1
TEMPLETON
GROWTH
FUND
INC.
Prospectus
January 1, 1996
[logo] Templeton
Member US $140 Billion Franklin Templeton Fund
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Templeton Growth Fund, Inc.
700 Central Avenue, St. Petersburg, Florida 33701-3628 USA
Custodian
The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
New York, New York 10081 USA
Transfer Agent
Franklin Templeton Investor Services, Inc.
700 Central Avenue
St. Petersburg, Florida 33701-3628 USA
Paying Agents in the Federal Republic of Germany:
Chase Bank AG
Alexanderstrasse 59, 60489 Frankfurt a. M.
Marcard, Stein & Co.
Bankers Since 1790
Ballindamm 36, 20095 Hamburg
Merck Finck & Co.
Private Bankers
ABC-Strasse 47, 20354 Hamburg
Paying Agent in the Republic of Austria
Creditanstalt-Bankverein
Schottengasse 6, 1010 Vienna
Representative in the Federal Republic of Germany
Dr. Carl Graf Hardenberg
Attorney at Law
Klein Fontenay 1, 20354 Hamburg
Representative in the Republic of Austria
Creditanstalt-Bankverein
Schottengasse 6, 1010 Vienna
Auditors
McGladrey & Pullen, L.L.P.
1133 Avenue of the Americas
New York, New York 10036 USA
General Distribution and Service Company
Templeton Global Strategic Services (Deutschland) GmbH
Taunusanlage 11, 60329 Frankfurt a.M.
In countries where the offering of the securities described herein is not
permitted this prospectus does not constitute an offer. No investment brokers,
dealers or other persons are entitled to give
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information or commitments not contained in this prospectus.
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TABLE OF CONTENTS
PAGE NUMBER
Participation in the Fund
Important notice
Participation in the fund
Publications
Expense table
Financial highlights
Investment objective and policies
Investment techniques Repurchase agreements Stock index options Stock index
futures contracts Depositary receipts Debt securities
Investment restrictions
Risks
How to buy shares of the fund
Paying agents
Account maintenance
Determination of net asset value Suspensions in determining the net asset value
Offering price Sales charge Cumulative quantity discount Letter of intent Group
purchases Net asset value purchases Savings plan Institutional accounts Account
statements Exchange privilege How to sell shares of the fund Reinstatement
privilege Deferred sales charge Systematic withdrawal plan Management of the
fund Investment manager
Investment management agreement
Management fees
Business manager
Transfer agent
Custodian
Independent accountants
Representatives
Statements and reports
Distribution service plan
General information
Description of shares/share certificates
Meetings of shareholders
Dividends and distributions
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Tax status
Taxes in the USA
Taxes in the Federal Republic of Germany
Taxes in the Republic of Austria
Inquiries
Performance information
Jurisdiction
Right of revocation
Contractual conditions
6
IMPORTANT NOTICE
This prospectus contains information on Templeton Growth Fund, Inc. (the "Fund"
or the "Investment Company") which future Shareholders should be aware of before
they invest. It is recommended that investors carefully read this prospectus and
keep it with the other documents given to them.
Templeton Growth Fund, Inc. was incorporated under the laws of Maryland on
November 10, 1986, with unlimited duration, and is a successor to Templeton
Growth Fund, Ltd. The Fund is registered under the Investment Company Act of
1940, as amended (the "1940 Act") as an open-end, diversified investment company
in the United States of America with the Securities and Exchange Commission
("SEC") under Registration No. 33-9981. The Shares of the Fund are not traded on
a securities exchange but, rather, under normal circumstances are redeemed by
the Fund at all times.
The German version of the prospectus and all of the other published documents of
the Fund govern your legal relationship with the Fund. The text of the
contractual conditions is included in this prospectus starting on page 30. A
complete transcript of the charter/bylaws of the Fund and of the additional
information will be supplied to you upon request from the German service company
Templeton Global Strategic Services (Deutschland) GmbH.
The prospectus is to be accompanied by an annual report with a closing date not
longer than 16 months past, and when the closing date is more than 9 months past
a semi-annual report is also to be included.
The investment shares have been neither approved nor disapproved by the
Securities and Exchange Commission or state regulatory agencies in the United
States, and nor has the Securities and Exchange Commission or the state
regulatory agencies given an opinion on the accuracy or adequacy of this
prospectus. Representations to the contrary constitute a criminal offense.
The investment company is under the supervision of neither the Federal
Regulatory Office for the Credit System nor any other governmental supervision
by a German authority, though the intention to distribute the Shares of the
investment company in the Federal Republic of Germany has been reported to the
Federal Regulatory Office for the Credit System since July 28, 1982 in
accordance with Section 3 of the Foreign Investment Law.
The investment company is under the supervision of neither the Federal Ministry
of Finance nor any other governmental supervision by an Austrian authority. The
distribution of the investment Shares in the Republic of Austria is reported to
the Federal Ministry of Finance, Department V/13, Vienna, in accordance with
Section 3 of the Investment Fund Law of 1993.
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Investment Shares are not deposits or obligations of, or guaranteed or endorsed
by, a bank. Furthermore, investment Shares in the United States are not insured
by the Federal Deposit Insurance Corporation, the Federal Reserve Board or any
other agency. Investment Shares involve economic risks including the possible
loss of capital.
Deposits of the investment Shares with the custodian are not covered by deposit
insurance mechanisms.
PARTICIPATION IN THE FUND
The investment Shares of Templeton Growth Fund, Inc. have been offered since May
1, 1995 in Germany and Austria under the category of Class I Shares with no
change in the rights pertaining to them. The new category was needed because a
new class of Shares in the Fund assets is being offered in the United States
(Class II Shares) which involves a different expense structure.
In Germany and Austria only the Class I Shares are available. If you desire to
acquire these Shares, please fill out the Shareholder Application and sent it to
the address provided. If you need assistance in filling it out, please consult
your investment broker or the German service company. The Class I Shares can be
acquired at the Offering Price, which is calculated on the basis of the net
asset value per Share in addition to sales charges of a maximum of 5.75% of the
Offering Price (6.10% of the net asset value). The initial investment must
amount to at least DM 5,000 (in Germany) or Sch 35,000 (in Austria). Subsequent
payments, other than a Savings Plan, must be at least DM 1,000 (see the section
"How to Buy Shares of the Fund").
PUBLICATIONS
Daily the Fund publishes the Offering Price and Liquidation Price, among other
things, in the following newspapers:
"Borsen-Zeitung" (interim gains and certain other proceeds are also
here)
"Die Welt"
"Frankfurter Allgemeine Zeitung"
"Handelsblatt"
"Hannoversche Allgemeine Zeitung"
"Stuttgarter Zeitung"
"Suddeutsche Zeitung"
"Der Standard" (Austria)
EXPENSE TABLE
The purpose of this table is to assist an investor in understanding the direct
and indirect costs in connection with an investment in
8
the Fund. The figures are estimates for the Fund's current fiscal
year.
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge
Imposed on Purchases
(as a percentage of
Offering Price 5.75%
Deferred Sales Charge None*
Exchange Fee None***
ANNUAL FUND OPERATING EXPENSES (As a percentage of average net assets)
Management Fees 0.62% 12b-1 Costs 0.22%** Other Expenses (audit, legal, business
management, transfer agent and custodian) 0.26% Total Fund Operating Expenses
1.10%
* Investments of $1 million or more are not subject to a front-end sales charge;
however, a deferred sales charge of 1% is imposed on certain redemptions within
12 months of the month of such investments. See the sections "How to Sell Shares
of the Fund" and "Deferred Sales Charge".
** These expenses may not exceed 0.25% of the Fund's average net assets (see the
section "Distribution Service Plan"). With a longer period of time it is
possible that the combination of front-end sales charges and these costs could
result in an amount which is higher than the maximum sales charge as the Fund
may calculate when they are calculated at the full level as sales charges.
*** Shareholders should only consider exchanges with other Templeton Funds which
are permitted to effect public distribution of their Shares in Germany or
Austria, as significant tax disadvantages are risked otherwise. In any event, an
exchange fee at present is only charged for "Timing Accounts", which are not
offered to Germany and Austrian investors at the present time.
Investors should be aware that the above table is not intended to reflect in
precise detail the fees and expenses associated with an individual's own
investment in the Fund. Rather, the table has been provided only to assist
investors in gaining a more complete understanding of fees, charges and
expenses. The information in this table does not reflect the charge of up to $15
per transaction if a Shareholder requests that redemption proceeds be sent by
express mail or wired to a commercial bank account. For a more detailed
discussion of these matters, investors should refer to the
9
appropriate sections of this Prospectus.
In a $1,000 investment in the Fund you would pay the following expenses,
assuming (1) a 5% annual rate of return and (2) redemption at the end of each
time period:
ONE YEAR THREE YEAR FIVE YEARS TEN YEARS
US $68 US $91 US $115 US $186
The annual return of 5% and the annual expenses are not to be interpreted as
commitments as to actual or expect performance or the actual or expected
expenses of the Fund. Deviations may arise in both cases.
