Registration No. 33-31267
As filed with the Securities and Exchange Commission on March 3,
1995
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
Pre-Effective Amendment No. ___ / /
Post-Effective Amendment No. 8 / X /
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 10 / X /
TEMPLETON GLOBAL OPPORTUNITIES TRUST
(Exact Name of Registrant as Specified in Charter)
700 Central Avenue, P.O. Box 33030,
St. Petersburg, Florida 33733-8030
(Address of Principal Executive Offices)
Registrant's Telephone Number: (813) 823-8712
Thomas M. Mistele, Esq.
Templeton Global Investors, Inc.
500 East Broward Blvd.
Fort Lauderdale, Florida 33394
(Name and Address of Agent for Service)
Copies to:
Jeffrey L. Steele, Esq.
Dechert Price & Rhoads
1500 K Street, N.W.
Washington, D.C. 20005
It is proposed that this filing will become effective (check
appropriate box):
_____ immediately upon filing pursuant to paragraph (b) or
__X__ on April 1, 1995 pursuant to paragraph (b) or
_____ 60 days after filing pursuant to paragraph (a) or
_____ on (date) pursuant to paragraph (a) of Rule 485
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
The Registrant has registered an indefinite number of shares of
beneficial interest under the Securities Act of 1933 pursuant to
Rule 24f-2 under the Investment Company Act of 1940, and filed
its Rule 24f-2 Notice for the fiscal year ended December 31, 1994
on February 28, 1995.
TEMPLETON GLOBAL OPPORTUNITIES TRUST
CROSS-REFERENCE SHEET
REQUIRED BY RULE 495
UNDER THE SECURITIES ACT OF 1933
Part A
Item No. Caption
1 Cover Page
2 Expense Table
3 Selected Financial Information
4 General Description;
Investment Techniques
5 Management of the Fund
5A See Annual Report to
Shareholders
6 General Information
7 How to Buy Shares of the Fund
8 How to Sell Shares of the Fund
9 Not Applicable
Part B
10 Cover Page
11 Table of Contents
12 General Information and
History
13 Investment Objective and
Policies
14 Management of the Fund
15 Principal Shareholders
16 Investment Management and
Other Services
17 Brokerage Allocation
Part B
Item No. Caption
18 Description of Shares; General
Information, Part A
19 Purchase, Redemption and
Pricing of Shares
20 Tax Status
21 Principal Underwriters
22 Performance Information
23 Financial Statements
<PAGE>
TEMPLETON PROSPECTUS -- APRIL 1, 1995
GLOBAL OPPORTUNITIES TRUST
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INVESTMENT Templeton Global Opportunities Trust (the "Fund") seeks long-
OBJECTIVE AND term capital growth through a flexible policy of investing in
POLICIES global securities. Although the Fund invests primarily in
common stock, it may also invest in preferred stocks and
certain debt securities, rated or unrated, such as convertible
bonds and bonds selling at a discount. Any income realized
will be incidental. THE FUND MAY INVEST UP TO 25% OF ITS TOTAL
ASSETS IN HIGH YIELD, HIGH RISK DEBT INSTRUMENTS THAT ARE
PREDOMINANTLY SPECULATIVE. SEE "RISK FACTORS."
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PURCHASE OF Please complete and return the Shareholder Application. If you
SHARES need assistance in completing this form, please call our
Account Services Department. The Fund offers two classes of
Shares to its investors. This structure allows investors to
consider, among other features, the impact of sales charges
and distribution fees ("Rule 12b-1 fees") on their investments
in the Fund. Shareholders should take the differences between
the two classes into account when determining which class of
Shares best meets their investment objective. The minimum
initial investment is $100 ($25 minimum for subsequent
investments).
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PROSPECTUS This Prospectus sets forth concisely information about the
INFORMATION Fund that a prospective investor ought to know before
investing. Investors are advised to read and retain this
Prospectus for future reference. A Statement of Additional
Information ("SAI") dated April 1, 1995, has been filed with
the Securities and Exchange Commission (the "SEC") and is
incorporated in its entirety by reference in and made a part
of this Prospectus. The SAI is available without charge upon
request to Franklin Templeton Distributors, Inc., 700 Central
Avenue, St. Petersburg, Florida 33701-3628 or by calling the
Fund Information Department.
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FUND INFORMATION DEPARTMENT--1-800-292-9293
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TEMPLETON "STAR" SERVICE (24 hours, seven days a week access to current
prices, shareholder account balances/values, last transaction and duplicate
account statements)--1-800-654-0123
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TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
EXPENSE TABLE........ 2
FINANCIAL
HIGHLIGHTS........... 3
GENERAL DESCRIPTION.. 3
Investment Objective
and Policies........ 4
INVESTMENT
TECHNIQUES.......... 5
Repurchase
Agreements.......... 5
Borrowing............ 5
Loans of Portfolio
Securities.......... 5
Options on Securities
or Indices.......... 5
Forward Foreign
Currency Contracts
and Options on
Foreign Currencies.. 5
Futures Contracts.... 6
Depositary Receipts.. 6
RISK FACTORS......... 6
HOW TO BUY SHARES OF
THE FUND............ 8
Alternative Purchase
Arrangements........ 8
Deciding Which Class
to Purchase......... 9
Offering Price....... 9
Class I.............. 9
Cumulative Quantity
Discount............ 10
Letter of Intent..... 11
Group Purchases ..... 11
Class II............. 12
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PAGE
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<S> <C>
Net Asset Value
Purchases (Both
Classes)............ 12
Additional Dealer
Compensation (Both
Classes)............ 13
Purchasing Class I
and Class II Shares. 14
Automatic Investment
Plan................ 14
Institutional
Accounts............ 14
Account Statements... 14
Templeton STAR
Service............. 14
Retirement Plans..... 15
Net Asset Value...... 15
EXCHANGE PRIVILEGE... 15
Exchanges of Class II
Shares.............. 16
Transfers............ 16
Conversion Rights.... 17
Exchanges by Timing
Accounts............ 17
HOW TO SELL SHARES OF
THE FUND............ 17
Contingent Deferred
Sales Charge........ 17
Reinstatement
Privilege........... 20
Systematic Withdrawal
Plan................ 20
Redemptions by
Telephone........... 21
TELEPHONE
TRANSACTIONS........ 21
<CAPTION>
PAGE
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<S> <C>
Verification
Procedures.......... 21
Restricted Accounts.. 21
General.............. 22
MANAGEMENT OF THE
FUND................ 22
Investment Manager... 22
Business Manager..... 23
Transfer Agent....... 23
Custodian............ 23
Plans of
Distribution........ 23
Expenses............. 24
Brokerage
Commissions......... 24
GENERAL INFORMATION.. 24
Description of
Shares/Share
Certificates........ 24
Meetings of
Shareholders........ 25
Dividends and
Distributions....... 25
Federal Tax
Information......... 25
Inquiries............ 26
Performance
Information......... 26
Statements and
Reports............. 26
WITHHOLDING
INFORMATION......... 27
CORPORATE RESOLUTION. 28
AUTHORIZATION
AGREEMENT........... 29
THE FRANKLIN
TEMPLETON GROUP..... 30
</TABLE>
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SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK; FURTHER, SUCH SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>
EXPENSE TABLE
<TABLE>
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CLASS I CLASS II
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<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a percentage
of Offering Price)........................................ 5.75% 1.00%/1/
Maximum Sales Charge Imposed on Reinvested Dividends....... None None
Deferred Sales Charge...................................... None/2/ 1.00%/3/
Redemption Fees............................................ None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees............................................ 0.80% 0.80%
12b-1 Fees/4/.............................................. 0.25% 1.00%
Other Expenses (audit, legal, business management, transfer
agent and custodian)...................................... 0.40% 0.40%
Total Fund Operating Expenses.............................. 1.45% 2.20%
</TABLE>
<TABLE>
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1 YEAR 3 YEARS 5 YEARS 10 YEARS
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<S> <C> <C> <C> <C>
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:
Class I: $71 $101 $132 $221
Class II:/5/ $42 $ 78 $127 $261
</TABLE>
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/1/ Although Class II has a lower initial sales charge than Class I, over time
the higher 12b-1 fee for Class II may cause Shareholders to pay more for
Class II Shares than for Class I Shares. Given the Fund's maximum initial
sales charge and the rate of the Fund's Rule 12b-1 fee, however, it is
estimated that this would take a substantial number of years.
/2/ Acontingent deferred sales charge of 1% may be imposed, however, on certain
redemptions of Class I Shares initially purchased without a sales charge as
described in the Prospectus under "How to Sell Shares of the Fund."
/3/ Class II Shares redeemed within 18 months of purchase are subject to a 1%
contingent deferred sales charge. After the 18-month period, however, the
Shares may be redeemed free of the charge.
/4/ Annual Rule 12b-1 fees may not exceed 0.25% of the Fund's average net assets
attributable to Class I Shares and 1.00% of the Fund's average net assets
attributable to Class II Shares. (See "Management of the Fund--Plans of
Distribution.") Consistent with the National Association of Securities
Dealers, Inc.'s rules, it is possible that the combination of front-end
sales charges and Rule 12b-1 fees could cause long-term Shareholders to pay
more than the economic equivalent of the maximum front-end sales charges
permitted under those same rules.
/5/ As noted in the table above, Class II Shares are generally subject to a
contingent deferred sales charge for a period of 18 months.
The information in the table above is an estimate based on the Fund's
expenses as of the end of the most recent fiscal year and is provided for
purposes of assisting current and prospective Shareholders in understanding
the various costs and expenses that an investor in the Fund will bear,
directly or indirectly. The information in the 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 or an
administrative service fee of $5.00 per exchange for market timing or
allocation service accounts. THE 5% ANNUAL RETURN AND ANNUAL EXPENSES SHOULD
NOT BE CONSIDERED A REPRESENTATION OF ACTUAL OR EXPECTED FUND PERFORMANCE OR
EXPENSES, BOTH OF WHICH MAY VARY. For a more detailed discussion of the Fund's
fees and expenses, see "Management of the Fund."
2
<PAGE>
FINANCIAL HIGHLIGHTS
The following table of selected financial information has been audited by
McGladrey & Pullen, LLP, independent certified public accountants, for the
periods indicated in their report which is incorporated by reference and which
appears in the Fund's 1994 Annual Report to Shareholders. This statement
should be read in conjunction with the other financial statements and notes
thereto included in the Fund's 1994 Annual Report to Shareholders, which
contains further information about the Fund's performance, and which is
available to Shareholders upon request and without charge.
<TABLE>
<CAPTION>
FEBRUARY 28, 1990
PER SHARE OPERATING YEAR ENDED DECEMBER 31, (COMMENCEMENT
PERFORMANCE --------------------------------------- OF OPERATIONS) TO
(FOR A SHARE OUTSTANDING 1994 1993 1992 1991 DECEMBER 31, 1990
THROUGHOUT THE PERIOD) -------- -------- -------- -------- -----------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 14.46 $__10.75 $__10.94 $__ 8.36 $__ 9.40
Income from investment
operations:
Net investment income.. .09 .12 .14 .17 .27
Net realized and
unrealized gain
(loss)................ (.63) 3.97 .61 2.59 (1.04)
-------- -------- -------- -------- --------
Total from investment
operations............. (.54) 4.09 .75 2.76 (.77)
-------- -------- -------- -------- --------
Distributions:
Dividends from net
investment income..... (.09) (.11) (.14) (.01) (.27)
Distributions from net
realized gains........ (1.99) (.27) (.65) (.17) --
Distribution in excess
of realized gains..... -- -- (.15) -- --
-------- -------- -------- -------- --------
Total distributions..... (2.08) (.38) (.94) (.18) (.27)
-------- -------- -------- -------- --------
Change in net asset
value for the period... (2.62) 3.71 (.19) 2.58 (1.04)
-------- -------- -------- -------- --------
Net asset value, end of
period................. $ 11.84 $ 14.46 $ 10.75 $ 10.94 $ 8.36
======== ======== ======== ======== ========
TOTAL RETURN* (4.09)% 38.13% 6.85% 31.16% (8.19)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period (000)........... $476,822 $410,747 $248,807 $200,848 $159,018
Ratio of expenses to
average net assets..... 1.53% 1.51% 1.63% 1.76% 1.64%**
Ratio of net investment
income to average net
assets................. 0.71% 1.07% 1.36% 1.63% 3.55%**
Portfolio turnover rate. 37.31% 40.56% 22.03% 21.02% 15.92%
</TABLE>
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*Total return does not reflect sales charges. Not annualized in periods of
less than one year.
**Annualized.
GENERAL DESCRIPTION
Templeton Global Opportunities Trust (the "Fund") was organized as a
business trust under the laws of Massachusetts on October 2, 1989, and is
registered under the Investment Company Act of 1940, as amended (the "1940
Act") as an open-end diversified management investment company.
Shares of the Fund may be purchased (minimum investment of $100 initially
and $25 thereafter) at the current public offering price which is equal to the
Fund's net asset value (see "How to Buy Shares of the Fund--Net Asset Value")
plus a sales charge based upon a variable percentage (ranging from 5.75% to
less than 1.00% of the offering price) depending on factors such as the class
of Shares purchased and the amount invested. (See "How to Buy Shares of the
Fund.")
3
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES. The Fund's investment objective is long-
term capital growth, which it seeks to achieve through a flexible policy of
investing in global securities. Any income realized will be incidental.
Although the Fund invests primarily in common stock, it may also invest in
preferred stock and certain debt securities, rated or unrated, such as
convertible bonds and bonds selling at a discount. The Fund may invest in
stocks and debt obligations of companies and debt obligations of governments
of any nation. Under normal circumstances, the Fund will invest at least 65%
of its total assets in issuers domiciled in at least three different nations
(one of which may be the United States).
The Trustees of the Fund have adopted a non-fundamental policy, effective
July 15, 1994, that no more than 25% of the Fund's assets will be invested in
debt securities rated lower than Baa by Moody's Investors Service, Inc.
("Moody's") or BBB by Standard & Poor's Corporation ("S&P"). The Fund will not
invest in debt securities rated lower than Caa by Moody's or CCC by S&P. Debt
securities rated Caa by Moody's are of poor standing. Such securities may be
in default or there may be present elements of danger with respect to
principal or interest. Debt securities rated CCC by S&P are regarded, on
balance, as predominantly speculative with respect to the issuer's capacity to
pay interest and principal in accordance with the terms of the obligation.
