Registration No. 33-30018
As filed with the Securities and Exchange Commission on December 29, 1995
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
-
Pre-Effective Amendment No.
Post-Effective Amendment No. 10 X
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY X
ACT OF 1940
Amendment No. 11 X
(Check appropriate box or boxes)
TEMPLETON REAL ESTATE SECURITIES FUND
(Exact Name of Registrant as Specified in Charter)
700 Central Avenue, P.O. Box 33030,
St. Petersburg, Florida 33733-8030
(Address of Principal Executive Offices)
Registrant's Telephone Number: (813) 823-8712
Thomas M. Mistele, Esq.
For Thomas Mistele use St. Petersburg office address (above)
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check
appropriate box)
____ immediately upon filing pursuant to paragraph (b)
X on January 1, 1996 pursuant to paragraph (b)
____ 60 days after filing pursuant to paragraph (a)
____ on (date) pursuant to paragraph (a) of Rule 485
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
Registrant has elected to register an indefinite number of Shares of
beneficial interest, $0.01 par value per Share, pursuant to Rule 24f-2 under the
Investment Company Act of 1940. A Rule 24f-2 Notice for the Registrant's fiscal
year ended August 31, 1995 was filed with the Commission on October 30, 1995.
<PAGE>
TEMPLETON REAL ESTATE SECURITIES FUND
CROSS-REFERENCE SHEET
REQUIRED BY RULE 495
UNDER THE SECURITIES ACT OF 1933
PART A
Item No. Caption
1 Cover Page
2 Expense Table
3 Financial Highlights
4 General Description;
Investment Techniques
5 Management of the Fund
5A See Annual Report to
Shareholders
6 General Information
7 How to Buy Shares of
the Fund; Net Asset
Value
8 How to Sell Shares of
the Fund
9 Not Applicable
PART B
10 Cover Page
11 Table of Contents
12 General Information
and History
13 Investment Objectives
and Policies
14 Management of the Fund
15 Principal Shareholders
16 Investment Management
<PAGE>
and Other Services
17 Brokerage Allocation
18 Description of Shares;
Part A
19 Purchase, Redemption,
and Pricing of Shares
20 Tax Status
21 Principal Underwriter
22 Performance
Information
23 Financial Statements
<PAGE>
TEMPLETON REAL ESTATE SECURITIES FUND PROSPECTUS -- JANUARY 1, 1996
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INVESTMENT Templeton Real Estate Securities Fund (the "Fund") seeks long-
OBJECTIVES term capital growth by investing primarily in securities of
AND POLICIES domestic and foreign companies which are principally engaged
in or related to the real estate industry or which own
significant real estate assets. Current income is a secondary
objective.
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PURCHASE OF Please complete and return the Shareholder Application. If you
SHARES need assistance in completing this form, please call our
Shareholder Services Department. The Fund offers two classes
to its investors: Templeton Real Estate Securities Fund--Class
I ("Class I") and Templeton Real Estate Securities Fund--Class
II ("Class II"). Investors can choose between Class I Shares,
which generally bear a higher front-end sales charge and lower
ongoing Rule 12b-1 distribution fees ("Rule 12b-1 fees"), and
Class II Shares, which generally have a lower front-end sales
charge and higher ongoing Rule 12b-1 fees. Investors should
consider the differences between the two classes, including
the impact of sales charges and distribution fees, in choosing
the more suitable class given their anticipated investment
amount and time horizon. See "How to Buy Shares of the Fund--
Differences Between Class I and Class II." The minimum initial
investment is $100 ($25 minimum for subsequent investments).
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PROSPECTUS This Prospectus sets forth concisely information about the
INFORMATION Fund that a prospective investor ought to know before
investing. Investors are advised to read and retain this
Prospectus for future reference. A Statement of Additional
Information ("SAI") dated January 1, 1996, has been filed with
the Securities and Exchange Commission (the "SEC") and is
incorporated in its entirety by reference in and made a part
of this Prospectus. This SAI is available without charge upon
request to Franklin Templeton Distributors, Inc., P.O. Box
33030, St. Petersburg, Florida 33733-8030 or by calling the
Fund Information Department.
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FUND INFORMATION DEPARTMENT -- 1-800/DIAL BEN
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TEMPLETON "STAR" SERVICE (24 hours, seven days a week access to current
prices, shareholder account balances/values, last transaction and duplicate
account statements) -- 1-800-654-0123
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
EXPENSE TABLE............................................................ 2
FINANCIAL HIGHLIGHTS..................................................... 3
GENERAL DESCRIPTION...................................................... 5
Investment Objectives and Policies....................................... 5
INVESTMENT TECHNIQUES.................................................... 6
Repurchase Agreements.................................................... 6
Borrowing................................................................ 6
Loans of Portfolio Securities............................................ 6
Options on Securities and Stock Indices.................................. 7
Forward Foreign Currency Contracts....................................... 7
Futures Contracts........................................................ 7
Depositary Receipts...................................................... 8
RISK FACTORS............................................................. 8
HOW TO BUY SHARES OF THE FUND............................................ 10
Differences Between Class I and Class II................................. 11
Deciding Which Class to Purchase......................................... 11
Offering Price--Class I.................................................. 12
Offering Price--Class II................................................. 14
Net Asset Value Purchases (Both Classes)................................. 14
Description of Special Net Asset Value Purchases......................... 15
Additional Dealer Compensation (Both Classes)............................ 16
Purchasing Class I and Class II Shares................................... 16
Automatic Investment Plan................................................ 17
Institutional Accounts................................................... 17
Account Statements....................................................... 17
Templeton STAR Service................................................... 17
Retirement Plans......................................................... 17
Net Asset Value.......................................................... 17
EXCHANGE PRIVILEGE....................................................... 18
Exchanges of Class I Shares.............................................. 19
Exchanges of Class II Shares............................................. 19
Transfers................................................................ 20
Conversion Rights........................................................ 20
Exchanges by Timing Accounts............................................. 20
HOW TO SELL SHARES OF THE FUND........................................... 21
Reinstatement Privilege.................................................. 22
Systematic Withdrawal Plan............................................... 23
Redemptions by Telephone................................................. 24
Contingent Deferred Sales Charge......................................... 24
TELEPHONE TRANSACTIONS................................................... 25
Verification Procedures.................................................. 25
Restricted Accounts...................................................... 25
General.................................................................. 25
MANAGEMENT OF THE FUND................................................... 26
Investment Manager....................................................... 26
Business Manager......................................................... 27
Transfer Agent........................................................... 27
Custodian................................................................ 27
Plans of Distribution.................................................... 27
Expenses................................................................. 28
Brokerage Commissions.................................................... 28
GENERAL INFORMATION...................................................... 28
Description of Shares/Share Certificates................................. 28
Voting Rights............................................................ 28
Meetings of Shareholders................................................. 29
Dividends and Distributions.............................................. 29
Federal Tax Information.................................................. 29
Inquiries................................................................ 30
Performance Information.................................................. 30
Statements and Reports................................................... 30
WITHHOLDING INFORMATION.................................................. 31
CORPORATE RESOLUTION..................................................... 32
AUTHORIZATION AGREEMENT.................................................. 33
THE FRANKLIN TEMPLETON GROUP............................................. 34
</TABLE>
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SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK; FURTHER, SUCH SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY. SHARES OF THE FUND INVOLVE INVESTMENT RISK, INCLUDING THE POSSIBLE
LOSS OF CAPITAL.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>
EXPENSE TABLE
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a Shareholder will bear directly or indirectly
in connection with an investment in the Fund. The figures are estimates of the
Fund's expenses for the current fiscal year, restated to reflect current sales
charges and Rule 12b-1 fees for each class.
<TABLE>
<CAPTION>
CLASS I CLASS II
------- --------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a percentage
of Offering Price)....................................... 5.75% 1.00%/1/
Deferred Sales Charge..................................... None/2/ 1.00%/3/
Exchange Fee (per transaction)............................ $5.00/4/ $5.00/4/
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees........................................... 0.75% 0.75%
Rule 12b-1 Fees/5/........................................ 0.25% 1.00%
Other Expenses (audit, legal, business management,
transfer agent and custodian)............................ 0.55% 0.51%
Total Fund Operating Expenses............................. 1.55% 2.26%
</TABLE>
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/1/ Although Class II has a lower front-end sales charge than Class I, over
time the higher Rule 12b-1 fees for Class II may cause Shareholders to pay
more for Class II Shares than for Class I Shares. Given the maximum front-
end sales charge and the rate of Rule 12b-1 fees for each class, it is
estimated that this would take less than six years for Shareholders who
maintain total Shares valued at less than $50,000 in the Franklin Templeton
Funds. Shareholders with larger investments in the Franklin Templeton Funds
will reach the cross-over point more quickly. (See "How to Buy Shares of
the Fund.")
/2/ Class I investments of $1 million or more are not subject to a front-end
sales charge; however, a contingent deferred sales charge of 1%, is
generally imposed on certain redemptions within a "contingency period" of
12 months of the calendar month of such investments. See "How to Sell
Shares of the Fund--Contingent Deferred Sales Charge."
/3/ Class II Shares redeemed within a "contingency period" of 18 months of the
calendar month of such investments are subject to a 1% contingent deferred
sales charge. See "How to Sell Shares of the Fund--Contingent Deferred
Sales Charge."
/4/ $5.00 fee imposed only on Timing Accounts as described under "Exchange
Privilege." All other exchanges are processed without a fee.
/5/ Annual Rule 12b-1 fees may not exceed 0.25% of the Fund's average net
assets attributable to Class I Shares and 1% of the Fund's average net
assets attributable to Class II Shares. Consistent with the National
Association of Securities Dealers, Inc.'s rules, it is possible that the
combination of front-end sales charges and Rule 12b-1 fees could cause long-
term Shareholders to pay more than the economic equivalent of the maximum
front-end sales charges permitted under those same rules.
Investors should be aware that the above table is not intended to reflect
in precise detail the fees and expenses associated with an individual's own
investment in the Fund. Rather, the table has been provided only to assist
investors in gaining a more complete understanding of fees, charges and
expenses. The information in this table does not reflect the charge of up to
$15 per transaction if a Shareholder requests that redemption proceeds be sent
by express mail or wired to a commercial bank account. For a more detailed
discussion of these matters, investors should refer to the appropriate sections
of this Prospectus.
EXAMPLE
As required by SEC regulations, the following example illustrates the
expenses, including the maximum front-end sales charge and applicable
contingent deferred sales charge, that apply to a $1,000 investment in the Fund
over various time periods assuming (1) a 5% annual rate of return and (2)
redemption at the end of each time period.
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
Class I.......................... $72 $104 $137 $231
Class II......................... $43 $80 $130 $267
You would pay the following
expenses on the same investment
in Class II Shares, assuming no
redemption...................... $33 $80 $130 $267
</TABLE>
For the purpose of this example, it is assumed that a contingent deferred
sales charge will not apply to Class I Shares.
THIS EXAMPLE IS BASED ON THE ESTIMATED ANNUAL OPERATING EXPENSES,
INCLUDING FEES SET BY CONTRACT, SHOWN ABOVE AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES, WHICH MAY BE MORE OR LESS THAN THOSE
SHOWN. The operating expenses are borne by the Fund and only indirectly by
Shareholders as a result of their investment in the Fund. In addition, federal
securities regulations require the example to assume an annual rate of return
of 5%, but the Fund's actual return may be more or less than 5%.
2
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables of selected financial information have been audited by
McGladrey & Pullen, LLP, independent certified public accountants, whose
report thereon, which is incorporated by reference, appears in the Fund's 1995
Annual Report to Shareholders. These statements should be read in conjunction
with the other financial statements and notes thereto included in the Fund's
1995 Annual Report to Shareholders, which contains further information about
the Fund's performance, and which is available to Shareholders upon request
and without charge.
<TABLE>
<CAPTION>
CLASS I
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PER SHARE OPERATING YEAR ENDED AUGUST 31,
PERFORMANCE -------------------------------------------------------
(for a Share outstanding
throughout the period) 1995 1994 1993 1992 1991 1990++
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<S> <C> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of period $ 13.66 $ 12.66 $ 10.40 $ 10.08 $ 8.88 $ 10.00
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Income from investment
operations
Net investment income 0.39 0.22 0.25 0.37 0.53 0.29
Net realized and
unrealized gain (loss) (0.64) 1.00 2.36 0.43 1.13 (1.33)
-------- -------- ------- ------- ------- -------
Total from investment
operations 0.25 1.22 2.61 0.80 1.66 (1.04)
-------- -------- ------- ------- ------- -------
Less distributions
Dividends from net in-
vestment income (0.21) (0.22) (0.35) (0.48) (0.37) (0.08)
Distributions from net
realized gains -- (0.00) (0.00) (0.00) (0.09) (0.00)
-------- -------- ------- ------- ------- -------
Total distributions (0.21) (0.22) (0.35) (0.48) (0.46) (0.08)
-------- -------- ------- ------- ------- -------
Change in net asset
value for the period (0.46) 1.00 2.26 0.32 1.20 (1.12)
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Net asset value, end of
period $ 13.20 $ 13.66 $ 12.66 $ 10.40 $ 10.08 $ 8.88
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TOTAL RETURN+ (1.74)% 9.69% 25.94% 8.29% 20.06% (10.48)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of pe-
riod (000) $130,149 $131,544 $61,820 $36,955 $32,830 $10,065
Ratio to average net as-
sets of:
Expenses 1.55% 1.58% 1.68% 1.69% 1.98% 2.77%*
Expenses, net of reim-
bursement 1.55% 1.58% 1.68% 1.69% 1.25% 1.25%*
Net investment income 3.05% 1.97% 2.60% 3.64% 5.48% 3.59%*
Portfolio turnover rate 38.69% 32.34% 19.74% 32.35% 25.24% 9.54%
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</TABLE>
++Period from September 12, 1989 (commencement of operations) to August 31,
1990.
+ Not annualized in periods of less than one year. Does not reflect sales
charges.
* Annualized.
During the fiscal year ended August 31, 1991, Templeton Funds Management,
Inc., the Fund's previous business manager, voluntarily limited the total
expenses (excluding interest, taxes, brokerage commissions and extraordinary
expenses) of the Fund to an annual rate of 1.25% of the Fund's average net
assets. Effective September 1, 1991, this expense limitation was terminated.
3
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
CLASS II
--------
FOR THE PERIOD
MAY 1, 1995
PER SHARE OPERATING PERFORMANCE THROUGH
(for a Share outstanding throughout the period) AUGUST 31, 1995++
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<S> <C>
Net asset value,
beginning of period $ 12.25
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Income from investment
operations
Net investment income 0.03
Net realized and
unrealized gain (loss) 0.89
-------
Total from investment
operations 0.92
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Net asset value, end of
period $ 13.17
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TOTAL RETURN+ 7.51%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period (000) $ 1,823
Ratio to average net
assets of:
Expenses 2.26%*
Net investment income 1.71%*
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</TABLE>
++Commencement of offering of Shares.
+ Not annualized in periods of less than one year. Does not reflect sales
charges.
* Annualized.
4
<PAGE>
GENERAL DESCRIPTION
Templeton Real Estate Securities Fund (the "Fund") was organized as a
Massachusetts business trust on July 17, 1989, and is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
diversified management investment company. The Fund has two classes of Shares
of beneficial interest with a par value of $0.01: Templeton Real Estate
Securities Fund--Class I and Templeton Real Estate Securities Fund--Class II.
All Fund Shares outstanding before May 1, 1995 have been redesignated as Class
I Shares, and will retain their previous rights and privileges, except for
legally required modifications to Shareholder voting procedures, as discussed
in "General Information--Voting Rights."
Shares of the Fund may be purchased (minimum investment of $100 initially
and $25 thereafter) at the current public Offering Price. The current public
Offering Price of the Class I Shares is equal to the net asset value per Share
(see "How to Buy Shares of the Fund--Net Asset Value"), plus a variable sales
charge not exceeding 5.75% of the Offering Price depending upon the amount
invested. The current public Offering Price of the Class II Shares is equal to
the net asset value per Share, plus a sales charge of 1% of the amount
invested. (See "How to Buy Shares of the Fund.")
INVESTMENT OBJECTIVES AND POLICIES. The Fund's principal investment
objective is long-term capital growth, with current income as a secondary
objective, which it seeks to achieve by investing primarily in securities of
issuers throughout the world which are principally engaged in or related to
the real estate industry or which own significant real estate assets. The Fund
will not invest directly in real estate. There can be no assurance that the
Fund's investment objective will be achieved.
Under normal conditions, the Fund will invest not less than 65% of its total
assets in securities of issuers listed on United States or foreign securities
exchanges or NASDAQ which are principally engaged in or related to the real
estate industry. A company is "principally engaged in or related to the real
estate industry" if at least 50% of its assets (marked-to-market), gross
income or net profits are attributable to ownership, construction, management
or sale of residential, commercial or industrial real estate, or to products
or services that are related to the real estate industry. Real estate industry
companies are defined as: equity real estate investment trusts, which pool
investors' funds for investment primarily in commercial real estate
properties; mortgage real estate investment trusts, which invest pooled funds
principally in real estate-related loans; brokers or real estate developers;
and issuers with substantial real estate holdings. Issuers whose products and
services are related to the real estate industry are defined as manufacturers
and distributors of building supplies and financial institutions which issue
or service mortgages.
Although the Fund generally invests in common stocks, it may also invest in
preferred stocks and, consistent with its secondary objective of current
income, in debt securities of issuers in the real estate industry. In addition
to these securities, the Fund may invest up to 35% of its total assets in
equity and debt securities of companies outside the real estate industry. Debt
securities purchased by the Fund (which may include structured investments, as
described in the SAI under "Investment Objectives and Policies--Structured
Investments") will be rated no lower than A by Moody's Investors Service, Inc.
("Moody's") or Standard & Poor's Corporation ("S&P") or if not so rated,
believed by Templeton Global Advisors Limited (the "Investment Manager") to be
of comparable quality, and may have an average weighted maturity of up to 30
years.
Whenever, in the judgment of the Investment Manager, market or economic
conditions warrant, the Fund may, for temporary defensive purposes, invest
without limit in money market securities, denominated in dollars or in the
currency of any foreign country, issued by entities organized in the U.S. or
any foreign country, such as: short-term (less than 12 months to maturity) and
medium-term (not greater than five years to maturity) obligations issued or
guaranteed by the U.S. Government or the government of a foreign country,
their agencies or instrumentalities; finance company and corporate commercial
paper and other short-term corporate obligations, in each case rated Prime-1
by Moody's or A or better by S&P or, if unrated, of comparable quality as
determined by the Investment
5
<PAGE>
Manager; and repurchase agreements with banks and broker-dealers with respect
to such securities. In addition, for temporary defensive purposes, the Fund
may invest up to 25% of its total assets in obligations (including
certificates of deposit, time deposits and bankers' acceptances) of banks;
provided that the Fund will limit its investment in time deposits for which
there is a penalty for early withdrawal to 10% of its total assets.
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. The
Fund may not invest more than 5% of its total assets in warrants (exclusive of
warrants acquired in units or attached to securities) nor more than 10% of its
total assets in securities with a limited trading market. The investment
objectives and policies described above, as well as the investment
restrictions described in the SAI, cannot be changed without Shareholder
approval.
The Fund may also lend its portfolio securities and borrow money for
investment purposes ( i.e., "leverage" its portfolio). In addition, the Fund
may enter into transactions in options on securities and securities indices,
forward foreign currency contracts, and futures contracts and related options.
These investment techniques are described below and under the heading
"Investment Objectives and Policies" in the SAI.
The Fund does not intend to emphasize short-term trading profits and usually
expects to have a portfolio turnover rate not exceeding 100%.
INVESTMENT TECHNIQUES
The Fund is authorized to use the various investment techniques described
below. Although these strategies are regularly used by some investment
companies and other institutional investors in various markets, some of these
strategies cannot at the present time be used to a significant extent by the
Fund in some of the markets in which the Fund will invest and may not be
available for extensive use in the future.
REPURCHASE AGREEMENTS. Consistent with its secondary objective of current
income, when the Fund acquires a security from a bank or a registered broker-
dealer, it may simultaneously enter into a repurchase agreement, wherein the
seller agrees to repurchase the security at a specified time and price. The
repurchase price is in excess of the purchase price by an amount which
reflects an agreed-upon rate of return, which is not tied to the coupon rate
on the underlying security. Under the 1940 Act, repurchase agreements are
considered to be loans collateralized by the underlying security and therefore
will be fully collateralized. However, if the seller should default on its
obligation to repurchase the underlying security, the Fund may experience
delay or difficulty in exercising its rights to realize upon the security and
may incur a loss if the value of the security should decline, as well as incur
disposition costs in liquidating the security.
BORROWING. The Fund may borrow up to 30% of the value of its assets to
increase its holdings of portfolio securities. Under the 1940 Act, the Fund is
required to maintain continuous asset coverage of 300% with respect to such
borrowings and to sell (within three days) sufficient portfolio holdings to
restore such coverage if it should decline to less than 300% due to market
fluctuations or otherwise, even if such liquidations of the Fund's portfolio
are disadvantageous from an investment standpoint. Leveraging by means of
borrowing may exaggerate the effect of any increase or decrease in the value
of portfolio securities on the Fund's net asset value, and money borrowed will
be subject to interest and other costs (which may include commitment fees
and/or the cost of maintaining minimum average balances) which may or may not
exceed the income received from the securities purchased with borrowed funds.
LOANS OF PORTFOLIO SECURITIES. Consistent with its secondary objective of
current income, the Fund may lend to broker-dealers portfolio securities with
an aggregate market value of up to one-third of its total assets. Such loans
must be secured by collateral
6
<PAGE>
(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
have voting rights with respect to the securities.
OPTIONS ON SECURITIES AND STOCK INDICES. In order to increase its return or
to hedge all or a portion of its portfolio investments, the Fund may write
(i.e., sell) covered put and call options and purchase put and call options on
securities or stock indices that are traded on United States and foreign
exchanges or in the over-the-counter markets. An option on a security is a
contract that gives the purchaser the option, in return for the premium paid,
the right to buy a specified security (in the case of a call option) or to
sell a specified security (in the case of a put option) from or to the writer
of the option at a designated price during the term of the option. An option
on a stock index gives the purchaser of the option, in return for the premium
paid, the right to receive from the seller cash equal to the difference
between the closing price of the index and the exercise price of the option.
The Fund may write a call or put option only if the option is "covered." This
means that so long as the Fund is obligated as the writer of a call option, it
will own the underlying securities subject to the call, or hold a call at the
same or lower exercise price, for the same exercise period, and on the same
securities as the written call. A put is covered if the Fund maintains liquid
assets with a value equal to the exercise price in a segregated account, or
holds a put on the same underlying security at an equal or greater exercise
price. The value of the underlying securities on which options may be written
at any one time will not exceed 15% of the total assets of the Fund. The Fund
will not purchase put or call options if the aggregate premium paid for such
options would exceed 5% of its total assets at the time of purchase.
FORWARD FOREIGN CURRENCY CONTRACTS. The Fund may enter into forward foreign
currency exchange contracts ("forward contracts") to attempt to minimize the
risk to the Fund from adverse changes in the relationship between the U.S.
dollar and foreign currencies. A forward contract is an obligation to purchase
or sell a specific currency for an agreed price at a future date which is
individually negotiated and privately traded by currency traders and their
customers. The Fund will enter into forward contracts only under two
circumstances. First, when the Fund enters into a contract for the purchase or
sale of a security denominated in a foreign currency, it may desire to "lock
in" the U.S. dollar price of the security in relation to another currency by
entering into a forward contract to buy the amount of foreign currency needed
to settle the transaction. Second, when the Investment Manager believes that
the currency of a particular foreign country may suffer or enjoy a substantial
movement against another currency, it may enter into a forward contract to
sell or buy the amount of the former foreign currency (or another currency
which acts as a proxy for that currency) approximating the value of some or
all of the Fund's portfolio securities denominated in such foreign currency.
The second investment practice is generally referred to as "cross-hedging."
The Fund's forward transactions may call for the delivery of one foreign
currency in exchange for another foreign currency and may at times not involve
currencies in which its portfolio securities are denominated. The Fund will
not enter into forward foreign currency contracts if, as a result, the Fund
will have more than 20% of the value of its total assets committed to the
consummation of such contracts.
FUTURES CONTRACTS. For hedging purposes only, the Fund may buy and sell
financial futures contracts, stock and bond index futures contracts, foreign
currency futures contracts and options on any of the foregoing. A financial
futures contract is an agreement between two parties to buy or sell a
specified debt security at a set price on a future date. An index futures
contract is an agreement to take or make delivery of an amount of cash based
on the difference between the value of the index at the beginning and at the
end of the contract period. A futures contract on a foreign currency is an
agreement to buy or sell a specified amount of a currency for a set price on a
future date.
When the Fund enters into a futures contract, it must make an initial
deposit, known as "initial margin," as a partial guarantee of its performance
under the contract. As the value of the security, index or currency
fluctuates, either party to the contract is required to make additional margin
payments, known as "variation margin," to cover any additional obligation it
may have under the contract. In
7
<PAGE>
addition, when the Fund enters into a futures contract, it will segregate
assets or "cover" its position in accordance with the 1940 Act. See
"Investment Objectives and Policies -- Futures Contracts" in the SAI.
The Fund may not commit more than 5% of its total assets to initial margin
deposits on futures contracts. The value of the underlying securities on which
futures will be written at any one time will not exceed 25% of the total
assets of the Fund.
DEPOSITARY RECEIPTS. The Fund may purchase sponsored or unsponsored American
Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs") and Global
Depositary Receipts ("GDRs") (collectively, "Depositary Receipts"). ADRs are
Depositary Receipts typically used by a U.S. bank or trust company which
evidence ownership of underlying securities issued by a foreign corporation.
EDRs and GDRs are typically issued by foreign banks or trust companies,
although they also may be issued by U.S. banks or trust companies, and
evidence ownership of underlying securities issued by either a foreign or a
United States corporation. Generally, Depositary Receipts in registered form
are designed for use in the U.S. securities market and Depositary Receipts in
bearer form are designed for use in securities markets outside the United
States. Depositary Receipts may not necessarily be denominated in the same
currency as the underlying securities into which they may be converted.
Depositary Receipts may be issued pursuant to sponsored or unsponsored
programs. In sponsored programs, an issuer has made arrangements to have its
securities traded in the form of Depositary Receipts. In unsponsored programs,
the issuer may not be directly involved in the creation of the program.
Although regulatory requirements with respect to sponsored and unsponsored
programs are generally similar, in some cases it may be easier to obtain
financial information from an issuer that has participated in the creation of
a sponsored program. Accordingly, there may be less information available
regarding issuers of securities underlying unsponsored programs and there may
not be a correlation between such information and the market value of the
Depositary Receipts. Depositary Receipts also involve the risks of other
investments in foreign securities, as discussed below. For purposes of the
Fund's investment policies, the Fund's investments in Depositary Receipts will
be deemed to be investments in the underlying securities.
RISK FACTORS
Shareholders should understand that all investments involve risk and there
can be no guarantee against loss resulting from an investment in the Fund, nor
can there be any assurance that the Fund's investment objectives will be
attained. As with any investment in securities, the value of, and income from,
an investment in the Fund can decrease as well as increase depending on a
variety of factors which may affect the values and income generated by the
Fund's portfolio securities, including general economic conditions and market
factors. In addition to the factors which affect the value of individual
securities, a Shareholder may anticipate that the value of the Shares of the
Fund will fluctuate with movements in the broader equity and bond markets. A
decline in the stock market of any country in which the Fund is invested may
also be reflected in declines in the price of Shares of the Fund. Changes in
currency valuations will also affect the price of Shares of the Fund. History
reflects both decreases and increases in worldwide stock markets and currency
valuations, and these may reoccur unpredictably in the future. The value of
debt securities held by the Fund generally will vary inversely with changes in
prevailing interest rates. Additionally, investment decisions made by the
Investment Manager will not always be profitable or prove to have been
correct. The Fund is intended as an investment vehicle for those investors
seeking long term capital growth and is not intended as a complete investment
program.
Because the Fund invests primarily in the real estate industry, it could
conceivably own real estate directly as a result of a default on debt
securities it owns. The Fund, therefore, may be subject to certain risks
associated with the direct ownership of real estate, including declines in the
value of real estate, risks related to general and local economic conditions,
overbuilding and increased competition, increases in property taxes and
operating expenses, changes in zoning laws, casualty or condemnation losses,
variations in rental income, changes in neighborhood values, the appeal of
properties to tenants and increases in interest rates. If the Fund has
8
<PAGE>
rental income or income from the disposition of real property, the receipt of
such income may adversely affect its ability to retain its tax status as a
regulated investment company. See "Tax Status" in the SAI.
In addition, equity real estate investment trusts may be affected by changes
in the value of the underlying property owned by the trusts, while mortgage
real estate investment trusts may be affected by the quality of credit
extended. Equity and mortgage real estate investment trusts are dependent upon
management skill, may not be diversified and are subject to the risks of
financing projects. Such trusts are also subject to heavy cash flow
dependency, defaults by borrowers, self-liquidation and the possibility of
failing to qualify for tax-free pass-through of income under the Internal
Revenue Code and to maintain exemption from the 1940 Act. Changes in interest
rates may also affect the value of the debt securities in the Fund's
portfolio. By investing in real estate investment trusts indirectly through
the Fund, a Shareholder will bear not only his proportionate share of the
expenses of the Fund, but also, indirectly, similar expenses of the real
estate investment trusts.
The Fund may borrow to the extent permitted above. Borrowing may exaggerate
the effect on the Fund's net asset value of any increase or decrease in the
value of the Fund's portfolio securities. Money borrowed will be subject to
interest and other costs (which may include commitment fees and/or the cost of
maintaining minimum average balances) which may or may not exceed the income
received from the securities purchased with borrowed funds.
The Fund has an unlimited right to purchase securities in any developed
foreign country, and may invest up to 10% of its total assets in securities in
developing countries. Investors should consider carefully the substantial
risks involved in investing in securities issued by companies and governments
of foreign nations, which are in addition to the usual risks inherent in
domestic investments. There is the possibility of expropriation,
nationalization or confiscatory taxation, taxation of income earned in foreign
nations or other taxes imposed with respect to investments in foreign nations,
foreign exchange controls (which may include suspension of the ability to
transfer currency from a given country), foreign investment controls on daily
stock market movements, default in foreign government securities, political or
social instability, or diplomatic developments which could affect investments
in securities of issuers in foreign nations. Some countries may withhold
portions of interest and dividends at the source. In addition, in many
countries there is less publicly available information about issuers than is
available in reports about companies in the United States. Foreign companies
are not generally subject to uniform accounting and auditing and financial
reporting standards, and auditing practices and requirements may not be
comparable to those applicable to U.S. companies. The Fund may encounter
difficulties or be unable to vote proxies, exercise shareholder rights, pursue
legal remedies, and obtain judgments in foreign courts.
Brokerage commissions, custodial services and other costs relating to
investment in foreign countries are generally more expensive than in the
United States. Foreign securities markets also have different clearance and
settlement procedures, and in certain markets there have been times when
settlements have been unable to keep pace with the volume of securities
transactions, making it difficult to conduct such transactions. Delays in
settlement could result in temporary periods when assets of the Fund are
uninvested and no return is earned thereon. The inability of the Fund to make
intended security purchases due to settlement problems could cause the Fund to
miss attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result either in losses to the
Fund due to subsequent declines in value of the portfolio security or, if the
Fund has entered into a contract to sell the security, could result in
possible liability to the purchaser.
In many foreign countries, there is less government supervision and
regulation of business and industry practices, stock exchanges, brokers and
listed companies than in the United States. There is an increased risk,
therefore, of uninsured loss due to lost, stolen, or counterfeit stock
certificates. In addition, the foreign securities markets of many of the
countries in which the Fund may invest may also be smaller, less liquid, and
subject to greater price volatility than those in the United States. The Fund
may invest in Eastern European countries, which involves special risks that
are described under "Risk Factors" in the SAI.
9
<PAGE>
Prior governmental approval of foreign investments may be required under
certain circumstances in some developing countries, and the extent of foreign
investment in domestic companies may be subject to limitation in other
developing countries. Foreign ownership limitations also may be imposed by the
charters of individual companies in developing countries to prevent, among
other concerns, violation of foreign investment limitations.
Repatriation of investment income, capital and proceeds of sales by foreign
investors may require governmental registration and/or approval in some
developing countries. The Fund could be adversely affected by delays in or a
refusal to grant any required governmental registration or approval for such
repatriation.
Further, the economies of developing countries generally are heavily
dependent upon international trade and, accordingly, have been and may
continue to be adversely affected by trade barriers, exchange controls,
managed adjustments in relative currency values and other protectionist
measures imposed or negotiated by the countries with which they trade. These
economies also have been and may continue to be adversely affected by economic
conditions in the countries with which they trade.
The Fund usually effects currency exchange transactions on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign exchange market.
However, some price spread on currency exchange (to cover service charges)
will be incurred when the Fund converts assets from one currency to another.
Successful use of futures contracts and related options is subject to
special risk considerations. A liquid secondary market for any futures or
options contract may not be available when a futures position is sought to be
closed. In addition, there may be an imperfect correlation between movements
in the securities or foreign currency on which the futures or options contract
is based and movements in the securities or currency in the Fund's portfolio.
As there is currently no index of real estate industry securities, the Fund's
use of stock index futures may involve a greater correlation risk than does
use of such futures by funds whose portfolios more closely match the
composition of stock indices. Successful use of futures or options contracts
is further dependent on the Investment Manager's ability to correctly predict
movements in the securities or foreign currency markets and no assurance can
be given that its judgment will be correct. Successful use of options on
securities or stock indices is subject to similar risk considerations.
There are further risk considerations, including possible losses through the
holding of securities in domestic and foreign custodian banks and
depositories, described in the SAI.
HOW TO BUY SHARES OF THE FUND
Shares of the Fund may be purchased at the Offering Price through any broker
which has a dealer agreement with Franklin Templeton Distributors, Inc.
("FTD"), the Principal Underwriter of the Shares of the Fund, or directly from
FTD upon receipt by FTD of a completed Shareholder Application and check
payable in U.S. currency. Shares of both classes of the Fund are offered at
their respective public Offering Prices, which are determined by adding the
net asset value per Share plus a front-end sales charge, next computed (i)
after the Shareholder's securities dealer receives the order which is promptly
transmitted to the Fund or (ii) after receipt of an order by mail from the
Shareholder directly in proper form (which generally means a completed
Shareholder Application accompanied by a negotiable check). The minimum
initial investment is $100, and subsequent investments must be $25 or more.
These minimums may be waived when the Shares are being purchased through
retirement plans providing for regular periodic investments, as described
below under "Retirement Plans."
10
<PAGE>
DIFFERENCES BETWEEN CLASS I AND CLASS II. The differences between Class I
and Class II Shares lie primarily in their front-end and contingent deferred
sales charges and Rule 12b-1 fees as described below.
Class I. All Fund Shares outstanding before the implementation of the
multiclass structure have been redesignated as Class I Shares, and will retain
their previous rights and privileges. Voting rights of each class will be the
same on matters affecting the Fund as a whole, but each will vote separately
on matters affecting its class. Class I Shares are generally subject to a
variable sales charge upon purchase and not subject to any sales charge upon
redemption. Class I Shares are subject to Rule 12b-1 fees of up to an annual
maximum of 0.25% of average daily net assets of such Shares. With this
multiclass structure, Class I Shares have higher front-end sales charges than
Class II Shares and comparatively lower Rule 12b-1 fees. Class I Shares may be
purchased at reduced front-end sales charges, or at net asset value if certain
conditions are met. In most circumstances, contingent deferred sales charges
will not be assessed against redemptions of Class I Shares. See "Management of
the Fund" and "How to Sell Shares of the Fund" for more information.
Class II. The current public Offering Price of Class II Shares is equal to
the net asset value per Share, plus a front-end sales charge of 1% of the
amount invested. Class II Shares are also subject to a contingent deferred
sales charge of 1% if Shares are redeemed within 18 months of the calendar
month of the purchase. In addition, Class II Shares are subject to Rule 12b-1
fees of up to a maximum of 1% per annum of average daily net assets of such
Shares, 0.75% of which will be retained by FTD during the first year of
investment. Class II Shares have lower front-end sales charges than Class I
Shares and comparatively higher Rule 12b-1 fees. See "How to Sell Shares of
the Fund--Contingent Deferred Sales Charge."
Purchases of Class II Shares are limited to purchases below $1 million. Any
purchases of $1 million or more will automatically be invested in Class I
Shares, since that is more beneficial to investors. Such purchases, however,
may be subject to a contingent deferred sales charge. Investors may exceed $1
million in Class II Shares by cumulative purchases over a period of time.
Investors who intend to make investments exceeding $1 million, however, should
consider purchasing Class I Shares through a Letter of Intent instead of
purchasing Class II Shares.
DECIDING WHICH CLASS TO PURCHASE. Investors should carefully evaluate their
anticipated investment amount and time horizon prior to determining which
class of Shares to purchase. Generally, an investor who expects to invest less
than $50,000 in the Franklin Templeton Funds and who expects to make
substantial redemptions within approximately six years or less of investment
should consider purchasing Class II Shares. However, the higher Rule 12b-1
fees on the Class II Shares will result in higher operating expenses, which
will accumulate over time to outweigh the difference in front-end sales
charges, and will lower income dividends for Class II Shares. For this reason,
Class I Shares may be more attractive to long-term investors even if no sales
charge reductions are available to them.
Investors who qualify to purchase Class I Shares at reduced sales charges
definitely should consider purchasing Class I Shares, especially if they
intend to hold their Shares approximately six years or more. Investors who
qualify to purchase Class I Shares at reduced sales charges but who intend to
hold their Shares less than approximately six years should evaluate whether it
is more economical to purchase Class I Shares through a Letter of Intent or
under cumulative quantity discount rather than purchasing Class II Shares.
INVESTORS INVESTING $1 MILLION OR MORE IN A SINGLE PAYMENT AND OTHER INVESTORS
WHO QUALIFY TO PURCHASE CLASS I SHARES AT NET ASSET VALUE WILL BE PRECLUDED
FROM PURCHASING CLASS II SHARES.
Each class represents the same interest in the investment portfolio of the
Fund and has the same rights, except that each class has a different sales
charge, bears the separate expenses of its Rule 12b-1 distribution plan, and
has exclusive voting rights with respect to such plan. The two classes also
have separate exchange privileges.
11
<PAGE>
Each class also has a separate schedule for compensating securities dealers
for selling Fund Shares. Investors should take all of the factors regarding an
investment in each class into account before deciding which class of Shares to
purchase.
OFFERING PRICE--CLASS I. The sales charge for Class I Shares is a variable
percentage of the Offering Price depending upon the amount of the sale. The
method of calculating net asset value per Share is described below under "Net
Asset Value."
The price to the public on purchases of Class I Shares made by a single
purchaser, by an individual together with his or her spouse and their children
under age 21 and grandchildren under age 21, or by a single trust or fiduciary
account other than an employee benefit plan holding Shares of the Fund on or
before February 1, 1995, is the net asset value per Share plus a sales charge
not exceeding 5.75% of the Offering Price (equivalent to 6.10% of the net
asset value), which is reduced on larger sales as shown below.
<TABLE>
<CAPTION>
TOTAL SALES CHARGE
--------------------------------------------
AS A PERCENTAGE OF AS A PERCENTAGE OF PORTION OF TOTAL
AMOUNT OF SALE OFFERING PRICE OF THE NET ASSET VALUE OF THE OFFERING PRICE
AT OFFERING PRICE SHARES PURCHASED SHARES PURCHASED RETAINED BY DEALERS/1/,/3/
- ----------------- --------------------- ---------------------- --------------------------
<S> <C> <C> <C>
Less than $50,000....... 5.75% 6.10% 5.00%
$50,000 but less than
$100,000............... 4.50% 4.71% 3.75%
$100,000 but less than
$250,000............... 3.50% 3.63% 2.80%
$250,000 but less than
$500,000............... 2.50% 2.56% 2.00%
$500,000 but less than
$1,000,000............. 2.00% 2.04% 1.60%
$1,000,000 or more...... none none (see below)/2/
</TABLE>
- -------
/1/ Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages set forth above.
/2/ The following commissions will be paid by FTD, from its own resources, to
securities dealers who initiate and are responsible for purchases of $1
million or more; 1% on sales of $1 million but less than $2 million, plus
0.80% on sales of $2 million but less than $3 million, plus 0.50% on sales
of $3 million but less than $50 million, plus 0.25% on sales of $50 million
but less than $100 million, plus 0.15% on sales of $100 million or more.
Dealer concession breakpoints are reset every 12 months for purposes of
additional purchases.
/3/ At the discretion of FTD, all sales charges may at times be reallowed to
the securities dealer. If 90% or more of the sales commission is reallowed,
such securities dealer may be deemed to be an underwriter as that term is
defined in the Securities Act of 1933.
No front-end sales charge applies to investments of $1 million or more, but
a contingent deferred sales charge of 1% is imposed on certain redemptions of
all or a portion of investments of $1 million or more within 12 months of the
calendar month of such investments ("contingency period"). See "How to Sell
Shares of the Fund--Contingent Deferred Sales Charge."
The size of a transaction which determines the applicable sales charge on
the purchases of Class I Shares is determined by adding the amount of the
Shareholder's current purchase plus the cost or current value (whichever is
higher) of a Shareholder's existing investment in one or more of the funds in
the Franklin Group of Funds (R) and the Templeton Family of Funds. Included
for three aggregation purposes are (i) the mutual funds in the Franklin Group
of Funds (R) except Franklin Valuemark Funds and Franklin Government
Securities Trust (the "Franklin Funds"); (ii) other investment products
underwritten by FTD or its affiliates (although certain investments may not
have the same schedule of sales charges and/or may not be subject to
reduction); and (iii) the U.S.-registered mutual funds in the Templeton Family
of Funds except Templeton Capital Accumulator Fund, Inc., Templeton Variable
Annuity Fund, and Templeton Variable Products Series Fund (the "Templeton
Funds"). (Franklin Funds and Templeton Funds are collectively referred to as
the "Franklin Templeton Funds.") Sales charge reductions based upon aggregate
holdings of (i), (ii) or (iii) above ("Franklin Templeton Investments") may be
effective only after notification to FTD that the investment qualifies for a
discount.
Other Payments to Securities Dealers. FTD, or one of its affiliates, may
make payments, from its own resources, of up to 1% of the amount purchased, to
securities dealers who initiate and are responsible for purchases made at net
asset value by certain designated retirement plans (as defined below)
(excluding IRA and IRA rollovers), certain non-designated plans (as defined
below), certain trust
12
<PAGE>
companies and trust departments of banks and certain retirement plans of
organizations with collective retirement plan assets of $10 million or more.
See definitions under "Description of Special Net Asset Value Purchases" below
and as set forth in the SAI.
A sales charge of 4% of the Offering Price (4.17% of the net asset value) is
applicable to all purchases of Shares made for any qualified or non-qualified
employee benefit plan account which is a Shareholder in the Fund on or before
February 1, 1995. Of the 4% sales charge applicable to such purchases, 3.20%
of the Offering Price will be retained by dealers.
Cumulative Quantity Discount. The schedule of reduced sales charges also may
be applied to qualifying sales of Class I Shares on a cumulative basis. For
this purpose, the dollar amount of the sale is added to the higher of (i) the
value (calculated at the applicable Offering Price) or (ii) the purchase
price, of Franklin Templeton Investments. The cumulative quantity discount
applies to Franklin Templeton Investments owned at the time of purchase by the
purchaser, his or her spouse, their children under age 21 and their
grandchildren under age 21. In addition, the aggregate investments of a
trustee or other fiduciary account (for an account under exclusive investment
authority) may be considered in determining whether a reduced sales charge is
available, even though there may be a number of beneficiaries of the account.
For example, if the investor held Class I Shares valued at $40,000 (or, if
valued at less than $40,000, had been purchased for $40,000) and purchased an
additional $20,000 of the Fund's Class I Shares, the sales charge for the
$20,000 purchase would be at the rate of 4.50%. It is FTD's policy to give
investors the best sales charge rate possible; however, there can be no
assurance that an investor will receive the appropriate discount unless, at
the time of placing the purchase order, the investor or the dealer makes a
request for the discount and gives FTD sufficient information to determine
whether the purchase will qualify for the discount. On telephone orders from
dealers for the purchase of Class I Shares to be registered in "street name,"
FTD will accept the dealer's instructions with respect to the applicable sales
charge rate to be applied. The cumulative quantity discount may be amended or
terminated at any time.
Letter of Intent. An investor may be eligible for reduced sales charges on
all investments in Class I Shares by means of a Letter of Intent ("LOI") which
expresses the investor's intention to invest a certain amount within a 13-
month period in Class I Shares of the Fund or any other Franklin Templeton
Fund. See the Shareholder Application. Except for certain employee benefit
plans, the minimum initial investment under an LOI is 5% of the total LOI
amount. Except for Shares purchased by certain employee benefit plans, Shares
purchased with the first 5% of such amount will be held in escrow to secure
payment of the higher sales charge applicable to the Shares actually purchased
if the full amount indicated is not purchased, and such escrowed Shares will
be involuntarily redeemed to pay the additional sales charge, if necessary. A
purchase not originally made pursuant to an LOI may be included under a
subsequent LOI executed within 90 days of the purchase. Any redemptions made
by Shareholders, other than by certain employee benefit plans, during the 13-
month period will be subtracted from the amount of the purchases for purposes
of determining whether the terms of the LOI have been completed. For a further
description of the LOI, see "Purchase, Redemption and Pricing of Shares --
Letter of Intent" in the SAI.
Group Purchases. An individual who is a member of a qualified group may also
purchase Class I Shares of the Fund at the reduced sales charge applicable to
the group as a whole. The sales charge is based upon the aggregate dollar
value of Class I Shares previously purchased and still owned by the group,
plus the amount of the current purchase. For example, if members of the group
had previously invested and still held $80,000 of Class I Shares and now were
investing $25,000, the sales charge would be 3.50%. Information concerning the
current sales charge applicable to a group may be obtained by contacting FTD.
A "qualified group" is one which (i) has been in existence for more than six
months, (ii) has a purpose other than acquiring Fund Shares at a discount, and
(iii) satisfies uniform criteria which enable FTD to realize economies of
scale in its costs of distributing Shares. A qualified group must have more
than 10 members, must be available to arrange for group meetings between
representatives of the Fund or FTD and the members, must agree to include
sales and other materials related to the Fund in its publications and mailings
to members at reduced or no cost to FTD, and must seek to arrange for payroll
deduction or other bulk transmission of investments to the Fund.
13
<PAGE>
If an investor selects a payroll deduction plan, subsequent investments will
be automatic and will continue until such time as the investor notifies the
Fund and the investor's employer to discontinue further investments. Due to
the varying procedures to prepare, process and forward the payroll deduction
information to the Fund, there may be a delay between the time of the payroll
deduction and the time the money reaches the Fund. The investment in the Fund
will be made at the Offering Price per Share determined on the day that both
the check and payroll deduction data are received in required form by the
Fund.
OFFERING PRICE--CLASS II. Unlike Class I Shares, the front-end sales charges
and dealer concessions for Class II Shares do not vary depending on the amount
of purchase. The total sales charges or underwriting commissions and dealer
concessions for Class II Shares are set forth below.
<TABLE>
<CAPTION>
TOTAL SALES CHARGE
--------------------------------------------
AS A PERCENTAGE OF AS A PERCENTAGE OF PORTION OF TOTAL
AMOUNT OF SALE OFFERING PRICE OF THE NET ASSET VALUE OF THE OFFERING PRICE
AT OFFERING PRICE SHARES PURCHASED SHARES PURCHASED RETAINED BY DEALERS*
- ----------------- --------------------- ---------------------- --------------------
<S> <C> <C> <C>
any amount (less than $1
million)............... 1.00% 1.01% 1.00%
</TABLE>
- -------
* FTD, or one of its affiliates, may make additional payments to securities
dealers, from its own resources, of up to 1% of the amount invested. During
the first year following a purchase of Class II Shares, FTD may retain a
portion of the Rule 12b-1 fees assessed on those Shares to partially recoup
fees FTD pays to securities dealers.
Class II Shares redeemed within 18 months of their purchase will be assessed
a contingent deferred sales charge of 1% on the lesser of the then-current net
asset value or the net asset value of such Shares at the time of purchase,
unless such charge is waived as described under "How to Sell Shares of the
Fund--Contingent Deferred Sales Charge."
NET ASSET VALUE PURCHASES (BOTH CLASSES). Class I Shares may be purchased
without the imposition of a front-end sales charge ("net asset value") or a
contingent deferred sales charge by (i) officers, trustees, directors, and
full-time employees of the Fund, any of the Franklin Templeton Funds, or
Franklin Resources, Inc. and its subsidiaries (the "Franklin Templeton
Group"), and their spouses and family members, including any subsequent
payments made by such parties after cessation of employment; (ii) companies
exchanging Shares with or selling assets pursuant to a merger, acquisition or
exchange offer; (iii) insurance company separate accounts for pension plan
contracts; (iv) accounts managed by the Franklin Templeton Group; (v)
shareholders of Templeton Institutional Funds, Inc. reinvesting redemption
proceeds from that fund under an employee benefit plan qualified under Section
401 of the Internal Revenue Code of 1986, as amended (the "Code"), in Shares
of the Fund; (vi) certain unit investment trusts and unit holders of such
trusts reinvesting their distributions from the trusts in the Fund; (vii)
registered securities dealers and their affiliates, for their investment
account only; and (viii) registered personnel and employees of securities
dealers and their affiliates, and by their spouses and family members, in
accordance with the internal policies and procedures of the employing
securities dealer.
For either Class I or Class II, the same class of Shares of the Fund may be
purchased at net asset value with the proceeds from (i) a redemption of Shares
of the Fund or shares of any other Franklin Templeton Fund, except any of the
Franklin Templeton money market funds (unless the redemption proceeds are from
Class I shares of a fund with a lower initial sales charge than that charged
by the Fund and have been held in that fund for less than six months), or (ii)
a dividend or distribution paid by any of the Franklin Templeton Funds, within
365 days after the date of the redemption or dividend or distribution. See
"How to Sell Shares of the Fund--Reinstatement Privilege." Class II
Shareholders may also invest such distributions at net asset value in a Class
I Franklin Templeton Fund.
Class I Shares may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by investors who have, within
the past 60 days, redeemed an investment in a mutual fund which is not part of
the Franklin Templeton Funds, which was subject to a front-end sales charge or
a contingent deferred sales charge and which has investment objectives similar
to those of the Fund.
14
<PAGE>
Class I Shares may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by broker-dealers who have
entered into a supplemental agreement with FTD, or by registered investment
advisers affiliated with such broker-dealers, on behalf of their clients who
are participating in a comprehensive fee program (also known as a wrap fee
program).
Class I Shares may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by anyone who has taken a
distribution from an existing retirement plan already invested in the Franklin
Templeton Funds (including former participants of the Franklin Templeton
Profit Sharing 401(k) plan), to the extent of such distribution. In order to
exercise this privilege, a written order for the purchase of Shares of the
Fund must be received by Franklin Templeton Trust Company ("FTTC"), the Fund,
or Franklin Templeton Investor Services, Inc. (the "Transfer Agent") within
365 days after the plan distribution.
Class I Shares may also be purchased at net asset value and without the
imposition of a contingent deferred sales charge by any state, county or city,
or any instrumentality, department, authority or agency thereof which has
determined that the Fund is a legally permissible investment and which is
prohibited by applicable investment laws from paying a sales charge or
commission in connection with the purchase of shares of any registered
management investment company (an "eligible governmental authority"). SUCH
INVESTORS SHOULD CONSULT THEIR OWN LEGAL ADVISERS TO DETERMINE WHETHER AND TO
WHAT EXTENT THE SHARES OF THE FUND CONSTITUTE LEGAL INVESTMENTS FOR THEM.
Municipal investors considering investment of proceeds of bond offerings into
the Fund should consult with expert counsel to determine the effect, if any,
of various payments made by the Fund or its investment manager on arbitrage
rebate calculations. If an investment by an eligible governmental authority at
net asset value is made through a securities dealer who has executed a dealer
agreement with FTD, FTD or one of its affiliates may make a payment, out of
its own resources, to such securities dealer in an amount not to exceed 0.25%
of the amount invested. Contact Franklin Templeton Institutional Services for
additional information.
DESCRIPTION OF SPECIAL NET ASSET VALUE PURCHASES. Class I Shares may also be
purchased at net asset value and without the imposition of a contingent
deferred sales charge by certain designated retirement plans, including
profit-sharing, pension, 401(k) and simplified employee pension plans
("designated plans"), subject to minimum requirements with respect to number
of employees or amount of purchase, which may be established by FTD.
Currently, those criteria require that the employer establishing the plan have
200 or more employees or that the amount invested or to be invested during the
subsequent 13-month period in the Fund or in any of the Franklin Templeton
Investments totals at least $1 million. Employee benefit plans not designated
above or qualified under Section 401 of the Code ("non-designated plans") may
be afforded the same privilege if they meet the above requirements as well as
the uniform criteria for qualified groups previously described under "Group
Purchases," which enable FTD to realize economies of scale in its sales
efforts and sales-related expenses.
Class I Shares may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by trust companies and bank
trust departments for funds over which they exercise exclusive discretionary
investment authority and which are held in a fiduciary, agency, advisory,
custodial or similar capacity. Such purchases are subject to minimum
requirements with respect to amount of purchase, which may be established by
FTD. Currently, those criteria require that the amount invested or to be
invested during the subsequent 13-month period in the Fund or any of the
Franklin Templeton Investments must total at least $1 million. Orders for such
accounts will be accepted by mail accompanied by a check, or by telephone or
other means of electronic data transfer directly from the bank or trust
company, with payment by federal funds received by the close of business on
the next business day following such order.
Class I Shares may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by trustees or other
fiduciaries purchasing securities for certain retirement plans of
organizations with collective retirement plan assets of $10 million or more,
without regard to where such assets are currently invested.
Refer to the SAI for further information regarding net asset value purchases
of Class I Shares.
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ADDITIONAL DEALER COMPENSATION (BOTH CLASSES). FTD, or one of its
affiliates, from its own resources, may also provide additional compensation
to securities dealers in connection with sales of shares of the Franklin
Templeton Funds. Compensation may include financial assistance to securities
dealers in connection with conferences, sales or training programs for their
employees, seminars for the public, advertising, sales campaigns and/or
shareholder services and programs regarding one or more of the Franklin
Templeton Funds and other dealer-sponsored programs or events. In some
instances, this compensation may be made available only to certain securities
dealers whose representatives have sold or are expected to sell significant
amounts of shares of the Franklin Templeton Funds. Compensation may include
payment for travel expenses, including lodging, incurred in connection with
trips taken by invited registered representatives and members of their
families to locations within or outside of the United States for meetings or
seminars of a business nature. Securities dealers may not use sales of the
Fund's Shares to qualify for this compensation to the extent such may be
prohibited by the laws of any state or any self-regulatory agency, such as the
National Association of Securities Dealers, Inc. In addition, FTD or its
affiliates may make ongoing payments to brokerage firms, financial
institutions (including banks) and others to facilitate the administration and
servicing of Shareholder accounts. None of the aforementioned additional
compensation is paid for by the Fund or its Shareholders.
Ongoing payments will be made to qualifying dealers at the annual rate of
0.25% of the average daily net asset value of Class I Shares (annual rate of
0.15% of the average daily net assets of Class I Shares purchased prior to
January 1, 1993), and 1% of the average daily net asset value of Class II
Shares, registered in the name of that broker-dealer as nominee or held in a
Shareholder account that designates that broker-dealer as dealer of record.
These payments are made in order to promote selling efforts and to compensate
dealers for providing certain services, including processing purchase and
redemption transactions, establishing Shareholder accounts and providing
certain information and assistance with respect to the Fund. For purchases of
Class I Shares on or after February 1, 1995 for which FTD advanced a
commission to a securities dealer, the dealer will receive ongoing payments
beginning in the thirteenth month after the date of purchase. For all
purchases of Class II Shares, the dealer will receive payments representing a
service fee (0.25% of average daily net asset value of the Shares) beginning
in the first month after the date of the purchase, and will receive additional
payments representing compensation for distribution (0.75% of average daily
net asset value of the Shares) beginning in the thirteenth month after the
date of the purchase, and beginning May 1, 1997 for exchanges from Templeton
American Trust, Inc., if the exchanged shares were purchased prior to May 1,
1995.
PURCHASING CLASS I AND CLASS II SHARES. When placing purchase orders,
investors should clearly indicate which class of Shares they intend to
purchase. A purchase order that fails to specify a class will automatically be
invested in Class I Shares. Purchases of $1 million or more in a single
payment will be invested in Class I Shares. There are no conversion features
attached to either class of Shares.