For your better understanding, note that you will only be directly charged the
sales charges while the annual operating expenses of the Fund are paid from its
assets and are already taken into account in the determination of the net asset
value.
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FINANCIAL HIGHLIGHTS
(per Share issued during the period of time indicated)
The following tables of selected financial information have been audited by
McGladrey & Pullen, LLP, independent certified public accountants, for the
periods indicated in the 1995 Annual Report. This report is attached to the
prospectus. The financial data should be read in conjunction with the other
financial statements and notes thereto included in the 1995 Annual Report.
Further data on the performance of the fund is set forth there.
YEAR ENDED AUGUST 31 Pro Forma*
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Earnings per share
(for a Share outstanding
throughout the period)
1995 1994 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------
Net asset value,
beginning of
period $ 18.95 $ 17.47 $ 15.81 $ 16.14 $ 15.23 $ 16.62 $ 13.65 $ 17.13
- -------------------------------------------------------------------------------
Income from investment operations:
Net investment
income .39 0.29 0.32 0.41 0.45 0.57 0.58 0.45
Net realized
and unrealized
gain (loss) 1.20 2.58 2.97 0.92 1.68 (0.87) 3.12 (2.41)
Total from
investment
operations 1.59 2.87 3.29 1.33 2.13 (0.30) 3.70 (1.96)
Less distributions:
Dividends from
net investment
income (.29) (0.27) (0.36) (0.44) (0.54) (0.62) (0.48) (0.44)
Distributions
from net
realized
gains (1.29) (1.12) (1.27) (1.22) (0.68) (0.47) (0.25) (1.08)
Total
distributions (1.58) (1.39) (1.63) (1.66) (1.22) (1.09) (0.73) (1.52)
Change in
net asset
value for
the year .01 1.48 1.66 (0.33) 0.91 (1.39) 2.97 (3.48)
Net asset
value, end
of year $18.96 $18.86 $ 17.47 $ 15.81 $ 16.14 $ 15.23 $ 16.62 $ 13.65
- -------------------------------------------------------------------------------
TOTAL RETURN*** 9.51% 17.47% 23.57% 9.22% 15.95% (2.01)% 28.38% (9.86)%
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RATIOS/SUPPLEMENTAL DATA
Net assets,
end of year
(000) $6,964,298 $5,611,560 $4,033,911 $3,268,644 $2,895,684 $2,466,684 $2,355,306 $1,572,112
Ratio to
average
net assets
of:
Expenses 1.12% 1.10% 1.03% 0.88% 0.75% 0.67% 0.66% 0.69%
Net
investment
income 2.40% 1.76% 2.10% 2.62% 3.09% 3.70% 4.20% 3.50%
Portfolio
turnover
rate 35.21% 27.35% 28.89% 29.46% 30.28% 18.47% 11.55% 11.44%
12
Eight Month Eight Month Eight Month
Period to Period to Period to
8/1/87 12/1/86 4/30/86
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 12.87 $ 13.33 $ 10.14
- -------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.29 0.14 0.19
Net realized and unrealized gain (loss) 3.97 0.28 3.72
Total from investment operations 4.26 0.42 3.91
Less distributions:
Dividends from net investment income -- (0.40) (0.24)
Distributions from net realized gains -- (0.48) (0.48)
Total distributions -- (0.88) (0.72)
Change in net asset value for the year 4.26 (0.46) 3.19
- ----------------------------------------------------------------------------
Net asset value, end of period $ 17.13 $ 12.87 $ 13.33
- ----------------------------------------------------------------------------
TOTAL RETURN*** 33.10% 3.32% 40.92%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000) $1,633,909 $1,132,570 $2,397,926
Ratio to average net assets of:
Expenses 0.66%** 2.40%** 2.50%
Net investment income 2.99%** 1.76%** 2.11%
Portfolio turnover rate 17.55% 9.50% 23.00%
</TABLE>
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* The Fund commenced operations on December 31, 1986 as successor in interest to
58% of Templeton Growth Fund, Ltd. (the "Canadian Fund") which reorganized into
two funds on that date. In accordance with the terms of the reorganization, the
Canadian shareholders, representing 42% of the shares outstanding, remained
shareholders of the Canadian Fund and the non-Canadian shareholders,
representing 58% of the shares outstanding, became Shareholders of the Fund. The
per share table is presented as if the reorganization took place as of the
inception of the Canadian Fund, 58% of the net assets and Shares outstanding
were allocated to the Fund and the Fund continued to operate in Canada subject
to Canadian federal and provincial taxes until December 31, 1986. No other pro
forma adjustments have been made for any changes in operating costs had the
reorganization taken place at that date. Since the table is on the basis of a
single Share outstanding throughout the period, the results illustrated, except
for the number of Shares outstanding at the end of each year, are the same as
those shown for the Canadian Fund.
** Annualized.
*** Total return does not reflect sales charges.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is long-term capital growth, which it seeks to
achieve through a flexible policy of investing in stocks and debt obligations of
companies and governments of any nation. Any income realized will be incidental.
There can be no assurance that the Fund's investment objective will be achieved.
Although the Fund generally invests in common stock, it may also invest in
preferred stocks and certain debt securities, 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
Techniques", 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.
14
The Investment Objective and Policies described above, as well as the Investment
Restrictions described under "Investment Restrictions", 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 Techniques".
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.
The Fund is not limited to investing in marketable securities and may also
acquire securities whose disposition may be restricted in any manner by virtue
of contractual engagements. The Fund may hold all of its assets in deposits,
which, however, on the basis of its investment objective, it will not do.
INVESTMENT TECHNIQUES
The Fund may make use of the various investment techniques described below.
Although these techniques 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 probably will not be used in
the future.
REPURCHASE AGREEMENTS. When the Fund acquires a security from a U.S. bank or a
registered broker-dealer, it may simultaneously enter into a repurchase
agreement, wherein the seller agrees to repurchase the security at a specified
time and price. The repurchase price is in excess of the purchase price by an
amount which reflects an agreed-upon rate of return, which is not tied to the
coupon rate of the underlying security. Under the 1940 Act, repurchase
agreements are considered to be loans collateralized by the underlying security
and therefore will be fully collateralized. However, if the seller should
default on its obligation to repurchase the underlying security, the Fund may
experience delay or difficulty in exercising its rights to realize upon the
security and might incur a loss if the value of the security declines, as well
as incur disposition costs in liquidating the security.
15
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.
Just as with other lending, however, there are the risks of delayed payment or
even loss of claims on collateral if the borrower goes into bankruptcy.
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 (National
Association of Securities Dealers Automated Quotations System). 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
16
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.
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. The Fund's investment policies also permit it to
buy and sell stock index futures contracts with respect to any stock index
traded on a recognized stock exchange or board of trade, to an aggregate amount
not exceeding 20% of the Fund's total assets at the time when such contracts are
entered into. Successful use of stock index futures is subject to the Investment
Manager's ability to predict correctly movements in the direction of the stock
markets. No assurance can be given that the Investment Manager's judgment in
this respect will be correct.
A stock index futures contract is a contract to buy or sell units of a stock
index at a specified future date at a price agreed upon when the contract is
made. The value of a unit is the current value of the stock index. For example,
the Standard & Poor's 500 Stock Index (the "S&P 500 Index") is composed of 500
selected common stocks, most of which are listed on the New York Stock Exchange
("NYSE"). The S&P 500 Index assigns relative weightings to the value of one
share of each of these 500 common stocks included in the Index, and the Index
fluctuates with changes in the market values of the shares of those common
stocks. In the case of the S&P 500 Index, contracts are to buy or sell 500
units. Thus, if the value of the S&P 500 Index were US $150, one contract would
be worth US $75,000 (500 units x US $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 US $150 and the S&P
500 Index is at US $154 on that future date, the Fund will gain US $2,000 (500
units x gain of US $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 US
$150 and the S&P 500 Index is at US $154 on that future date, the Fund will lose
US $2,000 (500 units x loss of US $4).
During or in anticipation of a period of market appreciation, the Fund may enter
into a "long hedge" of common stock which it
17
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).
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 non U.S. corporation. EDRs and
GDRs are typically issued by foreign (i.e., non U.S.) banks or
trust companies, although they also may be issued by U.S. banks or
trust companies, and evidence ownership of underlying securities
18
issued by either a foreign (i.e., non U.S.) or a United States corporation.
Generally, Depositary Receipts in registered form are designed for use in the
U.S. securities market and Depositary Receipts in bearer form are designed for
use in securities markets outside the United States. Depositary Receipts may not
necessarily be denominated in the same currency as the underlying securities
into which they may be converted. Depositary Receipts may be issued pursuant to
sponsored or unsponsored programs. In sponsored programs, an issuer has made
arrangements to have its securities traded in the form of Depositary Receipts.
