File No. 33-31084
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
POST-EFFECTIVE
AMENDMENT NO. 5
TO
FORM S-6
For Registration Under the Securities Act of 1933 of Securities
of Unit Investment Trusts Registered on Form N-8B-2
TEMPLETON GROWTH AND TREASURY TRUST, SERIES 1
(Exact Name of Trust)
NIKE SECURITIES L.P.
(Exact Name of Depositor)
1001 Warrenville Road
Lisle, Illinois 60532
(Complete address of Depositors principal executive offices)
NIKE SECURITIES L.P. CHAPMAN AND CUTLER
Attn: James A. Bowen Attn: Eric F. Fess
1001 Warrenville Road 111 West Monroe Street
Lisle, Illinois 60532 Chicago, Illinois 60603
(Name and complete address of agents for service)
It is proposed that this filing will become effective (check
appropriate box)
: : immediately upon filing pursuant to paragraph (b)
: x : December 31, 1997
: : 60 days after filing pursuant to paragraph (a)
: : on (date) pursuant to paragraph (a) of rule (485 or 486)
Pursuant to Rule 24f-2 under the Investment Company Act of 1940,
the issuer has registered an indefinite amount of securities. A
24f-2 Notice for the offering was last filed on October 10, 1997.
<PAGE>
TEMPLETON GROWTH AND TREASURY TRUST, SERIES 1
33,222,487 UNITS
PROSPECTUS
Part One
Dated December 26, 1997
Note: Part One of this Prospectus may not be distributed unless accompanied by
Part Two.
The Trust
The Templeton Growth and Treasury Trust (the "Trust") is a unit investment
trust consisting of a portfolio of "zero coupon" U.S. Treasury bonds (treasury
obligations) and shares of Templeton Growth Fund, Inc. ("Templeton").
Templeton is an open-end diversified management investment company, commonly
known as a mutual fund. At November 17, 1997, each Unit represented a
1/33,222,487 undivided interest in the principal and net income of the Trust
(see "The Trust" in Part Two).
The Units being offered by this Prospectus are issued and outstanding Units
which have been purchased by the Sponsor in the secondary market or from the
Trustee after having been tendered for redemption. The profit or loss
resulting from the sale of Units will accrue to the Sponsor. No proceeds from
the sale of Units will be received by the Trust.
Public Offering Price
The Public Offering Price per 1,000 Units is equal to the aggregate value of
the Securities in the Portfolio of the Trust divided by the number of Units
outstanding, multiplied by 1,000, plus a sales charge of 5.8% of the Public
Offering Price (6.157% of the amount invested). At November 17, 1997, the
Public Offering Price per 1,000 Units was $1,507.30 (see "Public Offering" in
Part Two).
Please retain both parts of this Prospectus for future reference.
______________________________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
______________________________________________________________________________
NIKE SECURITIES L.P.
Sponsor
<PAGE>
TEMPLETON GROWTH AND TREASURY TRUST, SERIES 1
SUMMARY OF ESSENTIAL INFORMATION AS OF NOVEMBER 17, 1997
Sponsor: Nike Securities L.P.
Evaluator: Securities Evaluation Service, Inc.
Trustee: The Chase Manhattan Bank
<TABLE>
<CAPTION>
GENERAL INFORMATION
<S> <C>
Aggregate Maturity Value of Treasury Obligations in the Trust $33,225,000
Aggregate Number of Shares of Templeton in the Trust 948,152.036
Number of Units 33,222,487
Fractional Undivided Interest in the Trust per Unit 1/33,222,487
Public Offering Price per 1,000 Units:
Aggregate Value of Securities in the Portfolio $47,171,901
Aggregate Value of Securities per 1,000 Units $1,419.88
Sales Charge 6.157% (5.8% of Public Offering Price) $87.42
Public Offering Price per 1,000 Units $1,507.30
Redemption Price and Sponsor's Repurchase Price per 1,000
Units ($87.42 less than the Public Offering Price per
1,000 Units) $1,419.88
</TABLE>
Date Trust Established March 22, 1990
Mandatory Termination Date September 1, 2000
Evaluator's Annual Fee: $.10 per $1,000 principal amount of Treasury
Obligations outstanding. Evaluations for purposes of sale, purchase or
redemption of Units are made as of the close of trading (4:00 p.m. Eastern
time) on the New York Stock Exchange on each day on which it is open.
Supervisory fee payable to an affiliate Maximum of $.15 per 1,000
of the Sponsor Units outstanding annually
Trustee's Annual Fee: $.85 per 1,000 Units outstanding.
Record Date: The same business day as Templeton's ex-dividend date.
Distribution Date: The same business day as Templeton's distribution date.
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Unit Holders of Templeton Growth and
Treasury Trust, Series 1
We have audited the accompanying statement of assets and liabilities,
including the portfolio, of Templeton Growth and Treasury Trust, Series 1 as
of August 31, 1997, and the related statements of operations and changes in
net assets for each of the three years in the period then ended. These
financial statements are the responsibility of the Trust's Sponsor. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of August 31, 1997, by
correspondence with the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Sponsor, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Templeton Growth and Treasury
Trust, Series 1 at August 31, 1997, and the results of its operations and
changes in its net assets for each of the three years in the period then ended
in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
December 5, 1997
<PAGE>
TEMPLETON GROWTH AND TREASURY TRUST, SERIES 1
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1997
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Securities, at market value (cost, including accretion
on the treasury obligations, $41,275,227)
(Note 1) $50,198,995
Cash 30,204
Receivable from investment transaction 25,729
___________
50,254,928
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
<S> <C> <C>
Accrued liabilities 20,786
Unit redemptions payable 57,098
___________
77,884
___________
Net assets, applicable to 33,792,498 outstanding
units of fractional undivided interest:
Cost of Trust assets, including accretion
on the treasury obligations (Note 1) $41,275,227
Net unrealized appreciation (Note 2) 8,923,768
Distributable funds (deficit) (21,951)
___________
$50,177,044
===========
Net asset value per 1,000 units $1,484.86
===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
TEMPLETON GROWTH AND TREASURY TRUST, SERIES 1
PORTFOLIO
August 31, 1997
<TABLE>
<CAPTION>
Maturity Market
value Name of Issuer and Title of Security (1) value
<C> <S> <C>
Corpus of a U.S. Treasury Note
(stripped of its interest-paying coupons)
$33,781,000 maturing August 15, 2000 $28,275,626
===========
</TABLE>
<TABLE>
<CAPTION>
Shares
<C> <S> <C>
964,937.036 Templeton Growth Fund, Inc. 21,923,369
=========== ___________
Total investments $50,198,995
===========
</TABLE>
(1) The treasury obligations have been purchased at a discount from their
par value because there is no stated interest income thereon (such
securities are often referred to as U.S. Treasury zero coupon bonds).
Over the life of the treasury obligations the value increases, so that
upon maturity the holders will receive 100% of the principal amount
thereof.
See accompanying notes to financial statements.
<PAGE>
TEMPLETON GROWTH AND TREASURY TRUST, SERIES 1
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended August 31,
1997 1996 1995
<S> <C> <C> <C>
Interest income $2,285,268 2,325,214 2,382,261
Dividends:
Ordinary income 472,989 727,442 655,973
Capital gain 698,188 1,674,064 1,224,089
__________________________________
Total investment income 3,456,445 4,726,720 4,262,323
Expenses:
Trustee's fees and related expenses (56,329) (69,280) (48,645)
Evaluator's fees (3,566) (4,157) (4,435)
Supervisory fees (5,348) (6,272) (6,432)
__________________________________
Total expenses (65,243) (79,709) (59,512)
__________________________________
Investment income - net 3,391,202 4,647,011 4,202,811
Net gain (loss) on investments:
Net realized gain (loss) 899,277 777,965 450,990
Change in unrealized appreciation
or depreciation 3,336,364 (2,158,090) 369,014
__________________________________
4,235,641 (1,380,125) 820,004
__________________________________
Net increase (decrease) in net
assets resulting from operations $7,626,843 3,266,886 5,022,815
==================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
TEMPLETON GROWTH AND TREASURY TRUST, SERIES 1
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended August 31,
1997 1996 1995
<S> <C> <C> <C>
Net increase (decrease) in net assets
resulting from operations:
Investment income - net $3,391,202 4,647,011 4,202,811
Net realized gain (loss)
on investments 899,277 777,965 450,990
Change in unrealized appreciation
or depreciation on investments 3,336,364 (2,158,090) 369,014
___________________________________
7,626,843 3,266,886 5,022,815
Units redeemed (3,755,117, 4,453,103
and 3,967,756 in 1997, 1996 and
1995, respectively) (5,253,040) (5,709,964) (4,720,377)
Distributions to unit holders:
Investment income - net (1,051,213) (2,338,014) (2,035,726)
___________________________________
Total increase (decrease) in net
assets 1,322,590 (4,781,092) (1,733,288)
Net assets:
At the beginning of the year 48,854,454 53,635,546 55,368,834
___________________________________
At the end of the year (including
distributable funds (deficit)
applicable to Trust units of
$(21,951), $(165,291) and $(250,696)
at August 31, 1997, 1996 and
1995, respectively) $50,177,044 48,854,454 53,635,546
===================================
Trust units outstanding at the end
of the year 33,792,498 37,547,615 42,000,718
</TABLE>
See accompanying notes to financial statements.
<PAGE>
TEMPLETON GROWTH AND TREASURY TRUST, SERIES 1
NOTES TO FINANCIAL STATEMENTS
1. Significant accounting policies
Security valuation -
The treasury obligations are stated at values as determined by Securities
Evaluation Service, Inc. (the Evaluator), certain shareholders of which are
officers of the Sponsor. The values are based on (1) current bid prices for
the securities obtained from dealers or brokers who customarily deal in
securities comparable to those held by the Trust, (2) current bid prices for
comparable securities, (3) appraisal or (4) any combination of the above.
Shares of Templeton Growth Fund, Inc. (Templeton) are stated at Templeton's
published net asset value as reported by the Evaluator. Net asset value is
determined by dividing the value of Templeton's securities plus any cash and
other assets (including accrued interest and dividends receivable) less all
liabilities (including accrued expenses) by the number of shares outstanding,
adjusted to the nearest whole cent.
Investment income -
Dividends from the Templeton shares are recorded on Templeton's ex-dividend
date. Interest income consists of amortization of original issue discount and
market discount or premium on the treasury obligations. Such amortization is
included in the cost of the treasury obligations rather than in distributable
funds because it is not currently available for distribution to unit holders.
Security cost -
Cost of the Trust's treasury obligations is based on the offering price of the
treasury obligations on the dates the treasury obligations were deposited in
the Trust, plus amortization of original issue discount and amortization of
market discount or premium. Cost of the Templeton shares is based on the net
asset value of such shares on the dates the shares were deposited in the
Trust. The cost of securities sold is determined on the average cost method.
Sales of securities are recorded on the trade date.
Federal income taxes -
The Trust is not taxable for Federal income tax purposes. Each unit holder is
considered to be the owner of a pro rata portion of the Trust and,
accordingly, no provision has been made for Federal income taxes.
<PAGE>
Expenses of the Trust -
The Trust pays a fee for Trustee services, which is based on $.85 per annum
per 1,000 units outstanding based on the largest aggregate number of units
outstanding during the calendar year. Prior to September 1, 1995, the Trustee
was United States Trust Company of New York; effective September 1, 1995, The
Chase Manhattan Bank succeeded United States Trust Company of New York as
Trustee. The Evaluator receives an annual fee based on $.10 per $1,000
principal amount of treasury obligations outstanding. Additionally, the Trust
pays recurring financial reporting costs and an annual supervisory fee payable
to an affiliate of the Sponsor.
2. Unrealized appreciation and depreciation
An analysis of net unrealized appreciation at August 31, 1997 follows:
<TABLE>
<CAPTION>
Treasury Templeton
obligations shares Total
<S> <C> <C> <C>
Unrealized appreciation $2,107,702 6,816,066 8,923,768
Unrealized depreciation - - -
_____________________________________
$2,107,702 6,816,066 8,923,768
=====================================
</TABLE>
3. Other information
Cost to investors -
The cost to initial investors of units of the Trust was based on the aggregate
offering price of the treasury obligations and the net asset value of the
Templeton shares on the date of an investor's purchase, plus a sales charge of
5.5% of the public offering price which is equivalent to approximately 5.820%
of the net amount invested.
Distributions to unit holders -
Distributions to unit holders are made on Templeton's distribution date.
During the years ended August 31, 1997, 1996 and 1995, the Trust made
distributions totaling $28.37, $56.90 and $44.64 per 1,000 units,
respectively, as described below.
<PAGE>
Selected data per 1,000 units of the Trust outstanding
throughout each year -
<TABLE>
<CAPTION>
Year ended August 31,
1997 1995 1994
<S> <C> <C> <C>
Investment income - interest and dividends $96.94 119.39 96.39
Expenses (1.83) (2.01) (1.35)
_____________________________
Investment income - net 95.11 117.38 95.04
Distributions to unit holders:
Investment income - net (28.37) (56.90) (44.64)
Net gain (loss) on investments 116.99 (36.36) 22.11
_____________________________
Total increase (decrease) in net assets 183.73 24.12 72.51
Net assets:
Beginning of the year 1,301.13 1,277.01 1,204.50
_____________________________
End of the year $1,484.86 1,301.13 1,277.01
=============================
</TABLE>
Investment income - interest and dividends, expenses and investment income -
net per 1,000 units have been calculated based on the weighted average number
of units outstanding during each year (35,655,687, 39,590,245 and 44,220,800
units during the years ended August 31, 1997, 1996 and 1995, respectively).
Distributions to unit holders of investment income - net per 1,000 units
reflects the Trust's cash distributions of $28.37 per 1,000 units to
37,053,670 units on October 21, 1996, $46.52 per 1,000 units to 41,279,751
units on October 24, 1996, $10.38 per 1,000 units to 40,246,375 units on
December 19, 1995, $40.22 per 1,000 units to 45,657,747 units on November 4,
1994 and $4.42 per 1,000 units to 45,106,585 units on December 30, 1994.
