PROSPECTUS & APPLICATION
INVESTMENT STRATEGY: Templeton
GLOBAL GROWTH Global
Real Estate
Fund
---------------------------------------------
JANUARY 1, 1998
[LOGO FRANKLIN TEMPLETON]
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This prospectus describes Templeton Global Real Estate Fund (the "Fund"). It
contains information you should know before investing in the Fund. Please keep
it for future reference.
The Fund has a Statement of Additional Information ("SAI") dated January 1,
1998, which may be amended from time to time. It includes more information about
the Fund's procedures and policies. It has been filed with the SEC and is
incorporated by reference into this prospectus. For a free copy or a larger
print version of this prospectus, call 1-800/DIAL BEN.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY OF THE U.S.
GOVERNMENT. SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SEC OR ANY STATE SECURITIES COMMISSION NOR HAS THE SEC OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TEMPLETON GLOBAL
REAL ESTATE FUND
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THIS PROSPECTUS IS NOT AN OFFERING OF THE SECURITIES HEREIN DESCRIBED IN ANY
STATE, JURISDICTION OR COUNTRY IN WHICH THE OFFERING IS NOT AUTHORIZED. NO SALES
REPRESENTATIVE, DEALER, OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR
MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS. FURTHER
INFORMATION MAY BE OBTAINED FROM DISTRIBUTORS.
<PAGE>
TEMPLETON GLOBAL REAL ESTATE FUND
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January 1, 1998
When reading this prospectus, you will see certain terms beginning with capital
letters. This means the term is explained in our glossary section.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
ABOUT THE FUND
Expense Summary........................................................ 2
Financial Highlights................................................... 4
How Does the Fund Invest Its Assets?................................... 6
What Are the Fund's Potential Risks?................................... 12
Who Manages the Fund?.................................................. 16
How Does the Fund Measure Performance?................................. 19
How Taxation Affects the Fund and Its Shareholders..................... 19
How Is the Fund Organized?............................................. 24
ABOUT YOUR ACCOUNT
How Do I Buy Shares?................................................... 25
May I Exchange Shares for Shares of Another Fund?...................... 33
How Do I Sell Shares?.................................................. 36
What Distributions Might I Receive From the Fund?...................... 40
Transaction Procedures and Special Requirements........................ 41
Services to Help You Manage Your Account............................... 46
What If I Have Questions About My Account?............................. 48
GLOSSARY
Useful Terms and Definitions........................................... 50
</TABLE>
100 Fountain Parkway
P.O. Box 33030
St. Petersburg FL
33733-8030
1-800/DIAL BEN
<PAGE>
ABOUT THE FUND
EXPENSE SUMMARY
This table is designed to help you understand the costs of investing in the
Fund. It is based on the historical expenses of each class for the fiscal year
ended August 31, 1997. The Fund's actual expenses may vary.
A. SHAREHOLDER TRANSACTION EXPENSES(+)
<TABLE>
<CAPTION>
CLASS I CLASS II
<S> <C> <C>
Maximum Sales Charge
(as a percentage of Offering Price) 5.75% 1.99%
Paid at time of purchase 5.75%(++) 1.00%(+++)
Paid at redemption(++++) NONE 0.99%
Exchange Fee (per transaction) $5.00* $5.00*
B. ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.75% 0.75%
Rule 12b-1 Fees 0.25%** 1.00%**
Other Expenses 0.45% 0.45%
---------- ---------
Total Fund Operating Expenses 1.45% 2.20%
</TABLE>
C. EXAMPLE
Assume the annual return for each class is 5%, operating expenses are as
described above, and you sell your shares after the number of years shown.
These are the projected expenses for each $1,000 that you invest in the
Fund.
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
<S> <C> <C> <C> <C>
------------------ ----------------- ---------------------- ------------------ ------------------
Class I $ 71*** $ 101 $ 132 $ 221
Class II $ 42 $ 78 $ 127 $ 261
</TABLE>
For the same Class II investment, you would pay projected expenses of $32 if
you did not sell your shares at the end of the first year. Your projected
expenses for the remaining periods would be the same.
THIS IS JUST AN EXAMPLE. IT DOES NOT REPRESENT PAST OR FUTURE EXPENSES OR
RETURNS. ACTUAL EXPENSES AND RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN.
The Fund pays its operating expenses. The effects of these expenses are
reflected in the Net Asset Value or dividends of each class and are not
directly charged to your account.
(+)IF YOUR TRANSACTION IS PROCESSED THROUGH YOUR SECURITIES DEALER, YOU MAY BE
CHARGED A FEE BY YOUR SECURITIES DEALER FOR THIS SERVICE.
(++)THERE IS NO FRONT-END SALES CHARGE IF YOU INVEST $1 MILLION OR MORE IN CLASS
I SHARES.
(+++)ALTHOUGH CLASS II HAS A LOWER FRONT-END SALES CHARGE THAN CLASS I, ITS RULE
12B-1 FEES ARE HIGHER. OVER TIME YOU MAY PAY MORE FOR CLASS II SHARES. PLEASE
SEE "HOW DO I BUY SHARES? -- CHOOSING A SHARE CLASS."
(++++)A CONTINGENT DEFERRED SALES CHARGE MAY APPLY TO ANY CLASS II PURCHASE IF
YOU SELL THE SHARES WITHIN 18 MONTHS AND TO CLASS I PURCHASES OF $1 MILLION OR
MORE IF YOU SELL THE SHARES WITHIN ONE YEAR. A CONTINGENT DEFERRED SALES CHARGE
MAY ALSO APPLY TO PURCHASES BY CERTAIN RETIREMENT PLANS THAT QUALIFY TO BUY
CLASS I SHARES WITHOUT A FRONT-END SALES CHARGE. THE CHARGE IS 1% OF THE VALUE
OF THE SHARES SOLD OR THE NET ASSET VALUE AT THE TIME OF PURCHASE, WHICHEVER IS
LESS. THE NUMBER IN THE TABLE SHOWS THE CHARGE AS A PERCENTAGE OF OFFERING
PRICE. WHILE THE PERCENTAGE IS DIFFERENT DEPENDING ON WHETHER THE CHARGE IS
SHOWN BASED ON THE NET ASSET VALUE OR THE OFFERING PRICE, THE DOLLAR AMOUNT PAID
BY YOU WOULD BE THE SAME. SEE "HOW DO I SELL SHARES? -- CONTINGENT DEFERRED
SALES CHARGE" FOR DETAILS.
*$5.00 FEE IS ONLY FOR MARKET TIMERS. WE PROCESS ALL OTHER EXCHANGES WITHOUT A
FEE.
**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 CHARGE PERMITTED UNDER THE NASD'S RULES.
***ASSUMES A CONTINGENT DEFERRED SALES CHARGE WILL NOT APPLY.
<PAGE>
FINANCIAL HIGHLIGHTS
This table summarizes the Fund's financial history. The information has been
audited by McGladrey & Pullen, LLP, the Fund's independent auditors. Their audit
report covering each of the most recent five years appears in the financial
statements in the Fund's Annual Report to Shareholders for the fiscal year ended
August 31, 1997. The Annual Report to Shareholders also includes more
information about the Fund's performance. For a free copy, please call Fund
Information.
<TABLE>
<CAPTION>
CLASS I SHARES
YEAR ENDED AUGUST 31 1997 1996 1995
- ------------------------------------------------------- ---------------- --------------- ------------
<S> <C> <C> <C>
Per Share Operating Performance
(for a share outstanding throughout the year)
Net asset value, beginning of year $ 13.78 $ 13.20 $ 13.66
Income from investment operations:
Net investment income .39 .31 .39
Net realized and unrealized gains (losses) 2.58 .64 (.64)
---------------- --------------- ------------
Total from investment operations 2.97 .95 (.25)
Less distributions:
Dividends from net investment income (.42) (.37) (.21)
Distributions from net realized gains -- -- --
================ =============== ============
Net asset value, end of year $ 16.33 $ 13.78 $ 13.20
================ =============== ============
Total return(2) 22.06% 7.48% (1.74)%
Ratios/Supplemental Data:
Net assets, end of year (000) $ 151,777 $ 125,875 $ 130,149
Ratios to average net assets:
Expenses 1.45% 1.51% 1.55%
Expenses, net of reimbursement 1.45% 1.51% 1.55%
Net investment income 2.55% 2.73% 3.05%
Portfolio turnover rate 24.03% 20.07% 38.69%
Average commission rate paid(5) $ .0053 $ .0418 --
</TABLE>
(1)FOR THE PERIOD FROM SEPTEMBER 12, 1989 (COMMENCEMENT OF OPERATIONS) TO AUGUST
31, 1990.
(2)TOTAL RETURN DOES NOT REFLECT SALES COMMISSIONS.
(3)ANNUALIZED.
(4)DURING THE FISCAL YEAR ENDED AUGUST 31, 1991, TEMPLETON FUNDS MANAGEMENT,
INC., THE FUND'S PREVIOUS ADMINISTRATOR, 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.
(5)RELATES TO PURCHASES AND SALES OF EQUITY SECURITIES. PRIOR TO FISCAL YEAR END
1996 DISCLOSURE OF AVERAGE COMMISSION RATE WAS NOT REQUIRED.
<PAGE>
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990(1)
- ---------------------- ---------------- ----------------- -------------------- -------------------
<S> <C> <C> <C> <C>
$ 12.66 $ 10.40 $ 10.08 $ 8.88 $ 10.00
- ---------------------- ---------------- ----------------- -------------------- -------------------
.22 .25 .37 .53 .29
1.00 2.36 .43 1.13 (1.33)
- ---------------------- ---------------- ----------------- -------------------- -------------------
1.22 2.61 .80 1.66 (1.04)
(.22) (.35) (.48) (.37) (.08)
-- -- -- (.09) --
- ---------------------- ---------------- ----------------- -------------------- -------------------
$ 13.66 $ 12.66 $ 10.40 $ 10.08 $ 8.88
====================== ================ ================= ==================== ===================
9.69% 25.94% 8.29% 20.06% (10.48)%
$ 131,544 $ 61,820 $ 36,955 $ 32,830 $ 10,065
1.58% 1.68% 1.69% 1.98% 2.77%(3)
1.58% 1.68% 1.69% 1.25%(4) 1.25%(3)
1.97% 2.60% 3.64% 5.48% 3.59%(3)
32.34% 19.74% 32.35% 25.24% 9.54%
-- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
CLASS II SHARES
YEAR ENDED AUGUST 31 1997 1996 1995(1)
- ------------------------------------------------------------- ------------ ------------- -----------
<S> <C> <C> <C>
Per Share Operating Performance
(for a share outstanding throughout the year)
Net asset value, beginning of year $ 13.67 $ 13.17 $ 12.25
------------ ------------- -----------
Income from investment operations:
Net investment income .31 .33 .03
Net realized and unrealized gains 2.52 .52 .89
------------ ------------- -----------
Total from investment operations 2.83 .85 .92
Distributions to shareholders from net investment
income (.34) (.35) --
============ ============= ===========
Net asset value, end of year $ 16.16 $ 13.67 $ 13.17
============ ============= ===========
Total return(2) 21.12% 6.69% 7.51%
Ratios/Supplemental Data:
Net assets, end of year (000) $ 8,917 $ 5,275 $ 1,823
Ratios to average net assets:
Expenses 2.20% 2.26% 2.26%(3)
Net investment income 1.74% 2.20% 1.71%(3)
Portfolio turnover rate 24.03% 20.07% 38.69%
Average commission rate paid(4) $ .0053 $ .0418 --
</TABLE>
(1)FOR THE PERIOD FROM MAY 1, 1995 (COMMENCEMENT OF SALES) THROUGH AUGUST 31,
1995.