In unsponsored programs, the issuer may not be directly involved in the creation
of the program. Although regulatory requirements with respect to sponsored and
unsponsored programs are generally similar, in some cases it may be easier to
obtain financial information from an issuer that has participated in the
creation of a sponsored program. Accordingly, there may be less information
available regarding issuers of securities underlying unsponsored programs and
there may not be a correlation between such information and the market value of
the Depositary Receipts. Depositary Receipts also involve the risks of other
investments in non U.S. 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.
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
19
redemption requests or to respond to changes in the economy or financial markets
and can subject the actual net value of the Shares of the Fund to unfavorable
influences and oscillations.
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 market for low grade bonds is relatively young and many of the low
rated bonds presently on the market have not weathered a major recession.
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.
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
20
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 own more than 0.5% of the
securities of such company or 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
21
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 one of the two New York exchanges (NYSE and AMEX), 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" (shares which can only be issued on the basis of a
"Special Letter" from the Securities and Exchange Commission (SEC) 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 under
Determination of Net Value. 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).
RISKS
22
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, market factors and currency
valuations.
In addition to the factors which affect the value of individual securities, a
Shareholder may anticipate that the value of the Shares of the Fund will
fluctuate with movements in the broader equity and bond markets. A decline in
the stock market of any country in which the Fund is invested may also be
reflected in declines in the price of Shares of the Fund. Changes in currency
valuations will also affect the price of Shares of the Fund. History reflects
both decreases and increases in worldwide stock markets and currency valuations,
and these may reoccur unpredictably in the future. The value of debt securities
held by the Fund generally will vary inversely with changes in prevailing
interest rates. Additionally, investment decisions made by the Investment
Manager will not always be profitable or prove to have been correct.
Finally, the exchange rate between the dollar and the DM and the Austrian Sch
has undergone major oscillations in the past and thus can significantly
influence the investment returns. The Fund is not intended as a complete
investment program.
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
23
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.
The Fund has the right to purchase securities in any country, developed or
developing. Investors should consider carefully the substantial risks involved
in investing in securities issued by U.S. companies and the U.S. government,
which are in addition to the usual risks inherent in investments within the
United States. There is the possibility of expropriation, nationalization or
confiscatory taxation, taxation of income earned outside of the United States or
other taxes imposed with respect to securities outside of the United States,
exchange controls (which may include suspension of the ability to transfer
currency from a given country), default in non U.S. Government securities,
political or social instability, or diplomatic developments which could affect
investment in securities of issuers outside of the United States. 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. Non U.S. companies
are not generally subject to uniform accounting, auditing and financial
reporting standards, and auditing practices and requirements may not be
comparable to those applicable to United States companies. The Fund may
encounter difficulties or be unable to vote proxies, exercise shareholder
rights, pursue legal remedies, and obtain judgments in non U.S. courts.
Brokerage commissions, custodial services, and other costs relating to
investment outside of the United States are generally more expensive than in the
United States. Non U.S. 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
24
portfolio securities due to settlement problems could result either in losses to
the Fund due to subsequent declines in value of the portfolio security or, if
the Fund has entered into a contract to sell the security, could result in
possible liability to the purchaser. In many countries, there is less government
supervision and regulation of business and industry practices, stock exchanges,
brokers and listed companies than in the United States. In addition, the
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.
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 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
25
may be illiquid.
The Fund usually effects currency exchange transactions on a spot (i.e., cash)
basis at the spot rate prevailing in the non U.S.
exchange market.
The Fund's management endeavors to buy and sell 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 outside of the United States. 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.
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 experienced a steady devaluation relative to the U.S. dollar.
Any devaluations in the currencies in which the Fund's portfolio securities are
denominated may have a detrimental impact on the Fund.
Through the Fund's flexible policy, management endeavors to avoid unfavorable
consequences and to take advantage of favorable developments in particular
nations where, from time to time, it places the Fund's investments. The exercise
of this flexible policy may include decisions to purchase securities with
substantial risk characteristics and other decisions such as changing the
emphasis on investments from one nation to another and from one type of security
to another. Some of these decisions may later prove profitable and others may
not. No assurance can be given that profits, if any, will exceed losses.
The Directors consider at least annually the likelihood of the imposition by any
non U.S. Government of exchange control restrictions which would affect the
liquidity of the Fund's assets maintained with custodians outside of the United
States, as well as the degree of risk from political acts of non U.S.
governments to which such assets may be exposed. The Directors also consider the
degree of risk involved through the holding of portfolio securities in U.S. and
non U.S. securities depositories. 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 outside of the United States and/or with securities depositories
outside of the United States will be at the risk of the Shareholders. No
assurance can be
26
given that the Directors' appraisal of the risks will always be correct, or that
such exchange controls will not be introduced, or that the policies of non U.S.
governments will not change.
HOW TO BUY SHARES OF THE FUND
Shares of the Fund may be purchased at the Offering Price through:
Templeton Global Strategic Services (Deutschland) GmbH
Taunusanlage 11, 60329 Frankfurt a.M.,
Telephone (00 49) 6 92 72 23-272
Fax (00 49) 6 92 72 23-120
Templeton Global Strategic Services (Deutschland) GmbH is the general
distribution company of the Fund for Europe and has entered into many
distribution agreements with investment brokers and banks enabling them to
independently deal in the Shares of the Fund.
The Shareholder Application should be sent to Templeton Global Strategic
Services (Deutschland) GmbH.
The broker is neither a servant of the Fund nor of the general distribution
company, and nor does the broker represent them in any other manner.
The authorized capital of the general distribution company was DM 1 million as
of 9/30/95.
In Germany the amount of the investment should be paid in DM at Chase Bank AG,
at Bankhaus Marcard, Stein & Co. or at Bank Merck Finck & Co. with the
annotation "Templeton Growth Fund Inc." If a nonnegotiable check in DM is issued
it should be made out to the Templeton Growth Fund, Inc. and the application
should be attached to it (see under "Paying Agents").
In Austria a direct deposit agent is recommended. Remittances of the application
amount should be effected in Austrian Sch to Creditanstalt-Bankverein with the
annotation "Templeton Growth Fund, Inc." If a nonnegotiable check in Sch is
issued it should be made out to the Templeton Growth Fund, Inc. and the
application should be attached to it (see under "Paying Agents").
Applications can also be sent to Templeton Global Strategic Services
(Deutschland) GmbH with a check in U.S. dollars drawn on a U.S. bank and made
out to the Transfer Agent of the Fund, Franklin Templeton Investor Services,
Inc. On behalf of and at the risk of the investor, Templeton Global Strategic
Services (Deutschland) GmbH forwards these documents to the Transfer Agent.
If a check in U.S. dollars is drawn on a non U.S. bank, Franklin
Templeton Investor Services, Inc. requires this amount first. Only
after receipt of the money by Franklin Templeton Investor Services,
27
Inc. can the application be activated.
Templeton Global Strategic Services (Deutschland) GmbH next reviews the
application for sufficiency and then forwards it with the check to Franklin
Templeton Investor Services, Inc.
After receipt of the application and payment at the business office of the
Transfer Agent it calculates the number of whole and fractional Shares of the
Fund acquired on the basis of the Offering Price, determined first after receipt
of the application and payment by Franklin Templeton Investor Services, Inc.
The Shareholders are then immediately mailed a written statement as to the
Shares of the Fund they have acquired along with the number of their shareholder
account at Franklin Templeton Investor Services, Inc. On written request
Franklin Templeton Investor Services, Inc. will issue a certificate for all of
the whole Shares
of a shareholder account.
Any Shareholder Application may be rejected by the Fund or by the Transfer
Agent.
Further payments to shareholder accounts already in existence can
be made to Account No. 623 12 04733 at Chase Bank AG, Frankfurt
(Bank Code No. 501 108 00), to Account No. 3010 014 at Bankhaus
Marcard, Stein & Co., Hamburg (Bank Code No. 200 304 00), to
Account No. 30 121 060 at Bankhaus Merck Finck & Co., Hamburg (Bank
Code No. 200 307 00) and in Austrian Sch to Account No. 0003-
00145/11 at Creditanstalt-Bankverein Wien (Vienna). They are to be
accompanied by the number of the shareholder account at Franklin
Templeton Investor Services, Inc.
Templeton Global Strategic Services (Deutschland) GmbH is to be informed of this
payment when placing an order in order to assure that a possible lower issuance
fee is applied.
Investors should immediately check the order statements which are mailed to them
after each purchase (or each redemption) to verify that the proper posting has
been made to the shareholder account of the investor.
PAYING AGENTS
In Germany the following act as Paying Agents for the Fund:
Chase Bank AG
Alexanderstrasse 59, 60489 Frankfurt a. M.
Account No. 623 12 04733, Bank Code No. 501 108 00,
Marcard, Stein & Co.
Ballindamm 36, 20095 Hamburg
Account No. 3010 014, Bank Code No. 200 304 00
28
and
Merck Finck & Co.
ABC-Strasse 47, 20354 Hamburg
Account No. 30 121 060, Bank Code No. 200 307 00.
In Austria the following acts as Paying Agent for the Fund:
Creditanstalt-Bankverein
Schottengasse 6, 1010 Vienna
Account No. 0003-00145/11, Bank Code No. 110 00.