<PAGE>
TEMPLETON GROWTH AND TREASURY TRUST, SERIES 1
PART ONE
Must be Accompanied by Part Two
___________________
P R O S P E C T U S
____________________
SPONSOR: Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
(800) 621-1675
TRUSTEE: The Chase Manhattan Bank
4 New York Plaza, 6th Floor
New York, New York 10004-2413
LEGAL COUNSEL Chapman and Cutler
TO SPONSOR: 111 West Monroe Street
Chicago, Illinois 60603
LEGAL COUNSEL Carter, Ledyard & Milburn
TO TRUSTEE: 2 Wall Street
New York, New York 10005
INDEPENDENT Ernst & Young, LLP
AUDITORS: Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606
This Prospectus does not constitute an offer to sell, or a solicitation of an
offer to buy, securities in any jurisdiction to any person to whom it is not
lawful to make such offer in such jurisdiction.
This Prospectus does not contain all the information set forth in the
registration statement and exhibits relating thereto, which the Trust has
filed with the Securities and Exchange Commission, Washington, D.C., under the
Securities Act of 1933 and the Investment Company Act of 1940, and to which
reference is hereby made.
TEMPLETON GROWTH AND TREASURY TRUST
TEMPLETON FOREIGN FUND & U.S. TREASURY SECURITIES TRUST
PROSPECTUS
Part Two NOTE: THIS PART TWO PROSPECTUS MAY
Dated December 30, 1997 ONLY BE USED WITH PART ONE
The Trust. Templeton Growth and Treasury Trust and Templeton Foreign
Fund & U.S. Treasury Securities Trust (each a "Trust" and collectively,
the "Fund") are unit investment trusts each consisting of a portfolio of
"zero coupon" U.S. Treasury bonds and shares of Templeton Growth Fund,
Inc. or Templeton Foreign Fund, respectively ("Templeton"). Templeton is
an open-end diversified management investment company, commonly known as
a mutual fund.
The objective of the Fund is to protect Unit holders' capital and
provide for potential capital appreciation by investing a portion of its
portfolio in "zero coupon" U.S. Treasury bonds, such securities being
referred to herein as "Treasury Obligations" and the remainder of the
Trust's portfolio in shares of Templeton. Collectively, the Treasury
Obligations and the Templeton shares are referred to herein as the
"Securities" (See "Portfolio"). Templeton's objective is to obtain long-
term capital growth through a flexible policy of investing in the equity
and debt securities of companies and governments of any nation (in the
case of Templeton Growth Fund, Inc.) or companies and governments
outside the United States (in the case of Templeton Foreign Fund).
Templeton Growth and Treasury Trust has a termination date of September
1, 2000 and Templeton Foreign Fund & U.S. Treasury Securities Trust has
a termination date of February 15, 2001. The Treasury Obligations
evidence the right to receive a fixed payment at a future date from the
U.S. Government and are backed by the full faith and credit of the U.S.
Government. The guarantee of the U.S. Government does not apply to the
market value of the Treasury Obligations or the Units of the Trust,
whose net asset value will fluctuate and, prior to maturity, may be
worth more or less than a purchaser's acquisition cost. There is, of
course, no guarantee that the objective of the Trust will be achieved.
Each Unit of a Trust represents an undivided fractional interest in all
the Securities deposited in the Trust. Each Trust has been organized so
that purchasers of Units should receive, at the termination of the
Trust, an amount per Unit at least equal to $1.00 (which is equal to the
per Unit value upon maturity of the Treasury Obligations), even if the
Trust never paid a dividend and the value of the Templeton shares were
to decrease to zero, which the Sponsor considers highly unlikely. This
feature of each Trust provides Unit holders who purchase Units at a
price of $1.00 or less per Unit with total principal protection,
including any sales charges paid, although they might forego any
earnings on the amount invested. To the extent that Units are purchased
at a price less than $1.00 per Unit, this feature may also provide a
potential for capital appreciation.
The Templeton shares deposited in each Trust's portfolio have no fixed
maturity date and the net asset value of the shares will fluctuate. The
Portfolio, essential information based thereon and financial statements,
including a report of independent auditors relating to the Trusts
offered hereby, are contained in Part One for each Trust to which
reference should be made for such information.
BOTH PARTS OF THE PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Page 1
Public Offering Price. The Public Offering Price per Unit will be based
upon a pro rata share of the bid prices of the Treasury Obligations and
the net asset value of the Templeton shares in each Trust plus or minus
a pro rata share of cash, if any, in the Principal Account of the Trust
plus a maximum sales charge of 5.8% (equivalent to 6.157% of the net
amount invested). The minimum purchase is $1,000. The sales charge is
reduced on a graduated scale for sales involving at least $100,000. See
"How is the Public Offering Price Determined?"
Dividend and Capital Distributions. Distributions, if any, of net
income, other than amortized discount, will be made at least annually.
Distributions of realized capital gains, if any, received by the Trusts,
will be made whenever Templeton makes such a distribution. Any
distribution of income and/or capital will be net of the expenses of the
Trusts. INCOME WITH RESPECT TO THE ACCRUAL OF ORIGINAL ISSUE DISCOUNT ON
THE TREASURY OBLIGATIONS WILL NOT BE DISTRIBUTED CURRENTLY, ALTHOUGH
UNIT HOLDERS WILL BE SUBJECT TO INCOME TAX AT ORDINARY INCOME RATES AS
IF A DISTRIBUTION HAD OCCURRED. SEE "WHAT IS THE FEDERAL TAX STATUS OF
UNIT HOLDERS?" Additionally, upon termination of each Trust, the Trustee
will distribute, upon surrender of Units for redemption, to each Unit
holder his pro rata share of the Trust's assets, less expenses, in the
manner set forth under "Rights of Unit Holders-How are Income and
Principal Distributed?"
Reinvestment. Each Unit holder will, unless he elects to receive cash
payments, have distributions of principal (including the proceeds
received upon the maturity of the Treasury Obligations in the Trust at
termination), capital gains, if any, and income earned by a Trust,
automatically invested in shares of Templeton (if Units are properly
registered) in the name of the Unit holder. Such distributions will be
reinvested without a sales charge to the participant on each applicable
distribution date. See "Rights of Unit Holders-How Can Distributions to
Unit Holders be Reinvested?"
Market for Units. While under no obligation to do so, the Sponsor
intends to maintain a market for Units of the Trust and offer to
repurchase such Units at prices which are based on the aggregate bid
side evaluation of the Treasury Obligations and the aggregate net asset
value of Templeton shares in each Trust plus or minus a pro rata share
of cash, if any, in the Principal Account of the Trust. In the absence
of such a market, a Unit holder may redeem Units through redemption at
prices based upon the aggregate bid price of the Treasury Obligations
plus the aggregate net asset value of the Templeton shares in the Trust
plus or minus a pro rata share of cash, if any, in the Principal Account
of the Trust. See "Rights of Unit Holders-How May Units be Redeemed?"
Risk Factors. An investment in the Trust should be made with an
understanding of the risks associated therewith, including, among other
factors, the possible deterioration of either the Securities which make
up the Trust or the general condition of the stock market, volatile
interest rates, economic recession, currency exchange fluctuations,
foreign withholding, and differences between domestic and foreign legal,
auditing, brokerage and economic standards. The Trust is not actively
managed and Securities will not be sold by the Trust to take advantage
of market fluctuations or changes in anticipated rates of appreciation.
See "What are the Fund's Investment Policies?-Risk Factors."
Page 2
TEMPLETON GROWTH AND TREASURY TRUST
TEMPLETON FOREIGN FUND & U.S. TREASURY SECURITIES TRUST
What are Templeton Growth and Treasury Trust and Templeton Foreign Fund
& U.S. Treasury Securities Trust?
The Fund is a series of trusts of either Templeton Growth and Treasury
Trust or Templeton Foreign Fund & U.S. Treasury Securities Trust, all of
which are generally similar but each of which is separate and is
designated by a different series number (the "Fund"). Each series
consists of underlying separate unit investment trusts (such Trusts
being collectively referred to herein as the "Fund") created under the
laws of the State of New York pursuant to a Trust Agreement (the
"Indenture"), dated the Initial Date of Deposit, with Nike Securities
L.P., as Sponsor, The Chase Manhattan Bank, as Trustee, Securities
Evaluation Service, Inc., as Evaluator, and First Trust Advisors L.P.,
as Portfolio Supervisor.
The objective of the Fund and each Series thereof is to protect Unit
holders' capital and provide for potential long-term capital
appreciation through an investment in "zero coupon" U.S. Treasury bonds,
such securities being referred to herein as the "Treasury Obligations"
and the remainder of the Trust's portfolio is invested in shares of
Templeton Growth Fund, Inc. or Templeton Foreign Fund (collectively, the
"Templeton Funds"). The Treasury Obligations evidence the right to
receive a fixed payment at a future date from the U.S. Government and
are backed by the full faith and credit of the U.S. Government. The
guarantee of the U.S. Government does not apply to the market value of
the Treasury Obligations or the Units of the Trust, whose net asset
value will fluctuate and, prior to maturity, may be more or less than a
purchaser's acquisition cost. Templeton is an open end mutual fund whose
objective is to obtain long-term capital growth through a flexible
policy of investing in the equity and debt securities of companies and
governments of any nation (in the case of Templeton Growth Fund, Inc.)
or companies and governments outside the United States (in the case of
Templeton Foreign Fund). Collectively, the Treasury Obligations and
Templeton shares in the Trust are referred to herein as the
"Securities." There is, of course, no guarantee that the objective of
the Trust will be achieved.
The Fund has been organized so that purchasers of Units should receive,
at the termination of a Trust, an amount per Unit at least equal to
$1.00 per Unit (which is equal to the per Unit value upon maturity of
the Treasury Obligations), even if the Templeton shares never paid a
dividend and the value of Templeton shares in the Trust were to decrease
to zero, which the Sponsor considers highly unlikely. To the extent that
Units of the Trust are redeemed, the aggregate value of the Securities
in the Trust will be reduced and the undivided fractional interest
represented by each outstanding Unit of the Trust will increase. See
"How May Units be Redeemed?"
What are the Expenses and Charges?
At no cost to the Fund, the Sponsor has borne all the expenses of
creating and establishing the Trusts, including the cost of the initial
preparation, printing and execution of the Indenture and the
certificates for the Units, legal and accounting expenses, expenses of
the Trustee and other out-of-pocket expenses. The Sponsor will not
receive any fees in connection with its activities relating to the Fund.
However, First Trust Advisors L.P., an affiliate of the Sponsor, will
receive an annual supervisory fee, which is not to exceed the amount set
forth in Part One for each Trust, for providing portfolio supervisory
services for each Trust. Such fee is based on the number of Units
outstanding in a Trust on January 1 of each year except for a trust
during the year or years in which an initial offering period occurs in
which case the fee for a month is based on the number of Units
outstanding at the end of such month. The fee may exceed the actual
costs of providing such supervisory services for a Trust, but at no time
will the total amount received for portfolio supervisory services
rendered to unit investment trusts to which First Trust Advisors L.P. is
the Sponsor in any calendar year exceed the aggregate cost to First
Trust Advisors L.P. of supplying such services in such year.
The Evaluator will receive a fee as indicated in Part One for each
Trust. No fee is paid to the Evaluator with respect to the Templeton
shares in the Trust. The Trustee pays certain expenses of the Trust for
which it is reimbursed by the Trust. The Trustee will receive for its
Page 3
ordinary recurring services to a Trust and for all normal expenses of
the Trustee incurred by or in connection with its responsibilities under
the Indenture, an annual fee computed at $.85 per annum per 1,000 Units
in the Trust outstanding based upon the largest aggregate number of
Units of the Trust outstanding at any time during the year. For a
discussion of the services performed by the Trustee pursuant to its
obligations under the Indenture, reference is made to the material set
forth under "Rights of Unit Holders."
The Trustee's and Evaluator's fees are payable from the Income Account
of the Trust to the extent funds are available and then from the
Principal Account of the Trust. Since the Trustee has the use of the
funds being held in the Principal and Income Accounts for payment of
expenses and redemptions and since such Accounts are noninterest-bearing
to Unit holders, the Trustee benefits thereby. Part of the Trustee's
compensation for its services to the Trust is expected to result from
the use of these funds. Both fees may be increased without approval of
the Unit holders by amounts not exceeding proportionate increases under
the category "All Services Less Rent of Shelter" in the Consumer Price
Index published by the United States Department of Labor.
The following additional charges are or may be incurred by the Trust:
all legal and annual auditing expenses of the Trustee incurred by or in
connection with its responsibilities under the Indenture; the expenses
and costs of any action undertaken by the Trustee to protect the Trust
and the rights and interests of the Unit holders; fees of the Trustee
for any extraordinary services performed under the Indenture;
indemnification of the Trustee for any loss, liability or expense
incurred by it without negligence, bad faith or willful misconduct on
its part, arising out of or in connection with its acceptance or
administration of the Trust; indemnification of the Sponsor for any
loss, liability or expense incurred without gross negligence, bad faith
or willful misconduct in acting as Depositor of the Trust; all taxes and
other government charges imposed upon the Securities or any part of the
Trust (no such taxes or charges are being levied or made or, to the
knowledge of the Sponsor, contemplated). The above expenses and the
Trustee's annual fee, when paid or owing to the Trustee, are secured by
a lien on the Trust. In addition, the Trustee is empowered to sell
Securities in the Trust in order to make funds available to pay all
these amounts if funds are not otherwise available in the Income and
Principal Accounts of the Trust except that the Trustee shall not sell
Treasury Obligations to pay Trust expenses.
The Indenture requires the Trust to be audited on an annual basis at the
expense of the Trust by independent auditors selected by the Sponsor. So
long as the Sponsor is making a market for the Units, the Sponsor is
required to bear the cost of such annual audits to the extent such cost
exceeds $.50 per 1,000 Units. Unit holders of the Trust covered by an
audit may obtain a copy of the audited financial statements upon request.
What is the Federal Tax Status of Unit Holders?