(2)TOTAL RETURN DOES NOT REFLECT SALES COMMISSIONS OR THE CONTINGENT DEFERRED
SALES CHARGE AND IS NOT ANNUALIZED.
(3)ANNUALIZED.
(4)RELATES TO PURCHASES AND SALES OF EQUITY SECURITIES. PRIOR TO FISCAL YEAR END
1996, DISCLOSURE OF AVERAGE COMMISSION RATE WAS NOT REQUIRED.
HOW DOES THE FUND INVEST ITS ASSETS?
THE FUND'S INVESTMENT OBJECTIVE
The Fund's 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. The objective is a fundamental
policy of the Fund and may not be changed without shareholder approval. Of
course, there is no assurance that the Fund's objective will be achieved.
Under normal conditions, the Fund will invest not less than 65% of its total
assets in securities of issuers domiciled in at least three different nations
(one of which may be the U.S.), whose securities are listed on U.S. or foreign
securities exchanges or NASDAQ, and 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),
<PAGE>
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 "How Does the Fund Invest Its Assets? -- Structured Investments")
will be rated no lower than A by Moody's or S&P or, if not so rated, believed by
Global Advisors to be of comparable quality, and may have an average weighted
maturity of up to 30 years.
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.
<PAGE>
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 "How Does the Fund Invest
Its Assets?" 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%.
TYPES OF SECURITIES IN WHICH THE FUND MAY INVEST
The Fund is authorized to use the various securities and 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.
TEMPORARY INVESTMENTS. Whenever, in the judgment of Global Advisors, 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 Global Advisors; 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.
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 its ability to dispose of the underlying security and may incur a loss if the
value of the security should decline, as well as incur disposition costs in
liquidating the security.
<PAGE>
BORROWING. The Fund may borrow up to 30% of the value of its total 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 or
gains 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 (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 SECURITIES 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 securities indices that are traded on U.S. 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
<PAGE>
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 EXCHANGE 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 Global Advisors 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
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
<PAGE>
between the value of the index at the beginning and at the end of the contract
period. A futures contract on a foreign currency is an agreement to buy or sell
a specified amount of a currency for a set price on a future date.
When the Fund enters into a futures contract, it must make an initial deposit,
known as "initial margin," as a partial guarantee of its performance under the
contract. As the value of the security, index or currency fluctuates, either
party to the contract is required to make additional margin payments, known as
"variation margin," to cover any additional obligation it may have under the
contract. In addition, when the Fund enters into a futures contract, it will
segregate assets or "cover" its position in accordance with the 1940 Act. See
"How Does the Fund Invest Its Assets? -- 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 U.S. 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 U.S. 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
<PAGE>
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.
WHAT ARE THE FUND'S POTENTIAL RISKS?
You 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, you 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 stock markets and currency valuations, and these may occur
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 Global Advisors 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 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
"Additional Information on Distributions and Taxes" in the SAI.
<PAGE>
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 or gains
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 20% 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. In addition, in many countries there is less publicly
available information about issuers than is available in reports about companies
in the U.S. Foreign companies are not generally subject to uniform accounting or
<PAGE>
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. Also, some countries may
withhold portions of income and dividends at the source. These considerations
generally are more of a concern in developing countries, where the possibility
of political instability (including revolution) and dependence on foreign
economic assistance may be greater than in developed countries. Investments in
companies domiciled in developing countries therefore may be subject to
potentially higher risks than in developed countries.
Brokerage commissions, custodial services and other costs relating to investment
in foreign countries are generally more expensive than in the U.S. 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 U.S. 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 U.S. The Fund may invest in Eastern European countries, which
involves special risks that are described under "What Are the Fund's Potential
Risks?" in the SAI.
Prior governmental approval of non-domestic investments may be required under
certain circumstances in some developing countries, and the extent of foreign
<PAGE>
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.
As a non-fundamental policy, the Fund will limit its investments in Russian
securities to 5% of its total assets. Russian securities involve additional
significant risks, including political and social uncertainty (for example,
regional conflicts and risk of war), currency exchange rate volatility,
pervasiveness of corruption and crime in the Russian economic system, delays in
settling portfolio transactions and risk of loss arising out of Russia's system
of share registration and custody. For more information on these risks and other
risks associated with Russian securities, please see "What Are the Fund's
Potential Risks?" in the SAI.
On July 1, 1997, Hong Kong reverted to the sovereignty of China. As with any
major political transfer of power, this could result in political, social,
economic, market or other developments in Hong Kong, China or other countries
that could affect the value of Fund investments.
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
<PAGE>
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
Global Advisors' 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 securities 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.
WHO MANAGES THE FUND?
THE BOARD. The Board oversees the management of the Fund and elects its
officers. The officers are responsible for the Fund's day-to-day operations. The
Board also monitors the Fund to ensure no material conflicts exist among the
Fund's classes of shares. While none is expected, the Board will act
appropriately to resolve any material conflict that may arise.
INVESTMENT MANAGER. Global Advisors manages the Fund's assets and makes its
investment decisions. Global Advisors also performs similar services for other
funds. It is wholly owned by Resources, a publicly owned company engaged in the
financial services industry through its subsidiaries. Charles B. Johnson and
Rupert H. Johnson, Jr. are the principal shareholders of Resources. Together,
Global Advisors and its affiliates manage over $223 billion in assets. The
Templeton organization has been investing globally since 1940. Global Advisors
and its affiliates have offices in Argentina, Australia, Bahamas, Canada,
France, Germany, Hong Kong, India, Italy, Japan, Korea, Luxembourg, Poland,
Russia, Singapore, South Africa, Taiwan, United Kingdom, U.S. and Vietnam.
Please see "Investment Management and Other Services" and "Miscellaneous
Information" in the SAI for information on securities transactions and a summary
of the Fund's Code of Ethics.
PORTFOLIO MANAGEMENT. The Fund's lead portfolio manager since 1993 is Jeffrey A.
Everett. Mr. Everett is an executive vice president of Global Advisors. He holds
a BS in finance from Pennsylvania State University and is also a Chartered
<PAGE>
Financial Analyst. Prior to joining the Templeton organization in 1989, Mr.
Everett was an investment officer at First Pennsylvania Investment Research, a
division of First Pennsylvania Corporation, where he analyzed equity and
convertible securities. He also coordinated research for Centre Square
Investment Group, the pension management subsidiary of First Pennsylvania
Corporation. Mr. Everett is responsible for managing several offshore accounts
at Templeton, as well as several Templeton funds. His global research
responsibilities encompass industry coverage for real estate and country
responsibilities for Italy and Australia.
Kent P. Shepherd and Richard Sean Farrington have secondary portfolio management
responsibilities for the Fund. Mr. Shepherd is a vice president of Global
Advisors. He holds undergraduate degrees in economics and political science from
Northwestern University and an MBA in international finance from UCLA. In
addition, Mr. Shepherd is a Chartered Financial Analyst and a Chartered
Investment Counselor. Mr. Shepard currently serves as president of the Bahamas
chapter of the International Society of Financial Analysts and course instructor
for the Bahamas Government's securities licensing exam. Prior to joining the
Templeton organization, Mr. Shepherd was an assistant portfolio manager of
Franklin's high yield bond funds. At that time, he had research responsibility
for high yield bonds and post-bankruptcy common stocks in a variety of
industries. Mr. Shepherd currently serves as a portfolio manager and research
analyst with global research responsibilities for the construction, housing,
leisure, tourism and recreation industries. He is also responsible for country
coverage of Belgium and Luxembourg. Mr. Farrington is a vice president of Global
Advisors. He holds a BA in economics from Harvard University. Mr. Farrington is
a Chartered Financial Analyst. He has served as the president of the Bahamas
Society of Financial Analysts and is currently on the board of the International
Society of Financial Analysts. He joined the Templeton organization in 1991 and
is currently a research analyst and portfolio manager. Mr. Farrington's research
responsibilities include global coverage of electrical equipment industries, as
well as international electric utilities. He is also responsible for country
coverage of Hong Kong, China and Taiwan.
MANAGEMENT FEES. During the fiscal year ended August 31, 1997, management fees
totaling 0.75% of the average daily net assets of the Fund were paid to Global
Advisors. Total expenses, including fees paid to Global Advisors, were 1.45% of
the average daily net assets of the Fund for Class I and 2.20% for Class II.
<PAGE>
PORTFOLIO TRANSACTIONS. Global Advisors tries to obtain the best execution on
all transactions. If Global Advisors believes more than one broker or dealer can
provide the best execution, it may consider research and related services and
the sale of Fund shares, as well as shares of other funds in the Franklin
Templeton Group of Funds, when selecting a broker or dealer. Please see "How
Does the Fund Buy Securities for Its Portfolio?" in the SAI for more
information.
ADMINISTRATIVE SERVICES. Since October 1, 1996, FT Services has provided certain
administrative services and facilities for the Fund. Prior to that date,
Templeton Global Investors, Inc. provided the same services to the Fund. During
the fiscal year ended August 31, 1997, administration fees totaled 0.15% of the
average daily net assets of the Fund. These fees are included in the amount of
total expenses shown above. Please see "Investment Management and Other
Services" in the SAI for more information.
THE RULE 12B-1 PLANS
Class I and Class II have separate distribution plans or "Rule 12b-1 Plans"
under which they may pay or reimburse Distributors or others for the expenses of
activities that are primarily intended to sell shares of the class. These
expenses may include, among others, distribution or service fees paid to
Securities Dealers or others who have executed a servicing agreement with the
Fund, Distributors or its affiliates; a prorated portion of Distributors'
overhead expenses; and the expenses of printing prospectuses and reports used
for sales purposes, and preparing and distributing sales literature and
advertisements.
Payments by the Fund under the Class I plan may not exceed 0.25% per year of
Class I's average daily net assets. Expenses not reimbursed in any quarter may
be reimbursed in future quarters or years. This includes expenses not reimbursed
because they exceeded the applicable limit under the plan. As of August 31,
1997, expenses under the Class I plan that may be reimbursable in future
quarters or years totaled $66,754, or 0.04% of Class I's net assets. During the
first year after certain Class I purchases made without a sales charge,
Distributors may keep the Rule 12b-1 fees associated with the purchase.
Under the Class II plan, the Fund may pay Distributors up to 0.75% per year of
Class II's average daily net assets to pay Distributors or others for providing
distribution and related services and bearing certain Class II expenses. All
distribution expenses over this amount will be borne by those who have incurred
<PAGE>
them. During the first year after a purchase of Class II shares, Distributors
may keep this portion of the Rule 12b-1 fees associated with the purchase.
The Fund may also pay a servicing fee of up to 0.25% per year of Class II's
average daily net assets under the Class II plan. This fee may be used to pay
Securities Dealers or others for, among other things, helping to establish and
maintain customer accounts and records, helping with requests to buy and sell
shares, receiving and answering correspondence, monitoring dividend payments
from the Fund on behalf of customers, and similar servicing and account
maintenance activities.