Investors who qualify to purchase Class I Shares at net asset value should
purchase Class I rather than Class II Shares. See the section "Net Asset Value
Purchases (Both Classes)" and "Description of Special Net Asset Value
Purchases" above for a discussion of when Shares may be purchased at net asset
value.
As to telephone orders placed with FTD by dealers, the dealer must receive
the investor's order before the close of the New York Stock Exchange ("NYSE")
and transmit it to FTD by 5:00 p.m., New York time, for the investor to
receive that day's Offering Price. Payment for such orders must be by check in
U.S. currency and must be promptly submitted to FTD. Orders mailed to FTD by
dealers or individual investors are effected at the net asset value of the
Fund's Shares next computed after the purchase order accompanied by payment
has been received by FTD. Such payment must be by check in U.S. currency drawn
on a commercial bank in the U.S. and, if over $100,000, may not be deemed to
have been received until the proceeds have been collected unless the check is
certified or issued by such bank. Any subscription may be rejected by FTD or
by the Fund.
The Fund may impose a $10 charge against a Shareholder account in the event
that a check or draft submitted for the purchase of Fund Shares is returned
unpaid to the Fund.
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Investors should promptly check the confirmation advice that is mailed after
each purchase (or redemption) order to insure that it has been accurately
recorded in the investor's account.
AUTOMATIC INVESTMENT PLAN. Investors may accumulate Fund Shares regularly
each month by means of automatic debits to their checking accounts ($25
minimum). Forms for this purpose are in the Shareholder Application in this
Prospectus. Such a plan is voluntary and may be discontinued by written notice
to FTD, which must be received at least 10 days prior to the collection date,
or by FTD upon written notice to the investor at least 30 days prior to the
collection date.
INSTITUTIONAL ACCOUNTS. Institutional investors will likely be required to
complete an institutional account application. There may be additional methods
of opening accounts, and purchasing, redeeming or exchanging Shares of the
Fund available for institutional accounts. To obtain an institutional account
application or additional information regarding institutional accounts,
contact Franklin Templeton Institutional Services at 1-800-321-8563.
ACCOUNT STATEMENTS. Shareholder accounts are opened in accordance with the
Shareholder's registration instructions. Transactions in the account, such as
additional investments and dividend reinvestments, will be reflected on
regular confirmation statements from the Transfer Agent.
TEMPLETON STAR SERVICE. From a touch-tone phone, Templeton and Franklin
shareholders may access an automated system (day or night) which offers the
following features:
By calling the Templeton STAR Service, shareholders may obtain current price
and yield information specific to a Templeton Fund, regardless of class;
obtain account information; and request duplicate confirmation or year-end
statements and money fund checks, if applicable.
By calling the Franklin TeleFACTS system, Class I shareholders may obtain
current price, yield or other performance information specific to a Class I
Franklin Fund; process an exchange into an identically registered Class I
Franklin account; obtain account information; and request duplicate
confirmation or year-end statements, money fund checks, if applicable, and
deposit slips.
Share prices and account information specific to Templeton Class I or II
shares and Franklin Class II shares may also be accessed on TeleFACTS by
Franklin and Templeton Class I and Class II shareholders.
The Templeton STAR Service is accessible by calling 1-800-654-0123. The
TeleFACTS system is accessible by calling 1-800-247-1753. Templeton Class I
and Class II Share codes for the Fund, which will be needed to access system
information, are 410 and 510, respectively. The system's automated operator
will prompt the caller with easy to follow step-by-step instructions from the
main menu. Other features may be added in the future.
RETIREMENT PLANS. Shares of the Fund may be purchased through various
retirement plans including the following plans for which FTTC or its affiliate
acts as trustee or custodian: IRAs, Simplified Employee Pensions, 403(b)
plans, qualified plans for corporations, self-employed individuals and
partnerships, and 401(k) plans. A plan document must be adopted in order for a
retirement plan to be in existence. For further information about any of the
plans, agreements, applications and annual fees, contact FTD. To determine
which retirement plan is appropriate, an investor should contact his or her
tax adviser.
NET ASSET VALUE. The net asset value per Share of each class of the Fund is
determined as of the scheduled closing time of the NYSE (generally 4:00 p.m.,
New York time) each day 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
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NASDAQ is valued at its last sale price on the principal exchange on which the
security is traded. The value of a foreign security is determined in its
national currency as of the as of the close of trading on the foreign exchange
on which it is traded or as of the scheduled closing time of the NYSE
(generally 4:00 p.m., New York time), if that is earlier, and that value is
then converted into its U.S. dollar equivalent at the foreign exchange rate in
effect at noon, New York time, on the day the value of the foreign security is
determined. If no sale is reported at that time, the mean between the current
bid and asked price is used. Occasionally, events which affect the values of
such securities and such exchange rates may occur between the times at which
they are determined and the close of the NYSE, and will therefore not be
reflected in the computation of the Fund's net asset value. If events
materially affecting the value of such securities occur during such period,
then these securities will be valued at fair value as determined by the
management and approved in good faith by the Board of Trustees. All other
securities for which over-the-counter market quotations are readily available
are valued at the mean between the current bid and asked price. Securities for
which market quotations are not readily available and other assets are valued
at fair value as determined by the management and approved in good faith by
the Board of Trustees.
Each of the Fund's classes will bear, pro-rata, all of the common expenses
of the Fund. The net asset value of all outstanding Shares of each class of
the Fund will be computed on a pro-rata basis for each outstanding Share based
on the proportionate participation in the Fund represented by the value of
Shares of such classes, except that the Class I and Class II Shares will bear
the Rule 12b-1 expenses payable under their respective plans. Due to the
specific distribution expenses and other costs that will be allocable to each
class, the dividends paid to each class of the Fund may vary.
EXCHANGE PRIVILEGE
A Shareholder may exchange Shares for the same class of shares of other
Franklin Templeton Funds which are eligible for sale in the Shareholder's
state of residence and in conformity with such fund's stated eligibility
requirements and investment minimums. Some funds, however, may not offer Class
II shares. Class I Shares may be exchanged for Class I shares of any Franklin
Templeton Funds. Class II Shares may be exchanged for Class II shares of any
Franklin Templeton Funds. No exchanges between different classes of shares
will be allowed. A contingent deferred sales charge will not be imposed on
exchanges. If the exchanged Shares were subject to a contingent deferred sales
charge in the original fund purchased, and Shares are subsequently redeemed
within 12 months (Class I Shares) or 18 months (Class II Shares) of the
calendar month of the original purchase date, a contingent deferred sales
charge will be imposed. The period will be tolled (or stopped) for the period
Class I Shares are exchanged into and held in a Franklin Templeton money
market fund. See also "How to Sell Shares of the Fund -- Contingent Deferred
Sales Charge."
Exchange purchases are subject to the minimum investment requirements of the
fund purchased and no sales charge generally applies. Exchanges of the same
class of shares are made on the basis of the net asset values of the class
involved, except as set forth below. Exchanges of shares of a class which were
originally purchased without a sales charge will be charged a sales charge in
accordance with the terms of the prospectus of the fund and the class of
shares being purchased, unless the original investment on which no sales
charge was paid was transferred in from a fund on which the investor paid a
sales charge. Exchanges of shares from the Franklin Templeton money market
funds are subject to applicable sales charges on the funds being purchased,
unless the Franklin Templeton money market fund shares were acquired by an
exchange from a fund having a sales charge, or by reinvestment of dividends or
capital gain distributions. Exchanges of Class I Shares of the Fund which were
purchased with a lower sales charge to a fund which has a higher sales charge
will be charged the difference, unless the shares were held in the original
fund for at least six months prior to executing the exchange. All exchanges
are permitted only after at least 15 days have elapsed from the date of the
purchase of the Shares to be exchanged.
A Shareholder may exchange Shares by writing to the Transfer Agent (see "How
to Sell Shares of the Fund"), by contacting his or her investment dealer or--
if the Shareholder Application indicates that the Shareholder has not declined
the option--by telephoning
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1-800-632-2301. Telephone exchange instructions must be received by FTD by the
scheduled closing time of the NYSE (generally 4:00 p.m., New York time).
Telephonic exchanges can involve only Shares in non-certificated form. Shares
held in certificate form are not eligible, but may be returned and qualify for
these services. All accounts involved in a telephonic exchange must have the
same registration and dividend option as the account from which the Shares are
being exchanged. The Fund and the Transfer Agent will employ reasonable
procedures to confirm that instructions communicated by telephone are genuine.
Please refer to "Telephone Transactions--Verification Procedures." Forms for
declining the telephone exchange privilege and prospectuses of the other funds
in the Franklin Templeton Group may be obtained from FTD. Exchange redemptions
and purchases are processed simultaneously at the share prices next determined
after the exchange order is received. (See "How to Buy Shares of the Fund--
Offering Price.") A gain or loss for tax purposes generally will be realized
upon the exchange, depending on the tax basis of the Shares redeemed.
This exchange privilege is available only in states where shares of the fund
being acquired may legally be sold and may be modified, limited or terminated
at any time by the Fund upon 60 days' written notice. A Shareholder who wishes
to make an exchange should first obtain and review a current prospectus of the
fund into which he or she wishes to exchange. Broker-dealers who process
exchange orders on behalf of their customers may charge a fee for their
services. Such fee may be avoided by making requests for exchange directly to
the Transfer Agent.
If a substantial portion of the Fund's Shareholders should, within a short
period, elect to redeem their shares of the Fund pursuant to the exchange
privilege, the Fund might have to liquidate portfolio securities it might
otherwise hold and incur the additional costs related to such transactions. On
the other hand, increased use of the exchange privilege may result in periodic
large inflows of money. If this should occur, it is the general policy of the
Fund to initially invest this money in short-term, interest-bearing money
market instruments, unless it is felt that attractive investment opportunities
consistent with the Fund's investment objectives exist immediately.
Subsequently, this money will be withdrawn from such short-term money market
instruments and invested in portfolio securities in as orderly a manner as is
possible when attractive investment opportunities arise.
EXCHANGES OF CLASS I SHARES. The contingency period of Class I Shares will
be tolled (or stopped) for the period such Shares are exchanged into and held
in a Franklin Templeton Class I money market fund. If a Class I account has
Shares subject to a contingent deferred sales charge, Class I Shares will be
exchanged into the new account on a "first-in, first-out" basis. See also "How
to Sell Shares of the Fund--Contingent Deferred Sales Charge."
EXCHANGES OF CLASS II SHARES. When an account is composed of Class II Shares
subject to the contingent deferred sales charge, and Shares that are not, the
Shares will be transferred proportionately into the new fund. Shares received
from reinvestment of dividends and capital gains are referred to as "free
Shares," Shares which were originally subject to a contingent deferred sales
charge but to which the contingent deferred sales charge no longer applies are
called "matured Shares," and Shares still subject to the contingent deferred
sales charge are referred to as "CDSC liable Shares." CDSC liable Shares held
for different periods of time are considered different types of CDSC liable
Shares. For instance, if a Shareholder has $1,000 in free Shares, $2,000 in
matured Shares, and $3,000 in CDSC liable Shares, and the Shareholder
exchanges $3,000 into a new fund, $500 will be exchanged from free Shares,
$1,000 from matured Shares, and $1,500 from CDSC liable Shares. Similarly, if
CDSC liable Shares have been purchased at different periods, a proportionate
amount will be taken from Shares held for each period. If, for example, the
Shareholder holds $1,000 in Shares bought three months ago, $1,000 bought six
months ago, and $1,000 bought nine months ago, and the Shareholder exchanges
$1,500 into a new fund, $500 from each of these Shares will be exchanged into
the new fund.
The only money market fund exchange option available to Class II
Shareholders is the Franklin Templeton Money Fund II ("Money Fund II"), a
series of the Franklin Templeton Money Fund Trust. No drafts (checks) may be
written on Money Fund II accounts, nor may Shareholders purchase shares of
Money Fund II directly. Class II Shares exchanged for shares of Money Fund II
will continue to age and a contingent deferred sales charge will be assessed
if CDSC liable Shares are redeemed. No other money market funds are
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available for Class II Shareholders for exchange purposes. Class I Shares may
be exchanged for shares of any of the money market funds in the Franklin
Templeton Funds except Money Fund II. Draft writing privileges and direct
purchases are allowed on these money market funds as described in their
respective prospectuses.
To the extent Shares are exchanged proportionately, as opposed to another
method, such as "first-in, first-out," or free Shares followed by CDSC liable
Shares, the exchanged Shares may, in some instances, be CDSC liable even
though a redemption of such Shares, as discussed elsewhere herein, may no
longer be subject to a CDSC. The proportional method is believed by management
to more closely meet and reflect the expectations of Class II Shareholders in
the event Shares are redeemed during the contingency period. For federal
income tax purposes, the cost basis of Shares redeemed or exchanged is
determined under the Code without regard to the method of transferring Shares
chosen by the Fund for purposes of exchanging or redeeming Shares.
TRANSFERS. Transfers between identically registered accounts in the same
fund and class are treated as non-monetary and non-taxable events, and are not
subject to a contingent deferred sales charge. The transferred Shares will
continue to age from the date of original purchase. Shares of each class will
be transferred on the same basis as described above for exchanges.
CONVERSION RIGHTS. It is not presently anticipated that Class II Shares will
be converted to Class I Shares at this time. A Shareholder may, however, sell
Class II Shares and use the proceeds to purchase Class I Shares, subject to
all applicable sales charges.
EXCHANGES BY TIMING ACCOUNTS. In the case of market timing or allocation
services ("Timing Accounts"), FTD will deduct an administrative service fee of
$5.00 per exchange. Timing Accounts generally include accounts administered so
as to redeem or purchase Shares based upon certain predetermined market
indicators. In accordance with the terms of their respective prospectuses,
certain funds in the Franklin Templeton Group do not accept or may place
differing limitations than those described below on exchanges by Timing
Accounts.
The Fund reserves the right to temporarily or permanently terminate the
exchange privilege or reject any specific purchase order for any Timing
Account or any person whose transactions seem to follow a timing pattern who:
(i) makes an exchange request out of the Fund within two weeks of an earlier
exchange request out of the Fund, (ii) makes more than two exchanges out of
the Fund per calendar quarter, or (iii) exchanges Shares equal in value to at
least $5 million, or more than 1% of the Fund's net assets. Accounts under
common ownership or control, including accounts administered so as to redeem
or purchase Shares based upon certain predetermined market indicators, will be
aggregated for purposes of the exchange limits.
In addition, the Fund reserves the right to refuse the purchase side of
exchange requests by any Timing Account, person, or group if, in the
Investment Manager's judgment, the Fund would be unable to invest effectively
in accordance with its investment objective and policies, or would otherwise
potentially be adversely affected. A Shareholder's exchanges into the Fund may
be restricted or refused if the Fund receives or anticipates simultaneous
orders affecting significant portions of the Fund's assets. In particular, a
pattern of exchanges that coincides with a "market timing" strategy may be
disruptive to the Fund and therefore may be refused.
Finally, as indicated above, the Fund and FTD reserve the right to refuse
any order for the purchase of Shares.
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HOW TO SELL SHARES OF THE FUND
Shares will be redeemed, without charge, on request of the Shareholder in
"Proper Order" to the Transfer Agent. "PROPER ORDER" MEANS THAT THE REQUEST TO
REDEEM MUST MEET ALL OF THE FOLLOWING REQUIREMENTS:
1. Except as provided below under "Redemptions by Telephone," it must be in
writing, signed by the Shareholder(s) exactly in the manner as the Shares are
registered, and must specify either the number of Shares, or the dollar amount
of Shares, to be redeemed and sent to Franklin Templeton Investor Services,
Inc., P.O. Box 33030, St. Petersburg, Florida 33733-8030;
2. The signature(s) of the redeeming Shareholder(s) must be guaranteed by an
"eligible guarantor," including (a) national or state banks, savings
associations, savings and loan associations, trust companies, savings banks,
industrial loan companies and credit unions; (b) national securities
exchanges, registered securities associations and clearing agencies; (c)
securities broker-dealers which are members of a national securities exchange
or a clearing agency or which have minimum net capital of $100,000; or (d)
institutions that participate in the Securities Transfer Agent Medallion
Program ("STAMP") or other recognized signature medallion program. A notarized
signature will not be sufficient for the request to be in Proper Order. If the
Shares are registered in more than one name, the signature of each of the
redeeming Shareholders must be guaranteed. A signature guarantee is not
required for redemptions of $50,000 or less, requested by and payable to all
Shareholders of record, to be sent to the address of record for that account.
However, the Fund reserves the right to require signature guarantees on all
redemptions. A signature guarantee is required in connection with any written
request for transfer of Shares. Also, a signature guarantee is required if the
Fund or the Transfer Agent believes that a signature guarantee would protect
against potential claims based on the transfer instructions, including, for
example, when (i) the current address of one or more joint owners of an
account cannot be confirmed; (ii) multiple owners have a dispute or give
inconsistent instructions to the Fund; (iii) the Fund has been notified of an
adverse claim; (iv) the instructions received by the Fund are given by an
agent, not the actual registered owner; (v) the Fund determines that joint
owners who are married to each other are separated or may be the subject of
divorce proceedings; or (vi) the authority of a representative of a
corporation, partnership, association, or other entity has not been
established to the satisfaction of the Fund;
3. Any outstanding certificates must accompany the request together with a
stock power signed by the Shareholder(s), with signature(s) guaranteed as
described in Item 2 above;
4. Liquidation requests of corporate, partnership, trust and custodianship
accounts, and accounts under court jurisdiction, require the following
documentation to be in proper form:
. Corporation--(i) Signature guaranteed letter of instruction from the
authorized officer(s) of the corporation, and (ii) a corporate
resolution in a form satisfactory to the Transfer Agent;
. Partnership--(i) Signature guaranteed letter of instruction from a
general partner and, if necessary, (ii) pertinent pages from the
partnership agreement identifying the general partners or other
documentation in a form satisfactory to the Transfer Agent;
. Trust--(i) Signature guaranteed letter of instruction from the
trustee(s), and (ii) a copy of the pertinent pages of the trust document
listing the trustee(s) or a certificate of incumbency if the trustee(s)
are not listed on the account registration;
. Custodial (other than a retirement account)--Signature guaranteed
letter of instruction from the custodian;
. Accounts under court jurisdiction--Check court documents and the
applicable state law since these accounts have varying requirements,
depending upon the state of residence; and
5. Redemption of Shares held in a retirement plan for which FTTC or its
affiliate acts as trustee or custodian must conform to the distribution
requirements of the plan and the Fund's redemption requirements above.
Distributions from such plans are subject to additional requirements under the
Code, and certain documents (available from the Transfer Agent) must be
completed before the
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distribution may be made. For example, distributions from retirement plans are
subject to withholding requirements under the Code, and the IRS Form W-4P
(available from the Transfer Agent) may be required to be submitted to the
Transfer Agent with the distribution request, or the distribution will be
delayed. Franklin Templeton Investor Services, Inc. and its affiliates assume
no responsibility to determine whether a distribution satisfies the conditions
of applicable tax laws and will not be responsible for any penalties assessed.
To avoid delay in redemption or transfer, Shareholders having questions
about these requirements should contact the Shareholder Services Department by
calling 1-800-632-2301.
The redemption price will be the net asset value of the Shares next computed
after the redemption request in Proper Order is received by the Transfer
Agent. A gain or loss for tax purposes generally will be realized upon the
redemption, depending on the tax basis of the Shares redeemed. Payment of the
redemption price will be made by check (or by wire at the sole discretion of
the Transfer Agent if wire transfer is requested, including name and address
of the bank and the Shareholder's account number to which payment of the
redemption proceeds is to be wired) within seven days after receipt of the
redemption request in Proper Order. However, if Shares have been purchased by
check, the Fund will make redemption proceeds available when a Shareholder's
check received for the Shares purchased has been cleared for payment by the
Shareholder's bank, which, depending upon the location of the Shareholder's
bank, could take up to 15 days or more. The check will be mailed by first-
class mail to the Shareholder's registered address (or as otherwise directed).
Remittance by wire (to a commercial bank account in the same name(s) as the
Shares are registered) or express mail, if requested, are subject to a
handling charge of up to $15, which will be deducted from the redemption
proceeds.
The Fund, through FTD, also repurchases Shares (whether in certificate or
book-entry form) through securities dealers. The Fund normally will accept
orders to repurchase such Shares by wire or telephone from dealers for their
customers at the net asset value next computed after the dealer has received
the Shareholder's request for repurchase, if the dealer received such request
before closing time of the NYSE on that day. Dealers have the responsibility
of submitting such repurchase requests by calling not later than 5:00 p.m.,
New York time, on such day in order to obtain that day's applicable redemption
price. Repurchase of Shares is for the convenience of Shareholders and does
not involve a charge by the Fund; however, securities dealers may impose a
charge on the Shareholder for transmitting the notice of repurchase to the
Fund. The Fund reserves the right to reject any order for repurchase, which
right of rejection might adversely affect Shareholders seeking redemption
through the repurchase procedure. Ordinarily payment will be made to the
securities dealer within seven days after receipt of a repurchase order and
Share certificate (if any) in "Proper Order" as set forth above. The Fund will
also accept, from member firms of the NYSE, orders to repurchase Shares for
which no certificates have been issued by wire or telephone without a
redemption request signed by the Shareholder, provided the member firm
indemnifies the Fund and FTD from any liability resulting from the absence of
the Shareholder's signature. Forms for such indemnity agreement can be
obtained from FTD.
The Fund may involuntarily redeem an investor's Shares if the net asset
value of such Shares is less than $100, except that involuntary redemptions
will not result from fluctuations in the value of an investor's Shares. In
addition, the Fund may involuntarily redeem the Shares of any investor who has
failed to provide the Fund with a certified taxpayer identification number or
such other tax-related certifications as the Fund may require. A notice of
redemption, sent by first-class mail to the investor's address of record, will
fix a date not less than 30 days after the mailing date, and Shares will be
redeemed at the net asset value at the close of business on that date, unless
sufficient additional Shares are purchased to bring the aggregate account
value up to $100 or more, or unless a certified taxpayer identification number
(or such other information as the Fund has requested) has been provided, as
the case may be. A check for the redemption proceeds will be mailed to the
investor at the address of record.
REINSTATEMENT PRIVILEGE. For either Class I or Class II, the same class of
Shares of the Fund may be purchased at net asset value with the proceeds from
(i) a redemption of Shares of the Fund or shares of any other Franklin
Templeton Fund except any of the Franklin Templeton money market funds (unless
the redemption proceeds are from Class I shares of a fund with a lower initial
sales charge than
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that charged by the Fund and have been held in that fund for less than six
months), or (ii) a dividend or distribution paid by any of the Franklin
Templeton Funds, within 365 days after the date of the redemption or dividend
or distribution. Class II Shareholders may also invest such distributions at
net asset value in a Class I Franklin Templeton Fund. However, if a
Shareholder's original investment was in Class I shares of a fund with a lower
sales charge, or no sales charge, the Shareholder must pay the difference. An
investor may reinvest an amount not exceeding the proceeds of the redemption
or the dividend or distribution. While credit will be given for any contingent
deferred sales charge paid on the Shares redeemed, a new contingency period
will begin. Matured Shares will be reinvested at net asset value and will not
be subject to a new contingent deferred sales charge. Shares of the Fund
redeemed in connection with an exchange into another fund (see "Exchange
Privilege") are not considered "redeemed" for this privilege. In order to
exercise this privilege, a written order for the purchase of Shares of the
Fund must be received by the Fund or the Fund's Transfer Agent within 365 days
after the redemption or the payment date of the distribution. The 365 days,
however, do not begin to run on redemption proceeds placed immediately after
redemption in a Franklin Bank Certificate of Deposit ("CD") until the CD
(including any rollover) matures. Reinvestment at net asset value may also be
handled by a securities dealer or other financial institution, who may charge
the Shareholder a fee for this service. The redemption is a taxable
transaction but reinvestment without a sales charge may affect the tax basis
of the Shares reinvested, and the amount of gain or loss resulting from a
redemption may be affected by exercise of the reinstatement privilege if the
Shares redeemed were held for 90 days or less, or if a Shareholder reinvests
in the same fund within 30 days. Reinvestment will be at the next calculated
net asset value after receipt.
SYSTEMATIC WITHDRAWAL PLAN. A Shareholder may establish a Systematic
Withdrawal Plan ("Plan") and receive periodic payments from the account
provided that the net asset value of the Shares held by the Shareholder is at
least $5,000. There are no service charges for establishing or maintaining a
Plan. The minimum amount which the Shareholder may withdraw is $50 per
withdrawal transaction although this is merely the minimum amount allowed
under the Plan and should not be mistaken for a recommended amount. Retirement
plans subject to mandatory distribution requirements are not subject to the
$50 minimum. The Plan may be established on a monthly, quarterly, semiannual
or annual basis. If the Shareholder establishes a Plan, any capital gain
distributions and income dividends paid by the Fund to the Shareholder's
account must be reinvested for the Shareholder's account in additional Shares
at net asset value. Payments are then made from the liquidation of Shares at
net asset value on the day of the liquidation (which is generally on or about
the 25th of the month) to meet the specified withdrawals. Payments are
generally received three to five days after the date of liquidation. By
completing the "Special Payment Instructions for Distributions" section of the
Shareholder Application included with this Prospectus, a Shareholder may
direct the selected withdrawals to another of the Franklin Templeton Funds, to
another person, or directly to a checking account. Liquidation of Shares may
reduce or possibly exhaust the Shares in the Shareholder's account, to the
extent withdrawals exceed Shares earned through dividends and distributions,
particularly in the event of a market decline. If the withdrawal amount
exceeds the total Plan balance the account will be closed and the remaining
balance will be sent to the Shareholder. As with other redemptions, a
liquidation to make a withdrawal payment is a sale for federal income tax
purposes. Because the amount withdrawn under the Plan may be more than the
Shareholder's actual yield or income, part of such a Plan payment may be a
return of the Shareholder's investment.
Maintaining a Plan concurrently with purchases of additional Shares of the
Fund would be disadvantageous because of the sales charge on the additional
purchases. Also, redemptions of Class I Shares and Class II Shares may be
subject to a contingent deferred sales charge if the Shares are redeemed
within 12 months (Class I Shares) or 18 months (Class II Shares) of the
calendar month of the original purchase date. The Shareholder should
ordinarily not make additional investments of less than $5,000 or three times
the annual withdrawals under the Plan during the time such a Plan is in
effect.
With respect to Class I Shares, the contingent deferred sales charge is
waived for redemptions through a Systematic Withdrawal Plan set up prior to
February 1, 1995. With respect to Systematic Withdrawal Plans set up on or
after February 1, 1995, the applicable contingent deferred sales charge is
waived for Class I and Class II Share redemptions of up to 1% monthly of an
account's net asset value (12% annually, 6% semiannually, 3% quarterly). For
example, if a Class I account maintained an annual balance of $1,000,000,
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only $120,000 could be withdrawn through a once-yearly Systematic Withdrawal
Plan free of charge; any amount over that $120,000 would be assessed a 1% (or
applicable) contingent deferred sales charge. Likewise, if a Class II account
maintained an annual balance of $10,000, only $1,200 could be withdrawn
through a once-yearly Systematic Withdrawal Plan free of charge.
A Plan may be terminated on written notice by the Shareholder or the Fund,
and it will terminate automatically if all Shares are liquidated or withdrawn
from the account, or upon the Fund's receipt of notification of the death or
incapacity of the Shareholder. Shareholders may change the amount (but not
below $50) and schedule of withdrawal payments or suspend one such payment by
giving written notice to the Transfer Agent at least seven business days prior
to the end of the month preceding a scheduled payment. Share certificates may
not be issued while a Plan is in effect.
REDEMPTIONS BY TELEPHONE. Shareholders who file a Telephone Redemption
Authorization Agreement (the "Agreement") (a copy of which is included in this
Prospectus) may redeem Shares of the Fund by telephone, subject to the
Restricted Account exception noted under "Telephone Transactions--Restricted
Accounts." The Fund and the Transfer Agent will employ reasonable procedures
to confirm that instructions given by telephone are genuine. Shareholders,
however, bear the risk of loss in certain cases as described under "Telephone
Transactions--Verification Procedures."
For Shareholder accounts with a completed Agreement on file, redemptions of
uncertificated Shares or Shares which have previously been deposited with the
Fund or the Transfer Agent may be made for up to $50,000 per day per Fund
account. Telephone redemption requests received before the scheduled closing
time of the NYSE (generally 4:00 p.m., New York time) on any business day will
be processed that same day. The redemption check will be sent within seven
days, made payable to all the registered owners on the account, and will be
sent only to the address of record. Redemption requests by telephone will not
be accepted within 30 days following an address change by telephone. In that
case, a Shareholder should follow the other redemption procedures set forth in
this Prospectus. Institutional accounts which wish to execute redemptions in
excess of $50,000 must complete an Institutional Telephone Privileges
Agreement which is available from Franklin Templeton Institutional Services by
telephoning 1-800-321-8563.
CONTINGENT DEFERRED SALES CHARGE. In order to recover commissions paid to
securities dealers, Class I investments of $1 million or more, and any Class
II investments, redeemed within the contingency period of 12 months (Class I)
or 18 months (Class II) of the calendar month of their purchase will be
assessed a contingent deferred sales charge, unless one of the exceptions
described below applies. The charge is 1% of the lesser of the net asset value
of the Shares redeemed (exclusive of reinvested dividends and capital gain
distributions) or the net asset value at the time of purchase of such Shares,
and is retained by FTD. The contingent deferred sales charge is waived in
certain instances. See below.
In determining if a contingent deferred sales charge applies, Shares not
subject to a contingent deferred sales charge are deemed to be redeemed first,
in the following order: (i) a calculated number of Shares representing amounts
attributable to capital appreciation of those Shares held less than the
contingency period (12 months in the case of Class I Shares and 18 months in
the case of Class II Shares); (ii) Shares purchased with reinvested dividends
and capital gain distributions; and (iii) other Shares held longer than the
contingency period, and followed by any Shares held less than the contingency
period, on a "first in, first out" basis. For tax purposes, a contingent
deferred sales charge is treated as either a reduction in redemption proceeds
or an adjustment to the cost basis of the Shares redeemed.
The contingent deferred sales charge on each class of Shares is waived, as
applicable, for: exchanges; any account fees; distributions from an individual
retirement plan account due to death or disability, or upon periodic
distributions based on life expectancy; tax-free returns of excess
contributions from employee benefit plans; distributions from employee benefit
plans, including those due to plan termination or plan transfer; redemptions
through a Systematic Withdrawal Plan set up for Shares prior to February 1,
1995 and, for Systematic Withdrawal Plans set up thereafter, redemptions of up
to 1% monthly of an account's net asset value (3% quarterly, 6%
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semiannually or 12% annually); redemptions initiated by the Fund due to a
Shareholder's account falling below the minimum specified account size; and
redemptions following the death of the Shareholder or the beneficial owner.
All investments made during a calendar month, regardless of when during the
month the investment occurred, will age one month on the last day of that
month and each subsequent month.
Requests for redemptions for a SPECIFIED DOLLAR amount, unless otherwise
specified, will result in additional Shares being redeemed to cover any
applicable contingent deferred sales charge, while requests for redemption of
a SPECIFIC NUMBER of Shares will result in the applicable contingent deferred
sales charge being deducted from the total dollar amount redeemed.
TELEPHONE TRANSACTIONS
Shareholders of the Fund and their investment representative of record, if
any, may be able to execute various transactions by calling the Shareholder
Services at 1-800-632-2301.
All Shareholders will be able to: (i) effect a change in address; (ii)
change a dividend option (see "Restricted Accounts" below); (iii) transfer
Fund Shares in one account to another identically registered account in the
Fund; (iv) request the issuance of certificates (to be sent to the address of
record only); and (v) exchange Fund Shares by telephone as described in this
Prospectus. In addition, Shareholders who complete and file an Agreement as
described under "How to Sell Shares of the Fund--Redemptions by Telephone"
will be able to redeem Shares of the Fund.
VERIFICATION PROCEDURES. The Fund and the Transfer Agent will employ
reasonable procedures to confirm that instructions communicated by telephone
are genuine. These will include: recording all telephone calls requesting
account activity by telephone, requiring that the caller provide certain
personal and/or account information requested by the telephone service agent
at the time of the call for the purpose of establishing the caller's
identification, and sending a confirmation statement on redemptions to the
address of record each time account activity is initiated by telephone. So
long as the Fund and the Transfer Agent follow instructions communicated by
telephone which were reasonably believed to be genuine at the time of their
receipt, neither they nor their affiliates will be liable for any loss to the
Shareholder caused by an unauthorized transaction. The Fund and the Transfer
Agent may be liable for any losses due to unauthorized or fraudulent
instructions in the event such reasonable procedures are not followed.
Shareholders are, of course, under no obligation to apply for or accept
telephone transaction privileges. In any instance where the Fund or the
Transfer Agent is not reasonably satisfied that instructions received by
telephone are genuine, the requested transaction will not be executed, and
neither the Fund, the Transfer Agent, nor their affiliates will be liable for
any losses which may occur because of a delay in implementing a transaction.
RESTRICTED ACCOUNTS. Telephone redemptions and dividend option changes may
not be accepted on Franklin Templeton retirement accounts. To assure
compliance with all applicable regulations, special forms are required for any
distribution, redemption, or dividend payment. While the telephone exchange
privilege is extended to Franklin Templeton IRA and 403(b) retirement
accounts, certain restrictions may apply to other types of retirement plans.
Changes to dividend options must also be made in writing.
To obtain further information regarding distribution or transfer procedures,
including any required forms, retirement account Shareholders may call to
speak to a Retirement Plan Specialist at 1-800/527-2020.
GENERAL. During periods of drastic economic or market changes, it is
possible that the telephone transaction privileges will be difficult to
execute because of heavy telephone volume. In such situations, Shareholders
may wish to contact their dealer for assistance, or to send written
instructions to the Fund as detailed elsewhere in this Prospectus.
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Neither the Fund nor the Transfer Agent will be liable for any losses
resulting from the inability of a Shareholder to execute a telephone
transaction. The telephone transaction privilege may be modified or
discontinued by the Fund at any time upon 60 days' written notice to
Shareholders.
MANAGEMENT OF THE FUND
The Fund is managed by its Board of Trustees and all powers are exercised by
or under authority of the Board. Information relating to the Trustees and
Executive Officers is set forth under the heading "Management of the Fund" in
the SAI.
The Board has carefully reviewed the multiclass structure to ensure that no
material conflict exists between the two classes of Shares. Although the Board
does not expect to encounter material conflicts in the future, the Board will
continue to monitor the Fund and will take appropriate action to resolve such
conflicts if any should later arise.
In developing the multiclass structure, the Fund has retained the authority
to establish additional classes of Shares. It is the Fund's present intention
to offer only two classes of Shares, but new classes may be offered in the
future.
INVESTMENT MANAGER. The Investment Manager of the Fund is Templeton Global
Advisors Limited, Lyford Cay, Nassau, Bahamas. The Investment Manager manages
the investment and reinvestment of the Fund's assets. The Investment Manager
is an indirect wholly owned subsidiary of Franklin Resources, Inc.
("Franklin"). Through its subsidiaries, Franklin is engaged in various aspects
of the financial services industry. The Investment Manager and its affiliates
serve as advisers for a wide variety of public investment mutual funds and
private clients in many nations. The Templeton organization has been investing
globally over the past 52 years and, with its affiliates, provides investment
management and advisory services to a worldwide client base, including over
4.3 million mutual fund shareholders, foundations, endowments, employee
benefit plans and individuals. The Investment Manager and its affiliates have
approximately 4,100 employees in the United States, Australia, Scotland,
Germany, Hong Kong, Luxembourg, Bahamas, Singapore, Canada and Russia.
The Investment Manager uses a disciplined, long-term approach to value-
oriented global and international investing. It has an extensive global
network of investment research sources. Securities are selected for the Fund's
portfolio on the basis of fundamental company-by-company analysis. Many
different selection methods are used for different funds and clients and these
methods are changed and improved by the Investment Manager's research on
superior selection methods.
The Investment Manager performs similar services for other funds and
accounts and there may be times when the actions taken with respect to the
Fund's portfolio will differ from those taken by the Investment Manager on
behalf of other funds and accounts. Neither the Investment Manager and its
affiliates, its officers, directors or employees, nor the officers and
Trustees of the Fund are prohibited from investing in securities held by the
Fund or other funds and accounts which are managed or administered by the
Investment Manager to the extent such transactions comply with the Fund's Code
of Ethics. Please see "Investment Management and Other Services--Investment
Management Agreement" in the SAI for further information on securities
transactions and a summary of the Fund's Code of Ethics.
The Investment Manager does not furnish any other services or facilities for
the Fund, although such expenses are paid by some investment advisers of other
investment companies. As compensation for its services, the Fund pays the
Investment Manager a fee which, during the most recent fiscal year,
represented 0.75% of its average daily net assets.
The lead portfolio manager of the Fund is Jeffrey A. Everett. Mr. Everett
holds a BS in Finance from Pennsylvania State University. He joined the
Templeton organization in 1989, and is Vice President of the Investment
Manager. Prior to joining the Templeton
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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. Dorian B. Foyil and
Sean Farrington also exercise secondary portfolio management responsibilities
with respect to the Fund. Mr. Foyil holds a BS in Computer Science and
Accounting, as well as an MBA from the Wharton School of Business at the
University of Pennsylvania. Mr. Foyil is 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. Farrington holds an AB in Economics from Harvard
University. He is a member of the Investment Manager's research technology
group responsible for the maintenance of the internal research database.
Further information concerning the Investment Manager is included under the
heading "Investment Management and Other Services" in the SAI.
BUSINESS MANAGER. Templeton Global Investors, Inc. provides certain
administrative facilities and services for the Fund, including payment of
salaries of officers, preparation and maintenance of books and records,
preparation of tax reports, preparation of financial reports, monitoring
compliance with regulatory requirements and monitoring tax-deferred retirement
plans. For its services, the Fund pays the Business Manager a monthly fee
equivalent on an annual basis to 0.15% of the average daily net assets of the
Fund, reduced to 0.135% of such assets in excess of $200 million, to 0.10% of
such assets in excess of $700 million and to 0.075% of such assets in excess
of $1,200 million. The combined investment management and business management
fees paid by the Fund are higher than those paid by most other investment
companies.
TRANSFER AGENT. Franklin Templeton Investor Services, Inc. serves as
transfer agent and dividend disbursing agent for the Fund.
CUSTODIAN. The Chase Manhattan Bank, N.A. serves as custodian of the Fund's
assets.
PLANS OF DISTRIBUTION. A separate Plan of Distribution has been approved and
adopted for each class ("Class I Plan" and "Class II Plan," respectively, or
"Plans") pursuant to Rule 12b-1 under the 1940 Act. The Rule 12b-1 fees
charged to each class will be based solely on the distribution and servicing
fees attributable to that particular class. Any portion of fees remaining from
either Plan after distribution to securities dealers of up to the maximum
amount permitted under each Plan may be used by the class to reimburse FTD for
routine ongoing promotion and distribution expenses incurred with respect to
such class. Such expenses may include, but are not limited to, the printing of
prospectuses and reports used for sales purposes, expenses of preparing and
distributing sales literature and related expenses, advertisements, and other
distribution-related expenses, including a prorated portion of FTD's overhead
expenses attributable to the distribution of Fund Shares, as well as any
distribution or service fees paid to securities dealers or their firms or
others who have executed a servicing agreement with the Fund, FTD or its
affiliates.
The maximum amount which the Fund may pay to FTD or others under the Class I
Plan for such distribution expenses is 0.25% per annum of Class I's average
daily net assets, payable on a quarterly basis. All expenses of distribution
and marketing in excess of 0.25% per annum will be borne by FTD, or others who
have incurred them, without reimbursement from the Fund. Under the Class I
Plan, costs and expenses not reimbursed in any one given quarter (including
costs and expenses not reimbursed because they exceed the applicable limit
under the Plan) may be reimbursed in subsequent quarters or years, subject to
applicable law. FTD has informed the Fund that the costs and expenses of Class
I Shares that may be reimbursable in future quarters or years were $30,457
(0.02% of its net assets) at August 31, 1995.
Under the Class II Plan, the maximum amount which the Fund is permitted to
pay to FTD or others for distribution expenses and related expenses is 0.75%
per annum of Class II's average daily net assets, payable quarterly. All
expenses of distribution, marketing and related services over that amount will
be borne by FTD, or others who have incurred them, without reimbursement by
the Fund. In addition, the Class II Plan provides for an additional payment by
the Fund of up to 0.25% per annum of Class II's average daily net assets as a
servicing fee, payable quarterly. This fee will be used to pay securities
dealers or other for, among other things, assisting in
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<PAGE>
establishing and maintaining customer accounts and records; assisting with
purchase and redemption requests; receiving and answering correspondence;
monitoring dividend payments from the Fund on behalf of the customers; or
similar activities related to furnishing personal services and/or maintaining
Shareholder accounts.
During the first year following the purchase of Class II Shares, FTD will
retain 0.75% per annum of Class II's average daily net assets to partially
recoup fees FTD pays to securities dealers. FTD, or its affiliates, may pay,
from its own resources, a commission of up to 1% of the amount invested to
securities dealers who initiate and are responsible for purchases of Class II
Shares.
Both Plans also cover any payments to or by the Fund, the Investment
Manager, FTD, or other parties on behalf of the Fund, the Investment Manager
or FTD, to the extent such payments are deemed to be for the financing of any
activity primarily intended to result in the sale of Shares issued by the Fund
within the context of Rule 12b-1. The payments under the Plans are included in
the maximum operating expenses which may be borne by each class of the Fund.
For more information including a discussion of the Board's policies with
regard to the amount of each Plan's fees, please see the SAI.
EXPENSES. For the fiscal year ended August 31, 1995, expenses borne by Class
I Shares of the Fund amounted to 1.55% of the Fund's average net assets of
such class, and expenses borne by Class II Shares of the Fund amounted to
2.26% (annualized) of the average net assets of such Class. See the Expense
Table for information on regarding estimated expenses of both Classes of
Shares for the current fiscal year.
BROKERAGE COMMISSIONS. The Fund's brokerage policies are described under the
heading "Brokerage Allocation" in the SAI. The Fund's brokerage policies
provide that the receipt of research services from a broker and the sale of
Shares by a broker are factors which may be taken into account in allocating
securities transactions, so long as the prices and execution provided by the
broker equal the best available within the scope of the Fund's brokerage
policies.
GENERAL INFORMATION
DESCRIPTION OF SHARES/SHARE CERTIFICATES. The capitalization of the Fund
consists of an unlimited number of Shares of beneficial interest, par value
$0.01 per Share. The Board of Trustees is authorized, in its discretion, to
classify and allocate the unissued Shares of the Fund. Each Share entitles the
holder to one vote.
Under Massachusetts law, Shareholders could, under certain circumstances, be
held personally liable for the obligations of the Fund. However, the
Declaration of Trust disclaims liability of the Shareholders, Trustees and
officers of the Fund for acts or obligations of the Fund, which are binding
only on the assets and property of the Fund. The Declaration of Trust provides
for indemnification out of Fund property for all loss and expense of any
Shareholder held personally liable for the obligations of the Fund. The risk
of a Shareholder incurring financial loss on account of Shareholder liability
is limited to circumstances in which the Fund itself would be unable to meet
its obligations and, thus, should be considered remote.
Shares for an initial investment, as well as subsequent investments,
including the reinvestment of dividends and capital gains distributions, are
generally credited to an account in the name of an investor on the books of
the Fund, without the issuance of a share certificate. Maintaining shares in
uncertificated form (also known as "plan balance") minimizes the risk of loss
or theft of a share certificate. No charge is made for the issuance of one
certificate for all or some of the Shares purchased in a single order. A lost,
stolen or destroyed certificate cannot be replaced without obtaining a
sufficient indemnity bond. The cost of such a bond, which is generally borne
by the shareholder, can be 2% or more of the value of the lost, stolen or
destroyed certificate. A certificate will be issued if requested by the
shareholder or by the securities dealer.
VOTING RIGHTS. Shares of each class represent proportionate interests in the
assets of the Fund and have the same voting and other rights and preferences
as the other class of the Fund for matters that affect the Fund as a whole.
For matters that only affect a
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certain class of the Fund's Shares, however, only Shareholders of that class
will be entitled to vote. Therefore, each class of Shares will vote separately
on matters (1) affecting only that class, (2) expressly required to be voted
on separately by state law, or (3) required to be voted on separately by the
1940 Act or the rules adopted thereunder. For instance, if a change to the
Rule 12b-1 plan relating to Class I Shares requires Shareholder approval, only
Shareholders of Class I may vote on changes to the Rule 12b-1 plan affecting
that class. Similarly, if a change to the Rule 12b-1 plan relating to Class II
Shares requires Shareholder approval, only Shareholders of Class II may vote
on the change to such plan. On the other hand, if there is a proposed change
to the investment objective of the Fund, this affects all Shareholders,
regardless of which class of Shares they hold, and therefore, each Share has
the same voting rights.
MEETINGS OF SHAREHOLDERS. The Fund is not required to hold regular 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 the holders of not
less than 10% of the outstanding Shares of the Fund. The Fund is required to
assist in Shareholder communications in connection with the calling of a
Shareholder meeting to consider the removal of a Trustee or Trustees.
DIVIDENDS AND DISTRIBUTIONS. The Fund intends to pay a dividend at least
annually representing substantially all of its net investment income and any
net realized capital gains. According to the requirements of the Code,
dividends and capital gains will be calculated and distributed in the same
manner for Class I and Class II Shares. The per share amount of any income
dividends will generally differ only to the extent that each class is subject
to different Rule 12b-1 fees. Unless otherwise requested, income dividends and
capital gain distributions paid by the Fund, other than on those Shares whose
owners keep them registered in the name of a broker-dealer, are automatically
reinvested on the payment date in whole or fractional Shares at net asset
value as of the ex-dividend date, unless a Shareholder makes a written or
telephonic request for payments in cash. By completing the "Special Payment
Instructions for Distributions" section of the Shareholder Application, Class
I Shareholders may direct that their dividends and/or capital gain
distributions be reinvested in Class I Shares of the Fund or Class I Shares of
any other Franklin Templeton Fund, and Class II Shareholders may direct that
their dividends and/or capital gain distributions be reinvested in either
Class I or Class II Shares of the Fund or any other Franklin Templeton Fund.
Shareholders may also direct the payment of their dividends or capital gain
distributions to another person. The processing date for the reinvestment of
dividends may vary from time to time, and does not affect the amount or value
of the Shares acquired. Income dividends and capital gain distributions will
be paid in cash on Shares during the time that their owners keep them
registered in the name of a broker-dealer, unless the broker-dealer has made
arrangements with the Transfer Agent for reinvestment.
Prior to purchasing Shares of the Fund, the impact of dividends or capital
gains distributions which have been declared but not yet paid should be
carefully considered. Any dividend or capital gains distribution paid shortly
after a purchase by a Shareholder prior to the record date will have the
effect of reducing the per Share net asset value of the Shares by the amount
of the dividend or distribution. All or a portion of such dividend or
distribution, although in effect a return of capital, generally will be
subject to tax.
Checks are forwarded by first-class mail to the address of record. The
proceeds of any such checks which are not accepted by the addressee and
returned to the Fund will be reinvested in the Shareholder's account in whole
or fractional Shares at net asset value next computed after the check has been
received by the Transfer Agent. Subsequent distributions will be reinvested
automatically at net asset value as of the ex-dividend date in additional
whole or fractional Shares.
FEDERAL TAX INFORMATION. The Fund intends to elect to be treated and to
qualify each year as a regulated investment company under Subchapter M of the
Code. See the SAI for a summary of the requirements that must be satisfied to
so qualify. A regulated investment company generally is not subject to federal
income tax on income and gains distributed in a timely manner to its
Shareholders. The Fund intends to distribute substantially all of its net
investment income and net realized capital gains to Shareholders, which will
be taxable income or capital gains in their hands. Distributions declared in
October, November or December to Shareholders of record on a date in such
month and paid during the following January will be treated as having been
received by Shareholders on
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December 31 in the year such distributions were declared. The Fund will inform
Shareholders each year of the amount and nature of such income or gains. Sales
or other dispositions of Fund Shares generally will give rise to taxable gain
or loss. A more detailed description of tax consequences to Shareholders is
contained in the SAI under the heading "Tax Status."
The Fund may be required to withhold federal income tax at the rate of 31%
of all taxable distributions (including redemptions) paid to Shareholders who
fail to provide the Fund with their correct taxpayer identification number or
to make required certifications or where the Fund or the Shareholder has been
notified by the Internal Revenue Service that the Shareholder is subject to
backup withholding. Corporate Shareholders and certain other Shareholders
specified in the Code are exempt from backup withholding. Backup withholding
is not an additional tax. Any amounts withheld may be credited against the
Shareholder's federal income tax liability.
INQUIRES. Shareholders' inquiries will be answered promptly. They should be
addressed to Franklin Templeton Investor Services, Inc., 700 Central Avenue,
P.O. Box 33030, St. Petersburg, Florida 33733-8030 -- telephone 1-800-632-
2301. Transcripts of Shareholder accounts less than three years old are
provided on request without charge; requests for transcripts going back more
than three years from the date the request is received by the Transfer Agent
are subject to a fee of up to $15 per account.
PERFORMANCE INFORMATION. The Fund may include its total return in
advertisements or reports to Shareholders or prospective investors. Quotations
of average annual total return will be expressed in terms of the average
annual compounded rate of return on a hypothetical investment in the Fund over
a period of 1, 5 and 10 years (or if less, up to the life of the Fund), will
reflect the deduction of the maximum initial sales charge and deduction of a
proportional share of Fund expenses (on an annual basis), and will assume that
all dividends and distributions are reinvested when paid. Total return may be
expressed in terms of the cumulative value of an investment in the Fund at the
end of a defined period of time. For a description of the methods used to
determine total return for the Fund, see "Performance Information" in the SAI.
Because Class II Shares were not offered prior to May 1, 1995, no
performance data is available for these Shares. After a sufficient period of
time has passed, Class II performance data will be available.
STATEMENTS AND REPORTS. The Fund's fiscal year ends on August 31. Annual
reports (containing financial statements audited by independent auditors and
additional information regarding the Fund's performance) and semiannual
reports (containing unaudited financial statements) are sent to Shareholders
each year. To reduce the volume of mail sent to one household as well as to
reduce Fund expenses, the Transfer Agent will attempt to identify related
Shareholders within a household and send only one copy of the report.
Additional copies may be obtained, without charge, upon request to the Fund
Information Department--telephone 1-800/DIAL BEN. The Fund also sends to each
Shareholder a confirmation statement after every transaction that affects the
Shareholder's account and a year-end historical confirmation statement.
30
<PAGE>
INSTRUCTIONS AND IMPORTANT NOTICE
SUBSTITUTE W-9 INSTRUCTIONS INFORMATION
GENERAL. Backup withholding is not an additional tax. Rather, the tax
liability of persons subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the Internal Revenue Service ("IRS").
OBTAINING A NUMBER. If you do not have a Social Security Number/Taxpayer
Identification Number ("SSN/TIN"), you must obtain Form SS-5 or Form SS-4 from
your local Social Security or IRS office and apply for one. If you have
checked the "Awaiting TIN" box and signed the certification, withholding will
apply to payments relating to your account unless you provide a certified TIN
within 60 days.
WHAT SSN/TIN TO GIVE. Please refer to the following guidelines:
<TABLE>
<CAPTION>
ACCOUNT TYPE GIVE SSN OF ACCOUNT TYPE GIVE TAXPAYER ID # OF
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
. Individual Individual . Trust, Estate, or Trust, Estate, or
Pension Plan Trust Pension Plan Trust
- -----------------------------------------------------------------------------------
. Joint Actual owner of . Corporation, Corporation,
Individual account, or if Partnership, or other Partnership, or other
combined funds, the organization organization
first-named
individual
- -----------------------------------------------------------------------------------
. Unif. Minor . Broker nominee Broker nominee
Gift/Transfer
to Minor
- -----------------------------------------------------------------------------------
. Sole Owner of business
Proprietor
- -----------------------------------------------------------------------------------
. Legal Ward, Minor, or
Guardian Incompetent
- -----------------------------------------------------------------------------------
</TABLE>
EXEMPT RECIPIENTS. Please provide your TIN and check the "Exempt Recipient"
box if you are an exempt recipient. Exempt recipients generally include:
A corporation A real estate investment trust
A financial institution A common trust fund operated by a bank
under section 584(a)
An organization exempt from tax An entity registered at all times
under section 501(a), or an under the Investment Company Act of
individual retirement plan 1940
A registered dealer in securities or
commodities registered in the U.S.
or a U.S. possession
IRS PENALTIES. If you do not supply us with your SSN/TIN, you will be subject
to an IRS $50 penalty unless your failure is due to reasonable cause and not
willful neglect. If you fail to report certain income on your federal income
tax return, you will be treated as negligent and subject to an IRS 20% penalty
on any underpayment of tax attributable to such negligence, unless there was
reasonable cause for the resulting underpayment and you acted in good faith.
If you falsify information on this form or make any other false statement
resulting in no backup withholding on an account which should be subject to
backup withholding, you may be subject to an IRS $500 penalty and certain
criminal penalties including fines and imprisonment.
SUBSTITUTE W-8 INSTRUCTIONS INFORMATION
EXEMPT FOREIGN PERSON. Check the "Exempt Foreign Person" box if you qualify as
a non-resident alien or foreign entity that is not subject to certain U.S.
information return reporting or to backup withholding rules. Dividends paid to
your account may be subject to withholding of up to 30%. Generally, you are an
"Exempt Foreign Person" if you are not (1) a citizen or resident of the U.S.,
or (2) a U.S. corporation, partnership, estate, or trust. In the case of an
individual, an "Exempt Foreign Person" is one who has been physically present
in the U.S. for less than 31 days during the current calendar year. An
individual who is physically present in the U.S. for at least 31 days during
the current calendar year will still be treated as an "Exempt Foreign Person,"
provided that the total number of days physically present in the current
calendar year and the two preceding calendar years does not equal or exceed
183 days (counting all of the days in the current calendar year, only one-
third of the days in the first preceding calendar year and only one-sixth of
the days in the second preceding calendar year). In addition, lawful permanent
residents or green card holders may not be treated as "Exempt Foreign
Persons." If you are an individual or an entity, you must not now be, or at
this time expect to be, engaged in a U.S. trade or business with respect to
which any gain derived from transactions effected by the Fund/Payer during the
calendar year is effectively connected to the U.S.
PERMANENT ADDRESS. The Shareholder Application must contain your permanent
address if you are an "Exempt Foreign Person." If you are an individual,
provide your permanent address. If you are a partnership or corporation,
provide the address of your principal office. If you are an estate or trust,
provide the address of your permanent residence or the principal office of any
fiduciary.
NOTICE OF CHANGE IN STATUS. If you become a U.S. citizen or resident after you
have provided certification of your foreign status, or if you cease to be an
"Exempt Foreign Person," you must notify the Fund/Payer within 30 days of your
change in status. Reporting will then begin on the account(s) listed, and
backup withholding may also begin unless you certify to the Fund/Payer that
(1) the taxpayer identification number you have given is correct, and (2) the
IRS has not notified you that you are subject to backup withholding because
you failed to report certain interest or dividend income. You may use Form W-
9, "Payer's Request for Taxpayer Identification Number and Certification," to
make these certifications. If an account is no longer active, you do not have
to notify a Fund/Payer or broker of your change in status unless you also have
another account with the same Fund/Payer that is still active. If you receive
interest from more than one Fund/Payer or have dealings with more than one
broker or barter exchange, file a certificate with each. If you have more than
one account with the same Fund/Payer, the Fund/Payer may require you to file a
separate certificate for each account.
WHEN TO FILE. File these certifications with the Fund before a payment is made
to you, unless you have already done this in either of the two preceding
calendar years. Only certifications that are in proper order will be treated
as having been filed with the Fund.
HOW OFTEN YOU MUST FILE. This certificate generally remains in effect for
three calendar years. A Fund/Payer or broker, however, may require that a new
certificate be filed each time a payment is made. On joint accounts for which
each joint owner is a foreign person, each must provide a certification of
foreign status.
1/94
31
<PAGE>
FOR CORPORATE SHAREHOLDERS--FORM OF RESOLUTION
It will be necessary for corporate shareholders to provide a certified copy of
a resolution or other certificate of authority to authorize the purchase as
well as sale (redemption) of shares and withdrawals by checks or drafts. You
may use the following form of resolution or you may prefer to use your own. It
is understood that the Fund, Franklin Templeton Distributors, Inc., Franklin
Templeton Investor Services, Inc., the custodian bank and their affiliates may
rely upon these authorizations until revoked or amended by written notice
delivered by registered or certified mail to the Fund.