While such securities may have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk exposure to adverse
conditions. See "Risk Factors." Certain debt securities can provide the
potential for capital appreciation based on various factors such as changes in
interest rates, economic and market conditions, improvement in an issuer's
ability to repay principal and pay interest, and ratings upgrades.
Additionally, convertible bonds offer the potential for capital appreciation
through the conversion feature, which enables the holder of the bond to
benefit from increases in the market price of the securities into which they
are convertible.
Whenever, in the judgment of Templeton Investment Counsel, Inc. (the
"Investment Manager"), market or economic conditions warrant, the Fund may,
for temporary defensive purposes, invest without limit in money market
securities, denominated in dollars or in the currency of any foreign country,
issued by entities organized in the U.S. or any foreign country. Such
investments may include short-term (less than 12 months to maturity) and
medium-term (not greater than five years to maturity) obligations issued or
guaranteed by the U.S. Government or the government of a foreign country,
their agencies or instrumentalities; finance company and corporate commercial
paper, and other short-term corporate obligations, in each case rated Prime-1
by Moody's or A or better by S&P or, if unrated, of comparable quality as
determined by the Investment Manager; and repurchase agreements with banks and
broker-dealers with respect to such securities. In addition, for temporary
defensive purposes, the Fund may invest up to 25% of its total assets in
obligations of banks (including certificates of deposit, time deposits and
bankers' acceptances); provided that the Fund will limit its investment in
time deposits for which there is a penalty for early withdrawal to 10% of its
total assets.
As a diversified management investment company, the Fund may invest no more
than 5% of its total assets in securities issued by any one company or
government, exclusive of U.S. Government securities. Although the Fund may
invest up to 25% of its assets in a single industry, it has no present
intention of doing so. The Fund may not invest more than 5% of its assets in
warrants (exclusive of warrants acquired in units or attached to securities)
or more than 10% of its assets in securities with a limited trading market.
The investment objective and policies described above, as well as all of the
investment restrictions described in the SAI, cannot be changed without
Shareholder approval.
The Fund may also lend its portfolio securities and borrow money for
investment purposes (i.e., "leverage" its portfolio). In addition, the Fund
may enter into transactions in options on securities, securities indices and
foreign currencies, forward foreign currency contracts, and futures contracts
and related options. When deemed appropriate by the Investment Manager, the
Fund may invest cash balances in repurchase agreements and other money market
investments to maintain liquidity in an amount to meet expenses or for day to
day operating purposes. In addition, when the Fund experiences large cash
inflows through issuance of new Shares, and desirable investment securities
which are consistent with the Fund's investment objective are unavailable in
sufficient quantities or at reasonable prices, the Fund may invest in money
market instruments for a limited time pending availability of such securities.
These investment techniques are described below and under the heading
"Investment Objective and Policies" in the SAI.
4
<PAGE>
The Fund does not intend to emphasize short-term trading profits and usually
expects to have a portfolio turnover rate not exceeding 100%.
INVESTMENT TECHNIQUES
REPURCHASE AGREEMENTS. When the Fund acquires a security from a bank or a
registered broker-dealer, it may simultaneously enter into a repurchase
agreement, wherein the seller agrees to repurchase the security as a specified
time and price. The repurchase price is in excess of the purchase price by an
amount which reflects an agreed-upon rate of return, which is not tied to the
coupon rate on the underlying security. Under the 1940 Act, repurchase
agreements are considered to be loans collateralized by the underlying
security and therefore will be fully collateralized. However, if the seller
should default on its obligation to repurchase the underlying security, the
Fund may experience delay or difficulty in exercising its rights to realize
upon the security and might incur a loss if the value of the security
declines, as well as disposition costs in liquidating the security.
BORROWING. The Fund may borrow up to 10% of the value of its total assets
from banks to increase its holdings of portfolio securities. Under the 1940
Act, the Fund is required to maintain continuous asset coverage of 300% with
respect to such borrowings and to sell (within three days) sufficient
portfolio holdings to restore such coverage if it should decline to less than
300% due to market fluctuations or otherwise, even if such liquidations of the
Fund's holdings may be disadvantageous from an investment standpoint.
Leveraging by means of borrowing may exaggerate the effect of any increase or
decrease in the value of portfolio securities on the Fund's net asset value,
and money borrowed will be subject to interest and other costs (which may
include commitment fees and/or the cost of maintaining minimum average
balances) which may or may not exceed the income received from the securities
purchased with borrowed funds.
LOANS OF PORTFOLIO SECURITIES. The Fund may lend to broker-dealers portfolio
securities with an aggregate market value of up to one-third of its total
assets generally to generate income to offset Fund expenses. Such loans must
be secured by collateral (consisting of any combination of cash, U.S.
Government securities or irrevocable letters of credit) in an amount at least
equal (on a daily marked-to-market basis) to the current market value of the
securities loaned. The Fund may terminate the loans at any time and obtain the
return of the securities loaned within five business days. The Fund will
continue to receive any interest or dividends paid on the loaned securities
and will continue to retain any voting rights with respect to the securities.
OPTIONS ON SECURITIES OR INDICES. The Fund may write (i.e., sell) covered
put and call options and purchase put and call options on securities or
securities indices that are traded on United States and foreign exchanges or
in the over-the-counter markets. An option on a security is a contract that
permits the purchaser of the option, in return for the premium paid, the right
to buy a specified security (in the case of a call option) or to sell a
specified security (in the case of a put option) from or to the writer of the
option at a designated price during the term of the option. An option on a
securities index permits the purchaser of the option, in return for the
premium paid, the right to receive from the seller cash equal to the
difference between the closing price of the index and the exercise price of
the option. The Fund may write a call or put option only if the option is
"covered." This means that so long as the Fund is obligated as the writer of a
call option, it will own the underlying securities subject to the call, or
hold a call at the same exercise price, for the same exercise period, and on
the same securities as the written call. A put is covered if the Fund
maintains liquid assets with a value equal to the exercise price in a
segregated account, or holds a put on the same underlying securities at an
equal or greater exercise price. The value of the underlying securities on
which options may be written at any one time will not exceed 15% of the total
assets of the Fund. The Fund will not purchase put or call options if the
aggregate premium paid for such options would exceed 5% of its total assets at
the time of purchase.
FORWARD FOREIGN CURRENCY CONTRACTS AND OPTIONS ON FOREIGN CURRENCIES. The
Fund may enter into forward foreign currency exchange contracts ("forward
contracts") to attempt to minimize the risk to the Fund from adverse changes
in the relationship between
5
<PAGE>
the U.S. dollar and foreign currencies. A forward contract is an obligation to
purchase or sell a specific currency for an agreed price at a future date
which is individually negotiated and privately traded by currency traders and
their customers. The Fund may enter into a forward contract, for example, when
it enters into a contract for the purchase or sale of a security denominated
in a foreign currency in order to "lock in" the U.S. dollar price of the
security. The Fund will not enter into forward foreign currency contracts if,
as a result, the Fund will have more than 20% of its total assets committed to
the consummation of such contracts. The Fund may also purchase and write put
and call options on foreign currencies for the purpose of protecting against
declines in the dollar value of foreign portfolio securities and against
increases in the U.S. dollar cost of foreign securities to be acquired.
FUTURES CONTRACTS. For hedging purposes only, the Fund may buy and sell
financial futures contracts, stock index futures contracts, foreign currency
futures contracts and options on any of the foregoing. A financial futures
contract is an agreement between two parties to buy or sell a specified debt
security at a set price on a future date. An index futures contract is an
agreement to take or make delivery of an amount of cash based on the
difference between the value of the index at the beginning and at the end of
the contract period. A futures contract on a foreign currency is an agreement
to buy or sell a specified amount of a currency for a set price on a future
date.
When the Fund enters into a futures contract, it must make an initial
deposit, known as "initial margin," as a partial guarantee of its performance
under the contract. As the value of the security, index or currency
fluctuates, either party to the contract is required to make additional margin
payments, know as "variation margin," to cover any additional obligation it
may have under the contract. In addition, when the Fund enters into a futures
contract, it will segregate assets or "cover" its position in accordance with
the 1940 Act. See "Investment Objective and Policies--Futures Contracts" in
the SAI.
The Fund may not commit more than 5% of its total assets to initial margin
deposits on futures contracts and related options. The value of the underlying
securities on which futures contracts will be written at any one time will not
exceed 25% of the total assets of the Fund.
DEPOSITARY RECEIPTS. The Fund may purchase sponsored or unsponsored American
Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs") and Global
Depositary Receipts ("GDRs") (collectively, "Depositary Receipts"). ADRs are
Depositary Receipts typically issued by a U.S. bank or trust company which
evidence ownership of underlying securities issued by a foreign corporation.
EDRs and GDRs are typically issued by foreign banks or trust companies,
although they also may be issued by U.S. banks or trust companies, and
evidence ownership of underlying securities issued by either a foreign or a
United States corporation. Generally, Depositary Receipts in registered form
are designed for use in the U.S. securities market and Depositary Receipts in
bearer form are designed for use in securities markets outside the United
States. Depositary Receipts may not necessarily be denominated in the same
currency as the underlying securities into which they may be converted.
Depositary Receipts may be issued pursuant to sponsored or unsponsored
programs. In sponsored programs, an issuer has made arrangements to have its
securities traded in the form of Depositary Receipts. In unsponsored programs,
the issuer may not be directly involved in the creation of the program.
Although regulatory requirements with respect to sponsored and unsponsored
programs are generally similar, in some cases it may be easier to obtain
financial information from an issuer that has participated in the creation of
a sponsored program. Accordingly, there may be less information available
regarding issuers of securities underlying unsponsored programs and there may
not be a correlation between such information and the market value of the
Depositary Receipts. Depositary Receipts also involve the risks of other
investments in foreign securities, as discussed below. For purposes of the
Fund's investment policies, the Fund's investments in Depositary Receipts will
be deemed to be investments in the underlying securities.
RISK FACTORS
Shareholders should understand that all investments involve risk and there
can be no guarantee against loss resulting from an investment in the Fund nor
can there be any assurance that the Fund's investment objective will be
attained. As with any investment in securities, the value of, and income from,
an investment in the Fund can decrease as well as increase, depending on a
variety of factors which may affect the values and income generated by the
Fund's portfolio securities, including general economic conditions and market
factors. In addition to the factors which affect the value of individual
securities, a Shareholder may anticipate that the value of the Shares
6
<PAGE>
of the Fund will fluctuate with movements in the broader equity and bond
markets, as well. A decline in the stock market of any country in which the
Fund is invested may also be reflected in declines in the price of the Shares
of the Fund. Changes in currency valuations will also affect the price of the
Shares of the Fund. History reflects both decreases and increases in worldwide
stock markets and currency valuations, and these may reoccur unpredictably in
the future. Additionally, investment decisions made by the Investment Manager
will not always be profitable or prove to have been correct.
The Fund has an unlimited right to purchase securities in any developed
foreign country and may invest up to 25% of its total assets in securities in
underdeveloped countries. Investors should consider carefully the substantial
risks involved in investing in foreign securities, which are in addition to
the usual risks inherent in domestic investments. There is the possibility of
expropriation, nationalization or confiscatory taxation, taxation of income
earned in the foreign nation (including withholding taxes on interest and
dividends) or other taxes imposed with respect to investments in the foreign
nation, foreign exchange controls (which may include suspension of the ability
to transfer currency from a given country), default in foreign government
securities, political or social instability or diplomatic developments which
could affect investments in securities of issuers in foreign nations. Some
countries may withhold portions of interest and dividends at the source. In
addition, in many countries there is less publicly available information about
issuers than is available in reports about companies in the United States.
Foreign companies are not generally subject to uniform accounting, auditing
and financial reporting standards, and auditing practices and requirements may
not be comparable to those applicable to U.S. companies. Further, the Fund may
encounter difficulties or be unable to pursue legal remedies and obtain
judgments in foreign courts. Foreign securities markets also have different
clearance and settlement procedures, and in certain markets there have been
times when settlements have been unable to keep pace with the volume of
securities transactions, making it difficult to conduct such transactions.
Delays in settlement could result in temporary periods when assets of the Fund
are uninvested and no return is earned thereon. The inability of the Fund to
make intended security purchases due to settlement problems could cause the
Fund to miss attractive investment opportunities. Inability to dispose of
portfolio securities due to settlement problems could result either in losses
to the Fund due to subsequent declines in value of the portfolio security or,
if the Fund has entered into a contract to sell the security, could result in
possible liability to the purchaser. In many foreign countries, there is less
government supervision and regulation of business and industry practices,
stock exchanges, brokers and listed companies than in the United States.
Foreign securities transactions may be subject to higher brokerage and
custodial costs than domestic securities transactions. In addition, the
foreign securities markets of many of the countries in which the Fund may
invest may also be smaller, less liquid and subject to greater price
volatility than those in the United States.
The Fund will usually effect currency exchange transactions on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign exchange market.
However, some price spreads on currency exchange (to cover service charges)
will be incurred when the Fund converts assets from one currency to another.
Leveraging by means of borrowing may exaggerate the effect of any increase
or decrease in the value of portfolio securities on the Fund's net asset
value, and money borrowed will be subject to interest and other costs (which
may include commitment fees and/or the cost of maintaining minimum average
balances) which may or may not exceed the income received from the securities
purchased with borrowed funds.
Successful use of futures contracts and related options is subject to
special risk considerations. A liquid secondary market for any futures or
options contract may not be available when a futures position is sought to be
closed. In addition, there may be an imperfect correlation between movements
in the securities or foreign currency on which the futures or options contract
is based and movements in the securities or currency in the Fund's portfolio.
Successful use of futures or options contracts is further dependent on the
Investment Manager's ability to correctly predict movements in the securities
or foreign currency markets and no assurance can be given that its judgment
will be correct. Successful use of options on securities or stock indices is
subject to similar risk considerations.
Effective July 15, 1994, the Fund may invest up to 25% of its total assets
in high yield, high risk debt instruments that are predominantly speculative.