The Rule 12b-1 fees charged to each class are based only on the fees
attributable to that particular class. For more information, please see "The
Fund's Underwriter" in the SAI.
HOW DOES THE FUND MEASURE PERFORMANCE?
From time to time, each class of the Fund advertises its performance. A commonly
used measure of performance is total return. Performance figures are usually
calculated using the maximum sales charges, but certain figures may not include
sales charges.
Total return is the change in value of an investment over a given period. It
assumes any dividends and capital gains are reinvested.
The investment results of each class will vary. Performance figures are always
based on past performance and do not guarantee future results. For a more
detailed description of how the Fund calculates its performance figures, please
see "How Does the Fund Measure Performance?" in the SAI.
HOW TAXATION AFFECTS THE FUND AND ITS SHAREHOLDERS
ON AUGUST 5, 1997, PRESIDENT CLINTON SIGNED INTO LAW THE TAXPAYER RELIEF ACT OF
1997 (THE "1997 ACT"). THIS NEW LAW MAKES SWEEPING CHANGES IN THE CODE. BECAUSE
MANY OF THESE CHANGES ARE COMPLEX, THEY ARE DISCUSSED IN THE SAI.
<PAGE>
HOW DOES THE FUND EARN INCOME AND GAINS?
The Fund earns interest and dividends (the Fund's "income") on its investments.
When the Fund sells a security for a price that is higher than it paid, it has a
gain. When the Fund sells a security for a price that is lower than it paid, it
has a loss. If the Fund has held the security for more than one year, the gain
or loss will be a long-term capital gain or loss. If the Fund has held the
security for one year or less, the gain or loss will be a short-term capital
gain or loss. The Fund's gains and losses are netted together, and, if the Fund
has a net gain (the Fund's "gains"), that gain will generally be distributed to
you.
TAXATION OF THE FUND'S INVESTMENTS. The Fund invests your money in the stocks,
bonds and other securities that are described in the section "How Does the Fund
Invest Its Assets?" Special tax rules may apply in determining the income and
gains the Fund earns on its investments. These rules may, in turn, affect the
amount of distributions that the Fund pays to you. These special tax rules are
discussed in the SAI.
TAXATION OF THE FUND. As a regulated investment company,
the Fund generally pays no federal income tax on the income and gains that it
distributes to you.
FOREIGN TAXES. Foreign governments may impose taxes on the
income and gains from the Fund's investments in foreign stocks and bonds. These
taxes will reduce the amount of the Fund's distributions to you. The Fund may
also invest in the securities of foreign companies that are "passive foreign
investment companies" ("PFICs"). These investments in PFICs may cause the Fund
to pay income taxes and interest charges. If possible, the Fund will not invest
in PFICs or will adopt other strategies to avoid these taxes and charges.
<PAGE>
TAXATION OF SHAREHOLDERS
WHAT IS A DISTRIBUTION?
As a shareholder, you will receive your share of the Fund's income and gains on
its investments in stocks, bonds and other securities. The Fund's income and
short-term capital gains are paid to you as ordinary dividends. The Fund's
long-term capital gains are paid to you as capital gain distributions. If the
Fund pays you an amount in excess of its income and gains, this excess will
generally be treated as a non-taxable distribution. These amounts, taken
together, are what we call the Fund's distributions to you.
DISTRIBUTIONS. Distributions from the Fund, whether you receive them in cash or
in additional shares, are generally subject to income tax. The Fund will send
you a statement in January of the current year showing the ordinary dividends,
capital gain distributions and non-taxable distributions you received from the
Fund in the prior year. The amounts on this statement will include distributions
declared in December of the prior year, and paid to you in January of the
current year. These distributions are taxable as if you had received them on
December 31 of the prior year. The IRS requires you to report these amounts on
your income tax return for the prior year.
The Fund's statement for the prior year will tell you how much of your capital
gain distribution represents 28% rate gain, or 25% rate gain, if applicable. The
remainder of the capital gain distribution, after subtracting out these amounts,
represents 20% rate gain.
DISTRIBUTIONS TO RETIREMENT PLANS. Fund distributions received by your qualified
retirement plan, such as a Section 401(k) plan or IRA, are generally
tax-deferred; this means that you are not required to report Fund distributions
on your income tax return when paid to your plan, but, rather, when your plan
makes payments to you.
DIVIDENDS -- RECEIVED DEDUCTION. Corporate investors may be entitled to a
dividends-received deduction on a portion of the ordinary dividends received
from the Fund.
<PAGE>
WHAT IS A REDEMPTION?
A redemption is a sale by you to the Fund of some or all of your shares in the
Fund. The price per share you receive when you redeem Fund shares may be more or
less than the price at which you purchased those shares. An exchange of shares
in the Fund for shares of another Franklin Templeton Fund is treated as a
redemption of Fund shares and then a purchase of shares of the other Fund. When
you redeem or exchange your shares, you will generally have a gain or loss,
depending upon whether the basis in your shares is more or less than your cost
or other basis in the shares. Call Fund Information at 1-800-342-5236 for a free
Shareholder Tax Information Handbook if you need more information in calculating
the gain or loss on the redemption or exchange of your shares.
REDEMPTIONS AND EXCHANGES. If you redeem your shares or if you exchange your
shares in the Fund for shares in another Franklin Templeton Fund, you will
generally have a gain or loss that the IRS requires you to report on your income
tax return. If you exchange Fund shares held for 90 days or less and pay no
sales charge, or a reduced sales charge for the new shares, all or a portion of
the sales charge you paid on the purchase of the shares you exchanged is not
included in their cost for purposes of computing gain or loss on the exchange.
If you hold your shares for six months or less, any loss you have will be
treated as a long-term capital loss to the extent of any capital gain
distributions received by you from the Fund. All or a portion of any loss on the
redemption or exchange of your shares will be disallowed by the IRS if you
purchase other shares in the Fund within 30 days before or after your redemption
or exchange.
WHAT IS A FOREIGN TAX CREDIT?
A foreign tax credit is a tax credit for the amount of taxes imposed by a
foreign country on earnings of the Fund. When a foreign company in which the
Fund invests pays a dividend to the Fund, the dividend will generally be subject
to a withholding tax. The taxes withheld in foreign countries create credits
that you may use to offset your U.S. federal income tax.
<PAGE>
FOREIGN TAXES. If more than 50% of the value of the Fund's assets consists of
foreign securities, the Fund may elect to pass-through to you the amount of
foreign taxes it paid. If the Fund makes this election, your year-end statement
will show more taxable income than was actually distributed to you. However, you
will be entitled to either deduct your share of such taxes in computing your
taxable income or claim a foreign tax credit for such taxes against your U.S.
federal income tax. Your year-end statement, showing the amount of deduction or
credit available to you, will be distributed to you in January along with other
shareholder information records including your Fund Form 1099-DIV.
The 1997 Act included a provision that allows you to claim these credits
directly on your income tax return (Form 1040) and eliminates the previous
requirement that you complete a detailed supporting form. To qualify, you must
have $600 or less in joint return foreign taxes ($300 or less on a single
return), all of which are reported to you on IRS Form 1099-DIV. THIS SIMPLIFIED
PROCEDURE APPLIES ONLY FOR CALENDAR YEARS 1998 AND BEYOND, AND IS NOT AVAILABLE
IN 1997.
NON-U.S. INVESTORS. Ordinary dividends generally will be subject to U.S. income
tax withholding. Your home country may also tax ordinary dividends, capital gain
distributions and gains arising from redemptions or exchanges of your Fund
shares. Fund shares held by the estate of a non-U.S. investor may be subject to
U.S. estate tax. You may wish to contact your tax advisor to determine the U.S.
and non-U.S. tax consequences of your investment in the Fund.
STATE TAXES. Ordinary dividends and capital gain distributions that you receive
from the Fund as well as gains arising from redemptions or exchanges of your
Fund shares will generally be subject to state and local income tax. The holding
of Fund shares may also be subject to state and local intangibles taxes. You may
wish to contact your tax advisor to determine the state and local tax
consequences of your investment in the Fund.
<PAGE>
WHAT IS A BACKUP WITHHOLDING?
Backup withholding occurs when the Fund is required to withhold and pay over to
the IRS 31% of your distributions and redemption proceeds. You can avoid backup
withholding by providing the Fund with your TIN, and by completing the tax
certifications on your account application that you were asked to sign when you
opened your account. However, if the IRS instructs the Fund to begin backup
withholding, it is required to do so even if you provided the Fund with your TIN
and these tax certifications, and backup withholding will remain in place until
the Fund is instructed by the IRS that it is no longer required.
BACKUP WITHHOLDING. When you open an account, IRS regulations require that you
provide your taxpayer identification number ("TIN"), certify that it is correct,
and certify that you are not subject to backup withholding under IRS rules. If
you fail to provide a correct TIN or the proper tax certifications, the Fund is
required to withhold 31% of all the distributions (including ordinary dividends
and capital gain distributions) and redemption proceeds paid to you. The Fund is
also required to begin backup withholding on your account if the IRS instructs
the Fund to do so. The Fund reserves the right not to open your account or,
alternatively, to redeem your shares at the current net asset value, less any
taxes withheld, if you fail to provide the proper tax certifications, or the IRS
instructs the Fund to begin value, less any taxes withheld, if you fail to
provide a correct TIN, fail to backup withholding on your account.
THIS TAX DISCUSSION IS FOR GENERAL INFORMATION ONLY. PROSPECTIVE INVESTORS
SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE FEDERAL, STATE, LOCAL OR
FOREIGN TAX CONSEQUENCES OF AN INVESTMENT IN THE FUND. A MORE COMPLETE
DISCUSSION OF THESE RULES AND RELATED MATTERS IS CONTAINED IN THE SECTION
ENTITLED "ADDITIONAL INFORMATION ABOUT DISTRIBUTIONS AND TAXES" IN THE SAI. THE
TAX TREATMENT OF DISTRIBUTIONS OF ORDINARY DIVIDENDS, CAPITAL GAIN
DISTRIBUTIONS, FOREIGN TAXES PAID, AND INCOME TAXES WITHHELD IS ALSO DISCUSSED
IN A FREE SHAREHOLDER TAX INFORMATION HANDBOOK, AVAILABLE FROM FUND INFORMATION
AT 1-800-342-5236.
HOW IS THE FUND ORGANIZED?
The Fund is a diversified, open-end management investment company, commonly
called a mutual fund. It was organized as a Massachusetts business trust on July
17, 1989, and is registered with the SEC. The Fund offers two classes of shares:
Templeton Global Real Estate Fund -- Class I and Templeton Global Real Estate
Fund -- Class II. All shares outstanding before the offering of Class II shares
are considered Class I shares. Additional classes of shares may be offered in
the future.
<PAGE>
Shares of each class represent proportionate interests in the assets of the Fund
and have the same voting and other rights and preferences as any other class of
the Fund for matters that affect the Fund as a whole. For matters that only
affect one class, however, only shareholders of that class may vote. Each class
will vote separately on matters affecting only that class, or expressly required
to be voted on separately by state or federal law.
The Fund has noncumulative voting rights. This gives holders of more than 50% of
the shares voting the ability to elect all of the members of the Board. If this
happens, holders of the remaining shares voting will not be able to elect anyone
to the Board.