The use of Paying Agents facilitates the movement of payments between the
investor and the Transfer Agents of the Fund. The Fund pays an annual fee to
Chase Bank AG of DM 5,000, to Marcard, Stein & Co. and to Merck Finck & Co. an
annual fee of US $15,000 each, and to Creditanstalt-Bankverein an annual fee of
35,000 Austria Sch. Costs incurred are also reimbursed.
Payments should be made in DM in Germany and in Sch in Austria.
In Germany the amounts received in U.S. dollars (or on transfers of redemption
proceeds through the Transfer Agents in DM) are converted by the Paying Agents
and these amounts are immediately forwarded to the Transfer Agents to the
investor's account or, for redemptions proceeds, to the investor. As of February
1, 1996 the Paying Agents will not longer charge a processing fee to the
investor for this service.
In Germany investors may demand payment in German marks through the Paying
Agents for redemption proceeds, distributions and other payments.
In Austria, Creditanstalt-Bankverein forwards the amounts received immediately
to the Transfer Agents to the investor's account. Investors may demand payment
in Austria schillings through the Paying Agents for redemption proceeds,
distributions and other payments.
Investors can also pay by check in U.S. dollars made out to
Franklin Templeton Investor Services, Inc. Such checks must be
drawn on U.S. banks.
All amounts received directly by a Transfer Agent or through a Paying Agent will
be applied, after deduction of the sales charges, to the acquisition of Shares
of the Fund at the net asset value calculated at the close of the trading day of
the New York Stock Exchange following receipt of the money by the Transfer
Agent, provided that the Transfer Agent has at that time a sufficiently complete
Shareholder Application. Only then does the investor become a Shareholder of the
Fund. Prior to that time no rights or engagements exist between the Fund and the
investor.
29
ACCOUNT MAINTENANCE
Accounts can be opened either for a single investor or for two joint investors
(joint account). Dispositions of joint accounts can only be effected with the
signatures of both holders of the account. By opening a joint account the
account holders authorize the Fund or the Transfer Agent to transfer their share
to the surviving account holder in the event of their death. If, however, the
heir of the deceased account holder revokes the transfer order before the Fund
or the Transfer Agent can effect it, the surviving account holder will not be
able to demand transfer of the share, if he would receive it from the deceased
by way of gift.
In the event of death the Fund may demand the submittal of letters of
administration, letters testamentary or other documents needed for verification
of entitlement to availment. The Fund may waive the submittal of letters of
administration or letters testamentary when it has an original copy or a
certified copy of the testamentary disposition (will or inheritance agreement)
along with the pertinent probate record. The Fund may consider those indicated
therein as heirs or testamentary executors to be those entitled, may allow them
to effect dispositions and, in particular, freely render service to them.
This does not apply when the Fund knows that the person indicated therein is not
entitled to disposition or when the Fund is not informed as to this as the
result of any negligence.
DETERMINATION OF 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 non U.S. security is determined in its national currency as of the close of
trading on the non U.S. exchange on which it is traded, or as of the scheduled
closing time of the NYSE, 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 non U.S. 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
30
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.
The expenses of the Fund will be borne by both of the Fund's classes in
proportion to the respective outstanding number of shares of each class, so that
each class will only bear the costs of the distribution service plan applicable
to it. The allocation of the net assets is also determined in proportion to the
outstanding shares.
SUSPENSIONS IN DETERMINING THE NET ASSET VALUE
The Board of Directors may establish procedures under which the Fund may suspend
the determination of net asset value for the whole or any part of any period
during which (1) the NYSE is closed other than for customary weekend and holiday
closings, (2) trading on the NYSE is restricted, (3) an emergency exists as a
result of which disposal of securities owned by the Fund is not reasonably
practicable or it is not reasonably practicable for the Fund fairly to determine
the value of its net assets, or (4) for such other period as the SEC may by
order permit for the protection of the holders of the Fund's Shares. As long as
there is a suspension of the determination of the net asset value the Fund will
effect no issuance, redemption or exchange of its shares.
OFFERING PRICE
The price to the public on purchases of Class I Shares made by a single
purchaser, by an individual together with his or her spouse and their children
under age 21 and their grandchildren under age 21, or by a single trust or
fiduciary account other than a (U.S.) employee benefit plan, is the net asset
value per Share plus a sales charge according to the following table:
SALES CHARGE
<TABLE>
<CAPTION>
Amount of As a Percentage As a Percentage
Investment of the Gross of the Net
at Offering Investment Investment
Price (Offering Price) (Offering Price
less Sales
Charges)
31
<S> <C> <C>
Less than $50,000 5.75% 6.10%
$50,000 but less than
$100,000 4.50% 4.71%
$100,000 but less than
$250,000 3.50% 3.63%
$250,000 but less than
$500,000 2.50% 2.56%
$500,000 but less than
$1,000,000 2.00% 2.04%
$1,000,000 or more none none
</TABLE>
No front-end sales charge applies to investments of US $1 million or more, but a
deferred sales charge of 1% is imposed on certain redemptions of all or a
portion of investments of US $1 million or more within 12 months of the calendar
month of such investments.
A portion or all of the sales charge is paid by Templeton Global Strategic
Services (Deutschland) GmbH to persons, banks and other entities who have
brokered the acquisition of the Shares of the Fund.
In the following an example is given of the offering price as of August 31,
1995.
The assets of the Fund in the amount of US $7,071,944,192, less liabilities of
US $65,097,618, leaves net assets of the Fund at US $7,006,846,574, of which a
share of US $6,964,298,306 pertains to Class I. These net assets, divided by the
number of outstanding Class I shares (367,396,849) as of 8/31/95, result in a
net asset value per Class I share of US $18.96, which corresponds to the
redemption value on that date. The net asset value per Class I share in addition
to the sales charge of 6.10% (US $1.16) results in an offering price per Class I
share of US $20.12.
Upon determination of the pertinent sales charges the present investment amount
and the net asset value applicable at present or upon purchase (whichever is
higher) of the Class I shares already held by the investor in given U.S. Funds
of the Franklin Group of Funds and the Templeton Family of Funds (also "Franklin
Templeton Funds") are added in favor of the investor. In order to make use of
the reduced sales charge the investor must inform the distribution company of
his existing shareholder account.
As only some of the U.S. Franklin Templeton Funds are registered
32
for public distribution in Germany and Austria, if in doubt the
investor should contact Templeton Global Strategic Services
(Deutschland) GmbH.
CUMULATIVE QUANTITY DISCOUNT
The schedule of reduced sales charges per the sale charge table 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 the value
(calculated at the applicable Offering Price) or the purchase price of the
shares owned by the purchaser, his or her spouse, their children under age 21,
and their grandchildren under age 21 in a Franklin Templeton Fund.
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 US $40,000 (or, if
valued at less than US $40,000, had been purchased for US $40,000) and purchased
an additional US $20,000 of the Fund's Class I Shares, the sales charge for the
US $20,000 purchase would be at the rate of 4.50%. It is the policy of the
general distribution company 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 the general
distribution company sufficient information to determine whether the purchase
will qualify for the discount. The cumulative quantity discount may be amended
or terminated at any time.
LETTER OF INTENT
An Investor also may be eligible for reduced sales charges on 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 the Templeton Smaller Companies Growth Fund, Inc.
The appropriate forms can be obtained from Templeton Global Strategic Services
(Deutschland) GmbH. The initial investment must be at least DM 5,000 (in
Germany) or Sch 35,000 (in Austria), or amount to 5% of the target sum in
reference.
Shares purchased with the first 5% of the target 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.
33
A purchase not originally made pursuant to an LOI may be included under a
subsequent LOI executed within 90 days of the respective purchase.
Redemptions made by Shareholders 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.
GROUP PURCHASES
An individual who is a member or client of certain qualified groups who, for
example, also has life insurance connected with the fund, may also purchase
Class I Shares of the Fund at the sales charge applicable. Further information
can be obtained from Templeton Global Strategic Services (Deutschland) GmbH.
NET ASSET VALUE PURCHASES
Class I Shares may be purchased without the imposition of a sales charge ("net
asset value") by (i) officers, trustees, directors, and full-time employees of
the Fund, any of the Franklin Templeton Funds, or 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 with
the Fund; (iii) insurance company separate accounts for pension plan contracts;
(iv) accounts managed by the Franklin Templeton Group; (v) shareholders of the
unavailable (in Germany and Austria) 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; (vi) [sic] registered securities dealers or brokers for their
investment account only; and (viii) registered personnel and employees of
securities dealers and their family members, in accordance with the internal
policies and procedures of the employing securities dealer.
In the context of investments for various pension plans for U.S. employees, in
which German and Austrian Shareholders cannot participate under all rules, sales
charges are also not applied.
Finally, investment Shares may be acquired at the net asset value by banks and
securities servicing firms with moneys over which they have free and exclusive
investment power and which they hold as trustees, agents, advisors, custodians
or in similar capacities. Minimum requirements apply to such acquisitions which
can be requested from Templeton Global Strategic Services (Deutschland) GmbH.