The following is a general discussion of certain of the federal income
tax consequences of the purchase, ownership and disposition of the
Units. The summary is limited to investors who hold Units as "Capital
Assets" (generally, property held for investment) within the meaning of
Section 1221 of the Internal Revenue Code of 1986 (the "Code"). Unit
holders should consult their tax advisors in determining the federal,
state, local and any other tax consequences of the purchase, ownership
and disposition of Units in a Trust. For purposes of the following
discussion and opinion, it is assumed that shares in the Fund represent
shares in an entity treated as a regulated investment company for
Federal income tax purposes.
In the opinion of Chapman and Cutler, counsel for the Sponsor, under
then existing law:
1. Each Trust is not an association taxable as a corporation for
federal income tax purposes; each Unit holder will be treated as the
owner of a pro rata portion of each of the assets of each Trust under
the Code; the income of each Trust will be treated as income of the Unit
holders thereof under the Code; and each Unit holder will be considered
to have received his pro rata share of income derived from each Trust
asset when such income is considered to be received by a Trust.
2. Each Unit holder will have a taxable event when a Trust disposes of
a Security (whether by sale, exchange, liquidation, redemption, or
otherwise) or upon the sale or redemption of Units by such Unit holder.
The price a Unit holder pays for his Units is allocated among his pro
rata portion of each Security held by a Trust (in proportion to the fair
market values thereof on the valuation date closest to the date the Unit
holder purchases his Units) in order to determine his or her initial tax
Page 4
basis (before adjustment in accrual of original issue discount) for his
pro rata portion of each Security held by a Trust. It should be noted
that certain legislative proposals have been made which could effect the
calculation of basis for Unit holders holding securities that are
substantially identical to the Securities. Unit holders should consult
their own tax advisors with regard to calculation of basis. The Treasury
Obligations held by the Trust are treated as stripped bonds and are
treated as bonds issued at an original issue discount as of the date a
Unit holder purchases his Units. Because the Treasury Obligations
represent interests in "stripped" U.S. Treasury bonds, a Unit holder's
initial cost for his pro rata portion of each Treasury Obligation held
by the Trusts (determined at the time he or she acquires his or her
Units, in the manner described above) shall be treated as its "purchase
price" by the Unit holder. Original issue discount is effectively
treated as interest for federal income tax purposes and the amount of
original issue discount in this case is generally the difference between
the bond's purchase price and its stated redemption price at maturity. A
Unit holder will be required to include in gross income for each taxable
year the sum of his daily portions of original issue discount
attributable to the Treasury Obligations held by the Trusts as such
original issue discount accrues and will, in general, be subject to
federal income tax with respect to the total amount of such original
issue discount that accrues for such year even though the income is not
distributed to the Unit holders during such year to the extent it is not
less than a "de minimis" amount as determined under Treasury Regulations
relating to stripped bonds. To the extent the amount of such discount is
less than the respective "de minimis" amount, such discount is generally
treated as zero. In general, original issue discount accrues daily under
a constant interest rate method which takes into account the semi-annual
compounding of accrued interest. In the case of the Treasury
Obligations, this method will generally result in an increasing amount
of income to the Unit holders each year. Unit holders should consult
their tax advisors regarding the Federal income tax consequences and
accretion of original issue discount. For Federal income tax purposes, a
Unit holder's pro rata portion of dividends, (other than designated
capital gains dividends as discussed below) as defined by Section 316 of
the Code, paid with respect to a Fund share held by the Trust is taxable
as ordinary income to the extent of such Fund's current and accumulated
"earnings and profits." A Unit holder's pro rata portion of dividends
paid on such Fund share which exceed such current and accumulated
earnings and profits will first reduce a Unit holder's tax basis in such
Fund share, and to the extent that such dividends exceed a Unit holder's
tax basis in such Fund share shall generally be treated as capital gain.
In general, the holding period for such capital gain will be determined
by the period of time a Unit holder has held his Units.
3. A Unit holder's portion of gain, if any, upon the sale or
redemption of Units or the disposition of Securities held by a Trust
will generally be considered a capital gain except in the case of a
dealer or a financial institution. A Unit holder's portion of loss, if
any, upon the sale or redemption of Units or the disposition of
Securities held by a Trust will generally be considered a capital loss
(except in the case of a dealer or a financial institution). Unit
holders should consult their tax advisors regarding the recognition of
gains and losses for federal income tax purposes.
Because Unit holders are deemed to directly own a pro rata portion of
the Fund shares as discussed above, Unit holders are advised to read the
discussion of tax consequences set forth in the current prospectus for
the Fund. Distributions declared by the Fund on the Fund shares in
October, November or December that are held by a Trust and paid during
the following January will be treated as having been received by Unit
holders on December 31 in the year such distributions were declared.
Distributions of the Fund's net capital gain which the Fund properly
designates as capital gain dividends will be taxable to the Unit holders
as long-term capital gains regardless of how long a person has been a
Unit holder. If a Unit holder holds his Units for six months or less or
if a Trust holds shares of the Fund for six months or less, any loss
incurred by a Unit holder related to the disposition of the Fund shares
will be treated as a long-term capital loss to the extent of any long-
term capital gains distributions received (or deemed to have been
received) with respect to such shares. For taxpayers other than
corporations, net capital gain (which is defined as net long-term
capital gain over net short-term capital loss for the taxable year) is
subject to a maximum marginal stated tax rate of either 28% or 20%,
depending upon the holding periods of the capital assets. Capital loss
Page 5
is long-term if the holding period for the asset is more than one year,
and is short-term if the holding period for the asset is one year or
less. Generally, capital gains realized from assets held for more than
one year but not more than 18 months are taxed at a maximum marginal
stated tax rate of 28% and capital gains realized from assets (with
certain exclusions) held for more than 18 months are taxed at a maximum
marginal stated tax rate of 20% (10% in the case of certain taxpayers in
the lowest tax bracket). Further, capital gains realized from assets
held for one year or less are taxed at the same rates as ordinary
income. Legislation is currently pending that provides the appropriate
methodology that should be applied in netting the realized capital gains
and losses. Such legislation is proposed to be effective retroactively
for tax years ending after May 6, 1997. Note, however, that the 1997 Act
provides that the application of the rules described above in the case
of pass-through entities, such as the Fund shares will be prescribed in
future Treasury Regulations. The Internal Revenue Service has released
preliminary guidance which provides that, in general, pass-through
entities may designate their capital gain dividends as either a 20% rate
gain distribution or a 28% rate gain distribution, depending on the
nature of the gain received by the pass-through entity. Unit holders
should consult their own tax advisers as to the tax rate applicable to
capital gain dividends.
The Taxpayer Relief Act of 1997 (the "1997 Act") includes provisions
that treat certain transactions designed to reduce or eliminate risk of
loss and opportunities for gain (e.g., short sales, offsetting notional
principal contracts, futures or forward contracts, or similar
transactions) as constructive sales for purposes of recognition of gain
(but not loss) and for purposes of determining the holding period. Unit
holders should consult their own tax advisors with regard to any such
constructive sales rules.
In addition, it should be noted that capital gains may be
recharacterized as ordinary income in the case of certain financial
transactions that are "conversion transactions" effective for
transactions entered into after April 30, 1993. Unit holders and
prospective investors should consult with their tax advisors regarding
the potential effect of this provision on their investment in Units. If
a Unit holder dispenses of a Unit, he or she is deemed thereby to have
disposed of his or her entire pro rata interest in all assets of the
Trust involved, including his or her pro rata portion of all the
Securities represented by the Unit.
Distributions on the Fund shares which are taxable as ordinary income to
the Unit holders will constitute dividends for federal income tax
purposes. To the extent dividends received by the Fund are attributable
to foreign corporations, a corporation that owns Units will not be
entitled to the dividends received deduction with respect to the pro
rata portion of such dividends, since the dividends received deduction
is generally available only with respect to dividends paid by domestic
corporations. However, to the extent dividends received by the Fund are
from United States corporations (other than real estate investment
trusts) and are designated by the Fund as being eligible for the
dividends received deduction, distributions received by corporate Unit
holders with respect to Fund shares attributable to such dividends may
qualify for the 70% dividends received deduction, subject to limitations
otherwise applicable to the availability of the deduction. It should be
noted that various legislative proposals that would affect the dividends
received deduction should have been introduced. Unit holders should
consult with their tax advisers with respect to the limitation on a
possible modification of the dividends received deduction.
The Fund may elect to pass through to its shareholders the foreign
income and similar taxes paid by the Fund in order to enable such
shareholders to take a credit (or deduction) for foreign income taxes
paid by the Fund. If such an election is made, Unit holders of a Trust,
because they are deemed to own a pro rata portion of the Fund shares
held by the Trust, as described above, must include in their gross
income, for federal income tax purposes, both their portion of dividends
received by the Trust from the Fund, and also their portion of the
amount which the Fund deems to be the Trust's portion of foreign income
taxes paid with respect to, or withheld from, dividends, interest or
other income of the Fund from its foreign investments. Unit holders may
then subtract from their federal income tax the amount of the foreign
tax credit with respect to such taxes withheld, or else treat such
foreign taxes as deductions from gross income; however, as in the case
of investors receiving income directly from foreign sources, the above
described tax credit or deduction is subject to certain limitations.
Unit holders should consult their tax advisors regarding this election
and its consequences to them.
Limitations on Deductibility of Trust Expenses by Unit Holders. Each
Unit holder's pro rata share of each expense paid by the Trust is
deductible by the Unit holder to the same extent as though the expense
Page 6
had been paid directly by him. It should be noted that as a result of
the Tax Reform Act of 1986, certain miscellaneous itemized deductions,
such as investment expenses, tax return preparation fees and employee
business expenses will be deductible by an individual only to the extent
they exceed 2% of such individual's adjusted gross income. Unit holders
may be required to treat some or all of the expenses of the Trust as
miscellaneous itemized deductions subject to this limitation.
General. Each Unit holder will be requested to provide the Unit holder's
taxpayer identification number to the Trustee and to certify that the
Unit holder has not been notified that payments to the Unit holder are
subject to back-up withholding. If the proper taxpayer identification
number and appropriate certification are not provided when requested,
distributions by the Trusts to such Unit holder (including amounts
received upon the redemption of Units) will be subject to back-up
withholding. Distributions by a Trust will generally be subject to
United States income taxation and withholding in the case of Units held
by non-resident alien individuals, foreign corporations or other non-
United States persons (accrual of original issue discount on the
Treasury Obligations may not be subject to taxation or withholding
provided certain requirements are met). Such persons should consult
their tax advisors.
Unit holders will be notified annually of the amounts of original issue
discount, dividends and long-term capital gains distributions includable
in the Unit holder's gross income and amounts of Trust expenses which
may be claimed as itemized deductions.
Dividend income, long-term capital gains and accrual of original issue
discount may also be subject to state and local taxes. Foreign investors
may be subject to different Federal income tax consequences than those
described above. Investors should consult their tax advisors for
specific information on the tax consequences of investing in the Trusts
and of particular types of distributions.
Unit holders desiring to purchase Units for tax-deferred plans and IRAs
should consult their broker for details on establishing such accounts.
Units may also be purchased by persons who already have self-directed
plans established. See "Why are Investments in the Trust Eligible for
Retirement Plans?"
The foregoing discussion relates only to the tax treatment of United
States Unit holders ("U.S. Unit holders") with regard to Federal and
certain aspects of New York State and City income taxes. Unit holders
may be subject to taxation in New York or in other jurisdictions and
should consult their own tax advisers in this regard. As used herein,
the term "U.S. Unit holder" means an owner of a Unit in the Trust that
(a) is (i) for United States Federal income tax purposes a citizen or
resident of the United States, (ii) a corporation, partnership or other
entity created or organized in or under the laws of the United States or
of any political subdivision thereof, or (iii) an estate or trust the
income of which is subject to United States Federal income taxation
regardless of its source or (b) does not qualify as a U.S. Unit holder
in paragraph (a) but whose income from a Unit is effectively connected
with such Unit holder's conduct of a United States trade or business.
The term also includes certain former citizens of the United States
whose income and gain on the Units will be taxable.
In the opinion of Carter, Ledyard & Milburn, Special Counsel to the
Trusts for New York tax matters, under then existing income tax laws of
the State of New York each Trust is not an association taxable as a
corporation and the income of each Trust will be treated as the income
of the Unit holders thereof.
Why are Investments in the Trust Eligible for Retirement Plans?
Units of a Trust are eligible for purchase by Individual Retirement
Accounts, Keogh Plans, pension funds and other tax-deferred retirement
plans. Generally, federal income tax relating to capital gains and
income received in each of the foregoing plans is deferred until
distributions are received. Distributions from such plans are generally
treated as ordinary income but may, in some cases, be eligible for
special averaging or tax-deferred rollover treatment. Investors
considering participation in any such plan should review specific tax
laws related thereto and should consult their attorneys or tax advisors
with respect to the establishment and maintenance of any such plan. Such
plans are offered by brokerage firms and other financial institutions.
Fees and charges with respect to such plans may vary.
Page 7
PORTFOLIO
What are Zero Coupon Treasuries?
The Treasury Obligations deposited in the Trust consist of U.S. Treasury
bonds which have been stripped of their unmatured interest coupons. The
Treasury Obligations evidence the right to receive a fixed payment at a
future date from the U.S. Government, and are backed by the full faith
and credit of the U.S. Government. Treasury Obligations are purchased at
a deep discount because the buyer obtains only the right to a fixed
payment at a fixed date in the future and does not receive any periodic
interest payments. The effect of owning deep discount bonds which do not
make current interest payments (such as the Treasury Obligations) is
that a fixed yield is earned not only on the original investment but
also, in effect, on all earnings during the life of the discount
obligation. This implicit reinvestment of earnings at the same rate
eliminates the risk of being unable to reinvest the income on such
obligations at a rate as high as the implicit yield on the discount
obligation, but at the same time eliminates the holder's ability to
reinvest at higher rates in the future. For this reason, the Treasury
Obligations are subject to substantially greater price fluctuations
during periods of changing interest rates than are securities of
comparable quality which make regular interest payments. The effect of
being able to acquire the Treasury Obligations at a lower price is to
permit more of the Trust's portfolio to be invested in shares of
Templeton.