The Fund does not intend to hold annual shareholder meetings. It may hold
special meetings, however, for matters requiring shareholder approval. A meeting
may also be called by the Board in its discretion or for the purpose of
considering the removal of a Board member if requested in writing to do so by
shareholders holding at least 10% of the outstanding shares. In certain
circumstances, we are required to help you communicate with other shareholders
about the removal of a Board member.
ABOUT YOUR ACCOUNT
HOW DO I BUY SHARES?
OPENING YOUR ACCOUNT
To open your account, contact your investment representative or complete and
sign the enclosed shareholder application and return it to the Fund with your
check. PLEASE INDICATE WHICH CLASS OF SHARES YOU WANT TO BUY. IF YOU DO NOT
SPECIFY A CLASS, YOUR PURCHASE WILL BE AUTOMATICALLY INVESTED IN CLASS I SHARES.
MINIMUM
INVESTMENTS*
- ---------------------------------------------- -------------------
To Open Your Account. $ 100
To Add to Your Account $ 25
*We may waive these minimums for retirement plans. We may also refuse any order
to buy shares.
CHOOSING A SHARE CLASS
Each class has its own sales charge and expense structure, allowing you to
choose the class that best meets your situation. The class that may be best for
you depends on a number of factors, including the amount and length of time you
expect to invest. Generally, Class I shares may be more attractive for long-term
<PAGE>
investors or investors who qualify to buy Class I shares at a reduced sales
charge. Your financial representative can help you decide.
CLASS I
Higher front-end sales charges than Class II shares. There are several
ways to reduce these charges, as described below. There is no front-end
sales charge for purchases of $1 million or more.*
Contingent Deferred Sales Charge on purchases of $1 million or more sold
within one year
Lower annual expenses than Class II shares
CLASS II
Lower front-end sales charges than Class I shares
Contingent Deferred Sales Charge on purchases sold within 18 months
Higher annual expenses than Class I shares
*If you are investing $1 million or more, it is generally more beneficial for
you to buy Class I shares because there is no front-end sales charge and the
annual expenses are lower. Therefore, ANY PURCHASE OF $1 MILLION OR MORE IS
AUTOMATICALLY INVESTED IN CLASS I SHARES. You may accumulate more than $1
million in Class II shares through purchases over time. If you plan to do this,
however, you should determine if it would be better for you to buy Class I
shares through a Letter of Intent.
<PAGE>
PURCHASE PRICE OF FUND SHARES
For Class I shares, the sales charge you pay depends on the dollar amount you
invest, as shown in the table below. The sales charge for Class II shares is 1%
and, unlike Class I, does not vary based on the size of your purchase.
<TABLE>
<CAPTION>
TOTAL SALES CHARGE AMOUNT PAID
AS A PERCENTAGE OF TO DEALER AS A
AMOUNT OF PURCHASE OFFERING NET AMOUNT PERCENTAGE OF
AT OFFERING PRICE PRICE INVESTED OFFERING PRICE
<S> <C> <C> <C>
- --------------------------------------------- -------------------- -------------------- -------------------
CLASS I
Under $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 None
CLASS II
Under $1,000,000*................. 1.00% 1.01% 1.00%
</TABLE>
*A Contingent Deferred Sales Charge of 1% may apply to Class I purchases of $1
million or more and any Class II purchase. Please see "How Do I Sell Shares? --
Contingent Deferred Sales Charge." Please also see "Other Payments to Securities
Dealers" below for a discussion of payments Distributors may make out of its own
resources to Securities Dealers for certain purchases. Purchases of Class II
shares are limited to purchases below $1 million. Please see "Choosing a Share
Class."
SALES CHARGE REDUCTIONS AND WAIVERS
IF YOU QUALIFY TO BUY SHARES UNDER ONE OF THE SALES CHARGE REDUCTION OR
WAIVER CATEGORIES DESCRIBED BELOW, PLEASE INCLUDE A WRITTEN STATEMENT WITH
EACH PURCHASE ORDER EXPLAINING WHICH PRIVILEGE APPLIES. If you don't include
this statement, we cannot guarantee that you will receive the sales charge
reduction or waiver.
CUMULATIVE QUANTITY DISCOUNTS -- CLASS I ONLY. To determine if you may pay a
reduced sales charge, the amount of your current Class I purchase is added to
the cost or current value, whichever is higher, of your existing shares in the
Franklin Templeton Funds, as well as those of your spouse, children under the
age of 21 and grandchildren under the age of 21. If you are the sole owner of a
company, you may also add any company accounts, including retirement plan
accounts. Companies with one or more retirement plans may add together the total
plan assets invested in the Franklin Templeton Funds to determine the sales
charge that applies.
<PAGE>
LETTER OF INTENT -- CLASS I ONLY. You may buy Class I shares at a reduced sales
charge by completing the Letter of Intent section of the shareholder
application. A Letter of Intent is a commitment by you to invest a specified
dollar amount during a 13 month period. The amount you agree to invest
determines the sales charge you pay on Class I shares.
BY COMPLETING THE LETTER OF INTENT SECTION OF THE SHAREHOLDER APPLICATION, YOU
ACKNOWLEDGE AND AGREE TO THE FOLLOWING:
You authorize Distributors to reserve 5% of your total intended purchase in
Class I shares registered in your name until you fulfill your Letter.
You give Distributors a security interest in the reserved shares and
appoint Distributors as attorney-in-fact.
Distributors may sell any or all of the reserved shares to cover any
additional sales charge if you do not fulfill the terms of the Letter.
Although you may exchange your shares, you may not sell reserved shares
until you complete the Letter or pay the higher sales charge.
Your periodic statements will include the reserved shares in the total shares
you own. We will pay or reinvest dividend and capital gain distributions on the
reserved shares as you direct. Our policy of reserving shares does not apply to
certain retirement plans.
If you would like more information about the Letter of Intent privilege, please
see "How Do I Buy, Sell and Exchange Shares? -- Letter of Intent" in the SAI or
call Shareholder Services.
GROUP PURCHASES -- CLASS I ONLY. If you are a member of a qualified group, you
may buy Class I shares at a reduced sales charge that applies to the group as a
whole. The sales charge is based on the combined dollar value of the group
members' existing investments, plus the amount of the current purchase.
A qualified group is one that:
Was formed at least six months ago,
Has a purpose other than buying Fund shares at a discount,
Has more than 10 members,
Can arrange for meetings between our representatives and group members,
Agrees to include Franklin Templeton Fund sales and other materials in
publications and mailings to its members at reduced or no cost to
Distributors,
Agrees to arrange for payroll deduction or other bulk transmission of
investments to the Fund, and
Meets other uniform criteria that allow Distributors to achieve cost
savings in distributing shares.
SALES CHARGE WAIVERS. If one of the following sales charge waivers applies to
you or your purchase of Fund shares, you may buy shares of the Fund without a
front-end sales charge or a Contingent Deferred Sales Charge. All of the sales
charge waivers listed below apply to purchases of Class I shares only, except
for items 1 and 2 which also apply to Class II purchases.
Certain distributions, payments or redemption proceeds that you receive may be
used to buy shares of the Fund without a sales charge if you reinvest them
within 365 days of their payment or redemption date. They include:
1. Dividend and capital gain distributions from any Franklin Templeton
Fund. The distributions generally must be reinvested in the SAME CLASS of
shares. Certain exceptions apply, however, to Class II shareholders who
chose to reinvest their distributions in Class I shares of the Fund before
November 17, 1997, and to Advisor Class or Class Z shareholders of a
Franklin Templeton Fund who may reinvest their distributions in Class I
shares of the Fund.
2. Redemption proceeds from the sale of shares of any Franklin Templeton
Fund if you originally paid a sales charge on the shares and you reinvest
the money in the SAME CLASS of shares. This waiver does not apply to
exchanges.
If you paid a Contingent Deferred Sales Charge when you redeemed your
shares from a Franklin Templeton Fund, a Contingent Deferred Sales Charge
will apply to your purchase of Fund shares and a new Contingency Period
will begin. We will, however, credit your Fund account with additional
shares based on the Contingent Deferred Sales Charge you paid and the
amount of redemption proceeds that you reinvest.
If you immediately placed your redemption proceeds in a Franklin Bank CD,
you may reinvest them as described above. The proceeds must be reinvested
within 365 days from the date the CD matures, including any rollover.
<PAGE>
3. Dividend or capital gain distributions from a real estate investment
trust (REIT) sponsored or advised by Franklin Properties, Inc.
4. Annuity payments received under either an annuity option or from death
benefit proceeds, only if the annuity contract offers as an investment
option the Franklin Valuemark Funds, the Templeton Variable Annuity Fund,
or the Templeton Variable Products Series Fund. You should contact your tax
advisor for information on any tax consequences that may apply.
5. Distributions from an existing retirement plan invested in the Franklin
Templeton Funds
6. Redemption proceeds from the sale of Class A shares of any of the Templeton
Global Strategy Funds if you are a qualified investor.
If you paid a contingent deferred sales charge when you redeemed your Class
A shares from a Templeton Global begin. We will, however, credit your Fund
account with additional shares based on the contingent deferred sales
charge you paid and the amount of the redemption proceeds that you
reinvest.
If you immediately placed your redemption proceeds in a Franklin Templeton
money fund, you may reinvest them as described above. The proceeds must be
reinvested within 365 days from the date they are redeemed from the money
fund.
Various individuals and institutions also may buy Class I shares without a
front-end sales charge or Contingent Deferred Sales Charge, including:
1. Trust companies and bank trust departments agreeing to invest in Franklin
Templeton Funds over a 13 month period at least $1 million of assets held
in a fiduciary, agency, advisory, custodial or similar capacity and over
which the trust companies and bank trust departments or other plan
fiduciaries or participants, in the case of certain retirement plans, have
full or shared investment discretion. We will accept orders for these
accounts 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 the order.
<PAGE>
2. An Eligible Governmental Authority. Please consult your legal and
investment advisors to determine if an investment in the Fund is
permissible and suitable for you and the effect, if any, of payments by the
Fund on arbitrage rebate calculations.
3. Broker-dealers, registered investment advisors or certified financial
planners who have entered into an agreement with Distributors for clients
participating in comprehensive fee programs
4. Registered Securities Dealers and their affiliates, for their investment
accounts only
5. Current employees of Securities Dealers and their affiliates and their
family members, as allowed by the internal policies of their employer
6. Officers, trustees, directors and full-time employees of the Franklin
Templeton Funds or the Franklin Templeton Group, and their family members,
consistent with our then-current policies
7. Investment companies exchanging shares or selling assets pursuant to a
merger, acquisition or exchange offer
8. Accounts managed by the Franklin Templeton Group
9. Certain unit investment trusts and their holders reinvesting
distributions from the trusts
10. Group annuity separate accounts offered to retirement plans
11. Chilean retirement plans that meet the requirements described under
"Retirement Plans" below
RETIREMENT PLANS. Retirement plans that (i) are sponsored by an employer with at
least 100 employees, or (ii) have plan assets of $1 million or more, or (iii)
agree to invest at least $500,000 in the Franklin Templeton Funds over a 13
month period may buy Class I shares without a front-end sales charge. Retirement
plans that are not Qualified Retirement Plans or SEPs, such as 403(b) or 457
plans, must also meet the requirements described under "Group Purchases -- Class
I Only" above to be able to buy Class I shares without a front-end sales charge.
For retirement plan accounts opened on or after May 1, 1997, a Contingent
Deferred Sales Charge may apply if the account is closed within 365 days of the
retirement plan account's initial purchase in the Franklin Templeton Funds.