34
Shares of the Fund may also be purchased at net asset value by any state, county
or city, or any instrumentality, department, authority or agency thereof which
has determined that the Fund is a legally permissible investment and which is
prohibited by applicable investment laws from paying a sales charge or
commission in connection with the purchase of shares of any registered
management investment company (an "eligible governmental authority"). Such
investors should consult their own legal departments to determine whether and to
what extent the shares of the fund constitute legal investments for them, and
can contact Templeton Global Strategic Services (Deutschland) GmbH for further
particulars.
SAVINGS PLAN
In Germany investors can open a savings plan in which they can may payment to
purchase Class I Shares in monthly or quarterly amounts.
The minimum amount for a savings installment is DM 300 (monthly or quarterly)
and no initial payment is required to initiate the savings plan.
In order to eliminate fees for the investor and the Fund, from April 1, 1996 the
savings plan will be operated by direct deposit.
Participants in the savings program are thus requested to provide a collection
authorization, revocable at all times, to Templeton Global Strategic Services
(Deutschland) GmbH in the application form so that it can debit their bank
account either on the first day of each month or of the first month of each
calendar quarter for the savings amount agreed to, and to credit the Paying
Agent's account for the Fund.
Participants in the savings program engage to have sufficient funds in their
bank account on the date of the debit entry and only to challenge the debits
entered when the content of the debit is not covered by the collection
authorization.
The sales changes will only apply on savings amounts actually paid in; no prior
charge will apply.
In Austria savings plans are presently not offered.
Investors should realize that the Shares of the Fund acquired in the context of
a savings plan may undergo oscillations in value and, under certain
circumstances, a constant increase in the asset value will not be achieved and,
under unfavorable circumstances, a loss may even be sustained in the savings
amount.
INSTITUTIONAL ACCOUNTS
35
There are additional methods of purchasing, redeeming or exchanging Shares of
the Fund available for institutional accounts. Additional information can be
obtained from Templeton Global Strategic Services (Deutschland) GmbH.
ACCOUNT STATEMENTS
Shareholder accounts are opened in accordance with the Shareholder's
registration instructions. Transactions in the account, such as additional
investments and dividend reinvestments, will be reflected on regular
confirmation statements from Franklin Templeton Investor Services, Inc. (the
"Transfer Agent").
EXCHANGE PRIVILEGE
Class I Shares of the Templeton Growth Fund, Inc. can be exchanged free of
charge for Class I Shares of other U.S. Franklin Templeton Funds which are
eligible for sale in the Shareholder's state of residence, doing so on the basis
of the respective net asset value per Share at the time of the exchange. If the
exchanged Shares were subject to a deferred sales charge in the original fund
purchased, and Shares are subsequently redeemed within 12 months of the calendar
month of the original purchase date, a deferred sales charge will be imposed.
The application can be made by letter, without the use of a form, in the German
language, to Templeton Global Strategic Services (Deutschland) GmbH.
Exchange purchases are subject to the minimum investment requirements of the
fund purchased and no sales charge generally applies when it had already been
charged on the original investment and no higher sales charge applies to the new
fund. Such exchanges are permitted only after at least 15 days have elapsed from
the date of the prior exchange or of the purchase of the Shares to be exchanged.
(Shares held in reserve under a letter of intent do not qualify for the exchange
privilege.)
This exchange privilege 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.
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. The application is to be sent in writing through:
36
Templeton Global Strategic Services (Deutschland) GmbH Taunusanlage 11, 60329
Frankfurt a.M.
to
Franklin Templeton Investor Services, Inc.
P.O. Box 33030
St. Petersburg, Florida 33733-8030
1. [sic] It must be 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.
2. The signature(s) of the redeeming Shareholder(s) must be
guaranteed.
Such signature guaranty must be performed in the manner employed for signature
guaranties by the subsidiaries of U.S. financial institutions and member firms
of the U.S. NASD or the British IMRO, or a similar independent administrative
agency, or that employed by a German or Austrian bank under license or permit in
accordance with Section 32 of the "KWG" or Section 4 of the "BWG", or else the
signature(s) must be certified by a German or Austrian notary.
If a share is registered to more than one person the signature of each redeeming
shareholder must be guaranteed. Legalization of the signature(s) by a U.S.
consulate or the certification of the signature(s) by a German or Austrian
notary is also sufficient.
For signature guaranties done in the United States special requirements apply
which are to be fulfilled with the German service company and the Transfer
Agent.
A signature guarantee is not required for redemptions of US $50,000 or less,
requested by a registered Shareholder. However, the Fund reserves the right to
require signature guarantees on all redemptions. A signature guarantee is
required in connection with any request for a transfer of Shares or when
payments at to be made to addresses other than the address registered with the
Transfer Agent. A signature guaranty is also required in connection with a
redemption of shares if the Transfer Agent has received instructions to change
the address within 30 days prior to receiving the redemption request.
Also, a signature guarantee is required if the Fund or the Transfer Agent
believes that a signature guarantee would protect the Fund 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
37
owner; (e) the Fund determines that joint owners who are married to each other
are separated; or (f) the authority of a representative of a company 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. In the case where the shares intended for redemption involve an estate, bank,
foundation, trust, custodian, corporation or partnership, documents must be
attached which, in the opinion of the Transfer Agent, substantiate the authority
of the signatory or signatories, or which satisfy all applicable legal
requirements. Further information can be obtained from Templeton Global
Strategic Services (Deutschland) GmbH.
The redemption application can also be made in accordance with the requirements
set forth above directly to Franklin Templeton Investor Services, Inc. In such
case, however, it must be made in the English language.
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 in U.S. dollars
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 air mail to the Shareholder's registered address (or as
otherwise directed). Remittance by wire to an account in the same name(s) as the
Shares are registered subject to a handling charge of up to US $15 which will be
deducted from the redemption proceeds.
The investor may also demand payment through the Paying Agent.
The Fund may involuntarily redeem an investor's Shares if the net asset value of
such Shares is less than US $100, except that involuntary redemptions will not
result from fluctuations in the value of an investor's Shares. In addition, the
Fund may involuntarily redeem the Shares of any investor who has failed to
provide the Fund with a certified taxpayer identification number or such other
tax-related certifications as the Fund may require. A notice of redemption sent
by air 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 US $100 or more, or unless
a certified taxpayer identification number (or such
38
other information as the Fund has requested) has been provided, as the case may
be. A check for the redemption proceeds will be mailed to the investor at the
address of record.
REINSTATEMENT PRIVILEGE
Former Shareholders can reinvest the proceeds of redemptions of Shares and
dividends or capital gain distributions free of sales charges in the Templeton
Growth Fund, Inc. and/or the Templeton Smaller Companies Growth Fund, Inc. if,
within 365 days after the date of the redemption or dividend or distribution,
they send a written application and a check to the Transfer Agent. Each
Shareholder can only make use of this right once. The reinstatement will then be
effected at the net asset value, calculated right after receipt. Credit will be
given for any deferred sales charge paid on the Shares redeemed. The tax
liability on redemption proceeds and dividend distributions will subsist
regardless of whether the income has been reinvested.
DEFERRED SALES CHARGE
In order to recover commissions paid to investment brokers for investments of US
$1 million or more, the pertinent Class I Shares redeemed within the period of
12 months of the calendar month of their purchase will be assessed a deferred
sales charge. The deferred charge is 1% of the lesser of the 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. In determining if a deferred sales charge applies, and at what amount,
Shares not subject to a deferred sales charge are deemed to be redeemed first,
including those held longer. In a Share exchange (excluding Shares acquired by
exchange which are redeemed within 12 months after the initial acquisition) and
in distributions to the Shareholders of certain U.S. pension plans, sales
charges due subsequently are waived.
SYSTEMATIC WITHDRAWAL PLAN
A Shareholder may establish a Systematic Withdrawal Plan ("Plan") and receive
periodic monthly, quarterly, semiannual or annual payments from the account from
his account of US $100 dollars or more. The equivalent value of the Shares held
by the Shareholder must be at least US $25,000. There are no service charges for
establishing or maintaining a Plan. Capital gain distributions and income
dividends paid 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. The payment of the liquidation price is effected
by check in U.S.
39
dollars within seven days after the date of liquidation in good
order.
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
40
event of a market decline. If sufficient Shares are not posted on the date of
the agreed distribution no payment under the plan will be made and, rather, the
account will be closed and the remaining balance will be sent to the
Shareholder. The payments under the withdrawal plan cannot be considered pure
profit or income because part of the payment may be in the nature of a return of
the invested capital.
Maintaining a Plan concurrently with purchases of additional Shares of the Fund
would be disadvantageous because of the sales charge on the additional
purchases. The Shareholder should ordinarily not make additional investments of
less than US $5,000 or three times the annual withdrawals.
The deferred sales charge is waived for withdrawal plans set up prior to
February 1, 1995. With respect to a withdrawal plan set up on or after February
1, 1995 on Shares acquired without sales charges, the applicable deferred sales
charge is waived up to 1% monthly of an account's net asset value.
