC INVESTMENT PLAN. Investors may accumulate Fund Shares regularly
each month by means of automatic debits to their checking accounts ($25
minimum). Forms for this purpose are in the Shareholder Application in this
Prospectus. Such a plan is voluntary and may be discontinued by written notice
to FTD, which must be received at least 10 days prior to the collection date,
or by FTD upon written notice to the investor at least 30 days prior to the
collection date.
INSTITUTIONAL ACCOUNTS. Institutional investors will likely be required to
complete an institutional account application. There may also be additional
methods of opening accounts, purchasing, redeeming or exchanging shares of the
Fund available for institutional accounts. To obtain an institutional account
application or additional information regarding institutional accounts,
contact Franklin Templeton Institutional Services at 1-800-321-8563.
ACCOUNT STATEMENTS. Shareholder accounts are opened in accordance with the
Shareholder's registration instructions. Transactions in the account, such as
additional investments and dividend reinvestments, will be reflected on
regular confirmation statements from the Transfer Agent.
TEMPLETON STAR SERVICE. 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, or
Franklin Class II shares; obtain account information; and request duplicate
confirmation or year-end statements and money fund checks, if applicable.
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By calling the Franklin TeleFACTS system, Class I Shareholders may obtain
current price, yield or other performance information specific to a Franklin
Fund; process an exchange into an identically registered 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 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. For further information about any of the
plans, agreements, applications and annual fees, contact Franklin Templeton
Distributors, Inc. To determine which retirement plan is appropriate, an
investor should contact his or her tax adviser.
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 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.
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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 or 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 Funds are
subject to applicable sales charges on the funds being purchased, unless the
Franklin Templeton Money Fund shares were acquired by an exchange from a fund
having a sales charge, or by reinvestment of dividends or capital 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 1-800-393-3001. Telephone exchange
instructions must be received by FTD by the scheduled closing time of the NYSE
(generally 4:00 p.m., New York time). Telephonic exchanges can involve only
Shares in non-certificated form. Shares held in certificate form are not
eligible, but may be returned and qualify for these services. All accounts
involved in a telephonic exchange must have the same registration and dividend
option as the account from which the Shares are being exchanged. The Fund and
the Transfer Agent will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. Please refer to "Telephone
Transactions -- Verification Procedures." Forms for declining the telephone
exchange privilege and prospectuses of the other funds in the Franklin
Templeton Group may be obtained from FTD. Exchange redemptions and purchases
are processed simultaneously at the share prices next determined after the
exchange order is received. (See "How to Buy Shares of the Fund -- Offering
Price.") A gain or loss for tax purposes generally will be realized upon the
exchange, depending on the tax basis of the Shares redeemed.
This exchange privilege is available only in states where shares of the fund
being acquired may legally be sold and may be modified, limited or terminated
at any time by the Fund upon 60 days' written notice. A Shareholder who wishes
to make an exchange should first obtain and review a current prospectus of the
fund into which he or she wishes to exchange. Broker-dealers who process
exchange orders on behalf of their customers may charge a fee for their
services. Such fee may be avoided by making requests for exchange directly to
the Transfer Agent.
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 or Templeton 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
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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.
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 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. Like exchanges, Class II Shares will be moved
proportionately from each type of Share in the original account.
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 objectives and policies, or would otherwise
potentially be adversely affected. A Shareholder's exchanges into the Fund may
be restricted or refused
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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 (1) national or state banks, savings
associations, savings and loan associations, trust companies, savings banks,
industrial loan companies and credit unions; (2) national securities
exchanges, registered securities associations and clearing agencies; (3)
securities broker-dealers which are members of a national securities exchange
or a clearing agency or which have minimum net capital of $100,000; or (4)
institutions that participate in the Securities Transfer Agent Medallion
Program ("STAMP") or other recognized signature medallion program. A notarized
signature will not be sufficient for the request to be in Proper Order. If the
Shares are registered in more than one name, the signature of each of the
redeeming Shareholders must be guaranteed. A signature guarantee is not
required for redemptions of $50,000 or less, requested by and payable to all
Shareholders of record, to be sent to the address of record for that account.
However, the Fund reserves the right to require signature guarantees on all
redemptions. A signature guarantee is required in connection with any written
request for transfer of Shares. Also, a signature guarantee is required if the
Fund or the Transfer Agent believes that a signature guarantee would protect
against potential claims based on the transfer instructions, including, for
example, when (a) the current address of one or more joint owners of an
account cannot be confirmed; (b) multiple owners have a dispute or give
inconsistent instructions to the Fund; (c) the Fund has been notified of an
adverse claim; (d) the instructions received by the Fund are given by an
agent, not the actual registered owner; (e) the Fund determines that joint
owners who are married to each other are separated or may be the subject of
divorce proceedings; or (f) the authority of a representative of a
corporation, partnership, association, or other entity has not been
established to the satisfaction of the Fund;
3. Any outstanding certificates must accompany the request together with a
stock power signed by the Shareholder(s), with signature(s) guaranteed as
described in Item 2 above;
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;
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. 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 Account Services Department by
calling 1-800-393-3001 or 813-823-8712.
The redemption price will be the net asset value of the Shares next computed
after the redemption request in Proper Order is received by the Transfer
Agent. Payment of the redemption price ordinarily will be made by check (or by
wire at the sole discretion of the Transfer Agent if wire transfer is
requested including name and address of the bank and the Shareholder's account
number to which payment of the redemption proceeds is to be wired) within
seven days after receipt of the redemption request in Proper Order. However,
if Shares have been purchased by check, the Fund will make redemption proceeds
available when a Shareholder's check received for the Shares purchased has
been cleared for payment by the Shareholder's bank, which, depending upon the
location of the Shareholder's bank, could take up to 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, provided that involuntary redemptions
will not result from fluctuations in the value of an investor's Shares. In
addition, the Fund may involuntarily redeem the Shares of any investor who has
failed to provide the Fund with a certified taxpayer identification number or
such other tax-related certifications as the Fund may require. A notice of
redemption sent by first-class mail to the investor's address of record will
fix a date not less than 30 days after the mailing date, and Shares will be
redeemed at net asset value at the close of business on that date, unless
sufficient additional Shares are purchased to bring the aggregate account
value up to $100 or more, or unless a certified taxpayer identification number
(or such other information as the Fund has requested) has been provided, as
the case may be. A check for the redemption proceeds will be mailed to the
investor at the address of record.
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REINSTATEMENT PRIVILEGE. Shares of the Fund may be purchased at net asset
value with the proceeds from (i) a redemption of Shares of any fund in the
Franklin Templeton Group (except Templeton Capital Accumulator Fund, Inc.,
Templeton Variable Annuity Fund, Templeton Variable Products Series Fund,
Franklin Valuemark Funds and Franklin Government Securities Trust) which were
purchased with an initial sales charge or assessed a contingent deferred sales
charge on redemption, or (ii) a dividend or distribution paid by any fund in
the Franklin Templeton Group, within 120 days after the date of the redemption
or dividend or distribution. 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. While credit will be given for any
contingent deferred sales charge paid on the Shares redeemed, a new
contingency period will begin. Shares of the Fund redeemed in connection with
an exchange into another fund (see "Exchange Privilege") are not considered
"redeemed" for this privilege. In order to exercise this privilege, a written
order for the purchase of Shares of the Fund must be received by the Fund or
the Fund's Transfer Agent within 120 days after the redemption. The 120 days,
however, do not begin to run on redemption proceeds placed immediately after
redemption in a CD until the CD (including any rollover) matures. 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. 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.
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A Plan may be terminated on written notice by the Shareholder or the Fund,
and it will terminate automatically if all Shares are liquidated or withdrawn
from the account, or upon the Fund's receipt of notification of the death or
incapacity of the Shareholder. Shareholders may change the amount (but not
below $50) and schedule of withdrawal payments or suspend one such payment by
giving written notice to the Transfer Agent at least seven business days prior
to the end of the month preceding a scheduled payment. Share certificates may
not be issued while a Plan is in effect.
REDEMPTIONS BY TELEPHONE. Shareholders who file a Telephone Redemption
Authorization Agreement (the "Agreement") (a copy of which is included in this
Prospectus) may redeem Shares of the Fund by telephone, subject to the
Restricted Account exception noted under "Telephone Transactions -- Restricted
Accounts." The Fund and the Transfer Agent will employ reasonable procedures
to confirm that instructions given by telephone are genuine. Shareholders,
however, bear the risk of loss in certain cases as described under "Telephone
Transactions -- Verification Procedures."
For Shareholder accounts with a completed Agreement on file, redemptions of
uncertificated Shares or Shares which have previously been deposited with the
Fund or the Transfer Agent may be made for up to $50,000 per day per Fund
account. Telephone redemption requests received before 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. Class I. In order to recover commissions
paid to securities dealers on investments of $1 million or more, a contingent
deferred sales charge of 1% applies to redemptions of those investments within
the contingency period of 12 months following the calendar month of their
purchase. 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 of such Shares at the time of purchase, and is retained by
FTD. The contingent deferred sales charge is waived in certain instances. See
"How to Buy Shares of the Fund -- Net Asset Value Purchases (Both Classes)."
Class II. Class II Shares redeemed within the contingency period of 18
months of the calendar month following 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.
Class I and Class II. 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) 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 to participants or
beneficiaries in FTTC individual retirement plan accounts due to death,
disability or attainment of age 59 1/2; 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
21
<PAGE>
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.
All investments made during a calendar month, regardless of when during the
month the investment occurred, will age one month on the last day of that
month and each subsequent month.
Requests for redemptions for a SPECIFIED DOLLAR amount, unless otherwise
specified, will result in additional Shares being redeemed to cover any
applicable contingent deferred sales charge, while requests for redemption of
a SPECIFIC NUMBER of Shares will result in the applicable contingent deferred
sales charge being deducted from the total dollar amount redeemed.
TELEPHONE TRANSACTIONS
Shareholders of the Fund and their dealer of record, if any, may be able to
execute various transactions by calling the Transfer Agent at 1-800-393-3001.
All Shareholders will be able to: (i) effect a change in address, (ii) change
a dividend option (see "Restricted Accounts" below), (iii) transfer Fund
Shares in one account to another identically registered account in the Fund,
and (iv) exchange Fund Shares by telephone as described in this Prospectus. In
addition, Shareholders who complete and file an Agreement as described under
"How to Sell Shares of the Fund -- Redemptions by Telephone" will be able to
redeem Shares of the Fund.
VERIFICATION PROCEDURES. The Fund and the Transfer Agent will employ
reasonable procedures to confirm that instructions communicated by telephone
are genuine. These will include: recording all telephone calls requesting
account activity by telephone, requiring that the caller provide certain
personal and/or account information requested by the telephone service agent
at the time of the call for the purpose of establishing the caller's
identification, and sending a confirmation statement on redemptions to the
address of record each time account activity is initiated by telephone. So
long as the Fund and the Transfer Agent follow instructions communicated by
telephone which were reasonably believed to be genuine at the time of their
receipt, neither they nor their affiliates will be liable for any loss to the
Shareholder caused by an unauthorized transaction. 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 FTTC retirement accounts. To assure compliance with all
applicable regulations, special forms are required for any distribution,
redemption, or dividend payment. Although the telephone exchange privilege is
extended to these retirement accounts, a Franklin Templeton Transfer
Authorization Form must be on file in order to transfer retirement plan assets
between the Franklin Group of Funds (R) and the Templeton Family of Funds
within the same plan type. Changes to dividend options for these accounts must
also be made in writing.
To obtain further information regarding distribution or transfer procedures,
including any required forms, FTTC retirement account shareholders may call
toll-free 1-800-527-2020 or 1-800-354-9191 (press "2").
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.
22
<PAGE>
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 multi class structure to ensure that no
material conflict exists between the two classes of Shares. Although the Board
does not expect to encounter material conflicts in the future, the Board will
continue to monitor the Fund and will take appropriate action to resolve such
conflicts if any should later arise.
In developing the multi class 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,
Galbraith & Hansberger Ltd., 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 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.
Currently, the lead portfolio manager for the Fund is Mark G. Holowesko. Mr.
Holowesko 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 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 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
23
<PAGE>
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.
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 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, 1994.
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 after the purchase of Class II Shares, FTD will keep a
portion of the Plan fees assessed on Class II Shares 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
24
<PAGE>
in the sale of Shares issued by the Fund within the context of Rule 12b-1. The
payments under the Plans are included in the maximum operating expenses which
may be borne by each class of the Fund. For more information including a
discussion of the Board's policies with regard to the amount of each Plan's
fees, please see the SAI.