Although they may offer higher yields than higher rated securities, low rated
and unrated debt securities generally involve greater volatility of price and
risk of principal and income, including the possibility of default by, or
bankruptcy of, the
7
<PAGE>
issuers of the securities. In addition, the markets in which low rated and
unrated debt securities are traded are more limited than those in which higher
rated securities are traded. The existence of limited markets for particular
securities may diminish the Fund's ability to sell the securities at fair
value either to meet redemption requests or to respond to a specific economic
event such as a deterioration in the creditworthiness of the issuer. Reduced
secondary market liquidity for certain low rated or unrated debt securities
may also make it more difficult for the Fund to obtain accurate market
quotations for the purposes of valuing the Fund's portfolio. Market quotations
are generally available on many low rated or unrated securities only from a
limited number of dealers and may not necessarily represent firm bids of such
dealers or prices for actual sales.
Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the values and liquidity of low rated debt
securities, especially in a thinly traded market. Analysis of the
creditworthiness of issuers of low rated debt securities may be more complex
than for issuers of higher rated securities, and the ability of the Fund to
achieve its investment objective may, to the extent of investment in low rated
debt securities, be more dependent upon such creditworthiness analysis than
would be the case if the Fund were investing in higher rated securities.
Low rated debt securities may be more susceptible to real or perceived
adverse economic and competitive industry conditions than investment grade
securities. The prices of low rated debt securities have been found to be less
sensitive to interest rate changes than higher rated investments, but more
sensitive to adverse economic downturns or individual corporate developments.
A projection of an economic downturn or of a period of rising interest rates,
for example, could cause a decline in low rated debt securities prices because
the advent of a recession could lessen the ability of a highly leveraged
company to make principal and interest payments on its debt securities. If the
issuer of low rated debt securities defaults, the Fund may incur additional
expenses to seek recovery. The low rated bond market is relatively new, and
many of the outstanding low rated bonds have not endured a major business
recession.
There are further risk considerations, including possible losses through the
holding of securities in domestic and foreign custodian banks and depositories
and risks associated with borrowing, described elsewhere in the Prospectus and
in the SAI.
HOW TO BUY SHARES OF THE FUND
Shares of the Fund may be purchased at the Offering Price through any broker
which has a dealer agreement with Franklin Templeton Distributors, Inc.
("FTD"), the Principal Underwriter for the Shares of the Fund, or directly
from FTD upon receipt by FTD of a completed Shareholder Application and check.
The minimum initial purchase order is $100 (other than in monthly investment
plans, such as sponsored payroll deduction, automatic investment, split-
funding or comparable plans, which require a minimum of $25), with subsequent
investments of $25 or more.
ALTERNATIVE PURCHASE ARRANGEMENTS. The Fund offers two different classes of
Shares, each of which has its own initial, contingent, and Rule 12b-1 sales
charge structures. All Fund Shares outstanding before the implementation of
the multiclass structure have been designated as Class I Shares and continue
to possess their previous rights and privileges, except for legally required
modifications to Shareholder voting requirements. Shareholders may not convert
Shares of one class into Shares of the other at this time.
Class I. Class I Shares have higher initial sales charges than Class II
Shares and they have lower yearly asset-based Rule 12b-1 fees. Class I Shares
may be purchased at reduced initial sales charges, or without any initial
sales charge at all if certain conditions are met. In most circumstances,
contingent deferred sales charges will not be assessed against redemptions of
Class I Shares. See "Management of the Fund" and "How to Sell Shares of the
Fund" for more information.
8
<PAGE>
Class II. By contrast, Class II Shares have lower initial sales charges than
Class I Shares and higher yearly Rule 12b-1 fees. Also, although there are
certain exceptions, Class II Shares redeemed within 18 months of purchase will
generally be assessed a contingent deferred sales charge of 1% on the lesser
of the then-current net asset value or the original purchase price of such
Shares. See "Contingent Deferred Sales Charge--Class II Shares" under "How to
Sell Shares of the Fund" for a complete description of the contingent deferred
sales charge.
Purchases of Class II Shares are limited to amounts below $1 million. Any
purchases of $1 million or more will automatically be invested in Class I
Shares, since the Shareholder may purchase the Class I Shares at net asset
value and take advantage of the lower annual fees associated with Class I
Shares. Shareholders who intend to make large investments in the Fund should
consider purchasing Class I Shares through a Letter of Intent instead of
purchasing Class II Shares. With the exception of certain employee benefit
plans described below, however, a Shareholder may maintain an account balance
of an unlimited dollar amount in Class II Shares.
DECIDING WHICH CLASS TO PURCHASE. Each investor's individual objectives must
be carefully evaluated before determining which class of Shares will be more
beneficial to that investor. Generally speaking, an investor who expects to
invest less than $100,000 in the Franklin Group of Funds(R) and Templeton
Family of Funds (collectively, the "Franklin Templeton Group") and who expects
to make substantial redemptions within six years of investment should consider
Class II Shares. This is because it is more economical for a Shareholder to
invest, for example, $50,000 for two years in Class II Shares than in Class I
Shares. Over time, however, the higher annual Rule 12b-1 charges on the Class
II Shares will accumulate to outweigh the difference in initial sales charges.
For this reason, Class I Shares may be more attractive to long-term investors
even if no sales charge reductions are available to them.
Investors who qualify to purchase Class I Shares at reduced sales charges or
at net asset value should consider purchasing Class I Shares, especially if
they intend to hold their Shares for long periods of time. Similarly,
investors who intend to make large investments in the Fund should consider
purchasing Class I Shares through a Letter of Intent or under Cumulative
Quantity Discount rather than purchasing Class II Shares. Investors investing
over $1 million (in a single payment or through a Letter of Intent or
Cumulative Quantity Discount) will be prohibited from purchasing Class II
Shares because Class I Shares would always be more beneficial to such
investors.
In determining which Shares are more appropriate for a Shareholder's
investment objectives and income needs, a Shareholder should also consider
that the higher Rule 12b-1 fees for Class II will generally result in lower
dividends and consequently lower yields for Class II Shares as compared to
Class I Shares.
Each class also has a separate schedule for awarding compensation to
securities dealers for selling Fund Shares. A Shareholder should take all of
the circumstances surrounding each investment into account before deciding
which class of shares to purchase.
IMPORTANT NOTICE! THE APPLICATION FORM ATTACHED TO THIS PROSPECTUS MUST BE
USED FOR ALL FUTURE PURCHASES. OLD APPLICATION FORMS SHOULD BE DISCARDED.
OFFERING PRICE. Shares of the Fund are offered at the public Offering Price,
which is the net asset value per share plus a sales charge, next computed (i)
after the Shareholder's securities dealer receives the order which is promptly
transmitted to the Fund or (ii) after receipt of an order by mail from the
Shareholder directly in proper form (which generally means a completed
Shareholder Application accompanied by a negotiable check).
CLASS I. The sales charge for Class I Shares is a variable percentage of the
Offering Price depending upon the amount of the sale. A description of the
method of calculating net asset value per share is included under the caption
"Net Asset Value."
9
<PAGE>
Set forth below is a table of total sales charges or underwriting
commissions and dealer concessions for all Class I Shares of the Fund,
including all designated Retirement Plans.
The price to the public on purchases of Class I Shares made by a single
purchaser, by an individual, his or her spouse and their children under age
21, or by a single trust account or fiduciary account, other than an employee
benefit plan holding Shares of the Fund on or before February 1, 1995, is the
net asset value per Share plus a sales charge not exceeding 5.75% of the
Offering Price (6.10% of the net asset value), which is reduced on larger
sales as shown below:
<TABLE>
<CAPTION>
CLASS I SHARES--TOTAL SALES CHARGE
-----------------------------------------------
AS A PERCENTAGE OF AS A PERCENTAGE OF PORTION OF TOTAL
AMOUNT OF SALE OFFERING PRICE NET ASSET VALUE OFFERING PRICE
AT OFFERING PRICE OF THE SHARES PURCHASED OF THE SHARES PURCHASED RETAINED BY DEALERS*
- ----------------- ----------------------- ----------------------- --------------------
<S> <C> <C> <C>
Less than $50,000....... 5.75% 6.10% 5.00%
$50,000 but less than
$100,000............... 4.50% 4.71% 3.75%
$100,000 but less than
$250,000............... 3.50% 3.63% 2.80%
$250,000 but less than
$500,000............... 2.50% 2.56% 2.00%
$500,000 but less than
$1,000,000............. 2.00% 2.04% 1.60%
$1,000,000 or more...... none none (see below)**
</TABLE>
- -------
* Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages set forth above.
** The following commissions will be paid by FTD, from its own resources, to
securities dealers who initiate and are responsible for purchases of $1
million or more; 1% on sales of $1 million but less than $2 million, plus
0.80% on sales of $2 million but less than $3 million, plus 0.50% on sales
of $3 million but less than $50 million, plus 0.25% on sales of $50 million
but less than $100 million, plus 0.15% on sales of $100 million or more.
Dealers concession breakpoints are reset every 12 months for purposes of
additional purchases.
FTD, or one of its affiliates, may make payments, from its own resources, of
up to 1% of the amount purchased, to securities dealers who initiate and are
responsible for purchases made at net asset value by certain designated
retirement plans (as defined below) (excluding IRA and IRA rollovers), certain
non-designated plans (as defined below), certain trust companies and trust
departments of banks and certain retirement plans of organizations with
collective retirement plan assets of $10 million or more. Please refer to the
SAI for further information.
No initial sales charge applies on investments on $1 million or more, but a
contingent deferred sales charge of 1% is imposed on certain redemptions of
investments of $1 million or more within 12 months of the calendar month
following such investments ("contingency period"). See "How to Sell Shares of
the Fund--Contingent Deferred Sales Charge."
A sales charge of 4% of the Offering Price (4.17% of the net asset value) is
applicable to all purchases of Shares made for any qualified or non-qualified
employee benefit plan which is a Shareholder with the Fund on or before
February 1, 1995. Of the 4% sales charge applicable to such purchases, 3.20%
of the Offering Price will be retained by dealers.
At the discretion of FTD, the entire sales commission may at times be
reallowed to dealers. During periods when 90% or more of the sales commission
is reallowed, such dealers may be deemed to be underwriters as that term is
defined in the Securities Act of 1933.
CUMULATIVE QUANTITY DISCOUNT. The schedule of reduced sales charges also may
be applied to qualifying sales of Class I Shares on a cumulative basis. For
this purpose, the dollar amount of the sale is added to the higher of (1) the
value (calculated at the applicable Offering Price) or (2) the purchase price,
of the following: (a) Class I Shares of the Fund; (b) Class I shares of other
funds in the Franklin
10
<PAGE>
Templeton Group (except Templeton Capital Accumulator Fund, Inc., Templeton
Variable Annuity Fund, Templeton Variable Products Series Fund, Franklin
Valuemark Funds and Franklin Government Securities Trust); and (c) other
investment products underwritten by FTD or its affiliates (although certain
investments may not have the same schedule of sales charges and/or may not be
subject to reduction in sales charges). Clauses (a), (b) and (c) above are
collectively referred to as "Franklin Templeton Investments." The cumulative
quantity discount applies to Franklin Templeton Investments owned at the time
of purchase by the purchaser, his or her spouse, and their children under age
21. In addition, the aggregate investments of a trustee or other fiduciary
account (for an account under exclusive investment authority) may be
considered in determining whether a reduced sales charge is available, even
though there may be a number of beneficiaries of the account. For example, if
the investor held Class I Shares valued at $40,000 (or, if valued at less than
$40,000, had been purchased for $40,000) and purchased an additional $20,000
of the Fund's Class I Shares, the sales charge for the $20,000 purchase would
be at the rate of 4.50%. It is FTD's policy to give investors the best sales
charge rate possible; however, there can be no assurance that an investor will
receive the appropriate discount unless, at the time of placing the purchase
order, the investor or the dealer makes a request for the discount and gives
FTD sufficient information to determine whether the purchase will qualify for
the discount. On telephone orders from dealers for the purchase of Class I
Shares to be registered in "street name," FTD will accept the dealer's
instructions with respect to the applicable sales charge rate to be applied.
The Cumulative Quantity Discount may be amended or terminated at any time.
LETTER OF INTENT. Investors may also reduce sales charges on all investments
in Class I Shares by means of a Letter of Intent ("LOI") which expresses the
investor's intention to invest a certain amount within a 13-month period in
Class I Shares of the Fund or any other fund in the Franklin Templeton Group
(except Templeton Capital Accumulator Fund, Inc., Templeton Variable Annuity
Fund, Templeton Variable Products Series Fund, Franklin Valuemark Funds and
Franklin Government Securities Trust). See the Shareholder Application. Except
for certain employee benefit plans, the minimum initial investment under an
LOI is 5% of the total LOI amount. Except for Shares purchased by certain
employee benefit plans, shares purchased with the first 5% of such amount will
be held in escrow to secure payment of the higher sales charge applicable to
the Shares actually purchased if the full amount indicated is not purchased,
and such escrowed Shares will be involuntarily redeemed to pay the additional
sales charge, if necessary. A purchase not originally made pursuant to an LOI
may be included under a subsequent LOI executed within 90 days of the
purchase. Any redemptions made by Shareholders, other than by certain employee
benefit plans, during the 13-month period will be subtracted from the amount
of the purchases for purposes of determining whether the terms of the LOI have
been completed. For a further description of the LOI, see "Purchase,
Redemption and Pricing of Shares--Letter of Intent" in the SAI.
GROUP PURCHASES. An individual who is a member of a qualified group may also
purchase Class I Shares of the Fund at the reduced sales charge applicable to
the group as a whole. The sales charge is based upon the aggregate dollar
value of Class I Shares previously purchased and still owned by the group,
plus the amount of the current purchase. For example, if members of the group
had previously invested and still held $80,000 of Class I Shares and now were
investing $25,000, the sales charge would be 3.50%. Information concerning the
current sales charge applicable to a group may be obtained by contacting FTD.
A "qualified group" is one which (i) has been in existence for more than six
months, (ii) has a purpose other than acquiring Fund Shares at a discount, and
(iii) satisfies uniform criteria which enable FTD to realize economies of
scale in its costs of distributing Shares. A qualified group must have more
than 10 members, must be available to arrange for group meetings between
representatives of the Fund or FTD and the members, must agree to include
sales and other materials related to the Fund in its publications and mailings
to members at reduced or no cost to FTD, and must seek to arrange for payroll
deduction or other bulk transmission of investments to the Fund.