CERTIFIED COPY OF RESOLUTION (Corporation or Association)
The undersigned hereby certifies and affirms that he/she is the duly elected
______________________________ of _____________________________________________
TITLE CORPORATE NAME
a ________________________ organized under the laws of the State of ___________
TYPE OF ORGANIZATION STATE
the following is a and that true and correct copy of a resolution adopted by
the Board of Directors at a meeting duly called and held on ___________________
DATE
RESOLVED, that the _________________________________________________ of this
OFFICERS' TITLES
Corporation or Association are authorized to open an account in the name of
the Corporation or Association with one or more of the Franklin Group of
Funds or Templeton Family of Funds (collectively, the "Funds") and to
deposit such funds of this Corporation or Association in this account as
they deem necessary or desirable; that the persons authorized below may
endorse checks and other instruments for deposit to said account or
accounts; and
FURTHER RESOLVED, that any of the following _____________ officers are
NUMBER
authorized to sign any share assignment on behalf of this Corporation or
Association and to take any other actions as may be necessary to sell or
redeem its shares in the Funds or to sign checks or drafts withdrawing funds
from the account; and
FURTHER RESOLVED, that this Corporation or Association shall hold harmless,
indemnify, and defend the Funds, their custodian bank, Franklin Templeton
Distributors, Inc., Franklin Templeton Investor Services, Inc., and their
affiliates, from any claim, loss or liability resulting in whole or in
part, directly or indirectly, from their reliance from time to time upon
any certifications by the secretary or any assistant secretary of this
Corporation or Association as to the names of the individuals occupying
such offices and their acting in reliance upon these resolutions until
actual receipt by them of a certified copy of a resolution of the Board of
Directors of the Corporation or Association modifying or revoking any or
all such resolutions.
The undersigned further certifies that the below named persons, whose
signatures appear opposite their names and office titles, are duly elected
officers of the Corporation or Association. (Attach additional list if
necessary.)
- -------------------------------------- ---------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- ---------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- ---------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- ---------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- ---------------------------------------
NAME OF CORPORATION OR ASSOCIATION DATE
Certified from minutes ________________________________________________________
NAME AND TITLE
CORPORATE SEAL (if appropriate)
32
<PAGE>
THE FRANKLIN TEMPLETON TELEPHONE REDEMPTION AUTHORIZATION AGREEMENT
You may use Franklin Templeton's telephone redemption privilege to redeem
uncertificated Franklin Templeton Fund shares for up to $50,000 (or your
Shareholder account balance, whichever is less) per day, per fund account in
accordance with the terms of the Fund's Prospectus.
The telephone redemption privilege is available only to Shareholders who
specifically request it. If you would like to add this redemption privilege to
the other telephone transaction privileges automatically available to Franklin
Templeton Fund shareholders, please sign and return this authorization to
Franklin Templeton Investor Services, Inc. ("Services"), transfer agent and
shareholder servicing agent for the Franklin Templeton Funds.
SHAREHOLDER AUTHORIZATION: I/We request the telephone redemption privilege
under the terms described below and in the prospectus for each investment
company in the Franklin Templeton Group (a "Franklin Templeton Fund" or a
"Fund"), now opened or opened at a later date, holding shares registered as
follows:
- ------------------------------------- ---------------------------------------
PRINT NAME(S) AS SHOWN IN YOUR ACCOUNT REGISTRATION ("SHAREHOLDER")
- ------------------------------------- ---------------------------------------
ACCOUNT NUMBER(S)
I/We authorize each Fund and Services to honor and act upon telephone requests
given as provided in this agreement to redeem shares from any
Shareholder account:
- ------------------------------------- ---------------------------------------
SIGNATURE(S) AND DATE
- ------------------------------------- ---------------------------------------
PRINT NAME(S) (AND TITLE/CAPACITY,
IF APPLICABLE)
VERIFICATION PROCEDURES: I/We understand and agree that: (1) each Fund and
Services will employ reasonable procedures to confirm that redemption
instructions communicated by telephone are genuine and that if these
confirmation procedures are not followed, the Fund or Services may be liable
for any losses due to unauthorized or fraudulent telephone instructions; (2)
the confirmation procedures will include the recording of telephone calls
requesting redemptions, requiring that the caller provide certain personal
and/or account information requested by the telephone service agent at the
time of the call for the purpose of establishing the caller's identification,
and the sending of confirmation statements to the address of record each time
a redemption is initiated by telephone; and (3) so long as the Fund and
Services follow the confirmation procedures in acting on instructions
communicated by telephone which were reasonably believed to be genuine at the
time of receipt, neither they, nor their parent or affiliates, will be liable
for any loss, damages or expenses caused by an unauthorized or fraudulent
redemption request.
JOINTLY OWNED/CO-TRUSTEE ACCOUNTS: Each of us signing this agreement as either
joint owners or co-trustees authorizes each Fund and Services to honor
telephone redemption requests given by ANY ONE of the signers, or our
investment representative of record, if any, ACTING ALONE.
APPOINTMENT OF ATTORNEY-IN-FACT: In order to issue telephone redemption
requests acting alone, each of us individually makes the following
appointment: I hereby appoint the other joint owner(s)/co-trustee(s) as my
agent(s) (attorney[s]-in-fact) with full power and authority to individually
act for me in any lawful way with respect to the issuance of instructions to a
Fund or Services in accordance with the telephone redemption privilege we have
requested by signing this agreement. This appointment shall not be affected by
my subsequent disability or incompetency and shall remain in effect until it
is revoked by either written notice from any one of us delivered to a Fund or
Services by registered mail, return receipt requested or by a Fund or Services
upon receipt of any information that causes a Fund or Services to believe in
good faith that there is or that there may be a dispute among any of us with
respect to the Franklin Templeton Fund account(s) covered by this agreement.
Each of us agrees to notify the Fund or Services immediately upon the death of
any of the signers.
CORPORATE/PARTNERSHIP/TRUST/RETIREMENT ACCOUNTS: The Shareholder and each of
us signing this agreement on behalf of the Shareholder represent and warrant
to each Franklin Templeton Fund and Services that the Shareholder has the
authority to enter into this agreement and that each of us is duly authorized
to execute this agreement on behalf of the Shareholder. The Shareholder agrees
that its election of the telephone redemption privilege means that a Fund or
Services may honor a telephone redemption request given by ANY
officer/partner/member/administrator/or agent of the Shareholder ACTING ALONE.
RESTRICTED ACCOUNTS: Telephone redemptions may not be accepted on Franklin
Templeton Trust Company retirement accounts.
PLEASE RETURN THIS FORM TO:
Franklin Templeton Investor Services, Inc., Attn.: Telephone Redemptions
Dept., 700 Central Avenue, St. Petersburg, Florida 33701-3628.
33
<PAGE>
The Franklin Templeton Group
Literature Request -- Call today for a free descriptive brochure and
prospectus on any of the funds listed below. The prospectus contains more
complete information, including fees, charges and expenses, and should be read
carefully before investing or sending money.
<TABLE>
<S> <C> <C>
TEMPLETON FUNDS Maryland FRANKLIN FUNDS SEEKING
American Trust Massachusetts*** HIGH CURRENT INCOME
Americas Government Securities Fund Michigan*** AGE High Income Fund
Developing Markets Trust Minnesota*** German Government Bond Fund
Foreign Fund Missouri Global Government Income Fund
Global Infrastructure Fund New Jersey Investment Grade Income Fund
Global Opportunities Trust New York* U.S. Government Securities Fund
Greater European Fund North Carolina
Growth Fund Ohio*** FRANKLIN FUNDS SEEKING HIGH CURRENT
Growth and Income Fund Oregon INCOME AND STABILITY OF PRINCIPAL
Income Fund Pennsylvania Adjustable Rate Securities Fund
Japan Fund Tennessee** Adjustable U.S. Government Securities Fund
Latin America Fund Texas Short-Intermediate U.S. Government Securities Fund
Money Fund Virginia
Real Estate Securities Fund Washington** FRANKLIN FUNDS FOR NON-U.S. INVESTORS
Smaller Companies Growth Fund Tax-Advantaged High Yield Securities Fund
World Fund FRANKLIN FUNDS Tax-Advantaged International Bond Fund
SEEKING CAPITAL GROWTH Tax-Advantaged U.S. Government Securities Fund
FRANKLIN FUNDS California Growth Fund
SEEKING TAX-FREE INCOME DynaTech Fund FRANKLIN TEMPLETON INTERNATIONAL
Federal Intermediate Term Equity Fund CURRENCY FUNDS
Tax-Free Income Fund Global Health Care Fund Global Currency Fund
Federal Tax-Free Income Fund Gold Fund Hard Currency Fund
High Yield Tax-Free Income Growth Fund High Income Currency Fund
Fund International Equity Fund
Insured Tax-Free Income Fund*** Pacific Growth Fund FRANKLIN MONEY MARKET FUNDS
Puerto Rico Tax-Free Income Fund Real Estate Securities Fund California Tax-Exempt Money Fund
FRANKLIN STATE-SPECIFIC FUNDS Small Cap Growth Fund Federal Money Fund
SEEKING TAX-FREE INCOME IFT U.S. Treasury Money Market Portfolio
Alabama FRANKLIN FUNDS SEEKING Money Fund
Arizona* GROWTH AND INCOME New York Tax-Exempt Money Fund
Arkansas** Balance Sheet Investment Fund Tax-Exempt Money Fund
California* Convertible Securities Fund
Colorado Equity Income Fund FRANKLIN FUND FOR CORPORATIONS
Connecticut Global Utilities Fund Corporate Qualified Dividend Fund
Florida* Income Fund
Georgia Premier Return Fund FRANKLIN TEMPLETON VARIABLE ANNUITIES
Hawaii** Rising Dividends Fund Franklin Valuemark
Indiana Strategic Income Fund Franklin Templeton Valuemark Income
Kentucky Utilities Fund Plus (an immediate annuity)
Louisiana
</TABLE>
Toll-free 1-800-DIAL BEN (1-800-342-5236)
* Two or more fund options available: long-term portfolio, intermediate-term
portfolio, a portfolio of municipal securities, and a high yield portfolio
(CA).
** The fund may invest up to 100% of its assets in bonds that pay interest
subject to the federal alternative minimum tax.
*** Portfolio of insured municipal securities.
34
<PAGE>
NOTES
-----
35
<PAGE>
- --------------------------------------------------------------------------------
TEMPLETON REAL
ESTATE SECURITIES
FUND
PRINCIPAL UNDERWRITER:
Franklin Templeton
Distributors, Inc.
700 Central Avenue
St. Petersburg,
Florida 33701-3628
Shareholder Services
1-800-632-2301
Fund Information
1-800/DIAL BEN
Institutional Services
1-800-321-8563
Dealer Services
1-800-524-4040
Retirement Plan Services
1-800-527-2020
This Prospectus is not an offering of the securities herein described in any
state in which the offeringis not authorized. No sales representative, dealer,
or other person is authorized to give any information or make any
representations other than those contained in this Prospectus. Further
information may be obtained from the Principal Underwriter.
- --------------------------------------------------------------------------------
[LOGO OF FRANKLIN TEMPLETON APPEARS HERE]
TEMPLETON
REAL
ESTATE
SECURITIES
FUND
Prospectus
January 1, 1996
[LOGO OF RECYCLED PAPER APPEARS HERE]
TL410 P 1/96
<PAGE>
[LOGO OF FRANKLIN TEMPLETON APPEARS HERE]
Mail to: FRANKLIN TEMPLETON
P.O. Box 33031 St. Petersburg, Florida 33733-8031 (800) 393-3001
Please do not use this form for any Retirement Plan for which Franklin Templeton
Trust Company serves as custodian or trustee, or for Templeton Money Fund,
Templeton Institutional Funds or Templeton Capital Accumulator Fund. Request
separate Applications and/or Prospectuses.
- --------------------------------------------------------------------------------
SHAREHOLDER APPLICATION OR REVISION
[_] Please check the box if this is a revision and see Section 8
- --------------------------------------------------------------------------------
Please check Class I or Class II, if applicable, next to your Fund selection.
Class I and Class II shares have different sales charges and operating expenses,
among other differences, as described in each Fund's prospectus.
Date __________________
<TABLE>
<CAPTION>
CLASS CLASS
I II TEMPLETON I II TEMPLETON
<S> <C> <C> <C>
[_] [_]$______ AMERICAN TRUST [_] [_]$______ GLOBAL OPPORTUNITIES TRUST
[_] ______ AMERICAS GOVERNMENT SECURITIES FUND [_] [_] ______ GREATER EUROPEAN FUND
[_] [_] ______ DEVELOPING MARKETS TRUST [_] [_] ______ GROWTH FUND
[_] [_] ______ FOREIGN FUND [_] [_] ______ GROWTH AND INCOME FUND
[_] [_] ______ GLOBAL INFRASTRUCTURE FUND [_] [_] ______ INCOME FUND
<CAPTION>
CLASS CLASS
I II TEMPLETON I II
<S> <C> <C>
[_] $______ JAPAN FUND [_] [_] OTHER: $___________
[_] [_] ______ LATIN AMERICA FUND (Except for Class II Money Fund)
[_] [_] ______ REAL ESTATE SECURITIES FUND _______________________________
[_] [_] ______ SMALLER COMPANIES GROWTH FUND _______________________________
[_] [_] ______ WORLD FUND _______________________________
</TABLE>
- --------------------------------------------------------------------------------
1 ACCOUNT REGISTRATION (PLEASE PRINT)
- --------------------------------------------------------------------------------
[_] INDIVIDUAL OR JOINT ACCOUNT
_ _
__________________________________________________ ____________________________
First Name Middle Initial Last Name Social Security Number (SSN)
_ _
__________________________________________________ ____________________________
Joint Owner(s) (Joint ownership means "Joint Social Security Number (SSN)
Tenants With Rights of Survivorship" unless
otherwise specified) All owners must sign Section 4.
- --------------------------------------------------------------------------------
[_] GIFT/TRANSFER TO A MINOR
_______________________________ As Custodian For________________________________
Name of Custodian (one only) Minor's Name (one only)
_ _
_____________Uniform Gifts/Transfers to Minors Act______________________________
State of Residence Minor's Social Security Number
Please Note: Custodian's Signature, not Minor's, is required in Section 4.
- --------------------------------------------------------------------------------
[_] TRUST, CORPORATION, PARTNERSHIP, RETIREMENT PLAN, OR OTHER ENTITY
_
__________________________________________ ___________________________________
Name Taxpayer Identification Number (TIN)
__________________________________________ ____________________________________
Name of Beneficiary (if to be included in Date of Trust Document (must be
the Registration) completed for registration)
________________________________________________________________________________
Name of Each Trustee (if to be included in the Registration)
- --------------------------------------------------------------------------------
2 ADDRESS
- --------------------------------------------------------------------------------
___________________________________________ Daytime Phone (___)________________
Street Address Area Code
_
___________________________________________ Evening Phone (___)________________
City State Zip Code Area Code
I am a Citizen of: [_] U.S. or [_]______________________________
Country of Residence
- --------------------------------------------------------------------------------
3 INITIAL INVESTMENT ($100 minimum initial investment)
- --------------------------------------------------------------------------------
Check(s) enclosed for $___________________ . (Payable to the Fund(s)
indicated above.)
- --------------------------------------------------------------------------------
4 SIGNATURE AND TAX CERTIFICATIONS
(All registered owners must sign application)
- --------------------------------------------------------------------------------
See "Important Notice Regarding Taxpayer IRS Certifications" in back of
prospectus. The Fund reserves the right to refuse to open an account without
either a certified Taxpayer Identification Number ("TIN") or a certification of
foreign status. Failure to provide tax certifications in this section may result
in backup withholding on payments relating to your account and/or in your
inability to qualify for treaty withholding rates.
I am(We are) not subject to backup withholding because I(we) have not been
notified by the IRS that I am(we are) subject to backup withholding as a result
of a failure to report all interest or dividends or because the IRS has notified
me(us) that I am(we are) no longer subject to backup withholding. (If you are
currently subject to backup withholding as a result of a failure to report all
interest or dividends, please cross out the preceding statement.)
[_] The number shown above is my(our) correct TIN, or that of the Minor named in
Section 1.
[_] AWAITING TIN. I am(We are) waiting for a number to be issued to me(us).
I(We) understand that if I(we) do not provide a TIN to the Fund within 60
days, the Fund is required to commence 31% backup withholding until I(we)
provide a certified TIN.
[_] EXEMPT RECIPIENT. Individuals cannot be exempt. Check this box only after
reading the instructions to see whether you qualify as an exempt recipient.
(You should still provide a TIN.)
[_] EXEMPT FOREIGN PERSON. Check this box only if the following statement
applies: "I am(we are) neither a citizen nor a resident of the United
States. I(we) certify to the best of my(our) knowledge and belief, I(we)
qualify as an exempt foreign person and/or entity as described in the
instructions."
Permanent address for tax purposes:
________________________________________________________________________________
Street Address City State Country Postal Code
PLEASE NOTE: The IRS only allows one TIN to be listed on an account. On joint
accounts, it is preferred that the primary account owner (or person listed first
on the account) list his/her number as requested above.
CERTIFICATION - Under the penalties of perjury, I(we) certify that (1) the
information provided on this application is true, correct and complete, (2)
I(we) have read the prospectus(es) for the Fund(s) in which I am(we are)
investing and agree to the terms thereof, and (3) I am(we are) of legal age or
an emancipated minor. I (we) acknowledge that Shares of the Fund(s) are not
insured or guaranteed by any agency or institution and that an investment in the
Shares involves risks, including the possible loss of principal.
X X
- ---------------------------------------- ---------------------------------------
Signature Signature
X X
- ---------------------------------------- ---------------------------------------
- --------------------------------------------------------------------------------
5 BROKER/DEALER USE ONLY (PLEASE PRINT)
- --------------------------------------------------------------------------------
-----------------------
We hereby submit this application for the purchase of Templeton Dealer Number
shares of the Fund indicated above in accordance with
the terms of our selling agreement with Franklin -----------------------
Templeton Distributors, Inc. ("FTD"), and with the
Prospectus for the Fund. We agree to notify FTD of any
purchases of Class I shares which may be eligible for
reduced or eliminated sales charges.
-----------------------------------------------------------------------------
WIRE ORDER ONLY: The attached check for $_______ should be applied against
Wire Order
Confirmation Number ___________ Dated___________ For__________ Shares
-----------------------------------------------------------------------------
Securities Dealer Name__________________________________________________________
Main Office Address________________ Main Office Telephone Number (___)__________
Branch Number________ Representative Number ________ Representative Name________
Branch Address_________________________ Branch Telephone Number (___)___________
Authorized Signature, Securities Dealer______________________ Title_____________
- --------------------------------------------------------------------------------
ACCEPTED: Franklin Templeton Distributors, Inc. By___________ Date______________
- --------------------------------------------------------------------------------
Please see reverse side for Shareholder Account Privileges:
[_] Distribution Options [_] Special Instructions for Distributions
[_] Systematic Withdrawal Plan [_] Automatic Investment Plan
[_] Telephone Exchange Service [_] Letter of Intent
[_] Cumulative Quantity Discount
This application must be preceded or accompanied by a prospectus for
the Fund(s) being purchased.
<PAGE>
- --------------------------------------------------------------------------------
6 DISTRIBUTION OPTIONS (Check one)
- --------------------------------------------------------------------------------
Check one - if no box is checked, all dividends and capital gains will be
reinvested in additional shares of the Fund.
[_] Reinvest all dividends [_] Pay all dividends in cash
and capital gains. and reinvest capital gains.
[_] Pay capital gains in cash [_] Pay all dividends and
and reinvest dividends. capital gains in cash.
- --------------------------------------------------------------------------------
7 OPTIONAL SHAREHOLDER PRIVILEGES
- --------------------------------------------------------------------------------
A. SPECIAL PAYMENT INSTRUCTIONS FOR DISTRIBUTIONS (Check one box)
[_] Invest Distributions, as noted in Section 6, or [_] withdrawals, as noted
in section 7(B), in another Franklin or Templeton Fund.
Restrictions may apply to purchases of shares of a different class. See
the prospectus for details.
Fund Name______________________ Existing Account Number___________________
[_] Send my Distributions to the person, named below, instead of as registered
and addressed in Sections 1 and 2.
Name___________________________ Street Address____________________________
City___________________________ State____________________Zip Code_________
- --------------------------------------------------------------------------------
B. SYSTEMATIC WITHDRAWAL PLAN
Please withdraw from my Franklin Templeton account $_____($50 minimum)
[_]Monthly [_]Quarterly [_]Semi-Annually or [_]Annually as set forth in the
Prospectus, starting in ______________(Month). The net asset value of the
shares held must be at least $5,000 at the time the plan is established.
Additional restrictions may apply to Class II or other shares subject to
contingent deferred sales charge, as described in the prospectus. Send the
withdrawals to: [_]Address of Record OR [_]the Franklin Templeton Fund or
person specified in Section 7(A) - Special Payment Instructions for
Distributions.
- --------------------------------------------------------------------------------
C. TELEPHONE TRANSACTIONS
TELEPHONE EXCHANGE PRIVILEGE: If the Fund does not receive specific
-----------------------------
instructions from the shareholder, either in writing or by telephone, the
Telephone Exchange Privilege (see the prospectus) is automatically extended
to each account. The shareholder should understand, however, that the Fund
and Franklin Templeton Investor Services, Inc. ("FTI") or Franklin Templeton
Trust Company and their agents will not be liable for any loss, injury,
damage or expense as a result of acting upon instructions communicated by
telephone reasonably believed to be genuine. The shareholder agrees to hold
the Fund and its agents harmless from any loss, claims, or liability arising
from its or their compliance with such instructions. The shareholder
understands that this option is subject to the terms and conditions set forth
in the prospectus of the fund to be acquired.
[_]No, I do NOT wish to participate in the Telephone Exchange Privilege or
authorize the Fund or its agents, including FTI or Templeton Funds Trust
Company, to act upon instructions received by telephone to exchange shares
for shares of any other account(s) within the Franklin Templeton Group of
Funds.
Telephone Redemption Privilege: This is available to shareholders who
-------------------------------
specifically request it and who complete the Franklin Templeton Telephone
Redemption Authorization Agreement in the back of the Fund's prospectus.
- --------------------------------------------------------------------------------
D. AUTOMATIC INVESTMENT PLAN
IMPORTANT: ATTACH AN UNSIGNED, VOIDED CHECK (FOR CHECKING ACCOUNTS) OR A
SAVINGS ACCOUNT DEPOSIT SLIP HERE, AND COMPLETE THE INFORMATION BELOW. I(We)
would like to establish an Automatic Investment Plan (the "Plan") as
described in the Prospectus. I(We) agree to reimburse FTI and/or FTD for any
expenses or losses that they may incur in connection with my(our) plan,
including any caused by my(our) bank's failure to act in accordance with
my(our) request. If my(our) bank makes any erroneous payment or fails to make
a payment after shares are purchased on my(our) behalf, any such purchase may
be cancelled and I(we) hereby authorize redemptions and/or deductions from
my(our) account for that purpose.
Debit my (circle one) savings, checking, other ________ account monthly for
$__________($25 minimum) on or about the [_]1st [_]5th [_]15th or [_]20th day
starting_______(month), to be invested in (name of
Fund)___________________Account Number (if known)_______
INSTRUCTIONS TO BANK - AUTOMATIC INVESTMENT PLAN AUTHORIZATION
To:__________________________________ ______________________________________
Name of Your Bank ABA Number
___________________________ _________________ ____________ ______________
Street Address City State Zip Code
I(We) authorize you to charge my(our) Checking/Savings Account and to make
payment to FTD, upon instructions from FTD. I(We) agree that in making payment
for such charges your rights shall be the same as if each were a charge made and
signed personally by me(us). This authority shall remain in effect until you
receive written notice from me(us) changing its terms or revoking it. Until you
actually receive such notice, I(we) agree that you shall be fully protected in
paying any charge under this authority. I(we) further agree that if any such
charge is not made, whether with or without cause and whether intentionally or
inadvertently, you shall be under no liability whatsoever.
X_________________________________________________ ___________________________
Signature(s) EXACTLY as shown on your bank records Date
______________________________________ _______________________________________
Print Name(s) Account Number
______________________________ _________________ ____________ ______________
Your Street Address City State Zip Code
- --------------------------------------------------------------------------------
E. LETTER OF INTENT (LOI) -- Not Applicable to Purchases of Class II
[_]I(We) agree to the terms of the LOI and provisions for reservations of
Class I shares and grant FTD the security interest set forth in the
Prospectus. Although I am(we are) not obligated to do so, it is my(our)
intention to invest over a 13 month period in Class I and/or Class II shares
of one or more Franklin or Templeton Funds (including all money market funds
in the Franklin Templeton Group) an aggregate amount at least equal to that
which is checked below. I understand that reduced sales charges will apply
only to purchases of Class I shares.
<TABLE>
<S> <C> <C> <C> <C>
[_]$50,000-99,999 (except for Income Fund [_]$100,000-249,999 [_]$250,000-499,999 [_]$500,000-999,999 [_]$1,000,0000 or more
and Americas Government Securities Fund)
</TABLE>
Purchases of Class I Shares under LOI of $1,000,000 or more are made at net
asset value and may be subject to a contingent deferred sales charge as
described in the prospectus.
Purchases made within the last 90 days will be included as part of your LOI.
Please write in your Account Number(s)____________ ____________ ____________
- --------------------------------------------------------------------------------
F. CUMULATIVE QUANTITY DISCOUNT -- Not Applicable to Purchases of Class II
Class I shares may be purchased at the offering price applicable to the total
of (a) the dollar amount then being purchased plus (b) the amount equal to
the cost or current value (whichever is higher) of the combined holdings of
the purchaser, his or her spouse, and their children or grandchildren under
age 21, of Class I and/or Class II shares of funds in the Franklin Templeton
Group, as well as other holdings of Franklin Templeton Investments, as that
term is defined in the prospectus. In order for this cumulative quantity
discount to be made available, the shareholder or his or her securities
dealer must notify FTI or FTD of the total holdings in the Franklin Templeton
Group each time an order is placed. I understand that reduced sales charges
will apply only to purchases of Class I shares.
[_]I(We) own shares of more than one Fund in the Franklin Templeton Group and
qualify for the Cumulative Quantity Discount described above and in the
Prospectus.
My(Our) other Account Number(s) are ___________ ___________ _______________
- --------------------------------------------------------------------------------
8 ACCOUNT REVISION (If Applicable)
- --------------------------------------------------------------------------------
If you are using this application to revise your Account Registration, or wish
to have Distributions sent to an address other than the address on your existing
Account's Registration, a Signature Guarantee is required. Signatures of all
registered owners must be guaranteed by an "eligible guarantor" as defined in
the "How to Sell Shares of the Fund" section in the Fund's Prospectus. A Notary
Public is not an acceptable guarantor.
X________________________________________ ____________________________________
Signature(s) of Registered Account Owners Account Number(s)
X________________________________________ ____________________________________
X________________________________________
X________________________________________ ____________________________________
Signature Guarantee Stamp
NOTE: For any change in registration, please send us any outstanding
Certificates by Registered Mail.
- --------------------------------------------------------------------------------
TLGOF APP 12/95
<PAGE>
TEMPLETON REAL ESTATE SECURITIES FUND
THIS STATEMENT OF ADDITIONAL INFORMATION DATED JANUARY 1, 1996,
IS NOT A PROSPECTUS. IT SHOULD BE READ
IN CONJUNCTION WITH THE PROSPECTUS OF
TEMPLETON REAL ESTATE SECURITIES FUND
DATED JANUARY 1, 1996, AS AMENDED FROM TIME TO TIME,
WHICH MAY BE OBTAINED WITHOUT
CHARGE UPON REQUEST TO THE PRINCIPAL UNDERWRITER,
FRANKLIN TEMPLETON DISTRIBUTORS, INC.,
700 CENTRAL AVENUE, P.O. BOX 33030,
ST. PETERSBURG, FLORIDA 33733-8030
TOLL FREE TELEPHONE: 800/DIAL BEN
TABLE OF CONTENTS
General Information and History.......................1
Investment Objectives and Policies....................1
-Investment Policies.................................1
-Repurchase Agreements...............................1
-Futures Contracts...................................2
-Options on Securities and Stock Indices.............3
-Foreign Currency Hedging Transactions...............5
-Structured Investments..............................6
-Investment Restrictions.............................7
-Risk Factors........................................9
-Trading Policies...................................14
-Personal Securities Transactions...................14
Management of the Fund...............................15
Trustee Compensation.................................20
Principal Shareholders...............................21
Investment Management and Other
Services...........................................21
-Investment Management Agreement....................21
-Management Fees....................................23
-The Investment Manager.............................24
-Business Manager...................................24
-Custodian and Transfer Agent.......................25
-Legal Counsel......................................26
-Independent Accountants............................26
-Reports to Shareholders............................26
Brokerage Allocation.................................26
Purchase, Redemption and Pricing of
Shares.............................................29
-Ownership and Authority Disputes...................30
-Tax-Deferred Retirement Plans......................30
-Letter of Intent...................................32
-Special Net Asset Value Purchases..................33
-Redemptions in Kind................................34
Tax Status...........................................34
Principal Underwriter................................42
Description of Shares................................44
Performance Information..............................44
Financial Statements.................................48
GENERAL INFORMATION AND HISTORY
Templeton Real Estate Securities Fund (the "Fund"), formerly Templeton
Real Estate Trust, was organized as a Massachusetts business trust on July 17,
1989, and is registered under the Investment Company Act of 1940 (the "1940
Act") as an open-end diversified management investment company.
INVESTMENT OBJECTIVES AND POLICIES
INVESTMENT POLICIES. The investment objectives and policies
of the Fund are described in the Fund's Prospectus under the
heading "General Description--Investment Objectives and
Policies."
REPURCHASE AGREEMENTS. Repurchase agreements are contracts
under which the buyer of a security simultaneously commits to
resell the security to the seller at an agreed-upon price and
date. Under a repurchase agreement, the seller is required to
maintain the value of the securities subject to the repurchase
agreement at not less than their repurchase price. Templeton
Global Advisors Limited (the
<PAGE>
"Investment Manager") will monitor the value of such securities daily to
determine that the value equals or exceeds the repurchase price. Repurchase
agreements may involve risks in the event of default or insolvency of the
seller, including possible delays or restrictions upon the Fund's ability to
dispose of the underlying securities. The Fund will enter into repurchase
agreements only with parties who meet creditworthiness standards approved by the
Board of Trustees, I.E., banks or broker-dealers which have been determined by
the Investment Manager to present no serious risk of becoming involved in
bankruptcy proceedings within the time frame contemplated by the repurchase
transaction.
FUTURES CONTRACTS. The Fund may purchase and sell financial futures
contracts. Although some financial futures contracts call for making or taking
delivery of the underlying securities, in most cases these obligations are
closed out before the settlement date. The closing of a contractual obligation
is accomplished by purchasing or selling an identical offsetting futures
contract. Other financial futures contracts by their terms call for cash
settlements.
The Fund may also buy and sell index futures contracts with respect to
any stock or bond index traded on a recognized stock exchange or board of trade.
An index futures contract is a contract to buy or sell units of an index at a
specified future date at a price agreed upon when the contract is made. The
stock index futures contract specifies that no delivery of the actual stocks
making up the index will take place. Instead, settlement in cash must occur upon
the termination of the contract, with the settlement being the difference
between the contract price and the actual level of the stock index at the
expiration of the contract.
At the time the Fund purchases a futures contract, an amount of cash,
U.S. Government securities, or other highly liquid debt securities equal to the
market value of the futures contract will be deposited in a segregated account
with the Fund's Custodian. When writing a 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 the instruments underlying the contract
(or, in the case of an index futures contract, 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).
- 2 -
<PAGE>
OPTIONS ON SECURITIES AND STOCK INDICES. The Fund may write covered
call and put options and purchase call and put options on securities or stock
indices that are traded on United States and foreign exchanges and in the
over-the-counter markets.
An option on a security is a contract that gives the purchaser of the
option, in return for the premium paid, the right to buy a specified security
(in the case of a call option) or to sell a specified security (in the case of a
put option) from or to the writer of the option at a designated price during the
term of the option. An option on a securities index gives the purchaser of the
option, in return for the premium paid, the right to receive from the seller
cash equal to the difference between the closing price of the index and the
exercise price of the option.
The Fund may write a call or put option only if the option is
"covered." A call option on a security written by the Fund is covered if the
Fund owns the underlying security covered by the call or has an absolute and
immediate right to acquire that security without additional cash consideration
(or for additional cash consideration held in a segregated account by its
Custodian) upon conversion or exchange of other securities held in its
portfolio. A call option on a security is also covered if the Fund holds a call
on the same security and in the same principal amount as the call written where
the exercise price of the call held (a) is equal to or less than the exercise
price of the call written or (b) is greater than the exercise price of the call
written if the difference is maintained by the Fund in cash or high grade U.S.
Government securities in a segregated account with its Custodian. A put option
on a security written by the Fund is "covered" if the Fund maintains cash or
fixed-income securities with a value equal to the exercise price in a segregated
account with its Custodian, or else holds a put on the same security and in the
same principal amount as the put written where the exercise price of the put
held is equal to or greater than the exercise price of the put written.
The Fund will cover call options on stock indices by owning securities
whose price changes, in the opinion of the Investment Manager, are expected to
be similar to those of the index, or in such other manner as may be in
accordance with the rules of the exchange on which the option is traded and
applicable laws and regulations. Nevertheless, where the Fund covers a call
option on a stock index through ownership of securities, such securities may not
match the composition of the index. In that event, the Fund will not be fully
covered and could be subject to risk of loss in the event of adverse changes in
the value of the index. The Fund will cover put options on stock indices by
segregating assets equal to the option's exercise price, or in such other
- 3 -
<PAGE>
manner as may be in accordance with the rules of the exchange on which the
option is traded and applicable laws and regulations.
The Fund will receive a premium from writing a put or call option,
which increases the Fund's gross income in the event the option expires
unexercised or is closed out at a profit. If the value of a security or an index
on which the Fund has written a call option falls or remains the same, the Fund
will realize a profit in the form of the premium received (less transaction
costs) that could offset all or a portion of any decline in the value of the
portfolio securities being hedged. If the value of the underlying security or
index rises, however, the Fund will realize a loss in its call option position,
which will reduce the benefit of any unrealized appreciation in the Fund's stock
investments. By writing a put option, the Fund assumes the risk of a decline in
the underlying security or index. To the extent that the price changes of the
portfolio securities being hedged correlate with changes in the value of the
underlying security or index, writing covered put options on securities or
indices will increase the Fund's losses in the event of a market decline,
although such losses will be offset in part by the premium received for writing
the option.
The Fund may also purchase put options to hedge its investments against
a decline in value. By purchasing a put option, the Fund will seek to offset a
decline in the value of the portfolio securities being hedged through
appreciation of the put option. If the value of the Fund's investments does not
decline as anticipated, or if the value of the option does not increase, the
Fund's loss will be limited to the premium paid for the option plus related
transaction costs. The success of this strategy will depend, in part, on the
accuracy of the correlation between the changes in value of the underlying
security or index and the changes in value of the Fund's security holdings being
hedged.
The Fund may purchase call options on individual securities to hedge
against an increase in the price of securities that the Fund anticipates
purchasing in the future. Similarly, the Fund may purchase call options to
attempt to reduce the risk of missing a broad market advance, or an advance in
an industry or market segment, at a time when the Fund holds uninvested cash or
short-term debt securities awaiting investment. When purchasing call options,
the Fund will bear the risk of losing all or a portion of the premium paid if
the value of the underlying security or index does not rise.
There can be no assurance that a liquid market will exist when the Fund
seeks to close out an option position. Trading could be interrupted, for
example, because of supply and demand
- 4 -
<PAGE>
imbalances arising from a lack of either buyers or sellers, or the options
exchange could suspend trading after the price has risen or fallen more than the
maximum specified by the exchange. Although the Fund may be able to offset to
some extent any adverse effects of being unable to liquidate an option position,
the Fund may experience losses in some cases as a result of such inability.
FOREIGN CURRENCY HEDGING TRANSACTIONS. In order to hedge against
foreign currency exchange rate risks, the Fund may enter into forward foreign
currency exchange contracts and foreign currency futures contracts, as well as
purchase put or call options on foreign currencies, as described below. The Fund
may also conduct its foreign currency exchange transactions on a spot (I.E.,
cash) basis at the spot rate prevailing in the foreign currency exchange market.
The Fund may enter into forward foreign currency exchange contracts
("forward contracts") to attempt to minimize the risk to the Fund from adverse
changes in the relationship between the U.S. dollar and foreign currencies. A
forward contract is an obligation to purchase or sell a specific currency for an
agreed price at a future date which is individually negotiated and privately
traded by currency traders and their customers. The Fund may enter into a
forward contract, for example, when it enters into a contract for the purchase
or sale of a security denominated in a foreign currency in order to "lock in"
the U.S. dollar price of the security. In addition, for example, when the Fund
believes that a foreign currency may suffer or enjoy a substantial movement
against another currency, it may enter into a forward contract to sell an amount
of the former foreign currency approximating the value of some or all of the
Fund's portfolio securities denominated in such foreign currency. This second
investment practice is generally referred to as "cross-hedging." Because in
connection with the Fund's foreign currency forward transactions an amount of
the Fund's assets equal to the amount of the purchase will be held aside or
segregated to be used to pay for the commitment, the Fund will always have cash,
cash equivalents or high quality debt securities available sufficient to cover
any commitments under these contracts or to limit any potential risk. The
segregated account will be marked-to-market on a daily basis. In addition, the
Investment Manager does not intend to enter into such forward contracts if, as a
result, the Fund will have more than 20% of the value of its total assets
committed to such contracts. While these contracts are not presently regulated
by the Commodity Futures Trading Commission ("CFTC"), the CFTC may in the future
assert authority to regulate forward contracts. In such event, the Fund's
ability to utilize forward contracts in the manner set forth above may be
restricted. Forward contracts may limit potential gain from a
- 5 -
<PAGE>
positive change in the relationship between the U.S. dollar and
foreign currencies. Unanticipated changes in currency prices may
result in poorer overall performance for the Fund than if it had
not engaged in such contracts.
The Fund may purchase and write put and call options on foreign
currencies for the purpose of protecting against declines in the dollar value of
foreign portfolio securities and against increases in the dollar cost of foreign
securities to be acquired. As is the case with other kinds of options, however,
the writing of an option on foreign currency will constitute only a partial
hedge, up to the amount of the premium received, and the Fund could be required
to purchase or sell foreign currencies at disadvantageous exchange rates,
thereby incurring losses. The purchase of an option on foreign currency may
constitute an effective hedge against fluctuation in exchange rates although, in
the event of rate movements adverse to the Fund's position, the Fund may forfeit
the entire amount of the premium plus related transaction costs. Options on
foreign currencies to be written or purchased by the Fund will be traded on U.S.
and foreign exchanges or over-the-counter.
The Fund may enter into exchange-traded contracts for the purchase or
sale for future delivery of foreign currencies ("foreign currency futures").
This investment technique will be used only to hedge against anticipated future
changes in exchange rates which otherwise might adversely affect the value of
the Fund's portfolio securities or adversely affect the prices of securities
that the Fund intends to purchase at a later date. The successful use of
currency futures will usually depend on the Investment Manager's ability to
forecast currency exchange rate movements correctly. Should exchange rates move
in an unexpected manner, the Fund may not achieve the anticipated benefits of
foreign currency futures or may realize losses.
STRUCTURED INVESTMENTS. Included among the issuers of debt securities
in which the Fund may invest are entities organized and operated solely for the
purpose of restructuring the investment characteristics of various securities.
These entities are typically organized by investment banking firms which receive
fees in connection with establishing each entity and arranging for the placement
of its securities. This type of restructuring involves the deposit with or
purchase by an entity, such as a corporation or trust, of specified instruments
and the issuance by that entity of one or more classes of securities
("Structured Investments") backed by, or representing interests in, the
underlying instruments. The cash flow on the underlying instruments may be
apportioned among the newly issued Structured Investments to create securities
with different investment characteristics such as varying maturities, payment
priorities or
- 6 -
<PAGE>
interest rate provisions; the extent of the payments made with respect to
Structured Investments is dependent on the extent of the cash flow on the
underlying instruments. Because Structured Investments of the type in which the
Fund anticipates investing typically involve no credit enhancement, their credit
risk will generally be equivalent to that of the underlying instruments.
The Fund is permitted to invest in a class of Structured Investments
that is either subordinated or unsubordinated to the right of payment of another
class. Subordinated Structured Investments typically have higher yields and
present greater risks than unsubordinated Structured Investments. Although a
Fund's purchase of subordinated Structured Investments would have a similar
economic effect to that of borrowing against the underlying securities, the
purchase will not be deemed to be leverage for purposes of the limitations
placed on the extent of the Fund's assets that may be used for borrowing
activities.
Certain issuers of Structured Investments may be deemed to be
"investment companies" as defined in the 1940 Act. As a result, a Fund's
investment in these Structured Investments may be limited by the restrictions
contained in the 1940 Act. Structured Investments are typically sold in private
placement transactions, and there currently is no active trading market for
Structured Investments. To the extent such investments are illiquid, they will
be subject to the Fund's restrictions on investments in illiquid securities.
INVESTMENT RESTRICTIONS. The Fund has imposed upon itself certain
investment restrictions which, together with its investment objectives and
policies, are fundamental policies except as otherwise indicated. No changes in
the Fund's investment objectives, policies or investment restrictions (except
those which are not fundamental policies) can be made without the approval of
the Shareholders of the Fund. For this purpose, the provisions of the 1940 Act
require the affirmative vote of the lesser of either (1) 67% or more of the
Fund's Shares present at a Shareholders' meeting at which more than 50% of the
outstanding Shares are present or represented by proxy or (2) more than 50% of
the outstanding Shares of the Fund.
In accordance with these restrictions, the Fund will not:
1. Invest more than 5% of its total assets in the
securities of any one issuer (exclusive of U.S.
Government securities).
2. Invest directly in real estate or interests in real
estate (although it may purchase securities secured by
real estate or interests therein, or issued by
- 7 -
<PAGE>
companies or investment trusts which invest in real estate or
interests therein); invest in other open-end investment
companies (except in connection with a merger, consolidation,
acquisition or reorganization); invest in interests (other
than publicly issued debentures or equity stock interests) in
oil, gas or other mineral exploration or development programs;
or purchase or sell commodity contracts (except futures
contracts as described in the Fund's Prospectus).
3. Purchase or retain securities of any company in which officers
of the Fund or of the Investment Manager, individually owning
more than 1/2 of 1% of the securities of such company, in the
aggregate own more than 5% of the securities of such company.
4. 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.
5. Act as an underwriter; issue senior securities; purchase on
margin or sell short, except that the Fund may make margin
payments in connection with futures contracts.
6. 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 enter into
repurchase agreements and lend its portfolio securities.
7. Invest more than 5% of the value of its total assets in
securities of issuers which have been in continuous operation
less than three years.
8. Invest more than 15% of its total assets in securities
of foreign companies that are not listed on a
recognized United States or foreign securities
exchange, including no more than 10% of its total
assets in restricted securities and other securities
(including repurchase agreements having more than seven
days remaining to maturity and over-the-counter options
purchased by the Fund and the assets used as cover for
over-the-counter options written by the Fund) which are
not restricted but which are not readily marketable
(I.E., trading in the security is suspended or, in the
----
case of unlisted securities, market makers do not exist
or will not entertain bids or offers).
- 8 -
<PAGE>
9. Concentrate its investments in any one industry, except that
the Fund may invest 25% or more of its total assets in
securities of companies principally engaged in or related to
the real estate industry.
10. Borrow money, except that the Fund may borrow money
from banks in an amount not exceeding 30% of the value
of the Fund's total assets (not including the amount
borrowed), or pledge, mortgage or hypothecate its
assets for any purpose, except to secure borrowings and
then only to an extent not greater than 15% of the
Fund's total assets. Arrangements with respect to
margin for futures contracts are not deemed to be a
pledge of assets.
11. Participate on a joint or a joint and several basis in any
trading account in securities. (See "Investment Objectives and
Policies--Trading Policies" as to transactions in the same
securities for the Fund and other Templeton Funds and
clients.)
12. Invest more than 5% of its total assets in warrants whether or
not listed on the New York or American Stock Exchanges, and
more than 2% of its total assets in warrants that are not
listed on those exchanges. Warrants acquired in units or
attached to securities are not included in this restriction.
The Fund has undertaken with a state securities commission that it will
limit investments in illiquid securities to no more than 5% of its total assets.
In addition, the Fund has no present intention of investing in collateralized
mortgage obligations.
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 investment restrictions do not preclude the Fund from
purchasing the securities of any issuer pursuant to the exercise of subscription
rights distributed to the Fund by the issuer, unless such purchase would result
in a violation of restrictions 8 or 9.
RISK FACTORS. The Fund has an unlimited right to purchase securities in
any developed foreign country and may invest up to 10% of its assets in
developing countries, if such securities are listed on an exchange, as well as a
limited right to purchase such securities if they are unlisted. Investors should
consider
- 9 -
<PAGE>
carefully the substantial risks involved in securities of companies and
governments of foreign nations, which are in addition to the usual risks
inherent in domestic investments.
There may be less publicly available information about foreign
companies comparable to the reports and ratings published about companies in the
United States. Foreign companies are not generally subject to uniform
accounting, auditing and financial reporting standards, and auditing practices
and requirements may not be comparable to those applicable to United States
companies. The Fund, therefore, may encounter difficulty in obtaining market
quotations for purposes of valuing its portfolio and calculating its net asset
value. Foreign markets have substantially less volume than the New York Stock
Exchange ("NYSE") and securities of some foreign companies are less liquid and
more volatile than securities of comparable United States companies. Commission
rates in foreign countries, which are generally fixed rather than subject to
negotiation as in the United States, are likely to be higher. In many foreign
countries there is less government supervision and regulation of stock
exchanges, brokers and listed companies than in the United States.
Investments in companies domiciled in developing countries may be
subject to potentially higher risks than investments in developed countries.
These risks include (i) less social, political and economic stability; (ii) the
small current size of the markets for such securities and the currently low or
nonexistent volume of trading, which result in a lack of liquidity and in
greater price volatility; (iii) certain national policies which may restrict the
Fund's investment opportunities, including restrictions on investment in issuers
or industries deemed sensitive to national interests; (iv) foreign taxation; (v)
the absence of developed legal structures governing private or foreign
investment or allowing for judicial redress for injury to private property; (vi)
the absence, until recently in certain Eastern European countries, of a capital
market structure or market-oriented economy; and (vii) the possibility that
recent favorable economic developments in Eastern Europe may be slowed or
reversed by unanticipated political or social events in such countries.
In addition, many countries in which a Fund may invest have experienced
substantial, and in some periods extremely high, rates of inflation for many
years. Inflation and rapid fluctuations in inflation rates have had and may
continue to have negative effects on the economies and securities markets of
certain countries. Moreover, the economies of some developing countries may
differ favorably or unfavorably from the United States economy in such respects
as growth of gross domestic product, rate of inflation, currency depreciation,
capital
- 10 -
<PAGE>
reinvestment, resource self-sufficiency and balance of payments
position.
Investments in Eastern European countries may involve risks of
nationalization, expropriation and confiscatory taxation. The Communist
governments of a number of Eastern European countries expropriated large amounts
of private property in the past, in many cases without adequate compensation,
and there can be no assurance that such expropriation will not occur in the
future. In the event of such expropriation, the Fund could lose a substantial
portion of any investments it has made in the affected countries. Further, no
accounting standards exist in Eastern European countries. Finally, even though
certain Eastern European currencies may be convertible into United States
dollars, the conversion rates may be artificial to the actual market values and
may be adverse to Fund Shareholders.
Investing in Russian companies involves a high degree of risk and
special considerations not typically associated with investing in the United
States securities markets, and should be considered highly speculative. Such
risks include: (a) delays in settling portfolio transactions and risk of loss
arising out of Russia's system of share registration and custody; (b) the risk
that it may be impossible or more difficult than in other countries to obtain
and/or enforce a judgment; (c) pervasiveness of corruption and crime in the
Russian economic system; (d) currency exchange rate volatility and the lack of
available currency hedging instruments; (e) higher rates of inflation (including
the risk of social unrest associated with periods of hyper-inflation); (f)
controls on foreign investment and local practices disfavoring foreign investors
and limitations on repatriation of invested capital, profits and dividends, and
on the Fund's ability to exchange local currencies for U.S. dollars; (g) the
risk that the government of Russia or other executive or legislative bodies may
decide not to continue to support the economic reform programs implemented since
the dissolution of the Soviet Union and could follow radically different
political and/or economic policies to the detriment of investors, including
non-market-oriented policies such as the support of certain industries at the
expense of other sectors or investors, or a return to the centrally planned
economy that existed prior to the dissolution of the Soviet Union; (h) the
financial condition of Russian companies, including large amounts of
inter-company debt which may create a payments crisis on a national scale; (i)
dependency on exports and the corresponding importance of international trade;
(j) the risk that the Russian tax system will not be reformed to prevent
inconsistent, retroactive and/or exorbitant taxation; and (k) possible
difficulty in identifying a purchaser of securities held by the Fund due to the
underdeveloped nature of the securities markets.
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<PAGE>
There is little historical data on Russian securities markets because
they are relatively new and a substantial proportion of securities transactions
in Russia are privately negotiated outside of stock exchanges. Because of the
recent formation of the securities markets as well as the underdeveloped state
of the banking and telecommunications systems, settlement, clearing and
registration of securities transactions are subject to significant risks.
Ownership of shares (except where shares are held through depositories that meet
the requirements of the 1940 Act) is defined according to entries in the
company's share register and normally evidenced by extracts from the register or
by formal share certificates. However, there is no central registration system
for shareholders and these services are carried out by the companies themselves
or by registrars located throughout Russia. These registrars are not necessarily
subject to effective state supervision and it is possible for the Fund to lose
its registration through fraud, negligence or even mere oversight. While the
Fund will endeavor to ensure that its interest continues to be appropriately
recorded either itself or through a custodian or other agent inspecting the
share register and by obtaining extracts of share registers through regular
confirmations, these extracts have no legal enforceability and it is possible
that subsequent illegal amendment or other fraudulent act may deprive the Fund
of its ownership rights or improperly dilute its interests. In addition, while
applicable Russian regulations impose liability on registrars for losses
resulting from their errors, it may be difficult for the Fund to enforce any
rights it may have against the registrar or issuer of the securities in the
event of loss of share registration. Furthermore, although a Russian public
enterprise with more than 1,000 shareholders is required by law to contract out
the maintenance of its shareholder register to an independent entity that meets
certain criteria, in practice this regulation has not always been strictly
enforced. Because of this lack of independence, management of a company may be
able to exert considerable influence over who can purchase and sell the
company's shares by illegally instructing the registrar to refuse to record
transactions in the share register. This practice may prevent the Fund from
investing in the securities of certain Russian companies deemed suitable by the
Investment Manager. Further, this also could cause a delay in the sale of
Russian company securities by the Fund if a potential purchaser is deemed
unsuitable, which may expose the Fund to potential loss on the investment.
The Fund endeavors to buy and sell foreign currencies on as favorable a
basis as practicable. Some price spread on currency exchange (to cover service
charges) may be incurred, particularly when the Fund changes investments from
one country to another or when proceeds of the sale of Shares in U.S. dollars
are used for
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<PAGE>
the purchase of securities in foreign countries. Also, some countries may adopt
policies which would prevent the Fund from transferring cash out of the country
or withhold portions of interest and dividends at the source. There is the
possibility of cessation of trading on national exchanges, expropriation,
nationalization or confiscatory taxation, withholding and other foreign taxes on
income or other amounts, foreign exchange controls (which may include suspension
of the ability to transfer currency from a given country), default in foreign
government securities, political or social instability, or diplomatic
developments which could affect investments in securities of issuers in foreign
nations.
The Fund may be affected either unfavorably or favorably by
fluctuations in the relative rates of exchange between the currencies of
different nations, by exchange control regulations and by indigenous economic
and political developments. Some countries in which the Fund may invest may also
have fixed or managed currencies that are not free-floating against the U.S.
dollar. Further, certain currencies 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 Trustees consider at least annually the likelihood of the
imposition by any foreign government of exchange control restrictions which
would affect the liquidity of the Fund's assets maintained with custodians in
foreign countries, as well as the degree of risk from political acts of foreign
governments to which such assets may be exposed. The Trustees also consider the
degree of risk involved through the holding of portfolio securities in domestic
and foreign securities depositories (see "Investment Management and Other
Services--Custodian and Transfer Agent"). However, in the absence of willful
misfeasance, bad faith or gross negligence on the part of the Investment
Manager, any losses resulting from the holding of the Fund's portfolio
securities in foreign countries and/or with securities depositories will be at
the risk of the Shareholders. No
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<PAGE>
assurance can be given that the Fund's appraisal of the risks will always be
correct or that such exchange control restrictions or political acts of foreign
governments might not occur.
Additional risks may be involved with the Fund's special investment
techniques, including loans of portfolio securities and borrowing for investment
purposes. These risks are described under the heading "Investment Techniques" in
the Prospectus.
TRADING POLICIES. The Investment Manager and its affiliated companies
serve as investment adviser to other investment companies and private clients.
Accordingly, the respective portfolios of certain of these funds and clients may
contain many or some of the same securities. When certain funds or clients are
engaged simultaneously in the purchase or sale of the same security, the trades
may be aggregated for execution and then allocated in a manner designed to be
equitable to each party. The larger size of the transaction may affect the price
of the security and/or the quantity which may be bought or sold for each party.
If the transaction is large enough, brokerage commissions in certain countries
may be negotiated below those otherwise chargeable.
Sale or purchase of securities, without payment of brokerage
commissions, fees (except customary transfer fees) or other remuneration in
connection therewith, may be effected between any of these funds, or between
funds and private clients, under procedures adopted pursuant to Rule 17a-7 under
the 1940 Act.
PERSONAL SECURITIES TRANSACTIONS. Access persons of the Franklin
Templeton Group, as defined in SEC Rule 17(j) under the 1940 Act, who are
employees of Franklin Resources, Inc. or their subsidiaries, are permitted to
engage in personal securities transactions subject to the following general
restrictions and procedures: (1) The trade must receive advance clearance from a
Compliance Officer and must be completed within 24 hours after this clearance;
(2) Copies of all brokerage confirmations must be sent to the Compliance Officer
and within 10 days after the end of each calendar quarter, a report of all
securities transactions must be provided to the Compliance Officer; (3) In
addition to items (1) and (2), access persons involved in preparing and making
investment decisions must file annual reports of their securities holdings each
January and also inform the Compliance Officer (or other designated personnel)
if they own a security that is being considered for a fund or other client
transaction or if they are recommending a security in which they have an
ownership interest for purchase or sale by a fund or other client.
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<PAGE>
MANAGEMENT OF THE FUND
The name, address, principal occupation during the past five years and
other information with respect to each of the Trustees and Principal Executive
Officers of the Fund are as follows:
NAME, ADDRESS AND PRINCIPAL OCCUPATION
OFFICES WITH FUND DURING PAST FIVE YEARS
HARRIS J. ASHTON
Metro Center, 1 Station
Place
Stamford, Connecticut
Trustee
Chairman of the Board, president
and chief executive officer of
General Host Corporation (nursery
and craft centers); and a
director of RBC Holdings (U.S.A.)
Inc. (a bank holding company) and
Bar-S Foods. Age 63.
NICHOLAS F. BRADY*
The Bullitt House
102 East Dover Street
Easton, Maryland
Trustee
Chairman of Templeton Emerging Markets Investment Trust PLC; chairman of
Templeton Latin America Investment Trust PLC; chairman of Darby Overseas
Investments, Ltd. (an investment firm) (1994-present); director of the Amerada
Hess Corporation, Capital Cities/ABC, Inc., Christiana Companies, and the H.J.
Heinz Company; Secretary of the United States Department of the Treasury
(1988-January 1993); and chairman of the board of Dillon, Read & Co. Inc.
(investment banking) prior thereto. Age 65.
F. BRUCE CLARKE
19 Vista View Blvd.
Thornhill, Ontario
Trustee
Retired; formerly, credit
adviser, National Bank of Canada,
Toronto. Age 85.
HASSO-G VON DIERGARDT-NAGLO
R.R. 3
Stouffville, Ontario
Trustee
Farmer; and president of
Clairhaven Investments, Ltd. and
other private investment
companies. Age 79.