<PAGE>
Please see "How Do I Sell Shares? -- Contingent Deferred Sales Charge" for
details.
Any retirement plan that does not meet the requirements to buy Class I shares
without a front-end sales charge and that was a shareholder of the Fund on or
before February 1, 1995, may buy shares of the Fund subject to a maximum sales
charge of 4% of the Offering Price, 3.2% of which will be retained by Securities
Dealers.
HOW DO I BUY SHARES IN CONNECTION WITH RETIREMENT PLANS?
Your individual or employer-sponsored retirement plan may invest in the Fund.
Plan documents are required for all retirement plans. Trust Company can provide
the plan documents for you and serve as custodian or trustee.
Trust Company can provide you with brochures containing important information
about its plans. To establish a Trust Company retirement plan, you will need an
application other than the one included in this prospectus. For a retirement
plan brochure or application, call Retirement Plan Services.
Please consult your legal, tax or retirement plan specialist before choosing a
retirement plan. Your investment representative or advisor can help you make
investment decisions within your plan.
OTHER PAYMENTS TO SECURITIES DEALERS
The payments described below may be made to Securities Dealers who initiate and
are responsible for Class II purchases and certain Class I purchases made
without a sales charge. The payments are subject to the sole discretion of
Distributors, and are paid by Distributors or one of its affiliates and not by
the Fund or its shareholders.
1. Class II purchases -- up to 1% of the purchase price.
2. Class I purchases of $1 million or more -- up to 1% of the amount invested.
3. Class I purchases made without a front-end sales charge by certain
retirement plans described under "Sales Charge Reductions and Waivers --
Retirement Plans" above -- up to 1% of the amount invested.
4. Class I purchases by trust companies and bank trust departments, Eligible
Governmental Authorities, and broker-dealers or others on behalf of clients
<PAGE>
participating in comprehensive fee programs -- up to 0.25% of the amount
invested.
5. Class I purchases by Chilean retirement plans -- up to 1% of the amount
invested.
A Securities Dealer may receive only one of these payments for each qualifying
purchase. Securities Dealers who receive payments in connection with investments
described in paragraphs 1, 2 or 5 above or a payment of up to 1% for investments
described in paragraph 3 will be eligible to receive the Rule 12b-1 fee
associated with the purchase starting in the thirteenth calendar month after the
purchase.
FOR BREAKPOINTS THAT MAY APPLY AND INFORMATION ON ADDITIONAL COMPENSATION
PAYABLE TO SECURITIES DEALERS IN CONNECTION WITH THE SALE OF FUND SHARES, PLEASE
SEE "HOW DO I BUY, SELL AND EXCHANGE SHARES? -- OTHER PAYMENTS TO SECURITIES
DEALERS" IN THE SAI.
FOR INVESTORS OUTSIDE THE U.S.
The distribution of this prospectus and the offering of Fund shares may be
limited in many jurisdictions. An investor who wishes to buy shares of the Fund
should determine, or have a broker-dealer determine, the applicable laws and
regulations of the relevant jurisdiction. Investors are responsible for
compliance with tax, currency exchange or other regulations applicable to
redemption and purchase transactions in any jurisdiction to which they may be
subject. Investors should consult appropriate tax and legal advisors to obtain
information on the rules applicable to these transactions.
MAY I EXCHANGE SHARES FOR SHARES OF ANOTHER FUND?
We offer a wide variety of funds. If you would like, you can move your
investment from your Fund account to an existing or new account in another
Franklin Templeton Fund (an "exchange"). Because it is technically a sale and a
purchase of shares, an exchange is a taxable transaction.
If you own Class I shares, you may exchange into any of our money funds except
Franklin Templeton Money Fund II ("Money Fund II"). Money Fund II is the only
money fund exchange option available to Class II shareholders. Unlike our other
money funds, shares of Money Fund II may not be purchased directly and no drafts
(checks) may be written on Money Fund II accounts.
<PAGE>
Before making an exchange, please read the prospectus of the fund you are
interested in. This will help you learn about the fund, its investment objective
and policies, and its rules and requirements for exchanges. For example, some
Franklin Templeton Funds do not accept exchanges and others may have different
investment minimums. Some Franklin Templeton Funds do not offer Class II shares.
<TABLE>
<CAPTION>
METHOD STEPS TO FOLLOW
<S> <C>
- ------------------------------------- ------------------------------------------------
BY MAIL 1. Send us signed written instructions
2. Include any outstanding share certificates
for the shares you want to exchange
- ------------------------------------- ------------------------------------------------
BY PHONE Call Shareholder Services or TeleFACTS(R)
If you do not want the ability to
exchange by phone to apply to your
account, please let us know.
- ------------------------------------- ------------------------------------------------
THROUGH YOUR DEALER Call your investment representative
- ------------------------------------- ------------------------------------------------
</TABLE>
Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to exchange shares.
WILL SALES CHARGES APPLY TO MY EXCHANGE?
You generally will not pay a front-end sales charge on exchanges. If you have
held your shares less than six months, however, you will pay the percentage
difference between the sales charge you previously paid and the applicable sales
charge of the new fund. If you have never paid a sales charge on your shares
because, for example, they have always been held in a money fund, you will pay
the Fund's applicable sales charge no matter how long you have held your shares.
These charges may not apply if you qualify to buy shares without a sales charge.
We will not impose a Contingent Deferred Sales Charge when you exchange shares.
Any shares subject to a Contingent Deferred Sales Charge at the time of
exchange, however, will remain so in the new fund. See the discussion on
Contingent Deferred Sales Charges below and under "How Do I Sell Shares?"
CONTINGENT DEFERRED SALES CHARGE. For accounts with shares subject to a
Contingent Deferred Sales Charge, we will first exchange any shares in your
account that are not subject to the charge. If there are not enough of these to
<PAGE>
meet your exchange request, we will exchange shares subject to the charge in the
order they were purchased.
If you exchange Class I shares into one of our money funds, the time your shares
are held in that fund will not count towards the completion of any Contingency
Period. If you exchange your Class II shares for shares of Money Fund II,
however, the time your shares are held in that fund will count towards the
completion of any Contingency Period.
EXCHANGE RESTRICTIONS
Please be aware that the following restrictions apply to exchanges:
You may only exchange shares within the SAME CLASS, except as noted below.
The accounts must be identically registered. You may, however, exchange
shares from a Fund account requiring two or more signatures into an
identically registered money fund account requiring only one signature for
all transactions. PLEASE NOTIFY US IN WRITING IF YOU DO NOT WANT THIS
OPTION TO BE AVAILABLE ON YOUR ACCOUNT. Additional procedures may apply.
Please see "Transaction Procedures and Special Requirements."
Trust Company IRA or 403(b) retirement plan accounts may exchange shares as
described above. Restrictions may apply to other types of retirement plans.
Please contact Retirement Plan Services for information on exchanges within
these plans.
The fund you are exchanging into must be eligible for sale in your state.
We may modify or discontinue our exchange policy if we give you 60 days'
written notice.
Your exchange may be restricted or refused if you have: (i) requested an
exchange out of the Fund within two weeks of an earlier exchange request,
(ii) exchanged shares out of the Fund more than twice in a calendar
quarter, or (iii) exchanged shares equal to at least $5 million, or more
than 1% of the Fund's net assets. Shares under common ownership or control
are combined for these limits. If you have exchanged shares as described in
this paragraph, you will be considered a Market Timer. Each exchange by a
Market Timer, if accepted, will be charged $5.00. Some of our funds do not
allow investments by Market Timers.
<PAGE>
Because excessive trading can hurt Fund performance, operations and
shareholders, we may refuse any exchange purchase if (i) we believe the Fund
would be harmed or unable to invest effectively, or (ii) the Fund receives or
anticipates simultaneous orders that may significantly affect the Fund.
LIMITED EXCHANGES BETWEEN DIFFERENT CLASSES OF SHARES
Certain funds in the Franklin Templeton Funds offer classes of shares not
offered by the Fund, such as "Advisor Class" or "Class Z" shares. Because the
Fund does not currently offer an Advisor Class, you may exchange Advisor Class
shares of any Franklin Templeton Fund for Class I shares of the Fund at Net
Asset Value. If you do so and you later decide you would like to exchange into a
fund that offers an Advisor Class, you may exchange your Class I shares for
Advisor Class shares of that fund. Certain shareholders of Class Z shares of
Franklin Mutual Series Fund Inc. may also exchange their Class Z shares for
Class I shares of the Fund at Net Asset Value.
HOW DO I SELL SHARES?
You may sell (redeem) your shares at any time.
<TABLE>
<CAPTION>
METHOD STEPS TO FOLLOW
<S> <C>
- --------------------------------- ---------------------------------------------
BY MAIL 1. Send us signed written instructions. If
you would like your redemption proceeds wired
to a bank account, your instructions
should include:
The name, address and telephone number of
the bank where you want the proceeds sent
Your bank account number
The Federal Reserve ABA routing number
If you are using a savings and loan or
credit union, the name of the corresponding
bank and the account number
2. Include any outstanding share certificates
for the shares you are selling
3. Provide a signature guarantee if required
4. Corporate, partnership and trust accounts
may need to send additional documents.
Accounts under court jurisdiction may have
other requirements.
<PAGE>
- --------------------------------- ---------------------------------------------
BY PHONE Call Shareholder Services. If you would like
your redemption proceeds wired to a bank
account, other than an escrow account, you
must first sign up for the wire feature. To
sign up, send us written instructions, with a
signature guarantee. To avoid any delay in
processing, the instructions should include
the items listed in "By Mail" above.
Telephone requests will be accepted:
If the request is $50,000 or less.
Institutional accounts may exceed $50,000
by completing a separate agreement. Call
Institutional Services to receive a copy.
If there are no share certificates issued
for the shares you want to sell or you
have already returned them to the Fund
Unless you are selling shares in a Trust
Company retirement plan account
Unless the address on your account was
changed by phone within the last 15 days
If you do not want the ability to
redeem by phone to apply to your
account, please let us know.
- --------------------------------- ---------------------------------------------
THROUGH YOUR DEALER Call your investment representative
- --------------------------------- ---------------------------------------------
</TABLE>
We will send your redemption check within seven days after we receive your
request in proper form. If you would like the check sent to an address other
than the address of record or made payable to someone other than the registered
owners on the account, send us written instructions signed by all account
owners, with a signature guarantee. We are not able to receive or pay out cash
in the form of currency.
The wiring of redemption proceeds is a special service that we make available
whenever possible for redemption requests of $1,000 or more. If we receive your
request in proper form before 4:00 p.m. Eastern time, your wire payment will be
sent the next business day. For requests received in proper form after 4:00 p.m.
Eastern time, the payment will be sent the second business day. By offering this
service to you, the Fund is not bound to meet any redemption request in less
than the seven day period prescribed by law. Neither the Fund nor its agents
shall be liable to you or any other person if, for any reason, a redemption
request by wire is not processed as described in this section.
<PAGE>
If you sell shares you recently purchased with a check or draft, we may delay
sending you the proceeds for up to 15 days or more to allow the check or draft
to clear. A certified or cashier's check may clear in less time.
Under unusual circumstances, we may suspend redemptions or postpone payment for
more than seven days as permitted by federal securities law.
Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to sell shares.