EXPENSES. For the fiscal year ended August 31, 1994, expenses borne by Class
I Shares of the Fund amounted to 1.10% of the Fund's average net assets of
such Class.
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 600,000,000 Common Shares of $0.01 par value per Share. Each Share
entitles the holder to one vote and to participate equally in dividends,
distributions of capital and net assets of the Fund on liquidation.
The Fund will not ordinarily issue certificates for Shares purchased. Share
certificates representing whole (not fractional) Shares are issued only upon
the specific request of the Shareholder made in writing to the Transfer Agent.
No charge is made for the issuance of one certificate for all or some of the
Shares purchased in a single order.
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 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 payable 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. Dividend and capital gain
distributions are only
25
<PAGE>
eligible for reinvestment at net asset value in the same class of Shares of
the Fund or the same class of another of the Franklin Templeton Funds. The
processing date for the reinvestment of dividends may vary from month to
month, and does not affect the amount or value of the Shares acquired. Income
dividends and capital gain distributions will be paid in cash on Shares during
the time 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 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. 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 1-800-393-3001 or 813-823-8712.
Transcripts of Shareholder accounts less than three years old are provided on
request without charge; requests for transcripts going back more than three
years from the date the request is received by the Transfer Agent are subject
to a fee of up to $15 per account.
PERFORMANCE INFORMATION. The Fund may include its total return in
advertisements or reports to Shareholders or prospective investors. Quotations
of average annual total return will be expressed in terms of the average
annual compounded rate of return on a hypothetical investment in the Fund over
a period of 1, 5 and 10 years (or up to the life of the Fund), will reflect
the deduction of the maximum initial sales charge and deduction of a
proportional share of Fund expenses (on an annual basis), and will assume that
all dividends and distributions are reinvested when paid. Total return may be
expressed in terms of the cumulative value of an investment in the Fund at the
end of a defined period of time. For a description of the methods used to
determine total return for the Fund, see the SAI.
26
<PAGE>
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. Additional copies may be obtained, without charge, upon request to
the Account Services Department. The Fund also sends to each Shareholder a
confirmation statement after every transaction that affects the Shareholder's
account and a year-end historical confirmation statement.
27
<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 common trust fund operated by a bank
A financial institution under section 584(a)
An entity registered at all times
An organization exempt from tax under the Investment Company
under section 501(a), or an Act of 1940
individual retirement plan
A registered dealer in securities or
commodities registered in the U.S.
or a U.S. possession
IRS PENALTIES. If you do not supply us with your SSN/TIN, you will be subject
to an IRS $50 penalty unless your failure is due to reasonable cause and not
willful neglect. If you fail to report certain income on your Federal income
tax return, you will be treated as negligent and subject to an IRS 20% penalty
on any underpayment of tax attributable to such negligence, unless there was
reasonable cause for the resulting underpayment and you acted in good faith.
If you falsify information on this form or make any other false statement
resulting in no backup withholding on an account which should be subject to
backup withholding, you may be subject to an IRS $500 penalty and certain
criminal penalties including fines and imprisonment.
SUBSTITUTE W-8 INSTRUCTIONS INFORMATION
EXEMPT FOREIGN PERSON. Check the "Exempt Foreign Person" box if you qualify as
a non-resident alien or foreign entity that is not subject to certain U.S.
information return reporting or to backup withholding rules. Dividends paid to
your account may be subject to withholding of up to 30%. Generally, you are an
"Exempt Foreign Person" if you are not (1) a citizen or resident of the U.S.,
or (2) a U.S. corporation, partnership, estate, or trust. In the case of an
individual, an "Exempt Foreign Person" is one who has been physically present
in the U.S. for less than 31 days during the current calendar year. An
individual who is physically present in the U.S. for at least 31 days during
the current calendar year will still be treated as an "Exempt Foreign Person,"
provided that the total number of days physically present in the current
calendar year and the two preceding calendar years does not equal or exceed
183 days (counting all of the days in the current calendar year, only one-
third of the days in the first preceding calendar year and only one-sixth of
the days in the second preceding calendar year). In addition, lawful permanent
residents or green card holders may not be treated as "Exempt Foreign
Persons." If you are an individual or an entity, you must not now be, or at
this time expect to be, engaged in a U.S. trade or business with respect to
which any gain derived from transactions effected by the Fund/Payer during the
calendar year is effectively connected to the U.S.
PERMANENT ADDRESS. The Shareholder Application must contain your permanent
address if you are an "Exempt Foreign Person." If you are an individual,
provide your permanent address. If you are a partnership or corporation,
provide the address of your principal office. If you are an estate or trust,
provide the address of your permanent residence or the principal office of any
fiduciary.
NOTICE OF CHANGE IN STATUS. If you become a U.S. citizen or resident after you
have provided certification of your foreign status, or if you cease to be an
"Exempt Foreign Person," you must notify the Fund/Payer within 30 days of your
change in status. Reporting will then begin on the account(s) listed, and
backup withholding may also begin unless you certify to the Fund/Payer that
(1) the tax payer identification number you have given is correct, and (2) the
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.
1/94
28
<PAGE>
FOR CORPORATE SHAREHOLDERS--FORM OF RESOLUTION
It will be necessary for corporate shareholders to provide a certified copy of
a resolution or other certificate of authority to authorize the purchase as
well as sale (redemption) of shares and withdrawals by checks or drafts. You
may use the following form of resolution or you may prefer to use your own. It
is understood that the Fund, Franklin Templeton Distributors, Inc., Franklin
Templeton Investor Services, Inc., the custodian bank and their affiliates may
rely upon these authorizations until revoked or amended by written notice
delivered by registered or certified mail to the Fund.
CERTIFIED COPY OF RESOLUTION (Corporation or Association)
The undersigned hereby certifies and affirms that he/she is the duly
elected ______________________________ of ____________________________________
TITLE CORPORATE NAME
a ____________________________ organized under the laws of the State of _______
TYPE OF ORGANIZATION STATE
and that the following is a true and correct copy of a resolution adopted by
the Board of Directors at a meeting duly called and held on ___________________
DATE
RESOLVED, that the _________________________________________________ of this
OFFICERS' TITLES
Corporation or Association are authorized to open an account in the name of
the Corporation or Association with one or more of the Franklin Group of
Funds or Templeton Family of Funds (collectively, the "Funds") and to
deposit such funds of this Corporation or Association in this account as
they deem necessary or desirable; that the persons authorized below may
endorse checks and other instruments for deposit to said account or
accounts; and
FURTHER RESOLVED, that any of the following __________________ officers are
NUMBER
authorized to sign any share assignment on behalf of this Corporation or
Association and to take any other actions as may be necessary to sell or
redeem its shares in the Funds or to sign checks or drafts withdrawing funds
from the account; and
FURTHER RESOLVED, that this Corporation or Association shall hold harmless,
indemnify, and defend the Funds, their custodian bank, Franklin Templeton
Distributors, Inc., Franklin Templeton Investor Services, Inc., and their
affiliates, from any claim, loss or liability resulting in whole or in
part, directly or indirectly, from their reliance from time to time upon
any certifications by the secretary or any assistant secretary of this
Corporation or Association as to the names of the individuals occupying
such offices and their acting in reliance upon these resolutions until
actual receipt by them of a certified copy of a resolution of the Board of
Directors of the Corporation or Association modifying or revoking any or
all such resolutions.
The undersigned further certifies that the below named persons, whose
signatures appear opposite their names and office titles, are duly elected
officers of the Corporation or Association. (Attach additional list if
necessary.)
- -------------------------------------- ---------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- ---------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- ---------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- ---------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- ---------------------------------------
NAME OF CORPORATION OR ASSOCIATION DATE
Certified from minutes ________________________________________________________
NAME AND TITLE
CORPORATE SEAL (if appropriate)
29
<PAGE>
THE FRANKLIN TEMPLETON TELEPHONE REDEMPTION AUTHORIZATION AGREEMENT
You may use Franklin Templeton's telephone redemption privilege to redeem
uncertificated Franklin Templeton Fund shares for up to $50,000 (or your
Shareholder account balance, whichever is less) per day, per fund account in
accordance with the terms of the Fund's Prospectus.
The telephone redemption privilege is available only to Shareholders who
specifically request it. If you would like to add this redemption privilege to
the other telephone transaction privileges automatically available to Franklin
Templeton Fund shareholders, please sign and return this authorization to
Franklin Templeton Investor Services, Inc. ("Services"), transfer agent and
shareholder servicing agent for the Franklin Templeton Funds.
SHAREHOLDER AUTHORIZATION: I/We request the telephone redemption privilege
under the terms described below and in the prospectus for each investment
company in the Franklin Templeton Group (a "Franklin Templeton Fund" or a
"Fund"), now opened or opened at a later date, holding shares registered as
follows:
- ------------------------------------- ---------------------------------------
PRINT NAME(S) AS SHOWN IN YOUR ACCOUNT REGISTRATION ("SHAREHOLDER")
- ------------------------------------- ---------------------------------------
ACCOUNT NUMBER(S)
I/We authorize each Fund and Services to honor and act upon telephone requests
given as provided in this agreement to redeem shares from any
Shareholder account:
- ------------------------------------- ---------------------------------------
SIGNATURE(S) AND DATE
- ------------------------------------- ---------------------------------------
PRINT NAME(S) (AND TITLE/CAPACITY, IF APPLICABLE)
VERIFICATION PROCEDURES: I/We understand and agree that: (1) each Fund and
Services will employ reasonable procedures to confirm that redemption
instructions communicated by telephone are genuine and that if these
confirmation procedures are not followed, the Fund or Services may be liable
for any losses due to unauthorized or fraudulent telephone instructions; (2)
the confirmation procedures will include the recording of telephone calls
requesting redemptions, requiring that the caller provide certain personal
and/or account information requested by the telephone service agent at the
time of the call for the purpose of establishing the caller's identification,
and the sending of confirmation statements to the address of record each time
a redemption is initiated by telephone; and (3) so long as the Fund and
Services follow the confirmation procedures in acting on instructions
communicated by telephone which were reasonably believed to be genuine at the
time of receipt, neither they, nor their parent or affiliates, will be liable
for any loss, damages or expenses caused by an unauthorized or fraudulent
redemption request.
JOINTLY OWNED/CO-TRUSTEE ACCOUNTS: Each of us signing this agreement as either
joint owners or co-trustees authorizes each Fund and Services to honor
telephone redemption requests given by ANY ONE of the signers, or our
investment representative of record, if any, ACTING ALONE.
APPOINTMENT OF ATTORNEY-IN-FACT: In order to issue telephone redemption
requests acting alone, each of us individually makes the following
appointment: I hereby appoint the other joint owner(s)/co-trustee(s) as my
agent(s) (attorney[s]-in-fact) with full power and authority to individually
act for me in any lawful way with respect to the issuance of instructions to a
Fund or Services in accordance with the telephone redemption privilege we have
requested by signing this agreement. This appointment shall not be affected by
my subsequent disability or incompetency and shall remain in effect until it
is revoked by either written notice from any one of us delivered to a Fund or
Services by registered mail, return receipt requested or by a Fund or Services
upon receipt of any information that causes a Fund or Services to believe in
good faith that there is or that there may be a dispute among any of us with
respect to the Franklin Templeton Fund account(s) covered by this agreement.
Each of us agrees to notify the Fund or Services immediately upon the death of
any of the signers.
CORPORATE/PARTNERSHIP/TRUST/RETIREMENT ACCOUNTS: The Shareholder and each of
us signing this agreement on behalf of the Shareholder represent and warrant
to each Franklin Templeton Fund and Services that the Shareholder has the
authority to enter into this agreement and that each of us is duly authorized
to execute this agreement on behalf of the Shareholder. The Shareholder agrees
that its election of the telephone redemption privilege means that a Fund or
Services may honor a telephone redemption request given by ANY
officer/partner/member/administrator/or agent of the Shareholder ACTING ALONE.
RESTRICTED ACCOUNTS: Telephone redemptions may not be accepted on Franklin
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.
30
<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.