If an investor selects a payroll deduction plan, subsequent investments will
be automatic and will continue until such time as the investor notifies the
Fund and the investor's employer to discontinue further investments. Due to
the varying procedures to prepare, process and forward the payroll deduction
information to the Fund, there may be a delay between the time of the payroll
deduction and
11
<PAGE>
the time the money reaches the Fund. The investment in the Fund will be made at
the Offering Price per Share determined on the day that both the check and
payroll deduction data are received in required form by the Fund.
CLASS II. Unlike Class I Shares, the sales charges and dealer concessions for
Class II Shares do not vary depending on the amount of sale. The total sales
charges or underwriting commissions and dealer concessions for Class II Shares
are set forth below.
<TABLE>
<CAPTION>
CLASS II SHARES--TOTAL SALES CHARGE
-----------------------------------------------
AS A PERCENTAGE OF AS A PERCENTAGE OF PORTION OF TOTAL
AMOUNT OF SALE OFFERING PRICE NET ASSET VALUE OFFERING PRICE
AT OFFERING PRICE OF THE SHARES PURCHASED OF THE SHARES PURCHASED RETAINED BY DEALERS*
- ----------------- ----------------------- ----------------------- --------------------
<S> <C> <C> <C>
any amount.............. 1.00% 1.01% 1.00%
</TABLE>
- --------
* FTD may pay the dealer, from its own resources, a commission of 1% of the
amount invested. FTD may retain a portion of the Rule 12b-1 fees assessed on
Class II Shares to partially recoup commissions FTD pays to a securities
dealer during the first year.
Net Asset Value Purchases (Both Classes). Shares of the Fund may be purchased
without the imposition of either an initial sales charge ("net asset value") or
a contingent deferred sales charge by (i) officers, trustees, directors, and
full-time employees of the Fund, of the Investment Manager or its affiliates, or
of any fund in the Franklin Templeton Group, and their spouses and family
members; (ii) companies exchanging Shares with or selling assets pursuant to a
merger, acquisition or exchange offer; (iii) insurance company separate accounts
for pension plan contracts; (iv) accounts managed by the Investment Manager or
its affiliates; (v) Shareholders of Templeton Institutional Funds, Inc.
reinvesting redemption proceeds from that fund under an employee benefit plan
qualified under Section 401 of the Internal Revenue Code of 1986, as amended
(the "Code"), in Shares of the Fund; (vi) certain unit investment trusts and
unit holders of such trusts reinvesting their distributions from the trusts in
the Fund; (vii) registered securities dealers and their affiliates, for their
investment account only; and (viii) registered personnel and employees of
securities dealers, and their spouses and family members, in accordance with the
internal policies and procedures of the employing securities dealer.
Shares of the Fund may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by registered investment
advisers and/or their affiliated broker-dealers, who have entered into a
supplemental agreement with FTD, on behalf of their clients who are
participating in a comprehensive fee program (also known as a wrap fee
program).
Shares of the Fund may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by certain designated
retirement plans, including profit sharing, pension, 401(k) and simplified
employee pension plans ("designated plans"), subject to minimum requirements
with respect to number of employees or amount of purchase, which may be
established by FTD. Currently, those criteria require that the employer
establishing the plan have 200 or more employees or that the amount invested or
to be invested during the subsequent 13-month period in the Fund or in any of
the Franklin Templeton Investments totals at least $1 million. Employee benefit
plans not designated above or qualified under Section 401 of the Code ("non-
designated plans") may be afforded the same privilege if they meet the above
requirements as well as the uniform criteria for qualified groups previously
described under "Group Purchases," which enable FTD to realize economies of
scale in its sales efforts and sales-related expenses.
Shares of the Fund may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by anyone who has taken a
distribution from an existing retirement plan already invested in any other
funds in the Franklin Templeton Group (including former participants of the
Franklin Templeton Profit Sharing 401(k) plan). In order to exercise this
privilege, a written order for the purchase of Shares of the Fund must be
received by Franklin Templeton Trust Company, the Fund, or Franklin Templeton
Investor Services, Inc. (the "Transfer Agent") within 120 days after the plan
distribution. To obtain a free Prospectus for any fund in the Franklin
Templeton Group, please call toll free at 1-800-DIAL-BEN (1-800-342-5236).
12
<PAGE>
Shares of the Fund may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by trust companies and bank
trust departments for funds over which they exercise exclusive discretionary
investment authority and which are held in a fiduciary, agency, advisory,
custodial or similar capacity. Such purchases are subject to minimum
requirements with respect to amount of purchase, which may be established by
FTD. Currently, those criteria require that the amount invested or to be
invested during the subsequent 13-month period in the Fund or any of the
Franklin Templeton Investments must total at least $1 million. Orders for such
accounts will be accepted by mail accompanied by a check, or by telephone or
other means of electronic data transfer directly from the bank or trust
company, with payment by federal funds received by the close of business on the
next business day following such order.
Shares of the Fund may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by investors who have, within
the past 60 days, redeemed an investment in an unaffiliated mutual fund which
charged the investor a contingent deferred sales charge upon redemption, and
which has investment objectives similar to those of the Fund.
Shares of the Fund may also be purchased at net asset value and without the
imposition of a contingent deferred sales charge by any state, county or city,
or any instrumentality, department, authority or agency thereof which has
determined that the Fund is a legally permissible investment and which is
prohibited by applicable investment laws from paying a sales charge or
commission in connection with the purchase of shares of any registered
management investment company (an "eligible governmental authority"). SUCH
INVESTORS SHOULD CONSULT THEIR OWN LEGAL ADVISERS TO DETERMINE WHETHER AND TO
WHAT EXTENT THE SHARES OF THE FUND CONSTITUTE LEGAL INVESTMENTS FOR THEM.
Municipal investors considering investment of proceeds of bond offerings into
the Fund should consult with expert counsel to determine the effect, if any, of
various payments made by the Fund or its investment manager on arbitrage rebate
calculations. If an investment by an eligible governmental authority at net
asset value is made through a securities dealer who has executed a dealer
agreement with FTD, FTD or one of its affiliates may make a payment, out of its
own resources, to such securities dealer in an amount not to exceed 0.25% of
the amount invested. Contact Templeton's Institutional Account Services
Department for additional information.
Shares of the Fund may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by trustees or other
fiduciaries purchasing securities for certain retirement plans of organizations
with collective retirement plan assets of $10 million or more, without regard
to where such assets are currently invested.
ADDITIONAL DEALER COMPENSATION (BOTH CLASSES). FTD or its affiliates, at
their expense, may also provide additional compensation to dealers in
connection with sales of Shares of the Fund and other funds in the Franklin
Group of Funds(R) and the Templeton Family of Funds (collectively, the
"Franklin Templeton Group"). Compensation may include financial assistance to
dealers in connection with conferences, sales or training programs for their
employees, seminars for the public, advertising, sales campaigns and/or
shareholder services and programs regarding one or more funds in the Franklin
Templeton Group and other dealer-sponsored programs or events. In some
instances, this compensation may be made available only to certain dealers
whose representatives have sold or are expected to sell significant amounts of
such Shares. Compensation may include payment for travel expenses, including
lodging, incurred in connection with trips taken by invited registered
representatives and members of their families to locations within or outside of
the U.S. for meetings or seminars of a business nature. Dealers may not use
sales of the Fund's Shares to qualify for this compensation to the extent such
may be prohibited by the laws of any state or any self-regulatory agency, such
as the National Association of Securities Dealers, Inc. In addition, FTD or its
affiliates may make ongoing payments to brokerage firms, financial institutions
(including banks) and others to facilitate the administration and servicing of
shareholder accounts. None of the aforementioned additional compensation is
paid for by the Fund or its Shareholders.
Ongoing payments will be made to qualifying dealers at the annual rate of
0.25% of the average daily net asset value of Class I Shares, and 1.00% of the
average daily net asset value of Class II Shares, registered in the name of
that broker-dealer as nominee or
13
<PAGE>
held in a Shareholder account that designates that broker-dealer as dealer of
record. These payments are made in order to promote selling efforts and to
compensate dealers for providing certain services, including processing
purchase and redemption transactions, establishing Shareholder accounts and
providing certain information and assistance with respect to the Fund. For
purchases on or after February 1, 1995 of Class I Shares that are subject to a
contingent deferred sales charge, the dealer will receive ongoing payments
beginning in the thirteenth month after the date of purchase. For all
purchases of Class II Shares that are subject to a contingent deferred sales
charge, the dealer will receive payments representing a service fee (0.25% of
average daily net asset value of the Shares) beginning in the first month
after the date of the purchase, and will receive payments representing
compensation for distribution (0.75% of average daily net asset value of the
Shares) beginning in the thirteenth month after the date of the purchase.
PURCHASING CLASS I AND CLASS II SHARES. When placing purchase orders for
Class I and Class II Shares of the Fund, investors should clearly state
whether Class I or Class II Shares are intended to be purchased. All Share
purchase orders that fail to specify a class will automatically be invested in
Class I Shares. Initial purchases of more than $1 million must be for Class I
Shares. At the present time, there are no conversion features attached to
either class of Shares.
Shareholders who qualify to invest in Class I Shares at net asset value are
prohibited from purchasing Class II Shares. See "Net Asset Value Purchases."
As to telephone orders placed with FTD by dealers, the dealer must receive
the investor's order before the close of the New York Stock Exchange and
transmit it to FTD by 5:00 p.m., New York time, for the investor to receive
that day's Offering Price. Payment for such orders must be made by check in
U.S. currency and must be promptly submitted to FTD. Orders mailed to FTD by
dealers or individual investors are effected at the net asset value of the
Fund's Shares next computed after the purchase order accompanied by payment
has been received by FTD. Such payment must be made by check in U.S. currency
drawn on a commercial bank in the United States and, if over $100,000, may not
be deemed to have been received until the proceeds have been collected unless
the check is certified or issued by such bank. Any subscription may be
rejected by FTD or by the Fund.
The Fund may impose a $10 charge against a Shareholder account in the event
that a check or draft submitted for the purchase of Fund Shares is returned
unpaid to the Fund.
Investors should promptly check the confirmation advice that is mailed after
each purchase (or redemption) in order to ensure that the purchase (or
redemption) of Shares has been accurately recorded in the investor's account.
AUTOMATIC INVESTMENT PLAN. Investors may accumulate Fund Shares regularly
each month by means of automatic debits to their checking accounts ($25
minimum). Forms for this purpose are in the Shareholder Application in this
Prospectus. Such a plan is voluntary and may be discontinued by written notice
to FTD, which must be received at least 10 days prior to the collection date,
or by FTD upon written notice to the investor at least 30 days prior to the
collection date.
INSTITUTIONAL ACCOUNTS. There may be additional methods of purchasing,
redeeming or exchanging Shares of the Fund available for institutional
accounts. For further information, contact Templeton's Institutional Account
Services Department at 1-800-684-4001.
ACCOUNT STATEMENTS. Shareholder accounts are opened in accordance with the
Shareholder's registration instructions. Transactions in the account, such as
additional investments and dividend reinvestments, will be reflected on
regular confirmation statements from the Transfer Agent.
TEMPLETON STAR SERVICE. Shareholders may check the current prices of Shares,
account balances/values, a description of the last transaction, and duplicate
account statements, 24 hours a day, 365 days a year, with Templeton STAR
Service by calling 1-800-654-0123 from a touch-tone telephone. A fund code
(the Fund's code is 415) and the Shareholder's account number are necessary
for accessing information (other than Share prices) from Templeton STAR
Service.
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RETIREMENT PLANS. Shares of the Fund may be purchased through various
retirement plans including the following plans for which Franklin Templeton
Trust Company or its affiliate acts as trustee or custodian: IRAs, Simplified
Employee Pensions, 403(b) plans, qualified plans for corporations, self-
employed individuals or partnerships, and 401(k) plans. For further
information about any of the plans, agreements, applications and annual fees,
contact Franklin Templeton Distributors, Inc. To determine which retirement
plan is appropriate, an investor should contact his or her tax adviser.
NET ASSET VALUE. The net asset value of the Shares of the Fund is computed
as of the close of trading on each day the New York Stock Exchange is open for
trading, by dividing the value of the Fund's securities plus any cash and
other assets (including accrued interest and dividends receivable) less all
liabilities (including accrued expenses) by the number of Shares outstanding,
adjusted to the nearest whole cent. A security listed or traded on a
recognized stock exchange or NASDAQ is valued at its last sale price on the
principal exchange on which the security is traded. The value of a foreign
security is determined in its national currency as of the close of trading on
the foreign exchange on which it is traded or as of the close of the New York
Stock Exchange, 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 the Fund's net asset value. If events
materially affecting the value of such securities occur during such period,
then these securities will be valued at fair value as determined by the
management and approved in good faith by the Board of Trustees. All other
securities for which over-the-counter market quotations are readily available
are valued at the mean between the current bid and asked price. Securities for
which market quotations are not readily available and other assets are valued
at fair value as determined by the management and approved in good faith by
the Board of Trustees.
EXCHANGE PRIVILEGE
A Shareholder may exchange Shares for the same class of shares of other
funds in the Franklin Templeton Group (except Templeton Capital Accumulator
Fund, Inc., Templeton Variable Annuity Fund, Templeton Variable Products
Series Fund, Franklin Valuemark Funds and Franklin Government Securities
Trust). A contingent deferred sales charge will not be imposed on exchanges.
If the exchanged Shares were subject to a contingent deferred sales charge in
the original fund purchased, and Shares are subsequently redeemed within 12
months (Class I Shares) or 18 months (Class II Shares) of the calendar month
of the original purchase date, a contingent deferred sales charge will be
imposed. The period will be tolled (or stopped) for the period Class I Shares
are exchanged into and held in a Franklin or Templeton money market fund. See
also "How to Sell Shares of the Fund--Contingent Deferred Sales Charge."