TRUST COMPANY RETIREMENT PLAN ACCOUNTS
To comply with IRS regulations, you need to complete additional forms before
selling shares in a Trust Company retirement plan account. Tax penalties
generally apply to any distribution from these plans to a participant under age
59 1/2, unless the distribution meets an exception stated in the Code. To obtain
the necessary forms, please call Retirement Plan Services.
CONTINGENT DEFERRED SALES CHARGE
For Class I purchases, if you did not pay a front-end sales charge because you
invested $1 million or more or agreed to invest $1 million or more under a
Letter of Intent, a Contingent Deferred Sales Charge may apply if you sell all
or a part of your investment within the Contingency Period. Once you have
invested $1 million or more, any additional Class I investments you make without
a sales charge may also be subject to a Contingent Deferred Sales Charge if they
are sold within the Contingency Period. For any Class II purchase, a Contingent
Deferred Sales Charge may apply if you sell the shares within the Contingency
Period. The charge is 1% of the value of the shares sold or the Net Asset Value
at the time of purchase, whichever is less.
Certain retirement plan accounts opened on or after May 1, 1997, and that
qualify to buy Class I shares without a front-end sales charge may also be
subject to a Contingent Deferred Sales Charge if the retirement plan account is
closed within 365 days of the account's initial purchase in the Franklin
Templeton Funds.
We will first redeem any shares in your account that are not subject to the
charge. If there are not enough of these to meet your request, we will redeem
shares subject to the charge in the order they were purchased.
<PAGE>
Unless otherwise specified, when you request to sell a stated DOLLAR AMOUNT, we
will redeem additional shares to cover any Contingent Deferred Sales Charge. For
requests to sell a stated NUMBER OF SHARES, we will deduct the amount of the
Contingent Deferred Sales Charge, if any, from the sale proceeds.
WAIVERS. We waive the Contingent Deferred Sales Charge for:
Account fees
Sales of shares purchased without a front-end sales charge by certain
retirement plan accounts if (i) the account was opened before May 1, 1997,
or (ii) the Securities Dealer of record received a payment from
Distributors of 0.25% or less, or (iii) Distributors did not make any
payment in connection with the purchase, or (iv) the Securities Dealer of
record has entered into a supplemental agreement with Distributors
Redemptions by the Fund when an account falls below the minimum required
account size
Redemptions following the death of the shareholder or beneficial owner
Redemptions through a systematic withdrawal plan set up before February 1,
1995
Redemptions through a systematic withdrawal plan set up on or after
February 1, 1995, at a rate of up to 1% a month of an account's Net Asset
Value. For example, if you maintain an annual balance of $1 million in
Class I shares, you can redeem up to $120,000 annually through a systematic
withdrawal plan free of charge. Likewise, if you maintain an annual balance
of $10,000 in Class II shares, $1,200 may be redeemed annually free of
charge.
Distributions from individual retirement plan accounts due to death or
disability or upon periodic distributions based on life expectancy
Tax-free returns of excess contributions from employee benefit plans
Redemptions by Trust Company employee benefit plans or employee benefit
plans serviced by ValuSelect(R)
Participant initiated distributions from employee benefit plans or
participant initiated exchanges among investment choices in employee
benefit plans
<PAGE>
WHAT DISTRIBUTIONS MIGHT I RECEIVE FROM THE FUND?
The Fund intends to pay a dividend at least annually representing substantially
all of its net investment income and any net realized capital gains.
Dividends and capital gains are calculated and distributed the same way for each
class. The amount of any income dividends per share will differ, however,
generally due to the difference in the Rule 12b-1 fees of Class I and Class II.
Dividend payments are not guaranteed, are subject to the Board's discretion and
may vary with each payment. THE FUND DOES NOT PAY "INTEREST" OR GUARANTEE ANY
FIXED RATE OF RETURN ON AN INVESTMENT IN ITS SHARES.
If you buy shares shortly before the record date, please keep in mind that any
distribution will lower the value of the Fund's shares by the amount of the
distribution and you will then receive a portion of the price you paid back in
the form of a taxable distribution.
DISTRIBUTION OPTIONS
You may receive your distributions from the Fund in any of these ways:
1. BUY ADDITIONAL SHARES OF THE FUND -- You may buy additional shares of the
Fund (without a sales charge or imposition of a Contingent Deferred Sales
Charge) by reinvesting capital gain distributions, dividend distributions, or
both. This is a convenient way to accumulate additional shares and maintain or
increase your earnings base.
2. BUY SHARES OF OTHER FRANKLIN TEMPLETON FUNDS -- You may direct your
distributions to buy shares of another Franklin Templeton Fund (without a sales
charge or imposition of a Contingent Deferred Sales Charge). Many shareholders
find this a convenient way to diversify their investments.
3. RECEIVE DISTRIBUTIONS IN CASH -- You may receive capital gain distributions,
dividend distributions, or both in cash. If you have the money sent to another
person or to a checking account, you may need a signature guarantee.
Distributions may be reinvested only in the SAME CLASS of shares, except as
follows: (i) Class II shareholders who chose to reinvest their distributions in
Class I shares of the Fund or another Franklin Templeton Fund before November
17, 1997, may continue to do so; and (ii) Class II shareholders may reinvest
<PAGE>
their distributions in shares of any Franklin Templeton money fund.
TO SELECT ONE OF THESE OPTIONS, PLEASE COMPLETE SECTIONS 6 AND 7 OF THE
SHAREHOLDER APPLICATION INCLUDED WITH THIS PROSPECTUS OR TELL YOUR INVESTMENT
REPRESENTATIVE WHICH OPTION YOU PREFER. IF YOU DO NOT SELECT AN OPTION, WE WILL
AUTOMATICALLY REINVEST DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS IN THE SAME CLASS
OF THE FUND. You may change your distribution option at any time by notifying us
by mail or phone. Please allow at least seven days before the record date for us
to process the new option. For Trust Company retirement plans, special forms are
required to receive distributions in cash.
TRANSACTION PROCEDURES AND SPECIAL REQUIREMENTS
SHARE PRICE
When you buy shares, you pay the Offering Price. This is the Net Asset Value per
share of the class you wish to purchase, plus any applicable sales charges. When
you sell shares, you receive the Net Asset Value per share minus any applicable
Contingent Deferred Sales Charges.
The Net Asset Value we use when you buy or sell shares is the one next
calculated after we receive your transaction request in proper form. If you buy
or sell shares through your Securities Dealer, however, we will use the Net
Asset Value next calculated after your Securities Dealer receives your request,
which is promptly transmitted to the Fund. Your redemption proceeds will not
earn interest between the time we receive the order from your dealer and the
time we receive any required documents.
HOW AND WHEN SHARES ARE PRICED
The Fund is open for business each day the NYSE is open. We determine the Net
Asset Value per share of each class as of the scheduled close of the NYSE,
generally 4:00 p.m. Eastern time. You can find the prior day's closing Net Asset
Value and Offering Price for each class in many newspapers.
The Net Asset Value of all outstanding shares of each class is calculated on a
pro rata basis. It is based on each class' proportionate participation in the
Fund, determined by the value of the shares of each class. Each class, however,
bears the Rule 12b-1 fees payable under its Rule 12b-1 plan. To calculate Net
Asset Value per share of each class, the assets of each class are valued and
<PAGE>
totaled, liabilities are subtracted, and the balance, called net assets, is
divided by the number of shares of the class outstanding. The Fund's assets are
valued as described under "How Are Fund Shares Valued?" in the SAI.
PROPER FORM
An order to buy shares is in proper form when we receive your signed shareholder
application and check. Written requests to sell or exchange shares are in proper
form when we receive signed written instructions, with a signature guarantee if
necessary. We must also receive any outstanding share certificates for those
shares.
WRITTEN INSTRUCTIONS
Written instructions must be signed by all registered owners. To avoid any delay
in processing your transaction, they should include:
Your name,
The Fund's name,
The class of shares,
A description of the request,
For exchanges, the name of the fund you are exchanging into,
Your account number,
The dollar amount or number of shares, and
A telephone number where we may reach you during the day, or in
the evening if preferred.
JOINT ACCOUNTS. For accounts with more than one registered owner, we accept
written instructions signed by only one owner for certain types of transactions
or account changes. These include transactions or account changes that you could
also make by phone, such as certain redemptions of $50,000 or less, exchanges
between identically registered accounts, and changes to the address of record.
For most other types of transactions or changes, written instructions must be
signed by all registered owners.
Please keep in mind that if you have previously told us that you do not want
telephone exchange or redemption privileges on your account, then we can only
<PAGE>
accept written instructions to exchange or redeem shares if they are signed by
all registered owners on the account.
SIGNATURE GUARANTEES
For our mutual protection, we require a signature guarantee in the following
situations:
1) You wish to sell over $50,000 worth of shares,
2) You want the proceeds to be paid to someone other than the registered owners,
3) The proceeds are not being sent to the address of record, preauthorized bank
account, or preauthorized brokerage firm account,
4) We receive instructions from an agent, not the registered owners,
5) We believe a signature guarantee would protect us against potential claims
based on the instructions received.
A signature guarantee verifies the authenticity of your signature. You should be
able to obtain a signature guarantee from a bank, broker, credit union, savings
association, clearing agency, or securities exchange or association. A NOTARIZED
SIGNATURE IS NOT SUFFICIENT.
SHARE CERTIFICATES
We will credit your shares to your Fund account. We do not issue share
certificates unless you specifically request them. This eliminates the costly
problem of replacing lost, stolen or destroyed certificates. If a certificate is
lost, stolen or destroyed, you may have to pay an insurance premium of up to 2%
of the value of the certificate to replace it.
Any outstanding share certificates must be returned to the Fund if you want to
sell or exchange those shares or if you would like to start a systematic
withdrawal plan. The certificates should be properly endorsed. You can do this
either by signing the back of the certificate or by completing a share
assignment form. For your protection, you may prefer to complete a share
assignment form and to send the certificate and assignment form in separate
envelopes.
<PAGE>
TELEPHONE TRANSACTIONS
You may initiate many transactions and changes to your account by phone. Please
refer to the sections of this prospectus that discuss the transaction you would
like to make or call Shareholder Services.
When you call, we will request personal or other identifying information to
confirm that instructions are genuine. We may also record calls. If our lines
are busy or you are otherwise unable to reach us by phone, you may wish to ask
your investment representative for assistance or send us written instructions,
as described elsewhere in this prospectus.
For your protection, we may delay a transaction or not implement one if we are
not reasonably satisfied that the instructions are genuine. If this occurs, we
will not be liable for any loss. We also will not be liable for any loss if we
follow instructions by phone that we reasonably believe are genuine or if you
are unable to execute a transaction by phone.
TRUST COMPANY RETIREMENT PLAN ACCOUNTS. We cannot accept instructions to sell
shares or change distribution options on Trust Company retirement plans by
phone. While you may exchange shares of Trust Company IRA and 403(b) retirement
accounts by phone, certain restrictions may be imposed on other retirement
plans.
To obtain any required forms or more information about distribution or transfer
procedures, please call Retirement Plan Services.
ACCOUNT REGISTRATIONS AND REQUIRED DOCUMENTS
When you open an account, we need you to tell us how you want your shares
registered. How you register your account will affect your ownership rights and
ability to make certain transactions. If you have questions about how to
register your account, you should consult your investment representative or
legal advisor. Please keep the following information in mind when registering
your account.