TEMPLETON FUNDS
American Trust
American Government Securities Fund
Developing Markets Trust
Foreign Fund
Global Infrastructure Fund
Global Opportunities Trust
Global Rising Dividends Fund
Growth Fund
Income Fund
Japan Fund
Money Fund
Real Estate Securities Fund
Smaller Companies Growth Fund
World Fund
FRANKLIN FUNDS
SEEKING TAX-FREE INCOME
Federal Intermediate Term
Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund***
Puerto Rico Tax-Free Income Fund
FRANKLIN STATE-SPECIFIC FUNDS
SEEKING TAX-FREE INCOME
Alabama
Arizona*
Arkansas**
California*
Colorado
Connecticut
Florida*
Georgia
Hawaii**
Indiana
Kentucky
Louisiana
Maryland
Massachusetts***
Michigan***
Minnesota***
Missouri
New Jersey
New York*
North Carolina
Ohio***
Oregon
Pennsylvania
Tennessee**
Texas
Virginia
Washington**
FRANKLIN FUNDS
SEEKING CAPITAL GROWTH
California Growth Fund
DynaTech Fund
Equity Fund
Global Health Care Fund
Gold Fund
Growth Fund
International Equity Fund
Pacific Growth Fund
Real Estate Securities Fund
Small Cap Growth Fund
FRANKLIN FUNDS SEEKING
GROWTH AND INCOME
Balance Sheet Investment Fund
Convertible Securities Fund
Equity Income Fund
Global Utilities Fund
Income Fund
Premier Return Fund
Rising Dividends Fund
Strategic Income Fund
Utilities Fund
FRANKLIN FUNDS SEEKING
HIGH CURRENT INCOME
AGE High Income Fund
German Government Bond Fund
Global Government Income Fund
Investment Grade Income Fund
U.S. Government Securities Fund
FRANKLIN FUNDS SEEKING HIGH CURRENT
INCOME AND STABILITY OF PRINCIPAL
Adjustable Rate Securities Fund
Adjustable U.S. Government Securities Fund
Short-Intermediate U.S. Government Securities Fund
FRANKLIN FUNDS FOR NON-U.S. INVESTORS
Tax-Advantaged High Yield Securities Fund
Tax-Advantaged International Bond Fund
Tax-Advantaged U.S. Government Securities Fund
FRANKLIN TEMPLETON INTERNATIONAL
CURRENCY FUNDS
Global Currency Fund
Hard Currency Fund
High Income Currency Fund
FRANKLIN MONEY MARKET FUNDS
California Tax-Exempt Money Fund
Federal Money Fund
IFT U.S. Treasury Money Market Portfolio
Money Fund
New York Tax-Exempt Money Fund
Tax-Exempt Money Fund
FRANKLIN FUND FOR CORPORATIONS
Corporate Qualified Dividend Fund
FRANKLIN TEMPLETON VARIABLE ANNUITIES
Franklin Valuemark
Franklin Templeton Valuemark Income
Plus (an intermediate annuity)
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.
31
<PAGE>
- -----------------------
TEMPLETON GROWTH
FUND, INC.
PRINCIPAL UNDERWRITER:
Franklin Templeton
Distributors, Inc.
700 Central Avenue
St. Petersburg,
Florida 33701-3628
Account Services
1-800-393-3001
Fund Information
1-800-292-9293
Institutional Service
1-800-321-8563
This Prospectus is not
an offering of the
securities herein
described in any state
in which the offering
is not authorized. No
sales representative,
dealer, or other person
is authorized to give
any information or make
any representations
other than those
contained in this
Prospectus. Further
information may be
obtained from the
Principal Underwriter.
- -----------------------
[RECYCLED LOGO APPEARS HERE]
TL01 P95 05/95
TEMPLETON
GROWTH
FUND, INC.
Prospectus
May 1, 1995
[LOGO OF FRANKLIN TEMPLETON APPEARS HERE]
<PAGE>
[LOGO OF FRANKLIN TEMPLETON APPEARS HERE]
Mail to: FRANKLIN TEMPLETON DISTRIBUTORS, INC.
P.O. Box 33031 St. Petersburg, Florida 33733-8031 (800) 393-3001
Please do not use this form for any Retirement Plan for which Franklin Templeton
Trust Company or its affiliate serves as custodian or trustee, or for any of the
following Templeton Funds: Templeton Money Fund, Templeton Institutional Funds
or Templeton Capital Accumulator Fund. Please request separate Applications
and/or Prospectuses.
- --------------------------------------------------------------------------------
SHAREHOLDER APPLICATION OR REVISION
[_] Please check the box if this is a revision and see Section 8
- --------------------------------------------------------------------------------
Please check Class I or Class II, if applicable, next to your Fund selection.
Class I and Class II shares have different sales charges and operating expenses,
among other differences, as described in each Fund's prospectus.
Date __________________
<TABLE>
<CAPTION>
CLASS CLASS
I II I II
<S> <C> <C> <C>
[_] [_] AMERICAN TRUST $______ [_] [_] GLOBAL INFRASTRUCTURE FUND $______
[_] AMERICAS GOVERNMENT SECURITIES FUND ______ [_] [_] GLOBAL OPPORTUNITIES TRUST ______
[_] [_] DEVELOPING MARKETS TRUST ______ [_] [_] GLOBAL RISING DIVIDENDS FUND ______
[_] [_] FOREIGN FUND ______ [_] [_] GROWTH FUND ______
<CAPTION>
CLASS CLASS
I II I II
<S> <C> <C> <C>
[_] [_] INCOME FUND $______ [_] [_] WORLD FUND $______
[_] JAPAN FUND ______ [_] [_] OTHER: ______
[_] [_] REAL ESTATE SECURITIES FUND ______ ____________________
[_] [_] SMALLER COMPANIES GROWTH 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. [_]______________________________
Country of Residence
- --------------------------------------------------------------------------------
3 INITIAL INVESTMENT ($100 minimum initial investment)
- --------------------------------------------------------------------------------
Check(s) enclosed for $___________________ . (Payable to Franklin Templeton
Distributors, Inc. or the Fund(s)
indicated above.)
- --------------------------------------------------------------------------------
4 SIGNATURE AND TAX CERTIFICATIONS
(All registered owners must sign application)
- --------------------------------------------------------------------------------
The Fund reserves the right to refuse to open an account without either a
certified Taxpayer Identification Number ("TIN") or a certification of foreign
status. Failure to provide tax certifications in this section may result in
backup withholding on payments relating to your account and/or in your inability
to qualify for treaty withholding rates.
I am(We are) not subject to backup withholding because I(we) have not been
notified by the IRS that I am(we are) subject to backup withholding as a result
of a failure to report all interest or dividends or because the IRS has notified
me(us) that I am(we are) no longer subject to backup withholding. (If you are
currently subject to backup withholding as a result of a failure to report all
interest or dividends, please cross out the preceding statement.)
[_] The number shown above is my(our) correct TIN, or that of the Minor named in
Section 1.
[_] AWAITING TIN. I am(We are) waiting for a number to be issued to me(us).
I(We) understand that if I(we) do not provide a TIN to the Fund within 60
days, the Fund is required to commence 31% backup withholding until I(we)
provide a certified TIN.
[_] EXEMPT RECIPIENT. Individuals cannot be exempt. Check this box only after
reading the instructions to see whether you qualify as an exempt recipient.
(You should still provide a TIN.)
[_] EXEMPT FOREIGN PERSON. Check this box only if the following statement
applies: "I am(we are) neither a citizen nor a resident of the United
States. I(we) certify to the best of my(our) knowledge and belief, I(we)
qualify as an exempt foreign person and/or entity as described in the
instructions."
Permanent address for tax purposes:
________________________________________________________________________________
Street Address City State Country Personal Code
PLEASE NOTE: The IRS only allows one TIN to be listed on an account. On joint
accounts, it is preferred that the primary account owner (or person listed first
on the account) list his/her number as requested above.
CERTIFICATION - Under the penalties of perjury, I(we) certify that (1) the
information provided on this application is true, correct and complete, (2)
I(we) have read the prospectus(es) for the Fund(s) in which I am(we are)
investing and agree to the terms thereof, and (3) I am(we are) of legal age or
an emancipated minor. I (we) acknowledge that Shares of the Fund(s) are not
insured or guaranteed by any agency or institution and that an investment in the
Shares involves risks, including the possible loss of principal.
X X
- ---------------------------------------- ---------------------------------------
Signature Signature
X X
- ---------------------------------------- ---------------------------------------
Signature Signature
Please make a photocopy of this application for your records.
- --------------------------------------------------------------------------------
5 BROKER/DEALER USE ONLY (PLEASE PRINT)
- --------------------------------------------------------------------------------
-----------------------
We hereby submit this application for the purchase of 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)
[_] Pay Distributions, as noted in Section 6, to another Franklin or Templeton
Fund.
Fund Name______________________ Existing Account Number___________________
[_] Send my Distributions to the person, named below, instead of as registered
in Section 1.
Name___________________________ Street Address____________________________
City___________________________ State____________________Zip Code_________
- --------------------------------------------------------------------------------
B. SYSTEMATIC WITHDRAWAL PLAN
Please withdraw from my Franklin Templeton account $_____($50 minimum)
[_]Monthly [_]Quarterly [_]Semi-Annually or [_]Annually as set forth in the
Prospectus, starting in ______________(Month). 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
proceeds to: [_]Address of Record OR [_]the Franklin Templeton Fund or person
specified in Section 7(A) - Special Payment Instructions for Distributions.
- --------------------------------------------------------------------------------
C. TELEPHONE TRANSACTIONS
TELEPHONE EXCHANGE PRIVILEGE: If the Fund does not receive specific
instructions from the shareholder, either in writing or by telephone, the
Telephone Exchange Privilege (see the prospectus) is automatically extended
to each account. The shareholder should understand, however, that the Fund
and Franklin Templeton Investor Services, Inc. ("FTI") or Templeton Funds
Trust Company and their agents will not be liable for any loss, injury,
damage or expense as a result of acting upon instructions communicated by
telephone reasonably believed to be genuine. The shareholder agrees to hold
the Fund and its agents harmless from any loss, claims, or liability arising
from its or their compliance with such instructions. The shareholder
understands that this option is subject to the terms and conditions set forth
in the prospectus of the fund to be acquired.
[_]No, I do NOT wish to participate in the Telephone Exchange Privilege or
authorize the Fund or its agents, including FTI or Templeton Funds Trust
Company, to act upon instructions received by telephone to exchange shares
for shares of any other account(s) within the Franklin Templeton Group of
Funds.
Telephone Redemption Privilege: This is available to shareholders who
specifically request it and who complete the Franklin Templeton Telephone
Redemption Authorization Agreement in the back of the Fund's prospectus.
- --------------------------------------------------------------------------------
D. AUTOMATIC INVESTMENT PLAN
IMPORTANT: ATTACH AN 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(our) bank account monthly for $__________($25 minimum) on or about
the [_]1st [_]5th [_]15th or [_]20th day starting_______(month), to be
invested in (name of Fund)___________________Account Number (if known)_______
- --------------------------------------------------------------------------------
E. INSTRUCTIONS TO BANK - AUTOMATIC INVESTMENT PLAN AUTHORIZATION
To:__________________________________ ______________________________________
Name of Your Bank ABA Number
___________________________ _________________ ____________ ______________
Street Address City State Zip Code
I(We) authorize you to charge my(our) Checking/Savings Account and to make
payment to FTD, upon instructions from FTD. I(We) agree that in making payment
for such charges your rights shall be the same as if each were a charge made and
signed personally by me(us). This authority shall remain in effect until you
receive written notice from me(us) changing its terms or revoking it. Until you
actually receive such notice, I(we) agree that you shall be fully protected in
paying any 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
______________________________ _________________ ____________ ______________
Street Address City State Zip Code
- --------------------------------------------------------------------------------
F. LETTER OF INTENT (LOI) -- APPLICABLE TO CLASS I SHARES ONLY
[_]I(We) agree to the terms of the LOI and provisions for reservations of
Shares and grant FTD the security interest set forth in the Prospectus.
Although I am(we are) not obligated to do so, it is my(our) intention to
invest over a 13 month period in shares of one or more Franklin or Templeton
Funds (including all Money Market Funds in the Franklin Templeton Group) an
aggregate amount at least equal to that which is checked below:
<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
</TABLE>
Purchases made within the last 90 days will be included as part of your LOI.