Exchange purchases are subject to the minimum investment requirements of the
fund purchased and no sales charge generally applies. However, exchanges of
shares from the Franklin Templeton Money Funds are subject to applicable sales
charges on the funds being purchased, unless the Franklin Templeton Money Fund
shares were acquired by an exchange from a fund having a sales charge, or by
reinvestment of dividends or capital gain distributions. Exchanges of Class I
Shares of the Fund which were purchased with a lower sales charge to a fund
which has a higher sales charge will be charged the difference, unless the
shares were held in the original fund for at least six months prior to
executing the exchange. All exchanges are permitted only after at least 15
days have elapsed from the date of the purchase of the Shares to be exchanged.
A Shareholder may exchange Shares by writing to the Transfer Agent (see "How
to Sell Shares of the Fund"), by contacting his or her investment dealer or--
if the Shareholder Application indicates that the Shareholder has not declined
the option--by telephoning 1-800-354-9191. Telephone exchange instructions
must be received by FTD by 4:00 p.m., New York time. Telephonic exchanges can
involve only Shares in non-certificated form. Shares held in certificate form
are not eligible, but may be returned and qualify for these
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services. All accounts involved in a telephonic exchange must have the same
registration and dividend option as the account from which the Shares are
being exchanged. The Fund and the Transfer Agent will employ reasonable
procedures to confirm that instructions communicated by telephone are genuine.
Please refer to "Telephone Transactions -- Verification Procedures." Forms for
declining the telephone exchange privilege and prospectuses of the other funds
in the Franklin Templeton Group may be obtained from FTD. Exchange redemptions
and purchases are processed simultaneously at the share prices next determined
after the exchange order is received. (See "How to Buy Shares of the Fund--
Offering Price.") A gain or loss for tax purposes generally will be realized
upon the exchange, depending on the tax basis of the Shares redeemed.
This exchange privilege is available only in states where shares of the fund
being acquired may legally be sold and may be modified, limited or terminated
at any time by the Fund upon 60 days' written notice. A Shareholder who wishes
to make an exchange should first obtain and review a current prospectus of the
fund into which he or she wishes to exchange. Broker-dealers who process
exchange orders on behalf of their customers may charge a fee for their
services. Such fee may be avoided by making requests for exchange directly to
the Transfer Agent.
During periods of drastic economic or market changes, it is possible that
the telephone exchange privilege may be difficult to implement. In this event,
Shareholders should follow the other exchange procedures discussed in this
section, including the procedures for processing exchanges through broker-
dealers.
The equivalent of an exchange involving retirement accounts (including IRAs)
between the Templeton Family of Funds and the Franklin Group of Funds(R)
requires the completion of additional documentation before it can be effected.
Call 1-800-354-9191 for further information and forms.
EXCHANGES OF CLASS II SHARES. When an account has some Shares subject to the
contingent deferred sales charge, and some that are not, the Shares will be
transferred proportionately from each type of Share into the new fund. Shares
received from reinvestment of dividends and capital gain distributions are
referred to as "free Shares," Shares which were originally subject to a
contingent deferred sales charge but to which the contingent deferred sales
charge no longer applies are called "matured Shares," and Shares still subject
to the contingent deferred sales charge are referred to as "CDSC liable
Shares," and each represents a different type of Share for purposes of
exchanging into a new fund. CDSC liable Shares held for different periods of
time are considered different types of CDSC liable Shares. For instance, if a
Shareholder has $1,000 in free Shares, $2,000 in matured Shares, and $3,000 in
CDSC liable Shares, and the Shareholder exchanges $3,000 into a new fund, $500
will be exchanged from free Shares, $1,000 from matured Shares, and $1,500
from CDSC liable Shares. Similarly, if CDSC liable Shares have been purchased
at different periods, a proportionate amount will be taken from Shares held
for each period. If, for example, the Shareholder holds $1,000 in Shares
bought three months ago, $1,000 bought six months ago, and $1,000 bought nine
months ago, $500 in each of these Shares will be exchanged into the new fund.
Class II Shares may be exchanged for shares of Franklin Templeton Money Fund
II ("Money Fund II"), a series of the Franklin Templeton Money Fund Trust. No
drafts (checks) may be written on Money Fund II accounts, nor may Shareholders
purchase shares in Money Fund II directly. Shares continue to age and a
contingent deferred sales charge will be assessed if CDSC liable Shares are
redeemed. No other money market funds are available for Class II Shareholders
for exchange purposes. On the other hand, Class I Shares may be exchanged for
shares of any money market funds in the Franklin Group of Funds(R) or the
Templeton Family of Funds except Money Fund II. Draft writing privileges and
direct purchases are allowed on these money market funds as described in their
respective prospectuses.
TRANSFERS. Transfers between accounts in the same fund and class are not
subject to a contingent deferred sales charge. The transferred Shares will
continue to age from the date of original purchase. Like exchanges, Shares
will be moved proportionately from each type of Share in the original account.
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CONVERSION RIGHTS. It is not presently anticipated that Class II Shares will
be converted to Class I Shares at this time. A Shareholder may, however, sell
Class II Shares and use the proceeds to purchase Class I Shares. In that
event, the sales charge for the purchased Class I Shares will be decreased by
the value of any initial sales charge and contingent deferred sales charge
paid in connection with the purchase and redemption of the Class II Shares.
EXCHANGES BY TIMING ACCOUNTS. In the case of market timing or allocation
services ("Timing Accounts"), FTD will deduct an administrative service fee of
$5.00 per exchange. Timing Accounts generally include accounts administered so
as to redeem or purchase Shares based upon certain predetermined market
indicators. In accordance with the terms of their respective prospectuses,
certain funds in the Franklin Templeton Group do not accept or may place
differing limitations than those described below on exchanges by Timing
Accounts.
The Fund reserves the right to temporarily or permanently terminate the
exchange privilege or reject any specific purchase order for any Timing
Account or any person whose transactions seem to follow a timing pattern who:
(i) makes an exchange request out of the Fund within two weeks of an earlier
exchange request out of the Fund, (ii) makes more than two exchanges out of
the Fund per calendar quarter, or (iii) exchanges shares equal in value to at
least $5 million, or more than 1% of the Fund's net assets. Accounts under
common ownership or control, including accounts administered so as to redeem
or purchase shares based upon certain predetermined market indicators, will be
aggregated for purposes of the exchange limits.
In addition, the Fund reserves the right to refuse the purchase side of
exchange requests by any Timing Account, person, or group if, in the
Investment Manager's judgment, the Fund would be unable to invest effectively
in accordance with its investment objectives and policies, or would otherwise
potentially be adversely affected. A Shareholder's exchanges into the Fund may
be restricted or refused
if the Fund receives or anticipates simultaneous orders affecting significant
portions of the Fund's assets. In particular, a pattern of exchanges that
coincides with a "market timing" strategy may be disruptive to the Fund and
therefore may be refused.
Finally, as indicated above, the Fund and FTD reserve the right to refuse
any order for the purchase of Shares.
HOW TO SELL SHARES OF THE FUND
CONTINGENT DEFERRED SALES CHARGE. Class I. In order to recover commissions
paid to securities dealers on qualified investments of $1 million or more, or
for purchases made by certain retirement plans of corporations with collective
retirement plan assets of $10 million or more, a contingent deferred sales
charge of 1% applies to redemptions of those investments within 12 months of
the calendar month of their purchase. The charge is 1% of the lesser of the
then-current net asset value of the Shares redeemed (exclusive of reinvested
dividends and capital gain distributions) or the original purchase price of
such Shares, and is retained by FTD.
Class II. Class II Shares redeemed within 18 months of their purchase will
be assessed a contingent deferred sales charge of 1% on the lesser of the
then-current net asset value of the Shares redeemed or the original purchase
price of such Shares unless one of the exceptions described below applies. A
contingent deferred sales charge will not be assessed on increases in net
asset value above the initial purchase price, on Class II Shares held more
than 18 months, or on Shares originally derived from reinvestment of dividends
or capital gain distributions. For tax purposes, a contingent deferred sales
charge is treated as a reduction in redemption proceeds, rather than an
adjustment to the cost basis.
Class I and Class II. In determining if a charge applies, Shares not subject
to a contingent deferred sales charge are deemed to be redeemed first, in the
following order: (i) Shares representing amounts attributable to capital
appreciation of those Shares held less
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<PAGE>
than the contingency period; (ii) Shares purchased with reinvested dividends
and capital gain distributions; and (iii) other Shares held longer than the
contingency period, followed by any Shares held less than the contingency
period, on a "first in, first out" basis.
The contingent deferred sales charge is waived for: exchanges; distributions
to participants in Franklin Templeton Trust Company or Templeton Funds Trust
Company retirement plan accounts due to death, disability or attainment of age
59 1/2; tax-free returns of excess contributions to employee benefit plans;
distributions from employee benefit plans, including those due to plan
termination or plan transfer; redemptions through a Systematic Withdrawal Plan
established prior to February 1, 1995 and, for Systematic Withdrawal Plans
established thereafter, redemptions of up to 1% monthly of an account's net
asset value (3% quarterly, 6% semiannually or 12% annually); and redemptions
initiated by the Fund due to a Shareholder's account falling below the minimum
specified account size.
All investments made during a calendar month, regardless of when during the
month the investment occurred, will age one month on the last day of that
month, and each subsequent month.
Requests for redemptions for a specified dollar amount will result in
additional Shares being redeemed to cover any applicable contingent deferred
sales charge while requests for redemption of a specific number of Shares will
result in the applicable contingent deferred sales charge being deducted from
the total dollar amount redeemed.
Shares will be redeemed, without charge, on request of the Shareholder in
"Proper Order" to the Transfer Agent. "PROPER ORDER" MEANS THAT THE REQUEST TO
REDEEM MUST MEET ALL OF THE FOLLOWING REQUIREMENTS:
1. Except as provided below under "Redemptions by Telephone," it must be in
writing, signed by the Shareholder(s) exactly in the manner as the Shares are
registered, and must specify either the number of Shares, or the dollar amount
of Shares, to be redeemed and sent to Franklin Templeton Investor Services,
Inc., P.O. Box 33030, St. Petersburg, Florida 33733-8030;
2. The signature(s) of the redeeming Shareholder(s) must be guaranteed by an
"eligible guarantor," including (1) national or state banks, savings
associations, savings and loan associations, trust companies, savings banks,
industrial loan companies and credit unions; (2) national securities
exchanges, registered securities associations and clearing agencies; (3)
securities broker-dealers which are members of a national securities exchange
or a clearing agency or which have minimum net capital of $100,000; or (4)
institutions that participate in the Securities Transfer Agent Medallion
Program ("STAMP") or other recognized signature medallion program. A notarized
signature will not be sufficient for the request to be in Proper Order. If the
Shares are registered in more than one name, the signature of each of the
redeeming Shareholders must be guaranteed. A signature guarantee is not
required for redemptions of $50,000 or less, requested by and payable to all
Shareholders of record, to be sent to the address of record for that account.
However, the Fund reserves the right to require signature guarantees on all
redemptions. A signature guarantee is required in connection with any written
request for transfer of Shares. Also, a signature guarantee is required if the
Fund or the Transfer Agent believes that a signature guarantee would protect
against potential claims based on the transfer instructions, including, for
example, when (a) the current address of one or more joint owners of an
account cannot be confirmed, (b) multiple owners have a dispute or give
inconsistent instructions to the Fund, (c) the Fund has been notified of an
adverse claim, (d) the instructions received by the Fund are given by an
agent, not the actual registered owner, (e) the Fund determines that joint
owners who are married to each other are separated or may be the subject of
divorce proceedings, or (f) the authority of a representative of a
corporation, partnership, association, or other entity has not been
established to the satisfaction of the Fund;
3. Any outstanding certificates must accompany the request together with a
stock power signed by the Shareholder(s), with signature(s) guaranteed as
described in Item 2 above;
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4. Liquidation requests of corporate, partnership, trust and custodianship
accounts, and accounts under court jurisdiction, require the following
documentation to be in proper form:
. Corporation--(i) Signature guaranteed letter of instruction from the
authorized officer(s) of the corporation, and (ii) a corporate
resolution in a form satisfactory to the Transfer Agent;
. Partnership--(i) Signature guaranteed letter of instruction from a
general partner and, if necessary, (ii) pertinent pages from the
partnership agreement identifying the general partners or other
documentation in a form satisfactory to the Transfer Agent;
. Trust--(i) Signature guaranteed letter of instruction from the
trustee(s), and (ii) a copy of the pertinent pages of the trust
document listing the trustee(s) or a certificate of incumbency if the
trustee(s) are not listed on the account registration;
. Custodial (other than a retirement account)--Signature guaranteed
letter of instruction from the custodian;
. Accounts under court jurisdiction--Check court documents and the
applicable state law since these accounts have varying requirements,
depending upon the state of residence; and
5. Redemption of Shares held in a retirement plan for which Franklin
Templeton Trust Company or its affiliate acts as trustee or custodian must
conform to the distribution requirements of the plan and the Fund's redemption
requirements above. Distributions from such plans are subject to additional
requirements under the Code, and certain documents (available from the Transfer
Agent) must be completed before the distribution may be made. For example,
distributions from retirement plans are subject to withholding requirements
under the Code, and the IRS Form W-4P (available from the Transfer Agent) may
be required to be submitted to the Transfer Agent with the distribution
request, or the distribution will be delayed. Franklin Templeton Investor
Services, Inc. and its affiliates assume no responsibility to determine whether
a distribution satisfies the conditions of applicable tax laws and will not be
responsible for any penalties assessed.
To avoid delay in redemption or transfer, Shareholders having questions about
these requirements should contact the Account Services Department by calling 1-
800-354-9191 or 813-823-8712.
The redemption price will be the net asset value of the Shares next computed
after the redemption request in Proper Order is received by the Transfer Agent.
Payment of the redemption price ordinarily will be made by check (or by wire at
the sole discretion of the Transfer Agent if wire transfer is requested,
including name and address of the bank and the Shareholder's account number to
which payment of the redemption proceeds is to be wired) within seven days
after receipt of the redemption request in Proper Order. However, if Shares
have been purchased by check, the Fund will make redemption proceeds available
when a Shareholder's check received for the Shares purchased has been cleared
for payment by the Shareholder's bank, which, depending upon the location of
the Shareholder's bank, could take up to 15 days or more. The check will be
mailed by first-class mail to the Shareholder's registered address (or as
otherwise directed). Remittance by wire (to a commercial bank account in the
same name(s) as the Shares are registered) or express mail, if requested, are
subject to a handling charge of up to $15, which will be deducted from the
redemption proceeds.