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. Share certificates may not be issued while a Plan
is in effect.
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. 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:
HARRIS J. ASHTON
Metro Center 1 Station Place Stamford, Connecticut Director Chairman of the
Board, president and chief executive officer of General Host Corporation
(nursery and craft centers); and a
director of RBC Holdings (U.S.A.)Inc. (a bank holding company) and
Bar-S Foods.
NICHOLAS F. BRADY*
The Bullitt House
102 East Dover Street Easton, Maryland
Director
Chairman of Templeton Emerging Markets Investment Trust PLC;
chairman of Templeton Latin America Investment Trust PLC; chairman
of Darby Overseas Investments, Ltd. (an investment firm) (1994-
present); director of the Amerada Hess Corporation, Capital
Cities/ABC, Inc., Christiana Companies, and the H.J. Heinz Company;
41
Secretary of the United States Department of the Treasury
(1988-January 1993); and chairman of the board of Dillion, Read &
Co. Inc. (investment banking) prior thereto.
Age 65.
F. BRUCE CLARKE
19 Vista View Blvd.
Thornhill, Ontario
Director
Retired; formerly, credit adviser, National Bank of Canada,
Toronto.
Age 85.
HASSO-G VON DIERGARDT
R.R. 3 Stouffville, Ontario
Director
Farmer; and president of Clairhaven Investments, Ltd. and other
private investment companies.
Age 79.
S. JOSEPH FORTUNATO
200 Campus Drive
Florham Park, New Jersey
Director
Member of the law firm of Pitney, Hardin, Kipp & Szuch; and a director of
General Host Corporation.
Age 63.
JOHN Wm. GALBRAITH
360 Central Avenue Suite 1300
St. Petersburg, Florida
Director
President of Galbraith Properties, Inc. (personal investment
company); director of Gulfwest Banks, Inc. (bank holding company)
(1995- present) and Mercantile Bank (1991-present); vice chairman
of Templeton, Galbraith & Hansberger Ltd. (1986-1992); and chairman
of Templeton Funds Management, Inc. (1974- 1991).
Age 74.
ANDREW H. HINES, JR.
150 2nd Avenue N.
St. Petersburg, Florida
Director Consultant for the Triangle Consulting Group; chairman of the board and
chief executive officer of Florida Progress Corporation (1982-February 1990) and
director of various of its subsidiaries; chairman and director of Precise Power
Corporation; executive-in-residence of Eckerd College (1991-present); and a
director of Checkers Drive-In Restaurants, Inc.
Age 72.
CHARLES B. JOHNSON*
777 Mariners Island Blvd.
42
San Mateo, California
Chairman of the Board and
Vice President
President, chief executive officer, and director of Franklin Resources, Inc.;
chairman of the board and director of Franklin Advisers, Inc. and Franklin
Templeton Distributors, Inc.; director of Franklin Administrative Services,
Inc., General Host Corporation, and Templeton Global Investors, Inc.; and
officer and director, trustee or managing general partner, as the case may be,
of most other subsidiaries of Franklin and of 55 of the investment companies in
the Franklin Templeton Group. Age 62.
BETTY P. KRAHMER
2201 Kentmere Parkway
Wilmington, Delaware
Director
Director or trustee of various civic associations; formerly,
economic analyst, U.S. Government.
Age 66.
GORDON S. MACKLIN
8212 Burning Tree Road
Bethesda, Maryland
Director Chairman of White River Corporation (information services); director of
Fund America Enterprises Holdings, Inc., Lockheed Martin Corporation, MCI
Communications Corporation, Fusion Systems Corporation, Infovest Corporation,
and Medimmune, Inc.; formerly, chairman of Hambrecht and Quist Group; director
of H&Q Healthcare Investors; and president of the National Association of
Securities Dealers, Inc. Age 67.
FRED R. MILLSAPS
2665 NE 37th Drive
Fort Lauderdale, Florida
Director
Manager of personal investments (1978-present); chairman and chief executive
officer of Landmark Banking Corporation (1969-1978); financial vice president of
Florida Power and Light (1965- 1969); vice president of The Federal Reserve Bank
of Atlanta (1958-1965); and director of various other business and nonprofit
organizations.
Age 66.
MARK G. HOLOWESKO
Lyford Cay
Nassau, Bahamas
President
President and director of Templeton Global Advisors Limited; director of global
equity research for Templeton Worldwide, Inc.; president or vice president of
the Templeton Funds; formerly, investment administrator with Roy West Trust
Corporation (Bahamas)
43
Limited (1984-1985).
Age 35.
MARTIN L. FLANAGAN
777 Mariners Island Blvd.
San Mateo, California
Vice President
Senior vice president, treasurer and chief financial officer of Franklin
Resources, Inc., director and executive vice president of Templeton Investment
Counsel, Inc.; director, president and chief executive officer of Templeton
Global Investors, Inc.; director or trustee and president or vice president of
various Templeton Funds; accountant, Arthur Andersen & Company (1982-1983); and
a member of the International Society of Financial Analysts and the American
Institute of Certified Public Accountants. Age 35.
JOHN R. KAY
500 East Broward Blvd.
Fort Lauderdale, Florida
Vice President
Vice president of the Templeton Funds; vice president and treasurer of Templeton
Global Investors, Inc. and Templeton Worldwide, Inc.; assistant vice president
of Franklin Templeton Distributors, Inc.; formerly, vice president and
controller, the Keystone Group, Inc. Age 55.
THOMAS M. MISTELE
700 Central Avenue
St. Petersburg, Florida
Secretary
Senior vice president of Templeton Global Investors, Inc.; vice president of
Franklin Templeton Distributors, Inc.; secretary of the Templeton Funds;
formerly, attorney, Dechert Price & Rhoads (1985-1988) and Freehill, Hollingdale
& Page (1988); and judicial clerk, U.S. District Court (Eastern District of
Virginia) (1984-1985). Age 42.
JAMES R. BAIO
500 East Broward Blvd.
Fort Lauderdale, Florida
Treasurer
Certified public accountant; treasurer of the Templeton Funds; senior vice
president of Templeton Worldwide, Inc., Templeton Global Investors, Inc., and
Templeton Funds Trust Company; formerly, senior tax manager, Ernst & Young
(certified public accountants) (1977-1989). Age 42.
JEFFREY L. STEELE
44
1500 K Street, N.W.
Washington, D.C.
Assistant Secretary
Partner, Dechert Price & Rhoads.
Age 50.
* These are Directors who are "interested persons" of the Fund as
that term is defined in the 1940 Act. Mr. Brady and Franklin
Resources, Inc. are limited partners of Darby Overseas Partners,
L.P. ("Darby Overseas"). Mr. Brady established Darby Overseas in
February, 1994, and is Chairman and a shareholder of the corporate
general partner of Darby Overseas. In addition, Darby Overseas and
Templeton Global Advisor Limited are limited partners of Darby
Emerging Markets Fund, L.P.
There are no family relationships between any of the Directors.
INVESTMENT MANAGER
The Investment Manager of the Fund is:
Templeton Global Advisors Ltd.
Lyford Cay
P.O. Box N-7776, 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") and as of 9/30/95 it had shareholders'
equity of US $652,808,123.
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. Templeton has a large
worldwide staff of analysts.
Templeton's analysts use a disciplined, long-term approach to value-oriented
global and international investing. 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.
45
The Investment Manager performs similar services for other funds and accounts
and there may be times when the actions taken with respect to the Fund's
portfolio will differ from those taken by the Investment Manager on behalf of
other funds and accounts. Neither the Investment Manager and its affiliates, its
officers, directors or employees, nor the officers and Directors of the Fund are
prohibited from investing in securities held by the Fund or other funds and
accounts which are managed or administered by the Investment Manager to the
extent such transactions comply with the Fund's Code of Ethics.
The lead portfolio manager for the Fund is Mark G. Holowesko. Mr. Holowesko
holds a BA from the College of Holy Cross and an MBA from Babson College. He
joined the Templeton organization in 1985, and is responsible for coordinating
equity research worldwide for the Investment Manager. Prior to joining the
Templeton organization, Mr. Holowesko worked with Roy West Trust Corporation
(Bahamas) Limited as an investment administrator. His duties at Roy West
included managing trust and individual accounts, as well as conducting research
of worldwide equity markets. Dorian B. Foyil and Jeffrey A. Everett exercise
secondary portfolio management responsibilities with respect to the Fund. Mr.
Foyil holds a BBA in Accounting and Computer Science from Temple University and
an MBA in Finance from the Wharton School of Business. He is Vice President of
the Investment Manager and head of the Investment Manager's research technology
group. Prior to joining the Templeton organization, Mr. Foyil was a research
analyst for four years with UBS Phillips & Drew in London, England. Mr. Everett
holds a BS in Finance from Pennsylvania State University. He joined the
Templeton organization in 1989 and is Vice President, Portfolio
Management/Research, of the Investment Manager. Prior to joining the Templeton
organization, Mr. Everett was an investment officer at First Pennsylvania
Investment Research, a division of First Pennsylvania Corporation, where he
analyzed equity and convertible securities. Mr. Everett was also responsible for
coordinating research for Centre Square Investment Group, the pension management
subsidiary of First Pennsylvania Corporation.