Please write in your Account Number(s)____________ ____________ ____________
- --------------------------------------------------------------------------------
G. CUMULATIVE QUANTITY DISCOUNT -- APPLICABLE TO CLASS I SHARES ONLY
Shares may be purchased at the Offering Price applicable to the dollar amount
of the sale added to the higher of (1) the value (calculated at the
applicable Offering Price) or (2) the purchase price, of any other Shares of
the Fund and/or other Funds in the Franklin Templeton Group owned at that
time by the purchaser, his or her spouse, and their children under age 21,
including all Money Market Funds in the Franklin Templeton Group as stated in
the Prospectus. in order for this Cumulative Quantity Discount to be made
available, the Shareholder or his or her Securities Dealer must notify FTI or
FTD of the total holdings in the Franklin Templeton Group each time an order
is placed.
[_]I(We) own shares of more than one Fund in the Franklin Templeton Group and
qualify for the Cumulative Quantity Discount described above and in the
Prospectus.
My(Our) other Account Number(s) are ___________ ___________ _______________
- --------------------------------------------------------------------------------
8 ACCOUNT REVISION (If Applicable)
- --------------------------------------------------------------------------------
If you are using this application to revise your Account Registration, or wish
to have Distributions sent to an address other than the address on your existing
Account's Registration, a Signature Guarantee is required. Signatures of all
registered owners must be guaranteed by an "eligible guarantor" as defined in
the "How to Sell Shares of the Fund" section in the Fund's Prospectus. A Notary
Public is not an acceptable guarantor.
X________________________________________ ____________________________________
Signature(s) of Registered Account Owners Account Number(s)
X________________________________________ ____________________________________
X________________________________________
X________________________________________ ____________________________________
Signature Guarantee Stamp
NOTE: For any change in registration, please send us any outstanding
Certificates by Registered Mail.
- --------------------------------------------------------------------------------
TLGOF APP 05/95
<PAGE>
TEMPLETON GROWTH FUND, INC.
THIS STATEMENT OF ADDITIONAL INFORMATION
DATED MAY 1, 1995
IS NOT A PROSPECTUS. IT SHOULD BE READ IN
CONJUNCTION WITH THE PROSPECTUS OF
TEMPLETON GROWTH FUND, INC. DATED
MAY 1, 1995, 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) 237-0738
TABLE OF CONTENTS
General Information and History -Templeton, Galbraith &
Investment Objective and Hansberger Ltd.
Policies -Business Manager
-Investment Policies -Custodian and Transfer Agent
-Repurchase Agreements -Legal Counsel
-Loans of Portfolio Securities -Independent Accountants
-Debt Securities -Reports to Shareholders . 24
-Stock Index Futures Contracts Brokerage Allocation 25
-Stock Index Options Purchase, Redemption and
-Investment Restrictions Pricing
-Risk Factors of Shares 28
-Trading Policies -Ownership and Authority
-Personal Securities Disputes 28
Transactions -Tax Deferred Retirement
Management of the Fund Plans . 29
-Director Compensation -Letter of Intent 30
Principal Shareholders -Special Net Asset Value
Investment Management and Other Purchases 31
Services Tax Status 32
-Investment Management Principal Underwriter 39
Agreement Description of Shares 41
-Management Fees Performance Information 42
Financial Statements 45
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.
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,
Galbraith & Hansberger Ltd. (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
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.
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.
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. 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, 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
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
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
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.
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 underdeveloped,
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 New York Stock Exchange 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 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.
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
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 exprienced 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. They 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
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 these funds and clients may contain many or some of
the same securities. When any two or more of these funds or
clients are engaged simultaneously in the purchase or sale of the
same security, the transactions will be placed for execution 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.
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
CHARLES B. JOHNSON* President, chief executive
777 Mariners Island officer, and director of Franklin
Boulevard Resources, Inc.; chairman of the
San Mateo, California board, Franklin Templeton
Director and Vice Distributors, Inc.; chairman of
President the board and director, Franklin
Advisers, Inc.; director, Franklin
Administrative Services, Inc. and
General Host Corporation; director
of Templeton Global Investors,
Inc.; director or trustee of other
Templeton Funds; and officer and
director, trustee or managing
general partner, as the case may
be, of most other subsidiaries of
Franklin and of most of the
investment companies in the
Franklin Templeton Group.
HARRIS J. ASHTON Chairman of the board, president
Metro Center, 1 Station and chief executive officer of
Place General Host Corporation (nursery
Stamford, Connecticut and craft centers); director of
Director RBC Holdings Inc. (a bank holding
company) and Bar-S Foods; director
or trustee of other Templeton
Funds; and director, trustee or
managing general partner, as the
case may be, for most of the
investment companies in the
Franklin Templeton Group.
S. JOSEPH FORTUNATO Member of the law firm of Pitney,
200 Campus Drive Hardin, Kipp & Szuch; director of
Florham Park, New Jersey General Host Corporation; director
Director or trustee of other Templeton
Funds; and director, trustee or
managing general partner, as the
case may be, for most of the
investment companies in the
Franklin Templeton Group.
F. BRUCE CLARKE Retired; former credit advisor,
19 Vista View Blvd. National Bank of Canada, Toronto;
Thornhill, Ontario a director or trustee of other
Director Templeton Funds.
HASSO-G VON DIERGARDT- Farmer; president of Clairhaven
NAGLO Investments, Ltd. and other
R.R. 3 private investment companies; a
Stouffville, Ontario director or trustee of other
Director Templeton Funds.
JOHN G. BENNETT, JR. A director or trustee of other
3 Radnor Corporate Templeton Funds; founder, chairman
Center, Suite 150 of the board, and president of the
100 Matsonford Road Foundation for New Era
Radnor, Pennsylvania Philanthropy; president and
Director chairman of the boards of the
Evelyn M. Bennett Memorial
Foundation and NEP International
Trust; chairman of the board and
chief executive officer of The
Bennett Group International, LTD;
chairman of the boards of Human
Service Systems, Inc. and Multi-
Media Communicators, Inc.; a
director or trustee of many
national and international
organizations, universities, and
grant-making foundations serving
in various executive board
capacities; member of the Public
Policy Committee of the
Advertising Council.
FRED R. MILLSAPS A director or trustee of other
2665 NE 37th Drive Templeton Funds; manager of
Fort Lauderdale, Florida personal investments (1978-
Director 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 Federal
Reserve Bank of Atlanta (1958-
1965); director of various
business and nonprofit
organizations.
BETTY P. KRAHMER A director or trustee of other
2201 Kentmere Parkway Templeton Funds; director or
Wilmington, Delaware trustee of various civic
Director associations; former economic
analyst, U.S. Government.
ANDREW H. HINES, JR. Consultant, Triangle Consulting
150 2nd Avenue N. Group; chairman of the board and
St. Petersburg, Florida chief executive officer of Florida
Director 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); director of Checkers
Drive-In Restaurants, Inc.; a
director or trustee of other
Templeton Funds.
GORDON S. MACKLIN Chairman of White River
8212 Burning Tree Road Corporation (information
Bethesda, Maryland services); director of Fund
Director America Enterprise Holdings, Inc.,
Martin Marietta Corporation, MCI
Communications Corporation and
Medimmune, Inc.; director or
trustee of other Templeton Funds;
director, trustee, or managing
general partner, as the case may
be, of most of the investment
companies in the Franklin
Templeton Group; formerly:
chairman, Hambrecht and Quist
Group; director, H&Q Healthcare
Investors; and president, National
Association of Securities Dealers,
Inc.
NICHOLAS F. BRADY* A director or trustee of other
The Bullitt House Templeton Funds; chairman of
102 East Dover Street Templeton Emerging Markets
Easton, Maryland Investment Trust PLC; chairman and
Director president of Darby Advisors, Inc.
(an investment firm) since
January, 1993; director of the H.
J. Heinz Company, Capital
Cities/ABC, Inc. and the
Christiana Companies; Secretary of
the United States Department of
the Treasury from 1988 to January,
1993; chairman of the board of
Dillon, Read & Co. Inc.
(investment banking) prior
thereto.
MARK G. HOLOWESKO President and director of
Lyford Cay Templeton, Galbraith & Hansberger
Nassau, Bahamas Ltd.; director of global equity
President research for Templeton Worldwide,
Inc.; president or vice president
of the Templeton Funds; investment
administrator with Roy West Trust
Corporation (Bahamas) Limited
(1984-1985).
MARTIN L. FLANAGAN Senior vice president, treasurer
777 Mariners Island and chief financial officer of
Blvd. Franklin Resources, Inc.; director
San Mateo, California and executive vice president of
Vice President Templeton Investment Counsel, Inc.
and Templeton Global Investors,
Inc.; president or vice president
of the Templeton Funds;
accountant, Arthur Andersen &
Company (1982-1983); member of the
International Society of Financial
Analysts and the American
Institute of Certified Public
Accountants.
JOHN R. KAY Vice president of the Templeton
500 East Broward Blvd. Funds; vice president and
Fort Lauderdale, Florida treasurer of Templeton Global
Vice President Investors, Inc. and Templeton
Worldwide, Inc.; assistant vice
president of Franklin Templeton
Distributors, Inc.; formerly, vice
president and controller of the
Keystone Group, Inc.
THOMAS M. MISTELE Senior vice president of Templeton
700 Central Avenue Global Investors, Inc.; vice
St. Petersburg, Florida president of Franklin Templeton
Secretary Distributors, Inc.; secretary of
the Templeton Funds; attorney,
Dechert Price & Rhoads (1985-1988)
and Freehill, Hollingdale & Page
(1988); judicial clerk, U.S.
District Court (Eastern District
of Virginia) (1984-1985).
JAMES R. BAIO Certified public accountant;
500 East Broward Blvd. treasurer of the Templeton Funds;
Fort Lauderdale, Florida senior vice president of Templeton
Treasurer Worldwide, Inc., Templeton Global
Investors, Inc., and Templeton
Funds Trust Company; formerly,
senior tax manager of Ernst &
Young (certified public
accountants) (1977-1989).
JACK L. COLLINS Assistant treasurer of the
700 Central Avenue Templeton Funds; assistant vice
St. Petersburg, Florida president of Franklin Templeton
Assistant Treasurer Investor Services, Inc.; formerly,
partner of Grant Thornton,
independent public accountants.
JEFFREY L. STEELE Partner, Dechert Price & Rhoads.
1500 K Street, N.W.
Washington, D.C.
Assistant Secretary
__________________________
* Messrs. Templeton, Johnson and Brady 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,
Galbraith & Hansberger, Ltd. are limited partners of Darby
Emerging Markets Fund, L.P. Messrs. von Diergardt-Naglo, Clarke,
Ashton, Fortunato, Millsaps, Hines, Macklin and Bennett and Mrs.
Krahmer are Directors who are not "interested persons" of the
Fund.
There are no family relationships between any of the
Directors.
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, based upon the assets of the Fund as of December 31,
1994, the Fund will pay the independent Directors and Mr. Brady
an annual retainer of $_______ and a fee of $_______ 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 for the fiscal year ended December 31,
1994:
Number of
Franklin Total
Aggregate Templeton Fund Compensation
Compensation Boards on from All Funds
from the Which Director in Franklin
Name of Director Fund Serves Templeton Group
Harris J. Ashton $ 54 $319,925
John G. Bennett, Jr. 23 105,625
Nicholas F. Brady 23 86,125
F. Bruce Clarke
Hasso-G von
Diergardt-Naglo
S. Joseph Fortunato 56 336,065
Andrew H. Hines, Jr. 23 106,125
Betty P. Krahmer 19 75,275
Gordon S. Macklin 51 303,685
Fred R. Millsaps 23 106,125
PRINCIPAL SHAREHOLDERS
As of __________, 1995, there were _________________ Shares
of the Fund outstanding, of which ________ Shares (_____%) were
owned beneficially, directly or indirectly, by all the Directors
and officers of the Fund as a group. As of ___________, 1995, to
the knowledge of management, no person owned beneficially 5% or
more of the outstanding Shares.
INVESTMENT MANAGEMENT AND OTHER SERVICES
Investment Management Agreement. The Investment Manager of
the Fund is Templeton, Galbraith & Hansberger Ltd., 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, 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 6, 1994, and will
continue through December 31, 1995. 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
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 one or more of its affiliates has
recommended for one or more of its other clients or for clients
of its affiliates, the orders for all such securities
transactions are 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 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
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, 1994, 1993, and
1992, the Investment Manager (and, prior to October 30, 1992, Old
TGH, the Fund's previous investment manager) received from the
Fund fees of $29,634,284, $22,294,296, and $17,858,042,
respectively, pursuant to the Agreement and agreements in effect
prior to October 30, 1992.