S. JOSEPH FORTUNATO
200 Campus Drive
Florham Park, New Jersey
Trustee
Member of the law firm of Pitney,
Hardin, Kipp & Szuch; and a
director of General Host
Corporation. Age 63.
- 15 -
<PAGE>
NAME, ADDRESS AND PRINCIPAL OCCUPATION
OFFICES WITH FUND DURING PAST FIVE YEARS
JOHN Wm. GALBRAITH
360 Central Avenue
Suite 1300
St. Petersburg, Florida
Trustee
President of Galbraith
Properties, Inc. (personal
investment company); director of
Gulfwest Banks, Inc. (bank
holding company) (1995-present)
and Mercantile Bank (1991-
present); vice chairman of
Templeton, Galbraith & Hansberger
Ltd. (1986-1992); and chairman of
Templeton Funds Management, Inc.
(1974-1991). Age 74.
ANDREW H. HINES, JR.
150 2nd Avenue N.
St. Petersburg, Florida
Trustee Consultant for the Triangle Consulting Group; chairman of the board
and chief executive officer of Florida Progress Corporation (1982-February 1990)
and director of various of its subsidiaries; chairman and director of Precise
Power Corporation; executive-in-residence of Eckerd College (1991-present); and
a director of Checkers Drive-In Restaurants, Inc. Age 72.
CHARLES B. JOHNSON*
777 Mariners Island Blvd.
San Mateo, California
Chairman of the Board
and Vice President
President, chief executive officer, and director of Franklin Resources, Inc.;
chairman of the board and director of Franklin Advisers, Inc. and Franklin
Templeton Distributors, Inc.; director of Franklin Administrative Services,
Inc., General Host Corporation, and Templeton Global Investors, Inc.; and
officer and director, trustee or managing general partner, as the case may be,
of most other subsidiaries of Franklin and of 55 of the investment companies in
the Franklin Templeton Group.
Age 62.
- 16 -
<PAGE>
NAME, ADDRESS AND PRINCIPAL OCCUPATION
OFFICES WITH FUND DURING PAST FIVE YEARS
RUPERT H. JOHNSON, JR.*
777 Mariners Island Blvd.
San Mateo, California
Trustee Executive vice president and director of Franklin Resources, Inc.;
president and director of Franklin Advisers, Inc.; executive vice president and
director of Franklin Templeton Distributors, Inc.; director of Franklin
Administrative Services, Inc.; and officer and/or director, trustee or managing
general partner, as the case may be, of most other subsidiaries of Franklin
Resources, Inc., and of 42 of the investment companies in the Franklin Templeton
Group. Age 55.
BETTY P. KRAHMER
2201 Kentmere Parkway
Wilmington, Delaware
Trustee
Director or trustee of various civic associations; formerly, economic analyst,
U.S.
Government. Age 66.
GORDON S. MACKLIN
8212 Burning Tree Road
Bethesda, Maryland
Trustee
Chairman of White River
Corporation (information
services); director of Fund
America Enterprises Holdings,
Inc., Lockheed Martin
Corporation, MCI Communications Corporation, Fusion Systems Corporation,
Infovest Corporation, and Medimmune, Inc.; and formerly held the following
positions: chairman of Hambrecht and Quist Group; director of H&Q Healthcare
Investors; and president of the National Association of Securities Dealers, Inc.
Age 67.
- 17 -
<PAGE>
NAME, ADDRESS AND PRINCIPAL OCCUPATION
OFFICES WITH FUND DURING PAST FIVE YEARS
FRED R. MILLSAPS
2665 NE 37th Drive
Fort Lauderdale, Florida
Trustee
Manager of personal investments (1978-present); chairman and chief executive
officer of Landmark Banking Corporation (1969-1978); financial vice president of
Florida Power and Light (1965-1969); vice president of The Federal Reserve Bank
of Atlanta (1958-1965); and a director of various other business and nonprofit
organizations. Age 66.
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 other Templeton Funds;
formerly, investment administrator with Roy West Trust Corporation (Bahamas)
Limited (1984-1985). Age 35.
MARTIN L. FLANAGAN
777 Mariners Island Blvd.
San Mateo, California
Vice President Senior vice president, treasurer, and chief financial officer
of Franklin Resources, Inc.; director and executive vice president of Templeton
Investment Counsel, Inc.; director, chief executive officer, and president of
Templeton Global Investors, Inc.; director or trustee, president or vice
president of various Templeton Funds; accountant with Arthur Andersen & Company
(1982-1983); and a member of the International Society of Financial Analysts and
the American Institute of Certified Public Accounts. Age 35.
- 18 -
<PAGE>
NAME, ADDRESS AND PRINCIPAL OCCUPATION
OFFICES WITH FUND DURING PAST FIVE YEARS
JEFFREY A. EVERETT
Lyford Cay
Nassau, Bahamas
Vice President
Vice president, Portfolio
Management/Research of Templeton
Global
Advisors Limited; formerly,
investment officer, First
Pennsylvania Investment Research
(until 1989). Age 31.
JOHN R. KAY
500 East Broward Blvd.
Fort Lauderdale, Florida
Vice President Vice president of the Templeton Funds; vice president and
treasurer of Templeton Global Investors, Inc. and Templeton Worldwide, Inc.;
assistant vice president of Franklin Templeton Distributors, Inc.; formerly,
vice president and controller of the Keystone Group, Inc. Age 55.
THOMAS M. MISTELE
700 Central Avenue
St. Petersburg, Florida
Secretary
Senior vice president of
Templeton Global Investors, Inc.; vice president of Franklin Templeton
Distributors, Inc.; secretary of the Templeton Funds; formerly, attorney,
Dechert Price & Rhoads (1985-1988) and Freehill, Hollingdale & Page (1988); and
judicial clerk, U.S. District Court (Eastern District of Virginia) (1984-1985).
Age 42.
JAMES R. BAIO
500 East Broward Blvd.
Fort Lauderdale, Florida
Treasurer Certified public accountant; treasurer of the Templeton Funds;
senior vice president of Templeton Worldwide, Inc., Templeton Global Investors,
Inc., and Templeton Funds Trust Company; formerly, senior tax manager with Ernst
& Young (certified public accountants) (1977-1989). Age 41.
- 19 -
<PAGE>
JEFFREY L. STEELE
1500 K Street, N.W.
Washington, D.C.
Assistant Secretary
Partner, Dechert Price & Rhoads.
Age 50.
- ------------------
* These are Trustees 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 Advisors
Limited are limited partners of Darby Emerging Markets Fund,
L.P.
There are no family relationships between any of the
Trustees, except that Messrs. Charles B. Johnson and Rupert
H. Johnson, Jr. are brothers.
TRUSTEE COMPENSATION
All of the Fund's Officers and Trustees also hold positions with other
investment companies in the Franklin Templeton Group. No compensation is paid by
the Fund to any officer or Trustee who is an officer, trustee or employee of the
Investment Manager or its affiliates. Each Templeton Fund pays its independent
directors and trustees and Mr. Brady an annual retainer and/or fees for
attendance at Board and Committee meetings, the amount of which is based on the
level of assets in each fund. Accordingly, the Fund currently pays the
independent Trustees and Mr. Brady an annual retainer of $1,000 and a fee of
$100 per meeting attended of the Board and its Committees. The independent
Trustees and Mr. Brady are reimbursed for any expenses incurred in attending
meetings, paid pro rata by each Franklin Templeton Fund in which they serve. No
pension or retirement benefits are accrued as part of Fund expenses.
- 20 -
<PAGE>
The following table shows the total compensation paid to the
Trustees by the Fund and by all investment companies in the
Franklin Templeton Group:
<TABLE>
<CAPTION>
Number of Total Compensation
Aggregate Franklin Templeton from all Funds in
Compenstion from Fund Boards on which Franklin Templeton
NAME OF TRUSTEE THE FUND TRUSTEE SERVES GROUP
<S> <C> <C> <C>
Harris J. Ashton $1,550 57 $327,925
Nicholas F. Brady 1,500 24 98,225
F. Bruce Clarke 2,050 20 83,350
Hasso-G von Diergardt-Naglo 1,550 20 77,350
S. Joseph Fortunato 1,550 59 344,745
John Wm. Galbraith 350 23 70,100
Andrew H. Hines, Jr. 2,050 24 106,325
Betty P. Krahmer 1,550 24
Gordon S. Macklin 1,550 54 321,525
Fred R. Millsaps 2,050 24 104,325
</TABLE>
- ---------------
* For the fiscal year ended August 31, 1995.
** For the calendar year ended December 31, 1995.
PRINCIPAL SHAREHOLDERS
As of December 1, 1995 there were 9,923,824 Shares of the Fund
outstanding, of which 4,419 Shares (0.045%) were owned beneficially, directly or
indirectly, by all the Trustees and officers of the Fund as a group. As of
December 1, 1995, to the knowledge of management, no person owned beneficially
or of record 5% or more of the outstanding Shares, except Prudential Securities,
FBO Christine T. Marks, owned 12,891 Class II Shares of the Fund (7% of the
outstanding Class II Shares).
INVESTMENT MANAGEMENT AND OTHER SERVICES
INVESTMENT MANAGEMENT AGREEMENT. The Investment Manager of
the Fund is TempletonGlobal Advisors
Limited, a Bahamian corporation with offices in Nassau, Bahamas.
On April 15, 1994, the Investment Manager assumed the investment
management duties of Templeton Investment Counsel, Inc. ("TICI"),
a Florida corporation, with respect to the Fund under the
- 21 -
<PAGE>
Investment Management Agreement. The Investment Management Agreement dated
October 30, 1992 (the "Agreement") was approved by the Shareholders of the Fund
on October 30, 1992, was last approved by the Board of Trustees, including a
majority of the Trustees who were not parties to the Agreement or interested
persons of any such party, at a meeting on December 5, 1995, and will run
through December 31, 1996. The Agreement continues from year to year subject to
approval annually by the Board of Trustees or by vote of a majority of the
outstanding Shares of the Fund (as defined in the 1940 Act) and also, in either
event, with the approval of a majority of those Trustees who are not parties to
the Agreement or interested persons of any such party in person at a meeting
called for the purpose of voting on such approval.
The Agreement requires the Investment Manager to manage the investment
and reinvestment of the Fund's assets. The Investment Manager is not required to
furnish any personnel, overhead items or facilities for the Fund, including
daily pricing or trading desk facilities, although such expenses are paid by
investment advisers of some other investment companies.
The Agreement provides that the Investment Manager will select brokers
and dealers for execution of the Fund's portfolio transactions consistent with
the Fund's brokerage policies (see "Brokerage Allocation"). Although the
services provided by broker-dealers in accordance with the brokerage policies
incidentally may help reduce the expenses of or otherwise benefit the Investment
Manager and other investment advisory clients of the Investment Manager and of
its affiliates, as well as the Fund, the value of such services is
indeterminable and the Investment Manager's fee is not reduced by any offset
arrangement by reason thereof.
When the Investment Manager determines to buy or sell the same security
for the Fund that the Investment Manager or certain of its affiliates have
selected for one or more of the Investment Manager's other clients or for
clients of its affiliates, the orders for all such securities trades may be
placed for execution by methods determined by the Investment Manager, with
approval by the Board of Trustees, to be impartial and fair, in order to seek
good results for all parties (see "Investment Objectives and Policies -- Trading
Policies"). Records of securities transactions of persons who know when orders
are placed by the Fund are available for inspection at least four times annually
by the Compliance Officer of the Fund so that the non-interested Trustees (as
defined in the 1940 Act) can be satisfied that the procedures are generally fair
and equitable to all parties.
- 22 -
<PAGE>
The Investment Manager also provides management services to numerous
other investment companies or funds and accounts pursuant to management
agreements with each fund or account. The Investment Manager may give advice and
take action with respect to any of the other funds and accounts it manages, or
for its own account, which may differ from action taken by the Investment
Manager on behalf of the Fund. Similarly, with respect to the Fund, the
Investment Manager is not obligated to recommend, purchase or sell, or to
refrain from recommending, purchasing or selling any security that the
Investment Manager and access persons, as defined by the 1940 Act, may purchase
or sell for its or their own account or for the accounts of any other fund or
account. Furthermore, the Investment Manager is not obligated to refrain from
investing in securities held by the Fund or other funds or accounts which it
manages or administers. Any transactions for the accounts of the Investment
Manager and other access persons will be made in compliance with the Fund's Code
of Ethics as described in the section "Investment Objectives and Policies --
Personal Securities Transactions."
The 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
Agreement, except liability resulting from willful misfeasance, bad faith or
gross negligence on the Investment Manager's part or reckless disregard of its
duties under the Agreement. The 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 Trustees in office at the time or by vote of a majority of the
outstanding voting securities 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
during the year. Each class of Shares pays a portion of the fee, determined by
the proportion of the Fund that it represents. During the fiscal years ended
August 31, 1995, 1994, and 1993, the Investment Manager ( and prior to April 30,
1994, TICI, the Fund's previous investment manager) received from the Fund under
the Agreement of $974,779, $733,198and $341,213, , respectively. 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
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<PAGE>
fee, but generally excluding interest, taxes, brokerage commissions and
extraordinary expenses, are in excess of specific applicable limitations. The
strictest rule currently applicable to the Fund is 2.5% of the first $30,000,000
of net assets, 2% of the next $70,000,000 of net assets and 1.5% of the
remainder.
THE INVESTMENT MANAGER. The Investment Manager is an
indirect wholly owned subsidiary of Franklin, a publicly traded
company whose shares are listed on the NYSE. Charles B. Johnson
(a Trustee and Officer of the Fund) and Rupert H. Johnson, Jr. (a
Trustee of the Fund) are principal shareholders of Franklin and
own, respectively, approximately 20% and 16% of its outstanding
shares. Messrs. Charles B. Johnson and Rupert H. Johnson, Jr.
are brothers.
BUSINESS MANAGER. Templeton Global Investors, Inc. performs
certain administrative functions as Business Manager for the
Fund, including:
o providing office space, telephone, office equipment and
supplies for the Fund;
o paying compensation of the Fund's officers for services
rendered as such;
o authorizing expenditures and approving bills for
payment on behalf of the Fund;
o supervising preparation of annual and semiannual reports to
Shareholders, notices of dividends, capital gain distributions
and tax credits, and attending to routine correspondence and
other communications with individual Shareholders;
o daily pricing of the Fund's investment portfolio and preparing
and supervising publication of daily quotations of the bid and
asked prices of the Fund's Shares, earnings reports and other
financial data;
o monitoring relationships with organizations serving the
Fund, including the custodian and printers;
o providing trading desk facilities for the Fund;
o supervising compliance by the Fund with recordkeeping
requirements under the 1940 Act and the rules and regulations
thereunder, with state regulatory requirements, maintaining
books and records for the Fund (other than those maintained by
the custodian and
- 24 -
<PAGE>
transfer agent), and preparing and filing tax reports
other than the Fund's income tax returns;
o monitoring the qualifications of tax-deferred
retirement plans providing for investment in Shares of
the Fund; and
o providing executive, clerical and secretarial help
needed to carry out these responsibilities.
For its services, the Business Manager receives a monthly fee equal on
an annual basis to 0.15% of the first $200,000,000 of the Fund's average daily
net assets, reduced to 0.135% annually of such net assets in excess of
$200,000,000, further reduced to 0.1% annually of such net assets in excess of
$700,000,000, and further reduced to 0.075% annually of such net assets in
excess of $1,200,000,000. Each class of Shares pays a portion of the fee,
determined by the proportion of the Fund that it represents. Since the Business
Manager's fee covers services often provided by investment advisers to other
funds, the Fund's combined expenses for advisory and administrative services
together may be higher than those of some other investment companies. During the
fiscal years ended August 31, 1995, 1994, and 1993, the Business Manager (and,
prior to April 1, 1993, Templeton Funds Management, Inc., the previous business
manager) received business management fees of $194,956, $146,640 and $68,243,
respectively.
The Business Manager is relieved of liability to the Fund for any act
or omission in the course of its performance under the Business Management
Agreement, in the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of its duties and obligations under the Agreement. The
Business Management Agreement may be terminated by the Fund at any time on 60
days' written notice without payment of penalty, provided that such termination
by the Fund shall be directed or approved by vote of a majority of the Trustees
of the Fund in office at the time or by vote of a majority of the outstanding
voting securities of the Fund, and shall terminate automatically and immediately
in the event of its assignment.
Templeton Global Investors, Inc. is an indirect wholly owned
subsidiary of Franklin.
CUSTODIAN AND TRANSFER AGENT. The Chase Manhattan Bank, N.A., serves as
Custodian of the Fund's assets, which are maintained at the Custodian's
principal office, MetroTech Center, Brooklyn, New York 11245, and at the offices
of its branches and agencies throughout the world. The Custodian has entered
into agreements with foreign sub-custodians approved by the Trustees
- 25 -
<PAGE>
pursuant to Rule 17f-5 under the 1940 Act. The Custodian, its branches and
sub-custodians generally domestically, and frequently abroad, do not actually
hold certificates for the securities in their custody, but instead have book
records with domestic and foreign securities depositories, which in turn have
book records with the transfer agents of the issuers of the securities.
Compensation for the services of the Custodian is based on a schedule of charges
agreed on from time to time.
Franklin Templeton Investor Services, Inc. serves as the Fund's
Transfer Agent. Services performed by the Transfer Agent include processing
purchase, transfer and redemption orders; making dividend payments, capital gain
distributions and reinvestments; and handling routine communications with
Shareholders. The Transfer Agent receives from the Fund an annual fee of $13.74
per Shareholder account plus out-of-pocket expenses. This fee is adjusted each
year to reflect changes in the Department of Labor Consumer Price Index.
LEGAL COUNSEL. Dechert Price & Rhoads, 1500 K Street, N.W.,
Washington, D.C. 20005, is legal counsel for the Fund.
INDEPENDENT ACCOUNTANTS. The firm of McGladrey & Pullen, LLP, 555 Fifth
Avenue, New York, New York 10017, serves as independent accountants for the
Fund. Its audit services comprise examination of the Fund's financial statements
and review of the Fund's filings with the Securities and Exchange Commission
("SEC") and the Internal Revenue Service ("IRS").
REPORTS TO SHAREHOLDERS. The Fund's fiscal year ends on August 31.
Shareholders are provided at least semiannually with reports showing the Fund's
portfolio and other information, including an annual report with financial
statements audited by independent accountants. Shareholders who would like to
receive an interim quarterly report may phone the Fund Information Department at
1-800/DIAL BEN.
BROKERAGE ALLOCATION
The Investment Management Agreement provides that the Investment
Manager is responsible for selecting members of securities exchanges, brokers
and dealers (such members, brokers and dealers being hereinafter referred to as
"brokers") for the execution of the Fund's portfolio transactions and, when
applicable, the negotiation of commissions in connection therewith. All
decisions and placements are made in accordance with the following principles:
1. Purchase and sale orders are usually placed with
brokers who are selected by the Investment Manager as
- 26 -
<PAGE>
able to achieve "best execution" of such orders. "Best
execution" means prompt and reliable execution at the most
favorable securities price, taking into account the other
provisions hereinafter set forth. The determination of what
may constitute best execution and price in the execution of a
securities transaction by a broker involves a number of
considerations, including, without limitation, the overall
direct net economic result to the Fund (involving both price
paid or received and any commissions and other costs paid),
the efficiency with which the transaction is effected, the
ability to effect the transaction at all where a large block
is involved, availability of the broker to stand ready to
execute possibly difficult transactions in the future, and the
financial strength and stability of the broker. Such
considerations are judgmental and are weighed by the
Investment Manager in determining the overall reasonableness
of brokerage commissions.
2. In selecting brokers for portfolio transactions, the
Investment Manager takes into account its past experience as
to brokers qualified to achieve "best execution," including
brokers who specialize in any foreign securities held by the
Fund.
3. The Investment Manager is authorized to allocate
brokerage business to brokers who have provided
brokerage and research services, as such services are
defined in Section 28(e) of the Securities Exchange Act
of 1934 (the "1934 Act"), for the Fund and/or other
accounts, if any, for which the Investment Manager
exercises investment discretion (as defined in Section
3(a)(35) of the 1934 Act) and, as to transactions to
which fixed minimum commission rates are not
applicable, to cause the Fund to pay a commission for
effecting a securities transaction in excess of the
amount another broker would have charged for effecting
that transaction, if the Investment Manager in making
the selection in question determines in good faith that
such amount of commission is reasonable in relation to
the value of the brokerage and research services
provided by such broker, viewed in terms of either that
particular transaction or the Investment Manager's
overall responsibilities with respect to the Fund and
the other accounts, if any, as to which it exercises
investment discretion. In reaching such determination,
the Investment Manager is not required to place or
attempt to place a specific dollar value on the
research or execution services of a broker or on the
portion of any commission reflecting either of said
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services. In demonstrating that such determinations were made
in good faith, the Investment Manager shall be prepared to
show that all commissions were allocated and paid for purposes
contemplated by the Fund's brokerage policy; that the research
services provide lawful and appropriate assistance to the
Investment Manager in the performance of its investment
decision-making responsibilities; and that the commissions
paid were within a reasonable range. The determination that
commissions were within a reasonable range shall be based on
any available information as to the level of commissions known
to be charged by other brokers on comparable transactions, but
there shall be taken into account the Fund's policies that (i)
obtaining a low commission is deemed secondary to obtaining a
favorable securities price, since it is recognized that
usually it is more beneficial to the Fund to obtain a
favorable price than to pay the lowest commission; and (ii)
the quality, comprehensiveness and frequency of research
studies which are provided for the Investment Manager are
useful to the Investment Manager in performing its advisory
services under its Agreement with the Fund. Research services
provided by brokers to the Investment Manager are considered
to be in addition to, and not in lieu of, services required to
be performed by the Investment Manager under its Investment
Management Agreement with the Fund. Research furnished by
brokers through whom the Fund effects securities transactions
may be used by the Investment Manager for any of its accounts,
and not all such research may be used by the Investment
Manager for the Fund. When execution of portfolio transactions
is allocated to brokers trading on exchanges with fixed
brokerage commission rates, account may be taken of various
services provided by the broker, including quotations outside
the United States for daily pricing of foreign securities held
in the Fund's portfolio.
4. Purchases and sales of portfolio securities within the United
States other than on a securities exchange are executed with
primary market makers acting as principal, except where, in
the judgment of the Investment Manager, better prices and
execution may be obtained on a commission basis or from other
sources.
5. Sales of the Fund's Shares (which shall be deemed to include
Shares of other companies registered under the 1940 Act which
have either the same investment adviser or an investment
adviser affiliated with the Fund's Investment Manager) made by
a broker are one factor
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among others to be taken into account in deciding to allocate
portfolio transactions (including agency transactions,
principal transactions, purchases in underwritings or tenders
in response to tender offers) for the account of the Fund to
that broker; provided that the broker shall furnish "best
execution," as defined in paragraph 1 above, and that such
allocation shall be within the scope of the Fund's other
policies as stated above; and provided further, that in every
allocation made to a broker in which the sale of Shares is
taken into account there shall be no increase in the amount of
the commissions or other compensation paid to such broker
beyond a reasonable commission or other compensation
determined, as set forth in paragraph 3 above, on the basis of
best execution alone or best execution plus research services,
without taking account of or placing any value upon such sale
of Shares.
Insofar as known to management, no Trustee or officer of the Fund, nor
the Investment Manager or Principal Underwriter or any person affiliated with
either of them, has any material direct or indirect interest in any broker
employed by or on behalf of the Fund. Franklin Templeton Distributors, Inc., the
Fund's Principal Underwriter, is a registered broker-dealer, but has never
executed any purchase or sale transactions for the Fund's portfolio or
participated in any commissions on any such transactions, and has no intention
of doing so in the future. The total brokerage commissions on the portfolio
transactions for the Fund during the fiscal years ended August 31, 1995, 1994,
and 1993, (not including any spreads or concessions on principal transactions)
were $388,000, $412,000and $156,000, respectively. All portfolio transactions
are allocated to broker-dealers only when their prices and execution, in the
judgment of the Investment Manager, are equal to the best available within the
scope of the Fund's policies. There is no fixed method used in determining which
broker-dealers receive which order or how many orders.
PURCHASE, REDEMPTION AND PRICING OF SHARES
The Prospectus describes the manner in which the Fund's Shares may be
purchased and redeemed. See "How to Buy Shares of the Fund" and "How to Sell
Shares of the Fund" in the Prospectus.
Net asset value per Share is determined as of the scheduled closing of
the NYSE (generally 4:00 p.m., New York time), every Monday through Friday
(exclusive of national business holidays). The Fund's offices will be closed,
and net asset value will not be calculated, on those days on which the NYSE is
closed, which
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currently are: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
Trading in securities on European and Far Eastern securities exchanges
and over-the-counter markets is normally completed well before the close of
business in New York on each day on which the NYSE is open. Trading of European
or Far Eastern securities generally, or in a particular country or countries,
may not take place on every New York business day. Furthermore, trading takes
place in various foreign markets on days which are not business days in New York
and on which the Fund's net asset value is not calculated. The Fund calculates
net asset value per Share, and therefore effects sales, redemptions and
repurchases of its Shares, as of the close of the NYSE once on each day on which
that Exchange is open. Such calculation does not take place contemporaneously
with the determination of the prices of many of the portfolio securities used in
such calculation and if events occur which materially affect the value of those
foreign securities, they will be valued at fair market value as determined by
the management and approved in good faith by the Board of Trustees.
The Board of Trustees may establish procedures under which the Fund may
suspend the determination of net asset value for the whole or any part of any
period during which (1) the NYSE is closed other than for customary weekend and
holiday closings, (2) trading on the NYSE is restricted, (3) an emergency exists
as a result of which disposal of securities owned by the Fund is not reasonably
practicable or it is not reasonably practicable for the Fund fairly to determine
the value of its net assets, or (4) for such other period as the SEC may by
order permit for the protection of the holders of the Fund's Shares.
OWNERSHIP AND AUTHORITY DISPUTES. In the event of disputes involving
multiple claims of ownership or authority to control a Shareholder's account,
the Fund has the right (but has no obligation) to: (1) freeze the account and
require the written agreement of all persons deemed by the Fund to have a
potential property interest in the account, prior to executing instructions
regarding the account; or (2) interplead disputed funds or accounts with a court
of competent jurisdiction. Moreover, the Fund may surrender ownership of all or
a portion of an account to the IRS in response to a Notice of Levy.
In addition to the special purchase plans described in the Prospectus,
other special purchase plans also are available:
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TAX-DEFERRED RETIREMENT PLANS. The Fund offers its
Shareholders the opportunity to participate in the following
types of retirement plans:
o For individuals whether or not covered by other
qualified plans;
o For simplified employee pensions;
o For employees of tax-exempt organizations; and
o For corporations, self-employed individuals and
partnerships.
Capital gains and income received by the foregoing plans generally are
exempt from taxation until distribution from the plans. Investors considering
participation in any such plan should review specific tax laws relating thereto
and should consult their attorneys or tax advisers with respect to the
establishment and maintenance of any such plan. Additional information,
including the fees and charges with respect to all of these plans, is available
upon request to the Principal Underwriter. No distribution under a retirement
plan will be made until Franklin Templeton Trust Company ("FTTC") receives the
participant's election on IRS Form W-4P (available on request from FTTC) and
such other documentation as it deems necessary, as to whether or not U.S. income
tax is to be withheld from such distribution.
INDIVIDUAL RETIREMENT ACCOUNT (IRA). All individuals (whether or not
covered by qualified private or governmental retirement plans) may purchase
Shares of the Fund pursuant to an IRA. However, contributions to an IRA by an
individual who is covered by a qualified private or governmental plan may not be
tax-deductible depending on the individual's income. Custodial services for IRAs
are available through FTTC. Disclosure statements summarizing certain aspects of
IRAs are furnished to all persons investing in such accounts, in accordance with
IRS regulations.
SIMPLIFIED EMPLOYEE PENSIONS (SEP-IRA). For employers who wish to
establish a simplified form of employee retirement program investing in Shares
of the Fund, there are available Simplified Employee Pensions invested in IRA
plans. Details and materials relating to these plans will be furnished upon
request to the Principal Underwriter.
RETIREMENT PLAN FOR EMPLOYEES OF TAX-EXEMPT ORGANIZATIONS
(403(B)). Employees of public school systems and certain types
of charitable organizations may enter into a deferred
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<PAGE>
compensation arrangement for the purchase of Shares of the Fund without being
taxed currently on the investment. Contributions which are made by the employer
through salary reduction are excludable from the gross income of the employee.
Such deferred compensation plans, which are intended to qualify under Section
403(b) of the Internal Revenue Code of 1986, as amended (the "Code"), are
available through the Principal Underwriter.
Custodial services are provided by FTTC.
QUALIFIED PLAN FOR CORPORATIONS, SELF-EMPLOYED INDIVIDUALS AND
PARTNERSHIPS. For employers who wish to purchase Shares of the Fund in
conjunction with employee retirement plans, there is a prototype master plan
which has been approved by the IRS. A "Section 401(k) plan" is also available.
FTTC furnishes custodial services for these plans. For further details,
including custodian fees and plan administration services, see the master plan
and related material which is available from the Principal Underwriter.
LETTER OF INTENT. Purchasers who intend to invest $50,000 or more in
Class I Shares of the Fund or any other fund in the Franklin Group of Funds and
the Templeton Family of Funds, except Templeton Capital Accumulator Fund, Inc.,
Templeton Variable Annuity Fund, Templeton Variable Products Series Fund,
Franklin Valuemark Funds and Franklin Government Securities Trust (the "Franklin
Templeton Funds"), within 13 months (whether in one lump sum or in installments,
the first of which may not be less than 5% of the total intended amount and each
subsequent installment not less than $25 unless the investor is a qualifying
employee benefit plan (the "Benefit Plan"), including automatic investment and
payroll deduction plans), and to beneficially hold the total amount of such
Class I Shares fully paid for and outstanding simultaneously for at least one
full business day before the expiration of that period, should execute a Letter
of Intent ("LOI") on the form provided in the Shareholder Application in the
Prospectus. Payment for not less than 5% of the total intended amount must
accompany the executed LOI unless the investor is a Benefit Plan. Except for
purchases of Shares by a Benefit Plan, those Class I Shares purchased with the
first 5% of the intended amount stated in the LOI will be held as "Escrowed
Shares" for as long as the LOI remains unfulfilled. Although the Escrowed Shares
are registered in the investor's name, his full ownership of them is conditional
upon fulfillment of the LOI. No Escrowed Shares can be redeemed by the investor
for any purpose until the LOI is fulfilled or terminated. If the LOI is
terminated for any reason other than fulfillment, the Transfer Agent will redeem
that portion of the Escrowed Shares required and apply the proceeds to pay any
adjustment that may be appropriate to the sales commission on all Class I Shares
(including the Escrowed Shares) already purchased under the LOI
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<PAGE>
and apply any unused balance to the investor's account. The LOI is not a binding
obligation to purchase any amount of Shares, but its execution will result in
the purchaser paying a lower sales charge at the appropriate quantity purchase
level. A purchase not originally made pursuant to an LOI may be included under a
subsequent LOI executed within 90 days of such purchase. In this case, an
adjustment will be made at the end of 13 months from the effective date of the
LOI at the net asset value per Share then in effect, unless the investor makes
an earlier written request to the Principal Underwriter upon fulfilling the
purchase of Shares under the LOI. In addition, the aggregate value of any
Shares, including Class II Shares, purchased prior to the 90-day period referred
to above may be applied to purchases under a current LOI in fulfilling the total
intended purchases under the LOI. However, no adjustment of sales charges
previously paid on purchases prior to the 90-day period will be made.
If an LOI is executed on behalf of a benefit plan (such plans are
described under "How to Buy Shares of the Fund -- Net Asset Value Purchases
(Both Classes)" in the Prospectus), the level and any reduction in sales charge
for these employee benefit plans will be based on actual plan participation and
the projected investments in the Franklin Templeton Funds under the LOI. Benefit
Plans are not subject to the requirement to reserve 5% of the total intended
purchase, or to any penalty as a result of the early termination of a plan, nor
are Benefit Plans entitled to receive retroactive adjustments in price for
investments made before executing LOIs.
SPECIAL NET ASSET VALUE PURCHASES. As discussed in the Prospectus under
"How to Buy Shares of the Fund - Description of Special Net Asset Value
Purchases," certain categories of investors may purchase Class I Shares of the
Fund at net asset value (without a front-end or contingent deferred sales
charge). Franklin Templeton Distributors, Inc. ("FTD") or one of its affiliates
may make payments, out of its own resources, to securities dealers who initiate
and are responsible for such purchases, as indicated below. FTD may make these
payments in the form of contingent advance payments, which may require
reimbursement from the securities dealers with respect to certain redemptions
made within 12 months of the calendar month following purchase, as well as other
conditions, all of which may be imposed by an agreement between FTD, or its
affiliates, and the securities dealer.
The following amounts will be paid by FTD or one of its affiliates, out
of its own resources, to securities dealers who initiate and are responsible for
(i) purchases of most equity and fixed-income Franklin Templeton Funds made at
net asset value by certain designated retirement plans (excluding IRA and IRA
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<PAGE>
rollovers): 1.00% on sales of $1 million but less than $2 millon, plus 0.80% on
sales of $2 million but less than $3 million, plus 0.50% on sales of $3 million
but less than $50 million, plus 0.25% on sales of $50 million but less than $100
million, plus 0.15% on sales of $100 million or more; and (ii) purchases of most
fixed-income Franklin Templeton Funds made at net asset value by non-designated
retirement plans: 0.75% on sales of $1 million but less than $2 million, plus
0.60% on sales of $2 million but less than $3 million, plus 0.50% on sales of $3
million but less than $50 million, plus 0.25% on sales of $50 million but less
than $100 million, plus 0.15% on sales of $100 million or more. These payment
breakpoints are reset every 12 months for purposes of additional purchases. With
respect to purchases made at net asset value by certain trust companies and
trust departments of banks and certain retirement plans of organizations with
collective retirement plan assets of $10 million or more, FTD, or one of its
affiliates, out of its own resources, may pay up to 1% of the amount invested.
Under agreements with certain banks in Taiwan, Republic of China, the
Fund's Shares are available to such banks' discretionary trust funds at net
asset value. The banks may charge service fees to their customers who
participate in the discretionary trusts. Pursuant to agreements, a portion of
such service fees may be paid to FTD, or an affiliate of FTD to help defray
expenses of maintaining a service office in Taiwan, including expenses related
to local literature fulfillment and communication facilities.
REDEMPTIONS IN KIND. Redemption proceeds are normally paid in cash;
however, the Fund may pay the redemption price in whole or in part by a
distribution in kind of securities from the portfolio of the Fund, in lieu of
cash, in conformity with rules of the SEC. In such circumstances, the securities
distributed would be valued at the price used to compute the Fund's net asset
value. If Shares are redeemed in kind, the redeeming Shareholder might incur
brokerage costs in converting the assets into cash. The Fund is obligated to
redeem Shares solely in cash up to the lesser of $250,000 or 1% of its net
assets during any 90-day period for any one Shareholder.
TAX STATUS
The Fund intends normally to pay a dividend at least once annually
representing substantially all of its net investment income and to distribute at
least annually any realized capital gains. By so doing and meeting certain
diversification of assets and other requirements of the Code, the Fund intends
to qualify annually as a regulated investment company under the Code. The status
of the Fund as a regulated investment company does not
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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 (which includes, among other items, dividends and interest)
and net realized capital gains which it distributes to its Shareholders. Amounts
not distributed on a timely basis in accordance with a calendar year
distribution requirement also are subject to a nondeductible 4% excise tax. To
prevent application of the excise tax, the Fund intends to make distributions in
accordance with the calendar year distribution requirement.
Among other things, in order for the Fund to qualify as a regulated
investment company, at least 90% of its income for each taxable year must be
so-called "qualifying income" (e.g., interest, dividends, gains from the sale or
other disposition of stocks and securities, and other income (including gains
from options, futures, and forward contracts) derived with respect to the
business of investing in stocks or securities). Certain of the debt securities
acquired by the Fund may be secured in whole or in part by interests in real
estate. If the Fund were to acquire real estate (by foreclosure, for example),
income, if any, generated by that real estate (including rental income and gain
on its disposition) may not be regarded as qualifying income. If the Fund's
non-qualifying income for a taxable year exceeded 10% of its gross income, it
would fail to qualify as a regulated investment company and it would be taxed in
the same manner as an ordinary corporation. In that case, the Fund would be
ineligible to deduct its distributions to its Shareholders and those
distributions, to the extent derived from the Fund's current and accumulated
earnings and profits, would constitute dividends (which may be eligible for the
corporate dividends-received deduction) which are taxable to Shareholders as
ordinary income, even though those distributions might otherwise, at least in
part, have been treated in the Shareholder's hands as long-term capital gain. If
the Fund fails to qualify as a regulated investment company in a given taxable
year, it must distribute its earnings and profits accumulated in that year in
order to qualify again as a regulated investment company.
Amounts not distributed on a timely basis in accordance with a calendar
year distribution requirement are subject to a nondeductible 4% excise tax. To
prevent application of the tax, the Fund must distribute or be deemed to have
distributed with respect to each calendar year an amount equal to the sum of:
(1) at least 98% of its ordinary income (not taking into account any capital
gains or losses) for the calendar year; (2) at least 98% of its capital gains in
excess of its capital losses (adjusted for certain ordinary losses) for the
12-month period ending on October 31 of the calendar year; and (3) all taxable
ordinary
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income and capital gains for previous years that were not distributed during
such years. A distribution will be treated as paid on December 31 of the
calendar year if it is declared by the Fund in October, November, or December of
that year to Shareholders of record on a date in such a month and paid by the
Fund during January of the following calendar year. Such distributions will be
treated as received by Shareholders in the calendar year in which the
distributions are declared, rather than the calendar year in which the
distributions are received.
Dividends of net investment income and net short-term capital gains are
taxable to Shareholders as ordinary income. Distributions of net investment
income may be eligible for the corporate dividends-received deduction to the
extent attributable to the Fund's qualifying dividend income. However, the
alternative minimum tax applicable to corporations may reduce the benefit of the
dividends-received deduction. Distributions of net capital gains (the excess of
net long-term capital gains over net short-term capital losses) designated by
the Fund as capital gain dividends are taxable to Shareholders as long-term
capital gains, regardless of the length of time the Fund's Shares have been held
by a Shareholder, and are not eligible for the dividends-received deduction.
Generally, dividends and distributions are taxable to Shareholders, whether
received in cash or reinvested in Shares of the Fund. Any distributions that are
not from the Fund's investment company taxable income or net capital gain may be
characterized as a return of capital to Shareholders or, in some cases, as
capital gain. Shareholders will be notified annually as to the Federal tax
status of dividends and distributions they receive and any tax withheld thereon.
Distributions by the Fund reduce the net asset value of the Fund
Shares. Should a distribution reduce the net asset value below a Shareholder's
cost basis, the distribution nevertheless would be taxable to the Shareholder as
ordinary income or capital gain as described above, even though, from an
investment standpoint, it may constitute a partial return of capital. In
particular, investors should be careful to consider the tax implications of
buying Shares just prior to a distribution by the Fund. The price of Shares
purchased at that time includes the amount of the forthcoming distribution, but
the distribution will generally be taxable to them.
The Fund may invest in real estate investment trusts ("REITs") that
hold residual interests in real estate mortgage investment conduits ("REMICs").
Under Treasury regulations that have not yet been issued, but may apply
retroactively, a portion of the Fund's income from a REIT that is attributable
to the REITs residual interest in a REMIC (referred to in the Code as an
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<PAGE>
"excess inclusion") will be subject to Federal income tax in all events. These
regulations are also expected to provide that excess inclusion income of a
regulated investment company, such as the Fund, will be allocated to
shareholders of the regulated investment company in proportion to the dividends
received by such shareholders, with the same consequences as if the shareholders
held the related REMIC residual interest directly. In general, excess inclusion
income allocated to shareholders (i) cannot be offset by net operating losses
(subject to a limited exception for certain thrift institutions), (ii) will
constitute unrelated business taxable income to entities (including a qualified
pension plan, an individual retirement account, a 401(k) plan, a Keogh plan or
other tax-exempt entity) subject to tax on unrelated business income, thereby
potentially requiring such an entity that is allocated excess inclusion income,
and otherwise might not be required to file a tax return, to file a tax return
and pay tax on such income, and (iii) in the case of a foreign shareholder, will
not qualify for any reduction in U.S. federal withholding tax. In addition, if
at any time during any taxable year a "disqualified organization" (as defined in
the Code) is a record holder of a share in a regulated investment company, then
the regulated investment company will be subject to a tax equal to that portion
of its excess inclusion income for the taxable year that is allocable to the
disqualified organization, multiplied by the highest federal income tax rate
imposed on corporations. The Investment Manager does not intend on behalf of the
Fund to invest in REITs, a substantial portion of the assets of which consists
of residual interests in REMICs.
The Fund may invest in stocks of foreign companies that are classified
under the Code as passive foreign investment companies ("PFICs"). In general, a
foreign company is classified as a PFIC if at least one-half of its assets
constitute investment-type assets or 75% or more of its gross income is
investment-type income. Under the PFIC rules, an "excess distribution" received
with respect to PFIC stock is treated as having been realized ratably over the
period during which the Fund held the PFIC stock. The Fund itself will be
subject to tax on the portion, if any, of the excess distribution that is
allocated to the Fund's holding period in prior taxable years (and an interest
factor will be added to the tax, as if the tax had actually been payable in such
prior taxable years) even though the Fund distributes the corresponding income
to Shareholders. Excess distributions include any gain from the sale of PFIC
stock as well as certain distributions from a PFIC. All excess distributions are
taxable as ordinary income.
The Fund may be able to elect alternative tax treatment with respect to
PFIC stock. Under an election that currently may be available, the Fund
generally would be required to include in its
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gross income its share of the earnings of a PFIC on a current basis, regardless
of whether any distributions are received from the PFIC. If this election were
made, the special rules, discussed above, relating to the taxation of excess
distributions, would not apply. In addition, another election may be available
that would involve marking to market the Fund's PFIC shares at the end of each
taxable year (and on certain other dates prescribed in the Code), with the
result that unrealized gains are treated as though they were realized. If this
election were made, tax at the fund level under the PFIC rules would generally
be eliminated, but the Fund could, in limited circumstances, incur nondeductible
interest charges. The Fund's intention to qualify annually as a regulated
investment company may limit its elections with respect to PFIC shares.
Because the application of the PFIC rules may affect, among other
things, the character of gains, the amount of gain or loss and the timing of the
recognition of income with respect to PFIC stock, as well as subject the Fund
itself to tax on certain income from PFIC stock, the amount that must be
distributed to Shareholders, and which will be taxed to Shareholders as ordinary
income or long-term capital gain, may be increased or decreased substantially as
compared to a fund that did not invest in PFIC stock.
Income received by the Fund from sources within foreign countries may
be subject to withholding and other income or similar taxes imposed by such
countries. If more than 50% of the value of the Fund's total assets at the close
of its taxable year consists of securities of foreign corporations, the Fund
will be eligible and intends to elect to "pass through" to the Fund's
Shareholders the amount of foreign taxes paid by the Fund. Pursuant to this
election, a Shareholder will be required to include in gross income (in addition
to taxable dividends actually received) his pro rata share of the foreign taxes
paid by the Fund, and will be entitled either to deduct (as an itemized
deduction) his pro rata share of foreign income and similar taxes in computing
his taxable income or to use it as a foreign tax credit against his U.S. Federal
income tax liability, subject to limitations. No deduction for foreign taxes may
be claimed by a Shareholder who does not itemize deductions, but such a
Shareholder may be eligible to claim the foreign tax credit (see below). Each
Shareholder will be notified within 60 days after the close of the Fund's
taxable year whether the foreign taxes paid by the Fund will "pass through" for
that year.
Generally, a credit for foreign taxes is subject to the
limitation that it may not exceed the Shareholder's U.S. tax
attributable to his foreign source taxable income. For this
purpose, if the pass-through election is made, the source of the
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Fund's income flows through to its Shareholders. With respect to the Fund, gains
from the sale of securities will be treated as derived from U.S. sources and
certain currency fluctuation gains, including fluctuation gains from foreign
currency-denominated debt securities, receivables and payables, will be treated
as ordinary income derived from U.S. sources. The limitation on the foreign tax
credit is applied separately to foreign source passive income (as defined for
purposes of the foreign tax credit), including the foreign source passive income
passed through by the Fund. Shareholders may be unable to claim a credit for the
full amount of their proportionate share of the foreign taxes paid by the Fund.
Foreign taxes may not be deducted in computing alternative minimum taxable
income and the foreign tax credit can be used to offset only 90% of the
alternative minimum tax (as computed under the Code for purposes of this
limitation) imposed on corporations and individuals. If the Fund is not eligible
to make the election to "pass through" to its Shareholders its foreign taxes,
the foreign income taxes it pays generally will reduce investment company
taxable income and the distributions by the Fund will be treated as United
States source income.
Certain options, futures contracts and forward contracts in which the
Fund may invest are "section 1256 contracts." Gains or losses on section 1256
contracts generally are considered 60% long-term and 40% short-term capital
gains or losses ("60/40"); however, foreign currency gains or losses (as
discussed below) arising from certain section 1256 contracts may be treated as
ordinary income or loss. Also, section 1256 contracts held by the Fund at the
end of each taxable year (and at certain other times prescribed pursuant to the
Code) are "marked-to-market" with the result that unrealized gains or losses are
treated as though they were realized.
Generally, the hedging transactions undertaken by the Fund may result
in "straddles" for U.S. Federal income tax purposes. The straddle rules may
affect the character of gains (or losses) realized by the Fund. In addition,
losses realized by the Fund on positions that are part of a straddle may be
deferred under the straddle rules, rather than being taken into account in
calculating the taxable income for the taxable year in which the losses are
realized. Because only a few regulations implementing the straddle rules have
been promulgated, the tax consequences to the Fund of hedging transactions are
not entirely clear. The hedging transactions may increase the amount of
short-term capital gain realized by the Fund which is taxed as ordinary income
when distributed to Shareholders.
The Fund may make one or more of the elections available
under the Code which are applicable to straddles. If the Fund
- 39 -
<PAGE>
makes any of the elections, the amount, character, and timing of the recognition
of gains or losses from the affected straddle positions will be determined under
rules that vary according to the election(s) made. The rules applied under
certain of the elections may operate to accelerate the recognition of gains or
losses from the affected straddle positions.
Because application of the straddle rules may affect the character of
gains or losses, defer losses and/or accelerate the recognition of gains or
losses from the affected straddle positions, the amount which must be
distributed to Shareholders and which will be taxed to Shareholders as ordinary
income or long-term capital gain may be increased or decreased as compared to a
fund that did not engage in such hedging transactions.
Requirements relating to the Fund's tax status as a regulated
investment company may limit the extent to which the Fund will be able to engage
in transactions in options, futures contracts and forward contracts.
Under the Code, gains or losses attributable to fluctuations in foreign
currency exchange rates which occur between the time the Fund accrues income or
other receivables or accrues expenses or other liabilities denominated in a
foreign currency and the time the Fund actually collects such receivables or
pays such liabilities generally are treated as ordinary income or ordinary loss.
Similarly, on disposition of debt securities denominated in a foreign currency
and on disposition of certain financial contracts, forward contracts, and
options, gains or losses attributable to fluctuations in the value of foreign
currency between the date of acquisition of the security or contract and the
date of disposition also are treated as ordinary gain or loss. These gains and
losses, referred to under the Code as "section 988" gains and losses, may
increase or decrease the amount of the Fund's net investment income to be
distributed to its Shareholders as ordinary income. For example, fluctuations in
exchange rates may increase the amount of income that the Fund must distribute
in order to qualify for treatment as a regulated investment company and to
prevent application of an excise tax on undistributed income. Alternatively,
fluctuations in exchange rates may decrease or eliminate income available for
distribution. If section 988 losses exceed other net investment income during a
taxable year, the Fund would not be able to make ordinary dividend
distributions, or distributions made before the losses were realized would be
recharacterized as a return of capital to Shareholders for Federal income tax
purposes, rather than as an ordinary dividend, reducing each Shareholder's basis
in his Fund Shares, or as a capital gain.
- 40 -
<PAGE>
Upon the sale or exchange of his Shares, a Shareholder will realize a
taxable gain or loss depending upon his basis in the Shares. Such gain or loss
will be treated as capital gain or loss if the Shares are capital assets in the
Shareholder's hands, and generally will be long-term if the Shareholder's
holding period for the Shares is more than one year and generally otherwise will
be short-term. Any loss realized on a sale or exchange will be disallowed to the
extent that the Shares disposed of are replaced (including replacement through
the reinvesting of dividends and capital gain distributions in the Fund) within
a period of 61 days beginning 30 days before and
- 41 -
<PAGE>
ending 30 days after the disposition of the Shares. In such a case, the basis of
the Shares acquired will be adjusted to reflect the disallowed loss. Any loss
realized by a Shareholder on the sale of Fund Shares held by the Shareholder for
six months or less will be treated for Federal income tax purposes as a
long-term capital loss to the extent of any distributions of long-term capital
gains received by the Shareholder with respect to such Shares.
Under certain circumstances, the sales charge incurred in acquiring
Shares of the Fund may not be taken into account in determining the gain or loss
on the disposition of those Shares. This rule applies where Shares of the Fund
are exchanged within 90 days after the date they were purchased and new Shares
of the Fund or another eligible regulated investment company are acquired
without a sales charge or at a reduced sales charge. In that case, the gain or
loss recognized on the exchange will be determined by excluding from the tax
basis of the Shares exchanged all or a portion of the sales charge incurred in
acquiring those Shares. This exclusion applies to the extent that the otherwise
applicable sales charge with respect to the newly acquired Shares is reduced as
a result of having incurred a sales charge initially. The portion of the sales
charge affected by this rule will be treated as a sales charge paid for the new
Shares.
The Fund generally will be required to withhold Federal income tax at a
rate of 31% ("backup withholding") from dividends paid, capital gain
distributions, and redemption proceeds to Shareholders if (1) the Shareholder
fails to furnish the Fund with the Shareholder's correct taxpayer identification
number or social security number and to make such certifications as the Fund may
require, (2) the IRS notifies the Shareholder or the Fund that the Shareholder
has failed to report properly certain interest and dividend income to the IRS
and to respond to notices to that effect, or (3) when required to do so, the
Shareholder fails to certify that he is not subject to backup withholding. Any
amounts withheld may be credited against the Shareholder's Federal income tax
liability.
Distributions also may be subject to state, local and
foreign taxes. U.S. tax rules applicable to foreign investors
may differ significantly from those outlined above. Shareholders
are advised to consult their own tax advisers for details with
respect to the particular tax consequences to them of an
investment in the Fund.
PRINCIPAL UNDERWRITER
- 42 -
<PAGE>
Franklin Templeton Distributors, Inc. ("FTD" or the
"Principal Underwriter"), P.O. Box 33030, St. Petersburg, Florida
33733-8030, toll free telephone (800) 237-0738, is the Principal
Underwriter of the Fund's Shares. FTD is a wholly owned
subsidiary of Franklin.
The Fund, pursuant to Rule 12b-1 under the 1940 Act, has adopted a
Distribution Plan with respect to each class of Shares (the "Plans"). Under the
Plan adopted with respect to Class I Shares, the Fund may reimburse the
Principal Underwriter or others quarterly (subject to a limit of 0.25% per annum
of the Fund's average daily net assets attributable to Class I Shares) for costs
and expenses incurred by FTD or others in connection with any activity which is
primarily intended to result in the sale of Fund Shares. Under the Plan adopted
with respect to Class II Shares, the Fund will pay FTD or others quarterly
(subject to a limit of $1.00% per annum of the Fund's average daily assets
attributable to Class II Shares of which up to 0.25% of such net assets may be
paid to dealers for personal service and/or maintenance of Shareholder accounts)
for costs and expenses incurred by FTD or others in connection with any activity
which is primarily intended to result in the sale of the Fund's Shares. Payments
to FTD or others could be for various types of activities, including (1)
payments to broker-dealers who provide certain services of value to the Fund's
Shareholders (sometimes referred to as a "trail fee"); (2) reimbursement of
expenses relating to selling and servicing efforts or of organizing and
conducting sales seminars; (3) payments to employees or agents of the Principal
Underwriter who engage in or support distribution of Shares; (4) payments of the
costs of preparing, printing and distributing Prospectuses and reports to
prospective investors and of printing and advertising expenses; (5) payment of
dealer commissions and wholesaler compensation in connection with sales of Fund
Shares and interest or carrying charges in connection therewith; and (6) such
other similar services as the Fund's Board of Trustees determines to be
reasonably calculated to result in the sale of Shares. Under the Plan adopted
with respect to Class I Shares, the costs and expenses not reimbursed in any one
given quarter (including costs and expenses not reimbursed because they exceed
0.25% of the Fund's average daily net assets attributable to Class I Shares) may
be reimbursed in subsequent quarters or years.
During the fiscal year ended August 31, 1995, FTD incurred costs and
expenses of $353,806 in connection with distribution of Class I Shares of the
Fund and $2,642 in connection with Class II Shares of the Fund. During the same
period, the Fund made reimbursements in the amount of $328,175 pursuant to the
Class I Plan and in the amount of $325,533 pursuant to the Class II Plan. As
indicated
- 43 -
<PAGE>
above, unreimbursed expenses, which amount to $ 30,457 for Class I Shares of the
Fund, may be reimbursed by the Fund during the fiscal year ending August 31,
1996 or in subsequent years. In the event that the Plan is terminated, the Fund
will not be liable to FTD for any unreimbursed expenses that had been carried
forward from previous months or years. During the fiscal year ended August 31,
1995, FTD spent, pursuant to the Plans, the following amounts on: compensation
to dealers, $274,253 (Class I) and $193 (Class II); sales promotion, $0 (Class I
and Class II); printing, $72,996 (Class I) and $17 (Class II); advertising, $0
(Class I and Class II); and wholesale costs and expenses, $6,557 (Class I) and
$2,432 (Class II).
The Distribution Agreement provides that the Principal Underwriter will
use its best efforts to maintain a broad distribution of the Fund's Shares among
bona fide investors and may sign selling agreements with responsible dealers, as
well as sell to individual investors. The Shares are sold only at the Offering
Price in effect at the time of sale, and the Fund receives not less than the
full net asset value of the Shares sold. The discount between the Offering Price
and the net asset value may be retained by the Principal Underwriter or it may
reallow all or any part of such discount to dealers. During the fiscal years
ended August 31, 1995, 1994, and 1993, FTD (and, prior to June 1, 1993,
Templeton Funds Distributor, Inc.) retained of such discount $159,475,
$422,672and $141,190, or approximately 14.13%, 15.52%and 16%, respectively.
The Distribution Agreement provides that the Fund shall pay the costs
and expenses incident to registering and qualifying its Shares for sale under
the Securities Act of 1933 and under the applicable Blue Sky laws of the
jurisdictions in which the Principal Underwriter desires to distribute such
Shares, and for preparing, printing and distributing prospectuses and reports to
Shareholders. The Principal Underwriter pays the cost of printing additional
copies of prospectuses and reports to Shareholders used for selling purposes.
(The Fund pays costs of preparation, set-up and initial supply of the Fund's
prospectus for existing Shareholders.)
The Distribution Agreement is subject to renewal from year to year in
accordance with the provisions of the 1940 Act and terminates automatically in
the event of its assignment. The Distribution Agreement may be terminated
without penalty by either party upon 60 days' written notice to the other,
provided termination by the Fund shall be approved by the Board of Trustees or a
majority (as defined in the 1940 Act) of the Shareholders. The Principal
Underwriter is relieved of liability
- 44 -
<PAGE>
for any act or omission in the course of its performance of the Distribution
Agreement, in the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations.
FTD is the principal underwriter for the other Franklin Templeton
Funds.
DESCRIPTION OF SHARES
The Shares have non-cumulative voting rights so that the holders of a
plurality of the Shares voting for the election of Trustees at a meeting at
which 50% of the outstanding Shares are present can elect all the Trustees and,
in such event, the holders of the remaining Shares voting for the election of
Trustees will not be able to elect any person or persons to the Board of
Trustees.
The Declaration of Trust provides that the holders of not less than
two-thirds of the outstanding Shares of the Fund may remove a person serving as
Trustee either by declaration in writing or at a meeting called for such
purpose. The Trustees are required to call a meeting for the purpose of
considering the removal of a person serving as Trustee if requested in writing
to do so by the holders of not less than 10% of the outstanding Shares of the
Fund. In addition, the Fund is required to assist Shareholder communication in
connection with the calling of a Shareholder meeting to consider the removal of
a Trustee.
Under Massachusetts law, Shareholders could, under certain
circumstances, be held personally liable for the obligations of the Fund.