JOINT OWNERSHIP. If you open an account with two or more owners, we register the
account as "joint tenants with rights of survivorship" unless you tell us
otherwise. An account registered as "joint tenants with rights of survivorship"
is shown as "Jt Ten" on your account statement. For any account with two or more
owners, we cannot accept instructions to change owners on the account unless ALL
owners agree in writing, even if the law in your state says otherwise. If you
<PAGE>
would like another person or owner to sign for you, please send us a current
power of attorney.
GIFTS AND TRANSFERS TO MINORS. You may set up a custodial account for a minor
under your state's Uniform Gifts/Transfers to Minors Act. Other than this form
of registration, a minor may not be named as an account owner.
TRUSTS. You should register your account as a trust only if you have a valid
written trust document. This avoids future disputes or possible court action
over who owns the account.
REQUIRED DOCUMENTS. For corporate, partnership and trust accounts, please send
us the following documents when you open your account. This will help avoid
delays in processing your transactions while we verify who may sign on the
account.
TYPE OF ACCOUNT DOCUMENTS REQUIRED
- --------------------------------- --------------------------------------------
Corporation Corporate Resolution
- --------------------------------- --------------------------------------------
Partnership 1. The pages from the partnership agreement
that identify the general partners, or
2. A certification for a partnership
agreement
- --------------------------------- ---------------------------------------------
Trust 1. The pages from the trust document that
identify the trustees, or
2. A certification for trust
- --------------------------------- ---------------------------------------------
STREET OR NOMINEE ACCOUNTS. If you have Fund shares held in a "street" or
"nominee" name account with your Securities Dealer, you may transfer the shares
to the street or nominee name account of another Securities Dealer. Both dealers
must have an agreement with Distributors or we cannot process the transfer.
Contact your Securities Dealer to initiate the transfer. We will process the
transfer after we receive authorization in proper form from your delivering
Securities Dealer. Accounts may be transferred electronically through the NSCC.
For accounts registered in street or nominee name, we may take instructions
directly from the Securities Dealer or your nominee.
IMPORTANT INFORMATION IF YOU HAVE AN INVESTMENT REPRESENTATIVE
If there is a Securities Dealer or other representative of record on your
account, we are authorized: (1) to provide confirmations, account statements and
other information about your account directly to your dealer and/or
<PAGE>
representative; and (2) to accept telephone and electronic instructions directly
from your dealer or representative, including instructions to exchange or redeem
your shares. Electronic instructions may be processed through established
electronic trading systems and programs used by the Fund. Telephone instructions
directly from your representative will be accepted unless you have told us that
you do not want telephone privileges to apply to your account.
KEEPING YOUR ACCOUNT OPEN
Due to the relatively high cost of maintaining a small account, we may close
your account if the value of your shares is less than $50. We will only do this
if the value of your account fell below this amount because you voluntarily sold
your shares and your account has been inactive (except for the reinvestment of
distributions) for at least six months. Before we close your account, we will
notify you and give you 30 days to increase the value of your account to $100.
SERVICES TO HELP YOU MANAGE YOUR ACCOUNT
AUTOMATIC INVESTMENT PLAN
Our automatic investment plan offers a convenient way to invest in the Fund.
Under the plan, you can have money transferred automatically from your checking
account to the Fund each month to buy additional shares. If you are interested
in this program, please refer to the shareholder application included with this
prospectus or contact your investment representative. The market value of the
Fund's shares may fluctuate and a systematic investment plan such as this will
not assure a profit or protect against a loss. You may discontinue the program
at any time by notifying Investor Services by mail or phone.
SYSTEMATIC WITHDRAWAL PLAN
Our systematic withdrawal plan allows you to sell your shares and receive
regular payments from your account on a monthly, quarterly, semiannual or annual
basis. The value of your account must be at least $5,000 and the minimum payment
amount for each withdrawal must be at least $50. For retirement plans subject to
mandatory distribution requirements, the $50 minimum will not apply.
<PAGE>
If you would like to establish a systematic withdrawal plan, please complete the
systematic withdrawal plan section of the shareholder application included with
this prospectus and indicate how you would like to receive your payments. You
may choose to direct your payments to buy the same class of shares of another
Franklin Templeton Fund or have the money sent directly to you, to another
person, or to a checking account. Once your plan is established, any
distributions paid by the Fund will be automatically reinvested in your account.
You will generally receive your payment by the end of the month in which a
payment is scheduled. When you sell your shares under a systematic withdrawal
plan, it is a taxable transaction.
To avoid paying sales charges on money you plan to withdraw within a short
period of time, you may not want to set up a systematic withdrawal plan if you
plan to buy shares on a regular basis. Shares sold under the plan may also be
subject to a Contingent Deferred Sales Charge. Please see "Contingent Deferred
Sales Charge" under "How Do I Sell Shares?"
You may discontinue a systematic withdrawal plan, change the amount and schedule
of withdrawal payments, or suspend one payment by notifying us in writing at
least seven business days before the end of the month preceding a scheduled
payment. Please see "How Do I Buy, Sell and Exchange Shares? -- Systematic
Withdrawal Plan" in the SAI for more information.
TELEFACTS (R)
From a touch-tone phone, you may call our TeleFACTS(R) system (day or night)
at 1-800/247-1753 to:
obtain information about your account;
obtain price and performance information about any Franklin Templeton
Fund;
exchange shares between identically registered Franklin accounts; and
request duplicate statements and deposit slips for Franklin accounts.
You will need the code number for each class to use TeleFACTS(R). The code
number is 410 for Class I and 510 for Class II.
<PAGE>
STATEMENTS AND REPORTS TO SHAREHOLDERS
We will send you the following statements and reports on a regular basis:
Confirmation and account statements reflecting transactions in your
account, including additional purchases and dividend reinvestments. Please
verify the accuracy of your statements when you receive them.
Financial reports of the Fund will be sent every six months. To reduce Fund
expenses, we attempt to identify related shareholders within a household and
send only one copy of a report. Call Fund Information if you would like an
additional free copy of the Fund's financial reports.
INSTITUTIONAL ACCOUNTS
Additional methods of buying, selling or exchanging shares of the Fund may be
available to institutional accounts. Institutional investors may also be
required to complete an institutional account application. For more information,
call Institutional Services.
AVAILABILITY OF THESE SERVICES
The services above are available to most shareholders. If, however, your shares
are held by a financial institution, in a street name account, or networked
through the NSCC, the Fund may not be able to offer these services directly to
you. Please contact your investment representative.
WHAT IF I HAVE QUESTIONS ABOUT MY ACCOUNT?
If you have any questions about your account, you may write to Investor Services
at 100 Fountain Parkway, P.O. Box 33030, St. Petersburg, Florida 33733-8030. The
Fund and Distributors are also located at this address. Global Advisors is
located in Lyford Cay, Nassau, Bahamas. You may also contact us by phone at one
of the numbers listed below.
<PAGE>
<TABLE>
<CAPTION>
HOURS OF OPERATION (EASTERN TIME)
DEPARTMENT NAME TELEPHONE NO. (MONDAY THROUGH FRIDAY)
- -------------------------------- ------------------ -------------------------------------------
<S> <C> <C>
Shareholder Services 1-800/632-2301 8:30 a.m. to 8:00 p.m.
Dealer Services 1-800/524-4040 8:30 a.m. to 8:00 p.m.
Fund Information 1-800/DIAL BEN 8:30 a.m. to 11:00 p.m.
(1-800/342-5236) 9:30 a.m. to 5:30 p.m. (Saturday)
Retirement Plan Services 1-800/527-2020 8:30 a.m. to 8:00 p.m.
Institutional Services 1-800/321-8563 9:00 a.m. to 8:00 p.m.
TDD (hearing impaired) 1-800/851-0637 8:30 a.m. to 8:00 p.m.
</TABLE>
Your phone call may be monitored or recorded to ensure we provide you with high
quality service. You will hear a regular beeping tone if your call is being
recorded.
<PAGE>
GLOSSARY
USEFUL TERMS AND DEFINITIONS
1940 ACT - Investment Company Act of 1940, as amended
BOARD - The Board of Trustees of the Fund
CD - Certificate of deposit
CLASS I AND CLASS II - The Fund offers two classes of shares, designated "Class
I" and "Class II." The two classes have proportionate interests in the Fund's
portfolio. They differ, however, primarily in their sales charge structures and
Rule 12b-1 plans.
CODE - Internal Revenue Code of 1986, as amended
CONTINGENCY PERIOD - For Class I shares, the 12 month period during which a
Contingent Deferred Sales Charge may apply. For Class II shares, the contingency
period is 18 months. Regardless of when during the month you purchased shares,
they will age one month on the last day of that month and each following month.
CONTINGENT DEFERRED SALES CHARGE (CDSC) - A sales charge of 1% that may apply if
you sell your shares within the Contingency Period.
DISTRIBUTORS - Franklin/Templeton Distributors, Inc., the Fund's principal
underwriter. The SAI lists the officers and Board members who are affiliated
with Distributors. See "Officers and Trustees."
ELIGIBLE GOVERNMENTAL AUTHORITY - Any state or local government or any
instrumentality, department, authority or agency thereof that has determined the
Fund is a legally permissible investment and that can only buy shares of the
Fund without paying sales charges.
FRANKLIN TEMPLETON FUNDS - The U.S. registered mutual funds in the Franklin
Group of Funds (R) and the Templeton Group of Funds except Franklin Valuemark
Funds, Templeton Capital Accumulator Fund, Inc., Templeton Variable Annuity
Fund, and Templeton Variable Products Series Fund
FRANKLIN TEMPLETON GROUP - Franklin Resources, Inc., a publicly owned holding
company, and its various subsidiaries
FRANKLIN TEMPLETON GROUP OF FUNDS - All U.S. registered investment companies in
the Franklin Group of Funds(R) and the Templeton Group of Funds
<PAGE>
FT SERVICES - Franklin Templeton Services, Inc., the Fund's administrator
GLOBAL ADVISORS - Templeton Global Advisors Limited, the Fund's investment
manager
INVESTOR SERVICES - Franklin/Templeton Investor Services, Inc., the Fund's
shareholder servicing and transfer agent
IRS - Internal Revenue Service
LETTER - Letter of Intent
MARKET TIMERS - Market Timers generally include market timing or asset
allocation services, accounts administered so as to buy, sell or exchange shares
based on predetermined market indicators, or any person or group whose
transactions seem to follow a timing pattern or whose transactions include
frequent or large exchanges.
MOODY'S - Moody's Investors Service, Inc.
NASD - National Association of Securities Dealers, Inc.
NET ASSET VALUE (NAV) - The value of a mutual fund is determined by deducting
the fund's liabilities from the total assets of the portfolio. The net asset
value per share is determined by dividing the net asset value of the fund by the
number of shares outstanding.
NSCC - National Securities Clearing Corporation
NYSE - New York Stock Exchange
OFFERING PRICE - The public offering price is based on the Net Asset Value per
share of the class and includes the front-end sales charge. The maximum
front-end sales charge is 5.75% for Class I and 1% for Class II.
QUALIFIED RETIREMENT PLANS - An employer sponsored pension or profit-sharing
plan that qualifies under section 401 of the Code. Examples include 401(k),
money purchase pension, profit sharing and defined benefit plans.
RESOURCES - Franklin Resources, Inc.