Templeton, Galbraith & Hansberger Ltd. The Investment
Manager is an indirect wholly owned subsidiary of Franklin, a
publicly traded company whose shares are listed on the New York
Stock Exchange. 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.
Business Manager. Templeton Global Investors, Inc. performs
certain administrative functions as Business Manager for the
Fund, including:
- providing office space, telephone, office equipment and
supplies for the Fund;
- paying compensation of the Fund's officers for services
rendered as such;
- authorizing expenditures and approving bills for
payment on behalf of the Fund;
- 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;
- 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;
- monitoring relationships with organizations serving the
Fund, including the Custodian and printers;
- providing trading desk facilities to the Fund;
- 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;
- monitoring the qualifications of tax deferred
retirement plans providing for investment in Shares of
the Fund; and
- 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
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, 1994, 1993,
and 1992, the Business Manager (and, prior to April 1, 1993,
Templeton Funds Management, Inc., the previous business manager)
received business management fees of $4,138,659, $3,221,160, and
$2,925,761, 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
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,
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 and
the Internal Revenue Service.
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.
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
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
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.
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, 1994, 1993, and 1992 (not including any spreads or
concessions on principal transactions) were $6,914,000,
$4,154,000, and $3,412,349, 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 New York Stock Exchange (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
New York Stock Exchange 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
New York Stock Exchange 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
New York Stock Exchange once on each day on which that Exchange
is open. Such calculation does not take place contemporaneously
with the determination of the prices of many of the portfolio
securities used in such calculation and if events occur which
materially affect the value of those foreign securities, they
will be valued at fair market value as determined by the
management and approved in good faith by the Board of 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 New York
Stock Exchange is closed other than for customary weekend and
holiday closings, (2) trading on the New York Stock Exchange 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
Securities and Exchange Commission 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: (a) freeze the account and require the written
agreement of all persons deemed by the Fund to have a potential
property interest in the account, prior to executing instructions
regarding the account; or (b) 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 Internal Revenue Service 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:
- For individuals whether or not covered by other
qualified plans;
- For simplified employee pensions;
- For employees of tax-exempt organizations; and
- For corporations, self-employed individuals and
partnerships.
Capital gains and income received by the foregoing plans
generally are exempt from taxation until distribution from the
plans. Investors considering participation in any such plan
should review specific tax laws relating thereto and should
consult their attorneys or tax advisers with respect to the
establishment and maintenance of any such plan. Additional
information, including the fees and charges with respect to all
of these plans, is available upon request to the Principal
Underwriter. No distribution under a retirement plan will be
made until Franklin Templeton Trust Company receives the
participant's election on IRS Form W-4P (available on request
from Franklin Templeton Trust Company) 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
Individual Retirement Account. 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 Individual
Retirement Accounts are available through Franklin Templeton
Trust Company. Disclosure statements summarizing certain aspects
of Individual Retirement Accounts are furnished to all persons
investing in such accounts, in accordance with Internal Revenue
Service 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, are available through the
Principal Underwriter. Custodial services are provided by
Franklin Templeton Trust Company.
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 Internal
Revenue Service. A "Section 401(k) plan" is also available.
Franklin Templeton Trust Company 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.
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 Templeton Group (except Templeton Capital Accumulator
Fund, Inc., Templeton Variable Annuity Fund, Templeton Variable
Products Series Fund, Franklin Valuemark Funds and Franklin
Government Securities Trust) 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
Asset Value Purchases" 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 Group (except Templeton
Capital Accumulator Fund, Inc., Templeton Variable Annuity Fund,
Templeton Variable Products Series Fund, Franklin Valuemark Funds
and Franklin Government Securities Trust) 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).
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.
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 Internal Revenue Code of
1986, as amended (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
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. All dividends and distributions
are taxable to Shareholders, whether or not reinvested in Shares
of the Fund. 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.
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.
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
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 semi-annual compounding of interest.
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 futures 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.
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.
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 Internal Revenue Service notifies the
Shareholder or the Fund that the Shareholder has failed to report
properly certain interest and dividend income to the Internal
Revenue Service 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,
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 may reimburse 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 exceeding $1 million (on
which the Fund imposes no initial sales charge) 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 Plans, the costs and expenses not reimbursed in any one given
quarter (including costs and expenses not reimbursed because they
exceed the percentage limit applicable to either class of Shares)
may be reimbursed in subsequent quarters or years.
During the fiscal year ended August 31, 1994, FTD incurred
costs and expenses of $10,638,858 in connection with distribution
of Class I 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, 1994. In the event that the Plan 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, 1994,
FTD spent, pursuant to the Plan, the following amounts on:
compensation to dealers, $7,901,514; sales promotion, $171,940;
printing, $676,706; advertising, $1,726,776; and wholesale costs
and expenses, $161,922.
The Underwriting 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, 1994, 1993, and 1992, Franklin
Templeton Distributors, Inc. (and, prior to June 1, 1993,
Templeton Funds Distributor, Inc.) retained of such discount
$5,682,478, $3,162,262, and $2,476,658, or approximately 16.12%,
22.30%, and 14.30% of the gross sales commissions, respectively.
The Principal Underwriter in all cases buys Shares from the Fund
acting as principal for its own account. Dealers generally act
as principal for their own account in buying Shares from the
Principal Underwriter. No agency relationship exists between any
dealer and the Fund or the Principal Underwriter.
The Underwriting 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 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.)
The Underwriting Agreement is subject to renewal from year
to year in accordance with the provisions of the 1940 Act and
terminates automatically in the event of its assignment. The
Underwriting 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
Underwriting Agreement, in the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of its
obligations.
The Underwriting 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. Noramco (Europa) A.G., whose office address is P.O.
Box 470, Aeulestrasse 5, FL-9490 Vaduz, Liechtenstein, is
principal underwriter for sale of the Shares in Germany,
Luxembourg, The Netherlands, Switzerland, Liechtenstein, and
Austria. 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 with the exception of
those countries for which Noramco serves as principal
underwriter. The terms of the underwriting agreements with
Templeton Strategic Services and Noramco are substantially
similar to those of the Underwriting Agreement with FTD.
Templeton Strategic Services is an indirect wholly owned
subsidiary of Franklin. During the fiscal year ended August 31,
1994, Templeton Strategic Services retained $445,047 in sales
commissions in connection with sales in its territories and
Noramco retained $1,311,876 in sales commissions in connection
with sales in its territories.
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,
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, 1994 was 10.75%, 11.17% and 15.03%, 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 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 Corp.,
Morgan Stanley Capital International or a similar financial
organization.
(4) The geographic distribution of the Fund's portfolio.
(5) The gross national product and populations, including age
characteristics, 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.
(12) Quotations from the Templeton organization's founder, Sir
John Templeton,* advocating the virtues of diversification
and long-term investing, including the following:
_______________
* Sir John Templeton is not involved in investment decisions,
which are made by the Fund's Investment Manager.
- "Never follow the crowd. Superior performance is
possible only if you invest differently from the
crowd."
- "Diversify by company, by industry and by
country."
- "Always maintain a long-term perspective."
- "Invest for maximum total real return."
- "Invest - don't trade or speculate."
- "Remain flexible and open-minded about types of
investment."
- "Buy low."
- "When buying stocks, search for bargains among
quality stocks."
- "Buy value, not market trends or the economic
outlook."
- "Diversify. In stocks and bonds, as in much else,
there is safety in numbers."
- "Do your homework or hire wise experts to help
you."
- "Aggressively monitor your investments."
- "Don't panic."
- "Learn from your mistakes."
- "Outperforming the market is a difficult task."
- "An investor who has all the answers doesn't even
understand all the questions."
- "There's no free lunch."
- "And now the last principle: Do not be fearful or
negative too often."
In addition, the Fund and the Investment Manager may also
refer to the number of shareholders in the Fund or the aggregate
number of shareholders in the Franklin Templeton Group 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 1994 Annual
Report to Shareholders are incorporated herein by reference.
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements: Incorporated by reference from
the 1994 Annual Reports to Shareholders of Templeton
World Fund and Templeton Foreign Fund:
Independent Auditors' Report
Investment Portfolios as of August 31, 1994
Statements of Assets and Liabilities as of August 31,
1994
Statements of Operations for the year ended August
31, 1994
Statements of Changes in Net Assets for the years ended
August 31, 1994 and 1993
Notes to Financial Statements
(b) Exhibits
(1) (A) Amended and Restated Articles of
Incorporation dated January 26, 1989
(B) Articles Supplementary dated October 24,
1990*
(C) Articles Supplementary dated October 16,
1993*
(D) Articles Supplementary dated February 22,
1994*
(E) Articles Supplementary dated January 6, 1995
(F) Articles Supplementary dated April 13, 1995
(G) Articles of Amendment dated April 17, 1995
(2) (A) By-laws*
(B) Amendments to the By-laws dated
January 18, 1979 of Articles 6.1, 6.5 and
7.1*
(C) Amendments to Articles 1.1 and 6.5 of By-
laws*
_______________
* Previously filed with Registration Statement No. 2-60067 and
incorporated by reference herein.
(3) Not Applicable
(4) (A) Specimen stock certificate for Templeton
World Fund*
(B) Specimen stock certificate for Templeton
Foreign Fund*
(5) (A) Amended and Restated Investment Management
Agreement -- Templeton World Fund
(B) Amended and Restated Investment Management
Agreement -- Templeton Foreign Fund
(6) (A) Distribution Agreement*
(B) Form of Dealer Agreement*
(7) Not Applicable
(8) (A) Custody Agreement dated June 1, 1984 on
behalf of Templeton World Fund with The Chase
Manhattan Bank, N.A.*
(B) Custody Agreement dated June 1, 1984 on
behalf of Templeton Foreign Fund with The
Chase Manhattan Bank, N.A.*
(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) Copy of License Agreement dated October 14,
1977 among Registrant, Templeton Growth Fund,
Ltd., Templeton Investment Counsel Limited
and John M. Templeton, individually, granting
Registrant right to use name "Templeton."*
(F) Form of Sub-Transfer Agent Agreement between
Fidelity Investments Institutional Operations
Company and Templeton Funds Trust Company*
(10) Opinion and consent of counsel (filed with
Rule 24f-2 Notice)
(11) Consent of Independent Public Accountants
(12) Not Applicable
(13) (A) Not Applicable
(13) (B) Investment Letter
(14) Retirement plans*
(15) (A)(1) Distribution Plan -- Templeton World
Fund Class I Shares
(2) Distribution Plan -- Templeton World
Fund Class II Shares
(B)(1) Distribution Plan -- Templeton Foreign
Fund Class I Shares
(2) Distribution Plan -- Templeton Foreign
Fund Class II Shares
(16) Schedule showing computation of performance
quotations provided in response to Item 22*
(18) Form of Multiclass Plan
(27) Financial Data Schedule
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
Templeton World Fund 279,846 as of January 31, 1995
Class of Common Shares
of Templeton Funds, Inc.
Templeton Foreign Fund 298,928 as of January 31, 1995
Class of Common Shares
of Templeton Funds, Inc.
Item 27. Indemnification
All officers, directors, employees and agents of the
Registrant are to be indemnified to the fullest extent
permitted by law for any liabilities of any nature
whatsoever incurred in connection with the affairs of
the Registrant, except in cases where willful
misfeasance, bad faith, gross negligence or reckless
disregard of duties to the Registrant are established.
See Article 5.1 of the By-Laws of the Registrant, filed
as Exhibit 2 to the Registration Statement, which is
incorporated herein by reference, for a more complete
description of matters relating to indemnification.
Item 28. Business and Other Connections of Investment Adviser
The business and other connections of Registrant's
investment manager, Templeton, Galbraith & Hansberger
Ltd., 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, Galbraith & Hansberger Ltd.
Item 29. Principal Underwriters
(a) Franklin Templeton Distributors, Inc. also acts as
principal underwriter of shares of Templeton
Growth Fund, Inc., 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, 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, and
Institutional Fiduciary Trust.