However, the Declaration of Trust disclaims liability of the Shareholders,
Trustees or officers of the Fund for acts or obligations of the Fund, which are
binding only on the assets and property of the Fund. The Declaration of Trust
provides for indemnification out of Fund property for all loss and expenses of
any Shareholder held personally liable for the obligations of the Fund. The risk
of a Shareholder incurring financial loss on account of Shareholder liability is
limited to circumstances in which the Fund itself would be unable to meet its
obligations and, thus, should be considered remote.
PERFORMANCE INFORMATION
The Fund may, from time to time, include its total return in
advertisements or reports to Shareholders or prospective investors. Quotations
of average annual total return for the Fund will be expressed in terms of the
average annual compounded rate of return for periods in excess of one year or
the total return for periods less than one year of a hypothetical
- 45 -
<PAGE>
investment in the Fund over a period of one, five and ten years (or, if less, up
to the life of the Fund) calculated pursuant to the following formula: P(1 + T)n
= ERV (where P = a hypothetical initial payment of $1,000, T = the average
annual total return for periods of one year or more or the total return for
periods of less than one year, n = the number of years, and ERV = the ending
redeemable value of a hypothetical $1,000 payment made at the beginning of the
period). All total return figures reflect the deduction of the maximum initial
sales charge and deduction of a proportional share of Fund expenses on an annual
basis, and assume that all dividends and distributions are reinvested when paid.
The average annualized total return for the one-year and five-year periods ended
August 31, 1995 and for the period from commencement of operations on September
12, 1989 to August 31, 1995 was -7.39%, 10.72%, and 6.90%, respectively, for
Class I Shares.
Performance information for the Fund may be compared, in reports and
promotional literature, to: (i) the Standard & Poor's 500 Stock Index, Dow Jones
Industrial Average, or other unmanaged indices so that investors may compare the
Fund's results with those of a group of unmanaged securities widely regarded by
investors as representative of the securities market in general; (ii) other
groups of mutual funds tracked by Lipper Analytical Services, Inc., a widely
used independent research firm which ranks mutual funds by overall performance,
investment objectives and assets, or tracked by other services, companies,
publications, or persons who rank mutual funds on overall performance or other
criteria; and (iii) the Consumer Price Index (measure for inflation) to assess
the real rate of return from an investment in the Fund. Unmanaged indices may
assume the reinvestment of dividends but generally do not reflect deductions for
administrative and management costs and expenses.
Performance information for the Fund reflects only the performance of a
hypothetical investment in the Fund during the particular time period on which
the calculations are based. Performance information should be considered in
light of the Fund's investment objectives and policies, characteristics and
quality of the portfolio and the market conditions during the given time period,
and should not be considered as a representation of what may be achieved in the
future.
From time to time, the Fund and the Investment Manager may also refer
to the following information:
1. The Investment Manager's and its affiliates' market share of
international equities managed in mutual funds prepared or
published by Strategic Insight or a similar statistical
organization.
- 46 -
<PAGE>
2. The performance of U.S. equity and debt markets
relative to foreign markets prepared or published by
Morgan Stanley Capital International or a similar
financial organization.
3. The capitalization of U.S. and foreign stock markets as
prepared or published by the International Finance
Corporation, Morgan Stanley Capital International or a
similar financial organization.
4. The geographic and industry distribution of the Fund's
portfolio and the Fund's top ten holdings.
5. The gross national product and populations, including age
characteristics, literacy rates, foreign investment
improvements due to a liberalization of securities laws and a
reduction of foreign exchange controls, and improving
communication technology, of various countries as published by
various statistical organizations.
6. To assist investors in understanding the different
returns and risk characteristics of various
investments, the Fund may show historical returns of
various investments and published indices (E.G.,
Ibbotson Associates, Inc. Charts and Morgan Stanley
EAFE - Index).
7. The major industries located in various jurisdictions
as published by the Morgan Stanley Index.
8. Rankings by DALBAR Surveys, Inc. with respect to mutual
fund shareholder services.
9. Allegorical stories illustrating the importance of
persistent long-term investing.
10. The Fund's portfolio turnover rate and its ranking
relative to industry standards as published by Lipper
Analytical Services, Inc. or Morningstar, Inc.
11. A description of the Templeton organization's investment
management philosophy and approach, including its worldwide
search for undervalued or "bargain" securities and its
diversification by industry, nation and type of stocks or
other securities.
- 47 -
<PAGE>
12. Quotations from the Templeton organization's founder,
Sir John Templeton,* advocating the virtues of
diversification and long-term investing, including the
following:
o "Never follow the crowd. Superior performance is
possible only if you invest differently from the
crowd."
o "Diversify by company, by industry and by
country."
o "Always maintain a long-term perspective."
o "Invest for maximum total real return."
o "Invest - don't trade or speculate."
o "Remain flexible and open-minded about types of
investment."
o "Buy low."
o "When buying stocks, search for bargains among
quality stocks."
o "Buy value, not market trends or the economic
outlook."
o "Diversify. In stocks and bonds, as in much else,
there is safety in numbers."
o "Do your homework or hire wise experts to help
you."
o "Aggressively monitor your investments."
o "Don't panic."
o "Learn from your mistakes."
o "Outperforming the market is a difficult task."
- --------
* Sir John Templeton sold the Templeton organization to
Franklin Resources, Inc. in October, 1992 and resigned from
the Fund's Board on April 16, 1995. He is no longer
involved with the investment management process.
- 48 -
<PAGE>
o "An investor who has all the answers doesn't even
understand all the questions."
o "There's no free lunch."
o "And now the last principle: Do not be fearful or
negative too often."
In addition, the Fund and the Investment Manager may also refer to the
number of Shareholders in the Fund or the aggregate number of shareholders of
the Franklin Templeton Funds or the dollar amount of fund and private account
assets under management in advertising materials.
FINANCIAL STATEMENTS
The financial statements contained in the Annual Report to Shareholders
of Templeton Real Estate Securities Fund dated August 31, 1995 are incorporated
herein by reference.
- 49 -
<PAGE>
TL410 STMT 01/96
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements: Incorporated by Reference
from Registrant's 1995 Annual Report
Independent Auditor's Report
Investment Portfolio as of August 31, 1995
Statement of Assets and Liabilities as of
August 31, 1995
Statement of Operations for the year ended
August 31, 1995
Statement of Changes in Net Assets for the years
ended August 31, 1995 and 1994
Notes to Financial Statements
(b) Exhibits
(1) (A) Declaration of Trust
(B) Second Amendment to the Declaration of
Trust
(C) Third Amendment to the Declaration of
Trust*
(D) Establishment and Designation of Classes*
(2) By-Laws
(3) Not Applicable
(4) Specimen Security*
(5) Amended and Restated Investment Management
Agreement*
(6) (A) Distribution Agreement
(B) Dealer Agreement
(7) Not Applicable
- ---------------
* Previously filed with Registration Statement No. 33-30018 and
incorporated by reference herein.
(8) Custody Agreement
(9) (A) Business Management Agreement
(B) Form of Transfer Agent Agreement
(C) Form of Sub-Transfer Agent Services
Agreement
(D) Form of Sub-Accounting Services
Agreement
(10) Opinion and consent of counsel (filed with
Rule 24f-2 Notice)
(11) Consent of independent public accountants
(12) Not Applicable
(13) Subscription Agreement*
(14) Not Applicable
(15) (A) Distribution Plan -- Class I*
(B) Distribution Plan -- Class II*
(16) Schedule showing computation of performance
quotations provided in response to Item 22
- 51 -
<PAGE>
(17) Assistant Secretary's Certificate pursuant to
Rule 483(b)
(18) Form of Multiclass Plan*
(27) Financial Data Schedule
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT
None
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
Number of
DATE TITLE OF CLASS RECORDHOLDERS
Shares of Beneficial
November 30, 1995 Interest -- Class I 11,938
November 30, 1995 Shares of Beneficial 197
Interest -- Class II
ITEM 27. INDEMNIFICATION.
Reference is made to Article IV of the Registrant's
Declaration of Trust, which is filed herewith.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers
and controlling persons of the Registrant by the Registrant
pursuant to the Declaration of Trust or otherwise, the
Registrant is aware that in the opinion of the Securities and
Exchange Commission, such indemnification is against public
policy as expressed in the Act and, therefore, is
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by trustees, officers
or controlling persons of the Registrant in connection with
the successful defense of any act, suit or proceeding) is
asserted by such trustees, officers or controlling persons in
connection with the shares being registered, the Registrant
will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed
in the Act and will be governed by the final adjudication of
such issues.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
AND ITS OFFICERS AND DIRECTORS
See "Management of the Fund." Information regarding the
directors and officers of the Investment Manager is
included in its Form ADV filed with the Commission and is
incorporated herein by reference thereto.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Franklin Templeton Distributors, Inc. also acts as
principal underwriter of shares of:
AGE High Income Fund, Inc.
Franklin Balance Sheet Investment Fund
Franklin California Tax-Free Income Fund, Inc.
Franklin California Tax-Free Trust
Franklin Custodian Funds, Inc.
Franklin Equity Fund
Franklin Federal Money Fund
Franklin Federal Tax-Free Income Fund
Franklin Gold Fund
Franklin International Trust
Franklin Investors Securities Trust
Franklin Managed Trust
Franklin Money Fund
Franklin Municipal Securities Trust
Franklin New York Tax-Free Income Fund
Franklin New York Tax-Free Trust
Franklin Premier Return Fund
Franklin Real Estate Securities Trust
Franklin Strategic Series
Franklin Tax-Advantaged High Yield Securities Fund
Franklin Tax-Advantaged International Bond Fund
Franklin Tax-Advantaged U.S. Government Securities
Fund
Franklin Tax Exempt Money Fund
Franklin Tax-Free Trust
Franklin Templeton Global Trust
Franklin Templeton Japan Fund
Franklin Templeton Money Fund Trust
Franklin Value Investors Trust
Institutional Fiduciary Trust
Templeton American Trust, Inc.
Templeton Capital Accumulator Fund, Inc.
Templeton Developing Markets Trust
- 52 -
<PAGE>
Templeton Funds, Inc.
Templeton Global Investment Trust
Templeton Global Opportunities Trust
Templeton Growth Fund, Inc.
Templeton Income Trust
Templeton Institutional Funds, Inc.
Templeton Smaller Companies Growth, Inc.
Templeton Variable Annuity Fund
Templeton Variable Products Series Fund
(b) The directors and officers of FTD, located at 700
Central Avenue, St. Petersburg, Florida 33733-9926,
are as follows:
<TABLE>
<CAPTION>
Positions and Officers Positions and Officers
NAME WITH UNDERWRITER WITH REGISTRANT
<S> <C> <C>
Charles B. Johnson Chairman of the Board Vice President
and Director
Gregory E. Johnson President None
Rupert H. Johnson, Jr. Executive Vice President Trustee
and Director
Harmon E. Burns Executive Vice President None
and Director
Edward V. McVey Senior Vice President None
Kenneth V. Domingues Senior Vice President None
Kenneth A. Lewis Treasurer None
William J. Lippman Senior Vice President None
Richard C. Stoker Senior Vice President None
Charles E. Johnson Senior Vice President None
Deborah R. Gatzek Senior Vice President None
and Assistant Secretary
</TABLE>
<TABLE>
<CAPTION>
Positions and Officers Positions and Officers
NAME WITH UNDERWRITER WITH REGISTRANT
<S> <C> <C>
James K. Blinn Vice President None
Richard O. Conboy Vice President None
James A. Escobedo Vice President None
Loretta Fry Vice President None
Robert N. Geppner Vice President None
Mike Hackett Vice President None
Peter Jones Vice President None
Philip J. Kearns Vice President None
Ken Leder Vice President None
Jack Lemein Vice President None
- 53 -
<PAGE>
John R. McGee Vice President None
Thomas M. Mistele Vice President Secretary
Harry G. Mumford Vice President None
Vivian J. Palmieri Vice President None
</TABLE>
<TABLE>
<CAPTION>
Positions and Officers Positions and Officers
NAME WITH UNDERWRITER WITH REGISTRANT
<S> <C> <C>
Kent P. Strazza Vice President None
John R. Kay Assistant Vice President Vice President
Phillip A. Scatina Assistant Treasurer None
Karen DeBellis Assistant Treasurer None
Leslie M. Kratter Secretary None
</TABLE>
(c) Not Applicable (Information on unaffiliated
underwriters).
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The accounts, books, and other documents required to be
maintained by Registrant pursuant to Section 31(a) of the
Investment Company Act of 1940 and rules promulgated
thereunder are in the possession of Templeton Global
Investors, Inc., 500 East Broward Blvd., Fort Lauderdale,
Florida 33394.
ITEM 31. MANAGEMENT SERVICES
Not Applicable.
ITEM 32. UNDERTAKINGS
(a) Not Applicable.
(b) Not Applicable.
(c) Registrant undertakes to furnish to each person to
whom its Prospectus is provided a copy of its Annual
Report, upon request and without charge.
- 54 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness of the Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Post-Effective
Amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of St. Petersburg, Florida
on the 29th day of Decembe, 1995.
TEMPLETON REAL ESTATE SECURITIES FUND
By:
Mark G. Holowesko*
President
*By: /S/ THOMAS M. MISTELE
Thomas M. Mistele
as attorney-in-fact**
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the date indicated:
SIGNATURE TITLE DATE
- --------- ----- ----
_________________________ President (Chief
Mark G. Holowesko* Executive Officer) December 29, 1995
_________________________ Trustee December 29, 1995
F. Bruce Clarke*
_________________________ Trustee December 29, 1995
Betty P. Krahmer*
_________________________ Trustee December 29, 1995
Hasso-G von Diergardt-Naglo*
_________________________ Trustee December 29, 1995
Fred R. Millsaps*
_________________________ Trustee December 29, 1995
Charles B. Johnson
_________________________ Trustee December 29, 1995
John Wm. Galbraith
_________________________ Trustee December 29, 1995
Rupert H. Johnson, Jr.*
_________________________ Trustee December 29, 1995
Andrew H. Hines, Jr.*
_________________________ Trustee December 29, 1995
Harris J. Ashton*
_________________________ Trustee December 29, 1995
S. Joseph Fortunato*
_________________________ Trustee December 29, 1995
Gordon S. Macklin*
- 55 -
<PAGE>
_________________________ Trustee December 29, 1995
Nicholas F. Brady*
_________________________ Treasurer (Chief December 29, 1995
James R. Baio* Financial and
Accounting Officer)
*By: /S/ THOMAS M. MISTELE
Thomas M. Mistele
as attorney-in-fact**
** Powers of Attorney are contained in Post-Effective Amendment No. 4 to
this Registration Statement filed on August 19, 1992,
Post-Effective Amendment No. 6 to this Registration Statement
filed on November 2, 1993, Post-Effective Amendment No. 7 to
this Registration Statement filed on December 23, 1993,
Post-Effective Amendment No. 9 to this Registration Statement
file on December 30, 1994, and herein.
<PAGE>
EXHIBIT LIST
EXHIBIT NUMBER NAME OF EXHIBIT
(1)(A)
Declaration of Trust
(1)(B)
Second Amendment to
Declaration of Trust
(2) By-Laws
(6)(A) Distribution Agreement
(6)(B) Dealer Agreement
(8) Custody Agreement
(9)(A) Business Management
Agreement
(9)(B) Form of Transfer Agent
Agreement
(9)(C) Form of Sub-Transfer Agent
Agreement
(9)(D) Form of Sub-Accounting
Services Agreement
(11) Consent of Independent
Public Accountants
(15)(A) Distribution Plan --
Class I Shares
(15)(B) Distribution Plan --
Class II Shares
(16) Schedule Showing Computation of Performance
Quotations
(17) Assistant Secretary's Cert-
ificate pursuant to Rule
483(b)
(18) Form of Multiclass Plan
(27) Financial Data Schedule
- 56 -
<
TEMPLETON REAL ESTATE SECURITIES FUND
AMENDED AND RESTATED
DECLARATION OF TRUST
DATED MARCH 3, 1990
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I -- NAME AND DEFINITIONS 1
Section 1.1 Name......................... 1
Section 1.2 Definitions.................. 2
ARTICLE II -- TRUSTEES 4
Section 2.1 General Powers..................... 4
Section 2.2 Investments........................ 5
Section 2.3 Legal Title........................ 8
Section 2.4 Issuance and Repurchase of
Securities.............. 8
Section 2.5 Delegation; Committees............. 9
Section 2.6 Collection and Payment............. 9
Section 2.7 Expenses........................... 9
Section 2.8 Manner of Acting; By-Laws.......... 10
Section 2.9 Miscellaneous Powers............... 11
Section 2.10 Principal Transactions............. 12
Section 2.11 Number of Trustees................. 12
Section 2.12 Election and Term.................. 13
Section 2.13 Resignation and Removal............ 13
Section 2.14 Vacancies.......................... 14
Section 2.15 Delegation of Power to Other
Trustees................... 15
ARTICLE III -- CONTRACTS 15
Section 3.1 Underwriting Contract.............. 15
Section 3.2 Advisory, Management or
Administrative Contracts... 16
Section 3.3 Other Service Contracts............ 16
Section 3.4 Affiliations of Trustees or
Officers, Etc.............. 17
Section 3.5 Compliance with 1940 Act........... 18
ARTICLE IV -- LIMITATIONS OF LIABILITY OF SHARE-
HOLDERS, TRUSTEES AND OTHERS 18
Section 4.1 No Personal Liability of Share-
holders, Trustees, Etc..... 18
Section 4.2 Non-Liability of Trustees, Etc..... 19
Section 4.3 Mandatory Indemnification.......... 20
Section 4.4 No Bond Required of Trustees....... 23
Section 4.5 No Duty of Investigation; Notice
in Trust Instruments, Etc........ 23
Section 4.6 Reliance on Experts, Etc........ 24
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PAGE
ARTICLE V -- SHARES OF BENEFICIAL INTEREST 25
Section 5.1 Beneficial Interest............. 25
Section 5.2 Rights of Shareholders.......... 25
Section 5.3 Trust Only...................... 26
Section 5.4 Issuance of Shares............... 26
Section 5.5 Register of Shares............... 27
Section 5.6 Transfer of Shares............... 27
Section 5.7 Notices.......................... 28
Section 5.8 Treasury Shares.................. 29
Section 5.9 Voting Powers.................... 29
Section 5.10 Meetings of Shareholders......... 30
Section 5.11 Series Designation............... 30
Section 5.12 Power of Trustees to Change
Provisions Relating to Shares... 34
ARTICLE VI -- REDEMPTION AND REPURCHASE OF SHARES 36
Section 6.1 Redemption of Shares.............. 36
Section 6.2 Price............................. 37
Section 6.3 Payment........................... 37
Section 6.4 Effect of Suspension of
Determination of Net
Asset Value..................... 37
Section 6.5 Repurchase by Agreement........... 38
Section 6.6 Redemption of Shareholder's
Interest................. 38
Section 6.7 Redemption of Shares in Order
to Qualify as Regulated
Investment Company;
Disclosure of Holding.... 39
Section 6.8 Reductions in Number of Out-
standing Shares Pursuant
to Net Asset Value Formula 40
Section 6.9 Suspension of Right of Redemption. 40
ARTICLE VII -- DETERMINATION OF NET ASSET VALUE, NET
INCOME AND DISTRIBUTIONS 41
Section 7.1 Net Asset Value................... 41
Section 7.2 Distributions to Shareholders..... 42
Section 7.3 Determination of Net Income....... 43
Section 7.4 Allocation Between Principal and
Income........................ 45
Section 7.5 Power to Modify Foregoing
Procedures................ 45
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ARTICLE VIII -- DURATION, TERMINATION OF TRUST;
AMENDMENT; MERGERS, ETC. 46
Section 8.1 Duration.......................... 46
Section 8.2 Termination of Trust or
Series of the Trust....... 46
Section 8.3 Amendment Procedure............... 48
Section 8.4 Merger, Consolidation and Sale
of Assets................. 49
Section 8.5 Incorporation..................... 50
ARTICLE IX -- REPORTS TO SHAREHOLDERS 51
ARTICLE X -- MISCELLANEOUS 51
Section 10.1 Filing............................ 51
Section 10.2 Governing Law..................... 52
Section 10.3 Counterparts...................... 52
Section 10.4 Reliance by Third Parties......... 53
Section 10.5 Provisions in Conflict with Law
or Regulations.................. 53
Section l0.6 Name Reservation............... 54
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<PAGE>
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
TEMPLETON REAL ESTATE SECURITIES FUND
THIS DECLARATION OF TRUST, made July 17, 1989 and amended September
11, 1989 and March 3, 1990 by the Trustees hereunder (together with all other
persons from time to time duly elected, qualified and serving as Trustees in
accordance with the provisions of Article II hereof, the "Trustees");
WHEREAS, the Trustees desire to establish a trust for the
investment and reinvestment of funds contributed thereto; and
WHEREAS, the Trustees desire that the beneficial interest in the
trust assets be divided into transferable shares of beneficial interest, as
hereinafter provided;
NOW, THEREFORE, the Trustees declare that all money and property
contributed to the trust established hereunder shall be held and managed in
trust for the benefit of the holders, from time to time, of the shares of
beneficial interest issued hereunder and subject to the provisions hereof.
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ARTICLE I
NAME AND DEFINITIONS
SECTION 1.1. NAME. The name of the trust created hereby,
until and unless changed by the Trustees as provided in Section
8.3(a) hereof, is "Templeton Real Estate Securities Fund."
SECTION 1.2. DEFINITIONS. Wherever they are used herein,
the following terms have the following respective meanings:
(a) "BY-LAWS" means the By-laws referred to in
Section 2.8 hereof, as from time to time amended.
(b) The terms "COMMISSION" and "INTERESTED PERSON,"
have the meanings given them in the 1940 Act. Except as otherwise defined by the
Trustees in conjunction with the establishment of any series of Shares, the term
"VOTE OF A MAJORITY OF THE SHARES OUTSTANDING AND ENTITLED TO VOTE" shall have
the same meaning as the term "VOTE OF A MAJORITY OF THE OUTSTANDING VOTING
SECURITIES" given it in the 1940 Act.
(c) "CUSTODIAN" means any Person other than the
Trust who has custody of any Trust Property as required by Section 17(f) of the
1940 Act, but does not include a system for the central handling of securities
described in said Section 17(f).
(d) "DECLARATION" means this Declaration of Trust as
amended from time to time. Reference in this Declaration of Trust to
"DECLARATION", "HEREOF," and "HEREUNDER" shall be deemed to refer to this
Declaration rather than exclusively to the article or section in which such
words appear.
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(e) "DISTRIBUTOR" means a party, other than the
Trust, to a contract described in Section 3.1 hereof.
(f) "HIS" shall include the feminine and neuter, as
well as the masculine, genders, and the plural as well as the singular number,
in accordance with the context.
(g) The "1940 ACT" means the Investment Company Act
of 1940, as amended from time to time.
(h) "PERSON" means and includes individuals,
corporations, partnerships, trusts, associations, joint ventures and other
entities, whether or not legal entities, and governments and agencies and
political subdivisions thereof.
(i) "SHAREHOLDER" means a record owner of
Outstanding Shares.
(j) "SHARES" means the equal proportionate units of
interest into which the beneficial interest in the Trust shall be divided from
time to time, including the Shares of any and all series which may be
established by the Trustees, and includes fractions of Shares as well as whole
Shares. "OUTSTANDING SHARES" means those Shares shown from time to time on the
books of the Trust or its Transfer Agent as then issued and outstand-ing, but
shall not include Shares which have been redeemed or repurchased by the Trust
and which are at the time held in the Treasury of the Trust.
(k) "TRANSFER AGENT" means any Person other than the
Trust who maintains the Shareholder records of the Trust, such as
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the list of Shareholders, the number of Shares credited to each
account, and the like.
(l) The "TRUST" means Templeton Real Estate
Securities Fund.
(m) The "TRUST PROPERTY" means any and all
property, real or personal, tangible or intangible, which is owned or held by or
for the account of the Trust, including any series of the Trust, or the Trustees
in their capacity as such.
(n) The "TRUSTEES" means any Person who has signed
this Declaration, so long as he shall continue in office in accordance with the
terms hereof, and any other Person who may from time to time be duly elected,
qualified and serving as Trustees in accordance with the provisions of Article
II hereof, and reference herein to a Trustee or the Trustees shall refer to such
Person or Persons in this capacity or their capacities as Trustees hereunder.
ARTICLE II
TRUSTEES
SECTION 2.1. GENERAL POWERS. The Trustees shall have exclusive and
absolute control over the Trust Property and over the business of the Trust to
the same extent as if the Trustees were the sole owners of the Trust Property
and business in their own right, but with such powers of delegation as may be
permitted, and such obligations and duties as may be prescribed, by this
Declaration. The Trustees shall have power to conduct
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the business of the Trust and carry on its operations in any and all of its
branches and maintain offices both within and without the Commonwealth of
Massachusetts, in any and all states of the United States of America, in the
District of Columbia, and in any and all commonwealths, territories,
dependencies, colonies, possessions, agencies or instrumentalities of the United
States of America and of foreign governments, and to do all such other things
and execute all such instruments as they may deem neces-sary, proper or
desirable in order to promote the interests of the Trust, including such things
as may not be herein specifi-cally mentioned. Any determination as to what is in
the interests of the Trust made by the Trustees in good faith shall be
conclusive. In construing the provisions of this Declaration, the presumption
shall be in favor of a grant of power to the Trustees.
The enumeration of any specific power herein shall not be construed
as limiting the aforesaid power. Such powers of the Trustees may be executed
without order of or resort to any court.
SECTION 2.2. INVESTMENTS. The Trustees shall have the
power:
(a) To operate as and carry on the business of an
open-end, management investment company, as defined in the 1940 Act, and
exercise all the powers necessary and appropriate to the conduct of such
operations.
(b) To invest in, hold for investment, or reinvest
in, securities (which term "securities" shall include common and
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preferred stocks; warrants; bonds, debentures, bills, time notes and all other
evidences of indebtedness; negotiable or non-negotiable instruments; government
securities, including securities of any state, municipality or other political
subdivision thereof, or any government or quasi-governmental agency or
instrumentality; and money market instruments including bank certificates of
deposit, finance paper, commercial paper, bankers' acceptances and all kinds of
repurchase agreements, of any corporation, company, trust, association, firm or
other business organization however established, and of any country, state,
municipality or other political subdivision, or any governmental or
quasi-governmental agency or instrumentality).
(c) To acquire (by purchase, subscription or
otherwise), to hold, to trade in and deal in, to acquire or sell any rights,
options, futures contracts or other instruments to purchase or sell, and to sell
or otherwise dispose of, to lend, and to pledge any securities, property or
other assets.
(d) To exercise all rights, powers and privileges of
ownership or interest in all securities and repurchase agreements included in
the Trust Property, including the right to vote thereon and otherwise act with
respect thereto and to do all acts for the preservation, protection, improvement
and enhancement in value of all such securities and repurchase agreements.
(e) To acquire (by purchase, lease or otherwise) and
to hold, use, maintain, develop and dispose of (by sale or
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otherwise) any property, real or personal, including cash, and
any interest therein.
(f) To borrow money and in this connection issue
notes or other evidence of indebtedness; to secure borrowings by mortgaging,
pledging or otherwise subjecting as security the Trust Property; to endorse,
guarantee, or undertake the performance of any obligation or engagement of any
other Person and to lend Trust Property.
(g) To aid by further investment any corporation,
company, trust, association or firm, any obligation of or interest in which is
included in the Trust Property or in the affairs of which the Trustees have any
direct or indirect interest; to do all acts and things designed to protect,
preserve, improve or enhance the value of such obligation or interest.
(h) In general to carry on any other business in
connection with or incidental to any of the foregoing powers, to do everything
necessary, suitable or proper for the accomplishment of any purpose or the
attainment of any object or the furtherance of any power hereinbefore set forth,
either alone or in association with others, and to do every other act or thing
incidental or appurtenant to or growing out of or connected with the aforesaid
business or purposes, objects or powers.
The foregoing clauses shall be construed both as objects and
powers, and the foregoing enumeration of specific powers
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<PAGE>
shall not be held to limit or restrict in any manner the general
powers of the Trustees.
The Trustees shall not be limited to investing in obligations
maturing before the possible termination of the Trust, nor shall the Trustees be
limited by any law limiting the investments which may be made by fiduciaries.
SECTION 2.3. LEGAL TITLE. Legal title to all the Trust Property
shall be vested in the Trustees as joint tenants except that the Trustees shall
have power to cause legal title to any Trust Property to be held by or in the
name of one or more of the Trustees, or in the name of the Trust, or in the name
of any other Person as nominee, on such terms as the Trustees may determine,
provided that the interest of the Trust therein is deemed appropriately
protected. The right, title and interest of the Trustees in the Trust Property
and the property of each series of the Trust shall vest automatically in each
Person who may hereafter become a Trustee. Upon the termination of the term of
office, resignation, removal or death of a Trustee he shall automatically cease
to have any right, title or interest in any of the Trust Property and the right,
title and interest of such Trustee in all such property shall vest automatically
in the remaining Trustees. Such vesting and cessation of title shall be
effective whether or not conveying documents have been executed and delivered.
SECTION 2.4. ISSUANCE AND REPURCHASE OF SECURITIES. The
Trustees shall have the power to issue, sell, repurchase, redeem,
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retire, cancel, acquire, hold, resell, reissue, dispose of, transfer, and
otherwise deal in Shares and, subject to the provisions set forth in Articles VI
and VII and Section 5.11 hereof, to apply to any such repurchase, redemption,
retirement, cancellation or acquisition of Shares any funds or property of the
particular series of the Trust with respect to which such Shares are issued,
whether capital or surplus or otherwise, to the full extent now or hereafter
permitted by the laws of the Commonwealth of Massachusetts governing business
corporations.
SECTION 2.5. DELEGATION; COMMITTEES. The Trustees shall have power
to delegate from time to time to such of their number or to officers, employees
or agents of the Trust the doing of such things and the execution of such
instruments either in the name of the Trust or the names of the Trustees or
otherwise as the Trustees may deem expedient, to the same extent as such
delegation is permitted by the 1940 Act.
SECTION 2.6. COLLECTION AND PAYMENT. The Trustees shall have power
to collect all property due to the Trust; to pay all claims, including taxes,
against the Trust Property; to prosecute, defend, compromise or abandon any
claims relating to the Trust Property; to foreclose any security interest
securing any obligations, by virtue of which any property is owed to the Trust;
and, without need for any court order, to enter into releases, agreements and
other instruments.
SECTION 2.7. EXPENSES. The Trustees shall have the power
to incur and pay any expenses which in the opinion of the
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Trustees are necessary or incidental to carrying out any of the purposes of this
Declaration, and to pay reasonable compensation from the Trust and/or its series
to themselves as Trustees. The Trustees shall fix the compensation of all
officers, employees and Trustees.
SECTION 2.8. MANNER OF ACTING; BY-LAWS. Except as otherwise
provided herein or in the By-laws, any action to be taken by the Trustees may be
taken by a majority of the Trustees present at a meeting of Trustees (a quorum
being present), including any meeting held by means of a conference telephone
circuit or similar communications equipment by means of which all persons
participating in the meeting can hear each other, or by written consents of the
entire number of Trustees then in office. The Trustees may adopt By-laws not
inconsistent with this Declaration to provide for the conduct of the business of
the Trust and may amend or repeal such By-laws to the extent such power is not
reserved to the Shareholders.
Notwithstanding the foregoing provisions of this Section 2.8 and in
addition to such provisions or any other provision of this Declaration or of the
By-laws, the Trustees may by resolution appoint a committee consisting of one or
more Trustees and less than the whole number of Trustees then in office, which
committee may be empowered to act for and bind the Trustees and the Trust, as if
the acts of such committee were the acts of all the Trustees then in office,
with respect to the institution, prosecution, dismissal, settlement, review or
investigation of
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any action, suit or proceeding which shall be pending or threatened to be
brought before any court, administrative agency or other adjudicatory body.
SECTION 2.9. MISCELLANEOUS POWERS. The Trustees shall have the
power to: (a) employ or contract with such Persons as the Trustees may deem
desirable for the transaction of the business of the Trust; (b) enter into joint
ventures, partnerships and any other combinations or associations, to the extent
permitted by law; (c) remove Trustees or fill vacancies in or add to their
number, elect and remove such officers and appoint and terminate such agents or
employees as they consider appropriate, and appoint from their own number, and
terminate, any one or more committees which may exercise some or all of the
power and authority of the Trustees as the Trustees may determine; (d) to the
extent permitted by law, purchase, and pay for out of Trust Property, insurance
policies insuring the Shareholders, Trustees, officers, employees, agents,
investment advisers, administrators, distributors, selected dealers or
independent contractors of the Trust against all claims arising by reason of
holding any such position or by reason of any action taken or omitted by any
such Person in such capacity; (e) establish pension, profit-sharing, Share
purchase, and other retirement, incentive and benefit plans for any Trustees,
officers, employees and agents of the Trust; (f) to the extent permitted by law,
indemnify any person with whom the Trust has dealings, including persons
referred to in subparagraph
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(d), above, to such extent as the Trustees shall determine; (g) determine and
change the fiscal year of the Trust and the method by which its accounts shall
be kept; and (h) adopt a seal for the Trust, but the absence of such seal shall
not impair the validity of any instrument executed on behalf of the Trust.
SECTION 2.10. PRINCIPAL TRANSACTIONS. Except in transactions not
permitted by the 1940 Act or rules and regulations adopted by the Commission,
the Trustees may, on behalf of the Trust, buy any securities from or sell any
securities to, or lend any assets of the Trust to, any Trustee or officer of the
Trust or any firm of which any such Trustee or officer is a member acting as
principal, or have any such dealings with persons acting as investment adviser,
administrator, Distributor or Transfer Agent or with any Interested Person of
such Person; and the Trust may employ any such Person, or firm or company in
which such Person is an Interested Person, as broker, legal counsel, registrar,
Transfer Agent, dividend disbursing agent or Custodian upon customary terms.
SECTION 2.11. NUMBER OF TRUSTEES. The number of Trustees shall
initially be one (1), and thereafter shall be such number as shall be fixed from
time to time by a written instrument signed by a majority of the Trustees,
provided, however, that the number of Trustees shall in no event be less than
one (1) nor more than fifteen (15).
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SECTION 2.12. ELECTION AND TERM. Except for the Trustees named
herein, designated by such Trustees prior to the issuance of Shares, or
appointed to fill vacancies pursuant to Section 2.14 hereof, the Trustees shall
be elected by the Shareholders owning of record a plurality of the Shares voting
at a meeting of Shareholders called for that purpose. Except in the event of
resignation or removal pursuant to Section 2.13 hereof, each Trustee shall hold
office until the next such meeting of Shareholders and until his successor is
duly elected and qualified.
SECTION 2.13. RESIGNATION AND REMOVAL. Any Trustee may resign his
trust (without need for prior or subsequent accounting) by an instrument in
writing signed by him and delivered to the other Trustees and such resignation
shall be effective upon such delivery, or at a later date according to the terms
of the instrument. Any of the Trustees may be removed (i) with cause, by the
action of two-thirds of the remaining Trustees (provided the aggregate number of
Trustees after such removal shall not be less than three) or (ii) by vote of
holders of two-thirds of the outstanding Shares of the Trust, either by
declaration in writing or at a meeting called for such purpose. A meeting for
the purpose of considering the removal of a person serving as Trustee shall be
called by the Trustees if requested in writing to do so by holders of not less
than 10% of the outstanding Shares of the Trust. Upon the resignation or removal
of a Trustee, or his otherwise ceasing to be a Trustee, he shall
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execute and deliver such documents as the remaining Trustees shall require for
the purpose of conveying to the Trust or the remaining Trustees any Trust
Property held in the name of the resigning or removed Trustee. Upon the
incapacity or death of any Trustee, his legal representative shall execute and
deliver on his behalf such documents as the remaining Trustee shall require as
provided in the preceding sentence.
SECTION 2.14. VACANCIES. The term of office of a Trustee shall
terminate and a vacancy shall occur in the event of the death, resignation,
removal, bankruptcy, adjudicated incompetence or other incapacity to perform the
duties of the office of a Trustee. No such vacancy shall operate to annul the
Declaration or to revoke any existing vacancy, including a vacancy existing by
reason of an increase in the number of Trustees. Subject to the provisions of
Section 16(a) of the 1940 Act, the remaining Trustees shall fill such vacancy by
the appointment of such other person as they in their discretion shall see fit,
made by a written instrument signed by a majority of the Trustees then in
office. Any such appointment shall not become effective, however, until the
person named in the written instrument of appointment shall have accepted in
writing such appointment and agreed in writing to be bound by the terms of the
Declaration. An appointment of a Trustee may be made in anticipation of a
vacancy to occur at a later date by reason of retirement, resignation or
increase in the number of Trustees, provided that such appointment shall not
become effective prior to such
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retirement, resignation or increase in the number of Trustees. Whenever a
vacancy in the number of Trustees shall occur, until such vacancy is filled as
provided in this Section 2.14, the Trustees in office, regardless of their
number, shall have all the powers granted to the Trustees and shall discharge
all the duties imposed upon the Trustees by the Declaration. A written
instrument certifying the existence of such vacancy signed by a majority of the
Trustees in office shall be conclusive evidence of the existence of such
vacancy.
SECTION 2.15. DELEGATION OF POWER TO OTHER TRUSTEES. Any Trustee
may, by power of attorney, delegate his power for a period not exceeding six (6)
months at any one time to any other Trustee or Trustees; provided that in no
case shall less than two (2) Trustees personally exercise the powers granted to
the Trustees under this Declaration, except as herein otherwise expressly
provided.
ARTICLE III
CONTRACTS
SECTION 3.1. UNDERWRITING CONTRACT. The Trustees may in their
discretion from time to time enter into an exclusive or non-exclusive
underwriting contract or contracts providing for the sale of the Shares to net
the Trust not less than the amount provided for in Section 7.1 of Article VII
hereof, whereby the Trustees may either agree to sell the Shares to the other
party to the contract or appoint such other party their sales agent for
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the Shares, and in either case on such terms and conditions as may be prescribed
in the By-laws, if any, and such further terms and conditions as the Trustees
may in their discretion determine not inconsistent with the provisions of this
Article III or of the By-laws; and such contract may also provide for the
repurchase of the Shares by such other party as agent of the Trustees.
SECTION 3.2. ADVISORY, MANAGEMENT OR ADMINISTRATIVE CONTRACTS. The
Trustees may in their discretion from time to time enter into one or more
investment advisory, management or administrative contracts whereby the other
party(ies) to such contract(s) shall undertake to furnish to the Trust or to one
or more of its series such management, investment advisory, administrative,
statistical and research facilities and services and such other facilities and
services, if any, and all upon such terms and conditions as the Trustees may in
their discretion determine, including the grant of authority to such other party
to recommend or to determine what securities shall be purchased or sold by the
Trust or a series and what portion of assets shall be uninvested, which
authority shall include the power to make changes in investments, and to
recommend or to select the brokers or dealers to be used for such transactions.
SECTION 3.3. OTHER SERVICE CONTRACTS. The Trustees are
also empowered, at any time and from time to time, to contract
with any corporations, trusts, associations, or other
organizations, appointing it or them the Business Manager,
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Custodian(s), Transfer Agent(s) and/or shareholder servicing agent(s) and/or
other agents for the Trust or one or more of the series. Every such contract
shall comply with such requirements and restrictions as may be set forth in the
By-laws or stipulated by resolution of the Trustees.
SECTION 3.4. AFFILIATIONS OF TRUSTEES OR OFFICERS, ETC.
The fact that:
(i) any of the Shareholders, Trustees or
officers of the Trust is a shareholder, director,
officer, partner, trustee, employee, manager,
adviser or distributor of or for any partnership,
corporation, trust, association or other
organization or of or for any parent or affiliate
of any organization, with which a contract of the
character described in Sections 3.1, 3.2 or 3.3
above may have been or may hereafter be made, or
that any such organization, or any parent or
affiliate thereof, is a Shareholder of or has an
interest in the Trust, or that (ii) any
partnership, corporation, trust,
association or other organization with which a contract of
the character described in Sections 3.1, 3.2 or 3.3 above
may have been or may hereafter be made also has any one or
more of such contracts with one or more other
partnerships, corporations, trusts,
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associations or other organizations, or has other
businesses or interests, shall not affect the validity of
any such contract or disqualify any Shareholder, Trustee
or officer of the Trust from voting upon or executing the
same or create any liability or accountability to the
Trust or its Shareholders.
SECTION 3.5. COMPLIANCE WITH 1940 ACT. Any contract entered into by
the Trust shall be consistent with applicable requirements of the 1940 Act or
other applicable law.
ARTICLE IV
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS
SECTION 4.1. NO PERSONAL LIABILITY OF SHAREHOLDERS, TRUSTEES, ETC.
No Shareholder shall be subject to any personal liability whatsoever to any
Person in connection with Trust Property or the acts, obligations or affairs of
the Trust. No Trustee, officer, employee or agent of the Trust shall be subject
to any personal liability whatsoever to any Person, other than to the Trust or
its Shareholders, in connection with Trust Property or the affairs of the Trust,
save only that arising from bad faith, willful misfeasance, gross negligence or
reckless disregard of his duties with respect to such Person; and all such
Persons shall look solely to the Trust Property for satisfaction
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of claims of any nature arising in connection with the affairs of the Trust. If
any Shareholder, Trustee, officer, employee, or agent, as such, of the Trust is
made a party to any suit or proceeding to enforce any such liability of the
Trust, he shall not, on account thereof, be held to any personal liability. The
Trust shall indemnify and hold each Shareholder harmless from and against all
claims and liabilities, to which such Shareholder may become subject by reason
of his being or having been a Shareholder, and shall reimburse such Shareholder
for all legal and other expenses reasonably incurred by him in connection with
any such claim or liability, provided that any such expenses shall be paid
solely out of the funds and property of the series of the Trust with respect to
which such Shareholder's Shares are issued. The rights accruing to a Shareholder
under this Section 4.1 shall not exclude any other right to which such
Shareholder may be lawfully entitled, nor shall anything herein contained
restrict the right of the Trust to indemnify or reimburse a Shareholder in any
appropriate situation even though not specifically provided for herein.
SECTION 4.2. NON-LIABILITY OF TRUSTEES, ETC. No Trustee, officer,
employee or agent of the Trust shall be liable to the Trust, its Shareholders,
or to any Shareholder, Trustee, officer, employee, agent or service provider
thereof for any action or failure to act by him (her) or any other such Trustee,
officer, employee, agent or service provider (including without limitation the
failure to compel in any way any former or acting Trustee to
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redress any breach of trust) except for his own bad faith, willful misfeasance,
gross negligence or reckless disregard of the duties involved in the conduct of
his office. The term "service provider," as used in this Section 4.2, shall
include any investment adviser, principal underwriter, transfer agent, business
manager or other person with whom the Trust has an agreement for provision of
services.
SECTION 4.3. MANDATORY INDEMNIFICATION.
(a) Subject to the exceptions and limitations contained in
paragraph (b) below:
(i) every person who is, or has been, a Trustee or officer
of the Trust shall be indemnified by the Trust to the fullest
extent permitted by law against all liability and against all
expenses reasonably incurred or paid by him in connection with any
claim, action, suit or proceeding in which he becomes involved as a
party or otherwise by virtue of his being or having been a Trustee
or officer and against amounts paid or incurred by him in the
settlement thereof;
(ii) the words "claim", "action", "suit", or "proceeding"
shall apply to all claims, actions, suits or proceedings (civil,
criminal, or other, including appeals), actual or threatened; and
the words "liability" and "expenses" shall include, without
limitation, attorneys' fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.
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(b) No indemnification shall be provided hereunder to a
Trustee or officer:
(i) against any liability to the Trust or the Shareholders
by reason of a final adjudication by the court or other body before
which the proceeding was brought that he engaged in willful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office;
(ii) with respect to any matter as to which he shall have
been finally adjudicated not to have acted in good faith in the
reasonable belief that his action was in the best interest of the
Trust;
(iii) in the event of a settlement or other disposition
not involving a final adjudication as provided in paragraph (b)(i)
resulting in a payment by a Trustee or officer, unless there has
been a determination that such Trustee or officer did not engage in
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office:
(A) by the court or other body approving the
settlement or other disposition; or
(B) based upon a review of readily available facts
(as opposed to a full trial-type inquiry) by (1) vote of a
majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested
Trustees then in office act on the
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matter) or (2) written opinion of independent legal
counsel.
(c) To the extent permitted by law, the rights of indemnification herein
provided may be insured against by policies maintained by the Trust, shall be
severable, shall not affect any other rights to which any Trustee or officer may
now or hereafter be entitled, shall continue as to a person who has ceased to be
such Trustee or officer and shall inure to the benefit of the heirs, executors,
administrators and assigns of such a person. Nothing contained herein shall
affect any rights to indemnification to which personnel of the Trust other than
Trustees and officers may be entitled by contract or otherwise under law.
(d) Expenses of preparation and presentation of a defense to any claim,
action, suit or proceeding of the character described in paragraph (a) of this
Section 4.3 may be advanced by the Trust prior to final disposition thereof upon
receipt of an undertaking by or on behalf of the recipient to repay such amount
if it is ultimately determined that he is not entitled to indemnification under
this Section 4.3, provided that either:
(i) such undertaking is secured by a surety bond or some
other appropriate security provided by the recipient, or the Trust
shall be insured against losses arising out of any such advances;
or
(ii) a majority of the Disinterested Trustees
acting on the matter (provided that a majority
of the
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Disinterested Trustees act on the matter) or an independent legal
counsel in a written opinion shall determine, based upon a review
of readily available facts (as opposed to a full trial-type
inquiry), that there is reason to believe that the recipient
ultimately will be found entitled to indemnification.
As used in this Section 4.3, a "Disinterested Trustee" is one who is not (i)
an "Interested Person" of the Trust (including anyone who has been exempted from
being an "Interested Person" by any rule, regulation or order of the
Commission), or (ii) involved in the claim, action, suit or proceeding.
SECTION 4.4. NO BOND REQUIRED OF TRUSTEES. No Trustee
shall be obligated to give any bond or other security for the
performance of any of his duties hereunder.
SECTION 4.5. NO DUTY OF INVESTIGATION; NOTICE IN TRUST INSTRUMENTS,
ETC. No purchaser, lender, transfer agent or other Person dealing with the
Trustees or any officer, employee or agent of the Trust shall be bound to make
any inquiry concerning the validity of any transaction purporting to be made by
the Trustees or by said officer, employee or agent or be liable for the
application of money or property paid, loaned, or delivered to or on the order
of the Trustees or of said officer, employee or agent. Every obligation,
contract, instrument, certificate, Share, other security of the Trust or
undertaking, and every other act or thing whatsoever executed in connection with
the Trust shall be conclusively presumed to have been executed or
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done by the executors thereof only in their capacity as Trustees under this
Declaration or in their capacity as officers, employees or agents of the Trust.
Every written obligation, contract, instrument, certificate, Share, other
security of the Trust or undertaking made or issued by the Trustees may recite
that the same is executed or made by them not individually, but as Trustees
under the Declaration, and that the obligations of the Trust under any such
instrument are not binding upon any of the Trustees or Shareholders
individually, but bind only the estate of the Trust or series, as applicable,
and may contain any further recital which they or he may deem appropriate, but
the omission of such recital shall not operate to bind the Trustees
individually. The Trustees may maintain insurance for the protection of the
Trust Property, its Shareholders, Trustees, officers, employees and agents in
such amount as the Trustees shall deem adequate to cover possible tort
liability, and such other insurance as the Trustees in their sole judgment shall
deem advisable.
SECTION 4.6. RELIANCE ON EXPERTS, ETC. Each Trustee and officer or
employee of the Trust shall, in the performance of his duties, be fully and
completely justified and protected with regard to any act or any failure to act
resulting from reliance in good faith upon the books of account or other records
of the Trust, upon an opinion of counsel, or upon reports made to the Trust by
any of its officers or employees or by the Investment Adviser, the Distributor,
Business Manager, Transfer Agent,
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selected dealers, accountants, appraisers or other experts or consultants
selected with reasonable care by the Trustees, officers or employees of the
Trust, regardless of whether such counsel or expert may also be a Trustee.
ARTICLE V
SHARES OF BENEFICIAL INTEREST
SECTION 5.1. BENEFICIAL INTEREST. The interest of the beneficiaries
hereunder shall be divided into transferable Shares of beneficial interest of
$0.01 par value per share. All Shares shall be of one class, except as provided
in Section 5.11 hereof. The number of shares of beneficial interest authorized
hereunder is unlimited. All Shares issued hereunder including, without
limitation, Shares issued in connection with a dividend in Shares or a split of
Shares, shall be fully paid and non-assessable.
SECTION 5.2. RIGHTS OF SHAREHOLDERS. The ownership of the Trust
Property and the property of each series of the Trust of every description and
the right to conduct any business hereinbefore described are vested exclusively
in the Trustees, and the Shareholders shall have no interest therein other than
the beneficial interest conferred by their Shares, and they shall have no right
to call for any partition or division of any property, profits, rights or
interests of the Trust nor can they be called upon to share or assume any losses
of the Trust or suffer an assessment of any kind by virtue of their ownership of
Shares. The Shares shall be personal property giving only the
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rights in this Declaration specifically set forth. The Shares shall not entitle
the holder to preference, preemptive, appraisal, conversion or exchange rights,
except as the Trustees may determine with respect to any series of Shares.
SECTION 5.3. TRUST ONLY. It is the intention of the Trustees to
create only the relationship of trustee and beneficiary between the Trustees and
each Shareholder from time to time. It is not the intention of the Trustees to
create a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than a trust.
Nothing in this Declaration of Trust shall be construed to make the
Shareholders, either by themselves or with the Trustees, partners or members of
a joint stock association.
SECTION 5.4. ISSUANCE OF SHARES. The Trustees in their discretion
may, from time to time without vote of the Shareholders, issue Shares, in
addition to the then issued and outstanding Shares and Shares held in the
treasury, to such party or parties and for such amount and type of
consideration, including cash or property, at such time or times and on such
terms as the Trustees may deem best, and may in such manner acquire other assets
(including the acquisition of assets subject to, and in connection with the
assumption of liabilities) and businesses. In connection with any issuance of
Shares, the Trustees may issue fractional Shares and Shares held in the
treasury, and Shares may be issued in separate series as provided
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in Section 5.11 hereof. The Trustees may from time to time divide or combine the
Shares into a greater or lesser number without thereby changing the
proportionate beneficial interests in the Trust or any series. Contributions to
the Trust may be accepted for, and Shares shall be redeemed as, whole Shares
and/or 1/1,000ths of a Share or integral multiples thereof. The Trustees, the
Distributor or any other person the Trustees may authorize for the purpose may,
in their discretion, reject any application for the issuance of Shares.
SECTION 5.5. REGISTER OF SHARES. A register shall be kept at the
principal office of the Trust or an office of the Transfer Agent which shall
contain the names and addresses of the Shareholders and the number of Shares
held by them respectively and a record of all transfers thereof. Such register
shall be conclusive as to who are the holders of the Shares and who shall be
entitled to receive dividends or distributions or otherwise to exercise or enjoy
the rights of Shareholders. No Shareholder shall be entitled to receive payment
of any dividend or distribution, nor to have notice given to him as herein or in
the By-laws provided, until he has given his address to the Transfer Agent or
such other officer or agent of the Trustees as shall keep the said register for
entry thereon. It is not contemplated that certificates will be issued for the
Shares; however, the Trustees, in their discretion, may authorize the issuance
of share certificates and promulgate appropriate rules and regulations as to
their use.
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SECTION 5.6. TRANSFER OF SHARES. Shares shall be transferable on
the records of the Trust only by the record holder thereof or by his agent
thereunto duly authorized in writing, upon delivery to the Trustees or the
Transfer Agent of a duly executed instrument of transfer, together with such
evidence of the genuineness of each such execution and authorization and of
other matters as may reasonably be required. Upon such delivery the transfer
shall be recorded on the register of the Trust. Until such record is made, the
Shareholder of record shall be deemed to be the holder of such Shares for all
purposes hereunder and neither the Trustees nor any Transfer Agent or registrar
nor any officer, employee or agent of the Trust shall be affected by any notice
of the proposed transfer.
Any Person becoming entitled to any Shares in consequence of the
death, bankruptcy, or incompetence of any Shareholder, or otherwise by operation
of law, shall be recorded on the register of Shares as the holder of such Shares
upon production of the proper evidence thereof to the Trustees or the Transfer
Agent, but until such record is made, the Shareholder of record shall be deemed
to be the holder of such Shares for all purposes hereunder and neither the
Trustees nor any Transfer Agent or registrar nor any officer or agent of the
Trust shall be affected by any notice of such death, bankruptcy or incompetence,
or other operation of law.
SECTION 5.7. NOTICES. Any and all notices to which any
Shareholder may be entitled and any and all communications shall
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be deemed duly served or given if mailed, postage pre-paid, addressed to any
Shareholder of record at his last known address as recorded on the register of
the Trust.
SECTION 5.8. TREASURY SHARES. Shares held in the treasury shall,
until reissued pursuant to Section 5.4, not confer any voting rights on the
Trustees, nor shall such Shares be entitled to any dividends or other
distributions declared with respect to the Shares.
SECTION 5.9. VOTING POWERS. The Shareholders shall have power to
vote only (i) for the election of Trustees as provided in Section 2.12; (ii)
with respect to any investment advisory or investment management contract
entered into pursuant to Section 3.2; (iii) with respect to termination of the
Trust as provided in Section 8.2; (iv) with respect to any amendment of this
Declaration to the extent and as provided in Section 8.3; (v) with respect to
any merger, consolidation or sale of assets as provided in Section 8.4; (vi)
with respect to incorporation of the Trust to the extent and as provided in
Section 8.5; (vii) to the same extent as the stockholders of a Massachusetts
business corporation as to whether or not a court action, proceeding or claim
should or should not be brought or maintained derivatively or as a class action
on behalf of the Trust or the Shareholders; and (viii) with respect to such
additional matters relating to the Trust as may be required by this Declaration,
the By-laws or any registration of the Trust as an investment company under the
1940 Act with the Commission (or any successor agency) or as the
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Trustees may consider necessary or desirable. Each whole Share shall be entitled
to one vote as to any matter on which it is entitled to vote and each fractional
Share shall be entitled to a proportionate fractional vote, except that the
Trustees may, in conjunction with the establishment of any series of Shares,
establish conditions under which the several series shall have separate voting
rights or no voting rights. There shall be no cumulative voting in the election
of Trustees. Until Shares are issued, the Trustees may exercise all rights of
Shareholders and may take any action required by law, this Declaration or the
By-laws to be taken by Shareholders. The By-laws may include further provisions
for Shareholders' votes and meetings and related matters.
SECTION 5.10. MEETINGS OF SHAREHOLDERS. A meeting of the
Shareholders shall be held at such times, on such day and at such hour as the
Trustees may from time to time determine, either at the principal office of the
Trust, or at such other place as may be designated by the Trustees, for the
purposes specified in Section 2.12 or 2.13 and for such other purposes as may be
specified by the Trustees.
SECTION 5.11. SERIES DESIGNATION. The Trustees, in their
discretion, may authorize the division of Shares into two or more series, and
the different series shall be established and designated, and the variations in
the relative rights and preferences as between the different series shall be
fixed and determined, by the Trustees; provided, that all Shares shall be
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identical except for such variations as shall be fixed and determined by the
Trustees and set forth in the Trust's then current registration statement, and
the reasonable consequences of such variations. All references to Shares in this
Declaration shall be deemed to be Shares of any or all series as the context may
require.
If the Trustees shall divide the Shares of the Trust into two or
more series, the following provisions shall be applicable:
(a) All provisions herein relating to the Trust shall apply equally
to each series of the Trust except as the context requires otherwise.
(b) The number of authorized Shares and the number of Shares of
each series that may be issued shall be unlimited. The Trustees may classify or
reclassify any unissued Shares or any Shares previously issued and reacquired of
any series into one or more series that may be established and designated from
time to time. The Trustees may hold as treasury shares (of the same or some
other series), reissue for such consideration and on such terms as they may
determine, or cancel any Shares of any series reacquired by the Trust at their
discretion from time to time.
(c) All consideration received by the Trust for the issue or sale
of Shares of a particular series, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment
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of such proceeds in whatever form the same may be, shall irrevocably belong to
that series for all purposes, subject only to the rights of creditors of such
series and except as may otherwise be required by applicable tax laws, and shall
be so recorded upon the books of account of the Trust. In the event that there
are any assets, income, earnings, profits, and proceeds thereof, funds, or
payments which are not readily identifiable as belonging to any particular
series, the Trustees shall allocate them among any one or more of the series
established and designated from time to time in such manner and on such basis as
they, in their sole discretion, deem fair and equitable. Each such allocation by
the Trustees shall be conclusive and binding upon all persons for all purposes.