What is Templeton Growth Fund, Inc.?
The portfolio of a Series of the Fund may also contain shares of
Templeton Growth Fund, Inc. Templeton Growth Fund, Inc. (the "Growth
Fund") was organized as a Maryland corporation on November 10, 1986,
from its predecessor entity which commenced operations on November 29,
1954, and is registered with the SEC as an open-end management
investment company. The Growth Fund began offering two classes of shares
on May 1, 1995: Class I and Class II. As of January 1, 1997, the Growth
Fund began offering a new class of shares designated the "Advisor
Class." All Shares purchased before May 1, 1995, are considered Class I
shares, so all shares held in the Trust are Class I shares.
The following tables of selected financial information have been audited
by the Growth Fund's independent certified public accountants for the
periods indicated in their report which is incorporated by reference and
which appears in the Growth Fund's 1997 Annual Report to Shareholders.
This statement should be read in conjunction with the other financial
statements and notes thereto included in the Growth Fund's 1997 Annual
Report to Shareholders, which contains further information about the
Growth Fund's performance, and which is available to Shareholders upon
request and without charge.
Page 8
Templeton Growth Fund, Inc.
per Share Operating Performance
(for a Share Outstanding
throughout the Period)
<TABLE>
<CAPTION>
Class I Shares
Year Ended August 31
1997 1996 1995 1994 1993 1992
_____ _____ _____ _____ _____ _____
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 18.75 $ 18.96 $ 18.95 $ 17.47 $ 15.81 $ 16.14
Income from investment operations:
Net investment income .54 .50 .39 0.29 0.32 0.41
Net realized and unrealized gain (loss) 4.48 1.34 1.20 2.58 2.97 0.92
Total from investment operations 5.02 1.84 1.59 2.87 3.29 1.33
Less distributions:
Dividends from net investment income (.49) (.44) (.29) (0.27) (0.36) (0.44)
Distributions from net realized gains (.81) (1.61) (1.29) (1.12) (1.27) (1.22)
Total distributions (1.30) (2.05) (1.58) (1.39) (1.63) (1.66)
Change in net asset value for the year 3.72 (.21) .01 1.48 1.66 (0.33)
Net asset value at end of period $22.47 $18.75 $18.96 $18.95 $ 17.47 $ 15.81
Total Return (2) 28.28% 10.85% 9.51% 17.47% 23.57% 9.22%
Ratios/Supplemental data:
Net Assets, end of year (in millions) $12,129,283 $8,450,737 $6,964,298 $5,611.6 $4,033.9 $3,268.6
Ratio to average net assets of:
Expenses 1.08% 1.09% 1.12% 1.10% 1.03% 0.88%
Net investment income 2.81% 2.87% 2.40% 1.76% 2.10% 2.62%
Portfolio turnover rate 41.81% 19.63% 35.21% 27.35% 28.89% 29.46%
Average commission rate paid (3) $ .0007 $ .0146
</TABLE>
<TABLE>
<CAPTION>
Class I Shares
Year Ended August 31
1991 1990 1989 1988 1987 (1)
____ ____ ____ ____ ________
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 15.23 $ 16.62 $ 13.65 $ 17.13 $ 12.87
Income from investment operations:
Net investment income 0.45 0.57 0.58 0.45 0.29
Net realized and unrealized gain (loss) (0.87) 3.12 (2.41) 3.97 0.28
Total from investment operations 2.13 (0.30) 3.70 (1.96) 4.26
Less distributions:
Dividends from net investment income (0.54) (0.62) (0.48) (0.44) 0.00
Distributions from net realized gains (0.68) (0.47) (0.25) (1.08) 0.00
Total distributions (1.22) (1.09) (0.73) (1.52) 0.00
Change in net asset value for the year 0.91 (1.39) 2.97 (3.48) 4.26
Net asset value at end of period $ 16.14 $ 15.23 $ 16.62 $ 13.65 $ 17.13
Total Return ++ 15.95% (2.01)% 28.38% (9.86)% 33.10%
Ratios/Supplemental data:
Net Assets, end of year (in millions) $2,895.7 $2,466.7 $2,355.3 $1,572.1 $1,633.9
Ratio to average net assets of:
Expenses 0.75% 0.67% 0.66% 0.69% 0.66%+
Net investment income 3.09% 3.70% 4.20% 3.50% 2.99%+
Portfolio turnover rate 30.28% 18.47% 11.55% 11.44% 17.55%
Average commission rate paid (3)
<FN>
(1)For the period December 31, 1986 (commencement of operations) through
August 31, 1987. The Fund commenced operations as successor in interest
to 58% of Templeton Growth Fund, Ltd. (the "Canadian Fund") which
reorganized into two funds on that date. In accordance with the terms of
the reorganization, the Canadian shareholders, representing 42% of the
shares outstanding, remained shareholders of the Canadian Fund and the
non-Canadian shareholders, representing 58% of the shares outstanding,
became shareholders of the Growth Fund.
(2)Total return does not reflect sales commissions.
(3)Relates to purchases and sales of equity securities. Prior to fiscal
year end 1996, disclosure of average commission rate was not required.
+ Annualized.
</FN>
</TABLE>
Page 9
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a Shareholder will bear directly or
indirectly in connection with an investment in the Growth Fund. The
figures are estimates of the Growth Fund's expenses for the current
fiscal year, restated to reflect current sales charges and Rule 12b-1
fees for each class.
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of Offering Price) 5.75%*
Annual Templeton Growth Fund, Inc. Operating Expenses
(as a percentage of average net assets)
Management Fees 0.61%
12b-1 Fees 0.24%**
Other Expenses (audit, legal, business management,
transfer agent and custodian) 0.23%
Total Templeton Growth Fund, Inc. Operating Expenses 1.08%
Investors should be aware that the above table is not intended to
reflect in precise detail the fees and expenses associated with an
individual's own investment in the Growth Fund. Rather, the table has
been provided only to assist investors in gaining a more complete
understanding of fees, charges and expenses. The information in this
table does not reflect the charge of up to $15 per transaction if a
Shareholder requests that redemption proceeds be sent by express mail or
wired to a commercial bank account. For a more detailed discussion of
these matters, investors should refer to the appropriate sections of the
Growth Fund's Prospectus.
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:
1 Year 3 Years 5 Years 10 Years
______ _______ ______ _______
$ 68 $ 90 $114 $182
The above example is based on the estimated annual operating expenses,
including fees set by contract, shown above and should not be considered
a representation of past or future expenses, which may be more or less
than those shown. The operating expenses are borne by the Growth Fund
and only indirectly by Shareholders as a result of their investment in
the Growth Fund. In addition, federal securities regulations require the
example to assume an annual rate of return of 5%, but the Growth Fund's
actual return may be more or less than 5%.
Dividends from investment income were paid commencing in 1964 and
distributions of capital gains were paid commencing in 1972. Prior to
those years net income and realized capital gains were retained by the
Canadian Fund.
Templeton Growth Fund, Inc. may include its total return in
advertisements or reports to its shareholders or prospective investors.
Quotations of average annual total return will be expressed in terms of
the average annual compounded rate of return on a hypothetical
investment in Templeton Growth Fund, Inc. over a period of 1, 5 and 10
years (or up to the life of Templeton Growth Fund, Inc.), will reflect
the deduction of the maximum initial sales charge and deduction of a
proportional share of Templeton Growth Fund, Inc. expenses (on an annual
basis), and will assume that all dividends and distributions are
reinvested when paid. Total return may be expressed in terms of the
cumulative value of an investment in Templeton Growth Fund, Inc. at the
end of a defined period of time. For a description of the methods used
to determine total return for Templeton Growth Fund, Inc., see Templeton
Growth Fund, Inc.'s Statement of Additional Information ("SAI").
_______________
*There is no sales charge payable on the Templeton Growth Fund, Inc.
shares deposited in a Trust. However, the maximum sales charge on the
Units, and therefore indirectly on the Templeton Growth Fund, Inc.
shares is 5.8% in the secondary market.
**Annual 12b-1 fees may not exceed 0.25% for Class I of the Growth Fund.
After a substantial period, these expenses, together with the initial
sales charge, may total more than the maximum sales expense that would
have been permissible if imposed entirely as an initial sales charge.
Effectively, there are no 12b-1 fees on the Growth Fund shares held in a
Trust. However, Unit holders who acquire shares of the Growth Fund
through reinvestment of dividends or other distributions or through
reinvestment at a Trust's termination will begin to incur 12b-1 fees at
such time as shares are acquired.
Page 10
What is Templeton Foreign Fund?
The portfolio of a Series of the Fund may also contain shares of
Templeton Foreign Fund (the "Foreign Fund). Templeton Foreign Fund is an
open-end diversified management investment company, commonly known as a
mutual fund. It was organized as a Maryland corporation on August 15,
1977, and is registered with the SEC. The Foreign Fund began offering
two classes of shares on May 1, 1995: Class I and Class II. As of
January 1, 1997, the Foreign Fund began offering a new class of shares
designated as the "Advisor Class." All Shares purchased before May 1,
1995, are considered Class I shares, so all shares held in the Trust are
Class I shares. Templeton Foreign Fund's objective is long-term capital
growth through a flexible policy of investing in the equity and debt
securities of companies and governments outside the United States. The
shares of Templeton Foreign Fund deposited in a Trust are maintained on
the books of Templeton Foreign Fund's transfer agent.
Templeton Foreign Fund has followed the practice of paying a
distribution at least once annually representing substantially all of
its net investment income and distributing any net realized capital gains.
The following tables of selected financial information have been audited
by the Foreign Fund's independent certified public accountants for the
years indicated in their report which is incorporated by reference and
which appears in the Foreign Fund's 1997 Annual Report to Shareholders.
These statements should be read in conjunction with the other financial
statements and notes thereto included in the Foreign Fund's 1997 Annual
Report to Shareholders, which contains further information about the
Foreign Fund's performance, and which is available to shareholders upon
request and without charge.
Page 11
Templeton Foreign Fund per Share
Operating Performance for a Share
Outstanding Throughout the Period*
<TABLE>
<CAPTION>
Class I Shares
Year Ended August 31
1997 1996 1995 1994 1993 1992
_____ _____ _____ _____ _____ _____
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.97 $ 9.62 $ 10.01 $ 8.74 $ 7.92 $ 7.91
Income from investment operations:
Net investment income 0.32 0.27 0.23 0.14 0.14 0.20
Net realized and unrealized gain 1.56 0.69 0.05 1.39 1.21 0.43
Total from investment operations 1.88 0.96 0.28 1.53 1.35 0.63
Less distributions:
Dividends from net investment income (0.28) (0.25) (0.16) (0.13) (0.19) (0.23)
Distributions from net realized gains (0.17) (0.36) (0.51) (0.13) (0.34) (0.39)
Total distributions (0.45) (0.61) (0.67) (0.26) (0.53) (0.62)
Change in net asset value for the period 1.43 0.35 (0.39) 1.27 0.82 0.01
Net asset value, end of period $ 11.40 $ 9.97 $ 9.62 $ 10.01 $ 8.74 $ 7.92
Total return (1) 19.55% 10.68% 3.14% 17.94% 18.65% 8.52%
Ratios/supplemental data:
Net assets, end of year (in millions) $14,367,787 $9,602,209 $6,941,238 $5,014.4 $2,667.8 $1,672.2
Ratio to average net assets of:
Expenses 1.08% 1.12% 1.15% 1.14% 1.12% 0.94%
Net investment income 3.28% 3.09% 2.81% 1.84% 2.11% 2.92%
Portfolio turnover rate 37.28% 15.91% 21.78% 38.75% 21.29% 22.00%
Average commission rate paid (2) $ .0005 $ .0075
</TABLE>
<TABLE>
<CAPTION>
Class I Shares
Year Ended August 31
1991 1990 1989 1988 1987
____ ____ ____ ____ ____
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.19 $ 7.60 $ 6.37 $ 7.73 $ 5.34
Income from investment operations:
Net investment income 0.25 0.25 0.22 0.21 0.16
Net realized and unrealized gain 0.03 0.92 1.60 (0.97) 2.71
Total from investment operations 0.28 1.17 1.82 (0.76) 2.87
Less distributions:
Dividends from net investment income (0.26) (0.25) (0.21) (0.19) (0.13)
Distributions from net realized gains (0.30) (0.33) (0.38) (0.41) (0.35)
Total distributions (0.56) (0.58) (0.59) (0.60) (0.48)
Change in net asset value for the period (0.28) 0.59 1.23 (1.36) 2.39
Net asset value, end of period $ 7.91 $ 8.19 $ 7.60 $ 6.37 $ 7.73
Total return+ 4.17% 16.35% 30.99% (8.78%) 59.23%
Ratios/supplemental data:
Net assets, end of year (in millions) $1,211.5 $933.0 $438.6 $292.7 $319.6
Ratio to average net assets of:
Expenses 0.80% 0.77% 0.81% 0.81% 0.77%
Net investment income 3.59% 3.95% 3.65% 3.29% 2.89%
Portfolio turnover rate 19.24% 11.49% 16.62% 20.37% 14.49%
Average commission rate paid (per share)
____________
<FN>
* Per share amounts for years ended prior to August 31, 1994, have been
restated to reflect a 3-for-1 stock split effective February 25, 1994.
(1)Does not reflect sales commissions or service charges.
(2)Relates to purchases and sales of equity securities. Prior to fiscal
year end 1996, disclosure of average commission rate was not required.
</FN>
</TABLE>
Page 12
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a Shareholder will bear directly or
indirectly in connection with an investment in the Foreign Fund. The
figures are estimates of the Foreign Fund's expenses for the current
fiscal year, restated to reflect current sales charges and Rule 12b-1
fees for each class.