INVESTMENT MANAGEMENT AGREEMENT. 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
46
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 US $200,000,000, reduced to a fee of 0.675% of such net assets in excess of
US $200,000,000, and further reduced to a fee of 0.60% of such net assets in
excess of US $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 US $30,000,000 of net assets, 2% of
the next US $70,000,000 of net assets and 1.5% of the remainder.
The investment manager represents no overhead or equipment expense for the Fund,
though such expenses are assumed by some investment advisers of other investment
firms.
BUSINESS MANAGER
Templeton Global Investors, Inc.
700 Central Avenue, St. Petersburg,
Florida 33701-3628 USA
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 US $200 million, to 0.10% of such assets in excess of US
$700 million, and to 0.075% of such assets in excess of US $1,200 million.
The shareholders' equity of Templeton Global Investors, Inc.
amounted to US $708,265,555 million [sic] as of 9/30/95.
TRANSFER AGENT
Franklin Templeton Investor Services, Inc.
47
700 Central Avenue, St. Petersburg,
Florida 33701-3628 USA
serves as transfer agent and dividend disbursing agent for the Fund. 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 US $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. The
shareholders' equity of Franklin Templeton Investor Services, Inc. as of 9/13/95
was about US $82,975,473.
CUSTODIAN
The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
New York, New York 10081 USA
serves as custodian of the Fund's assets, which are maintained at the
Custodian's principal office and at the offices of its branches and agencies
throughout the world. The Custodian has entered into agreements with non U.S.
sub-custodians approved by the Directors pursuant to Rule 17f-5 under the 1940
Act. The Custodian, its branches and sub-custodians, in the United States and
frequently outside of the United States, generally do not actually hold
certificates for the securities in their custody, but instead have book records
with U.S. and non U.S. 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.
The shareholders' equity of the custodian as of 12/31/94 amounted to about US
$5.57 billion.
The custodian receives the following annual depository fees for its service:
Canadian and U.S. Securities:
0.02% calculated on the value up to US $1 billion
0.0175% on the value from US $1 billion to US $2 billion
0.015% on the value from US $2 billion to US $5 billion
0.0125% on the value in excess of that set forth above
Foreign Securities (non U.S.)
0.08% on the value up to US $1 billion
0.07% on the value in excess of US $1 billion
Securities of Developing Markets:
0.03% (Mexico) - 0.05% (other countries)
48
Cash management fee: US $10,000
The Custodian also receives reimbursement for its expenses.
These fees are periodically reviewed by the contractual parties.
INDEPENDENT ACCOUNTANTS
The accounting firm of
McGladrey & Pullen, L.L.P.
1133 Avenue of the Americas
New York, New York 10036
serves as independent accountants for the Fund. Its audit services comprise
examination of the Fund's financial statements and review of the Fund's filings
with the Securities and Exchange Commission ("SEC") and the Internal Revenue
Service ("IRS").
REPRESENTATIVES
Representative in the Federal Republic of Germany:
Dr. Carl Graf Hardenberg
Attorney at Law
Klein Fontenay 1
20354 Hamburg
acts as representative for the Fund in the Federal Republic of Germany in
accordance with Section 6 of the Foreign Investment Law.
He represents the Fund before the courts and otherwise. He serves as authorized
recipient for certain documents for the management company and the general
distribution company.
For claims against the Fund, the management company or the general distribution
company which relate to the distribution of the Shares in the Federal Republic
of Germany the courts of Hamburg have jurisdiction.
Representative in the Republic of Austria:
Creditanstalt-Bankverein
Schottengasse 6,
A-1010 Vienna
acts as representative for the Fund in the Republic of Austria.
He represents the Fund before the courts and otherwise. He serves as authorized
recipient for certain documents for the management company and the general
distribution company.
For claims against the Fund, the management company or the general
49
distribution company which relate to the distribution of the Shares in the
Republic of Austria, the courts of Vienna have jurisdiction.
STATEMENTS AND REPORTS
The Fund's fiscal year ends on August 31. Semiannual reports, at least, are sent
to Shareholders each year containing the securities position of the fund and
other information, including the annual reports with financial statements
audited by independent auditors.
DISTRIBUTION SERVICE PLAN
A distribution service plan has been approved for Class I Shares pursuant to
Rule 12b-1 under the 1940 Act, within the framework of which the general
distribution company can reimburse expenses for the financing of any activity
primarily intended to result in the sale of Shares issued by the Fund. The
maximum amount which the Fund may pay under the Plan for such distribution
expenses is 0.25% per annum of Class I's average daily net assets. The general
distribution company may repay part of these fees to investment brokers who
provide an active service to the Shareholders mediated thereby. The Plan
provides that costs and expenses not compensated in a given month (including
costs and expenses not compensated because they exceed the annual limit of 0.25%
of the average daily net assets of the Fund), in accordance with the provisions
of law, may be reimbursed in subsequent months or years.
GENERAL INFORMATION
DESCRIPTION OF SHARES/SHARE CERTIFICATES. The Fund's authorized capital consists
of 1,400,000,000 Common Shares, par value $0.01 per Share, of which 800,000,000
shares are classified as Class I Shares. Each Share entitles the holder to one
vote and a similarly calculated amount of dividends as well as capital and net
asset distributions in the event of the liquidation of the Fund. Fractional
Shares confer the same partial rights to the holder as whole Shares.
The Fund usually does not issue any certificate for Shares acquired.
Certificates representing whole Shares (but not Fractional Shares) are only
issued at the express, written request of a Shareholder made 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. One should note, however, that lost or
destroyed certificates cannot be replaced without obtaining a sufficient
indemnity bond, the cost of which is generally borne by the Shareholder and can
be 2% or more of the value of the lost or destroyed certificate.
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
50
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. Dividends and (any) distributions realizing capital
gains are paid normally in October and (if necessary) in December and represent
all or substantially all of the net income of the Fund from financial
investments and the net capital gain realized. Income dividends and capital gain
distributions paid by the Fund, other than on those Shares whose owners keep
them registered in the name of a broker-dealer, are automatically reinvested on
the payment date in whole or fractional Shares at net asset value as of the
ex-dividend date, unless a Shareholder makes a written request for payments in
cash.
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
in U.S. dollars are forwarded by air 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.
TAX STATUS
TAXES IN THE USA. U.S. income tax: The Fund intends normally to pay a dividend
at least once annually representing substantially all of its net investment
income. This includes, among other items, dividends, interest, and net
short-term capital gains to the extent that they exceed net long-term capita
losses. It also intends 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 Service Code of 1986, 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.
Distributions are subject to U.S.
51
federal income tax to the extent that they flow to American
taxpayers.
U.S. source taxes: In accordance with Article X of the treaty between the
Federal Republic of Germany and the United States of America on avoiding double
taxation in the area of income taxes, in the 8/21/91 version, the American
government assesses a source tax in the amount of 15% on the distribution of
dividends, interest and short-term gains from the Fund on persons residing in
the Federal Republic of Germany. Distributions of long-term realized capital
gains are not subject to source taxation.
U.S. estate taxes: In accordance with Article 9 of the treaty of 12/3/90 between
the Federal Republic of Germany and the United States of America on avoiding
double taxation in the area of estates and gifts taxation, the Shares of the
Fund are not subject to American taxation to the extent that they are part of an
estate or a gift of a person residing in the Federal Republic of Germany. The
entitlement to dispose of an individual account passes the heirs upon the death
of the holder, after submitting certain documents (forms may be obtained through
the general distribution company).
In addition, the Fund may have to require from the heirs transfer forms issued
by the U.S. Internal Revenue Service or similar documents releasing the Fund
from liability for estate taxes arising in certain circumstances. A transfer
form for the Internal Revenue Service (Form 5173) will be required in any event
when the gross assets located in the United States of America by a deceased
Shareholder are more than or equal to US $60,000.00. In the case of gross assets
located in the United States of America which have a lower value, the Fund may
require the appropriate affidavit. Further particulars on this can be obtained
from the German service company Templeton Global Strategic Services
(Deutschland) GmbH.
TAXATION IN THE FEDERAL REPUBLIC OF GERMANY: With each distribution and proceeds
equivalent to distribution, at latest 3 months after the close of the fiscal
year of the Fund it gives the tax information required in Section 17, Paragraph
3, Number 2 of the Foreign Investment Law and informs the tax authorities. Every
exchange day, in accordance with Section 17, Paragraph 3, Number 3 of the
Foreign Investment Law, the Fund also publishes its interim gain and the
proceeds equivalent to distribution.
Shareholders in Germany, in accordance with Section 17 of the Foreign Investment
Law, are only liable for income tax on the distributed and retained interest and
dividend income of the Fund, so it is unimportant whether the proceeds
distributed are paid out or automatically reinvested into new Shares of the
Fund.