(d) The assets belonging to each particular series shall be charged
with the liabilities of the Trust in respect of that series and all expenses,
costs, charges and reserves attributable to that series, and any general
liabilities, expenses, costs, charges or reserves of the Trust which are not
readily identifiable as belonging to any particular series shall be allocated
and charged by the Trustees to and among any one or more of the series
established and designated from time to time in such manner and on such basis as
the Trustees in their sole discretion deem fair and equitable and no series
shall be liable to any person except for its allocated share. Each allocation of
liabilities, expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon all persons for all
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purposes. The Trustees shall have full discretion, to the extent not
inconsistent with the 1940 Act, to determine which items are capital; and each
such determination and allocation shall be conclusive and binding upon all
persons. All persons extending credit to, or contracting with or having any
claim against a particular series of the Trust shall look only to the assets of
that particular series for payment of such credit, contract or claim.
(e) Each Share of a series of the Trust shall represent a
beneficial interest in the net assets of such series. Each holder of Shares of a
series shall be entitled to receive his pro rata share of distributions of
income and capital gains made with respect to such series. Upon redemption of
his Shares or indemnification for liabilities incurred by reason of his being or
having been a Shareholder of a series, such Shareholder shall be paid solely out
of the funds and property of such series of the Trust. Upon liquidation or
termination of a series of the Trust, Shareholders of such series shall be
entitled to receive a pro rata share of the net assets of such series. A
Shareholder of a particular series of the Trust shall not be entitled to
participate in a derivative or class action on behalf of any other series or the
Shareholders of any other series of the Trust.
(f) Notwithstanding any other provision hereof, on any matter
submitted to a vote of Shareholders of the Trust, all Shares then entitled to
vote shall be voted by individual series,
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except that (1) when required by the 1940 Act, Shares shall be voted in the
aggregate and not by individual series, and (2) when the Trustees have
determined that the matter affects only the interests of Shareholders of a
limited number of series, then only the Shareholders of such series shall be
entitled to vote thereon.
The establishment and designation of any series of Shares shall be
effective upon the execution by a majority of the Trustees of an instrument
setting forth such establishment and designation and the relative rights and
preferences of such series, or as otherwise provided in such instrument. At any
time that there are no Shares outstanding of any particular series previously
established and designated, the Trustees may by an instrument executed by a
majority of their number abolish that series and the establishment and
designation thereof. Each instrument referred to in this paragraph shall have
the status of an amendment to this Declaration.
SECTION 5.12. POWER OF TRUSTEES TO CHANGE PROVISIONS RELATING TO
SHARES. Notwithstanding any other provision of this Declaration of Trust and
without limiting the power of the Trustees to amend the Declaration of Trust as
provided elsewhere herein, the Trustees shall have the power to amend this
Declaration of Trust, at any time and from time to time, in such manner as the
Trustees may determine in their sole discretion, without the need for
Shareholder action, so as to add to, delete, replace or otherwise modify any
provisions relating to the Shares
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contained in this Declaration of Trust, provided that before adopting any such
amendment without Shareholder approval the Trustees shall determine that it is
consistent with the fair and equitable treatment of all Shareholders or that
Shareholder approval is not otherwise required by the 1940 Act or other
applicable law.
Without limiting the generality of the foregoing, the Trustees may,
for the above-stated purposes, amend the Declaration of Trust to:
(a) create one or more Series of Shares (in addition to any Series
already existing or otherwise) with such rights and preferences and such
eligibility requirements for investment therein as the Trustees shall determine
and reclassify any or all outstanding Shares as shares of particular Series in
accordance with such eligibility requirements;
(b) amend any of the provisions set forth in Section 5.11
of this Article V;
(c) combine one or more Series of Shares into a single Series, upon
approval of a majority of the outstanding Shares of the affected Series, and on
such terms and conditions as the Trustees shall determine;
(d) change or eliminate any eligibility requirements for investment
in Shares of any Series, including without limitation, to provide for the issue
of Shares of any Series in connection with any merger or consolidation of the
Trust with another Trust
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or company or any acquisition by the Trust of part or all of the
assets of another trust or investment company;
(e) change the designation of any Series of Shares;
(f) change the method of allocating dividends among the
various Series of Shares;
(g) allocate any specific assets or liabilities of the
Trust or any specific items of income or expense of the Trust to
one or more Series of Shares;
(h) specifically allocate assets to any or all Series of Shares or
create one or more additional Series of Shares which are preferred over all
other Series of Shares in respect of assets specifically allocated thereto or
any dividends paid by the Trust with respect to any net income, however
determined, earned from the investment and reinvestment of any assets so
allocated or otherwise and provide for any special voting or other rights with
respect to such Series.
ARTICLE VI
REDEMPTION AND REPURCHASE OF SHARES
SECTION 6.1. REDEMPTION OF SHARES. All Shares of the
Trust shall be redeemable at the redemption price determined in
the manner set out in this Declaration. Redeemed or repurchased
Shares may be resold by the Trust.
The Trust shall redeem the Shares at the price determined as
hereinafter set forth, upon the appropriately verified written application of
the record holder thereof (or upon such other form
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of request as the Trustees may determine) at such office or agency as may be
designated from time to time for that purpose by the Trustees. The Trustees may
from time to time specify additional conditions, not inconsistent with the 1940
Act, regarding the redemption of Shares in the Trust's then effective
registration statement or prospectus under the Securities Act of 1933.
SECTION 6.2. PRICE. Shares will be redeemed at their net asset
value determined as set forth in Section 7.1 hereof as of such time as the
Trustees shall have theretofore prescribed by resolution. In the absence of such
resolution, the redemption price of Shares deposited shall be the net asset
value of such Shares next determined as set forth in Section 7.1 hereof after
receipt of such application.
SECTION 6.3. PAYMENT. Payment for such Shares shall be made in cash
or in property out of the assets of the relevant series of the Trust to the
Shareholder of record at such time and in the manner, not inconsistent with the
1940 Act or other applicable laws, as may be specified from time to time in the
Trust's then effective registration statement or prospectus under the Securities
Act of 1933, subject to the provisions of Section 6.4 hereof.
SECTION 6.4. EFFECT OF SUSPENSION OF DETERMINATION OF NET
ASSET VALUE. If, pursuant to Section 6.9 hereof, the Trustees
shall declare a suspension of the determination of net asset
value, the rights of Shareholders (including those who shall have
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applied for redemption pursuant to Section 6.1 hereof but who shall not yet have
received payment) to have Shares redeemed and paid for by the Trust shall be
suspended until the termination of such suspension is declared. Any record
holder who shall have his redemption right so suspended may, during the period
of such suspension, by appropriate written notice of revocation at the office or
agency where application was made, revoke any application for redemption not
honored and withdraw any certificates on deposit. The redemption price of Shares
for which redemption applications have not been revoked shall be the net asset
value of such Shares next determined as set forth in Section 7.1 after the
termination of such suspension, and payment shall be made within seven (7) days
after the date upon which the application was made plus the period after such
application during which the determination of net asset value was suspended.
SECTION 6.5. REPURCHASE BY AGREEMENT. The Trust may repurchase
Shares directly, or through the Distributor or another agent designated for the
purpose, by agreement with the owner thereof at a price not exceeding the net
asset value per share determined as of the time when the purchase or contract of
purchase is made or the net asset value as of any time which may be later
determined pursuant to Section 7.1 hereof, provided payment is not made for the
Shares prior to the time as of which such net asset value is determined.
SECTION 6.6. REDEMPTION OF SHAREHOLDER'S INTEREST. The
Trust shall have the right at any time to redeem Shares of any
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Shareholder in accordance with applicable law, subject to such terms and
conditions as the Trustees may approve.
SECTION 6.7. REDEMPTION OF SHARES IN ORDER TO QUALIFY AS REGULATED
INVESTMENT COMPANY; DISCLOSURE OF HOLDING. If the Trustees shall, at any time
and in good faith, be of the opinion that direct or indirect ownership of Shares
or other securities of the Trust has or may become concentrated in any Person to
an extent which would disqualify any series of the Trust as a regulated
investment company under the Internal Revenue Code, then the Trustees shall have
the power by lot or other means deemed equitable by them (i) to call for
redemption by any such Person of a number, or principal amount, of Shares or
other securities of the Trust sufficient to maintain or bring the direct or
indirect ownership of Shares or other securities of the Trust into conformity
with the requirements for such qualification and (ii) to refuse to transfer or
issue Shares or other securities of the Trust to any Person whose acquisition of
the Shares or other securities of the Trust in question would result in such
disqualification. The redemption shall be effected at the redemption price and
in the manner provided in Section 6.1.
The holders of Shares of the Trust shall upon demand disclose to
the Trustees in writing such information with respect to direct and indirect
ownership of Shares of the Trust as the Trustees may deem necessary to comply
with the provisions of the
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Internal Revenue Code, or to comply with the requirements of any other taxing
authority.
SECTION 6.8. REDUCTIONS IN NUMBER OF OUTSTANDING SHARES PURSUANT TO
NET ASSET VALUE FORMULA. The Trust may also reduce the number of outstanding
Shares pursuant to the provisions of Section 7.3.
SECTION 6.9. SUSPENSION OF RIGHT OF REDEMPTION. The Trustees may
adopt procedures under which the Trust may declare a suspension of the right of
redemption or postpone the date of payment or redemption for the whole or any
part of any period (i) during which the New York Stock Exchange is closed other
than customary weekend and holiday closings, (ii) during which trading on the
New York Stock Exchange is restricted, (iii) during which an emergency exists as
a result of which disposal by the Trust of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the Trust fairly
to determine the value of its net assets, or (iv) during any other period when
the Commission may for the protection of security holders of the Trust by order
permit suspension of the right of redemption or postponement of the date of
payment or redemption; provided that applicable rules and regulations of the
Commission shall govern as to whether the conditions prescribed in (ii), (iii),
or (iv) exist. To the extent permitted by the Commission, (i) and (ii) above may
be expanded to include other securities exchanges. Such suspension shall take
effect at such time as the Trust shall specify and there shall be no right of
redemption or payment on
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redemption until the Trust shall declare the suspension at an
end.
ARTICLE VII
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS
SECTION 7.1. NET ASSET VALUE. The value of the assets of any series
of the Trust shall be determined by appraisal of the securities allocated to
such series, such appraisal to be on the basis of the market value of such
securities or, consistent with the rules and regulations of the Commission, by
such other method as shall be deemed to reflect the fair value thereof,
determined in good faith by or under the direction of the Trustees. Money market
instruments with remaining maturities of less than sixty days shall be valued on
an amortized cost basis. From the total value of said assets, there shall be
deducted all indebtedness, interest, taxes, payable or accrued, including
estimated taxes on unrealized book profits, expenses and management charges
accrued to the appraisal date, net income determined and declared as a
distribution and all other items in the nature of liabilities attributable to
such series which shall be deemed appropriate. The resulting amount which shall
represent the total net assets of the series shall be divided by the number of
Shares of such series outstanding at the time and the quotient so obtained shall
be deemed to be the net asset value of the Shares of such series (which may be
rounded to the nearest whole cent). The net asset
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value of the Shares shall be determined at least once daily on such days and in
accordance with the requirements provided for in applicable rules of the
Commission, at such time or times as the Trustees shall determine. The power and
duty to make the daily calculations may be delegated by the Trustees to the
Investment Adviser, the Custodian, the Business Manager, the Transfer Agent or
such other Person as the Trustees may determine. The Trustees may suspend the
daily determination of net asset value to the extent permitted by the 1940 Act.
SECTION 7.2. DISTRIBUTIONS TO SHAREHOLDERS. The Trustees shall from
time to time distribute ratably among the Shareholders of a series such
proportion of the net profits, surplus (including paid-in surplus), capital, or
assets of such series held by the Trustees as they may deem proper. Such
distributions may be made in cash or property (including without limitation any
type of obligations of such series or any assets thereof), and the Trustees may
distribute ratably among the Shareholders additional Shares of such series
issuable hereunder in such manner, at such times, and on such terms as the
Trustees may deem proper. Such distributions may be among the Shareholders of
record at the time of declaring a distribution or among the Shareholders of
record at such other date or time or dates or times as the Trustees shall
determine. The Trustees may in their discretion determine that, solely for the
purposes of such distributions, Outstanding Shares shall exclude Shares for
which orders have been placed subsequent to a specified time on the
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date the distribution is declared or on the next preceding day if the
distribution is declared as of a day on which the Transfer Agent for the Trust
or applicable series is not open for business. The Trustees may always retain
from the net profits such amount as they may deem necessary to pay the debts or
expenses of the series or to meet obligations of the series, or as they may deem
desirable to use in the conduct of its affairs or to retain for future
requirements or extensions of the business.
Inasmuch as the computation of net income and gains for Federal
income tax purposes may vary from the computation thereof on the books, the
above provisions shall be interpreted to give the Trustees the power in their
discretion to distribute for any fiscal year as ordinary dividends and as
capital gains distributions, respectively, additional or lesser amounts
sufficient to enable the Trust or the series to avoid or reduce liability for
taxes.
SECTION 7.3. DETERMINATION OF NET INCOME. The net income of any
series may consist of (i) all dividend and interest income accrued on portfolio
assets of the series, less (ii) all actual and accrued liabilities determined in
accordance with generally accepted accounting principles and plus or minus (iii)
net realized or net unrealized gains and losses on the assets of the series.
Interest income may include discount earned (including both original issue and
market discount) on discount paper accrued ratably to the date of maturity or
determined in such
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<PAGE>
other manner as the Trustees may determine. Expenses of the series, including
the advisory or management fee, shall be accrued each day. Such net income may
be determined by or under the direction of the Trustees as of such time or times
as the Trustees shall determine, and all the net income of the series, so
determined, may be declared as a dividend on the Outstanding Shares of such
series. If, for any reason, the net income of the series determined at any time
is a negative amount, the Trustees shall have the power (i) to offset each
Shareholder's pro rata share of such negative amount from the accrued dividend
account of such Shareholder, or (ii) to reduce the number of Outstanding Shares
of the series by reducing the number of Shares in the account of such
Shareholder by that number of full and fractional Shares which represents the
amount of such excess negative net income, or (iii) to cause to be recorded on
the books of the series an asset account in the amount of such negative net
income, which account may be reduced by the amount, provided that the same shall
thereupon become the property of the series and shall not be paid to any
Shareholder, of dividends declared thereafter upon the Outstanding Shares on the
day such negative net income is experienced, until such asset account is reduced
to zero; or (iv) to combine the methods described in clauses (i) and (ii) and
(iii) of this sentence, in order to cause the net asset value per Share of the
series to remain at a constant amount per Outstanding Share immediately after
each such determination and declaration. The Trustees shall also have the power
to omit to
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<PAGE>
declare a dividend out of net income for the purpose of causing the net asset
value per Share of the series to be increased to a constant amount. The Trustees
shall not be required to adopt, but may at any time adopt, discontinue or amend
a practice of maintaining the net asset value per Share of a series at a
constant amount, in accordance with applicable rules under the 1940 Act.
SECTION 7.4. ALLOCATION BETWEEN PRINCIPAL AND INCOME. The Trustees
shall have full discretion to determine whether any cash or property received
shall be treated as income or as principal and whether any item of expense shall
be charged to the income or the principal account, and their determination made
in good faith shall be conclusive. In the case of stock dividends received, the
Trustees shall have full discretion to determine, in the light of the particular
circumstances, how much if any of the value thereof shall be treated as income,
the balance, if any, to be treated as principal.
SECTION 7.5. POWER TO MODIFY FOREGOING PROCEDURES. Notwithstanding
any of the foregoing provisions of this Article VII, the Trustees may prescribe,
in their absolute discretion, such other bases and times for determining the per
Share net asset value of the series' Shares or net income, or the declaration
and payment of dividends and distributions as they may deem necessary or
desirable.
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<PAGE>
ARTICLE VIII
DURATION; TERMINATION OF TRUST;
AMENDMENT; MERGERS, ETC.
SECTION 8.1. DURATION. The Trust or any series of the
Trust shall continue without limitation of time but subject to
the provisions of this Article VIII.
SECTION 8.2. TERMINATION OF TRUST OR SERIES OF THE TRUST. (a) The
Trust or any series of the Trust may be terminated by the affirmative vote of
the holders of not less than two-thirds of the Shares outstanding and entitled
to vote, at any meeting of Shareholders or by an instrument in writing, without
a meeting, signed by a majority of the Trustees and consented to by the holders
of not less than two-thirds of such Shares, or by such other vote as may be
established by the Trustees with respect to any series of Shares. Upon the
termination of the Trust or any series of the Trust,
(i) The Trust or the series of the Trust shall carry on no
business except for the purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of
the Trust or the series of the Trust and all of the powers of the
Trustees under this Declaration shall continue until the affairs of
the Trust or the series of the Trust shall have been wound up,
including the power to fulfill or discharge the contracts of the
Trustees on behalf of the Trust or any series of the Trust, collect
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<PAGE>
its assets, sell, convey, assign, exchange, transfer or otherwise
dispose of all or any part of the remaining Trust Property or
property of the series of the Trust to one or more persons at
public or private sale for consideration which may consist in whole
or in part of cash, securities or other property of any kind,
discharge or pay its liabilities, and do all other acts appropriate
to liquidate its business; provided that any sale, conveyance,
assignment, exchange, transfer or other disposition of all or
substantially all the Trust Property or property of the series of
the Trust shall require Shareholder approval in accordance with
Section 8.4 hereof.
(iii) After paying or adequately providing for the payment
of all liabilities, and upon receipt of such releases, indemnities
and refunding agreements as they deem necessary for their
protection, the Trustees may distribute the remaining Trust
Property, in cash or in kind or partly each, among the Shareholders
according to their respective rights.
(b) After termination of the Trust or any series of
the Trust and distribution to the Shareholders as herein provided, a majority of
the Trustees shall execute and lodge among the records of the Trust or the
series of the Trust an instrument in writing setting forth the fact of such
termination, and the Trustees shall thereupon be discharged from all further
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<PAGE>
liabilities and duties hereunder, and the rights and interests of
all Shareholders shall thereupon cease.
SECTION 8.3. AMENDMENT PROCEDURE. (a) This Declaration may be
amended by a vote of the holders of a majority of the Shares outstanding and
entitled to vote or by any instrument in writing, without a meeting, signed by a
majority of the Trustees and consented to by the holders of a majority of the
Shares outstanding and entitled to vote. The Trustees may also amend this
Declaration without the vote or consent of Shareholders to change the name of
the Trust, to supply any omission, to cure, correct or supplement any ambiguous,
defective or inconsistent provision hereof, or if they deem it necessary to
conform this Declaration to the requirements of applicable federal laws or
regulations or the requirements of the regulated investment company provisions
of the Internal Revenue Code, but the Trustees shall not be liable for failing
so to do.
(b) No amendment may be made under this Section 8.3
which would change any rights with respect to any Shares of the Trust by
reducing the amount payable thereon upon liquidation of the Trust or by
diminishing or eliminating any voting rights pertaining thereto, except with the
vote or consent of the holders of two-thirds of the Shares outstanding and
entitled to vote, or by such other vote as may be established by the Trustees
with respect to any series of Shares. Nothing contained in this Declaration
shall permit the amendment of this Declaration to impair the exemption from
personal liability of the Shareholders,
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<PAGE>
Trustees, officers, employees and agents of the Trust or to permit assessments
upon Shareholders.
(c) A certificate signed by a majority of the
Trustees setting forth an amendment and reciting that it was duly adopted by the
Shareholders or by the Trustees as aforesaid or a copy of the Declaration, as
amended, and executed by a majority of the Trustees, shall be conclusive
evidence of such amendment when lodged among the records of the Trust.
Notwithstanding any other provision hereof, until such time as a
Registration Statement under the Securities Act of 1933, as amended, covering
the first public offering of securities of the Trust shall become effective,
this Declaration may be terminated or amended in any respect by the affirmative
vote of a majority of the Trustees or by an instrument signed by a majority of
the Trustees.
SECTION 8.4. MERGER, CONSOLIDATION AND SALE OF ASSETS. The Trust
may merge or consolidate with any other corporation, association, trust or other
organization or may sell, lease or exchange all or substantially all of the
Trust Property, including its good will, upon such terms and conditions and for
such consideration when and as authorized at any meeting of Shareholders called
for the purpose by the affirmative vote of the holders of two-thirds of the
Shares outstanding and entitled to vote, or by an instrument or instruments in
writing without a meeting, consented to by the holders of two-thirds of the
Shares or by such other vote as may be established by the Trustees with
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respect to any series of Shares; provided, however, that, if such merger,
consolidation, sale, lease or exchange is recommended by the Trustees, the vote
or written consent of the holders of a majority of the Shares outstanding and
entitled to vote, or such other vote or written consent as may be established by
the Trustees with respect to any series of Shares, shall be sufficient
authorization; and any such merger, consolidation, sale, lease or exchange shall
be deemed for all purposes to have been accomplished under and pursuant to the
statutes of the Commonwealth of Massachusetts.
SECTION 8.5. INCORPORATION. With the approval of the holders of a
majority of the Shares outstanding and entitled to vote, or by such other vote
as may be established by the Trustees with respect to any series of Shares, the
Trustees may cause to be organized or assist in organizing a corporation or
corporations under the laws of any jurisdiction or any other trust, partnership,
association or other organization to take over all of the Trust Property or to
carry on any business in which the Trust shall directly or indirectly have any
interest, and to sell, convey and transfer the Trust Property to any such
corporation, trust, association or organization in exchange for the Shares or
securities thereof or otherwise, and to lend money to, subscribe for the Shares
or securities of, and enter into any contracts with any such corporation, trust,
partnership, association or organization, or any corporation, partnership,
trust, association or organization in which the Trust holds or is
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<PAGE>
about to acquire shares or any other interest. The Trustees may also cause a
merger or consolidation between the Trust or any successor thereto and any such
corporation, trust, partnership, association or other organization if and to the
extent permitted by law, as provided under the law then in effect. Nothing
contained herein shall be construed as requiring approval of Shareholders for
the Trustees to organize or assist in organizing one or more corporations,
trusts, partnerships, associations or other organizations and selling, conveying
or transferring a portion of the Trust Property for value to such organizations
or entities.
ARTICLE IX
REPORTS TO SHAREHOLDERS
The Trustees shall at least semi-annually submit to the
Shareholders a written financial report, which may be included in the Trust's
prospectus, of the transactions of the Trust, including financial statements
which shall at least annually be certified by independent public accountants.
ARTICLE X
MISCELLANEOUS
SECTION 10.1. FILING. This Declaration and any amendment
hereto shall be filed in the office of the Secretary of the
Commonwealth of Massachusetts and in such other places as may be
required under the laws of Massachusetts and may also be filed or
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<PAGE>
recorded in such other places as the Trustees deem appropriate. Each amendment
so filed shall be accompanied by a certificate signed and acknowledged by a
Trustee stating that such action was duly taken in a manner provided herein, and
unless such amendment or such certificate sets forth some later time for the
effectiveness of such amendment, such amendment shall be effective upon its
filing. A restated Declaration, integrating into a single instrument all of the
provisions of the Declaration which are then in effect and operative, may be
executed from time to time by a majority of the Trustees and shall, upon filing
with the Secretary of the Commonwealth of Massachusetts, be conclusive evidence
of all amendments contained therein and may hereafter be referred to in lieu of
the original Declaration and the various amendments thereto.
SECTION 10.2. GOVERNING LAW. This Declaration is executed by the
Trustees and delivered in the Commonwealth of Massachusetts and with reference
to the laws thereof, and the rights of all parties and the validity and
construction of every provision hereof shall be subject to and construed
according to the laws of said State.
SECTION 10.3. COUNTERPARTS. This Declaration may be simultaneously
executed in several counterparts, each of which shall be deemed to be an
original, and such counterparts, together, shall constitute one and the same
instrument, which shall be sufficiently evidenced by any such original
counterpart.
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<PAGE>
SECTION 10.4. RELIANCE BY THIRD PARTIES. Any certificate executed
by an individual who, according to the records of the Trust appears to be a
Trustee hereunder, certifying to: (a) the number or identity of Trustees or
Shareholders, (b) the due authorization of the execution of any instrument or
writing, (c) the form of any vote passed at a meeting of Trustees or
Shareholders, (d) the fact that the number of Trustees or Shareholders present
at any meeting or executing any written instrument satisfies the requirements of
this Declaration, (e) the form of any By-laws adopted by or the identity of any
officers elected by the Trustees, or (f) the existence of any fact or facts
which in any manner relate to the affairs of the Trust, shall be conclusive
evidence as to the matters so certified in favor of any Person entitled to rely
upon such certificates in dealing with the Trustees and their successors.
SECTION 10.5. PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS. (a)
The provisions of this Declaration are severable, and if the Trustees shall
determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the Internal Revenue Code or with other applicable
laws and regulations, the conflicting provision shall be deemed never to have
constituted a part of this Declaration; provided, however, that such
determination shall not affect any of the remaining provisions of this
Declaration or render invalid or improper any action taken or omitted prior to
such determination.
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<PAGE>
(b) If any provision of this Declaration shall be
held invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision in such jurisdiction and
shall not in any manner affect such provisions in any other jurisdiction or any
other provision of this Declaration in any jurisdiction.
SECTION 10.6. NAME RESERVATION. The Trustees on behalf of the Trust
acknowledge that Templeton Investment Counsel, Inc. ("TICI") licensed to the
Trust the non-exclusive right to use the name "Templeton" as part of the name of
the Trust, and has reserved the right to grant the non-exclusive use of the name
"Templeton" or any derivative thereof to any other party. In addition, TICI
reserves the right to grant the non-exclusive use of the name Templeton to, and
to withdraw such right from, any other business or other enterprise. TICI
reserves the right to withdraw from the Trust the right to use said name
Templeton and will withdraw such right if the Trust ceases to employ, for any
reason, TICI, an affiliate or any successor as adviser of the Trust.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have executed
this instrument this 3rd day of March, 1990.
-----------------------------
John M. Templeton, Jr.
-----------------------------
John Wm. Galbraith
----------------------------
F. Bruce Clarke
----------------------------
Hasso-G von Diergardt
----------------------------
LeRoy C. Paslay
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[DESCRIPTION] Second Amendment to Declaration of Trust
<PAGE>
SECOND AMENDMENT TO
DECLARATION OF TRUST
OF
TEMPLETON REAL ESTATE TRUST
This Second Amendment to the Declaration of Trust
("Declaration") of Templeton Real Estate Trust (the "Trust") is
made this 3rd day of March, 1990 by the parties signatory hereto,
as Trustees of the Trust (the "Trustees.").
WITNESSETH
WHEREAS, the Declaration was made on July 17, 1989 and
the Trustees now desire to amend the Declaration and change the
name of the Trust; and
WHEREAS, Article VIII, Section 8.3(a) of the
Declaration provides that the Trustees may amend the Declaration
without the vote or consent of Shareholders to change the name of
the Trust by an instrument signed by a majority of the Trustees:
NOW, THEREFORE, the Trustees hereby declare that
Article I, Section 1.1 and Article I, Section 1.2(l) be amended
to read as follows:
SECTION 1.1. NAME. The name of the trust created
hereby, until and unless changed by the Trustees as
provided in Section 8.3(a) hereof, is "Templeton Real
Estate Securities Fund."
SECTION 1.2. DEFINITIONS.
(1) The "TRUST" means Templeton Real Estate Securities
Fund.
IN WITNESS WHEREOF, the undersigned have executed this
instrument this 3rd of March, 1990.
John M. Templeton, Jr.
John M. Templeton, Jr.
John Wm. Galbraith
John Wm. Galbraith
F. Bruce Clarke
F. Bruce Clarke
Hasso-G von Diergardt
Hasso-G von Diergardt
LeRoy C. Paslay
LeRoy C. Paslay
<PAGE>
CERTIFICATE
Pursuant to Section 10.1 of the Declaration, the
undersigned Trustee hereby acknowledges and certifies that this
Amendment to the Declaration of Trust of Templeton Real Estate
Trust is made in accordance with the provisions of the
Declaration, and shall be effective upon its filing with the
Secretary of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the undersigned has executed this
instrument this 3rd day of March, 1990.
John M. Templeton, Jr.
John M. Templeton, Jr.
<PAGE>
CERTIFICATE
Pursuant to Section 10.1 of the Declaration, the
undersigned Trustee hereby acknowledges and certifies that this
Amendment to the Declaration of Trust of Templeton Real Estate
Trust is made in accordance with the provisions of the
Declaration, and shall be effective upon its filing with the
Secretary of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the undersigned has executed this
instrument this 3rd day of March, 1990.
John Wm. Galbraith
John Wm. Galbraith
<PAGE>
CERTIFICATE
Pursuant to Section 10.1 of the Declaration, the
undersigned Trustee hereby acknowledges and certifies that this
Amendment to the Restated Declaration of Trust of Templeton Real
Estate Trust is made in accordance with the provisions of the
Declaration, and shall be effective upon its filing with the
Secretary of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the undersigned has executed this
instrument this 3rd day of March, 1990.
F. Bruce Clarke
F. Bruce Clarke
<PAGE>
CERTIFICATE
Pursuant to Section 10.1 of the Declaration, the
undersigned Trustee hereby acknowledges and certifies that this
Amendment to the Declaration of Trust of Templeton Real Estate
Trust is made in accordance with the provisions of the
Declaration, and shall be effective upon its filing with the
Secretary of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the undersigned has executed this
instrument this 3rd day of March, 1990.
Hasso-G von Diergardt
Hasso-G von Diergardt
<PAGE>
CERTIFICATE
Pursuant to Section 10.1 of the Declaration, the
undersigned Trustee hereby acknowledges and certifies that this
Amendment to the Declaration of Trust of Templeton Real Estate
Trust is made in accordance with the provisions of the
Declaration, and shall be effective upon its filing with the
Secretary of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the undersigned has executed this
instrument this 3rd day of March, 1990.
Leroy C. Paslay
LeRoy C. Paslay
BY-LAWS
OF
TEMPLETON REAL ESTATE SECURITIES FUND
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I - DEFINITIONS 1
ARTICLE II - OFFICES 1
Section 1. Resident Agent 1
Section 2. Offices 1
ARTICLE III - SHAREHOLDERS 2
Section 1. Meetings 2
Section 2. Notice of Meetings 2
Section 3. Record Date for Meetings
and Other Purposes 2
Section 4. Proxies 3
Section 5. Action without Meeting 4
ARTICLE IV - TRUSTEES 4
Section 1. Meetings of the Trustees 4
Section 2. Quorum and Manner of Acting 5
ARTICLE V - COMMITTEES 6
Section 1. Executive and Other Committees 6
Section 2. Meetings, Quorum and Manner of Acting 7
ARTICLE VI - OFFICERS 7
Section 1. General Provisions 7
Section 2. Term of Office and Qualifications 8
Section 3. Removal 8
Section 4. Powers and Duties of the President 8
Section 5. Powers and Duties of Vice Presidents 9
Section 6. Powers and Duties of the Treasurer 9
Section 7. Powers and Duties of the Secretary 9
Section 8. Powers and Duties of Assistant
Treasurers 10
Section 9. Powers and Duties of Assistant
Secretaries 10
Section 10. Compensation of Officers and Trustees
and Members of the Advisory Board 10
ARTICLE VII - FISCAL YEAR 11
ARTICLE VIII - SEAL 11
ARTICLE IX - WAIVERS OF NOTICE 11
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<PAGE>
TABLE OF CONTENTS (continued)
PAGE
ARTICLE X - CUSTODY OF SECURITIES 12
Section 1. Employment of a Custodian 12
Section 2. Action Upon Termination of
Custodian Agreement 12
Section 3. Provisions of Custodian Agreement 13
Section 4. Central Certificate System 14
Section 5. Acceptance of Receipts in Lieu of
Certificates 14
ARTICLE XI - AMENDMENTS 15
ARTICLE XII - INSPECTION OF BOOKS 15
ARTICLE XIII - MISCELLANEOUS 15
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<PAGE>
BY-LAWS
OF
TEMPLETON REAL ESTATE SECURITIES FUND
AMENDED AND RESTATED AS OF JULY 29, 1992
ARTICLE I
DEFINITIONS
Any terms defined in the Declaration of Trust of Templeton Real
Estate Trust dated July 17, 1989, as amended from time to time, shall have the
same meaning when used
herein.
ARTICLE II
OFFICES
SECTION 1. RESIDENT AGENT. The Trust shall maintain a resident
agent in the Commonwealth of Massachusetts, which agent shall initially be CT
Corporation System, 2 Oliver Street, Boston, Massachusetts 02109. The Trustees
may designate a successor resident agent, provided, however, that such
appointment shall not become effective until written notice thereof is delivered
to the office of the Secretary of the Commonwealth.
SECTION 2. OFFICES. The Trust may have its
principal office and other offices in such places within as
well as without the Commonwealth as the Trustees may from
time to time determine.
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<PAGE>
ARTICLE III
SHAREHOLDERS
SECTION 1. MEETINGS. Meetings of the Shareholders shall be held as
provided in the Declaration of Trust at such place within or without the
Commonwealth of Massachusetts as the Trustees shall designate. The holders of a
majority of outstanding Shares present in person or by proxy shall constitute a
quorum at any meeting of the Shareholders.
SECTION 2. NOTICE OF MEETINGS. Notice of all meetings of the
Shareholders, stating the time, place and purposes of the meeting, shall be
given by the Trustees by mail to each Shareholder at his address as recorded on
the register of the Trust mailed at least ten (10) days and not more than sixty
(60) days before the meeting. Only the business stated in the notice of the
meeting shall be considered at such meeting. Any adjourned meeting may be held
as adjourned without further notice. No notice need be given to any Shareholder
who shall have failed to inform the Trust of his current address or if a written
waiver of notice, executed before or after the meeting by the Shareholder or his
attorney thereunto authorized, is filed with the records of the meeting.
SECTION 3. RECORD DATE FOR MEETINGS AND OTHER
PURPOSES. For the purpose of determining the Shareholders
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who are entitled to notice of and to vote at any meeting, or to participate in
any distribution, or for the purpose of any other action, the Trustees may from
time to time close the transfer books for such period, not exceeding thirty (30)
days, as the Trustees may determine; or without closing the transfer books the
Trustees may fix a date not more than ninety (90) days prior to the date of any
meeting of Shareholders or distribution or other action as a record date for the
determinations of the persons to be treated as Shareholders of record for such
purposes, subject to the provisions of the Declaration.
SECTION 4. PROXIES. At any meeting of Shareholders, any holder of
Shares entitled to vote thereat may vote by proxy, provided that no proxy shall
be voted at any meeting unless it shall have been placed on file with the
Secretary, or with such other officer or agent of the Trust as the Secretary may
direct, for verification prior to the time at which such vote shall be taken.
Proxies may be solicited in the name of one or more Trustees or one or more of
the officers of the Trust. Only Shareholders of record shall be entitled to
vote. Each whole share shall be entitled to one vote as to any matter on which
it is entitled by the Declaration to vote, and each fractional Share shall be
entitled to a proportionate fractional vote. When any Share is held jointly by
several persons, any one of them may
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<PAGE>
vote at any meeting in person or by proxy in respect of such Share, but if more
than one of them shall be present at such meeting in person or by proxy, and
such joint owners or their proxies so present disagree as to any vote to be
cast, such vote shall not be received in respect of such Share. A proxy
purporting to be executed by or on behalf of a Shareholder shall be deemed valid
unless challenged at or prior to its exercise, and the burden of proving
invalidity shall rest on the challenger. If the holder of any such Share is a
minor or legally incompetent, and subject to guardianship or the legal control
of any other person as regards the charge or management of such Share, he may
vote by his guardian or such other person appointed or having such control, and
such vote may be given in person or by proxy.
SECTION 5. ACTION WITHOUT MEETING. Any action which may be taken by
Shareholders may be taken without a meeting if a majority of Shareholders
entitled to vote on the matter (or such larger proportion thereof as shall be
required by law, the Declaration or these By-Laws for approval of such matter)
consent to the action in writing and the written consents are filed with the
records of the meetings of Shareholders. Such consents shall be treated for all
purposes as a vote taken at a meeting of Shareholders.
ARTICLE IV
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<PAGE>
TRUSTEES
SECTION 1. MEETINGS OF THE TRUSTEES. The Trustees may in their
discretion provide for regular or stated meetings of the Trustees. Notice of
regular or stated meetings need not be given. Meetings of the Trustees other
than regular or stated meetings shall be held whenever called by the President,
or by any one of the Trustees, at the time being in office. Notice of the time
and place of each meeting other than regular or stated meetings shall be given
by the Secretary or an Assistant Secretary or by the officer or Trustee calling
the meeting and shall be mailed to each Trustee at least two days before the
meeting, or shall be telegraphed, cabled, or wirelessed to each Trustee at his
business address, or personally delivered to him at least one day before the
meeting. Such notice may, however, be waived by any Trustee. Notice of a meeting
need not be given to any Trustee if a written waiver of notice, executed by him
before or after the meeting, is filed with the records of the meeting, or to any
Trustee who attends the meeting without protesting prior thereto or at its
commencement the lack of notice to him. A notice or waiver of notice need not
specify the purpose of any meeting. The Trustees may meet by means of a
telephone conference circuit or similar communications equipment by means of
which all persons participating in the meeting shall be deemed to have been held
at a place
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<PAGE>
designated by the Trustees at the meeting. Participation in a telephone
conference meeting shall constitute presence in person at such meeting. Any
action required or permitted to be taken at any meeting of the Trustees may be
taken by the Trustees without a meeting if all the Trustees consent to the
action in writing and the written consents are filed with the records of the
Trustees' meetings. Such consents shall be treated as a vote for all purposes.
SECTION 2. QUORUM AND MANNER OF ACTING. A majority of the Trustees
shall be present in person at any regular or special meeting of the Trustees in
order to constitute a quorum for the transaction of business at such meeting and
(except as otherwise required by law, the Declaration or these By-Laws) the act
of a majority of the Trustees present at any such meeting, at which a quorum is
present, shall be the act of the Trustees. In the absence of a quorum, a
majority of the Trustees present may adjourn the meeting from time to time until
a quorum shall be present. Notice of an adjourned meeting need not be given.
ARTICLE V
COMMITTEES
SECTION 1. EXECUTIVE AND OTHER COMMITTEES. The
Trustees by vote of a majority of all the Trustees may elect
from their own number an Executive Committee to consist of
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<PAGE>
not less than three (3) to hold office at the pleasure of the Trustees, which
shall have the power to conduct the current and ordinary business of the Trust
while the Trustees are not in session, including the purchase and sale of
securities and the designation of securities to be delivered upon redemption of
Shares of the Trust, and such other powers of the Trustees as the Trustees may,
from time to time, delegate to them except those powers which by law, the
Declaration or these By-Laws they are prohibited from delegating. The Trustees
may also elect from their own number other Committees from time to time, the
number composing such Committees, the powers conferred upon the same (subject to
the same limitations as with respect to the Executive Committee) and the term of
membership on such Committees to be determined by the Trustees. The Trustees may
designate a chairman of any such Committee. In the absence of such designation,
the Committee may elect its own Chairman.
SECTION 2. MEETINGS, QUORUM AND MANNER OF ACTING. The Trustees may
(1) provide for stated meetings of any Committee, (2) specify the manner of
calling and notice required for special meetings of any Committee, (3) specify
the number of members of a Committee required to constitute a quorum and the
number of members of a Committee required to exercise specified powers delegated
to such Committee, (4) authorize the making of decisions to exercise specified
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<PAGE>
powers by written assent of the requisite number of members of a Committee
without a meeting, and (5) authorize the members of a Committee to meet by means
of a telephone conference circuit.
The Executive Committee shall keep regular minutes of its meetings
and records of decisions taken without a meeting and cause them to be recorded
in a book designated for that purpose and kept in the Office of the Trust.
ARTICLE VI
OFFICERS
SECTION 1. GENERAL PROVISIONS. The officers of the Trust shall be a
President, a Treasurer and a Secretary, who shall be elected by the Trustees.
The Trustees may elect or appoint such other officers or agents as the business
of the Trust may require, including one or more Executive Vice Presidents, one
or more Vice Presidents, one or more Assistant Secretaries, and one or more
Assistant Treasurers. The Trustees may delegate to any officer or Committee the
power to appoint any subordinate officers or agents.
SECTION 2. TERM OF OFFICE AND QUALIFICATIONS. Except as otherwise
provided by law, the Declaration or these By-Laws, the President, the Treasurer
and the Secretary shall each hold office until his successor shall have been
duly elected and qualified, and all other officers shall hold
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office at the pleasure of the Trustees. The Secretary and Treasurer may be the
same person. A Vice President and the Treasurer or Assistant Treasurer or a Vice
President and the Secretary or Assistant Secretary may be the same person, but
the offices of Vice President and Secretary and Treasurer shall not be held by
the same person. The President shall hold no other office. Except as above
provided, any two offices may be held by the same person. Any officer may be,
but none need be, a Trustee or Shareholder.
SECTION 3. REMOVAL. The Trustees, at any regular or special meeting
of the Trustees, may remove any officer without cause, by a vote of a majority
of the Trustees then in office. Any officer or agent appointed by an officer or
Committee may be removed with or without cause by such appointing officer or
Committee.
SECTION 4. POWERS AND DUTIES OF THE PRESIDENT. The President may
call meetings of the Trustees and of any Committee thereof when he deems it
necessary and shall preside at all meetings of the Shareholders. Subject to the
control of the Trustees and to the control of any Committees of the Trustees,
within their respective spheres, as provided by the Trustees, he shall at all
times exercise a general supervision and direction over the affairs of the
Trust. He shall have the power to employ attorneys and counsel for the Trust and
to employ such subordinate officers, agents, clerks
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and employees as he may find necessary to transact the business of the Trust. He
shall also have the power to grant, issue, execute or sign such powers of
attorney, proxies or other documents as may be deemed advisable or necessary in
furtherance of the interests of the Trust. The President shall have such other
powers and duties as from time to time may be conferred upon or assigned to him
by the Trustees.
SECTION 5. POWERS AND DUTIES OF VICE PRESIDENTS. In the absence or
disability of the President, any Vice President designated by the Trustees shall
perform all the duties and may exercise any of the powers of the President,
subject to the control of the Trustees. Each Vice President shall perform such
other duties as may be assigned to him from time to time by the Trustees and the
President.
SECTION 6. POWERS AND DUTIES OF THE TREASURER. The Treasurer shall
be the principal financial and accounting officer of the Trust. He shall deliver
all funds of the Trust which may come into his hands to such Custodian as the
Trustees may employ pursuant to Article X of these By-Laws. He shall in general
perform all the duties incident to the office of Treasurer and such other duties
as from time to time may be assigned to him by the Trustees.
SECTION 7. POWERS AND DUTIES OF THE SECRETARY. The
Secretary shall keep the minutes of all meetings of the
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Trustees and of the Shareholders in proper books provided for that purpose; he
shall have custody of the seal of the Trust; he shall have charge of the Share
transfer books, lists and records unless the same are in the charge of the
Transfer Agent. He shall attend to the giving and serving of all notices by the
Trust in accordance with the provisions of these By-Laws and as required by law;
and subject to these By-Laws, he shall in general perform all duties incident to
the office of Secretary and such other duties as from time to time may be
assigned to him by the Trustees.
SECTION 8. POWERS AND DUTIES OF ASSISTANT TREASURERS. In the
absence or disability of the Treasurer, any Assistant Treasurer designated by
the Trustees shall perform all the duties, and may exercise any of the powers,
of the Treasurer. Each Assistant Treasurer shall perform such other duties as
from time to time may be assigned to him by the Trustees.
SECTION 9. POWERS AND DUTIES OF ASSISTANT SECRETARIES. In the
absence or disability of the Secretary, any Assistant Secretary designated by
the Trustees shall perform all the duties, and may exercise any of the powers,
of the Secretary. Each Assistant Secretary shall perform such other duties as
from time to time may be assigned to him by the Trustees.
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SECTION 10. COMPENSATION OF OFFICERS AND TRUSTEES AND MEMBERS OF
THE ADVISORY BOARD. Subject to any applicable provisions of the Declaration, the
compensation of the officers and Trustees and members of any Advisory Board
shall be fixed from time to time by the Trustees or, in the case of officers, by
any Committee or officer upon whom such power may be conferred by the Trustees.
No officer shall be prevented from receiving such compensation as such officer
by reason of the fact that he is also a Trustee.
ARTICLE VII
FISCAL YEAR
The fiscal year of the Trust shall begin on the first day of May in
each year and shall end on the 30th day of April in each year, provided,
however, that the Trustees may from time to time change the fiscal year.
ARTICLE VIII
SEAL
The Trustees may adopt a seal which shall be in such form and shall
have such inscription thereon as the Trustees may from time to time prescribe.
ARTICLE IX
WAIVERS OF NOTICE
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Whenever any notice is required to be given by law, the Declaration
or these By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto. A notice shall be deemed to have been telegraphed,
cabled or wirelessed for the purposes of these By-Laws when it has been
delivered to a representative of any telegraph, cable or wireless company with
instructions that it be telegraphed, cabled or wirelessed.
ARTICLE X
CUSTODY OF SECURITIES
SECTION 1. EMPLOYMENT OF A CUSTODIAN. The Trust shall place and at
all times maintain in the custody of a Custodian (including any sub-custodian
for the Custodian, which may be a foreign bank which meets applicable
requirements of law) all trusts, securities and similar investments included in
the Trust Property. The Custodian (and any sub-custodian) shall be a bank having
not less than $2,000,000 aggregate capital, surplus and undivided profits and
shall be appointed from time to time by the Trustees, who shall fix its
remuneration.
SECTION 2. ACTION UPON TERMINATION OF CUSTODIAN
AGREEMENT. Upon termination of a Custodian Agreement or
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inability of the Custodian to continue to serve, the Trustees shall promptly
appoint a successor custodian, but in the event that no successor custodian can
be found who has the required qualifications and is willing to serve, the
Trustees shall call as promptly as possible a special meeting of the
Shareholders to determine whether the Trust shall function without a custodian
or shall be liquidated. If so directed by vote of the holders of a majority of
the outstanding voting securities, the Custodian shall deliver and pay over all
Trust Property held by it as specified in such vote.
SECTION 3. PROVISIONS OF CUSTODIAN AGREEMENT. The following
provisions shall apply to the employment of a Custodian and to any contract
entered into with the Custodian so employed:
The Trustees shall cause to be delivered to the Custodian all
securities included in the Trust Property or to which the Trust may
become entitled, and shall order the same to be delivered by the
Custodian only in completion of a sale, exchange, transfer, pledge,
loan of portfolio securities to another person, or other
disposition thereof, all as the Trustees may generally or from time
to time require or approve or to a successor Custodian; and the
Trustees shall cause all trusts included in the Trust Property or
to which it may become entitled
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to be paid to the Custodian, and shall order the same disbursed
only for investment against delivery of the securities acquired, or
the return of cash held as collateral for loans of portfolio
securi-ties, or in payment of expenses, including management
compensation, and liabilities of the Trust, including distributions
to shareholders, or to a successor Custodian. In connection with
the Trust's purchase or sale of futures contracts, the Custodian
shall transmit, prior to receipt on behalf of the Trust of any
securities or other property, funds from the Trust's custodian
account in order to furnish to and maintain funds with brokers as
margin to guarantee the performance of the Trust's futures
obligations in accordance with the applicable requirements of
commodities exchanges and brokers. SECTION 4. CENTRAL CERTIFICATE
SYSTEM. Subject
to such rules, regulations and orders as the Commission may adopt, the Trustees
may direct the Custodian to deposit all or any part of the securities owned by
the Trust in a system for the central handling of securities established by a
national securities exchange or a national securities association registered
with the Commission under the Securities Exchange Act of 1934, or such other
person as may
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be permitted by the Commission, or otherwise in accordance with the 1940 Act,
pursuant to which system all securities of any particular class or series of any
issuer deposited within the system are treated as fungible and may be
transferred or pledged by bookkeeping entry without physical delivery of such
securities, provided that all such deposits shall be subject to withdrawal only
upon the order of the Trust.
SECTION 5. ACCEPTANCE OF RECEIPTS IN LIEU OF CERTIFICATES. Subject
to such rules, regulations and orders as the Commission may adopt, the Trustees
may direct the Custodian to accept written receipts or other written evidences
indicating purchases of securities held in book-entry form in the Federal
Reserve System in accordance with regulations promulgated by the Board of
Governors of the Federal Reserve System and the local Federal Reserve Banks in
lieu of receipt of certificates representing such securities.
ARTICLE XI
AMENDMENTS
These By-Laws, or any of them, may be altered, amended or repealed,
or new By-Laws may be adopted by (a) vote of a majority of the Shares
outstanding and entitled to vote or (b) the Trustees, provided, however, that no
By-Law may be amended, adopted or repealed by the Trustees if such
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amendment, adoption or repeal requires, pursuant to law, the Declaration or
these By-Laws, a vote of the Shareholders.
ARTICLE XII
INSPECTION OF BOOKS
The Trustees shall from time to time determine whether and to what
extent, and at what times and places, and under what conditions and regulations
the accounts and books of the Trust or any of them shall be open to the
inspection of the shareholders; and no shareholder shall have any right of
inspecting any account or book or document of the Trust except as conferred by
laws or authorized by the Trustees or by resolution of the shareholders.
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ARTICLE XIII
MISCELLANEOUS
(A) Except as hereinafter provided, no officer or Trustee of the
Trust and no partner, officer, director or shareholder of the Investment Adviser
of the Trust or of the Distributor of the Trust, and no Investment Adviser or
Distributor of the Trust, shall take long or short positions in the securities
issued by the Trust.
(1) The foregoing provisions shall not prevent the Distributor
from purchasing Shares from the Trust if such purchases are limited
(except for reasonable allowances for clerical errors, delays and
errors of transmission and cancellation of orders) to purchases for
the purpose of filling orders for such Shares received by the
Distributor, and provided that orders to purchase from the Trust
are entered with the Trust or the Custodian promptly upon receipt
by the Distributor of purchase orders for such Shares, unless the
Distributor is otherwise instructed by its customer.
(2) The foregoing provision shall not prevent the
Distributor from purchasing Shares of the Trust as agent for
the account of the Trust.
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(3) The foregoing provision shall not prevent the
purchase from the Trust or from the Distributor of Shares
issued by the Trust, by any officer, or Trustee of the Trust
or by any partner, officer, director or shareholder of the
Investment Adviser of the Trust or of the Distributor of the
Trust at the price available to the public generally at the
moment of such purchase, or as described in the then currently
effective Prospectus of the Trust.
(4) The foregoing shall not prevent the Distributor, or
any affiliate thereof, of the Trust from purchasing Shares
prior to the effectiveness of the first registration statement
relating to the Shares under the Securities Act of 1933. (B)
The Trust shall not lend assets of the Trust
to any officer or Trustee of the Trust, or to any partner, officer, director or
shareholder of, or person financially interested in, the Investment Adviser of
the Trust, or the Distributor of the Trust, or to the Investment Adviser of the
Trust or to the Distributor of the Trust.
(C) The Trust shall not impose any restrictions upon the
transfer of the Shares of the Trust except as provided in the Declaration, but
this requirement shall not prevent the charging of customary transfer agent
fees.
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(D) The Trust shall not permit any officer or Trustee of the
Trust, or any partner, officer or director of the Investment Adviser or
Distributor of the Trust to deal for or on behalf of the Trust with himself as
principal or agent, or with any partnership, association or corporation in which
he has a financial interest; provided that the foregoing provisions shall not
prevent (a) officers and Trustees of the Trust or partners, officers or
directors of the Investment Adviser or Distributor of the Trust from buying,
holding or selling shares in the Trust, or from being partners, officers or
directors or otherwise financially interested in the Investment Adviser or
Distributor of the Trust; (b) purchases or sales of securities or other property
by the Trust from or to an affiliated person or to the Investment Adviser or
Distributor of the Trust if such transaction is exempt from the applicable
provisions of the 1940 Act; (c) purchases of investments for the portfolio of
the Trust or sales of investments owned by the Trust through a security dealer
who is, or one or more of whose partners, shareholders, officers or directors
is, an officer or Trustee of the Trust, or a partner, officer or director of the
Investment Adviser or Distributor of the Trust, if such transactions are handled
in the capacity of broker only and commissions charged do not exceed customary
brokerage charges for such services; (d) employment of legal counsel,
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registrar, Transfer Agent, dividend disbursing agent or Custodian who is, or has
a partner, shareholder, officer, or director who is, an officer or Trustee of
the Trust, or a partner, officer or director of the Investment Adviser or
Distributor of the Trust, if only customary fees are charged for services to the
Trust; (e) sharing statistical research, legal and management expenses and
office hire and expenses with any other investment company in which an officer
or Trustee of the Trust, or a partner, officer or director of the Investment
Adviser or Distributor of the Trust, is an officer or director or otherwise
financially interested.
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TEMPLETON REAL ESTATE SECURITIES FUND
700 Central Avenue
St. Petersburg, Florida 33701-3628
Franklin Templeton Distributors, Inc.
700 Central Avenue
St. Petersburg, Florida 33701-3628
Re: Amended and Restated Distribution Agreement
Gentlemen:
We, TEMPLETON REAL ESTATE SECURITIES FUND (the "Trust") are a Massachusetts
business trust operating as an open-end management investment company or "mutual
fund", which is registered under the Investment Company Act of 1940 (the "1940
Act") and whose shares are registered under the Securities Act of 1933 (the
"1933 Act"). We desire to issue one or more series or classes of our authorized
but unissued shares of capital stock or beneficial interest (the "Shares") to
authorized persons in accordance with applicable Federal and State securities
laws. The Trust's Shares may be made available in one or more separate series,
each of which may have one or more classes.
You have informed us that your company is registered as a broker-dealer under
the provisions of the Securities Exchange Act of 1934 and that your company is a
member of the National Association of Securities Dealers, Inc. You have
indicated your desire to act as the exclusive selling agent and distributor for
the Shares. We have been authorized to execute and deliver this Distribution
Agreement ("Agreement") to you by a resolution of our Board of Trustees
("Board") passed at a meeting at which a majority of Board members, including a
majority who are not otherwise interested persons of the Trust and who are not
interested persons of our investment adviser, its related organizations or with
you or your related organizations, were present and voted in favor of the said
resolution approving this Agreement.
1. APPOINTMENT OF UNDERWRITER. Upon the execution of this Agreement and
in consideration of the agreements on your part herein expressed and upon the
terms and conditions set forth herein, we hereby appoint you as the exclusive
sales agent for our Shares and agree that we will deliver such Shares as you may
sell. You agree to use your best efforts to promote the sale of Shares, but are
not obligated to sell any specific number of Shares.
However, the Trust and each series retain the right to make direct
sales of its Shares without sales charges consistent with the terms of the then
current prospectus and applicable law, and to engage in other legally authorized
transactions in its Shares which do not involve the sale of Shares to the
general public. Such other transactions may include, without limitation,
transactions between the Trust or any series or class and its shareholders only,
transactions involving the reorganization of the Trust or any series, and
transactions involving the merger or combination of the Trust or any series with
another corporation or trust.
2. INDEPENDENT CONTRACTOR. You will undertake and discharge your
obligations hereunder as an independent contractor and shall have no authority
or power to obligate or bind us by your actions, conduct or contracts except
that you are authorized to promote the sale of Shares. You may appoint
sub-agents or distribute through dealers or otherwise as you may determine from
time to time, but this Agreement shall not be construed as authorizing any
dealer or other person to accept orders for sale or repurchase on our behalf or
otherwise act as our agent for any purpose.
3. OFFERING PRICE. Shares shall be offered for sale at a price
equivalent to the net asset value per share of that series and class plus any
applicable percentage of the public offering price as sales commission or as
otherwise set forth in our then current prospectus. On each business day on
which the New York Stock Exchange is open for business, we will furnish you with
the net asset value of the Shares of each available series and class which shall
be determined in accordance with our then effective prospectus. All Shares will
be sold in the manner set forth in our then effective prospectus and statement
of additional information, and in compliance with applicable law.
4. COMPENSATION.
A. SALES COMMISSION. You shall be entitled to charge a sales
commission on the sale or redemption, as appropriate, of each series and class
of each Trust's Shares in the amount of any initial, deferred or contingent
deferred sales charge as set forth in our then effective prospectus. You may
allow any sub-agents or dealers such commissions or discounts from and not
exceeding the total sales commission as you shall deem advisable, so long as any
such commissions or discounts are set forth in our current prospectus to the
extent required by the applicable Federal and State securities laws. You may
also make payments to sub-agents or dealers from your own resources, subject to
the following conditions: (a) any such payments shall not create any obligation
for or recourse against the Trust or any series or class, and (b) the terms and
conditions of any such payments are consistent with our prospectus and
applicable federal and state securities laws and are disclosed in our prospectus
or statement of additional information to the extent such laws may require.