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of Offering Price) 5.75%*
Annual Templeton Foreign Fund Operating Expenses
(as a percentage of average net assets)
Management Fees 0.61%
12b-1 Fees 0.25%**
Other Expenses (audit, legal, business management,
transfer agent and custodian) 0.22%
Total Templeton Foreign Fund Operating Expenses 1.08%
Investors should be aware that the above table is not intended to
reflect in precise detail the fees and expenses associated with an
individual's own investment in the Foreign Fund. Rather, the table has
been provided only to assist investors in gaining a more complete
understanding of fees, charges and expenses. The information in this
table does not reflect the charge of up to $15 per transaction if a
Shareholder requests that redemption proceeds be sent by express mail or
wired to a commercial bank account. For a more detailed discussion of
these matters, investors should refer to the appropriate sections of the
Foreign Fund's Prospectus.
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:
1 Year 3 Years 5 Years 10 Years
______ ______ ______ _______
$ 68 $ 90 $114 $182
The above example is based on the estimated annual operating expenses,
including fees set by contract, shown above and should not be considered
a representation of past or future expenses, which may be more or less
than those shown. The operating expenses are borne by the Foreign Fund
and only indirectly by Shareholders as a result of their investment in
the Foreign Fund. In addition, federal securities regulations require
the example to assume an annual rate of return of 5%, but the Foreign
Fund's actual return may be more or less than 5%.
What is Templeton's Investment Objective and Policy?
Templeton's investment objective is long-term capital growth, which it
seeks to achieve through a flexible policy of investing in the equity
and debt securities of companies and governments of any nation (in the
case of Templeton Growth Fund, Inc.) or in the equity and debt
securities of companies and governments outside the United States (in
the case of Templeton Foreign Fund). Any income realized will be
incidental. The objective is fundamental for both the Growth Fund and
the Foreign Fund, which means it may not be changed without shareholder
approval. Of course, there is no assurance that the Funds' objective
will be achieved.
Equity securities generally entitle the holder to participate in a
company's general operating results. These include common stock;
preferred stock; convertible securities; warrants or rights. Templeton's
primary investments are in common stock.
________________
*There is no sales charge payable on the Templeton Foreign Fund shares
deposited in the Trust. However, the maximum sales charge on the Units,
and therefore indirectly on the Templeton Foreign Fund shares, is 5.8%
in the secondary market.
**Annual 12b-1 fees may not exceed 0.25% for Class I of Templeton
Foreign Fund. After a substantial period, these expenses, together with
the initial sales charge, may total more than the maximum sales expense
that would have been permissible if imposed entirely as an initial sales
charge. Effectively, there are no 12b-1 fees on the Foreign Fund shares
held in a Trust. However, Unit holders who acquire shares of the Foreign
Fund through reinvestment of dividends or other distributions or through
reinvestment at a Trust's termination will begin to incur 12b-1 fees at
such time as shares are acquired.
Page 13
In selecting these equity securities, the Investment Manager does a
company-by-company analysis, rather than focusing on a specific industry
or economic sector. The Investment Manager concentrates primarily on the
market price of a company's securities relative to its view regarding
the company's long-term earnings potential. A company's historical value
measures, including price/earnings ratios, profit margins and
liquidation value, will also be considered.
Debt securities represent an obligation of the issuer to repay a loan of
money to it, and generally, provide for the payment of interest. These
include bonds, notes and debentures; commercial paper; time deposits;
bankers' acceptances; and structured investments which are described
more fully in the Statement of Additional Information of Templeton.
Templeton may buy both rated and unrated debt securities. Independent
rating organizations rate debt securities based upon their assessment of
the financial soundness of the issuer. Generally, a lower rating
indicates higher risk. Templeton may buy debt securities which are rated
Caa by Moody's or CCC by S&P or better; or unrated debt which it
determines to be of comparable quality. At present, Templeton does not
intend to invest more than 5% of its total assets in non-investment
grade securities (rated lower than BBB by S&P or Baa by Moody's).
Templeton may also invest in American, European and Global Depositary
Receipts. Depositary Receipts are certificates typically issued by a
bank or trust company that give their holders the right to receive
securities issued by a foreign or domestic corporation.
Templeton may invest up to 5% of its total assets in securities issued
by any one company or foreign government. Templeton may invest any
amount of its assets in U.S. government securities. Templeton may invest
in any industry although it will not concentrate (invest more than 25%
of its total assets) in any one industry. Templeton may invest up to 15%
of its total assets in foreign securities that are not listed on a
recognized U.S. or foreign securities exchange, including up to 10% of
its total assets in securities with a limited trading market.
The Growth Fund may invest without percentage limitation in domestic or
foreign securities.
Investment Techniques for the Templeton Funds
Temporary Investments. When the Investment Manager believes that the
securities trading markets or the economy are experiencing excessive
volatility or a prolonged general decline, or other adverse conditions
exist, it may invest Templeton's portfolio in a temporary defensive
manner. Under such circumstances, Templeton may invest up to 100% of its
assets in: (1) U.S. government securities; (2) bank time deposits
denominated in the currency of any major nation; (3) commercial paper
rated A-1 by S&P or Prime-1 by Moody's or, if unrated, issued by a
company which, at the date of investment, had an outstanding debt issue
rated AAA or AA by S&P or Aaa or Aa by Moody's; and (4) repurchase
agreements with banks and broker/dealers.
Repurchase Agreements. Templeton will generally have a portion of its
assets in cash or cash equivalents for a variety of reasons including
waiting for a special investment opportunity or taking a defensive
position. To earn income on this portion of its assets, Templeton may
enter into repurchase agreements with certain banks and broker/dealers.
Under a repurchase agreement, Templeton agrees to buy a U.S. government
security from one of these issuers and then to sell the security back to
the issuer after a short period of time (generally, less than seven
days) at a higher price. The bank or broker/dealer must transfer to
Templeton's custodian securities with an initial value of at least 102%
of the dollar amount invested by Templeton in each repurchase agreement.
Short-Term Trading and Portfolio Turnover. Templeton invests for long-
term capital growth and does not intend to emphasize short-term trading
profits. It is anticipated, therefore, that Templeton's annual portfolio
turnover rate generally will be below 50%; although this rate may be
higher or lower, in relation to market conditions. A portfolio turnover
rate of less than 50% means that in a one-year period, less than one-
half of Templeton's portfolio is changed.
In addition to the investment techniques described above, the Growth
Fund is authorized to use the various investment techniques described
below.
Options on Securities Indices. The Growth Fund may buy and sell options
on securities indices to earn additional income and/or to help protect
its portfolio against market and/or exchange rate movements, although it
Page 14
presently has no intention of doing so. An option on a securities index
is a contract that allows the buyer of the option the right to receive
from the seller cash, in an amount equal to the difference between the
index's closing price and the option's exercise price. The Growth Fund
may only buy options if the total premiums it paid for such options is
5% or less of its total assets.
Stock Index Futures Contracts. Changes in interest rates, securities
prices or foreign currency valuations may affect the value of the Growth
Fund's investments. To reduce its exposure to these factors, the Growth
Fund may buy and sell stock index futures contracts. A stock index
futures contract is an agreement to take or make delivery of an amount
of cash based on the difference between the value of the index at the
beginning and end of the contract period. Although the Growth Fund may
invest up to 20% of its total assets in stock index futures contracts,
it presently has no intention of entering into these transactions.
Securities Lending. To generate additional income, the Growth Fund may
lend its portfolio securities to qualified securities dealers or other
institutional investors. Such loans may not exceed 33-1/3% of the value
of the Growth Fund's total assets measured at the time of the most
recent loan. For each loan the Growth Fund must receive in return
collateral with a value at least equal to 100% of the current market
value of the loaned securities.
Other Policies and Restrictions. Templeton has a number of additional
investment restrictions that govern its activities. Some of these
restrictions may only be changed with shareholder approval and some may
be changed by the Board alone. The policies and restrictions discussed
in this prospectus and in the Statement of Additional Information of
Templeton are applied at the time Templeton makes an investment.
Templeton is generally not required to sell a security because of a
change in circumstances.
How is Net Asset Value of Templeton Determined?
The net asset value per share of Templeton is determined as of the
scheduled closing time of the NYSE (generally 4:00 p.m. Eastern time, or
as of any earlier closing time on a day on which the NYSE is scheduled
in advance to close at such earlier time) each day that the NYSE is open
for trading, by dividing the value of Templeton's securities plus any
cash and other assets (including accrued interest and dividends
receivable) less all liabilities (including accrued expenses) by the
number of shares outstanding, adjusted to the nearest whole cent. A
security listed or traded on a recognized stock exchange or Nasdaq is
valued at its last sale price on the principal exchange on which the
security is traded. The value of a foreign security is determined in its
national currency as of the close of trading on the foreign exchange on
which it is traded, or as of the scheduled closing time of the NYSE
(generally 4:00 p.m. Eastern time, or as of any earlier closing time on
a day on which the NYSE is scheduled in advance to close at such earlier
time), if that is earlier, and that value is then converted into its
U.S. dollar equivalent at the foreign exchange rate in effect at noon,
New York time, on the day the value of the foreign security is
determined. If no sale is reported at that time, the mean between the
current bid and asked price is used. Occasionally, events which affect
the values of such securities and such exchange rates may occur between
the times at which they are determined and the close of the New York
Stock Exchange, and will therefore not be reflected in the computation
of Templeton's net asset value. If events materially affecting the value
of such securities occur during such period, then these securities will
be valued at fair value as determined by the management and approved in
good faith by the Board of Directors. All other securities for which
over-the-counter market quotations are readily available are valued at
the mean between the current bid and asked price. Securities for which
market quotations are not readily available and other assets are valued
at fair value as determined by the management and approved in good faith
by the Board of Directors of the Templeton Funds.
Who is the Investment Manager of Templeton?
The Investment Manager of Templeton is Global Advisors (the "Investment
Manager"). The Investment Manager manages the Templeton Funds' assets
and makes its investment decisions. The Investment Manager 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,
Page 15
Australia, Bahamas, Canada, France, Germany, Hong Kong, India, Italy,
Japan, Korea, Luxembourg, Poland, Russia, Singapore, South Africa,
Taiwan, United Kingdom, U.S., and Vietnam.
The Investment Manager manages the investment and reinvestment of the
assets of Templeton Growth Fund, Inc. and Templeton Foreign Fund. The
Investment Manager does not furnish any overhead items or facilities for
the Templeton Funds, although such expenses are paid by some investment
advisers of other investment companies. As compensation for its
services, the Templeton Funds pay the Investment Manager a fee which,
during the most recent fiscal year, represented 0.61% of its average
daily net assets for the Templeton Foreign Fund and 0.61% of its average
daily net assets for the Templeton Growth Fund, Inc. The Investment
Manager does not furnish any other services or facilities for the
Templeton Funds, although such expenses are paid by some investment
advisers of other investment companies.
The Investment Manager uses a disciplined, long-term approach to value-
oriented global and international investing. Securities are selected for
Templeton's portfolio on the basis of fundamental company-by-company
analysis. Many different selection methods are used for different funds
and clients, and these methods are changed and improved by the
Investment Manager's research on superior selection methods.
The Investment Manager performs similar services for other funds and
accounts and there may be times when the actions taken with respect to
the Templeton Fund's portfolio will differ from those taken by the
Investment Manager on behalf of other funds and accounts. Neither the
Investment Manager and its affiliates, its officers, directors or
employees, nor the officers and Directors of the Templeton Funds are
prohibited from investing in securities held by the Templeton Funds or
other funds and accounts which are managed or administered by the
Investment Manager to the extent such transactions comply with the
Templeton Fund's Code of Ethics. Please see "Investment Management and
Other Services-Investment Management Agreement" in the Templeton Funds'
SAI for further information on securities transactions and a summary of
the Fund's Code of Ethics.
The lead portfolio manager for the Templeton Funds since 1987 is Mark G.
Holowesko. Mr. Holowesko is President of Global Advisors. He holds a
B.A. in economics from the College of Holy Cross and an M.B.A. from
Babson College. He is a Chartered Financial Analyst, Chartered
Investment Counselor, and a founding member of the International Society
of Financial Analysts. Prior to joining the Templeton organization in
1985, Mr. Holowesko worked with RoyWest Trust Corporation (Bahamas)
Limited as an investment analyst. His duties at RoyWest included
managing trust and individual accounts, as well as equity markets
research worldwide. Richard Sean Farrington and Jeffrey A. Everett have
secondary portfolio management responsibilities for the Templeton Funds.
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 a research analyst and portfolio manager. Mr. Farrington's
research responsibilities include global coverage of the electrical
equipment industry, as well as international electric utilities. He is
also responsible for country coverage of Hong Kong, China and Taiwan.
Mr. Everett is an executive vice president of Global Advisors. He holds
a B.S. in Finance from Pennsylvania State University and is also a
Chartered 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 coverage of Italy and Australia.
Further information concerning the Investment Managers is included under
the heading "Investment Management and Other Services" in the Templeton
Funds' SAI.
Risk Factors
Shareholders should understand that all investments involve risk and
there can be no guarantee against loss resulting from an investment in
the Templeton Funds, nor can there be any assurance that the Templeton
Page 16
Funds' investment objective will be attained. The Templeton Funds will
seek to spread investment risk by diversifying their investments but the
possibility of losses remains. Generally, if the securities owned by the
Templeton Funds increase in value, the value of the shares of the
Templeton Funds which you own will increase. Similarly, if the
securities owned by the Templeton Funds decrease in value, the value of
your shares will also decline. In this way, you participate in any
change in the value of the securities owned by the Templeton Funds.
Foreign Securities Risk. The value of foreign (and U.S.) securities is
affected by general economic conditions and individual company and
industry earnings prospects. While foreign securities may offer
significant opportunities for gain, they also involve additional risks
that can increase the potential for losses in the Templeton Funds. These
risks can be significantly greater for investments in emerging markets.
Investments in Depositary Receipts also involve some or all of the risks
described below.
The political, economic and social structures of some countries in which
the Templeton Funds invest may be less stable and more volatile than
those in the United States. The risks of investing in these countries
include the possibility of the imposition of exchange controls,
expropriation, restrictions on removal of currency or other assets,
nationalization of assets and punitive taxes.