The Fund, through FTD, also repurchases Shares (whether in certificate or
book-entry form) through securities dealers. The Fund normally will accept
orders to repurchase such Shares by wire or telephone from dealers for their
customers at the net asset value next computed after the dealer has received
the Shareholder's request for repurchase, if the dealer received such request
before closing time of the New York Stock Exchange on that day. Dealers have
the responsibility of submitting such repurchase requests by calling not later
than 5:00 p.m., New York time, on such day in order to obtain that day's
applicable redemption price. Repurchase of Shares is for the convenience of
Shareholders and does not involve a charge by the Fund; however, securities
dealers may impose a charge on the Shareholder for transmitting the notice of
repurchase to the Fund. The Fund reserves the right to reject any order for
repurchase, which right of rejection might adversely affect Shareholders
seeking redemption through the repurchase procedure. Ordinarily, payment will
be made to the securities dealer within seven days after receipt of a
repurchase order and Share certificate (if any) in "Proper Order"
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as set forth above. The Fund will also accept, from member firms of the New
York Stock Exchange, orders to repurchase Shares for which no certificates have
been issued by wire or telephone without a redemption request signed by the
Shareholder, provided the member firm indemnifies the Fund and FTD from any
liability resulting from the absence of the Shareholder's signature. Forms for
such indemnity agreement can be obtained from FTD.
The Fund may involuntarily redeem an investor's Shares if the net asset value
of such Shares is less than $100, provided that involuntary redemptions will
not result from fluctuations in the value of an investor's Shares. In addition,
the Fund may involuntarily redeem the Shares of an investor who has failed to
provide the Fund with a certified taxpayer identification number or such other
tax-related certifications as the Fund may require. A notice of redemption sent
by first-class mail to the investor's address of record will fix a date not
less than 30 days after the mailing date, and the Shares will be redeemed at
the net asset value at the close of business on that date, unless sufficient
additional Shares are purchased to bring the aggregate account value up to $100
or more, or unless a certified taxpayer identification number (or such other
information as the Fund has requested) has been provided, as the case may be. A
check for the redemption proceeds will be mailed to the investor at the address
of record.
REINSTATEMENT PRIVILEGE. Shares of the Fund may be purchased at net asset
value with the proceeds from (i) a redemption of Shares of any fund in the
Franklin Templeton Group (except Templeton Capital Accumulator Fund, Inc.,
Templeton Variable Annuity Fund, Templeton Variable Products Series Fund,
Franklin Valuemark Funds and Franklin Government Securities Trust) which were
purchased with an initial sales charge or assessed a contingent deferred sales
charge on redemption, or (ii) a dividend or distribution paid by any fund in
the Franklin Templeton Group, within 120 days after the date of the redemption
or dividend or distribution. However, if a Shareholder's original investment
was in Class I shares of a fund with a lower sales charge, or no sales charge,
the Shareholder must pay the difference. While credit will be given for any
contingent deferred sales charge paid on the Shares redeemed, a new contingency
period will begin. Shares of the Fund redeemed in connection with an exchange
into another fund (see "Exchange Privilege") are not considered "redeemed" for
this privilege. In order to exercise this privilege, a written order for the
purchase of Shares of the Fund must be received by the Fund or the Fund's
Transfer Agent within 120 days after the redemption. The 120 days, however, do
not begin to run on redemption proceeds placed immediately after redemption in
a Franklin Bank Certificate of Deposit ("CD") until the CD (including any
rollover) matures. The amount of gain or loss resulting from a redemption may
be affected by exercise of the reinstatement privilege if the Shares redeemed
were held for 90 days or less, or if a Shareholder reinvests in the same fund
within 30 days. Reinvestment will be at the next calculated net asset value
after receipt.
SYSTEMATIC WITHDRAWAL PLAN. A Shareholder may establish a Systematic
Withdrawal Plan ("Plan") and receive periodic payments from the account
provided that the net asset value of the Shares held by the Shareholder is at
least $5,000. There are no service charges for establishing or maintaining a
Plan. The minimum amount which the Shareholder may withdraw is $50 per
withdrawal transaction although this is merely the minimum amount allowed under
the Plan and should not be mistaken for a recommended amount. The Plan may be
established on a monthly, quarterly, semi-annual or annual basis. If the
Shareholder establishes a Plan, any capital gain distributions and income
dividends paid by the Fund to the Shareholder's account must be reinvested for
the Shareholder's account in additional Shares at net asset value. Payments are
then made from the liquidation of Shares at net asset value on the day of the
liquidation (which is generally on or about the 25th of the month) to meet the
specified withdrawals. Payments are generally received three to five days after
the date of liquidation. By completing the "Special Payment Instructions for
Distributions" section of the Shareholder Application included with this
Prospectus, a Shareholder may direct the selected withdrawals to another fund
in the Franklin Templeton Group, to another person, or directly to a checking
account. Liquidation of Shares may reduce or possibly exhaust the Shares in the
Shareholder's account, to the extent withdrawals exceed Shares earned through
dividends and distributions, particularly in the event of a market decline. If
the withdrawal amount exceeds the total Plan balance, the account will be
closed and the remaining balance will be sent to the Shareholder. As with other
redemptions, a liquidation to make a withdrawal payment is a sale for Federal
income tax purposes. Because the amount withdrawn under the Plan may be more
than the Shareholder's actual yield or income, part of such a Plan payment may
be a return of the Shareholder's investment.
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Maintaining a Plan concurrently with purchases of additional Shares of the
Fund would be disadvantageous because of the sales charge on the additional
purchases. The Shareholder should ordinarily not make additional investments of
less than $5,000 or three times the annual withdrawals under the Plan during
the time such a Plan is in effect. A Plan may be terminated on written notice
by the Shareholder or the Fund, and it will terminate automatically if all
Shares are liquidated or withdrawn from the account, or upon the Fund's receipt
of notification of the death or incapacity of the Shareholder. Shareholders may
change the amount (but not below $50) and schedule of withdrawal payments or
suspend one such payment by giving written notice to the Transfer Agent at
least seven business days prior to the end of the month preceding a scheduled
payment. Share certificates may not be issued while a Plan is in effect.
REDEMPTIONS BY TELEPHONE. Shareholders who file a Telephone Redemption
Authorization Agreement (the "Agreement") (a copy of which is included in this
Prospectus) may redeem Shares of the Fund by telephone, subject to the
Restricted Account exception noted under "Telephone Transactions--Restricted
Accounts." The Fund and the Transfer Agent will employ reasonable procedures to
confirm that instructions given by telephone are genuine. Shareholders,
however, bear the risk of loss in certain cases as described under "Telephone
Transactions--Verification Procedures."
For Shareholder accounts with a completed Agreement on file, redemptions of
uncertificated Shares or Shares which have previously been deposited with the
Fund or the Transfer Agent may be made for up to $50,000 per day per Fund
account. Telephone redemption requests received before 4:00 p.m., New York
time, on any business day will be processed that same day. The redemption check
will be sent within seven days, made payable to all the registered owners on
the account, and will be sent only to the address of record. Redemption
requests by telephone will not be accepted within 30 days following an address
change by telephone. In that case, a Shareholder should follow the other
redemption procedures set forth in this Prospectus. Institutional accounts
which wish to execute redemptions in excess of $50,000 must complete an
Institutional Telephone Privileges Agreement which is available from
Templeton's Institutional Account Services Department by telephoning 1-800-684-
4001.
TELEPHONE TRANSACTIONS
Shareholders of the Fund and their dealer of record, if any, may be able to
execute various transactions by calling the Transfer Agent at 1-800-354-9191.
All Shareholders will be able to: (i) effect a change in address, (ii) change a
dividend option (see "Restricted Accounts" below), (iii) transfer Fund Shares
in one account to another identically registered account in the Fund, and (iv)
exchange Fund Shares as described in this Prospectus by telephone. In addition,
Shareholders who complete and file an Agreement as described under "How to Sell
Shares of the Fund--Redemptions by Telephone" will be able to redeem Shares of
the Fund.
VERIFICATION PROCEDURES. The Fund and the Transfer Agent will employ
reasonable procedures to confirm that instructions communicated by telephone
are genuine. These will include: recording all telephone calls requesting
account activity by telephone, requiring that the caller provide certain
personal and/or account information requested by the telephone service agent at
the time of the call for the purpose of establishing the caller's
identification, and sending a confirmation statement on redemptions to the
address of record each time account activity is initiated by telephone. So long
as the Fund and the Transfer Agent follow instructions communicated by
telephone which were reasonably believed to be genuine at the time of their
receipt, neither they nor their affiliates will be liable for any loss to the
Shareholder caused by an unauthorized transaction. Shareholders are, of course,
under no obligation to apply for or accept telephone transaction privileges. In
any instance where the Fund or the Transfer Agent is not reasonably satisfied
that instructions received by telephone are genuine, the requested transaction
will not be executed, and neither the Fund, the Transfer Agent, nor their
affiliates will be liable for any losses which may occur because of a delay in
implementing a transaction.
RESTRICTED ACCOUNTS. Telephone redemptions and dividend option changes may
not be accepted on Franklin Templeton Trust Company ("FTTC") or Templeton Funds
Trust Company ("TFTC") retirement accounts. To assure compliance with all
applicable regulations, special forms are required for any distribution,
redemption, or dividend payment. Although the telephone exchange privilege
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is extended to these retirement accounts, a Franklin Templeton Transfer
Authorization Form must be on file in order to transfer retirement plan assets
between the Franklin Group of Funds (R) and the Templeton Family of Funds
within the same plan type. Changes to dividend options for these accounts must
also be made in writing.
To obtain further information regarding distribution or transfer procedures,
including any required forms, FTTC retirement account shareholders may call 1-
800-527-2020 (toll free), and TFTC retirement account shareholders may call 1-
800-354-9191 (press "2") (also toll free).
GENERAL. During periods of drastic economic or market changes, it is
possible that the telephone transaction privileges will be difficult to
execute because of heavy telephone volume. In such situations, Shareholders
may wish to contact their dealer for assistance, or to send written
instructions to the Fund as detailed elsewhere in this Prospectus.
Neither the Fund nor the Transfer Agent will be liable for any losses
resulting from the inability of a Shareholder to execute a telephone
transaction.
The telephone transaction privilege may be modified or discontinued by the
Fund at any time upon 60 days' written notice to Shareholders.
MANAGEMENT OF THE FUND
The Fund is managed by its Board of Trustees and all powers are exercised by
or under authority of the Board. Information relating to the Trustees and
Executive Officers is set forth under the heading "Management of the Fund" in
the SAI.
The Board has carefully reviewed the multiclass structure to ensure that no
material conflict exists between the two classes of Shares. Although the Board
does not expect to encounter material conflicts in the future, the Board will
continue to monitor the Fund and will take appropriate action to resolve such
conflicts if any should later arise.
INVESTMENT MANAGER. The Investment Manager of the Fund is Templeton
Investment Counsel, Inc., a Florida corporation located at Broward Financial
Centre, Fort Lauderdale, Florida 33394-3091. The Investment Manager manages
the investment and reinvestment of the Fund's assets. The Investment Manager
is an indirect wholly owned subsidiary of Franklin Resources, Inc.
("Franklin"). Through its subsidiaries, Franklin is engaged in various aspects
of the financial services industry. The Investment Manager and its affiliates
serve as advisers for a wide variety of public investment mutual funds and
private clients in many nations. The Templeton organization has been investing
globally over the past 52 years and, with its affiliates, provides investment
management and advisory services to a worldwide client base, including over
4.3 million mutual fund shareholders, foundations and endowments, employee
benefit plans and individuals. The Investment Manager and its affiliates have
approximately 4,100 employees in the United States, Australia, Scotland,
Germany, Hong Kong, Luxembourg, Bahamas, Singapore, Canada and Russia.
The Investment Manager uses a disciplined, long-term approach to value-
oriented global and international investing. It has an extensive global
network of investment research sources. Securities are selected for the Fund's
portfolio on the basis of fundamental company-by-company analysis. Many
different selection methods are used for different funds and clients and these
methods are changed and improved by the Investment Manager's research on
superior selection methods.
22
<PAGE>
The Investment Manager does not furnish any other services or facilities for
the Fund, although such expenses are paid by some investment advisers of other
investment companies. As compensation for its services, the Fund pays the
Investment Manager a fee which, during the most recent fiscal year,
represented 0.80% of its average daily net assets.
Currently, the lead portfolio manager for the Fund is Howard J. Leonard. Mr.
Leonard joined the Investment Manager in 1989 and is Vice President, Portfolio
Management/Research, of the Investment Manager. Prior to 1989, Mr. Leonard was
director of investment research at First Pennsylvania Bank, where he was
responsible for equity and fixed income research activities. Mr. Leonard also
worked previously at Provident National Bank as a security analyst covering a
variety of industries. Gary P. Motyl, a Senior Vice President of the
Investment Manager, and Mark R. Beveridge, Vice President of the Investment
Manager, also exercise significant portfolio management responsibilities with
respect to the Fund. Mr. Motyl has been a security analyst and portfolio
manager with the Investment Manager since 1981. Prior to joining the Templeton
organization, Mr. Motyl worked from 1974 to 1979 as a security analyst with
Standard & Poor's Corporation. He then worked as a research analyst and
portfolio manager from 1979 to 1981 with Landmark First National Bank. In this
capacity he had responsibility for equity research and managed several pension
and profit sharing plans. Mr. Beveridge joined the Templeton organization in
1985 and is Vice President of the Investment Manager and a member of the
Templeton Research Technology Group with responsibility for industrial
components and market coverage of Venezuela. Prior to joining the Templeton
organization, Mr. Beveridge was a principal with a financial accounting
software firm.