B. DISTRIBUTION PLANS. You shall also be entitled to
compensation for your services as provided in any Distribution Plan adopted as
to any series and class of any Trust's Shares pursuant to Rule 12b-1 under the
1940 Act.
5. TERMS AND CONDITIONS OF SALES. Shares shall be offered for sale only
in those jurisdictions where they have been properly registered or are exempt
from registration, and only to those groups of people which the Board may from
time to time determine to be eligible to purchase such shares.
6. ORDERS AND PAYMENT FOR SHARES. Orders for Shares shall be directed
to the Trust's shareholder services agent, for acceptance on behalf of the
Trust. At or prior to the time of delivery of any of our Shares you will pay or
cause to be paid to the custodian of the Trust's assets, for our account, an
amount in cash equal to the net asset value of such Shares. Sales of Shares
shall be deemed to be made when and where accepted by the Trust's shareholder
services agent. The Trust's custodian and shareholder services agent shall be
identified in its prospectus.
7. PURCHASES FOR YOUR OWN ACCOUNT. You shall not purchase our Shares
for your own account for purposes of resale to the public, but you may purchase
Shares for your own investment account upon your written assurance that the
purchase is for investment purposes and that the Shares will not be resold
except through redemption by us.
8. SALE OF SHARES TO AFFILIATES. You may sell our Shares at net asset
value to certain of your and our affiliated persons pursuant to the applicable
provisions of the federal securities statutes and rules or regulations
thereunder (the "Rules and Regulations"), including Rule 22d-1 under the 1940
Act, as amended from time to time.
9. ALLOCATION OF EXPENSES. We will pay the expenses:
(a) Of the preparation of the audited and certified
financial statements of our company to be included in
any Post-Effective Amendments ("Amendments") to our
Registration Statement under the 1933 Act or 1940
Act, including the prospectus and statement of
additional information included therein;
(b) Of the preparation, including legal fees, and
printing of all Amendments or supplements filed with
the Securities and Exchange Commission, including the
copies of the prospectuses included in the Amendments
and the first 10 copies of the definitive
prospectuses or supplements thereto, other than those
necessitated by your (including your "Parent's")
activities or Rules and Regulations related to your
activities where such Amendments or supplements
result in expenses which we would not otherwise have
incurred;
(c) Of the preparation, printing and distribution of any
reports or communications which we send to our
existing shareholders; and
(d) Of filing and other fees to Federal and State
securities regulatory authorities necessary to
continue offering our Shares.
You will pay the expenses:
(a) Of printing the copies of the prospectuses and any
supplements thereto and statements of additional
information which are necessary to continue to offer
our Shares;
(b) Of the preparation, excluding legal fees, and
printing of all Amendments and supplements to our
prospectuses and statements of additional information
if the Amendment or supplement arises from your
(including your "Parent's") activities or Rules and
Regulations related to your activities and those
expenses would not otherwise have been incurred by
us;
(c) Of printing additional copies, for use by you as
sales literature, of reports or other communications
which we have prepared for distribution to our
existing shareholders; and
(d) Incurred by you in advertising, promoting and selling
our Shares.
10. FURNISHING OF INFORMATION. We will furnish to you such information
with respect to each series and class of Shares, in such form and signed by such
of our officers as you may reasonably request, and we warrant that the
statements therein contained, when so signed, will be true and correct. We will
also furnish you with such information and will take such action as you may
reasonably request in order to qualify our Shares for sale to the public under
the Blue Sky Laws of jurisdictions in which you may wish to offer them. We will
furnish you with annual audited financial statements of our books and accounts
certified by independent public accountants, with semi-annual financial
statements prepared by us, with registration statements and, from time to time,
with such additional information regarding our financial condition as you may
reasonably request.
11. CONDUCT OF BUSINESS. Other than our currently effective prospectus,
you will not issue any sales material or statements except literature or
advertising which conforms to the requirements of Federal and State securities
laws and regulations and which have been filed, where necessary, with the
appropriate regulatory authorities. You will furnish us with copies of all such
materials prior to their use and no such material shall be published if we shall
reasonably and promptly object.
You shall comply with the applicable Federal and State laws
and regulations where our Shares are offered for sale and conduct your affairs
with us and with dealers, brokers or investors in accordance with the Rules of
Fair Practice of the National Association of Securities Dealers, Inc.
12. REDEMPTION OR REPURCHASE WITHIN SEVEN DAYS. If Shares are tendered
to us for redemption or repurchase by us within seven business days after your
acceptance of the original purchase order for such Shares, you will immediately
refund to us the full sales commission (net of allowances to dealers or brokers)
allowed to you on the original sale, and will promptly, upon receipt thereof,
pay to us any refunds from dealers or brokers of the balance of sales
commissions reallowed by you. We shall notify you of such tender for redemption
within 10 days of the day on which notice of such tender for redemption is
received by us.
13. OTHER ACTIVITIES. Your services pursuant to this Agreement
shall not be deemed to be exclusive, and you may render similar services and
act as an underwriter, distributor or dealer for other investment companies in
the offering of their shares.
14. TERM OF AGREEMENT. This Agreement shall become effective on the
date of its execution, and shall remain in effect for a period of two (2) years.
The Agreement is renewable annually thereafter, with respect to the Trust or, if
the Trust has more than one series, with respect to each series, for successive
periods not to exceed one year (i) by a vote of (a) a majority of the
outstanding voting securities of the Trust or, if the Trust has more than one
series, of each series, or (b) by a vote of the Board, AND (ii) by a vote of a
majority of the members of the Board who are not parties to the Agreement or
interested persons of any parties to the Agreement (other than as members of the
Board), cast in person at a meeting called for the purpose of voting on the
Agreement.
This Agreement may at any time be terminated by the Trust or
by any series without the payment of any penalty, (i) either by vote of the
Board or by vote of a majority of the outstanding voting securities of the Trust
or any series on 90 days' written notice to you; or (ii) by you on 90 days'
written notice to the Trust; and shall immediately terminate with respect to the
Trust and each series in the event of its assignment.
15. SUSPENSION OF SALES. We reserve the right at all times to
suspend or limit the public offering of Shares upon two days' written notice to
you.
16. MISCELLANEOUS. This Agreement shall be subject to the laws of the
State of California and shall be interpreted and construed to further promote
the operation of the Trust as an open-end investment company. This Agreement
shall supersede all Distribution Agreements and Amendments previously in effect
between the parties. As used herein, the terms "Net Asset Value," "Offering
Price," "Investment Company," "Open-End Investment Company," "Assignment,"
"Principal Underwriter," "Interested Person," "Parent," "Affiliated Person," and
"Majority of the Outstanding Voting Securities" shall have the meanings set
forth in the 1933 Act or the 1940 Act and the Rules and Regulations thereunder.
Nothing herein shall be deemed to protect you against any liability to us or to
our securities holders to which you would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of your
duties hereunder, or by reason of your reckless disregard of your obligations
and duties hereunder.
If the foregoing meets with your approval, please acknowledge your acceptance by
signing each of the enclosed copies, whereupon this will become a binding
agreement as of the date set forth below.
Very truly yours,
Templeton Real Estate Securities Fund
By:/s/THOMAS M. MISTELE
Accepted:
Franklin Templeton Distributors, Inc.
By:/s/PETER JONES
DATED: May 1, 1995
SPECIMEN
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
DEALER AGREEMENT
Effective: XXXXX YY, 1995
Dear Securities Dealer:
Franklin/Templeton Distributors, Inc. ("we" or "us") invites you to
participate in the distribution of shares of the mutual funds in the Franklin
Templeton Group of Funds (the "Funds") for which we now or in the future serve
as principal underwriter, subject to the terms of this Agreement. We will notify
you from time to time of the Funds which are eligible for distribution and the
terms of compensation under this Agreement. This Agreement supersedes any prior
dealer agreements between us, under paragraph 18, below.
1. LICENSING.
(a) You represent that you are a member in good standing of the National
Association of Securities Dealers, Inc. ("NASD") and are presently licensed
to the extent necessary by the appropriate regulatory agency of each state
in which you will offer and sell shares of the Funds. You agree that
termination or suspension of such membership with the NASD, or of your
license to do business by any state or federal regulatory agency, at any
time shall terminate or suspend this Agreement forthwith and shall require
you to notify us in writing of such action. If you are not a member of the
NASD but are a dealer subject to the laws of a foreign country, you agree
to conform to the rules of fair practice of such association. This
Agreement is in all respects subject to Rule 26 of the Rules of Fair
Practice of the NASD which shall control any provision to the contrary in
this Agreement.
(b) You agree to notify us immediately in writing if at any time you are
not a member in good standing of the Securities Investor Protection
Corporation ("SIPC").
2. SALES OF FUND SHARES. You may offer and sell shares of each Fund and class
only at the public offering price which shall be applicable to, and in effect at
the time of, each transaction. The procedures relating to all orders and the
handling of them shall be subject to the terms of the then current prospectus
and statement of additional information (hereafter, the "prospectus") and new
account application, including amendments, for each such Fund, and our written
instructions from time to time. This Agreement is not exclusive, and either
party may enter into similar agreements with third parties.
3. DUTIES OF DEALER: IN GENERAL. You agree:
(a) To act as principal, or as agent on behalf of your
customers, in all transactions in shares of the Funds except as
provided in paragraph 4 hereof. You shall not have any
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SPECIMEN
authority to act as agent for the issuer (the Funds), for the Principal
Underwriter, or for any other dealer in any respect, nor will you represent
to any third party that you have such authority or are acting in such
capacity.
(b) To purchase shares only from us or from your customers.
(c) To enter orders for the purchase of shares of the Funds only from us
and only for the purpose of covering purchase orders you have already
received from your customers or for your own bona fide investment.
(d) To maintain records of all sales and redemptions of shares made through
you and to furnish us with copies of such records on request.
(e) To distribute prospectuses and reports to your customers in compliance
with applicable legal requirements, except to the extent that we expressly
undertake to do so on your behalf.
(f) That you will not withhold placing customers' orders for shares so as
to profit yourself as a result of such withholding or place orders for
shares in amounts just below the point at which sales charges are reduced
so as to benefit from a higher sales charge applicable to an amount below
the breakpoint.
(g) That if any shares confirmed to you hereunder are repurchased or
redeemed by any of the Funds within seven business days after such
confirmation of your original order, you shall forthwith refund to us the
full concession allowed to you on such orders. We shall forthwith pay to
the appropriate Fund our share, if any, of the "charge" on the original
sale and shall also pay to such Fund the refund from you as herein
provided. We shall notify you of such repurchase or redemption within a
reasonable time after settlement. Termination or cancellation of this
Agreement shall not relieve you or us from the requirements of this
subparagraph.
(h) That if payment for the shares purchased is not received within the
time customary or the time required by law for such payment, the sale may
be canceled forthwith without any responsibility or liability on our part
or on the part of the Funds, or at our option, we may sell the shares which
you ordered back to the Funds, in which latter case we may hold you
responsible for any loss to the Fund or loss of profit suffered by us
resulting from your failure to make payment as aforesaid. We shall have no
liability for any check or other item returned unpaid to you after you have
paid us on behalf of a purchaser. We may refuse to liquidate the investment
unless we receive the purchaser's signed authorization for the liquidation.
(i) That you shall assume responsibility for any loss to a Fund(s) caused
by a correction made subsequent to trade date, provided such correction was
not based on any error, omission
<PAGE>
SPECIMEN
or negligence on our part, and that you will immediately pay such loss to
the Fund(s) upon notification.
(j) That if on a redemption which you have ordered, instructions in proper
form, including outstanding certificates are not received within the time
customary or the time required by law, the redemption may be canceled
forthwith without any responsibility or liability on our part or on the
part of any Fund, or at our option, we may buy the shares redeemed on
behalf of the Fund, in which latter case we may hold you responsible for
any loss to the Fund or loss of profit suffered by us resulting from your
failure to settle the redemption.
4. DUTIES OF DEALER: RETIREMENT ACCOUNTS. In connection with orders for the
purchase of shares on behalf of an Individual Retirement Account, Self-Employed
Retirement Plan or other retirement accounts, by mail, telephone, or wire, you
shall act as agent for the custodian or trustee of such plans (solely with
respect to the time of receipt of the application and payments) and shall not
place such order until you have received from your customer payment for such
purchase and, if such purchase represents the first contribution to such a plan,
the completed documents necessary to establish the plan. You agree to indemnify
us and Franklin Templeton Trust Company and/or Templeton Funds Trust Company as
applicable for any claim, loss, or liability resulting from incorrect investment
instructions received from you which cause a tax liability or other tax penalty.
5. CONDITIONAL ORDERS; CERTIFICATES. We will not accept from you any
conditional orders for shares of any of the Funds. Delivery of certificates for
shares purchased shall be made by the Funds only against constructive receipt of
the purchase price, subject to deduction for your concession and our portion of
the sales charge, if any, on such sale. No certificates will be issued unless
specifically requested.
6. DEALER COMPENSATION.
(a) On each purchase of shares by you from us, the total sales charges and
your dealer concessions shall be as stated in each Fund's then current
prospectus, subject to NASD rules and applicable state and federal laws.
Such sales charges and dealer concessions are subject to reductions under a
variety of circumstances as described in the Funds' prospectuses. To obtain
these reductions, we must be notified when the sale takes place which would
qualify for the reduced charge. If you fail to notify us of the
applicability of a reduction in the sales charge at the time the trade is
placed, neither we nor any of the Funds will be liable for amounts
necessary to reimburse any investor for the reduction which should have
been effected.
(b) In accordance with the Funds' prospectuses, we or our
affiliates may, but are not obligated to, make payments to
<PAGE>
SPECIMEN
dealers from our own resources as compensation for certain sales which are
made at net asset value and are not subject to any contingent deferred
sales charges ("Qualifying Sales"). If you notify us of a Qualifying Sale,
we may make a contingent advance payment up to the maximum amount available
for payment on the sale. If any of the shares purchased in a Qualifying
Sale are redeemed within twelve months of the end of the month of purchase,
we shall be entitled to recover any advance payment attributable to the
redeemed shares by reducing any account payable or other monetary
obligation we may owe to you or by making demand upon you for repayment in
cash. We reserve the right to withhold advances to any dealer, if for any
reason we believe that we may not be able to recover unearned advances from
such dealer.
7. REDEMPTIONS. Redemptions or repurchases of shares will be made at the net
asset value of such shares, less any applicable deferred sales or redemption
charges, in accordance with the applicable prospectuses. Except as permitted by
applicable law, you agree not to purchase any shares from your customers at a
price lower than the redemption or repurchase prices then computed by the Funds.
You shall, however, be permitted to sell shares for the account of the record
owner to the Funds at the repurchase price then currently in effect for such
shares and may charge the owner a fair commission for handling the transaction.
8. EXCHANGES. Telephone exchange orders will be effective only for shares in
plan balance (uncertificated shares) or for which share certificates have been
previously deposited and may be subject to any fees or other restrictions set
forth in the applicable prospectuses. You may charge the shareholder a fair
commission for handling an exchange transaction. Exchanges from a Fund sold with
no sales charge to a Fund which carries a sales charge, and exchanges from a
Fund sold with a sales charge to a Fund which carries a higher sales charge may
be subject to a sales charge in accordance with the terms of each Fund's
prospectus. You will be obligated to comply with any additional exchange
policies described in each Fund's prospectus, including without limitation any
policy restricting or prohibiting "Timing Accounts" as therein defined.
9. TRANSACTION PROCESSING. All orders are subject to acceptance by us and by
the Fund or its transfer agent, and become effective only upon confirmation by
us. If required by law, each transaction shall be confirmed in writing on a
fully disclosed basis and if confirmed by us, a copy of each confirmation shall
be sent simultaneously to you if you so request. All sales are made subject to
receipt of shares by us from the Funds. We reserve the right in our discretion,
without notice, to suspend the sale of shares or withdraw the offering of shares
entirely. Telephone orders will be effected at the price(s) next computed on the
day they are received from you if, as set forth in each Fund's current
prospectus, they are received prior to the time the price of its shares is
calculated. Orders received after that time will be
<PAGE>
SPECIMEN
effected at the price(s) computed on the next business day. All
orders must be accompanied by payment in U.S. dollars. Orders
payable by check must be drawn payable in U.S. dollars on a U.S.
bank, for the full amount of the investment.
10. MULTIPLE CLASSES. We may from time to time provide to you written
compliance guidelines or standards relating to the sale or distribution of Funds
offering multiple classes of shares with different sales charges and
distribution-related operating expenses. In addition, you will be bound by any
applicable rules or regulations of government agencies or self-regulatory
organizations generally affecting the sale or distribution of mutual funds
offering multiple classes of shares.
11. RULE 12B-1 PLANS. You are also invited to participate in
all Plans adopted by the Funds (the "Plan Funds") pursuant to Rule
12b-1 under the 1940 Act.
To the extent you provide administrative and other services, including, but
not limited to, furnishing personal and other services and assistance to your
customers who own shares of a Plan Fund, answering routine inquiries regarding a
Fund, assisting in changing account designations and addresses, maintaining such
accounts or such other services as a Fund may require, to the extent permitted
by applicable statutes, rules, or regulations, we shall pay you a Rule 12b-1
servicing fee. To the extent that you participate in the distribution of Fund
shares which are eligible for a Rule 12b-1 distribution fee, we shall also pay
you a Rule 12b-1 distribution fee. All Rule 12b-1 servicing and distribution
fees shall be based on the value of shares attributable to customers of your
firm and eligible for such payment, and shall be calculated on the basis and at
the rates set forth in the compensation schedule then in effect. Without prior
approval by a majority of the outstanding shares of a Fund, the aggregate annual
fees paid to you pursuant to each Plan shall not exceed the amounts stated as
the "annual maximums" in each Fund's prospectus, which amount shall be a
specified percent of the value of the Fund's net assets held in your customers'
accounts which are eligible for payment pursuant to this Agreement (determined
in the same manner as each Fund uses to compute its net assets as set forth in
its effective Prospectus).
You shall furnish us and each Fund with such information as shall reasonably
be requested by the Boards of Directors, Trustees or Managing General Partners
(hereinafter referred to as "Directors") of such Funds with respect to the fees
paid to you pursuant to the Schedule. We shall furnish to the Boards of
Directors of the Plan Funds, for their review on a quarterly
<PAGE>
SPECIMEN
basis, a written report of the amounts expended under the Plans and the purposes
for which such expenditures were made.
The Plans and provisions of any agreement relating to such Plans must be
approved annually by a vote of the Plan Funds' Directors, including such persons
who are not interested persons of the Plan Funds and who have no financial
interest in the Plans or any related agreement ("Rule 12b-1 Directors"). The
Plans or the provisions of this Agreement relating to such Plans may be
terminated at any time by the vote of a majority of the Plan Funds' Boards of
Directors, including Rule 12b-1 Directors, or by a vote of a majority of the
outstanding shares of the Plan Funds, on sixty (60) days' written notice,
without payment of any penalty. The Plans or the provisions of this Agreement
may also be terminated by any act that terminates the Underwriting Agreement
between us and the Plan Funds, and/or the management or administration agreement
between Franklin Advisers, Inc. or Templeton Investment Counsel, Inc. or their
affiliates and the Plan Funds. In the event of the termination of the Plans for
any reason, the provisions of this Agreement relating to the Plans will also
terminate.
Continuation of the Plans and provisions of this Agreement relating to such
Plans are conditioned on Rule 12b-1 Directors being ultimately responsible for
selecting and nominating any new Rule 12b-1 Directors. Under Rule 12b-1,
Directors of any of the Plan Funds have a duty to request and evaluate, and
persons who are party to any agreement related to a Plan have a duty to furnish,
such information as may reasonably be necessary to an informed determination of
whether the Plan or any agreement should be implemented or continued.
Parties to this Agreement who provide services to Plan Funds in the promotion
of shares of such Funds should be aware that under Rule 12b-1 Plan Funds are
permitted to implement or continue Plans or the provisions of this Agreement
relating to such Plans from year-to-year only if, based on certain legal
considerations, the board is able to conclude that the Plans will benefit the
Plan Funds. Absent such yearly determination the Plans and the provisions of
this Agreement relating to the Plans must be terminated as set forth above. In
addition, any obligation assumed by a Fund pursuant to this Agreement shall be
limited in all cases to the assets of such Fund and no person shall seek
satisfaction thereof from shareholders of a Fund.
<PAGE>
SPECIMEN
You agree to waive payment of any amounts payable to you by us under a Fund's
Plan of Distribution pursuant to Rule 12b-1 until such time as we are in receipt
of such fee from the Fund.
The provisions of the Rule 12b-1 Plans between the Plan Funds and us, insofar
as they relate to Plans, shall control over the provisions of this Agreement in
the event of any inconsistency.
12. REGISTRATION OF SHARES. Upon request, we shall notify you of the states
or other jurisdictions in which Fund shares are currently registered or
qualified for sale to the public. We shall have no obligation to register or
qualify, or to maintain registration or qualification of, Fund shares in any
state or other jurisdiction. We shall have no responsibility, under the laws
regulating the sale of securities in any U.S. or foreign jurisdiction, for the
qualification or status of persons selling Fund shares or for the manner of sale
of Fund shares. Except as stated in this paragraph, we shall not, in any event,
be liable or responsible for the issue, form, validity, enforceability and value
of such shares or for any matter in connection therewith, and no obligation not
expressly assumed by us in this Agreement shall be implied. Nothing in this
Agreement, however, shall be deemed to be a condition, stipulation or provision
binding any person acquiring any security to waive compliance with any provision
of the Securities Act of 1933, or of the rules and regulations of the Securities
and Exchange Commission, or to relieve the parties hereto from any liability
arising under the Securities Act of 1933.
13. ADDITIONAL REGISTRATIONS. If it is necessary to register or qualify the
shares in any foreign jurisdictions in which you intend to offer the shares, it
will be your responsibility to arrange for and to pay the costs of such
registration or qualification; prior to any such registration or qualification
you will notify us of your intent and of any limitations that might be imposed
on the Funds and you agree not to proceed with such registration or
qualification without the written consent of the Funds and of ourselves.
14. FUND INFORMATION. No person is authorized to give any
information or make any representations concerning shares of the
Funds except those contained in the current prospectus, or
statement of additional information issued by the Fund or by us
as information supplemental to such prospectus or statement of
additional information. We will supply prospectuses, reasonable
<PAGE>
SPECIMEN
quantities of supplemental sale literature, sales bulletins, and additional
information as issued. You agree not to use other advertising or sales material
relating to the Funds except that which (a) conforms to the requirements of any
applicable laws or regulations of any government or authorized agency in the
U.S. or any other country, having jurisdiction over the offering or sale of
shares of the Funds, and (b) is approved in writing by us in advance of such
use. Such approval may be withdrawn by us in whole or in part upon notice to
you, and you shall, upon receipt of such notice, immediately discontinue the use
of such sales literature, sales material and advertising. You are not authorized
to modify or translate any such materials without our prior written consent.
15. INDEMNIFICATION. You further agree to indemnify, defend and hold harmless
the Principal Underwriter, the Funds, their officers, directors and employees
from any and all losses, claims, liabilities and expenses, whether or not
resulting in any liability to any of the parties indemnified under this
subparagraph, arising out of (1) any alleged violation of any statute or
regulation (including without limitation the securities laws and regulations of
the United States or any state or foreign country) or any alleged tort or breach
of contract, in or related to the offer and sale by you of shares of the Funds
pursuant to this Agreement (except to the extent that our negligence or failure
to follow correct instructions received from you is the cause of such loss,
claim, liability or expense), (2) any redemption or exchange pursuant to
telephone instructions received from you or your agent or employees, or (3) the
breach by you of any of the terms and conditions of this Agreement.
16. TERMINATION; SUCCESSION; AMENDMENT. Each party to this Agreement may
cancel its participation in this Agreement by giving written notice to the other
parties. Such notice shall be deemed to have been given and to be effective on
the date on which it was either delivered personally to the other parties or any
officer or member thereof, or was mailed postpaid or delivered to a telegraph
office for transmission to the other parties' Chief Legal Officers at the
addresses shown herein or in the most recent NASD Manual. This Agreement shall
terminate immediately upon the appointment of a Trustee under the Securities
Investor Protection Act or any other act of insolvency by you. The termination
of this Agreement by any of the foregoing means shall have no effect upon
transactions entered into prior to the effective date of termination. A trade
placed
<PAGE>
SPECIMEN
by you subsequent to your voluntary termination of this Agreement will not serve
to reinstate the Agreement. Reinstatement, except in the case of a temporary
suspension of a dealer will only be effective upon written notification by us.
Unless terminated, this Agreement shall be binding upon each party's successors
or assigns. This Agreement may be amended by us at any time by written notice to
you and your placing of an order or acceptance of payments of any kind after the
effective date and receipt of notice of any such Amendment shall constitute your
acceptance of such Amendment.
17. SETOFF; DISPUTE RESOLUTION. Should any of your concession accounts with
us have a debit balance, we may offset and recover the amount owed from any
other account you have with us, without notice or demand to you. In the event of
a dispute concerning any provision of this Agreement, either party may require
the dispute to be submitted to binding arbitration under the commercial
arbitration rules of the NASD or the American Arbitration Association. Judgment
upon any arbitration award may be entered by any state or federal court having
jurisdiction. This Agreement shall be construed in accordance with the laws of
the State of California, not including any provision which would require the
general application of the law of another jurisdiction.
18. ACCEPTANCE; CUMULATIVE EFFECT. This Agreement is cumulative and
supersedes any agreement previously in effect. It shall be binding upon the
parties hereto when signed by us and accepted by you. If you have a current
dealer agreement with us, your first trade or acceptance of payments from us
after receipt of this Agreement, as it may be amended pursuant to paragraph 16,
above, shall constitute your acceptance of its terms. Otherwise, your signature
below shall constitute your acceptance of its terms.
Date:
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
By:
(Signature)
Name: Greg Johnson
Title: President
<PAGE>
SPECIMEN
777 Mariners Island Blvd.
San Mateo, CA 94404
Attention: Chief Legal Officer (for legal notices only)
700 Central Avenue
St. Petersburg, Florida 33701-3628
KEY PHONE NUMBERS FOR FRANKLIN TEMPLETON FUNDS
DEPARTMENT NAME
TELEPHONE NO.
HOURS OF OPERATION (PACIFIC
TIME) (MONDAY THROUGH
FRIDAY)SHAREHOLDER SERVICES
1-800/632-2301
6:00 A.M. TO 5:00 P.M.DEALER SERVICES
1-800/524-4040
6:00 A.M. TO 5:00 P.M.FUND INFORMATION
1-800/DIAL BEN
6:00 A.M. TO 8:00 P.M., 8:30
A.M. TO 5:00 P.M. (SATURDAY)RETIREMENT PLANS
1-800/527-2020
6:00 A.M. TO 5:00 P.M.TDD (HEARING IMPAIRED)
1-800/851-0637
6:00 A.M. TO 5:00 P.M.
<PAGE>
SPECIMEN
<PAGE>
SPECIMEN
[Note to Graphics: Please put this on a different page with some
marking to indicate that it's part of one agreement. Our idea is
to send only the part above the page break to current dealers,
and to attach a signature page for new dealers.]
[DEALER NAME]
By:
(Signature)
Name:
Title:
Address:
Attention: Chief Legal Officer
Telephone:
NASD CRD #
Franklin Templeton Dealer # _________________________________
(Internal Use Only)
<PAGE>
CUSTODY AGREEMENT
AGREEMENT dated September 12, 1989, between THE CHASE
MANHATTAN BANK, N.A. ("Chase"), having its principal place of business at 1
Chase Manhattan Plaza, New York, New York 10081, and TEMPLETON REAL ESTATE TRUST
(the "Fund"), an investment company registered under the Investment Company Act
of 1940 ("Act of 1940"), having its principal place of business at 700 Central
Avenue, St. Petersburg, Florida 33701.
WHEREAS, the Fund wishes to appoint Chase as custodian to its
securities and assets and Chase is willing to act as custodian under the terms
and conditions hereinafter set forth;
NOW, THEREFORE, the Fund and its successors and assigns and
Chase and its successors and assigns, hereby agree as follows:
1. APPOINTMENT AS CUSTODIAN. Chase agrees to act as custodian
for the Fund, as provided herein, in connection with (a) cash ("Cash") received
from time to time from, or for the account of, the Fund for credit to the Fund's
deposit account or accounts administered by Chase, Chase Branches and Domestic
Securities Depositories (as hereinafter defined), and/or Foreign Banks and
Foreign Securities Depositories (as hereinafter defined) (the "Deposit
Account"); (b) all stocks, shares, bonds, debentures, notes, mortgages, or other
obligations for the payment of money and any certificates,
<PAGE>
receipts, warrants, or other instruments representing rights to receive,
purchase, or subscribe for the same or evidencing or representing any other
rights or interests therein and other similar property ("Securities") from time
to time received by Chase and/or any Chase Branch, Domestic Securities
Depository, Foreign Bank or Foreign Securities Depository for the account of the
Fund (the "Custody Account"); and (c) original margin and variation margin
payments in a segregated account for futures contracts (the "Segregated
Account").
All cash held in the Deposit Account or in the Segregated
Account in connection with which Chase agrees to act as custodian is hereby
denominated as a special deposit which shall be held in trust for the benefit of
the Fund and to which Chase, Chase Branches and Domestic Securities Depositories
and/or Foreign Banks and Foreign Securities Depositories shall have no ownership
rights, and Chase will so indicate on its books and records pertaining to the
Deposit Account and the Segregated Account. All cash held in auxiliary accounts
that may be carried for the Fund with Chase (including a Money Market Account,
Redemption Account, Distribution Account and Imprest Account) is not so
denominated as a special deposit and title thereto is held by Chase subject to
the claims of creditors.
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<PAGE>
2. AUTHORIZATION TO USE BOOK ENTRY SYSTEM, DOMESTIC
SECURITIES DEPOSITORIES, BRANCH OFFICES, FOREIGN BANKS AND
FOREIGN SECURITIES DEPOSITORIES. Chase is hereby authorized
to appoint and utilize, subject to the provisions of Sections
4 and 5 hereof:
A. The Book Entry System and The Depository Trust
Company; and also such other Domestic Securities Depositories
selected by Chase and as to which Chase has received a
certified copy of a resolution of the Fund's Board of Trustees
authorizing deposits therein;
B. Chase's foreign branch offices in the United
Kingdom, Hong Kong, Singapore, and Tokyo, and such other
foreign branch offices of Chase located in countries approved
by the Board of Trustees of the Fund as to which Chase shall
have given prior notice to the Fund;
C. Foreign Banks which Chase shall have
selected, which are located in countries approved by
the Board of Trustees of the Fund, and as to which
banks Chase shall have given prior notice to the
Fund; and
D. Foreign Securities Depositories which Chase
shall have selected and as to which Chase has
received a certified copy of a resolution of the
Fund's Board of Trustees authorizing deposits
therein;
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<PAGE>
to hold Securities and Cash at any time owned by the Fund, it being understood
that no such appointment or utilization shall in any way relieve Chase of its
responsibilities as provided for in this Agreement. Foreign branch offices of
Chase appointed and utilized by Chase are herein referred to as "Chase
Branches." Unless otherwise agreed to in writing, (a) each Chase Branch, each
Foreign Bank and each Foreign Securities Depository shall be selected by Chase
to hold only Securities as to which the principal trading market or principal
location as to which such Securities are to be presented for payment is located
outside the United States; and (b) Chase and each Chase Branch, Foreign Bank and
Foreign Securities Depository will promptly transfer or cause to be transferred
to Chase, to be held in the United States, Securities and/or Cash that are then
being held outside the United States upon request of the Fund and/or of the
Securities and Exchange Commission. Utilization by Chase of Chase Branches,
Domestic Securities Depositories, Foreign Banks and Foreign Securities
Depositories shall be in accordance with provisions as from time to time
amended, of an operating agreement to be entered into between Chase and the Fund
(the "Operating Agreement").
3. DEFINITIONS. As used in this Agreement, the
following terms shall have the following meanings:
(a) "Authorized Persons of the Fund" shall mean
such officers or employees of the Fund or any other
person or persons as shall have been designated by a
- 4 -
<PAGE>
resolution of the Board of Trustees of the Fund, a certified
copy of which has been filed with Chase, to act as Authorized
Persons hereunder. Such persons shall continue to be
Authorized Persons of the Fund, authorized to act either
singly or together with one or more other of such persons as
provided in such resolution, until such time as the Fund shall
have filed with Chase a written notice of the Fund
supplementing, amending, or revoking the authority of such
persons.
(b) "Book-Entry system" shall mean the Federal
Reserve/Treasury book-entry system for United States and
federal agency securities, its successor or successors and its
nominee or nominees.
(c) "Domestic Securities Depository" shall mean The
Depository Trust Company, a clearing agency registered with
the Securities and Exchange Commission, its successor or
successors and its nominee or nominees; and (subject to the
receipt by Chase of a certified copy of a resolution of the
Fund's Board of Trustees specifically approving deposits
therein as provided in Section 2(a) of this Agreement) any
other person authorized to act as a depository under the Act
of 1940, its successor or successors and its nominee or
nominees.
(d) "Foreign Bank" shall mean any banking
institution organized under the laws of a
- 5 -
<PAGE>
jurisdiction other than the United States or of any
state thereof.
(e) A "Foreign Securities Depository" shall mean any
system for the central handling of securities abroad where all
securities of any particular class or series of any issuer
deposited within the system are treated as fungible and may be
transferred or pledged by bookkeeping without physical
delivery of the securities by any Chase Branch or Foreign
Bank.
(f) "Written Instructions" shall mean
instructions in writing signed by Authorized Persons
of the Fund giving such instructions, and/or such
other forms of communications as from time to time
shall be agreed upon in writing between the Fund and
Chase.
4. SELECTION OF COUNTRIES IN WHICH SECURITIES MAY
BE HELD. Chase shall not cause Securities and Cash to be held in any country
outside the United States until the Fund has directed the holding of its assets
in such country. Chase will be provided with a copy of a resolution of the
Fund's Board of Trustees authorizing such custody in any country outside of the
United States, which resolution shall be based upon, among other factors, the
following:
(a) comparative operational efficiencies of
custody;
- 6 -
<PAGE>
(b) clearance and settlement and the costs
thereof; and
(c) political and other risks, other than those
risks specifically assumed by Chase.
5. RESPONSIBILITY OF CHASE TO SELECT CUSTODIANS IN
INDIVIDUAL FOREIGN COUNTRIES. The responsibility for
selecting the Chase Branch, Foreign Bank or Foreign Securities Depository to
hold the Fund's Securities and Cash in individual countries authorized by the
Fund shall be that of Chase. Chase generally shall utilize Chase Branches where
available. In locations where there are no Chase Branches providing custodial
services, Chase shall select as its agent a Foreign Bank, which may be an
affiliate or subsidiary of Chase. To facilitate the clearance and settlement of
securities transactions, Chase represents that, subject to the approval of the
Fund, it may deposit Securities in a Foreign Securities Depository in which
Chase is a participant. In situations in which Chase is not a participant in a
Foreign Securities Depository, Chase may, subject to the approval of the Fund,
authorize a Foreign Bank acting as its subcustodian to deposit the Securities in
a Foreign Securities Depository in which the Foreign Bank is a participant.
Notwithstanding the foregoing, such selection by Chase of a Foreign Bank or
Foreign Securities Depository shall not become effective until Chase has been
advised by the Fund that a majority of its Board of Trustees:
- 7 -
<PAGE>
(a) Has approved Chase's selection of the particular
Foreign Bank or Foreign Securities Depository, as the case may
be, as consistent with the best interests of the Fund and its
Shareholder;
(b) Has approved as consistent with the best
interests of the Fund and its Shareholders a written
contract prepared by Chase which will govern the
manner in which such Foreign Bank will maintain the
Fund's assets.
6. CONDITIONS ON SELECTION OF FOREIGN BANK OR
FOREIGN SECURITIES DEPOSITORY. Chase shall authorize the
holding of Securities and Cash by a Chase Branch, Foreign
Bank or Foreign Securities Depository only:
(a) to the extent that the Securities and Cash are
not subject to any right, charge, security interest, lien or
claim of any kind in favor of any such Foreign Bank or Foreign
Securities Depository, except for their safe custody or
administration, and
(b) to the extent that the beneficial ownership
of Securities is freely transferable without the
payment of money or value other than for safe custody
or administration.
7. CHASE BRANCHES AND FOREIGN BANKS NOT AGENTS OF
THE FUND. Chase Branches, Foreign Banks and Foreign
Securities Depositories shall be subject to the instructions
of Chase and/or the Foreign Bank, and not to those of the
Fund. Chase warrants and represents that all such
- 8 -
<PAGE>
instructions shall afford protection to the Fund at least equal to that afforded
for Securities held directly by Chase. Any Chase Branch, Foreign Bank or Foreign
Securities Depository shall act solely as agent of Chase or of such
Foreign Bank.
8. CUSTODY ACCOUNT. Securities held in the Custody
Account shall be physically segregated at all times from
those of any other person or persons except that (a) with
respect to Securities held by Chase Branches, such Securities may be placed in
an omnibus account for the customers of Chase, and Chase shall maintain separate
book entry records for each such omnibus account, and such Securities shall be
deemed for the purpose of this Agreement to be held by Chase in the Custody
Account; (b) with respect to Securities deposited by Chase with a Foreign Bank,
a Domestic Securities Depository or a Foreign Securities Depository, Chase shall
identify on its books as belonging to the Fund the Securities shown on Chase's
account on the books of the Foreign Bank, Domestic Securities Depository or
Foreign Securities Depository; and (c) with respect to Securities deposited by a
Foreign Bank with a Foreign Securities Depository, Chase shall cause the Foreign
Bank to identify on its books as belonging to Chase, as agent, the Securities
shown on the Foreign Bank's account on the books of the Foreign Securities
Depository. All Securities of the Fund maintained by Chase pursuant to this
Agreement shall be subject only to the instructions of Chase, Chase Branches or
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<PAGE>
their agents. Chase shall only deposit Securities with a Foreign Bank in
accounts that include only assets held by Chase for its customers.
8a. SEGREGATED ACCOUNT FOR FUTURES CONTRACTS. With
respect to every futures contract purchased, sold or cleared
for the Custody Account, Chase agrees, pursuant to Written
Instructions, to:
(a) deposit original margin and variation
margin payments in a segregated account maintained by
Chase; and
(b) perform all other obligations attendant to
transactions or positions in such futures contracts,
as such payments or performance may be required by
law or the executing broker.
8b. SEGREGATED ACCOUNT FOR REPURCHASE AGREEMENTS.
With respect to purchases for the Custody Account from banks (including Chase)
or broker-dealers, of United States or foreign government obligations subject to
repurchase agreements, Chase agrees, pursuant to Written Instructions, to:
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(a) deposit such securities and repurchase
agreements in a segregated account maintained by
Chase; and
(b) promptly show on Chase's records that such
securities and repurchase agreements are being held
on behalf of the Fund and deliver to the Fund a
written confirmation to that effect.
8c. SEGREGATED ACCOUNTS FOR DEPOSITS OF COLLATERAL.
Chase agrees, with respect to (i) cash or high quality debt securities to secure
the Fund's commitments to purchase new issues of debt obligations offered on a
when-issued basis; (ii) cash, U.S. government securities, or irrevocable letters
of credit of borrowers of the Fund's portfolio securities to secure the loan to
them of such securities; and/or (iii) cash, securities or any other property
delivered to secure any other obligations; (all of such items being hereinafter
referred to as "collateral"), pursuant to Written Instructions, to:
(a) deposit the collateral for each such
obligation in a separate segregated account
maintained by Chase; and
(b) promptly to show on Chase's records that
such collateral is being held on behalf of the Fund
and deliver to the Fund a written confirmation to
that effect.
9. DEPOSIT ACCOUNT. Subject to the provisions of
this Agreement, the Fund authorizes Chase to establish and
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maintain in each country or other jurisdiction in which the principal trading
market for any Securities is located or in which any Securities are to be
presented for payment, an account or accounts, which may include nostro accounts
with Chase Branches and omnibus accounts of Chase at Foreign Banks, for receipt
of cash in the Deposit Account, in such currencies as directed by Written
Instructions. For purposes of this Agreement, cash so held in any such account
shall be evidenced by separate book entries maintained by Chase at its office in
London and shall be deemed to be Cash held by Chase in the Deposit Account.
Unless Chase receives Written Instructions to the contrary, cash received or
credited by Chase or any other Chase Branch, Foreign Bank or Foreign Securities
Depository for the Deposit Account in a currency other than United States
dollars shall be converted promptly into United States dollars whenever it is
practicable to do so through customary banking channels (including without
limitation the effecting of such conversions at Chase's preferred rates through
Chase, its affiliates or Chase Branches), and shall be automatically transmitted
back to Chase in the United States.
10. SETTLEMENT PROCEDURES. Settlement procedures
for transactions in Securities delivered to, held in, or to
be delivered from the Custody Account in Chase Branches,
Domestic Securities Depositories, Foreign Banks and Foreign
Securities Depositories, including receipts and payments of
cash held in any nostro account or omnibus account for the
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<PAGE>
Deposit Account as described in Section 9, shall be carried out in accordance
with the provisions of the Operating Agreement. It is understood that such
settlement procedures may vary, as provided in the Operating Agreement, from
securities market to securities market, to reflect particular settlement
practices in such markets.
Chase shall make or cause the appropriate Chase Branch or
Foreign Bank to move payments of Cash held in the Deposit Account only:
(a) in connection with the purchase of Securities for
the account of the Fund and only against the receipt of such
Securities by Chase or by another appropriate Chase Branch,
Domestic Securities Depository, Foreign Bank or Foreign
Securities Depository, or otherwise as provided in the
Operating Agreement, each such payment to be made at prices
confirmed by Written Instructions, or
(b) in connection with any dividend, interim
dividend or other distribution declared by the Fund,
or
(c) as directed by the Fund by Written Instructions
setting forth the name and address of the person to whom the
payment is to be made and the purpose for which the payment is
to be made.
Upon the receipt by Chase of Written Instructions
specifying the Securities to be so transferred or delivered,
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<PAGE>
which instructions shall name the person or persons to whom transfers or
deliveries of such Securities shall be made and shall indicate the time(s) for
such transfers or deliveries, Securities held in the Custody Account shall be
transferred, exchanged, or delivered by Chase, any Chase Branch, Domestic
Securities Depository, Foreign Bank, or Foreign Securities Depository, as the
case may be, against payment in Cash or Securities, or otherwise as provided in
the Operating Agreement, only:
(a) upon sale of such Securities for the account of
the Fund and receipt of such payment in the amount shown in a
broker's confirmation of sale of the Securities or other
proper authorization received by Chase before such payment is
made, as confirmed by Written Instructions;
(b) in exchange for or upon conversion into other
Securities alone or other Securities and Cash pursuant to any
plan of merger, consolidation, reorganization,
recapitalization, readjustment, or tender offer;
(c) upon exercise of conversion, subscription,
purchase, or other similar rights represented by such
Securities; or
(d) otherwise as directed by the Fund by Written
Instructions which shall set forth the amount and purpose of
such transfer or delivery.
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<PAGE>
Until Chase receives Written Instructions to the contrary,
Chase shall, and shall cause each Chase Branch, Domestic Securities Depository,
Foreign Bank and Foreign Securities Depository holding Securities or Cash to,
take the following actions in accordance with procedures established
in the Operating Agreement:
(a) collect and timely deposit in the Deposit Account
all income due or payable with respect to any Securities and
take any action which may be necessary and proper in
connection with the collection and receipt of such income;
(b) present timely for payment all Securities in the
Custody Account which are called, redeemed or retired or
otherwise become payable and all coupons and other income
items which call for payment upon presentation and to receive
and credit to the Deposit Account Cash so paid for the account
of the Fund except that, if such Securities are convertible,
such Securities shall not be presented for payment until two
business days preceding the date on which such conversion
rights would expire unless Chase previously shall have
received Written Instructions with respect thereto;
(c) present for exchange all Securities in the
Custody Account converted pursuant to their terms
into other Securities;
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(d) in respect of securities in the Custody Account,
execute in the name of the Fund such ownership and other
certificates as may be required to obtain payments in respect
thereto, provided that Chase shall have requested and the Fund
shall have furnished to Chase any information necessary in
connection with such certificates;
(e) exchange interim receipts or temporary
Securities in the Custody Account for definitive
Securities; and
(f) receive and hold in the Custody Account all
Securities received as a distribution on Securities
held in the Custody Account as a result of a stock
dividend, share split-up or reorganization,
recapitalization, readjustment or other rearrangement
or distribution of rights or similar Securities
issued with respect to any Securities held in the
Custody Account.
11. RECORDS. Chase hereby agrees that Chase and any
Chase Branch or Foreign Bank shall create, maintain, and retain all records
relating to their activities and obligations as custodian for the Fund under
this Agreement in such manner as will meet the obligations of the Fund under the
Act of 1940, particularly Section 31 thereof and Rules 31a-1 and 31a-2
thereunder, and Federal, state and foreign tax laws and other legal or
administrative rules or procedures, in each case as currently in effect and
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<PAGE>
applicable to the Fund. All records so maintained in connection with the
performance of its duties under this Agreement shall, in the event of
termination of this Agreement, be preserved and maintained by Chase as required
by regulation, and shall be made available to the Fund or its agent upon
request, in accordance with the provisions of Section 19.
Chase hereby agrees, subject to restrictions under applicable
laws, that the books and records of Chase and any Chase Branch pertaining to
their actions under this Agreement shall be open to the physical, on-premises
inspection and audit at reasonable times by the independent accountants
("Accountants") employed by, or other representatives of, the Fund. Chase hereby
agrees that, subject to restrictions under applicable laws, access shall be
afforded to the Accountants to such of the books and records of any Foreign
Bank, Domestic Securities Depository or Foreign Securities Depository with
respect to Securities and Cash as shall be required by the Accountants in
connection with their examination of the books and records pertaining to the
affairs of the Fund. Chase also agrees that as the Fund may reasonably request
from time to time, Chase shall provide the Accountants with information with
respect to Chase's and Chase Branches' systems of internal accounting controls
as they relate to the services provided under this Agreement, and Chase shall
use its best efforts to obtain and furnish similar information with respect to
each Domestic Securities
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<PAGE>
Depository, Foreign Bank and Foreign Securities Depository
holding Securities and Cash.
12. REPORTS. Chase shall supply periodically, upon the
reasonable request of the Fund, such statements, reports, and advices with
respect to Cash in the Deposit Account and the Securities in the Custody Account
and transactions in Securities from time to time received and/or delivered for
or from the Custody Account, as the case may be, as the Fund shall require. Such
statements, reports and advices shall include an identification of the Chase
Branch, Domestic Securities Depository, Foreign Bank and Foreign Securities
Depository having custody of the Securities and Cash, and descriptions thereof.
13. REGISTRATION OF SECURITIES. Securities in the Custody
Account which are issued or issuable only in bearer form (except such securities
as are held in the Book-Entry System) shall be held by Chase, Chase Branches,
Domestic Securities Depositories, Foreign Banks or Foreign Securities
Depositories in that form. All other Securities in the Custody Account shall be
held in registered form in the name of Chase, or any Chase Branch, the
Book-Entry System, Domestic Securities Depository, Foreign Bank or Foreign
Securities Depository and their nominees, as custodian or nominee.
14. STANDARD OF CARE.
(a) GENERAL. Chase shall assume entire
responsibility for all Securities held in the Custody
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<PAGE>
Account, Cash held in the Deposit Account, Cash or Securities
held in the Segregated Account and any of the Securities and
Cash while in the possession of Chase or any Chase Branch,
Domestic Securities Depository, Foreign Bank or Foreign
Securities Depository, or in the possession or control of any
employees, agents or other personnel of Chase or any Chase
Branch, Domestic Securities Depository, Foreign Bank or
Foreign Securities Depository; and shall be liable to the Fund
for any loss to the Fund occasioned by any destruction of the
Securities or Cash so held or while in such possession, by any
robbery, burglary, larceny, theft or embezzlement by any
employees, agents or personnel of Chase or any Chase Branch,
Domestic Securities Depository, Foreign Bank or Foreign
Securities Depository, and/or by virtue of the disappearance
of any of the Securities or Cash so held or while in such
possession, with or without any fault attributable to Chase
("fault attributable to Chase" for the purposes of this
Agreement being deemed to mean any negligent act or omission,
robbery, burglary, larceny, theft or embezzlement by any
employees or agents of Chase or any Chase Branch, Domestic
Securities Depository, Foreign Bank or Foreign Securities
Depository). In the event of Chase's discovery or notification
of any such loss of Securities or Cash, Chase shall promptly
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<PAGE>
notify the Fund and shall reimburse the Fund to the extent of
the market value of the missing Securities or Cash as at the
date of the discovery of such loss. The Fund shall not be
obligated to establish any negligence, misfeasance or
malfeasance on Chase's part from which such loss resulted, but
Chase shall be obligated hereunder to make such reimbursement
to the Fund after the discovery or notice of such loss,
destruction or theft of such Securities or Cash. Chase may at
its option insure itself against loss from any cause but shall
be under no obligation to insure for the benefit of the Fund.
(b) COLLECTIONS. All collections of funds or other
property paid or distributed in respect of Securities held in
the Custody Account shall be made at the risk of the Fund.
Chase shall have no liability for any loss occasioned by delay
in the actual receipt of notice by Chase (or by any Chase
Branch or Foreign Bank in the case of Securities or Cash held
outside of the United States) of any payment, redemption or
other transaction regarding Securities held in the Custody
Account or Cash held in the Deposit Account in respect of
which Chase has agreed to take action in the absence of
Written Instructions to the contrary as provided in Section 10
of this Agreement, which does not appear in any of
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<PAGE>
the publications referred to in Section 16 of this
Agreement.
(c) EXCLUSIONS. Notwithstanding any other provision
in this Agreement to the contrary, Chase shall not be
responsible for (i) losses resulting from war or from the
imposition of exchange control restrictions, confiscation,
expropriation, or nationalization of any securities or assets
of the issuer of such securities, or (ii) losses resulting
from any negligent act or omission of the Fund or any of its
affiliates, or any robbery, theft, embezzlement or fraudulent
act by any employee or agent of the Fund or any of its
affiliates. Chase shall not be liable for any action taken in
good faith upon Written Instructions of Authorized Persons of
the Fund or upon any certified copy of any resolution of the
Board of Trustees of the Fund, and may rely on the genuineness
of any such documents which it may in good faith believe to be
validly executed.
(d) LIMITATION ON LIABILITY UNDER SECTION 14(A).
Notwithstanding any other provision in this Agreement to the
contrary, it is agreed that Chase's sole responsibility with
respect to losses under Section 14(a) shall be to pay the Fund
the amount of any such loss as provided in Section 14(a)
(subject to the limitation provided in Section 14(e) of this
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<PAGE>
Agreement). This limitation does not apply to any
liability of Chase under Section 14(f) of this Agree-
ment.
(e) ANNUAL ADJUSTMENT OF LIMITATION OF LIABILITY. As
soon as practicable after June 1 of every year, the Fund shall
provide Chase with the amount of its total net assets as of
the close of business on such date (or if the New York Stock
Exchange is closed on such date, then in that event as of the
close of business on the next day on which the New York Stock
Exchange is open for business).
It is understood by the parties to this Agreement (1)
that Chase has entered into substantially similar custody
agreements with other Templeton Funds, all of which Funds have
as their investment adviser either the Investment Manager of
the Fund or companies which are affiliated with the Investment
Manager; and (2) that Chase may enter into substantially
similar custody agreements with additional mutual funds under
Templeton management which may hereafter be organized. Each of
such custody agreements with each of such other Templeton
Funds contains (or will contain) a "Standard of Care" section
similar to this Section 14, except that the limit of Chase's
liability is (or will be) in varying amounts for each Fund,
with the aggregate limits of
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<PAGE>
liability in all of such agreements, including this
Agreement, amounting to $150,000,000.
On each June 1, Chase will total the net assets
reported by each one of the Templeton Funds, and will
calculate the percentage of the aggregate net assets of all
the Templeton Funds that is represented by the net asset value
of this Fund. Thereupon Chase shall allocate to this Agreement
with this Fund that proportion of its total of $150,000,000
responsibility undertaking which is substantially equal to the
proportion which this Fund's net assets bears to the total net
assets of all such Templeton Funds subject to adjustments for
claims paid as follows: all claims previously paid to this
Fund shall first be deducted from its proportionate allocable
share of the $150,000,000 Chase responsibility, and if the
claims paid to this Fund amount to more than its allocable
share of the Chase responsibility, then the excess of such
claims paid to this Fund shall diminish the balance of the
$150,000,000 Chase responsibility available for the
proportionate shares of all of the other Templeton Funds
having similar custody agreements with Chase. Based on such
calculation, and on such adjustment for claims paid, if any,
Chase thereupon shall notify the Fund of such limit of
liability under this Section 14 which will be available to the
Fund with respect to
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<PAGE>
(1) losses in excess of payment allocations for previous years
and (2) losses discovered during the next year this Agreement
remains in effect and until a new determination of such limit
of responsibility is made on the next succeeding June 1.
(f) OTHER LIABILITY. Independently of Chase's
liability to the Fund as provided in Section 14(a) above (it
being understood that the limitations in Sections 14(d) and
14(e) do not apply to the provisions of this Section 14(f)),
Chase shall be responsible for the performance of only such
duties as are set forth in this Agreement or contained in
express instructions given to Chase which are not contrary to
the provisions of this Agreement. Chase will use and require
the same care with respect to the safekeeping of all
Securities held in the Custody Account, Cash held in the
Deposit Account, and Securities or Cash held in the Segregated
Account as it uses in respect of its own similar property, but
it need not maintain any insurance for the benefit of the
Fund. With respect to Securities and Cash held outside of the
United States, Chase will be liable to the Fund for any loss
to the Fund resulting from any disappearance or destruction of
such Securities or Cash while in the possession of Chase or
any Chase Branch, Foreign Bank or Foreign Securities
Depository, to the same extent it would be liable to
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<PAGE>
the Fund if Chase had retained physical possession of such
Securities and Cash in New York. It is specifically agreed
that Chase's liability under this Section 14(f) is entirely
independent of Chase's liability under Section 14(a).
Notwithstanding any other provision in this Agreement to the
contrary, in the event of any loss giving rise to liability
under this Section 14(f) that would also give rise to
liability under Section 14(a), the amount of such liability
shall not be charged against the amount of the limitation on
liability provided in Section 14(d).
(g) COUNSEL; LEGAL EXPENSES. Chase shall be entitled
to the advice of counsel (who may be counsel for the Fund) at
the expense of the Fund in connection with carrying out
Chase's duties hereunder and in no event shall Chase be liable
for any action taken or omitted to be taken by it in good
faith pursuant to advice of such counsel. If, in the absence
of fault attributable to Chase and in the course of or in
connection with carrying out its duties and obligations
hereunder, any claims or legal proceedings are instituted
against Chase or any Chase Branch by third parties, the Fund
will hold Chase harmless against any claims, liabilities,
costs, damages or expenses incurred in connection therewith
and, if the Fund so elects, the Fund may assume the
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defense thereof with counsel satisfactory to Chase,
and thereafter shall not be responsible for any
further legal fees that may be incurred by Chase,
provided, however, that all of the foregoing is
conditioned upon the Fund's receipt from Chase of
prompt and due notice of any such claim or
proceeding.
15. EXPROPRIATION INSURANCE. Chase represents that
it does not intend to obtain any insurance for the benefit of the Fund which
protects against the imposition of exchange control restrictions on the transfer
from any foreign jurisdiction of the proceeds of sale of any Securities or
against confiscation, expropriation or nationalization of any securities or the
assets of the issuer of such securities by a government of any foreign country
in which the issuer of such securities is organized or in which securities are
held for safekeeping either by Chase, or any Chase Branch, Foreign Bank or
Foreign Securities Depository in such country. Chase has discussed the
availability of expropriation insurance with the Fund, and has advised the Fund
as to its understanding of the position of the staff of the Securities and
Exchange Commission that any investment company investing in securities of
foreign issuers has the responsibility for reviewing the possibility of the
imposition of exchange control restrictions which would affect the liquidity of
such investment company's assets and the possibility of exposure to political
risk, including the appropriateness of insuring
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<PAGE>
against such risk. The Fund has acknowledged that it has the responsibility to
review the possibility of such risks and what, if any, action should be taken.