(b) The directors and officers of FTD, located at 700
Central Avenue, St. Petersburg, Florida
33733-9926, are as follows:
Positions and Positions ands
Offices with Offices with
Name Underwriter Registrant
Charles B. Johnson Chairman of the Board Vice President
and Director
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
Kenneth V. Domingues Senior Vice President None
Martin L. Flanagan Senior Vice President Vice President
and Treasurer
William J. Lippman Senior Vice President None
Richard C. Stoker Senior Vice President None
Charles E. Johnson Senior Vice President None
Deborah R. Gatzek Senior Vice President None
and Assistant Secretary
Peter Black Vice President None
James K. Blinn Vice President None
Bernie Buckley Vice President None
Joel Burns Vice President None
Debra Carter Vice President None
Richard O. Conboy Vice President None
Joe Cronin Vice President None
James F. Duryea Vice President None
James A. Escobedo Vice President None
Loretta Fry Vice President None
Robert N. Geppner Vice President None
John Gould Vice President None
Sheppard G. Griswold Vice President None
Mike Hackett Vice President None
Brad N. Hanson Vice President None
Carolyn L. Hennion Vice President None
Andrew Jennings Vice President None
Peter Jones Vice President None
Philip J. Kearns Vice President None
John Leach Vice President None
Ken Leder Vice President None
Jack Lemein Vice President None
John R. McGee Vice President None
Thomas M. Mistele Vice President Secretary
Harry G. Mumford Vice President None
Mike Nardone Vice President None
Thomas H. O'Connor Vice President None
Vivian J. Palmieri Vice President None
Roger Pearson Vice President None
Richard S. Petrell Vice President None
John Phillips Vice President None
Darrell Plocher Vice President None
Dennis Shannon Vice President None
Robert E. Silvani Vice President None
Kent P. Strazza Vice President None
Susan K. Tallarico Vice President None
Leslie M. Kratter Secretary None
(c) Not applicable (information on unaffiliated
underwriters).
tem 30. Location of Accounts and Records ______
The accounts, books and other documents required to be
maintained by Registrant pursuant to Rule 31a-1(a) of
the Investment Company Act of 1940 are in the
possession of Templeton Global Investors, Inc., 500
East Broward Blvd., Fort Lauderdale, Florida 33394.
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
(a) Not Applicable.
(b) Not Applicable.
(c) Registrant undertakes to furnish to each person to
whom a Prospectus for World Fund or Foreign Fund
is provided a copy of such Fund's latest Annual
Report, upon request and without charge.
<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 on its
behalf by the undersigned, thereunto duly authorized, in
Washington, D.C., on the 26th day of April, 1995.
Templeton Funds, Inc.
By:___________________________
Mark G. Holowesko*
President
*By: /s/ Jeffrey L. Steele
Jeffrey L. Steele
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
_________________________ President April 26, 1995
Mark G. Holowesko* (Chief Executive
Officer)
_________________________ Director April 26, 1995
Hasso-G von Diergardt-Naglo*
_________________________ Director April 26, 1995
Betty P. Krahmer*
_________________________ Director April 26, 1995
F. Bruce Clarke*
_________________________ Director April 26, 1995
Fred R. Millsaps*
_________________________ Director April 26, 1995
John G. Bennett, Jr.*
_________________________ Director April 26, 1995
Rupert H. Johnson, Jr.*
_________________________ Director April 26, 1995
Harris J. Ashton*
_________________________ Director April 26, 1995
S. Joseph Fortunato*
_________________________ Director April 26, 1995
Andrew H. Hines, Jr.*
_________________________ Director April 26, 1995
Gordon S. Macklin*
_________________________ Director April 26, 1995
Nicholas F. Brady*
_________________________ Treasurer April 26, 1995
James R. Baio* (Chief Financial
and Accounting Officer)
*By:/s/ Jeffrey L. Steele
Jeffrey L. Steele
as attorney-in-fact**
** Powers of Attorney are filed with Post-Effective Amendment
No. 21 to this Registration Statement on August 19, 1992,
Post-Effective Amendment No. 23 to this Registration
Statement on November 2, 1993, Post-Effective Amendment No.
24 to this Registration Statement on December 23, 1993, and
Post-Effective Amendment No. 25 to this Registration
Statement on December 30, 1994.
<PAGE>
EXHIBIT LIST
Exhibit Number Name of Exhibit
(1)(E) Articles Supplementary
(1)(F) Articles Supplementary
(1)(G) Articles of Amendment
(5)(A) Amended and Restated Investment
Management Agreement -- Templeton
World Fund
(5)(B) Amended and Restated Investment
Management Agreement -- Templeton
Foreign Fund
(11) Consent of Independent Public
Accountants
(13) (B) Investment Letter
(15)(A)(1) Distribution Plan -- Templeton
World Fund Class I Shares
(15)(A)(2) Distribution Plan -- Templeton
World Fund Class II Shares
(15)(B)(1) Distribution Plan -- Templeton
Foreign Fund Class I Shares
(15)(B)(2) Distribution Plan -- Templeton
Foreign Fund Class II Shares
(18) Form of Multiclass Plan
(27) Financial Data Schedule
McGLADREY & PULLEN, LLP
Certified Public Accountants and Consultants
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use of our report dated September
27, 1994, on the financial statements of Templeton Growth Fund,
Inc. referred to therein, which appears in the 1994 Annual Report
to Shareholders and which is incorporated herein by reference, in
Post-Effective Amendment No. 11 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
Statement of Additional Information under the caption
"Independent Accountants" and in the Prospectus under the caption
"Financial Highlights."
McGladrey & Pullen, LLP
New York, New York
April 26, 1995
TEMPLETON GROWTH FUND, INC.
ARTICLES OF AMENDMENT
CHANGING NAME OF CLASS
PURSUANT TO MGCL SECTION 2-605(B)
Templeton Growth Fund, Inc., a Maryland corporation, having
its principal office in Baltimore City, Maryland (hereinafter
called the "Corporation"), hereby certifies to the State
Department of Assessments and Taxation of Maryland that:
FIRST: The Charter of the Corporation is hereby amended to
provide as follows:
The name and designation of the capital stock of the
Corporation is hereby changed to be "Templeton Growth Fund Class
I" capital stock of the Corporation.
SECOND: The amendment does not change the outstanding
capital stock of the corporation or the aggregate par value
thereof.
THIRD: The foregoing amendment to the Charter of the
Corporation has been approved by the Board of Directors and is
limited to a change expressly permitted by Section 2-605 of the
Maryland General Corporation Law.
FOURTH: The Corporation is registered as an open-end
company under the Investment Company Act of 1940.
IN WITNESS WHEREOF, the Corporation has caused these
presents to be signed in its name on its behalf by its Vice
President and witnessed by its Assistant Secretary on this 17th
day of April, 1995.
TEMPLETON GROWTH FUND, INC.
By:______________________________
John R. Kay
Vice President
ATTEST:
______________________
Jeffrey L. Steele
Assistant Secretary
THE UNDERSIGNED, the Vice President of Templeton Growth
Fund, Inc., who executed on behalf of the Corporation the
foregoing Articles of Amendment of which this certificate is made
a part, hereby acknowledges in the name and on behalf of the
Corporation the foregoing Articles of Amendment to be the
corporate act of the Corporation and hereby certifies to the best
of his knowledge, information and belief the matters and facts
set forth herein with respect to the authorization and approval
thereof are true in all material respects under the penalties of
perjury.
_________________________
John R. Kay
Vice President
TEMPLETON GROWTH FUND, INC.
ARTICLES OF AMENDMENT
CHANGING NAME OF CLASS
PURSUANT TO MGCL SECTION 2-605(B)
Templeton Growth Fund, Inc., a Maryland corporation, having
its principal office in Baltimore City, Maryland (hereinafter
called the "Corporation"), hereby certifies to the State
Department of Assessments and Taxation of Maryland that:
FIRST: The Charter of the Corporation is hereby amended to
provide as follows:
The name and designation of the capital stock of the
Corporation is hereby changed to be "Templeton Growth Fund Class
I" capital stock of the Corporation.
SECOND: The amendment does not change the outstanding
capital stock of the corporation or the aggregate par value
thereof.
THIRD: The foregoing amendment to the Charter of the
Corporation has been approved by the Board of Directors and is
limited to a change expressly permitted by Section 2-605 of the
Maryland General Corporation Law.
FOURTH: The Corporation is registered as an open-end
company under the Investment Company Act of 1940.
IN WITNESS WHEREOF, the Corporation has caused these
presents to be signed in its name on its behalf by its Vice
President and witnessed by its Assistant Secretary on this 17th
day of April, 1995.
TEMPLETON GROWTH FUND, INC.
By:______________________________
John R. Kay
Vice President
ATTEST:
______________________
Jeffrey L. Steele
Assistant Secretary
THE UNDERSIGNED, the Vice President of Templeton Growth
Fund, Inc., who executed on behalf of the Corporation the
foregoing Articles of Amendment of which this certificate is made
a part, hereby acknowledges in the name and on behalf of the
Corporation the foregoing Articles of Amendment to be the
corporate act of the Corporation and hereby certifies to the best
of his knowledge, information and belief the matters and facts
set forth herein with respect to the authorization and approval
thereof are true in all material respects under the penalties of
perjury.
_________________________
John R. Kay
Vice President
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of the 30th day of October, 1992, and
amended and restated as of the 6th day of December, 1994, between
TEMPLETON GROWTH FUND, INC., a corporation organized under the
laws of the State of Maryland (hereinafter referred to as the
"Fund"), and TEMPLETON, GALBRAITH & HANSBERGER LTD. (hereinafter
referred to as the "Investment Manager").
In consideration of the mutual agreements herein made,
the Fund and the Investment Manager understand and agree as
follows:
(1) The Investment Manager agrees, during the life of
this Agreement, to manage the investment and reinvestment of the
Fund's assets consistent with the provisions of the Fund's
Articles of Incorporation and the investment policies adopted and
declared by the Fund's Board of Directors. In pursuance of the
foregoing, the Investment Manager shall make all determinations
with respect to the investment of the Fund's assets and the
purchase and sale of its investment securities, and shall take
all such steps as may be necessary to implement those
determinations. It is understood that all acts of the Investment
Manager in performing this Agreement are performed by it outside
the United States.
(2) The Investment Manager is not required to furnish
any personnel, overhead items or facilities for the Fund,
including trading desk facilities or daily pricing of the Fund's
portfolio.
(3) The Investment Manager shall be responsible for
selecting members of securities exchanges, brokers and dealers
(such members, brokers and dealers being hereinafter referred to
as "brokers") for the execution of the Fund's portfolio
transactions consistent with the Fund's brokerage policy and,
when applicable, the negotiation of commissions in connection
therewith.
All decisions and placements shall be made in
accordance with the following principles:
(A) Purchase and sale orders will usually be
placed with brokers which are selected by the
Investment Manager as able to achieve "best execution"
of such orders. "Best execution" shall mean prompt and
reliable execution at the most favorable 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 executed, the ability to
effect the transaction at all where a large block is
involved, availability of the broker to stand ready to
execute possibly difficult transactions in the future,
and the financial strength and stability of the broker.
Such considerations are judgmental and are weighed by
the Investment Manager in determining the overall
reasonableness of brokerage commissions.
(B) 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.
(C) 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 for 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 will not be 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 provide
lawful and appropriate assistance to the Investment
Manager in the performance of its investment decision-
making responsibilities, and that the commissions were
within a reasonable range. Whether commissions were
within a reasonable range shall be based on any
available information as to the level of commission
known to be charged by other brokers on comparable
transactions, but there shall be taken into account the
Fund's policies that (i) obtaining a low commission is
deemed secondary to obtaining a favorable securities
price, since it is recognized that usually it is more
beneficial to the Fund to obtain a favorable price than
to pay the lowest commission; and (ii) the quality,
comprehensiveness, and frequency of research studies
which are provided for the Investment Manager are
useful to the Investment Manager in performing its
advisory services under its Agreement. Research
services provided by brokers to the Investment Manager
are considered to be in addition to, and not in lieu
of, services required to be performed by the Investment
Manager under this Agreement. Research furnished by
brokers through which 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.
(D) 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.
(E) Sales of Fund Shares (which shall be deemed
to include also Shares of other registered investment
companies which have either the same adviser or an
investment adviser affiliated with the Fund's
Investment Manager) by a broker are one factor among
others to be taken into account in deciding to allocate
portfolio transactions (including agency transactions,
principal transactions, purchases in underwritings or
tenders in response to tender offers) for the account
of the Fund to that broker; provided that the broker
shall furnish "best execution," as defined in
subparagraph A above, and that such allocation shall be
within the scope of the Fund's policies as stated
above; provided further, that in every allocation made
to a broker in which the sale of Fund Shares is taken
into account, there shall be no increase in the amount
of the commissions or other compensation paid to such
broker beyond a reasonable commission or other
compensation determined, as set forth in subparagraph C
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
Fund's Shares.