There may be less publicly available information about a foreign company
or government than about a U.S. company or public entity. Certain
countries' financial markets and services are less developed than those
in the United States or other major economies. As a result, they may not
have uniform accounting, auditing and financial reporting standards and
may have less government supervision of financial markets. Foreign
securities markets may have substantially lower trading volumes than
U.S. markets, resulting in less liquidity and more volatility than
experienced in the United States. Transaction costs on foreign
securities markets are generally higher than in the United States. The
settlement practices may be cumbersome and result in delays that may
affect portfolio liquidity. The Templeton Funds may have greater
difficulty voting proxies, exercising shareholder rights, pursuing legal
remedies and obtaining judgments with respect to foreign investments in
foreign courts than with respect to domestic issuers in U.S. courts.
Some of the countries in which the Templeton Funds may invest such as
Russia and certain Asian and Eastern European countries are considered
developing or emerging markets. Investments in these markets are subject
to all of the risks of foreign investing generally, and have additional
and heightened risks due to a lack of legal, business and social
frameworks to support securities markets.
Emerging markets 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, delays in settling portfolio transactions and risk
of loss arising out of the system of share registration and custody. The
Templeton Funds may invest up to 100% of their total assets in emerging
markets, including up to 5% of their total assets in Russian securities.
For more information on the risks associated with emerging markets
securities, please see the SAI of the Templeton Funds.
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 Templeton Fund investments.
Market, Currency and Interest Rate Risk. General market movements in any
country where the Templeton Funds have investments are likely to affect
the value of the securities which the Templeton Funds own in that
country and the Templeton Funds' share price may also be affected. The
Templeton Funds' investments may be denominated in foreign currencies so
that changes in foreign currency exchange rates will also affect the
value of what the Templeton Funds own, and thus the price of their
shares. To the extent the Templeton Funds invest in debt securities,
changes in interest rates in any country where the Templeton Funds are
invested will affect the value of each Templeton Fund's portfolio and,
consequently, their share price. Rising interest rates, which often
occur during times of inflation or a growing economy, are likely to
cause the face value of a debt security to decrease, having a negative
effect on the value of the Templeton Funds' shares. Of course,
individual and worldwide stock markets, interest rates and currency
valuations have both increased and decreased, sometimes very
dramatically, in the past. These changes are likely to occur again in
the future at unpredictable times.
Credit and Issuer Risk. The Templeton Funds' investments in debt
securities involve credit risk. This is the risk that the issuer of a
debt security will be unable to make principal and interest payments in
Page 17
a timely manner and the debt security will go into default. The
Templeton Funds may invest up to 10% of their total assets in defaulted
debt securities. The purchase of defaulted debt securities involves
significant additional risks, such as the possibility of complete loss
of the investment in the event the issuer does not restructure or
reorganize to enable it to resume paying interest and principal to
holders.
Derivative Securities Risk for the Templeton Growth Fund, Inc.
Derivative investments are those whose values are dependent upon the
performance of one or more other securities or investments or indices;
in contrast to common stock, for example, whose value is dependent upon
the operations of the issuer. Options on securities indices and stock
index futures contracts are considered derivative investments. To the
extent the Templeton Growth Fund, Inc. enters into these transactions,
their success will depend upon the Investment Manager's ability to
predict pertinent market movements.
PUBLIC OFFERING
How is the Public Offering Price Determined?
Units are offered at the Public Offering Price as indicated in Part One
attached hereto. The Public Offering Price per 1,000 units is based on
the aggregate bid side evaluation of the Treasury Obligations and the
net asset value of the Templeton shares in the Trust, plus or minus
cash, if any, in the Principal Account held or owned by the Trust, plus
a maximum sales charge of 5.8% of the Public Offering Price (equivalent
to 6.157% of the net amount invested) divided by the number of
outstanding Units of the Trust multiplied by 1,000. The minimum purchase
of the Trust is $1,000. The applicable sales charge is reduced by a
discount as indicated below for volume purchases:
Percent of Percent of
Offering Net Amount
Number of Units Price Invested
_______________ __________ __________
100,000 but less than 500,000 0.60% 0.6036%
500,000 but less than 1,000,000 1.30% 1.3171%
1,000,000 or more 2.10% 2.1450%
Any such reduced sales charge shall be the responsibility of the selling
Underwriter or dealer. The Sponsor will pay Managing Underwriters and
Senior Underwriters an additional concession of .10% for volume
purchases of $100,000 or more. The Sponsor will also pay Underwriters an
additional concession of .40% on volume purchases of $1,000,000 or more.
The reduced sales charge structure will apply on all purchases of Units
in the Trust by the same person on any one day from any one Underwriter
or dealer. Additionally, Units purchased in the name of the spouse of a
purchaser or in the name of a child of such purchaser under 21 years of
age will be deemed, for the purposes of calculating the applicable sales
charge, to be additional purchases by the purchaser. The reduced sales
charges will also be applicable to a trustee or other fiduciary
purchasing securities for a single trust estate or single fiduciary
account. With respect to the employees, officers and directors
(including their immediate families and trustees, custodians or a
fiduciary for the benefit of such person) of Nike Securities L.P. and
its subsidiaries, the sales charge is reduced by 2% of the Public
Offering Price for purchases of Units.
The Public Offering Price will be equal to the bid price per Unit of the
Treasury Obligations and the net asset value of the Templeton shares
therein plus or minus a pro rata share of cash, if any, in the Principal
Account of the Trust plus the applicable sales charge. The offering
price of the Treasury Obligations in the Trust may be expected to be
greater than the bid price of the Treasury Obligations by less than 2%.
The Public Offering Price of Units on the date of this Prospectus may
vary in accordance with fluctuations in the prices of the underlying
Securities.
Although payment is normally made three business days following the
order for purchase, payment may be made prior thereto. Cash, if any,
made available to the Sponsor prior to the date of settlement for the
purchase of Units may be used in the Sponsor's business and may be
deemed to be a benefit to the Sponsor, subject to the limitations of the
Securities Exchange Act of 1934. Delivery of Certificates representing
Units so ordered will be made three business days following such order
or shortly thereafter. See "Rights of Unit Holders-How May Units be
Redeemed?" for information regarding the ability to redeem Units ordered
for purchase.
Page 18
How are Units Distributed?
Sales may be made to dealers and others at prices which represent a
concession or agency commission of 4.0% of the Public Offering Price.
The Sponsor reserves the right to change the amount of the concession or
agency commission from time to time. Certain commercial banks are making
Units of the Trust available to their customers on an agency basis. A
portion of the sales charge paid by these customers is retained by or
remitted to the banks in the amounts indicated in the third preceding
sentence. Under the Glass-Steagall Act, banks are prohibited from
underwriting Trust Units; however, the Glass-Steagall Act does permit
certain agency transactions and the banking regulators have not
indicated that these particular agency transactions are not permitted
under such Act. In Texas and in certain other states, any banks making
Units available must be registered as broker/dealers under state law.
From time to time the Sponsor may implement programs under which
Underwriters and dealers of the Trust may receive nominal awards from
the Sponsor for each of their registered representatives who have sold a
minimum number of UIT Units during a specified time period. In addition,
at various times the Sponsor may implement other programs under which
the sales force of an Underwriter or dealer may be eligible to win other
nominal awards for certain sales efforts, or under which the Sponsor
will reallow to any such Underwriter or dealer that sponsors sales
contests or recognition programs conforming to criteria established by
the Sponsor, or participates in sales programs sponsored by the Sponsor,
an amount not exceeding the total applicable sales charges on the sales
generated by such person at the public offering price during such
programs. Also, the Sponsor in its discretion may from time to time
pursuant to objective criteria established by the Sponsor pay fees to
qualifying Underwriters or dealers for certain services or activities
which are primarily intended to result in sales of Units of the Trust.
Such payments are made by the Sponsor out of its own assets, and not out
of the assets of the Trust. These programs will not change the price
Unit holders pay for their Units or the amount that the Trust will
receive from the Units sold.
The Sponsor may from time to time in its advertising and sales materials
compare the then current estimated returns on the Trust and returns over
specified periods on other similar Trusts sponsored by Nike Securities
L.P. with returns on other taxable investments such as corporate or U.S.
Government bonds, bank CDs and money market accounts or money market
funds, each of which has investment characteristics that may differ from
those of the Trust. U.S. Government bonds, for example, are backed by
the full faith and credit of the U.S. Government and bank CDs and money
market accounts are insured by an agency of the federal government.
Money market accounts and money market funds provide stability of
principal, but pay interest at rates that vary with the condition of the
short-term debt market. The investment characteristics of the Trust are
described more fully elsewhere in this Prospectus.
Trust performance may be compared to performance on a total return basis
with the Dow Jones Industrial Average, the S&P 500 Composite Stock Price
Index, or performance data from Lipper Analytical Services, Inc. and
Morningstar Publications, Inc. or from publications such as Money, The
New York Times, U.S. News and World Report, Business Week, Forbes or
Fortune. As with other performance data, performance comparisons should
not be considered representative of the Trust's relative performance for
any future period.
What are the Sponsor's Profits?
The Underwriters of the Trust, including the Sponsor, will receive a
gross sales commission equal to 5.8% of the Public Offering Price of the
Units (equivalent to 6.157% of the net amount invested) less any reduced
sales charge for quantity purchases as described under "Public Offering-
How is the Public Offering Price Determined?" See "Underwriting" for
information regarding the receipt of the excess gross sales commissions
by the Sponsor from the other Underwriters and additional concessions
available to the Underwriters, dealers and others.
In maintaining a market for the Units, the Sponsor will also realize
profits or sustain losses in the amount of any difference between the
price at which Units are purchased and the price at which Units are
resold (which price includes a sales charge of 5.8%) or redeemed.
Page 19
Will There be a Secondary Market?
Although it is not obligated to do so, the Sponsor intends to maintain a
market for the Units and continuously to offer to purchase Units at
prices, subject to change at any time, based upon the aggregate bid
price of the Treasury Obligations in the portfolio of the Trust and the
net asset value of the Templeton shares in the Trust plus or minus cash,
if any, in the Principal Account of the Trust. All expenses incurred in
maintaining a secondary market, other than the fees of the Evaluator,
the supervisory and audit expenses and the costs of the Trustee in
transferring and recording the ownership of Units, will be borne by the
Sponsor. If the supply of Units exceeds demand, or for some other
business reason, the Sponsor may discontinue purchases of Units at such
prices. IF A UNIT HOLDER WISHES TO DISPOSE OF HIS UNITS, HE SHOULD
INQUIRE OF THE SPONSOR AS TO CURRENT MARKET PRICES PRIOR TO MAKING A
TENDER FOR REDEMPTION TO THE TRUSTEE.
RIGHTS OF UNIT HOLDERS
How is Evidence of Ownership Issued and Transferred?
The Trustee is authorized to treat as the record owner of Units that
person who is registered as such owner on the books of the Trustee.
Ownership of Units may be evidenced by registered certificates executed
by the Trustee and the Sponsor. Delivery of certificates representing
Units ordered for purchase is normally made three business days
following such order or shortly thereafter. Certificates are
transferable or may be redeemed by presentation and surrender to the
Trustee properly endorsed or accompanied by a written instrument or
instruments of transfer. A Unit holder must sign exactly as his name
appears on the face of the certificate with the signature guaranteed by
a participant in the Securities Transfer Agents Medallion Program
("STAMP") or such other signature guaranty program in addition to, or in
substitution for, STAMP as may be accepted by the Trustee. In certain
instances the Trustee may require additional documents such as, but not
limited to, trust instruments, certificates of death, appointments as
executor or administrator or certificates of corporate authority. Record
ownership may occur before settlement.
Certificates will be issued in fully registered form, transferable only
on the books of the Trustee in denominations of one Unit or any multiple
thereof, numbered serially for purposes of identification.
Unit holders may elect to hold their Units in uncertificated form. The
Trustee will maintain an account for each such Unit holder and will
credit each such account with the number of Units purchased by that Unit
holder. Within two business days of the issuance or transfer of Units
held in uncertificated form, the Trustee will send to the registered
owner of Units a written initial transaction statement containing a
description of the Trust; the number of Units issued or transferred; the
name, address and taxpayer identification number, if any, of the new
registered owner; a notation of any liens and restrictions of the issuer
and any adverse claims to which such Units are or may be subject or a
statement that there are no such liens, restrictions or adverse claims;
and the date the transfer was registered. Uncertificated Units are
transferable through the same procedures applicable to Units evidenced
by certificates (described above), except that no certificate need be
presented to the Trustee and no certificate will be issued upon the
transfer unless requested by the Unit holder. A Unit holder may at any
time request the Trustee to issue certificates for Units.
Although no such charge is now made or contemplated, a Unit holder may
be required to pay $2.00 to the Trustee per certificate reissued or
transferred and to pay any governmental charge that may be imposed in
connection with each such transfer or exchange. For new certificates
issued to replace destroyed, stolen or lost certificates, the Unit
holder may be required to furnish indemnity satisfactory to the Trustee
and pay such expenses as the Trustee may incur. Mutilated certificates
must be surrendered to the Trustee for replacement.
How are Income and Principal Distributed?
The Trustee will distribute any net income (other than accreted
interest) received with respect to any of the Securities in the Trust on
or about the Distribution Dates to Unit holders of record on the
preceding Record Date. See Part One for each Trust. Proceeds received on
the sale of any Securities in the Trust, to the extent not used to meet
redemptions of Units or pay expenses, will be distributed annually on
the Distribution Date to Unit holders of record on the preceding Record
Date. INCOME WITH RESPECT TO THE ORIGINAL ISSUE DISCOUNT ON THE TREASURY
Page 20
OBLIGATIONS IN THE TRUST, WILL NOT BE DISTRIBUTED CURRENTLY, ALTHOUGH
UNIT HOLDERS WILL BE SUBJECT TO FEDERAL INCOME TAX AS IF A DISTRIBUTION
HAD OCCURRED. SEE "WHAT IS THE FEDERAL TAX STATUS OF UNIT HOLDERS?"
The Record Dates and Distribution Dates were established so as to occur
shortly after the record date and on the payment dates of Templeton.
Templeton normally pays a dividend in October of each year representing
substantially all of its net investment income and net realized capital
gains, if any. Pursuant to current Internal Revenue Service regulations,
Templeton pays a second dividend and distribution in December of each
year.