16. PROXY, NOTICES, REPORTS, ETC. Chase shall watch for the
dates of expiration of (a) all purchase or sale rights (including warrants,
puts, calls and the like) attached to or inherent in any of the Securities held
in the Custody Account and (b) conversion rights and conversion price changes
for each convertible Security held in the Custody Account as published in
Telstat Services, Inc., Standard & Poor's Financial Inc. and/or any other
publications listed in the Operating Agreement (it being understood that Chase
may give notice to the Fund as provided in Section 21 as to any change, addition
and/or omission in the publications watched by Chase for these purposes). If
Chase or any Chase Branch, Foreign Bank or Foreign Securities Depository shall
receive any proxies, notices, reports, or other communications relative to any
of the Securities held in the Custody Account, Chase shall, on its behalf or on
behalf of a Chase Branch, Foreign Bank or Foreign Securities Depository,
promptly transmit in writing any such communication to the Fund. In addition,
Chase shall notify the Fund by person-to-person collect telephone concerning any
such notices relating to any matters specified in the first sentence of this
Section 16.
As specifically requested by the Fund, Chase shall execute or
deliver or shall cause the nominee in whose name
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Securities are registered to execute and deliver to such person as may be
designated by the Fund proxies, consents, authorizations and any other
instruments whereby the authority of the Fund as owner of any Securities in the
Custody Account registered in the name of Chase or such nominee, as the case may
be, may be exercised. Chase shall vote Securities in accordance with Written
Instructions timely received by Chase, or such other person or persons as
designated in or pursuant to the Operating Agreement.
Chase and any Chase Branch shall have no liability for any
loss or liability occasioned by delay in the actual receipt by them or any
Foreign Bank or Foreign Securities Depository of notice of any payment or
redemption which does not appear in any of the publications referred to in the
first sentence of this Section 16.
17. COMPENSATION. The Fund agrees to pay to Chase from time to
time such compensation for its services pursuant to this Agreement as may be
mutually agreed upon in writing from time to time and Chase's out-of-pocket or
incidental expenses, as from time to time shall be mutually agreed upon by Chase
and the Fund. The Fund shall have no responsibility for the payment of services
provided by any Domestic Securities Depository, such fees being paid directly by
Chase. In the event of any advance of Cash for any purpose made by Chase
pursuant to any Written Instruction, or in the event that Chase or any nominee
of Chase shall incur or be assessed any taxes in connection with the performance
of this
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<PAGE>
Agreement, the Fund shall indemnify and reimburse Chase therefor, except such
assessment of taxes as results from the negligence, fraud, or willful misconduct
of Chase, any Domestic Securities Depository, Chase Branch, Foreign Bank or
Foreign Securities Depository, or as constitutes a tax on income, gross receipts
or the like of any one or more of them. Chase shall have a lien on Securities in
the Custody Account and on Cash in the Deposit Account for any amount owing to
Chase from time to time under this Agreement upon due notice to the Fund.
18. AGREEMENT SUBJECT TO APPROVAL OF THE FUND. It
is understood that this Agreement and any amendments shall be
subject to the approval of the Fund.
19. TERM. This Agreement shall remain in effect until
terminated by either party upon 60 days' written notice to the other, sent by
registered mail. Notwithstanding the preceding sentence, however, if at any time
after the execution of this Agreement Chase shall provide written notice to the
Fund, by registered mail, of the amount needed to meet a substantial increase in
the cost of maintaining its present type and level of bonding and insurance
coverage in connection with Chase's undertakings in Section 14(a), (d) and (e)
of this Agreement, said Section 14(a), (d) and (e) of this Agreement shall cease
to apply 60 days after the providing of such notice by Chase, unless prior to
the expiration of such 60 days the Fund agrees in writing to assume the amount
needed for such purpose. Chase, upon the
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<PAGE>
date this Agreement terminates pursuant to notice which has been given in a
timely fashion, shall, and/or shall cause each Domestic Securities Depository
to, deliver the Securities in the Custody Account, pay the Cash in the Deposit
Account, and deliver and pay Securities and Cash in the Segregated Account to
the Fund unless Chase has received from the Fund 60 days prior to the date on
which this Agreement is to be terminated Written Instructions specifying the
name(s) of the person(s) to whom the Securities in the Custody Account shall be
delivered, the Cash in the Deposit Account shall be paid, and Securities and
Cash in the Segregated Account shall be delivered and paid. Concurrently with
the delivery of such Securities, Chase shall deliver to the Fund, or such other
person as the Fund shall instruct, the records referred to in Section 11 which
are in the possession or control of Chase, any Chase Branch, or any Domestic
Securities Depository, or any Foreign Bank or Foreign Securities Depository, or
in the event that Chase is unable to obtain such records in their original form
Chase shall deliver true copies of such records.
20. AUTHORIZATION OF CHASE TO EXECUTE NECESSARY DOCUMENTS. In
connection with the performance of its duties hereunder, the Fund hereby
authorizes and directs Chase and each Chase Branch acting on behalf of Chase,
and Chase hereby agrees, to execute and deliver in the name of the Fund, or
cause such other Chase Branch to execute and deliver in the name of the Fund,
such certificates, instruments, and other
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<PAGE>
documents as shall be reasonably necessary in connection with such performance,
provided that the Fund shall have furnished to Chase any information necessary
in connection therewith.
21. NOTICES. Any notice or other communication
authorized or required by this Agreement to be given to the
parties shall be sufficiently given (except to the extent
otherwise specifically provided) if addressed and mailed
postage prepaid or delivered to it at its office at the
address set forth below:
If to the Fund, then to
Templeton Real Estate Trust
700 Central Avenue, P.O. Box 33030
St. Petersburg, Florida 33733
Attention: John Wm. Galbraith, Vice President
If to Chase, then to
The Chase Manhattan Bank, N.A.
1211 Avenue of the Americas
33rd Floor
New York, New York 10036
Attention: Global Custody Division Executive
or such other person or such other address as any party shall have furnished to
the other party in writing.
22. NON-ASSIGNABILITY OF AGREEMENT. This Agreement shall not
be assignable by either party hereto; provided, however, that any corporation
into which the Fund or Chase, as the case may be, may be merged or converted or
with which it may be consolidated, or any corporation succeeding to all or
substantially all of the trust business of Chase, shall succeed to the
respective rights and shall assume the respective duties of the Fund or of
Chase, as the case may be, hereunder.
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<PAGE>
23. NO PERSONAL LIABILITY. It is understood and expressly
stipulated that neither the holders of Shares of the Fund nor any Trustee,
officer, agent or employee of the Fund shall be personally liable hereunder, nor
shall any resort be had to other private property for the satisfaction of any
claim or obligation hereunder, but the Fund only shall be liable.
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<PAGE>
24. GOVERNING LAW. This Agreement shall be governed
by the laws of the State of New York.
THE CHASE MANHATTAN BANK, N.A.
By:/s/CATHERINE LEE
Vice President
TEMPLETON REAL ESTATE TRUST
By:/s/JOHN WM. GALBRIATH
John Wm. Galbraith
Vice President
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- 3 -
BUSINESS MANAGEMENT AGREEMENT BETWEEN
TEMPLETON REAL ESTATE SECURITIES FUND AND
TEMPLETON GLOBAL INVESTORS, INC.
AGREEMENT as of April 1, 1993, between Templeton
Real Estate Securities Fund, a Massachusetts business trust which is a
registered open-end investment company (the "Trust") and Templeton Global
Investors, Inc. ("TGII").
In consideration of the mutual promises herein made, the
parties hereby agree as follows:
(1) TGII agrees, during the life of this Agreement, to
be responsible for:
(a) providing office space, telephone, office equipment
and supplies for the Trust;
(b) paying compensation of the Trust's officers for
services rendered as such;
(c) authorizing expenditures and approving bills for
payment on behalf of the Trust;
(d) supervising preparation of annual and semiannual
reports to Shareholders, notices of dividends,
capital gains distributions and tax credits, and
attending to routine correspondence and other
communications with individual Shareholders;
(e) daily pricing of the Trust's investment portfolio and
preparing and supervising publication of daily
quotations of the bid and asked prices of the Trust's
Shares, earnings reports and other financial data;
(f) monitoring relationships with organizations serving
the Trust, including custodians, transfer agents and
printers;
(g) providing trading desk facilities for the Trust;
(h) supervising compliance by the Trust with
recordkeeping requirements under the Investment
Company Act of 1940 (the "1940 Act") and the rules
and regulations thereunder, with state regulatory
requirements, maintenance of books and records for
the Trust (other than those maintained by the
custodian and transfer agent), preparing and filing
of tax reports other than the Trust's income tax
returns;
(i) monitoring the qualifications of tax deferred
retirement plans for the Trust; and
(j) providing executive, clerical and secretarial
personnel needed to carry out the above
responsibilities.
(2) The Trust agrees, during the life of this Agreement, to
pay to TGII as compensation for the foregoing a monthly fee equal on an annual
basis to 0.15% of the first $200 million of the aggregate average daily net
assets of the Trust during the month preceding each payment, reduced as follows:
on such net assets in excess of $200 million up to $700 million, a monthly fee
equal on an annual basis to 0.135%; on such net assets in excess of $700 million
up to $1.2 billion, a monthly fee equal on an annual basis to 0.1%; and on such
net assets in excess of $1.2 billion, a monthly fee equal on an annual basis to
0.075%.
(3) This Agreement shall remain in full force and effect
through December 31, 1993 and thereafter from year to year to the extent
continuance is approved annually by the Board of Trustees of the Trust.
(4) This Agreement may be terminated by the Trust at any time
on sixty (60) days' written notice without payment of penalty, provided that
such termination by the Trust shall be directed or approved by the vote of a
majority of the Trustees of the Trust in office at the time or by the vote of a
majority of the outstanding voting securities of the Trust (as defined by the
1940 Act); and shall automatically and immediately terminate in the event of its
assignment (as defined by the 1940 Act).
(5) In the absence of willful misfeasance, bad faith or gross
negligence on the part of TGII, or of reckless disregard of its duties and
obligations hereunder, TGII shall not be subject to liability for any act or
omission in the course of, or connected with, rendering services hereunder.
(6) In accordance with the Agreement dated September 12, 1989,
TGII has advanced for the account of the Trust all organizational expenses of
the Trust, all of which expenses are being deferred by the Trust and amortized
ratably over a five-year period commencing on September 12, 1989; and during the
amortization period, the proceeds of any redemption of the original Shares will
be reduced by a pro rata portion of any then unamortized organizational expenses
based on the ratio of the Shares redeemed to the total initial Shares
outstanding immediately prior to the redemption.
<PAGE>
(7) It is understood and expressly stipulated that neither the
holders of Shares of the Trust nor any Trustee, officer, agent or employee of
the Trust shall be personally liable hereunder, nor shall any resort be had to
other private property for the satisfaction of any claim or obligation
hereunder, but the Trust only shall be liable.
IN WITNESS WHEREOF, the parties hereto have caused this
amended Agreement to be duly executed by their duly authorized officers and
their respective corporate seals to be hereunto duly affixed and attested.
TEMPLETON REAL ESTATE SECURITIES FUND
By:/s/HAROLD F. MCELRAFT
Harold F. McElraft
Vice President
ATTEST:
/s/THOMAS M. MISTELE
Thomas M. Mistele
Secretary
TEMPLETON GLOBAL INVESTORS, INC.
By:/s/THOMAS L. HANSBERGER
Thomas L. Hansberger
President
ATTEST:
/s/GREGORY E. MCGOWAN
Gregory E. McGowan
Secretary
TRANSFER AGENT AGREEMENT BETWEEN
TEMPLETON REAL ESTATE SECURITIES FUND AND
FRANKLIN TEMPLETON INVESTOR SERVICES, INC.
AGREEMENT dated as of September 1, 1993, and amended and restated as of
August 10, 1995, between TEMPLETON REAL ESTATE SECURITIES FUND, a registered
open-end investment company with offices at 700 Central Avenue, St. Petersburg,
Florida 33701 (the "Fund") and FRANKLIN TEMPLETON INVESTOR SERVICES, INC., a
registered transfer agent with offices at 700 Central Avenue, St. Petersburg,
Florida 33701 ("FTIS").
W I T N E S S E T H:
That for and in consideration of the mutual promises hereinafter set
forth, the Fund and FTIS agree as follows:
1. DEFINITIONS. Whenever used in this Agreement, the following
words and phrases, unless the context otherwise requires, shall have the
following meanings:
(a) "Declaration of Trust" shall mean the Declaration of Trust
of the Fund as the same may be amended from time to time;
(b) "Authorized Person" shall be deemed to include any person,
whether or not such person is an officer or employee of the Fund, duly
authorized to give Oral Instructions or Written Instructions on behalf of the
Fund as indicated in a certificate furnished to FTIS pursuant to Section 4(c)
hereof as may be received by FTIS from time to time;
(c) "Custodian" refers to the custodian and any sub-custodian
of all securities and other property which the Fund may from time to time
deposit, or cause to be deposited or held under the name or account of such
custodian pursuant to the Custody Agreement;
(d) "Oral Instructions" shall mean instructions, other than
written instructions, actually received by FTIS from a person reasonably
believed by FTIS to be an Authorized Person;
(e) "Shares" refers to shares of beneficial interest, par
value $.01 per share, of the Fund; and
(f) "Written Instructions" shall mean a written communication
signed by a person reasonably believed by FTIS to be an Authorized Person and
actually received by FTIS.
2. APPOINTMENT OF FTIS. The Fund hereby appoints and constitutes FTIS
as transfer agent for Shares of the Fund and as shareholder servicing agent for
the Fund, and FTIS accepts such appointment and agrees to perform the duties
hereinafter set forth.
3. COMPENSATION.
(a) The Fund will compensate or cause FTIS to be compensated
for the performance of its obligations hereunder in accordance with the fees set
forth in the written schedule of fees annexed hereto as Schedule A and
incorporated herein. Schedule A does not include out-of-pocket disbursements of
FTIS for which FTIS shall be entitled to bill the Fund separately. FTIS will
bill the Fund as soon as practicable after the end of each calendar month, and
said billings will be detailed in accordance with Schedule A. The Fund will
promptly pay to FTIS the amount of such billing.
Out-of-pocket disbursements shall include, but shall not be
limited to, the items specified in the written schedule of out-of-pocket
expenses annexed hereto as Schedule B and incorporated herein. Schedule B may be
modified by FTIS upon not less than 30 days' prior written notice to the Fund.
Unspecified out-of-pocket expenses shall be limited to those out-of-pocket
expenses reasonably incurred by FTIS in the performance of its obligations
hereunder. Reimbursement by the Fund for expenses incurred by FTIS in any month
shall be made as soon as practicable after the receipt of an itemized bill from
FTIS.
(b) Any compensation agreed to hereunder may be adjusted from
time to time by attaching to Schedule A of this Agreement a revised Fee
Schedule.
4. DOCUMENTS. In connection with the appointment of FTIS, the Fund
shall, on or before the date this Agreement goes into effect, but in any case,
within a reasonable period of time for FTIS to prepare to perform its duties
hereunder, deliver or cause to be delivered to FTIS the following documents:
(a) If applicable, a specimen of the certificate for
Shares of the Fund;
(b) All account application forms and other documents
relating to Shareholder accounts or to any plan, program or service offered by
the Fund;
(c) A certificate identifying the Authorized Persons and
specimen signatures of Authorized Persons who will sign Written Instructions;
and
(d) All documents and papers necessary under the laws of
Florida, under the Fund's Declaration of Trust, and as may be required for the
due performance of FTIS's duties under this Agreement or for the due performance
of additional duties as may from time to time be agreed upon between the Fund
and FTIS.
5. DISTRIBUTIONS PAYABLE IN SHARES. In the event that the Board of
Trustees of the Trust shall declare a distribution payable in Shares, the Trust
shall deliver or cause to be delivered to FTIS written notice of such
declaration signed on behalf of the Trust by an officer thereof, upon which FTIS
shall be entitled to rely for all purposes, certifying (i) the number of Shares
involved, and (ii) that all appropriate action has been taken.
6. DUTIES OF THE TRANSFER AGENT. FTIS shall be responsible for
administering and/or performing transfer agent functions; for acting as service
agent in connection with dividend and distribution functions; and for performing
shareholder account and administrative agent functions in connection with the
issuance, transfer and redemption or repurchase (including coordination with the
Custodian) of Shares. The operating standards and procedures to be followed
shall be determined from time to time by agreement between the Fund and FTIS.
Without limiting the generality of the foregoing, FTIS agrees to perform the
specific duties listed on Schedule C.
7. RECORDKEEPING AND OTHER INFORMATION. FTIS shall create and
maintain all necessary records in accordance with all applicable laws, rules and
regulations.
8. OTHER DUTIES. In addition, FTIS shall perform such other duties and
functions, and shall be paid such amounts therefor, as may from time to time be
agreed upon in writing between the Fund and FTIS. Such other duties and
functions shall be reflected in a written amendment to Schedule C, and the
compensation for such other duties and functions shall be reflected in a written
amendment to Schedule A.
9. RELIANCE BY TRANSFER AGENT; INSTRUCTIONS.
(a) FTIS will be protected in acting upon Written or Oral
Instructions reasonably believed to have been executed or orally communicated by
an Authorized Person and will not be held to have any notice of any change of
authority of any person until receipt of a Written Instruction thereof from an
officer of the Fund. FTIS will also be protected in processing Share
certificates which it reasonably believes to bear the proper manual or facsimile
signatures of the officers of the Fund and the proper countersignature of FTIS.
(b) At any time FTIS may apply to any Authorized Person of the
Fund for Written Instructions and may seek advice at the Fund's expense from
legal counsel for the Fund or from its own legal counsel, with respect to any
matter arising in connection with this Agreement, and it shall not be liable for
any action taken or not taken or suffered by it in good faith in accordance with
such Written Instructions or in accordance with the opinion of counsel for the
Fund or for FTIS. Written Instructions requested by FTIS will be provided by the
Fund within a reasonable period of time. In addition, FTIS, or its officers,
agents or employees, shall accept Oral Instructions or Written Instructions
given to them by any person representing or acting on behalf of the Fund only if
said representative is known by FTIS, or its officers, agents or employees, to
be an Authorized Person.
10. ACTS OF GOD, ETC. FTIS will not be liable or responsible for delays
or errors by reason of circumstances beyond its control, including acts of civil
or military authority, national emergencies, labor difficulties, fire,
mechanical breakdown beyond its control, flood or catastrophe, acts of God,
insurrection, war, riots or failure beyond its control of transportation,
communication or power supply.
11. DUTY OF CARE AND INDEMNIFICATION. The Fund will indemnify FTIS
against and hold it harmless from any and all losses, claims, damages,
liabilities or expenses (including reasonable counsel fees and expenses)
resulting from any claim, demand, action or suit not resulting from willful
misfeasance, bad faith or gross negligence on the part of FTIS, and arising out
of, or in connection with, its duties hereunder. In addition, the Fund will
indemnify FTIS against and hold it harmless from any and all losses, claims,
damages, liabilities or expenses (including reasonable counsel fees and
expenses) resulting from any claim, demand, action or suit as a result of: (i)
any action taken in accordance with Written or Oral Instructions, or any other
instructions or Share certificates reasonably believed by FTIS to be genuine and
to be signed, countersigned or executed, or orally communicated by an Authorized
Person; (ii) any action taken in accordance with written or oral advice
reasonably believed by FTIS to have been given by counsel for the Fund or by its
own counsel; (iii) any action taken as a result of any error or omission in any
record (including but not limited to magnetic tapes, computer printouts, hard
copies and microfilm copies) delivered, or caused to be delivered by the Fund to
FTIS in connection with this Agreement; or (iv) any action taken in accordance
with oral instructions given under the Telephone Exchange and Redemption
Privileges, as described in the Fund's current prospectus, when believed by FTIS
to be genuine.
In any case in which the Fund may be asked to indemnify or hold FTIS
harmless, the Fund shall be advised of all pertinent facts concerning the
situation in question and FTIS will use reasonable care to identify and notify
the Fund promptly concerning any situation which presents or appears likely to
present a claim for indemnification against the Fund. The Fund shall have the
option to defend FTIS against any claim which may be the subject of this
indemnification, and, in the event that the Fund so elects, such defense shall
be conducted by counsel chosen by the Fund and satisfactory to FTIS, and
thereupon the Fund shall take over complete defense of the claim and FTIS shall
sustain no further legal or other expenses in such situation for which it seeks
indemnification under this Section 11. FTIS will not confess any claim or make
any compromise in any case in which the Fund will be asked to provide
indemnification, except with the Fund's prior written consent. The obligations
of the parties hereto under this Section shall survive the termination of this
Agreement.
<PAGE>
12. TERM AND TERMINATION.
(a) This Agreement shall be effective as of the date first
written above and shall continue through December 31, 1993 and thereafter shall
continue automatically for successive annual periods ending on December 31 of
each year, provided such continuance is specifically approved at least annually
by (i) the Fund's Board of Trustees or (ii) a vote of a "majority" (as defined
in the Investment Company Act of 1940 (the "1940 Act")) of the Fund's
outstanding voting securities, provided that in either event the continuance is
also approved by a majority of the Board of Trustees who are not "interested
persons" (as defined in the 1940 Act) of any party to this Agreement, by vote
cast in person at a meeting called for the purpose of voting such approval;
(b) Either party hereto may terminate this Agreement by giving
to the other party a notice in writing specifying the date of such termination,
which shall be not less than 60 days after the date of receipt of such notice.
In the event such notice is given by the Fund, it shall be accompanied by a
resolution of the Board of Trustees of the Fund, certified by the Secretary of
the Fund, designating a successor transfer agent or transfer agents. Upon such
termination and at the expense of the Fund, FTIS will deliver to such successor
a certified list of shareholders of the Fund (with names and addresses), an
historical record of the account of each Shareholder and the status thereof, and
all other relevant books, records, correspondence, and other data established or
maintained by FTIS under this Agreement in a form reasonably acceptable to the
Fund, and will cooperate in the transfer of such duties and responsibilities,
including provisions for assistance from FTIS's personnel in the establishment
of books, records and other data by such successor or successors.
13. AMENDMENT. This Agreement may not be amended or modified in
any manner except by a written agreement executed by both parties.
14. SUBCONTRACTING. The Fund agrees that FTIS may, in its
discretion, subcontract for certain of the services described under this
Agreement or the Schedules hereto; provided that the appointment of any such
agent shall not relieve FTIS of its responsibilities hereunder.
15. MISCELLANEOUS.
(a) Any notice or other instrument authorized or required by
this Agreement to be given in writing to the Fund or FTIS shall be sufficiently
given if addressed to that party and received by it at its office set forth
below or at such other place as it may from time to time designate in writing.
To the Fund:
Templeton Real Estate Securities Fund
700 Central Avenue
St. Petersburg, Florida 33701
To FTIS:
Franklin Templeton Investor Services, Inc.
700 Central Avenue
St. Petersburg, Florida 33701
(b) This Agreement shall extend to and shall be binding upon
the parties hereto, and their respective successors and assigns; provided,
however, that this Agreement shall not be assignable without the written consent
of the other party.
(c) This Agreement shall be construed in accordance with
the laws of the State of California.
(d) This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original; but such
counterparts shall, together, constitute only one instrument.
(e) The captions of this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
(f) It is understood and expressly stipulated that neither the
holders of Shares of the Fund nor any Trustee, officer, agent or employee of the
Fund shall be personally liable hereunder, nor shall any resort be had to other
private property for the satisfaction of any claim or obligation hereunder, but
the Fund only shall be liable.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective corporate officers thereunder duly authorized as of
the day and year first above written.
TEMPLETON REAL ESTATE SECURITIES FUND
BY:/s/JOHN R. KAY
John R. Kay
Vice President
FRANKLIN TEMPLETON INVESTOR SERVICES, INC.
BY:/s/THOMAS M. MISTELE
Thomas M. Mistele
Vice President
<PAGE>
A-1
Schedule A
FEES
Shareholder account maintenance $13.74, adjusted as (per annum,
prorated payable of February 1 of
each monthly) year to reflect
changes in the Department of Labor
Consumer Price Index.
Cash withdrawal program No charge to the Fund.
Retirement plans No charge to the Fund.
Wire orders or express $15.00 fee may be charged for each
mailings of redemption wire order and each express
proceeds mailing.
February 1, 1995
<PAGE>
B-1
Schedule B
OUT-OF-POCKET EXPENSES
The Fund shall reimburse FTIS monthly for the following out-of-pocket
expenses:
o postage and mailing
o forms
o outgoing wire charges
o telephone
o Federal Reserve charges for check clearance
o if applicable, magnetic tape and freight
o retention of records
o microfilm/microfiche
o stationary
o insurance
o if applicable, terminals, transmitting lines and any expenses
incurred in connection with such terminals and lines
o all other miscellaneous expenses reasonably incurred by FTIS
The Fund agrees that postage and mailing expenses will be paid on the
day of or prior to mailing as agreed with FTIS. In addition, the Fund will
promptly reimburse FTIS for any other expenses incurred by FTIS as to which the
Fund and FTIS mutually agree that such expenses are not otherwise properly borne
by FTIS as part of its duties and obligations under the Agreement.
<PAGE>
C-5
C-1
Schedule C
DUTIES
AS TRANSFER AGENT FOR INVESTORS IN THE FUND, FTIS WILL:
o Record in its transfer record, countersign as transfer agent,
and deliver certificates signed manually or by facsimile, by
the President or a Vice-President and by the Secretary or the
Assistant Secretary of the Fund, in such names and for such
number of authorized but hitherto unissued Shares of the Fund
as to which FTIS shall receive instructions; and
o Transfer on its records from time to time, when presented to
it for that purpose, certificates of said Shares, whether now
outstanding or hereafter issued, when countersigned by a duly
authorized transfer agent, and upon the cancellation of the
old certificates, record and countersign new certificates for
a corresponding aggregate number of Shares and deliver said
new certificates.
AS SHAREHOLDER SERVICE AGENT FOR INVESTORS IN THE FUND, FTIS WILL:
o Receive from the Fund, from the Fund's Principal Underwriter
or from a Shareholder, on a form acceptable to FTIS,
information necessary to record sales and redemptions and to
generate sale and/or redemption confirmations;
o Mail sale and/or redemption confirmations using standard forms;
o Accept and process cash payments from investors, clear checks
which represent payments for the purchase of Shares;
o Requisition Shares in accordance with instructions of the
Principal Underwriter of the Shares of the Fund;
o Produce periodic reports reflecting the accounts receivable
and the paid pending (free stock) items;
o Open, maintain and close Shareholder accounts;
o Establish registration of ownership of Shares in accordance
with generally accepted form;
o Maintain monthly records of (i) issued Shares and (ii) number
of Shareholders and their aggregate Shareholdings classified
according to their residence in each State of the United
States or foreign country;
o Accept and process telephone and redemption exchanges for
Shares in accordance with the Fund's Telephone Exchange and
Redemption Privileges as described in the Fund's current
prospectus.
o Maintain and safeguard records for each Shareholder showing
name(s), address, number of any certificates issued, and
number of Shares registered in such name(s), together with
continuous proof of the outstanding Shares, and dealer
identification, and reflecting all current changes. On
request, provide information as to an investor's qualification
for Cumulative Quantity Discount. Provide all accounts with
confirmation statements reflecting the most recent
transactions, and also provide year-end historical
confirmation statements;
o Provide on request a duplicate set of records for file
maintenance in the Fund's office in St. Petersburg, Florida;
o Out of money received in payment for Share sales, pay to the
Fund's Custodian Account with the Custodian, the net asset
value per Share and pay to the Principal Underwriter its
commission;
o Redeem Shares and prepare and mail (or wire) liquidation
proceeds;
o Pass upon the adequacy of documents submitted by a Shareholder
or his legal representative to substantiate the transfer of
ownership of Shares from the registered owner to transferees;
o From time to time, make transfers upon the books of the Fund
in accordance with properly executed transfer instructions
furnished to FTIS and make transfers of certificates for such
Shares as may be surrendered for transfer properly endorsed,
and countersign new certificates issued in lieu thereof;
o Upon receipt of proper documentation, place stop transfers,
obtain necessary insurance forms, and reissue replacement
certificates against lost, stolen or destroyed Share
certificates;
o Check surrendered certificates for stop transfer restrictions.
Although FTIS cannot insure the genuineness of certificates
surrendered for cancellation, it will employ all due
reasonable care in deciding the genuineness of such
certificates and the guarantor of the signature(s) thereon;
o Cancel surrendered certificates and record and countersign new
certificates;
o Certify outstanding Shares to auditors;
o In connection with any meeting of Shareholders, upon receiving
appropriate detailed instructions and written materials
prepared by the Fund and proxy proofs checked by the Fund,
print proxy cards; deliver to Shareholders all reports,
prospectuses, proxy cards and related proxy materials of
suitable design for enclosing; receive and tabulate executed
proxies; and furnish a list of Shareholders for the meeting;
o Answer routine correspondence and telephone inquiries about
individual accounts. Prepare monthly reports for
correspondence volume and correspondence data necessary for
the Fund's Semi-Annual Report on Form N-SAR;
o Prepare and mail dealer commission statements and checks;
o Maintain and furnish the Fund and its Shareholders with such
information as the Fund may reasonably request for the purpose
of compliance by the Fund with the applicable tax and
securities laws of applicable jurisdictions;
o Mail confirmations of transactions to investors and dealers in
a timely fashion;
o Pay or reinvest income dividends and/or capital gains
distributions to Shareholders of record, in accordance with
the Fund's and/or Shareholder's instructions, provided that:
(a) The Fund shall notify FTIS in writing
promptly upon declaration of any such
dividend and/or distribution, and in any
event at least forty-eight (48) hours before
the record date;
(b) Such notification shall include the
declaration date, the record date, the
payable date, the rate, and, if applicable,
the reinvestment date and the reinvestment
price to be used; and
(c) Prior to the payable date, the Fund shall
furnish FTIS with sufficient fully and
finally collected funds to make such
distribution;
o Prepare and file annual United States information returns of
dividends and capital gains distributions (Form 1099) and mail
payee copies to Shareholders; report and pay United States
income taxes withheld from distributions made to nonresidents
of the United States, and prepare and mail to Shareholders the
notice required by the U.S. Internal Revenue Code as to
realized capital gains distributed and/or retained, and their
proportionate share of any foreign taxes paid by the Fund;
o Prepare transfer journals;
o Set up wire order trades on file;
o Receive payment for trades and update the trade file;
o Produce delinquency and other trade file reports;
o Provide dealer commission statements and payments thereof for
the Principal Underwriter;
o Sort and print shareholder information by state, social code,
price break, etc.; and
o Mail promptly the Statement of Additional Information of the
Fund to each Shareholder who requests it, at no cost to the
Shareholder.
In connection with the Fund's Cash Withdrawal Program, FTIS will:
o Make payment of amounts withdrawn periodically by the
Shareholder pursuant to the Program by redeeming Shares, and
confirm such redemptions to the Shareholder; and
o Provide confirmations of all redemptions, reinvestment of
dividends and distributions, and any additional investments in
the Program, including a summary confirmation at the year-end.
In connection with Tax Deferred Retirement Plans involving the Fund,
FTIS will:
o Receive and process applications, accept contributions, record
Shares issued and dividends reinvested;
o Make distributions when properly requested; and
o Furnish reports to regulatory authorities as required.
SUB-TRANSFER AGENT SERVICES AGREEMENT
AGREEMENT made as of March 1, 1992 by and between (i) each of the investment
companies listed herein (collectively the "FUNDS"); (ii) Templeton Funds Trust
Company ("TFTC"); and (iii) THE SHAREHOLDER SERVICES GROUP, INC. ("TSSG").
WITNESSETH
WHEREAS, the FUNDS are investment companies registered under the
Investment Company Act of 1940, as amended (the "Act"); and
WHEREAS, the FUNDS have engaged TFTC to act as their transfer agent,
dividend disbursing agent and shareholder servicing agent; and
WHEREAS, the FUNDS and TFTC have entered into a separate agreements
pursuant to which TFTC agreed to arrange for the performance of certain
administrative services for shareholders of the FUNDS who maintain shares of
such Funds; and
WHEREAS, TSSG, a transfer agent registered under the Securities
Exchange Act of 1934, has presented to the FUNDS the various shareholder
administrative services that may be performed by TSSG; and
WHEREAS, the FUNDS desire to retain TSSG in a sub-transfer agent
capacity to perform such services and TSSG is willing and able to furnish such
services on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, each party hereto severally agrees, as follows:
1. TSSG agrees to perform the shareholder administrative services and
functions specified in Exhibit A hereto (the "Services") for the benefit of the
shareholders of the FUNDS who maintain shares of any such FUND in brokerage
accounts with Shearson Lehman Brothers (the "Broker"), where the shareholders'
shares are included in the master account referred to in Exhibit A
(collectively, the "Broker Customers").
2. TSSG agrees that it will maintain and preserve all records as
required by law to be maintained and preserved in connection with providing the
services, and will otherwise comply with the law, rules and regulations
applicable to the services. Upon the written authorization of the Broker and the
FUND, TSSG shall provide copies of all the historical records relating to
transactions involving the FUNDS and Broker Customers, data formats for written
communication regarding that FUND to or from such customers and other materials,
in each case as may reasonably be requested to enable the FUND or its
representatives, including without limitation its auditors, investment advisor,
transfer agent
<PAGE>
or successor transfer agent or distributor, to monitor and review the Services,
or to copmly with any request of the board of directors, trustees or general
partners (collectively, the "Directors") of the FUNDS or of a governmental body,
self-regulatory organization or a shareholder. TSSG agrees that it will permit
the FUNDS to have reasonable access to its personnel and records in order to
facilitate the monitoring of the quality of the services. It is understood that
notwithstanding anything herein to the contrary, TSSG shall not be required to
provide the names, addresses and account numbers of Broker Customers to the
TFTC, the FUNDS or their representatives, unless applicable laws or regulations
otherwise require.
3. TSSG may contract with or establish relationships with third
parties, including, without limitation, the Broker, for the provision of
services or activities of TSSG required by the Agreement.
4. TSSG hereby agrees to notify promptly TFTC and the FUNDS if for any
reason TSSG is unable to perform fully and promptly any of its obligations under
this Agreement.
5. The provisions of this Agreement shall in no way limit the authority
of any of the FUNDS to take such actions as it may deem appropriate or advisable
in connection with all matters relating to the operations of such FUND and/or
sale of its shares.
6. In consideration of the performance of the services by TSSG,
hereunder, the FUNDS severally agree to compensate TSSG at the rate specified in
Schedule A, which rate may change pursuant to a written amendment to this
Agreement executed by and among the parties hereto. Payment shall be made
monthly based upon the number of shareholders of a FUND who hold shares of such
FUND in a broker's account for any part of the subject month. This number shall
be certified each year by independent public accountants of TSSG. The FUNDS also
agree to reimburse TSSG or its designated agent for postage and handling
expenses associated with teh distribution of proxies, prospectuses, reports and
other communications to shareholders prepared by the FUNDS or necessitated by
the actions of the FUNDS.
7. TSSG shall indemnify and hold harmless TFTC and the FUNDS from and
against any and all losses or liabilities that any one or more of them may
incur, including without limitation reasonable attorneys' fees, expenses and
cost, arising out of or related to the perofrmance or non-performance of TSSG of
its responsibilities under this Agreement, excluding, however, any such claims,
suits, loss, damage or cost caused by, materially contributed to or arising from
any noncompliance by TFTC or a FUND with its obligations under this Agreement,
as to which TFTC and each of the FUNDS shall indemnify, hold harmless and defend
TSSG on the same basis as set forth above.
8. This Agreement may be terminated at any time by each of
<PAGE>
TSSG, TFTC or by any FUNDS as to itself upon 30 days written notice to TSSG. The
provisions of paragraphs 2 and 7 shall continue in full force and effect after
termination of this Agreement. Notwithstanding the foregoing, this Agreement
shall not require TSSG to preserve any records relating to this Agreement beyond
the time periods otherwise required by the laws to which TSSG is subject.
9. Any other investment company affiliated with the FUNDS may become a
party to this Agreement by giving written notice to TSSG that it has elected to
become a party hereto and by having this Agreement executed on its behalf.
10. TSSG understands and agrees that the obligations of each FUND under
this Agreement are not binding upon any shareholder of the FUND personally, but
bind only each FUND and each FUND'S property; TSSG represents that it has notice
of the provisions of the Declaration of Trust, if applicable, of each FUND
disclaiming shareholder liability for acts or obligations of the FUNDS.
11. The parties agree that they are independent contractors
and not partners or co-venturers.
12. No amendment of any provision of this Agreement shall in any event
be effective unless the same shall be in writing and signed by both parties. Any
failure of any party to comply with any obligation, agreement or condition
hereunder may only be waived in writing by the other party, but such waiver
shall not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure. No failure by any party to take any action against any breach of
this Agreement of default by any other party shall constitute a waiver of such
party's right to enforce any provision hereof or to take such action.
13. All notices, demands and other communications hereunder shall be in
writing and shall be sent by personal delivery or registered or certified mail,
postage prepaid, or by telecopier confirmed in writing within three business
days as follows:
(a) if to the FUNDS:
Templeton Funds Management, Inc.
700 Central Avenue
St. Petersburg, FL 33701
Attention: President
(b) if to TFTC:
Templeton Funds Trust Company
700 Central Avenue
St. Petersburg, FL 33701
Attention: President
(c) if to TSSG:
The Shareholder Services Group, Inc.
One Exchange Place
<PAGE>
Boston, Massachusetts 02109
Attention: President
With a copy to:
The Shareholder Services Group, Inc.
One Exchange Place
Boston, Massachusetts 02109
Attention: General Counsel
Any party may change its address for receiving notices by written notice given
to the others named above. All notices shall be effective upon the earlier of
actual delivery or when deposited in the mail addressed as set forth above.
14. This agreement shall be governed by and construed in accordance
with the law of the State of New York, without regard to its conflicts of laws
doctrine, and the parties hereby consent to the jurisdiction of New York courts
over all matter relating to this Agreement and irrevocably waive any objection,
including without limitation, any objection of the laying of venue or based on
the grounds of forum non conveniens, which they may now have or may hereafter
have to bringing of any action or proceeding in such jurisdiction.
IN WITNESS HEREOF, the parties hereto have executed and delivered this
agreement as of the date first above written.
THE SHAREHOLDER SERVICES GROUP, INC.
By:________________________________
Title:_____________________________
Templeton Funds Trust Company Templeton Income
Templeton Growth Fund, Inc.
Templeton Smaller Companies Growth
Fund, Inc.
Templeton Foreign Fund
Templeton World Fund
Templeton Real Estate Securities Fund
Templeton Global Opportunities Trust
Templeton Insured Tax Free Fund
Templeton Value Fund, Inc.
Templeton American Trust, Inc.
Templeton Developing Markets Trust
By:/s/ HAROLD F. MCELRAFT By:________________________
Print Name: Harold F. McElraft Print Name:________________
Title:____________________ Title:_____________________
<PAGE>
EXHIBIT A
Pursuant to the Agreement by and among the parties hereto, TSSG shall,
upon the effective date of this Agreement, perform or cause to be performed, the
following services, as well as telephonic and personal shareholder services
related to the following services:
1. Transmit to TFTC purchase and redemption order placements and
registration instructions. Collect and remit to TFTC payments for all purchase
orders placed on behalf of Broker Customers.
2. Maintain separate records for each shareholder of any of the FUNDS
who hold shares of a FUND in a brokerage account with Broker Customers, which
records shall reflect shares purchased and redeemed, as well as account and
share balances. Process transactions versus master accounts maintained by TFTC
on behalf of Broker Customers and such account shall be in the name of the
Broker or its nominee as the record owner of the shares owned by such customers.
3. Disburse or credit to the Broker Customers all proceeds of
redemptions of shares of the FUNDS and all dividends and other distributions not
reinvested in shares of the FUNDS.
4. Prepare and transmit to Broker Customers:
(a) Periodic account statements which show the total number of FUND
shares owned by the Broker Customer in that account as of the closing date, as
well as purchases, redemption dividends (cash and reinvested) and other
distributions in the account during the period covered by the statement;
(b) Proxy materials and reports and other information received by TSSG
or its agent from any of the FUNDS and required to be sent to shareholders under
the federal securities laws, and, upon request of TFTC transmit to Broker
Customers material fund communications deemed by the FUND, through its Directors
or other similar governing body, to be necessary and proper for receipt by all
FUND beneficial shareholders.
(c) Provide to TFTC, or the FUNDS, or any of the agents designated by
any of them, such information as shall reasonably conclude is necessary to
enable any of the FUNDS and its distributor to comply with State Blue Sky
requirements.
(d) All tax information reports or statements required to be furnished
to shareholders of the FUNDS with respect to their FUND shares by the Internal
Revenue Code and the Regulations promulgated thereunder.
The following fees shall be billed by TSSG monthly in arrears
<PAGE>
on a prorated basis of 1/12 of the annualized fee for all accounts that are open
during such month.
Upon execution of this Agreement, the FUND shall pay TSSG an annualized
fee of $6.00 for each Broker Customer account in the FUND that is open during
any monthly period effective March 1, 1992.
SHAREHOLDER SUB-ACCOUNTING SERVICES AGREEMENT
Agreement made as of the 1st day of May, 1991 by and between (i) each
of the investment companies listed (collectively the "Templeton Funds"), as such
Schedule may be amended from time to time; (ii) Templeton Funds Trust Company
("Templeton Funds Trust Company"); (iii) Financial Data Service, Inc. ("FDS"), a
New Jersey corporation; and (iv) Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("MLPF&S"), a Delaware corporation.
WITNESSETH:
WHEREAS, the Templeton Funds are investment companies registered under
the Investment Company Act of 1940, as amended (the"Act"); and
WHEREAS, Templeton Funds Trust Company, is the transfer agent, dividend
disbursing agent and shareholder servicing agent for the Templeton Funds; and
WHEREAS, Templeton Funds and Templeton Funds Trust Company have entered
into a separate agreement pursuant to which Templeton Funds Trust Company agreed
to arrange for the performance of certain administrative services for
shareholders of the Templeton Funds who maintain shares of any of such Funds in
a brokerage account with MLPF&S, a broker-dealer affiliated with FDS; and
WHEREAS, Templeton Funds Trust Company desires to retain MLPF&S to
perform such services and MLPF&S is willing and able to furnish such services on
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, each party hereto severally agree, as follows:
1. MLPF&S agrees to perform the administrative services and functions
specified in Exhibit A hereto (the "Services") for the benefit of the
shareholders of the Templeton Funds who maintain shares of any of such Funds in
brokerage accounts with MLPF&S and whose shares are included in the master
account referred to in paragraph 1 of Exhibit A (collectively, the "MLPF&S
customers").
2. MLPF&S agrees that it will maintain and preserve all records as
required by law to be maintained and preserved in connection with providing the
services, and will other wise comply with all law, rules and regulations
applicable to the services. Upon the request of Templeton Funds Trust Company,
MLPF&S shall provide copies of all the historical records relating to
transactions involving any Templeton Fund and MLPF&S customers, written
communication regarding that Fund to or from such customers and other materials,
in each case as amy reasonably be requested to enable any of the Funds or its
representatives, including without limitation its auditors, investment adviser,
Templeton Funds Trust Company or successor transfer agent or distributor, to
monitor and
<PAGE>
review the Services, or to comply with any request of the board of directors,
trustees or general partners (collectively, the "Directors") of Templeton Funds
or of a governmental body, self-regulatory organization or a shareholder. MLPF&S
agrees that it will permit Templeton Funds Trust Company, and any Templeton Fund
or their representatives to have reasonable access to its personnel and records
in order to facilitate the monitoring of the quality of the services. It is
understood that notwithstanding anything herein to the contrary, neither FDS nor
MLPF&S shall be required to provide the names and addresses of MLPF&S customers
to Templeton Funds Trust Company, any Templeton Fund of their representatives,
unless applicable laws otherwise require.
3. MLPF&S may contract with or establish relationships with
FDS or other parties for the provision of services or activities of
MLPF&S required by the Agreement.
4. Each of MLPF&S and FDS hereby agrees to notify promptly Templeton
Funds Trust Company if for any reason either of them is unable to perform fully
and promptly any of its obligations under this Agreement.
5. Each of MLPF&S and FDS hereby represent that neither of them now
owns or holds with power to vote any shares of the Templeton Funds which are
registered in the name of MLPF&S or the name of its nominee and which are
maintained in MLPF&S brokerage accounts.
6. The provisions of the Agreement shall in no way limit the authority
of Templeton Funds Trust Company or any Templeton Fund to take such action as it
may deem appropriate or advisable in connection with all matters relating to the
operations of such Fund and/or sale of its shares.
7. In consideration of the performance of the services by MLPF&S and
FDS, hereunder, each Templeton Fund severally agrees to compensate FDS at the
rate of $6.00 annually per shareholder account which rate may change pursuant to
a written amendment to this Agreement executed by and amount the parties hereto.
Payment shall be made monthly based upon the number of shareholders of a Fund
who hold shares of such Fund in a MLPF&S brokerage account for any part of the
subject month. MLPF&S agrees that, notwithstanding anything herein to the
contrary, it will not request any increase in its compensation hereunder prior
to May 3, 1993. In the event MLPF&S or FDS as it's agent where to mail any such
Fund's proxy materials, reports, prospectuses and other information to
shareholders of any Templeton Fund who are Merrill Lynch customers pursuant to
paragraph 4 of Exhibit A, Templeton Funds Trust Company or any such Templeton
Funds agrees to reimburse MLPF&S or FDS, as the case by be, for postage,
handling fees and reasonable costs of supplies used by it in such mailings in an
amount to be determined in accordance with the rates set forth in Rule 451.90 of
the New York Stock Exchange, Inc.
<PAGE>
The accuracy of the account charges and the expenses for postage, handling fees
and reasonable costs of suppliers billed pursuant to this paragraph shall be
certified once each year by independent public accountants of MLPF&S as of a
month selected by Templeton Funds Trust Company, such certification to be at the
expense of MLPF&S.
8. FDS shall indemnify and hold harmless each Templeton Fund and
Templeton Funds Trust Company, from and against any all losses or liabilities
that any one or more of them may incur, including without limitation reasonable
attorneys' fees, expenses and cost, arising out of or related to the performance
or non-performance of MLPF&S or FDS or its responsibilities under this
Agreement, EXCLUDING, HOWEVER, any such claims, suits, loss, damage or cost
caused by, contributed to or arising from any noncompliance by Templeton Funds
Trust Company or any of the Templeton Funds with its obligations under this
Agreement, as to which Templeton Funds Trust Company and the Templeton Funds
shall indemnify, hold harmless and defend FDS and MLPF&S on the same basis as
set forth above.
9. This Agreement may be terminated at any time by each of MLPF&S, FDS
and Templeton Funds Trust Company or by any Templeton Fund as to itself upon 30
days written notice to FDS. This Agreement may also be terminated at any time
without penalty upon 30 days written notice to FDS that a majority of the
Directors of any Templeton Fund have determined to terminate its agreement(s)
with Templeton Funds Trust Company pertaining to the service hereunder. The
provisions of paragraph 2 and 8 shall continue in full force and effect after
the termination of this Agreement. Notwithstanding the foregoing, this Agreement
shall require MLPF&S to preserve any records relating to this Agreement beyond
the time period otherwise required by the laws to which MLPF&S is subject.
10. Any other Templeton Fund for which Templeton Funds Trust Company
serves as transfer agent may become a party to this Agreement by giving written
notice to MLPF&S or FDS that it has elected to become a party hereto and by
having this Agreement executed on its behalf.
11. Each of MLPF&S and FDS understand and agree that the obligations of
the Templeton Funds under this Agreement are not binding upon any shareholder of
any of the Funds personally, but bind only each Fund and each Fund's property;
each of MLPF&S and FDS represents that it has notice of the provisions of the
Declaration of trust of each of the Templeton Funds disclaiming shareholder
liability for acts or obligations of the Fund.
12. It is understood and agreed that in performing the services under
this Agreement, neither MLPF&S nor FDS shall be acting as an agent for any of
the Templeton Funds.
IN WITNESS HEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
<PAGE>
MERRILL LYNCH, PIERCE, FENNER FINANCIAL DATA SERVICES, INC.
& SMITH INC.
By: /s/ HARRY P. ALLEX By: /s/ ROBERT C. DOAN
Print Name: Harry P. Allex Print Name: Robert C. Doan
Title: Sr. Vice President Title: President
Templeton Funds Trust Company Templeton Income
Templeton Growth Fund, Inc.
Templeton Smaller Companies
Growth Fund
Templeton Foreign Fund
Templeton World Fund
Templeton Real Estate Securities
Fund
Templeton Global Opportunities
Trust
Templeton Tax Free Insured Fund
Templeton Value Fund, Inc.
Templeton American Trust, Inc.
By: /s/DAN CALABRIA By: /s/ DAN CALABRIA
Print Name: Dan Calabria Print Name: Dan Calabria
Title: President Title: Vice President
<PAGE>
EXHIBIT A
Pursuant to the Agreement by and among the parties hereto, MLPF&S shall
perform the following services:
1. Maintain separate records for each shareholder of any of the
Templeton Funds who hold shares of a Fund in a brokerage account with MLPF&S
("MLPF&S customers"), which records shall reflect shares purchased and redeemed
and share balances. MLPF&S customers and such account shall be in the name of
MLPF&S or its nominee as the record owner of the shares owned by such customers.
2. Disburse or credit to MLPF&S customers all proceeds of
redemptions of shares of the Funds and all dividends and other
distributions not reinvested in shares of the Funds.
3. Prepare and transmit to MLPF&S customers periodic account statements
showing the total number of shares owned by the customer as of the statement
closing date, purchases and redemptions of Templeton Fund shares by the customer
during the period covered by the statement and the dividends and other
distributions paid to the customer during the statement period (whether paid in
cash or reinvested in Fund shares).
4. Transmit to MLPF&S customers proxy materials and reports and other
information received by MLPF&S from any of the Templeton Funds and required to
be sent to shareholder under the federal securities laws, and, upon request of
the Fund's transfer agent transmit to MLPF&S customers material fund
communications deemed by the fund, through its Board of Directors or other
similar governing body, to be necessary and proper for receipt by all Fund
beneficial shareholders.
5. Transmit to the Fund's transfer agent purchase and redemption orders
on behalf of Merrill Lynch customers in accordance with the commission schedule
(front and rear end) in the Fund's then current prospectus.
6. Provide to Templeton Funds Trust Company, or the Funds, or any of
the agents designated by any of them, such periodic reports as Templeton Funds
Trust Company shall reasonably conclude is necessary to enable any of the
Templeton Funds and its distributor to comply with State Blue Sky requirements.
7. Prepare and transit to MLPF&S customers annually all tax information
reports or statements required to be furnished to shareholders of the Templeton
Funds with respect to their Fund shares by the Internal Revenue Code and the
Regulations promulgated thereunder.
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use of our report dated September 29, 1995 on
the financial statements of Templeton Real Estate Securities Fund referred to
therein, which appears in the 1995 Annual Report to Shareholders and which is
incorporated herein by reference, in Post-Effective Amendment No. 10 to the
Registration Statement on Form N-1A, File No. 33-30018 as filed with the
Securities and Exchange Commission.
We also consent to the reference to our firm in the Prospectus under
the caption "Financial Highlights" and in the Statement of Additional
Information under the caption "Independent Accountants".
/s/ MCGLADREY & PULLEN, LLP
New York, New York
December 16, 1995
<PAGE>
TEMPLETON REAL ESTATE SECURITIES FUND
ASSISTANT SECRETARY'S CERTIFICATE
The undersigned, being the duly elected Assistant Secretary of
Templeton Real Estate Securities Fund, a Massachusetts business trust (the
"Trust"), hereby certifies that the following resolution has been duly adopted
by the Trust's Board of Trustees, and that said resolution remains in effect on
the date hereof.
RESOLVED, that the officers and directors of the Trust be, and they
hereby are, authorized in the name and on behalf of the Trust to
execute, or grant power of attorney to counsel to execute, a
Notification of Registration on Form N-8A under the Investment Company
Act of 1940, and a Registration Statement on Form N-1A under the
Securities Act of 1933 and the Investment Company Act of 1940, to offer
and sell an unlimited number of shares of beneficial interest of the
Trust; to execute, or grant power of attorney to counsel to execute,
any amendments thereto in such form as may be approved by counsel; to
file or authorize the filing of such documents with the Securities and
Exchange Commission; and to designate agents for service of process.
Dated: December 29, 1994
/s/JEFFREY L. STEELE
Jeffrey L. Steele
Assistant Secretary
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
TEMPLETON REAL ESTATE SECURITIES FUND AUGUST 31, 1995 ANNUAL REPORT
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 001
<NAME> TEMPLETON REAL ESTATE SECURITIES FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 131517503
<INVESTMENTS-AT-VALUE> 131839953
<RECEIVABLES> 3074276
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 5185
<TOTAL-ASSETS> 134919414
<PAYABLE-FOR-SECURITIES> 2173988
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 772787
<TOTAL-LIABILITIES> 2946775
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 130997961
<SHARES-COMMON-STOCK> 9861117<F1>
<SHARES-COMMON-PRIOR> 9630037<F1>
<ACCUMULATED-NII-CURRENT> 2945004
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2292776)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 322450
<NET-ASSETS> 131972639
<DIVIDEND-INCOME> 4303077
<INTEREST-INCOME> 1678206
<OTHER-INCOME> 0
<EXPENSES-NET> 2019307
<NET-INVESTMENT-INCOME> 3961976
<REALIZED-GAINS-CURRENT> 2650946
<APPREC-INCREASE-CURRENT> (9032322)
<NET-CHANGE-FROM-OPS> (2419400)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2183210)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3107103<F1>
<NUMBER-OF-SHARES-REDEEMED> (3021430)<F1>
<SHARES-REINVESTED> 145407<F1>
<NET-CHANGE-IN-ASSETS> 428915
<ACCUMULATED-NII-PRIOR> 1450912
<ACCUMULATED-GAINS-PRIOR> (2766042)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 974779
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2019307
<AVERAGE-NET-ASSETS> 129706657<F1>
<PER-SHARE-NAV-BEGIN> 13.66<F1>
<PER-SHARE-NII> .39<F1>
<PER-SHARE-GAIN-APPREC> (.64)<F1>
<PER-SHARE-DIVIDEND> (.21)<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 13.20<F1>
<EXPENSE-RATIO> 1.55<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>EFFECTIVE MAY 1, 1995, THE FUND OFFERED TWO CLASSES OF SHARES: CLASS I
AND CLASS II SHARES. INFORMATION IS FOR CLASS I SHARES ONLY.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM THE
TEMPLETON REAL ESTATE SECURITIES FUND AUGUST 31, 1995 ANNUAL REPORT
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 002
<NAME> TEMPLETON REAL ESTATE SECURITIES FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 131517503
<INVESTMENTS-AT-VALUE> 131839953
<RECEIVABLES> 3074276
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 5185
<TOTAL-ASSETS> 134919414
<PAYABLE-FOR-SECURITIES> 2173988
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 772787
<TOTAL-LIABILITIES> 2946775
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 130997961
<SHARES-COMMON-STOCK> 138496<F1>
<SHARES-COMMON-PRIOR> 0<F1>
<ACCUMULATED-NII-CURRENT> 2945004
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2292776)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 322450
<NET-ASSETS> 131972639
<DIVIDEND-INCOME> 4303077
<INTEREST-INCOME> 1678206
<OTHER-INCOME> 0
<EXPENSES-NET> 2019307
<NET-INVESTMENT-INCOME> 3961976
<REALIZED-GAINS-CURRENT> 2650946
<APPREC-INCREASE-CURRENT> (9032322)
<NET-CHANGE-FROM-OPS> (2419400)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2183210)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 139647<F1>
<NUMBER-OF-SHARES-REDEEMED> (1151)<F1>
<SHARES-REINVESTED> 0<F1>
<NET-CHANGE-IN-ASSETS> 428915
<ACCUMULATED-NII-PRIOR> 1450912
<ACCUMULATED-GAINS-PRIOR> (2766042)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 974779
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2019307
<AVERAGE-NET-ASSETS> 783640<F1>
<PER-SHARE-NAV-BEGIN> 12.25<F1>
<PER-SHARE-NII> .03<F1>
<PER-SHARE-GAIN-APPREC> .89<F1>
<PER-SHARE-DIVIDEND> 0<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 13.17<F1>
<EXPENSE-RATIO> 2.26<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>EFFECTIVE MAY 1, 1995 THE FUND OFFERED TWO CLASSES OF SHARES: CLASS I AND
CLASS II SHARES. INFORMATION IS FOR CLASS II SHARES ONLY.
</FN>
</TABLE>