(4) The Fund agrees to pay to the Investment Manager
as compensation for such services a monthly fee equal on an
annual basis to 0.75% of the first $200,000,000 of the average
daily net assets of the Fund during the month preceding each
payment, reduced to a fee equal on an annual basis to 0.675% of
such average net assets in excess of $200,000,000 up to
$1,300,000,000 and further reduced to a fee equal on an annual
basis of 0.60% of such net assets in excess of $1,300,000,000.
Notwithstanding the foregoing, if the total expenses of
the Fund (including the fee to the Investment Manager) in any
fiscal year of the Fund exceed any expense limitation imposed by
applicable State law, the Investment Manager shall reimburse the
Fund for such excess in the manner and to the extent required by
applicable State law. The term "total expenses," as used in this
paragraph, does not include interest, taxes, litigation expenses,
distribution expenses, brokerage commissions or other costs of
acquiring or disposing of any of the Fund's portfolio securities
or any costs or expenses incurred or arising other than in the
ordinary and necessary course of the Fund's business. When the
accrued amount of such expenses exceeds this limit, the monthly
payment of the Investment Manager's fee will be reduced by the
amount of such excess, subject to adjustment month by month
during the balance of the Fund's fiscal year if accrued expenses
thereafter fall below the limit.
(5) This Agreement shall become effective on October
30, 1992 and shall continue in effect until
December 31, 1993. If not sooner terminated, this Agreement
shall continue in effect for successive periods of 12 months each
thereafter, provided that each such continuance shall be
specifically approved annually by the vote of a majority of the
Fund's Board of Directors who are not parties to this Agreement
or "interested persons" (as defined in Investment Company Act of
1940 (the "1940 Act")) of any such party, cast in person at a
meeting called for the purpose of voting on such approval and
either the vote of (a) a majority of the outstanding voting
securities of the Fund, as defined in the 1940 Act, or (b) a
majority of the Fund's Board of Directors as a whole.
(6) Notwithstanding the foregoing, this Agreement may
be terminated by either party at any time, without the payment of
any penalty, on sixty (60) days' written notice to the other
party, provided that termination by the Fund is approved by vote
of a majority of the Fund's Board of Directors in office at the
time or by vote of a majority of the outstanding voting
securities of the Fund (as defined by the 1940 Act).
(7) This Agreement will terminate automatically and
immediately in the event of its assignment (as defined in the
1940 Act).
(8) In the event this Agreement is terminated and the
Investment Manager no longer acts as Investment Manager to the
Fund, the Investment Manager reserves the right to withdraw from
the Fund the use of the name "Templeton" or any name misleadingly
implying a continuing relationship between the Fund and the
Investment Manager or any of its affiliates.
(9) Except as may otherwise be provided by the 1940
Act, neither the Investment Manager nor its officers, directors,
employees or agents shall be subject to any liability for any
error of judgment, mistake of law, or any loss arising out of any
investment or other act or omission in the performance by the
Investment Manager of its duties under the Agreement 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
securities depositories, or from any war or political act of any
foreign government to which such assets might be exposed, or for
failure, on the part of the custodian or otherwise, timely to
collect payments, except for any liability, loss or damage
resulting from willful misfeasance, bad faith or gross negligence
on the Investment Manager's part or by reason of reckless
disregard of the Investment Manager's duties under this
Agreement. It is hereby understood and acknowledged by the Fund
that the value of the investments made for the Fund may increase
as well as decrease and are not guaranteed by the Investment
Manager. It is further understood and acknowledged by the Fund
that investment decisions made on behalf of the Fund by the
Investment Manager are subject to a variety of factors which may
affect the values and income generated by the Fund's portfolio
securities, including general economic conditions, market factors
and currency exchange rates, and that investment decisions made
by the Investment Manager will not always be profitable or prove
to have been correct.
(10) It is understood that the services of the
Investment Manager are not deemed to be exclusive, and nothing in
this Agreement shall prevent the Investment Manager, or any
affiliate thereof, from providing similar services to other
investment companies and other clients, including clients which
may invest in the same types of securities as the Fund, or, in
providing such services, from using information furnished by
others. When the Investment Manager determines to buy or sell
the same security for the Fund that the Investment Manager or one
or more of its affiliates has selected for clients of the
Investment Manager or its affiliates, the orders for all such
security transactions shall 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.
(11) This Agreement shall be construed in accordance
with the laws of the State of Maryland, provided that nothing
herein shall be construed as being inconsistent with applicable
Federal and state securities laws and any rules, regulations and
orders thereunder.
(12) If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or otherwise,
the remainder of this Agreement shall not be affected thereby
and, to this extent, the provisions of this Agreement shall be
deemed to be severable.
(13) Nothing herein shall be construed as constituting
the Investment Manager an agent of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers and
their respective corporate seals to be hereunto duly affixed and
attested.
TEMPLETON GROWTH FUND, INC.
By: ___________________________________
John R. Kay
Vice President
TEMPLETON, GALBRAITH & HANSBERGER LTD.
By: ___________________________________
DISTRIBUTION PLAN
WHEREAS, Templeton Growth Fund, Inc. (the "Fund") is
registered as an open-end diversified management investment
company under the Investment Company Act of 1940 (the "1940
Act"); and
WHEREAS, the Fund and Franklin Templeton Distributors,
Inc. (the "Selling Company"), a wholly owned subsidiary of
Franklin Resources, Inc. and a broker-dealer registered under the
Securities Exchange Act of 1934, have entered into a Distribution
Agreement pursuant to which the Selling Company will act as
principal underwriter of the Class I Shares of the Fund for sale
to the public; and
WHEREAS, shares of common stock of the Fund are divided
into classes of shares, one of which is designated Class I; and
WHEREAS, the Board of Directors of the Fund has
determined to adopt this Distribution Plan (the "Plan"), in
accordance with the requirements of the 1940 Act and has
determined that there is a reasonable likelihood that the Plan
will benefit the Fund and the holders of Class I Shares.
NOW THEREFORE, the Fund hereby adopts, with respect to
its Class I Shares, the Plan on the following terms and
conditions:
1. The Fund will reimburse the Selling Company for
costs and expenses incurred in connection with the distribution
and marketing of the Class I Shares of the Fund. Such
distribution costs and expenses may include: (a) payments to
broker-dealers who provide certain services of value to the
Fund's Class I Shareholders (sometimes referred to as a "trail
fee"); (b) reimbursement of expenses relating to selling and
servicing efforts or of organizing and conducting sales seminars;
(c) payments to employees or agents of the Selling Company who
engage in or support distribution of the Class I Shares; (d)
payment of the costs of preparing, printing and distributing
prospectuses and reports to prospective investors and of printing
and advertising expenses; (e) payment of dealer commissions and
wholesaler compensation in connection with sales of the Fund's
Class I Shares exceeding $1 million (for which the Fund imposes
no sales charge) and interest or carrying charges in connection
therewith; and (f) such other similar services as the Fund's
Board of Directors determines to be reasonably calculated to
result in the sale of Class I Shares.
The Selling Company will be reimbursed for such costs,
expenses or payments on a quarterly basis, subject to a limit of
0.25% per annum of the average daily net assets of the Fund's
Class I Shares. Payments made out of or charged against the
assets of the Class I Shares of the Fund must be in reimbursement
for costs and expenses in connection with any activity which is
primarily intended to result in the sale of the Fund's Class I
Shares. The costs and expenses not reimbursed in any one given
quarter (including costs and expenses not reimbursed because they
exceeded the limit of 0.25% per annum of the average daily net
assets of the Fund's Class I Shares) may be reimbursed in
subsequent quarters or years.
2. The Plan shall not take effect with respect to the
Fund's Class I Shares until it has been approved by a vote of at
least a majority (as defined in the 1940 Act) of the outstanding
voting securities of the Class I Shares of the Fund. With
respect to the submission of the Plan for such a vote, it shall
have been effectively approved with respect to the Fund's Class I
Shares if a majority of the outstanding voting securities of the
Class I Shares of the Fund votes for approval of the Plan.
3. The Plan shall not take effect until it has been
approved, together with any related agreements and supplements,
by votes of a majority of both (a) the Board of Directors of the
Fund, and (b) those Directors of the Fund who are not "interested
persons" (as defined in the 1940 Act) and have no direct or
indirect financial interest in the operation of the Plan or any
agreements related to it (the "Plan Directors"), cast in person
at a meeting (or meetings) called for the purpose of voting on
the Plan and such related agreements.
4. The Plan shall continue in effect so long as such
continuance is specifically approved at least annually in the
manner provided for approval of the Plan in paragraph 3.
5. Any person authorized to direct the disposition of
monies paid or payable by the Class I Shares of the Fund pursuant
to the Plan or any related agreement shall provide to the Fund's
Board of Directors, and the Board shall review, at least
quarterly, a written report of the amounts so expended and the
purposes for which such expenditures were made.
6. Any agreement related to the Plan shall be in
writing and shall provide: (a) that such agreement may be
terminated at any time as to the Fund's Class I Shares, without
payment of any penalty, by vote of a majority of the Plan
Directors or by vote of a majority of the outstanding voting
securities of the Class I Shares of the Fund, on not more than
sixty days' written notice to any other party to the agreement;
and (b) that such agreement shall terminate automatically in the
event of its assignment.
7. The Plan may be terminated at any time, without
payment of any penalty, by vote of a majority of the Plan
Directors, or by vote of a majority of the outstanding Class I
Shares of the Fund.
8. The Plan may be amended at any time by the Fund's
Board of Directors, provided that (a) any amendment to increase
materially the costs which the Class I Shares of the Fund may
bear for distribution pursuant to the Plan shall be effective
only upon approval by a vote of a majority of the Class I Shares
of the Fund, and (b) any material amendments of the terms of the
Plan shall become effective only upon approval as provided in
paragraph 3 hereof.
9. While the Plan is in effect, the selection and
nomination of Directors who are not "interested persons" (as
defined in the 1940 Act) of the Fund shall be committed to the
discretion of the Directors who are not interested persons.
10. The Fund shall preserve copies of the Plan, any
related agreement and any report made pursuant to paragraph 5
hereof, for a period of not less than six years from the date of
the Plan, such agreement or report, as the case may be, the first
two years of which shall be in an easily accessible place.
IN WITNESS WHEREOF, the Fund has executed this
Distribution Plan on this 1st day of May, 1995.
TEMPLETON GROWTH FUND, INC.
By:_______________________________
John R. Kay
Vice President
DISTRIBUTION PLAN
WHEREAS, Templeton Growth Fund, Inc. (the "Fund") is
registered as an open-end diversified management investment
company under the Investment Company Act of 1940 (the "1940
Act"); and
WHEREAS, the Fund and Franklin Templeton Distributors,
Inc. (the "Selling Company"), a wholly owned subsidiary of
Franklin Resources, Inc. and a broker-dealer registered under the
Securities Exchange Act of 1934, have entered into a Distribution
Agreement pursuant to which the Selling Company will act as
principal underwriter of the Class II Shares of the Fund for sale
to the public; and
WHEREAS, shares of common stock of the Fund are divided
into classes of shares, one of which is designated Class II; and
WHEREAS, the Board of Directors of the Fund has
determined to adopt this Distribution Plan (the "Plan"), in
accordance with the requirements of the 1940 Act and has
determined that there is a reasonable likelihood that the Plan
will benefit the Fund and the holders of Class II Shares.
NOW THEREFORE, the Fund hereby adopts, with respect to
its Class II Shares, the Plan on the following terms and
conditions:
1. The Fund will reimburse the Selling Company for
costs and expenses incurred in connection with the distribution
and marketing of the Class II Shares of the Fund. Such
distribution costs and expenses may include: (a) payments to
broker-dealers who provide certain services of value to the
Fund's Class II Shareholders (sometimes referred to as a "trail
fee"); (b) reimbursement of expenses relating to selling and
servicing efforts or of organizing and conducting sales seminars;
(c) payments to employees or agents of the Selling Company who
engage in or support distribution of the Class II Shares; (d)
payment of the costs of preparing, printing and distributing
prospectuses and reports to prospective investors and of printing
and advertising expenses; (e) payment of dealer commissions and
wholesaler compensation in connection with sales of the Fund's
Class II Shares and interest or carrying charges in connection
therewith; and (f) such other similar services as the Fund's
Board of Directors determines to be reasonably calculated to
result in the sale of Class II Shares.