Under regulations issued by the Internal Revenue Service, the Trustee is
required to withhold a specified percentage of any distribution made by
the Trust if the Trustee has not been furnished the Unit holder's tax
identification number in the manner required by such regulations. Any
amount so withheld is transmitted to the Internal Revenue Service and
may be recovered by the Unit holder under certain circumstances by
contacting the Trustee, otherwise the amount may be recoverable only
when filing a tax return. Under normal circumstances the Trustee obtains
the Unit holder's tax identification number from the selling broker.
However, a Unit holder should examine his or her statements from the
Trustee to make sure that the Trustee has been provided a certified tax
identification number in order to avoid this possible "back-up
withholding." In the event the Trustee has not been previously provided
such number, one should be provided as soon as possible.
Within a reasonable time after the Trust is terminated, each Unit holder
will, upon surrender of his Units for redemption, receive: (i) the
number of shares of Templeton attributable to his Units, which will be
distributed "in-kind" directly to his account, rather than redeemed,
(ii) a pro rata share of the amounts realized upon the disposition of
the Treasury Obligations and (iii) a pro rata share of any other assets
of the Trust, less expenses of the Trust, subject to the limitation that
Treasury Obligations may not be sold to pay for Trust expenses. Not less
than 60 days prior to the termination of the Trust, Unit holders will be
offered the option of having the proceeds from the disposition of the
Treasury Obligations in the Trust invested, at the net asset value on
the date such proceeds become available to the Trust, in additional
shares of Templeton at net asset value. Unless a Unit holder indicates
that he wishes to reinvest such amounts, they will be paid in cash, as
indicated above. A Unit holder may, of course, at any time after the
shares are distributed to his account, instruct Templeton to redeem all
or a portion of the shares in his account. Shares of Templeton, as more
fully described in its prospectus, will be redeemed at the then current
net asset value. If within 180 days of the termination of the Trust a
registered owner of Units has not surrendered the Units, the Trustee
shall liquidate the shares of Templeton held for such owner and hold the
funds to which such owner is entitled until such Units are surrendered.
The Trustee will credit to the Income Account of the Trust any dividends
or distributions received on the Templeton shares therein. All other
receipts (e.g. return of principal, capital gains, etc.) are credited to
the Principal Account of the Trust.
The Trustee may establish reserves (the "Reserve Account") within the
Trust for state and local taxes, if any, and any governmental charges
payable out of the Trust.
How Can Distributions to Unit Holders be Reinvested?
Each Unit holder of the Trust will have distributions of principal,
capital gains, if any, or income automatically invested in Templeton
shares deposited at such share's net asset value next computed, unless
he indicates at the time of purchase, or subsequently notifies the
Trustee in writing, that he wishes to receive cash payments.
Reinvestment by the Trust in Templeton shares will normally be made as
of the ex-dividend date for Templeton after the Trustee deducts
therefrom the expenses of the Trust. THE RULE 12B-1 FEES IMPOSED ON
SHARES HELD IN THE TRUST ARE REBATED TO THE TRUST AND ARE USED TO REDUCE
EXPENSES OF THE TRUST RESULTING IN INCREASED DISTRIBUTIONS TO UNIT
HOLDERS. UNIT HOLDERS WHO ACQUIRE SHARES OF TEMPLETON THROUGH
REINVESTMENT OF DIVIDENDS OR OTHER DISTRIBUTIONS OR THROUGH REINVESTMENT
AT THE TRUST'S TERMINATION WILL BEGIN TO INCUR RULE 12B-1 FEES AT SUCH
TIME AS SHARES ARE ACQUIRED.
Additional information with respect to the investment objective and the
management of Templeton is contained in its prospectus, which can be
obtained from the Sponsor or any broker/dealer with a currently
effective sales agreement with Franklin Templeton Distributors, Inc.
Page 21
Unit holders who are receiving distributions in cash may elect to
participate in the automatic reinvestment feature by filing with the
Trustee an election to have such distributions reinvested without a
sales charge. Such election must be received by the Trustee at least ten
days prior to the Record Date applicable to any distribution in order to
be in effect for such Record Date. Any such election shall remain in
effect until a subsequent notice is received by the Trustee.
Exchange Privilege. Subject to the following limitations, shares held in
a Unit holder's reinvestment account may be exchanged for shares of
other Templeton funds, without sales charge, on the basis of their
relative net asset values per share at the time of exchange. THE
EXCHANGE PRIVILEGE DOES NOT APPLY TO TEMPLETON FUND SHARES IN THE
TRUST'S PORTFOLIO, ONLY TO A UNIT HOLDER'S REINVESTMENT ACCOUNT. The
exchange privilege is not a right and may be suspended, terminated or
modified at any time.
EXCHANGE PURCHASES ARE SUBJECT TO THE MINIMUM INVESTMENT REQUIREMENTS
OF THE FUND PURCHASED. EXCHANGES ARE PERMITTED ONLY AFTER AT LEAST 15
DAYS HAVE ELAPSED FROM THE DATE OF THE PURCHASE OF THE TEMPLETON FUND
SHARES TO BE EXCHANGED.
Exchange instructions may be given in writing or by telephone. Telephone
exchange privileges automatically apply to each Unit holder's
reinvestment account as shareholder of record unless and until the
Transfer Agent of the Templeton Funds receives written instructions from
the shareholder(s) of record canceling such privileges.
Telephonic exchanges can involve only Templeton Fund shares in non-
certificated form. Templeton Fund shares held in certificate form are
not eligible, but may be returned and qualify for these services. All
accounts involved in a telephonic exchange must have the same
registration and dividend option as the account from which the Templeton
Fund shares are being exchanged. If all telephone exchange lines are
busy (which might occur, for example, during periods of substantial
market fluctuations), shareholders of Templeton might not be able to
request telephone exchanges and would have to submit written exchange
requests.
Unless a shareholder of the Templeton Funds elects to decline the
telephone exchange privilege, the shareholder constitutes and appoints
the Transfer Agent of the Templeton Funds as the true and lawful
attorney to surrender for redemption or exchange any and all unissued
Templeton Fund shares held by it in an account with any eligible
Templeton fund, and authorizes and directs the Transfer Agent of the
Templeton Funds to act upon any instruction from any person. The
Transfer Agent of the Templeton Funds will accept instructions by
telephone to exchange Templeton Fund shares held in any account for
shares of any other eligible Templeton fund, provided the registration
and mailing address of the Templeton Fund shares to be purchased are
identical to those of the Templeton Fund shares to be redeemed. Further,
a shareholder(s) agrees that neither the Transfer Agent of the Templeton
Funds, any of its affiliates nor the Templeton Funds will be liable for
any loss, damages, expense or cost arising out of any requests effected
in accordance with an authorization, including requests effected by
impostors or persons otherwise unauthorized to act on behalf of the
account. If the shareholder is an entity other than an individual, such
entity may be required to certify the persons that have been duly
elected and are now legally holding the titles given and that the said
entity is duly organized and existing and has the power to take action
called for by this continuing authorization.
Neither the Templeton Funds nor the Transfer Agent of the Templeton
Funds will be responsible for acting upon any instructions believed by
them to be genuine. Forms for declining the telephone exchange privilege
and prospectuses of the other Templeton funds may be obtained from
Templeton Funds Distributors, Inc. A gain or loss for tax purposes will
be realized upon the exchange, depending on the cost basis of the
Templeton shares redeemed.
This exchange privilege is available only in states where shares of the
Templeton Funds being acquired legally may be sold and may be modified,
limited or terminated at any time by the Templeton Funds upon 60 days
written notice. A Unit holder who wishes to make an exchange should
first obtain and review a current prospectus of the fund into which he
or she wishes to exchange. All exchanges shall be governed by the
Templeton Funds' then current prospectus. Broker/dealers who process
exchange orders on behalf of their customers may charge a fee for their
services. Such fee may be avoided by making requests for exchange
directly to the Transfer Agent of the Templeton Funds.
Page 22
What Reports Will Unit Holders Receive?
The Trustee shall furnish Unit holders in connection with each
distribution a statement of the amount of income, if any, and the amount
of other receipts, if any, which are being distributed, expressed in
each case as a dollar amount per 1,000 Units. Within a reasonable time
after the end of each calendar year, the Trustee will furnish to each
person who at any time during the calendar year was a Unit holder of the
Trust the following information in reasonable detail: (1) a summary of
transactions in the Trust for such year; (2) any Securities sold during
the year and the Securities held at the end of such year by the Trust;
(3) the redemption price per 1,000 Units based upon a computation
thereof on the 31st day of December of such year (or the last business
day prior thereto); and (4) amounts of income and capital gains
distributed during such year.
How May Units be Redeemed?
A Unit holder may redeem all or a portion of his Units by tender to the
Trustee at its unit investment trust office in the City of New York of
the certificates representing the Units to be redeemed, or in the case
of uncertificated Units, delivery of a request for redemption, duly
endorsed or accompanied by proper instruments of transfer with signature
guaranteed as explained above (or by providing satisfactory indemnity,
as in connection with lost, stolen or destroyed certificates), and
payment of applicable governmental charges, if any. No redemption fee
will be charged. On the third business day following such tender, the
Unit holder will be entitled to receive in cash an amount for each Unit
equal to the Redemption Price per 1,000 Units next computed after
receipt by the Trustee of such tender of Units. The "date of tender" is
deemed to be the date on which Units are received by the Trustee (if
such day is a day on which the New York Stock Exchange is open for
trading), except that as regards Units received after 4:00 p.m. Eastern
time (or as of any earlier closing time on a day on which the New York
Stock Exchange is scheduled in advance to close at such earlier time),
the date of tender is the next day on which the New York Stock Exchange
is open for trading and such Units will be deemed to have been tendered
to the Trustee on such day for redemption at the redemption price
computed on that day. Units so redeemed shall be cancelled.
Under regulations issued by the Internal Revenue Service, the Trustee is
required to withhold a specified percentage of the principal amount of a
Unit redemption if the Trustee has not been furnished the redeeming Unit
holder's tax identification number in the manner required by such
regulations. For further information regarding this withholding, see
"How are Income and Capital Distributed?" In the event the Trustee has
not been previously provided such number, one must be provided at the
time redemption is requested.
Any amounts paid on redemption representing income shall be withdrawn
from the Income Account of the Trust to the extent that funds are
available for such purpose. All other amounts paid on redemption shall
be withdrawn from the Principal Account of the Trust.
The Trustee is empowered to sell Securities of the Trust in order to
make funds available for redemption. To the extent that Securities are
sold, the size and diversity of the Trust will be reduced. Such sales
may be required at a time when Securities would not otherwise be sold
and might result in lower prices than might otherwise be realized.
Shares of Templeton will be sold to meet redemptions of Units before
Treasury Obligations, although Treasury Obligations may be sold if the
Trust is assured of retaining a sufficient principal amount of Treasury
Obligations to provide funds upon maturity of the Trust at least equal
to $1.00 per Unit.
The Redemption Price per Unit (as well as the secondary market Public
Offering Price) will be determined on the basis of the bid price of the
Treasury Obligations and the net asset value of the Templeton shares in
the Trust plus or minus cash, if any, in the Principal Account of the
Trust as of the close of trading on the New York Stock Exchange on the
date any such determination is made. The Redemption Price per 1,000
Units is the pro rata share of each Unit determined by the Trustee by
adding: (1) the cash on hand in the Trust other than cash deposited in
the Trust to purchase Securities not applied to the purchase of such
Securities; (2) the aggregate value of the Securities (including "when
issued" contracts, if any) held in the Trust, as determined by the
Evaluator on the basis of bid prices of the Treasury Obligations and the
net asset value of the Templeton shares next computed; and (3) dividends
receivable on Templeton shares trading ex-dividend as of the date of
Page 23
computation; and deducting therefrom: (1) amounts representing any
applicable taxes or governmental charges payable out of the Trust; (2)
an amount representing estimated accrued expenses of the Trust,
including but not limited to fees and expenses of the Trustee (including
legal and auditing fees), the Evaluator, the Supervisor and counsel
fees, if any; (3) cash held for distribution to Unit holders of record
of the Trust as of the business day prior to the evaluation being made;
and (4) other liabilities incurred by the Trust; and finally dividing
the results of such computation by the number of Units of the Trust
outstanding as of the date thereof.
The right of redemption may be suspended and payment postponed for any
period during which the New York Stock Exchange is closed (other than
for customary weekend and holiday closings) or during which the
Securities and Exchange Commission determines that trading on that
Exchange is restricted or any emergency exists, as a result of which
disposal or evaluation of the Securities is not reasonably practicable,
or for such other periods as the Securities and Exchange Commission may
by order permit. Under certain extreme circumstances, the Sponsor may
apply to the Securities and Exchange Commission for an order permitting
a full or partial suspension of the right of Unit holders to redeem
their Units. The Trustee is not liable to any person in any way for any
loss or damage which may result from any such suspension or postponement.
How May Units be Purchased by the Sponsor?
The Trustee shall notify the Sponsor of any tender of Units for
redemption. If the Sponsor's bid in the secondary market at that time
equals or exceeds the Redemption Price per Unit, it may purchase such
Units by notifying the Trustee on the same business day and by making
payment therefor to the Unit holder not later than the day on which the
Units would otherwise have been redeemed by the Trustee. Units held by
the Sponsor may be tendered to the Trustee for redemption as any other
Units. In the event the Sponsor does not purchase Units, the Trustee may
sell Units tendered for redemption in the over-the-counter market, if
any, as long as the amount to be received by the Unit holder is equal to
the amount he would have received on redemption of the Units. Any profit
or loss resulting from the resale or redemption of Units acquired by the
Sponsor will belong to the Sponsor.
How May Securities be Removed from the Trust?
The portfolio of the Trust is not "managed" by the Sponsor or the
Trustee; their activities described herein are governed solely by the
provisions of the Indenture. The Indenture provides that the Sponsor may
(but need not) direct the Trustee to dispose of a Security in the
unlikely event that an issuer of a Security defaults in the payment of
dividends or interest or there exist certain other materially adverse
conditions described in the Indenture.