SAI - Statement of Additional Information
S&P - Standard & Poor's Corporation
SEC - U.S. Securities and Exchange Commission
<PAGE>
SECURITIES DEALER - A financial institution that, either directly or through
affiliates, has an agreement with Distributors to handle customer orders and
accounts with the Fund. This reference is for convenience only and does not
indicate a legal conclusion of capacity.
SEP - An employer sponsored simplified employee pension plan established under
section 408(k) of the Code
TELEFACTS(R) - FRANKLIN TEMPLETON'S AUTOMATED CUSTOMER SERVICING SYSTEM
TRUST COMPANY - Franklin Templeton Trust Company. Trust Company is an affiliate
of Distributors and both are wholly owned subsidiaries of Resources.
U.S. - United States
WE/OUR/US - Unless the context indicates a different meaning, these terms refer
to the Fund and/or Investor Services, Distributors, or other wholly owned
subsidiaries of Resources.
<PAGE>
INSTRUCTIONS AND IMPORTANT NOTICE
SUBSTITUTE W-9 INSTRUCTIONS INFORMATION
GENERAL. Backup withholding is not an additional tax. Rather, the tax liability
of persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained from the IRS.
OBTAINING A NUMBER. If you do not have a Social Security Number/Taxpayer
Identification Number or you do not know your 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 EMPLOYER ID # OF
- --------------------------- -------------- ------------------ ---------------------------
<S> <C> <C> <C>
o Individual Individual o Trust, Estate, Trust, Estate, or
or Pension Plan Pension Plan Trust
Trust
- --------------------------- -------------- ------------------ ---------------------------
o Joint Individual Owner who o Corporation, Corporation,
will be Partnership, or Partnership, or
paying tax other other
or organization organization
first-named
individual
- --------------------------- -------------- ------------------ ---------------------------
o Unif. Gift/ Minor o Broker nominee Broker nominee
Transfer to Minor
- --------------------------- -------------- ------------------ ---------------------------
o Sole Proprietor Owner of
business
- --------------------------- -------------- ------------------ ---------------------------
o Legal Guardian Ward,
Minor, or
Incompetent
- --------------------------- -------------- ------------------ ---------------------------
</TABLE>
EXEMPT RECIPIENTS. Please provide your TIN and check the "Exempt Recipient" box
if you are an exempt recipient. Exempt recipients include:
A corporation An organization exempt from
tax under section 501(a), or an
A financial institution individual retirement plan
<PAGE>
A registered dealer in securities An exempt charitable remainder
or commodities registered in trust or a non-exempt trust
the U.S. or a U.S. possession described in section 4947(a)(1)
A real estate investment trust An entity registered at all times
under the Investment Company
A common trust fund operated Act of 1940
by a bank under section 584(a)
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%. 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 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. (or
your transactions are exempt from U.S. taxes under a tax treaty).
<PAGE>
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 Internal
Revenue Service has not notified you that you are subject to backup withholding
because you failed to report certain interest or dividend income. You may use
Form W-9, "Payer's Request for Taxpayer Identification Number and
Certification," to make these certifications. If an account is no longer active,
you do not have to notify a Fund/Payer or broker of your change in status unless
you also have another account with the same Fund/Payer that is still active. If
you receive interest from more than one Fund/Payer or have dealings with more
than one broker or barter exchange, file a certificate with each. If you have
more than one account with the same Fund/Payer, the Fund/Payer may require you
to file a separate certificate for each account.
WHEN TO FILE. File these certifications with the Fund before a payment is made
to you, unless you have already done this in either of the two preceding
calendar years.
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.
<PAGE>
RESOLUTION SUPPORTING AUTHORITY OF
CORPORATE /ASSOCIATION SHAREHOLDER
- ------------------------------------------------------------------------------
INSTRUCTION:
It will be necessary for corporate/association shareholders to provide a
certified copy of a resolution or other certificate of authority supporting the
authority of designated officers of the corporation/association to issue oral
and written instruction on behalf of the corporation/association for the
purchase, sale (redemption), transfer and/or exchange of Franklin Templeton Fund
shares. You may use the following form of resolution or you may prefer to use
your own.
CERTIFIED COPY OF RESOLUTION (Corporation or Association)
The undersigned hereby certifies and affirms that he/she is the duly elected
_________________of__________________a______________________
Title Corporate Name Type of Organization
organized under the laws of the State of__________________and that the
State
following is a true and correct copy of a resolution adopted by the Board of
Directors by unanimous written consent (a copy of which is attached) or at a
meeting duly called and held on______________________, 19__.
"RESOLVED, that__________________________________________
Name of Corporation/Association
(the "Company") is authorized to invest the Company's assets in one or more
investment companies (mutual funds) whose shares are distributed by
Franklin/Templeton Distributors, Inc. ("Distributors"). Each such
investment company, or series thereof, is referred to as a "Franklin
Templeton Fund" or "Fund."
FURTHER RESOLVED, that any (enter number)____________ of the following
officers of this Company (acting alone, if one, or acting together, if more
than one) is/are authorized to issue oral or written instructions (including
the signing of drafts in the case of draft accessed money fund accounts) on
behalf of the Company for the purchase, sale (redemption), transfer and/or
exchange of Fund shares and to execute any Fund application(s) and
agreements pertaining to Fund shares registered or to be registered to the
Company (referred to as a "Company Instruction"); and, that this authority
shall continue until Franklin/Templeton Investor Services, Inc. ("Investor
Services") receives written notice of revocation or amendment delivered by
registered mail. The Company's officers authorized to act on behalf of the
<PAGE>
Company under this resolution are (enter officer titles only):
(referred to as the "Authorized Officers").
FURTHER RESOLVED, that Investor Services may rely on the most recently
provided incumbency certificate delivered by the Company to Investor
Services to identify those individuals who are the incumbent Authorized
Officers and that Investor Services shall have no independent duty to
determine if there has been any change in the individuals serving as
incumbent Authorized Officers.
FURTHER RESOLVED, that the Company ("Indemnitor") undertakes and agrees to
indemnify and hold harmless Distributors, each affiliate of Distributors,
each Franklin Templeton Fund and their officers, employees and agents
(referred to hereafter collectively as the "Indemnitees") from and against
any and all liability, loss, suits, claims, costs, damages and expenses of
whatever amount and whatever nature (including without limitation reasonable
attorneys' fees, whether for consultation and advice or representation in
litigation at both the trial and appellate level) any indemnitee may sustain
or incur by reason of, in consequence of, or arising from or in connection
with any action taken or not taken by an Indemnitee in good faith reliance
on a Company Instruction given as authorized under this resolution."
The undersigned further certifies that the below named persons, whose signatures
appear opposite their names, are the incumbent Authorized Officers (as that term
is defined in the above resolution) who have been duly elected to the office
identified beside their name(s) (attach additional list if necessary).
X
Name/title (please print or type) Signature
X
Name/title (please print or type) Signature
X
Name/title (please print or type) Signature
X
Name/title (please print or type) Signature
Certified from minutes
X
Signature
- --------------------------------------------------------------------------------
Name/title (please print or type)
CORPORATE SEAL (if appropriate)
<PAGE>
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<PAGE>
FRANKLIN TEMPLETON GROUP OF FUNDS
LITERATURE REQUEST CALL 1-800/DIAL BEN (1-800/342-5236) 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.
GLOBAL GROWTH
Franklin Global Health Care Fund
Franklin Templeton Japan Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller
Companies Fund
Templeton Global
Infrastructure Fund
Templeton Global
Opportunities Trust
Templeton Global Real Estate Fund
Templeton Global Smaller
Companies Fund
Templeton Greater European Fund
Templeton Growth Fund
Templeton Latin America Fund
Templeton Pacific Growth Fund
Templeton World Fund
GLOBAL GROWTH AND INCOME
Franklin Global Utilities Fund
Franklin Templeton German
Government Bond Fund
Franklin Templeton
Global Currency Fund
Mutual European Fund
Templeton Global Bond Fund
Templeton Growth and Income
Fund
GLOBAL INCOME
Franklin Global Government
Income Fund
Franklin Templeton Hard
Currency Fund
Franklin Templeton High
Income Currency Fund
Templeton Americas
Government Securities Fund
GROWTH
Franklin Biotechnology
Discovery Fund
Franklin Blue Chip Fund
Franklin California Growth Fund
Franklin DynaTech Fund
Franklin Equity Fund
Franklin Gold Fund
Franklin Growth Fund
Franklin MidCap
Growth Fund
Franklin Small Cap Growth Fund
Mutual Discovery Fund
GROWTH AND INCOME
Franklin Asset Allocation Fund
Franklin Balance Sheet
Investment Fund
Franklin Convertible Securities Fund
Franklin Equity Income
Fund
Franklin Income Fund
Franklin MicroCap Value Fund
Franklin Natural
Resources Fund
Franklin Real Estate Securities Fund
Franklin Rising Dividends
Fund
Franklin Strategic Income Fund
Franklin Utilities Fund
Franklin Value Fund
Mutual Beacon Fund
Mutual Financial Services Fund
Mutual Qualified Fund
Mutual Shares Fund
Templeton American Trust, Inc.
FUND ALLOCATOR SERIES
Franklin Templeton
Conservative Target Fund
Franklin Templeton
Moderate Target Fund
Franklin Templeton
Growth Target Fund
INCOME
Franklin Adjustable Rate
Securities Fund
Franklin Adjustable U.S.
Government Securities Fund
Franklin's AGE High Income Fund
Franklin Investment
Grade Income Fund
Franklin Short-Intermediate U.S.
Government Securities Fund
Franklin U.S. Government
Securities Fund
Franklin Money Fund
Franklin Federal Money Fund
FOR CORPORATIONS
Franklin Corporate Qualified
Dividend Fund
FRANKLIN FUNDS SEEKING
TAX-FREE INCOME
Federal Intermediate-Term
Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund
Puerto Rico Tax-Free Income Fund
Tax-Exempt Money Fund
FRANKLIN STATE-SPECIFIC FUNDS
SEEKING TAX-FREE INCOME
Alabama
Arizona*
Arkansas**
California*
Colorado
Connecticut
Florida*
Georgia
Hawaii**
Indiana
Kentucky
Louisiana
Maryland
Massachusetts***
Michigan*
Minnesota***
Missouri
New Jersey
New York*
North Carolina
Ohio***
Oregon
Pennsylvania
Tennessee**
Texas
Virginia
Washington**
VARIABLE ANNUITIES+
Franklin Valuemark(R)
Franklin Templeton
Valuemark Income Plus
(an immediate annuity)
*Two or more fund options available: long-term portfolio, intermediate-term
portfolio, a portfolio of insured municipal securities, and/or a high yield
portfolio (CA) and a money market portfolio (CA and NY).
**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.
+Franklin Valuemark and Franklin Templeton Valuemark Income Plus are issued by
Allianz Life Insurance Company of North America or by its wholly owned
subsidiary, Preferred Life Insurance Company of New York, and distributed by
NALAC Financial Plans, LLC.
410 P 01/98
FGF09/97 [LOGO] Printed on recycled paper TL410 P
<PAGE>
--------------
TEMPLETON Bulk Rate
GLOBAL REAL ESTATE FUND U.S. Postage
PAID
P.O. Box 33031 Sacramento, CA
ST. PETERSBURG, FL 33733-8031 Permit No. 333
--------------
410 P 01/98
TL410 P [LOGO] Printed on recycled paper