The Selling Company will be reimbursed for such costs,
expenses or payments on a quarterly basis, subject to a limit of
1.00% per annum of the average daily net assets of the Fund's
Class II Shares (of which up to 0.25% of such net assets may be
paid to dealers for personal service and/or the maintenance of
Class II Shareholder accounts (the "Service Fee")) and subject to
any applicable restriction imposed by rules of the National
Association of Securities Dealers, Inc. Payments made out of or
charged against the assets of the Class II Shares of the Fund
must be in reimbursement for costs and expenses in connection
with any activity which is primarily intended to result in the
sale of the Fund's Class II Shares or account maintenance and
personal service to Shareholders.
2. The Plan shall not take effect with respect to the
Fund's Class II Shares until it has been approved by a vote of at
least a majority (as defined in the 1940 Act) of the outstanding
voting securities of the Class II Shares of the Fund. With
respect to the submission of the Plan for such a vote, it shall
have been effectively approved with respect to the Fund's Class
II Shares if a majority of the outstanding voting securities of
the Class II Shares of the Fund votes for approval of the Plan.
3. The Plan shall not take effect until it has been
approved, together with any related agreements and supplements,
by votes of a majority of both (a) the Board of Directors of the
Fund, and (b) those Directors of the Fund who are not "interested
persons" (as defined in the 1940 Act) and have no direct or
indirect financial interest in the operation of the Plan or any
agreements related to it (the "Plan Directors"), cast in person
at a meeting (or meetings) called for the purpose of voting on
the Plan and such related agreements.
4. The Plan shall continue in effect so long as such
continuance is specifically approved at least annually in the
manner provided for approval of the Plan in paragraph 3.
5. Any person authorized to direct the disposition of
monies paid or payable by the Class II Shares of the Fund
pursuant to the Plan or any related agreement shall provide to
the Fund's Board of Directors, and the Board shall review, at
least quarterly, a written report of the amounts so expended and
the purposes for which such expenditures were made.
6. Any agreement related to the Plan shall be in
writing and shall provide: (a) that such agreement may be
terminated at any time as to the Fund's Class II Shares, without
payment of any penalty, by vote of a majority of the Plan
Directors or by vote of a majority of the outstanding voting
securities of the Class II Shares of the Fund, on not more than
sixty days' written notice to any other party to the agreement;
and (b) that such agreement shall terminate automatically in the
event of its assignment.
7. The Plan may be terminated at any time, without
payment of any penalty, by vote of a majority of the Plan
Directors, or by vote of a majority of the outstanding Class II
Shares of the Fund.
8. The Plan may be amended at any time by the Fund's
Board of Directors, provided that (a) any amendment to increase
materially the costs which the Class II Shares of the Fund may
bear for distribution pursuant to the Plan shall be effective
only upon approval by a vote of a majority of the Class II Shares
of the Fund, and (b) any material amendments of the terms of the
Plan shall become effective only upon approval as provided in
paragraph 3 hereof.
9. While the Plan is in effect, the selection and
nomination of Directors who are not "interested persons" (as
defined in the 1940 Act) of the Fund shall be committed to the
discretion of the Directors who are not interested persons.
10. The Fund shall preserve copies of the Plan, any
related agreement and any report made pursuant to paragraph 5
hereof, for a period of not less than six years from the date of
the Plan, such agreement or report, as the case may be, the first
two years of which shall be in an easily accessible place.
IN WITNESS WHEREOF, the Fund has executed this
Distribution Plan on this 1st day of May, 1995.
TEMPLETON GROWTH FUND, INC.
By:_______________________________
John R. Kay
Vice President
Templeton Growth Fund, Inc.
Multiple Class Plan
This Multiple Class Plan (the "Plan") has been adopted
by a majority of the Board of Directors of Templeton Growth Fund,
Inc. (the "Fund"). The Board has determined that the Plan is in
the best interests of each class and the Fund as a whole. The
Plan sets forth the provisions relating to the establishment of
multiple classes of shares for the Fund.
1. The Fund shall offer two classes of shares, to be known
as Templeton Growth Fund, Inc. - Class I and Templeton Growth
Fund, Inc. - Class II.
2. Class I shares shall carry a front-end sales charge
ranging from 0% - 5.75%, and Class II shares shall carry a front-
end sales charge of 1.00%.
3. Class I shares shall not be subject to a contingent
deferred sales charge ("CDSC") except in the following limited
circumstances. On investments of $1 million or more, a
contingent deferred sales charge of 1.00% of the lesser of the
then-current net asset value or the original net asset value at
the time of purchase applies to redemptions of those investments
within the contingency period of 12 months from the calendar
month following their purchase. The CDSC is waived in certain
circumstances, as described in the Fund's prospectus.
4. Class II shares redeemed within 18 months of their
purchase shall be assessed a CDSC of 1.00% on the lesser of the
then-current net asset value or the original net asset value at
the time of purchase. The CDSC is waived in certain
circumstances as described in the Fund's prospectus.
5. The Rule 12b-1 Plan associated with Class I shares may
be used to reimburse Franklin Templeton Distributors, Inc. (the
"Distributor") or others for expenses incurred in the promotion
and distribution of the shares of Class I. Such expenses
include, but are not limited to, the printing of the 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 the Distributor's overhead
expenses attributable to the distribution of Class I 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 for the Class, the Distributor or its
affiliates.
The Rule 12b-1 Plan associated with Class II shares has
two components. The first component is a shareholder servicing
fee, to be paid to broker-dealers, banks, trust companies and
others who will provide personal assistance to shareholders in
servicing their accounts. The second component is an asset-based
sales charge to be retained by the Distributor during the first
year after sale of shares, and, in subsequent years, to be paid
to dealers or retained by the Distributor to be used in the
promotion and distribution of Class II shares, in a manner
similar to that described above for Class I shares.
The Plans shall operate in accordance with the Rules of
Fair Practice of the National Association of Securities Dealers,
Inc., Article III, section 26(d).
6. The only difference in expenses as between Class I and
Class II shares shall relate to differences in the Rule 12b-1
plan expenses of each class, as described in each class' Rule
12b-1 Plan.
7. There shall be no conversion features associated with
the Class I and Class II shares.
8. Shares of Class I of the Fund may only be exchanged for
shares of Class I of any other fund in the Franklin Templeton
Group and may not be exchanged into the Franklin Templeton Money
Fund II of the Franklin Templeton Money Fund Trust. Shares of
Class II of the Fund may only be exchanged for shares of Class II
- 2 -
of any other fund in the Franklin Templeton Group and may also be
exchanged into the Franklin Templeton Money Fund II of the
Franklin Templeton Money Fund Trust.
9. Each Class will vote separately with respect to the
Rule 12b-1 Plan related to that Class.
10. On an ongoing basis, the directors, pursuant to their
fiduciary responsibilities under the 1940 Act and otherwise, will
monitor the Fund for the existence of any material conflicts
between the interests of the two classes of shares. The
directors, including a majority of the independent directors,
shall take such action as is reasonably necessary to eliminate
any such conflict that may develop. Templeton Galbraith &
Hansberger Ltd. and Franklin Templeton Distributors, Inc. shall
be responsible for alerting the Board of any material conflicts
that arise.
11. All material amendments to this Plan must be approved
by a majority of the directors of the Fund, including a majority
of the directors who are not interested persons of the Fund.
- 3 -
April 28, 1995
To: All Templeton Funds Listed on Schedule A
700 Central Avenue
St. Petersburg, FL 33701
Gentlemen:
We propose to invest $100.00 in the Class II shares (the "Shares") of each of
the Funds listed on the attached Schedule A (the "Funds"), on the business
day immediately preceding the effective date for each Fund's Class II shares,
at a purchase price per share equivalent to the net asset value per share of
each Fund's Class I shares on the date of purchase. We will purchase the
Shares in a private offering prior to the effectiveness of the post-effective
amendment to the Form N-1A registration statement under which each Fund's Class
II shares are initially offered, as filed by the Fund under the Securities Act
of 1933. The Shares are being purchased to serve as the seed money for each
Fund's Class II shares prior to the commencement of the public offering of
Class II shares.
In connection with such purchase, we understand that we, the purchaser,
intend to acquire the Shares for our own account as the sole beneficial owner
thereof and have no present intention of redeeming or reselling the Shares so
acquired.
We consent to the filing of this Investment Letter as an exhibit to the Form
N-1A registration statement of each Fund.
Sincerely,
TEMPLETON GLOBAL INVESTORS, INC.
By: /s/ Thomas M. Mistele
------------------------------------
Thomas M. Mistele
Senior Vice Presidemt
Date: April 28, 1995
<PAGE>
ACTION OF SOLE SHAREHOLDER BY WRITTEN CONSENT
The undersigned, being the sole shareholder of the Class II shares of each of
the Templeton Funds listed on the attached Schedule A (the "Funds"), each of
which is a series of the Investment Companies as indicated on Schedule A (the
"Companies"), does hereby take the following actions and does hereby consent
to the following resolution:
RESOLVED: That the Distribution Plans pursuant to Rule 12b-1 (under
the Investment Company Act of 1940), as agreed to and
accepted by Franklin Templeton Distributors, Inc. and each
of the Companies prior to the date below, be and it
hereby is, approved for each Fund.
By execution hereof, the undersigned shareholder waives prior notice of the
foregoing action by written consent.
TEMPLETON GLOBAL INVESTORS, INC.
Dated: April 28, 1995 By: /s/ Thomas M. Mistele
Title: Senior Vice President
<PAGE>
SCHEDULE A
INVESTMENT COMPANY FUND
Templeton Funds, Inc. Templeton World Fund - Class II
Templeton Foreign Fund - Class II
Templeton Smaller Companies Growth Templeton Smaller Companies
Fund, Inc. Growth Fund, Inc. - Class II
Templeton Growth Fund, Inc . Templeton Growth Fund, Inc. - Class II
Templeton Real Estate Securities Fund Templeton Real Estate Securities Fund -
Class II
Templeton Global Opportunities Trust Templeton Global Opportunities Trust -
Class II
Templeton Developing Markets Trust Templeton Developing Markets Trust -
Class II
Templeton Income Trust Templeton Income Fund - Class II
Templeton American Trust, Inc. Templeton American Trust, Inc. - Class I
Templeton Global Investment Trust Templeton Global Rising Dividends Fund -
Class II
Templeton Global Infrastructure Fund -
Class II
Templeton Latin America Fund - Class II
Templeton Greater European Fund - Class II
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
TEMPLETON GROWTH FUND, INC. FEBRUARY 28, 1995 SEMI-ANNUAL REPORT AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000805664
<NAME> GROWTH FUND, INC.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-END> FEB-28-1995
<INVESTMENTS-AT-COST> 4915285249
<INVESTMENTS-AT-VALUE> 5671946712
<RECEIVABLES> 144713772
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 794
<TOTAL-ASSETS> 5816661278
<PAYABLE-FOR-SECURITIES> 76651736
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 12271762
<TOTAL-LIABILITIES> 88923498
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<PAID-IN-CAPITAL-COMMON> 4853884074
<SHARES-COMMON-STOCK> 345453342
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<NET-INVESTMENT-INCOME> 43355650
<REALIZED-GAINS-CURRENT> 128815162
<APPREC-INCREASE-CURRENT> (409120246)
<NET-CHANGE-FROM-OPS> (236949434)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (89841133)
<DISTRIBUTIONS-OF-GAINS> (391713253)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 39804067
<NUMBER-OF-SHARES-REDEEMED> (15762606)
<SHARES-REINVESTED> 25222123
<NET-CHANGE-IN-ASSETS> 116177400
<ACCUMULATED-NII-PRIOR> 64446971
<ACCUMULATED-GAINS-PRIOR> 362128846
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 17044936
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 30752571
<AVERAGE-NET-ASSETS> 5543948783
<PER-SHARE-NAV-BEGIN> 18.95
<PER-SHARE-NII> .12
<PER-SHARE-GAIN-APPREC> (.91)
<PER-SHARE-DIVIDEND> (.29)
<PER-SHARE-DISTRIBUTIONS> (1.29)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.58
<EXPENSE-RATIO> 1.10
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