The distributed or retained capital gains achieved by the Fund from the disposal
of securities and warrants for shares of corporations
52
are always tax-free, unless the capital gain applies as operating
income of the taxpayer.
The application of the part of the 15% U.S. source tax withheld on interest and
dividends to the German income tax to be paid is effected in accordance with
Section 19 of the Foreign Investment Law and the rule of the Income Tax Law.
When Shareholders have their Shares of the Fund placed in the custody of or
managed by domestic credit institutions, such institutions are required to
withhold interest instalment tax at the level of 32.25% (or 37.625% in counter
trade), even when the distribution is automatically reinvested in new Shares of
the Fund. If at a given time only a portion of the interest and dividend
proceeds achieved up to that point are distributed, a domestic credit
institution must compute and discharge the interest instalment tax on the total
income of the Fund.
The interest instalment tax does not apply, however, when the Shareholder
himself manages his Shares of the Fund and receives the distributions directly
from the Fund or through a German Paying Agent.
In the event of a redemption, exchange or other transfer of rights to the Shares
of the Fund (transfer transactions) private Shareholders are only taxed on the
interim gain achieved. The interim gain is defined in Section 17, Paragraph 2 a)
of the Foreign Investment Law, with reference to Section 20, Paragraph 1, No. 7,
and Paragraph 2 of the Income Tax Law, and can be simply described as that part
of the net asset value of a Share of the Fund resulting from interest and
equally treated income realized from the Fund as well as accumulated claims to
such income where dividend income is not paid into the interim gain.
If a redemption of Shares of the Fund is effected through a domestic credit
institution then it is subject to the withholding of the interest instalment tax
on the interim gain.
Otherwise, for private Shareholders the gains made in transfer transactions are
tax-free, to the extent that the Shares of the Fund are held beyond the
speculation period of six months.
Shareholders are reminded that the description of taxation in this section
relies on knowledge up to January 1, 1996. Given the changes taking place in the
tax in ever more frequent intervals and the unforeseeable nature of differing
interpretations by the financial authorities, it is recommended to the
Shareholders that they contact their tax advisors as to their personal tax
situations.
TAXATION IN THE REPUBLIC OF AUSTRIA: In accordance with Section 42,
Paragraph 2 of the Investment Fund Law, Austrian investors are
53
liable for income tax on the proceeds of the Fund whether they are
distributed or invested in new Shares.
All capital gains from investments are tax-free for investors to the extent that
they are established by an Austrian agent and are not part of the investor's
operating assets.
The itemization of the proceeds as taxable interest and dividend income and
tax-free capital gains is provided annually by the Fund. In the event of the
disposal of Shares of the Fund an income tax return applies for lump-sum
taxation of the proceeds where the difference in the amount between the
liquidation price and the last liquidation price established in the closed
fiscal/calendar year, and at least 0.8% of the liquidation price per month, is
applied as proceeds equivalent to a distribution.
The application of American source taxes with respect to distributions of
dividends and interest to the Austrian income tax is effected in accordance with
the rules of the double taxation treaty between the Republic of Austria and the
United States of America.
INQUIRIES
Shareholders' inquiries will be answered promptly. They should be addressed to:
Templeton Global Strategic Services (Deutschland) GmbH
Taunusanlage 11,
60329 Frankfurt a.M.
Copies of account statements less than three years old are provided on request
without charge; requests for copies 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
US $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.
JURISDICTION
54
The Federal Republic of Germany:
The jurisdiction for claims against the Fund, the management company or the
general distribution company relating to the distribution of the Shares of the
Fund in the Federal Republic of Germany is Hamburg. The claim and all other
documents may be delivered to the representative.
The Republic of Austria:
The jurisdiction for claims against the Fund, the management company or the
distribution company relating to the distribution of the Shares of the Fund in
the Republic of Austria is Vienna. The claim and all other documents may be
delivered to the representative.
RIGHT OF REVOCATION
The Federal Republic of Germany:
When a purchase of Shares of the Fund takes place on the basis of verbal
negotiations outside of the scope of the ongoing of business of the seller of
the Shares or of such person as has intermediated in the sale of the Shares, and
such seller or intermediator has not been asked to the negotiations by the
buyer, in accordance with Section 11 of the Foreign Investment Law the buyer is
entitled to revoke his declaration of purchase (right of revocation). The
revocation must be effected within a period of two weeks in writing to the Fund
or to its representative. This period commences with the making of the
declaration of purchase and, at earliest, upon delivery of the sales prospectus.
Timely sending of the revocation shall be sufficient for compliance with the
period.
The right of revocation shall not apply when a trader acquires the Shares for
his operating assets.
If the buyer has already made payment prior to the revocation, he is to be
reimbursed by the investment company, against return of the Shares acquired, the
value of the Shares paid for (Section 21, Paragraph 2-4 of the "KAAG") on the
day subsequent to the receipt of the declaration of revocation, as well as the
expenses paid.
The Republic of Austria:
Section 3 of the "KSchG" applies to Austrian investors.
CONTRACTUAL CONDITIONS
1. General
1.1 The legal relationship between the investor and the Fund is
55
subject to United States law and shall be governed by the following contractual
conditions deriving from U.S. laws, the charter/bylaws and additional
information. The complete text of the contractual documents mentioned above in
the German language may be obtained from the German representative. In addition
to the documents mentioned above, the charter/bylaws and the current annual
report of the distribution company can be obtained from the Austrian
representative.
1.2 The purchase contract takes effect as soon as the Shareholder Application
and the Purchase Price are received in good order in the currency of the United
States of America by the Transfer Agent and provided that the Shareholder
Application is not rejected.
Upon the entry into force of the contract, the buyer acquires Class I Shares of
the Fund, the number of which is determined according to the net asset value of
the Class I Shares of the Fund on the day subsequent to the effectiveness of the
contract and according to the investment amount thereof.
An initial acquisition must be for at least DM 5,000 (in Germany) or Sch 35,000
(in Austria).
1.3 Immediately subsequent to the effectiveness of the purchase contract the
Transfer Agent shall avail the buyer of a shareholder account in which, among
other things, the number of Shares acquired thereby are to be held. The buyer
will be sent a pertinent statement and, upon request, a certificate.
2. Offering Price
2.1 The purchase price for a Class I Share is to be determined from the net
asset value of the Fund attributed to this Class of Shares divided by the number
of outstanding Class I Shares plus the sale charge scaled according the size of
the investment.
2.2 Buyers who acquire Shares in the amount of least US $50,000 within 13 months
and, for at least one day during this time, hold it, and make the respective
letter of intent, shall be entitled to benefit from a quantity discount on the
total investment. Redemptions effected by the Shareholder during this period of
13 months shall be deducted from the sum of the purchases whether or not the
provisions of the letter of intent are complied with or not.
2.3 The reduced sales charges shall also apply to further purchases of Class I
Shares when all Class I Shares belonging to a single buyer in addition to the
newly subscribed Shares reach the amount of US $50,000 or more.
3. Liquidation and Redemption of Shares
56
Class I shares may be redeemed free of charge when the Shareholder has made an
application to the Transfer Agent in good order through Templeton Global
Strategic Services (Deutschland) GmbH.
The liquidation price shall be the net asset value of the Class I Shares
calculated immediately subsequent to the receipt of the redemption application
in good order by the Transfer Agent.
4. Investment Restrictions
4.1 For the protection of the investors the Fund is subject to extensive
investment restrictions which cannot be changed without the consent of the
Shareholders. They are set forth in detail in the prospectus.
4.2 Essentially, the Fund cannot acquire:
a) Shares in other funds
b) Real estate or mortgages
c) Commodities or currency futures contracts
d) Securities of any company in which Directors or Officers of
individually own more than 0.5% of the securities of such
company or in the aggregate own more than 5% of the securities
of such company
e) Shares in mineral exploration programs
4.3 The Fund is also not authorized to:
a) Borrow money for any purpose other than redeeming Shares, and
then only as a temporary measure to an amount not exceeding 5%
of the value of its total assets
b) Encumber the net assets, or pledge or mortgage them other than
to secure borrowings in accordance with a), and then only to
such extent not exceeding 10% of the value of its net assets
c) Invest more than 25% of the Fund's total assets in a single
industry
d) Invest in "letter stocks" (or the like)
e) Participate on a joint or a joint and several basis in any
trading account in securities (or the like)
f) Sell short, or buy or sell puts, calls, straddles or spreads
The Fund is authorized to trade in so-called stock index futures
57
and under certain conditions acquire or dispose of options with respect to such
transactions.
Annotation of certification for the performance of prospectus verification by
Creditanstalt-Bankverein as representative and prospectus auditor, that the
preceding prospectus was found to be accurate and complete.
Creditanstalt-Bankverein
Dr. G. Bienenstein Dr. R. Rauscher
58
Templeton Growth Fund, Inc.
Service Company:
Templeton Global Strategic Services (Deutschland) GmbH
Taunusanlage 11
60329 Frankfurt
Telephone (00 49) 69 2 72 23-2 72
Fax (00 49) 69 2 72 23-1 20
59