The Investment Manager has entered into a Sub-Advisory Agreement with Dean
Witter InterCapital Inc. ("InterCapital"), whose address is Two World Trade
Center, New York, New York 10048, pursuant to which InterCapital provides the
Investment Manager with investment advisory assistance and portfolio
management advice. InterCapital, which was incorporated in July, 1992, is a
wholly-owned subsidiary of Dean Witter, Discover & Co. In an internal
reorganization which took place in January, 1993, InterCapital assumed the
investment advisory, management and administrative activities previously
performed by the InterCapital Division of Dean Witter Reynolds Inc., a broker-
dealer affiliate of InterCapital. InterCapital provides the Investment Manager
on an ongoing basis with analyses regarding economic and market conditions,
asset allocation, foreign currency matters and the advisability of entering
into foreign exchange contracts. For its services, the Investment Manager pays
InterCapital a monthly fee at an annual rate of 0.25% of the Fund's average
daily net assets. Further information concerning the Investment Manager and
InterCapital is included under the heading "Investment Management and Other
Services" in the SAI.
BUSINESS MANAGER. Templeton Global Investors, Inc. provides certain
administrative facilities and services for the Fund, including payment of
salaries of officers, preparation and maintenance of books and records,
preparation of tax returns, preparation of financial reports, monitoring
compliance with regulatory requirements and monitoring tax-deferred retirement
plans. For its services, the Fund pays the Business Manager a monthly fee
equivalent on an annual basis to 0.15% of the average daily net assets of the
Fund, reduced to 0.135% of such assets in excess of $200 million, to 0.10% of
such assets in excess of $700 million, and to 0.075% of such assets in excess
of $1,200 million. The combined investment management and business management
fees paid by the Fund are higher than those paid by most other investment
companies.
TRANSFER AGENT. Franklin Templeton Investor Services, Inc. serves as
transfer agent and dividend disbursing agent for the Fund.
CUSTODIAN. The Chase Manhattan Bank, N.A. serves as custodian of the Fund's
assets.
PLANS OF DISTRIBUTION. Each class of Shares of the Fund has approved and
adopted a separate Plan of Distribution ("Class I Plan" and "Class II Plan,"
respectively, or "Plans") pursuant to Rule 12b-1 under the 1940 Act. The Rule
12b-1 fees charged to each class will be based solely on the distribution
and/or servicing fees attributable to that particular class. Any portion of
fees remaining from any Plan after distribution to securities dealers up to
the maximum amount permitted under each Plan may be used by the class to
reimburse FTD for routine ongoing promotion and distribution expenses. Such
expenses may include, but are not limited to, the printing of prospectuses and
reports used for sales purposes, expenses of preparing and distributing sales
literature and related expenses,
23
<PAGE>
advertisements, and other distribution-related expenses, including a prorated
portion of FTD's overhead expenses attributable to the distribution of Fund
Shares, as well as any distribution or service fees paid to securities dealers
or their firms or others who have executed a servicing agreement with the
Fund, FTD or its affiliates.
The maximum amount which the Fund may pay to FTD under the Class I Plan for
such distribution expenses is 0.25% per annum of Class I's average daily net
assets, payable on a quarterly basis. Under the Class II Plan, the maximum
amount which the Fund may pay to FTD for such distribution expenses is 0.75%
of Class II's average daily net assets per annum, payable on a quarterly
basis. All expenses of distribution and marketing over that amount will be
borne by FTD, or others who have incurred them without reimbursement by the
Fund. In addition to this amount, under the Class II Plan, the Fund shall pay
0.25% per annum of the Class' average daily net assets as a servicing fee.
This fee will be used to pay dealers or others for, among other things,
assisting in establishing and maintaining customer accounts and records;
assisting with purchase and redemption requests; receiving and answering
correspondence; monitoring dividend payments from the Fund on behalf of the
customers; and similar activities related to furnishing personal services and
maintaining Shareholder accounts.
Under both Plans, costs and expenses not reimbursed in any one given month
(including costs and expenses not reimbursed because they exceed the
applicable limit of the Plan) may be reimbursed in subsequent months or years,
subject to applicable law. FTD has informed the Fund that the costs and
expenses of Class I Shares that may be reimbursable in future months or years
were $ ( % of its net assets) at December 31, 1994.
Each Plan also covers any payments to or by the Fund, the Investment
Manager, FTD, or other parties on behalf of the Fund, the Investment Manager
or FTD, to the extent such payments are deemed to be for the financing of any
activity primarily intended to result in the sale of Shares issued by the Fund
within the context of Rule 12b-1. The payments under the Plans are included in
the maximum operating expenses which may be borne by each class of the Fund.
For more information, please see the SAI.
EXPENSES. For the fiscal year ended December 31, 1994, expenses amounted to
1.53% of the Fund's average net assets.
BROKERAGE COMMISSIONS. The Fund's brokerage policies are described under the
heading "Brokerage Allocation" in the SAI. The Fund's brokerage policies
provide that the receipt of research services from a broker and the sale of
Shares by a broker are factors which may be taken into account in allocating
securities transactions, so long as the prices and execution provided by the
broker equal the best available within the scope of the Fund's brokerage
policies.
GENERAL INFORMATION
DESCRIPTION OF SHARES/SHARE CERTIFICATES. The capitalization of the Fund
consists of an unlimited number of Shares of beneficial interest, par value of
$.01 per Share. The Board of Trustees is authorized, in its discretion, to
classify and allocate the unissued Shares of the Fund, each such class to
represent a different portfolio of securities. Each Share entitles the holder
to one vote.
Under Massachusetts law, Shareholders could, under certain circumstances, be
held personally liable for the obligations of the Fund. However, the
Declaration of Trust disclaims liability of the Shareholders, Trustees and
officers of the Fund for acts or obligations of the Fund, which are binding
only on the assets and property of the Fund. The Declaration of Trust provides
for indemnification out of Fund property for all loss and expense of any
Shareholder held personally liable for the obligations of the Fund. The risk
of a Shareholder incurring financial loss on account of Shareholder liability
is limited to circumstances in which the Fund itself would be unable to meet
its obligations and, thus, should be considered remote.
24
<PAGE>
The Fund will not ordinarily issue certificates for Shares purchased. Share
certificates representing whole (not fractional) Shares are issued only upon
the specific request of the Shareholder made in writing to the Transfer Agent.
No charge is made for the issuance of one certificate for all or some of the
Shares purchased in a single order.
MEETINGS OF SHAREHOLDERS. Massachusetts business trust law does not require
the Fund to hold annual Shareholder meetings, although special meetings may be
called from time to time. The Fund will be required to hold a meeting to elect
Trustees to fill any existing vacancies on the Board if, at any time, fewer
than a majority of the Trustees have been elected by the Shareholders of the
Fund. In addition, the holders of not less than two-thirds of the outstanding
Shares or other voting interests of the Fund may remove a person serving as
Trustee either by declaration in writing or at a meeting called for such
purpose. The Trustees are required to call a meeting for the purpose of
considering the removal of a person serving as a Trustee if requested in
writing to do so by the holders of not less than 10% of the outstanding Shares
of the Fund. The Fund is required to assist in Shareholder communications in
connection with the calling of a Shareholder meeting to consider the removal
of a Trustee or Trustees.
DIVIDENDS AND DISTRIBUTIONS. The Fund intends to pay a dividend at least
annually representing substantially all of its net investment income and any
net realized capital gains. Dividends will be calculated and distributed in
the same manner for both classes of Shares, and their value will differ only
to the extent that they are affected by the distribution plan fees and sales
charges. Because ongoing Rule 12b-1 expenses will be lower for Class I than
Class II, dividends distributed to Class I Shares will generally be higher
than those distributed to Class II Shares. Income dividends and capital gains
distributions paid by the Fund, other than on those Shares whose owners keep
them registered in the name of a broker-dealer, are automatically reinvested
on the payable date in whole or fractional Shares at net asset value as of the
ex-dividend date, unless a Shareholder makes a written or telephonic request
for payments in cash. Dividend and capital gain distributions are eligible for
investment in the same class of Shares of the Fund or the same class of
another fund in the Franklin Group of Funds(R) or Templeton Family of Funds at
net asset value. The processing date for the reinvestment of dividends may
vary from month to month, and does not affect the amount or value of the
Shares acquired. Income dividends and capital gains distributions will be paid
in cash on Shares during the time that their owners keep them registered in
the name of a broker-dealer, unless the broker-dealer has made arrangements
with the Transfer Agent for reinvestment.
Prior to purchasing Shares of the Fund, the impact of dividends or capital
gains distributions which have been declared but not yet paid should be
carefully considered. Any dividend or capital gains distribution paid shortly
after a purchase by a Shareholder prior to the record date will have the
effect of reducing the per Share net asset value of the Shares by the amount
of the dividend or distribution. All or a portion of such dividend or
distribution, although in effect a return of capital, generally will be
subject to tax.
Checks are forwarded by first-class mail to the address of record. The
proceeds of any such checks which are not accepted by the addressee and are
returned to the Fund will be reinvested for the Shareholder's account in whole
or fractional Shares at net asset value next computed after the check has been
received by the Transfer Agent. Subsequent distributions automatically will be
reinvested at net asset value as of the ex-dividend date in additional whole
or fractional Shares.
FEDERAL TAX INFORMATION. The Fund intends to elect to be treated and to
qualify each year as a regulated investment company under Subchapter M of the
Code. See the SAI for a summary of the requirements that must be satisfied to
so qualify. A regulated investment company generally is not subject to federal
income tax on income and capital gains distributed in a timely manner to its
shareholders. Earnings of the Fund not distributed on a timely basis in
accordance with a calendar year distribution requirement are subject to a
nondeductible 4% excise tax. To prevent imposition of this tax, the Fund
intends to comply with this distribution requirement. The Fund intends to
distribute substantially all of its net investment income and realized capital
gains to Shareholders, which generally will be taxable income or capital gains
in their hands. Distributions declared in October, November or December to
Shareholders of record on a date in such month and paid during the following
January will be treated as having been received by Shareholders as of December
31 in the year such distributions were declared. The Fund will inform
Shareholders each year of the amount and nature of such income or gains. The
Fund may be required to withhold Federal income tax at the rate of 31% of all
taxable distributions (including
25
<PAGE>
redemptions) paid to Shareholders who fail to provide the Fund with their
correct taxpayer identification number or to make required certifications. A
more detailed description of tax consequences to Shareholders is contained in
the SAI under the heading "Tax Status."
INQUIRIES. Shareholders' inquiries will be answered promptly. They should be
addressed to Franklin Templeton Investor Services, Inc., 700 Central Avenue,
P.O. Box 33030, St. Petersburg, Florida 33733-8030--telephone 1-800-354-9191
or 813-823-8712. Transcripts of Shareholder accounts less than three-years old
are provided on request without charge; requests for transactions going back
more than three years from the date the request is received by the Transfer
Agent are subject to a fee of up to $15 per account.
PERFORMANCE INFORMATION. The Fund may include its total return in
advertisements or reports to Shareholders or prospective investors. Quotations
of average annual total return will be expressed in terms of the average
annual compounded rate of return on a hypothetical investment in the Fund over
a period of 1, 5 and 10 years (or up to the life of the Fund), will reflect
the deduction of the maximum initial sales charge and deduction of a
proportional share of Fund expenses (on an annual basis), and will assume that
all dividends and distributions are reinvested when paid. Total return may be
expressed in terms of the cumulative value of an investment in the Fund at the
end of a defined period of time. For a description of the methods used to
determine total return for the Fund, see "Performance Information" in the SAI.
STATEMENTS AND REPORTS. The Fund's fiscal year ends on December 31. Annual
reports (containing financial statements audited by independent auditors and
additional information regarding the Fund's performance) and semi-annual
reports (containing unaudited financial statements) are sent to Shareholders
each year. Additional copies may be obtained, without charge, upon request to
the Account Services Department. The Fund also sends to each Shareholder a
confirmation statement after every transaction that affects the Shareholder's
account and a year-end historical confirmation statement.
26
<PAGE>
INSTRUCTIONS AND IMPORTANT NOTICE
SUBSTITUTE W-9 INSTRUCTIONS INFORMATION
GENERAL. Backup withholding is not an additional tax. Rather, the tax liability
of persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained from the IRS.
OBTAINING A NUMBER. If you do not have a Social Security Number/Taxpayer
Identification Number, you must obtain Form SS-5 or Form SS-4 from your local
Social Security or IRS office and apply for one. If you have checked the
"Awaiting TIN" box and signed the certification, withholding will apply to
payments relating to your account unless you provide a certified TIN within 60
days.
WHAT SSN/TIN TO GIVE. Please refer to the following guidelines:
<TABLE>
<CAPTION>
ACCOUNT TYPE GIVE SSN OF ACCOUNT TYPE GIVE EMPLOYER ID # OF
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
. Individual Individual . Trust, Estate, or Trust, Estate, or
Pension Plan Trust Pension Plan Trust
- -----------------------------------------------------------------------------------
. Joint Owner who will be . Corporation, Corporation,
Individual paying tax or first- Partnership, or Partnership, or other
named individual other organization organization
- -----------------------------------------------------------------------------------
. Unif. Minor . Broker nominee Broker nominee
Gift/Transfer
to Minor
- -----------------------------------------------------------------------------------
. Sole Owner of business
Proprietor
- -----------------------------------------------------------------------------------
. Legal Ward, Minor, or
Guardian Incompetent
- -----------------------------------------------------------------------------------
</TABLE>
EXEMPT RECIPIENTS. Please provide your TIN and check the "Exempt Recipient" box
if you are an exempt recipient. Exempt recipients generally include:
A corporation A real estate investment trust
A financial institution A common trust fund operated by a bank
under section 584(a)
An organization exempt from tax An exempt charitable remainder trust or
under section 501(a), or an a non-exempt trust described in section
individual retirement plan 4947(a)(1)
A registered dealer in securities or An entity registered at all times under
commodities registered in the U.S. the Investment Company Act of 1940
or a U.S. possession
IRS PENALTIES. If you do not supply us with your SSN/TIN, you will be subject
to an IRS $50 penalty unless your failure is due to reasonable cause and not
willful neglect. If you fail to report certain income on your Federal income
tax return, you will be treated as negligent and subject to an IRS 20% penalty
on any underpayment of tax attributable to such negligence, unless there was
reasonable cause for the resulting underpayment and you acted in good faith. If
you falsify information on this form or make any other false statement
resulting in no backup withholding on an account which should be subject to
backup withholding, you may be subject to an IRS $500 penalty and certain
criminal penalties including fines and imprisonment.