The Trustee may also sell Securities designated by the Sponsor, or if
not so directed, in its own discretion, for the purpose of redeeming
Units of the Trust tendered for redemption and the payment of expenses;
provided, however, that in the case of Securities sold to meet
redemption requests, Treasury Obligations may only be sold if the Trust
is assured of retaining a sufficient principal amount of Treasury
Obligations to provide funds upon maturity of the Trust at least equal
to $1.00 per Unit. Treasury Obligations may not be sold to meet Trust
expenses.
INFORMATION AS TO SPONSOR, TRUSTEE AND EVALUATOR
Who is the Sponsor?
Nike Securities L.P., the Sponsor, specializes in the underwriting,
trading and distribution of unit investment trusts and other securities.
Nike Securities L.P., an Illinois limited partnership formed in 1991,
acts as Sponsor for successive series of The First Trust Combined
Series, the FT Series (formerly known as The First Trust Special
Situations Trust), The First Trust Insured Corporate Trust, The First
Trust of Insured Municipal Bonds, The First Trust GNMA, Templeton Growth
and Treasury Trust, Templeton Foreign Fund & U.S. Treasury Securities
Trust and The Advantage Growth and Treasury Securities Trust. First
Trust introduced the first insured unit investment trust in 1974 and to
date more than $9 billion in First Trust unit investment trusts have
been deposited. The Sponsor's employees include a team of professionals
Page 24
with many years of experience in the unit investment trust industry. The
Sponsor is a member of the National Association of Securities Dealers,
Inc. and Securities Investor Protection Corporation and has its
principal offices at 1001 Warrenville Road, Lisle, Illinois 60532;
telephone number (630) 241-4141. As of December 31, 1996, the total
partners' capital of Nike Securities L.P. was $9,005,203 (audited).
(This paragraph relates only to the Sponsor and not to the Trust or to
any series thereof or to any other Underwriter. The information is
included herein only for the purpose of informing investors as to the
financial responsibility of the Sponsor and its ability to carry out its
contractual obligations. More detailed financial information will be
made available by the Sponsor upon request.)
Who is the Trustee?
The Trustee is The Chase Manhattan Bank, with its principal executive
office located at 270 Park Avenue, New York, New York 10017 and its unit
investment trust office at 4 New York Plaza, 6th floor, New York, New
York 10004-2413. Unit holders who have questions regarding the Trusts
may call the Customer Service Help Line at 1-800-682-7520. The Trustee
is subject to supervision by the Superintendent of Banks of the State of
New York, the Federal Deposit Insurance Corporation and the Board of
Governors of the Federal Reserve System.
The Trustee, whose duties are ministerial in nature, has not
participated in the selection of the Securities. For information
relating to the responsibilities of the Trustee under the Indenture,
reference is made to the material set forth under "Rights of Unit
Holders."
The Trustee and any successor trustee may resign by executing an
instrument in writing and filing the same with the Sponsor and mailing a
copy of a notice of resignation to all Unit holders. Upon receipt of
such notice, the Sponsor is obligated to appoint a successor trustee
promptly. If the Trustee becomes incapable of acting or becomes bankrupt
or its affairs are taken over by public authorities, the Sponsor may
remove the Trustee and appoint a successor as provided in the Indenture.
If upon resignation of a trustee no successor has accepted the
appointment within 30 days after notification, the retiring trustee may
apply to a court of competent jurisdiction for the appointment of a
successor. The resignation or removal of a trustee becomes effective
only when the successor trustee accepts its appointment as such or when
a court of competent jurisdiction appoints a successor trustee.
Any corporation into which a Trustee may be merged or with which it may
be consolidated, or any corporation resulting from any merger or
consolidation to which a Trustee shall be a party, shall be the
successor Trustee. The Trustee must be a banking corporation organized
under the laws of the United States or any State and having at all times
an aggregate capital, surplus and undivided profits of not less than
$5,000,000.
Limitations on Liabilities of Sponsor and Trustee
The Sponsor and the Trustee shall be under no liability to Unit holders
for taking any action or for refraining from taking any action in good
faith pursuant to the Indenture, or for errors in judgment, but shall be
liable only for their own willful misfeasance, bad faith, gross
negligence (ordinary negligence in the case of the Trustee) or reckless
disregard of their obligations and duties. The Trustee shall not be
liable for depreciation or loss incurred by reason of the sale by the
Trustee of any of the Securities. In the event of the failure of the
Sponsor to act under the Indenture, the Trustee may act thereunder and
shall not be liable for any action taken by it in good faith under the
Indenture.
The Trustee shall not be liable for any taxes or other governmental
charges imposed upon or in respect of the Securities or upon the
interest thereon or upon it as Trustee under the Indenture or upon or in
respect of the Trust which the Trustee may be required to pay under any
present or future law of the United States of America or of any other
taxing authority having jurisdiction. In addition, the Indenture
contains other customary provisions limiting the liability of the Trustee.
If the Sponsor shall fail to perform any of its duties under the
Indenture or become incapable of acting or become bankrupt or its
affairs are taken over by public authorities, then the Trustee may (a)
appoint a successor Sponsor at rates of compensation deemed by the
Trustee to be reasonable and not exceeding amounts prescribed by the
Securities and Exchange Commission, or (b) terminate the Indenture and
liquidate the Trust as provided herein, or (c) continue to act as
Trustee without terminating the Indenture.
Page 25
Who is the Evaluator?
The Evaluator is Securities Evaluation Service, Inc., 531 East Roosevelt
Road, Suite 200, Wheaton, Illinois 60187. The Evaluator may resign or
may be removed by the Sponsor and the Trustee, in which event the
Sponsor and the Trustee are to use their best efforts to appoint a
satisfactory successor. Such resignation or removal shall become
effective upon the acceptance of appointment by the successor Evaluator.
If upon resignation of the Evaluator no successor has accepted
appointment within 30 days after notice of resignation, the Evaluator
may apply to a court of competent jurisdiction for the appointment of a
successor.
The Trustee, Sponsor and Unit holders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for the
accuracy thereof. Determinations by the Evaluator under the Indenture
shall be made in good faith upon the basis of the best information
available to it, provided, however, that the Evaluator shall be under no
liability to the Trustee, Sponsor or Unit holders for errors in
judgment. This provision shall not protect the Evaluator in any case of
willful misfeasance, bad faith, gross negligence or reckless disregard
of its obligations and duties.
OTHER INFORMATION
How May the Indenture be Amended or Terminated?
The Sponsor and the Trustee have the power to amend the Indenture
without the consent of any of the Unit holders when such an amendment is
(1) to cure any ambiguity or to correct or supplement any provision of
the Indenture which may be defective or inconsistent with any other
provision contained therein, or (2) to make such other provisions as
shall not adversely affect the interest of the Unit holders (as
determined in good faith by the Sponsor and the Trustee).
The Indenture provides that the Trust shall terminate upon the maturity,
redemption or other disposition of the last of the Treasury Obligations
held in the Trust but in no event beyond the Mandatory Termination Date
as set forth in Part One for each Trust. The Trust may be liquidated at
any time by consent of 100% of the Unit holders of the Trust or by the
Trustee in the event that Units of the Trust not yet sold aggregating
more than 60% of the Units of the Trust are tendered for redemption by
the Underwriters, including the Sponsor. If the Trust is liquidated
because of the redemption of unsold Units of the Trust by the
Underwriters, the Sponsor will refund to each purchaser of Units of the
Trust the entire sales charge paid by such purchaser. In the event of
termination, written notice thereof will be sent by the Trustee to all
Unit holders of the Trust. Within a reasonable period after termination,
the Trustee will follow the procedures set forth under "How are Income
and Principal Distributed?"
Legal Opinions
The legality of the Units offered hereby and certain matters relating to
federal tax law have been passed upon by Chapman and Cutler, 111 West
Monroe Street, Chicago, Illinois 60603, as counsel for the Sponsor.
Carter, Ledyard & Milburn will act as counsel for the Trustee and as
special New York tax counsel for the Trust.
Experts
The statement of net assets, including the portfolio, of each Trust
contained in Part One of this Prospectus has been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon
appearing therein, and is included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
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Page 27
CONTENTS:
Templeton Growth and Treasury Trust
Templeton Foreign Fund & U.S. Treasury Securities Trust:
What are Templeton Growth and Treasury Trust and
Templeton Foreign Fund & U.S. Treasury Securities
Trust? 3
What are the Expenses and Charges? 3
What is the Federal Tax Status of Unit Holders? 4
Why are Investments in the Trust Eligible for
Retirement Plans? 7
Portfolio:
What are Zero Coupon Treasuries? 8
What is Templeton Growth Fund, Inc.? 8
What is Templeton Foreign Fund? 11
What is Templeton's Investment Objective
and Policy? 13
Investment Techniques for Templeton Funds 14
How is Net Asset Value of Templeton Determined? 15
Who is the Investment Manager of Templeton? 15
Risk Factors 16
Public Offering:
How is the Public Offering Price Determined? 18
How are Units Distributed? 19
What Are the Sponsor's Profits? 19
Will There be a Secondary Market? 20
Rights of Unit Holders:
How is Evidence of Ownership Issued and
Transferred? 20
How are Income and Principal Distributed? 20
How Can Distributions to Unit Holders be
Reinvested? 21
What Reports Will Unit Holders Receive? 22
How May Units be Redeemed? 22
How May Units be Purchased by the Sponsor? 24
How May Securities be Removed from the Trust? 24
Information as to Sponsor, Trustee and Evaluator:
Who is the Sponsor? 24
Who is the Trustee? 25
Limitations on Liabilities of Sponsor and Trustee 25
Who is the Evaluator? 26
Other Information:
How May the Indenture be Amended or Terminated? 26
Legal Opinions 26
Experts 26
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM
IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
THIS PROSPECTUS DOES NOT CONTAIN ALL THE INFORMATION SET FORTH IN THE
REGISTRATION STATEMENTS AND EXHIBITS RELATING THERETO, WHICH THE FUND
HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WASHINGTON, D.C.
UNDER THE SECURITIES ACT OF 1933 AND THE INVESTMENT COMPANY ACT OF 1940,
AND TO WHICH REFERENCE IS HEREBY MADE.
TEMPLETON GROWTH AND TREASURY TRUST
TEMPLETON FOREIGN FUND & U.S. TREASURY SECURITIES TRUST
Prospectus
Part Two
December 30, 1997
First Trust (registered trademark)
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532
1-630-241-4141
Trustee:
The Chase Manhattan Bank
4 New York Plaza, 6th floor
New York, New York 10004-2413
1-800-682-7520
THIS PART TWO MUST BE
ACCOMPANIED BY PART ONE.
PLEASE RETAIN THIS PROSPECTUS
FOR FUTURE REFERENCE
Page 28
CONTENTS OF POST-EFFECTIVE AMENDMENT
OF REGISTRATION STATEMENT
This Post-Effective Amendment of Registration Statement
comprises the following papers and documents:
The facing sheet
The prospectus
The signatures
The Consent of Independent Auditors
Financial Data Schedule
S-1
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant, Templeton Growth and Treasury Trust, Series 1,
certifies that it meets all of the requirements for effectiveness
of this Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Post-Effective
Amendment of its Registration Statement to be signed on its
behalf by the undersigned thereunto duly authorized in the
Village of Lisle and State of Illinois on December 31, 1997.
TEMPLETON GROWTH AND TREASURY TRUST,
SERIES 1
(Registrant)
ByNIKE SECURITIES L.P.
(Depositor)
By Robert M. Porcellino
Vice President
Pursuant to the requirements of the Securities Act of 1933,
this Post-Effective Amendment of Registration Statement has been
signed below by the following person in the capacity and on the
date indicated:
Signature Title* Date
Robert D. Van Kampen Director of )
Nike Securities )
Corporation, the )
General Partner ) December 31, 1997
of Nike Securities L.P. )
) Robert M. Porcellino
) Attorney-in-Fact**
David J. Allen Director of Nike
Securities Corporation,
the General Partner
of Nike Securities L.P.
* The title of the person named herein represents his capacity
in and relationship to Nike Securities L.P., Depositor.
** An executed copy of the related power of attorney was filed
with the Securities and Exchange Commission in connection
with the Amendment No. 1 to Form S-6 of The First Trust
Special Situations Trust, Series 18 (File No. 33-42683) and
the same is hereby incorporated herein by this reference.
S-2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Experts" and to the use of our report dated December 5, 1997 in
this Post-Effective Amendment to the Registration Statement and
related Prospectus of Templeton Growth and Treasury Trust dated
December 26, 1997.
ERNST & YOUNG
Chicago, Illinois
December 24, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial
information extracted from Post Effective
Amendment to form S-6 and is qualified in its
entirety be reference to such Post Effective
Amendment to form S-6.
</LEGEND>
<SERIES>
<NUMBER> 001
<NAME> Templeton Gr & Tr
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> Aug-31-1997
<PERIOD-START> Sep-01-1996
<PERIOD-END> Aug-31-1997
<INVESTMENTS-AT-COST> 41,275,227
<INVESTMENTS-AT-VALUE> 50,198,995
<RECEIVABLES> 25,729
<ASSETS-OTHER> 30,204
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 50,254,928
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 77,884
<TOTAL-LIABILITIES> 77,884
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 41,275,227
<SHARES-COMMON-STOCK> 33,792,498
<SHARES-COMMON-PRIOR> 37,547,615
<ACCUMULATED-NII-CURRENT> (21,951)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 8,921,768
<NET-ASSETS> 50,177,044
<DIVIDEND-INCOME> 1,171,177
<INTEREST-INCOME> 2,285,268
<OTHER-INCOME> 0
<EXPENSES-NET> 65,243
<NET-INVESTMENT-INCOME> 3,391,202
<REALIZED-GAINS-CURRENT> 899,277
<APPREC-INCREASE-CURRENT> 3,336,364
<NET-CHANGE-FROM-OPS> 7,626,843
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,051,213
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 3,755,117
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,322,590
<ACCUMULATED-NII-PRIOR> (165,291)
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