SUBSTITUTE W-8 INSTRUCTIONS INFORMATION
EXEMPT FOREIGN PERSON. Check the "Exempt Foreign Person" box if you qualify as
a non-resident alien or foreign entity that is not subject to certain U.S.
information return reporting or to backup withholding rules. Dividends paid to
your account may be subject to withholding of up to 30%. You are an "Exempt
Foreign Person" if you are not (1) a citizen or resident of the U.S., or (2) a
U.S. corporation, partnership, estate, or trust. In the case of an individual,
an "Exempt Foreign Person" is one who has been physically present in the U.S.
for less than 31 days during the current calendar year. An individual who is
physically present in the U.S. for at least 31 days during the current calendar
year will still be treated as an "Exempt Foreign Person," provided that the
total number of days physically present in the current calendar year and the
two preceding calendar years does not exceed 183 days (counting all of the days
in the current calendar year, only one-third of the days in the first preceding
calendar year and only one-sixth of the days in the second preceding calendar
year). In addition, lawful permanent residents or green card holders may not be
treated as "Exempt Foreign Persons." If you are an individual or an entity, you
must not now be, or at this time expect to be, engaged in a U.S. trade or
business with respect to which any gain derived from transactions effected by
the Fund/Payer during the calendar year is effectively connected to the U.S.
(or your transactions are exempt from U.S. taxes under a tax treaty).
PERMANENT ADDRESS. The Shareholder Application must contain your permanent
address if you are an "Exempt Foreign Person." If you are an individual,
provide your permanent address. If you are a partnership or corporation,
provide the address of your principal office. If you are an estate or trust,
provide the address of your permanent residence or the principal office of any
fiduciary.
NOTICE OF CHANGE IN STATUS. If you become a U.S. citizen or resident after you
have provided certification of your foreign status, or if you cease to be an
"Exempt Foreign Person," you must notify the Fund/Payer within 30 days of your
change in status. Reporting will then begin on the account(s) listed, and
backup withholding may also begin unless you certify to the Fund/Payer that (1)
the tax payer identification number you have given is correct, and (2) the
Internal Revenue Service has not notified you that you are subject to backup
withholding because you failed to report certain interest or dividend income.
You may use Form W-9, "Payer's Request for Taxpayer Identification Number and
Certification," to make these certifications. If an account is no longer
active, you do not have to notify a Fund/Payer or broker of your change in
status unless you also have another account with the same Fund/Payer that is
still active. If you receive interest from more than one Fund/Payer or have
dealings with more than one broker or barter exchange, file a certificate with
each. If you have more than one account with the same Fund/Payer, the
Fund/Payer may require you to file a separate certificate for each account.
WHEN TO FILE. File these certifications with the Fund before a payment is made
to you, unless you have already done this in either of the two preceding
calendar years. Only certifications that are in proper order will be treated as
having been filed with the Fund.
HOW OFTEN YOU MUST FILE. This certificate generally remains in effect for three
calendar years. A Fund/Payer or broker, however, may require that a new
certificate be filed each time a payment is made. On joint accounts for which
each joint owner is a foreign person, each must provide a certification of
foreign status.
1/94
27
<PAGE>
FOR CORPORATE SHAREHOLDERS--FORM OF RESOLUTION
It will be necessary for corporate shareholders to provide a certified copy of
a resolution or other certificate of authority to authorize the purchase as
well as sale (redemption) of shares and withdrawals by checks or drafts. You
may use the following form of resolution or you may prefer to use your own. It
is understood that the Fund, Franklin Templeton Distributors, Inc., Franklin
Templeton Investor Services, Inc., the custodian bank and their affiliates may
rely upon these authorizations until revoked or amended by written notice
delivered by registered or certified mail to the Fund.
CERTIFIED COPY OF RESOLUTION (Corporation or Association)
The undersigned hereby certifies and affirms that he/she is the duly elected
_________________________________ of ___________________________________________
TITLE CORPORATE NAME
a ______________________________ organized under the laws of the State
TYPE OF ORGANIZATION
of ___________________ and that the following is a true and correct copy of a
STATE
resolution adopted by the Board of Directors at a meeting duly called and
held on ___________________________________
DATE
RESOLVED, that the _________________________________________________ of this
OFFICERS' TITLES
Corporation or Association are authorized to open an account in the name of
the Corporation or Association with one or more of the Franklin Group of
Funds (R) or Templeton Family of Funds (collectively, the "Funds") and to
deposit such funds of this Corporation or Association in this account as
they deem necessary or desirable; that the persons authorized below may
endorse checks and other instruments for deposit to said account or
accounts; and
FURTHER RESOLVED,that any of the following ___________________ officers are
NUMBER
authorized to sign any share assignment on behalf of this Corporation or
Association and to take any other actions as may be necessary to sell or
redeem its shares in the Funds or to sign checks or drafts withdrawing funds
from the account; and
FURTHER RESOLVED, that this Corporation or Association shall hold harmless,
indemnify, and defend the Funds, their custodian bank, Franklin Templeton
Distributors, Inc., Franklin Templeton Investor Services, Inc., and their
affiliates, from any claim, loss or liability resulting in whole or in
part, directly or indirectly, from their reliance from time to time upon
any certifications by the secretary or any assistant secretary of this
Corporation or Association as to the names of the individuals occupying
such offices and their acting in reliance upon these resolutions until
actual receipt by them of a certified copy of a resolution of the Board of
Directors of the Corporation or Association modifying or revoking any or
all such resolutions.
The undersigned further certifies that the below named persons, whose
signatures appear opposite their names and office titles, are duly elected
officers of the Corporation or Association. (Attach additional list if
necessary)
- -------------------------------------- ----------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- ----------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- ----------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- ----------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- ----------------------------------------
NAME OF CORPORATION OR ASSOCIATION DATE
Certified from minutes
---------------------------------------------------------
NAME AND TITLE
CORPORATE SEAL (if appropriate)
28
<PAGE>
THE FRANKLIN TEMPLETON TELEPHONE REDEMPTION AUTHORIZATION AGREEMENT
You may use Franklin Templeton's telephone redemption privilege to redeem
uncertificated Franklin Templeton Fund shares for up to $50,000 (or your
Shareholder account balance, whichever is less) per day, per fund account in
accordance with the terms of the Fund's Prospectus.
The telephone redemption privilege is available only to Shareholders who
specifically request it. If you would like to add this redemption privilege to
the other telephone transaction privileges automatically available to Franklin
Templeton Fund shareholders, please sign and return this authorization to
Franklin Templeton Investor Services, Inc. ("Services"), transfer agent and
shareholder servicing agent for the Franklin Templeton Funds.
SHAREHOLDER AUTHORIZATION: I/We request the telephone redemption privilege
under the terms described below and in the prospectus for each investment
company in the Franklin Templeton Group of Funds (a "Franklin Templeton Fund"
or a "Fund"), now opened or opened at a later date, holding shares registered
as follows:
- -------------------------------------- ----------------------------------------
PRINT NAME(S) AS SHOWN IN YOUR ACCOUNT REGISTRATION ("SHAREHOLDER")
- -------------------------------------- ----------------------------------------
ACCOUNT NUMBER(S)
I/We authorize each Fund and Services to honor and act upon telephone requests
given as provided in this agreement to redeem shares from any
Shareholder account:
- -------------------------------------- ----------------------------------------
SIGNATURE(S) AND DATE
- -------------------------------------- ----------------------------------------
PRINT NAME(S) (AND TITLE/CAPACITY, IF APPLICABLE)
VERIFICATION PROCEDURES: I/We understand and agree that: (1) each Fund and
Services will employ reasonable procedures to confirm that redemption
instructions communicated by telephone are genuine and that if these
confirmation procedures are not followed, the Fund or Services may be liable
for any losses due to unauthorized or fraudulent telephone instructions; (2)
the confirmation procedures will include the recording of telephone calls
requesting redemptions, requiring that the caller provide certain personal
and/or account information requested by the telephone service agent at the time
of the call for the purpose of establishing the caller's identification, and
the sending of confirmation statements to the address of record each time a
redemption is initiated by telephone; and (3) so long as the Fund and Services
follow the confirmation procedures in acting on instructions communicated by
telephone which were reasonably believed to be genuine at the time of receipt,
neither they, nor their parent or affiliates, will be liable for any loss,
damages or expenses caused by an unauthorized or fraudulent redemption request.
JOINTLY OWNED/CO-TRUSTEE ACCOUNTS: Each of us signing this agreement as either
joint owners or co-trustees authorizes each Fund and Services to honor
telephone redemption requests given by ANY ONE of the signers, or our
investment representative of record, if any, ACTING ALONE.
APPOINTMENT OF ATTORNEY-IN-FACT: In order to issue telephone redemption
requests acting alone, each of us individually makes the following appointment:
I hereby appoint the other joint owner(s)/co-trustee(s) as my agent(s)
(attorney[s]-in-fact) with full power and authority to individually act for me
in any lawful way with respect to the issuance of instructions to a Fund or
Services in accordance with the telephone redemption privilege we have
requested by signing this agreement. This appointment shall not be affected by
my subsequent disability or incompetency and shall remain in effect until it is
revoked by either written notice from any one of us delivered to a Fund or
Services by registered mail, return receipt requested or by a Fund or Services
upon receipt of any information that causes a Fund or Services to believe in
good faith that there is or that there may be a dispute among any of us with
respect to the Franklin Templeton Fund account(s) covered by this agreement.
Each of us agrees to notify the Fund or Services immediately upon the death of
any of the signers.
CORPORATE/PARTNERSHIP/TRUST/RETIREMENT ACCOUNTS: The Shareholder and each of us
signing this agreement on behalf of the Shareholder represent and warrant to
each Franklin Templeton Fund and Services that the Shareholder has the
authority to enter into this agreement and that each of us is duly authorized
to execute this agreement on behalf of the Shareholder. The Shareholder agrees
that its election of the telephone redemption privilege means that a Fund or
Services may honor a telephone redemption request given by ANY
officer/partner/member/administrator/or agent of the Shareholder ACTING ALONE.
RESTRICTED ACCOUNTS: Telephone redemptions may not be accepted on Franklin
Templeton Trust Company or Templeton Funds Trust Company retirement accounts.
PLEASE RETURN THIS FORM TO:
Franklin Templeton Investor Services, Inc., Attn.: Telephone Redemptions Dept.,
700 Central Avenue, St. Petersburg, Florida 33701-3628.
29
<PAGE>
THE FRANKLIN TEMPLETON GROUP
To receive a free brochure and prospectus, which contain more complete
information, including charges and expenses on each of the funds listed below,
call Franklin Fund Information, toll free, at 1-800-DIAL-BEN (1-800-342-5236)
or Templeton Fund Information at 1-800-292-9293. Please read the prospectus
carefully before you invest or send money.
TEMPLETON
FAMILY OF FUNDS
Franklin Templeton Japan Fund
Templeton American Trust
Templeton Americas Government
Securities Fund
Templeton Developing
Markets Trust
Templeton Foreign Fund
Templeton Global
Infrastructure Fund
Templeton Global
Opportunities Trust
Templeton Global Rising
Dividends Fund
Templeton Growth Fund
Templeton Income Fund
Templeton Money Fund
Templeton Real Estate
Securities Fund
Templeton Smaller
Companies Growth Fund
Templeton World Fund
FRANKLIN GROUP
OF FUNDS(R)
FRANKLIN GLOBAL/
INTERNATIONAL FUNDS
Franklin Global Health Care Fund
Franklin Global Government
Income Fund
Franklin Global Utilities Fund
Franklin International Equity Fund
Franklin Pacific Growth Fund
FUNDS SEEKING CAPITAL GROWTH
Franklin California Growth Fund
Franklin DynaTech Fund
Franklin Equity Fund
Franklin Gold Fund
Franklin Growth Fund
Franklin Rising Dividends Fund
Franklin Small Cap Growth Fund
FUNDS SEEKING GROWTH AND
INCOME
Franklin Balance Sheet
Investment Fund
Franklin Convertible
Securities Fund
Franklin Income Fund
Franklin Equity Income Fund
Franklin Utilities Fund
FUNDS SEEKING HIGH CURRENT
INCOME
Franklin's AGE High Income Fund
Franklin Investment Grade
Income Fund
Franklin Premier Return Fund
Franklin U.S. Government
Securities Fund
FUNDS SEEKING TAX-FREE
INCOME
Franklin Federal Tax-Free
Income Fund
Franklin High Yield Tax-Free
Income Fund
Franklin California High Yield
Municipal Fund
Franklin Alabama Tax-Free
Income Fund
Franklin Arizona Tax-Free
Income Fund
Franklin California Tax-Free
Income Fund
Franklin Colorado Tax-Free
Income Fund
Franklin Connecticut Tax-Free
Income Fund
Franklin Florida Tax-Free
Income Fund
Franklin Georgia Tax-Free
Income Fund
Franklin Hawaii Municipal
Bond Fund
Franklin Indiana Tax-Free
Income Fund
Franklin Kentucky Tax-Free
Income Fund
Franklin Louisiana Tax-Free
Income Fund
Franklin Maryland Tax-Free
Income Fund
Franklin Missouri Tax-Free
Income Fund
Franklin New Jersey Tax-Free
Income Fund
Franklin New York Tax-Free
Income Fund
Franklin North Carolina Tax-Free
Income Fund
Franklin Oregon Tax-Free
Income Fund
Franklin Pennsylvania Tax-Free
Income Fund
Franklin Puerto Rico Tax-Free
Income Fund
Franklin Virginia Tax-Free
Income Fund
Franklin Texas Tax-Free
Income Fund
Franklin Washington Municipal
Bond Fund
FUNDS SEEKING TAX-FREE
INCOME THROUGH INSURED
PORTFOLIOS
Franklin Insured Tax-Free
Income Fund
Franklin Arizona Insured Tax-
Free Income Fund
Franklin California Insured Tax-
Free Income Fund
Franklin Florida Insured Tax-Free
Income Fund
Franklin Massachusetts Insured
Tax-Free Income Fund
Franklin Michigan Insured Tax-
Free Income Fund
Franklin Minnesota Insured Tax-
Free Income Fund
Franklin New York Insured Tax-
Free Income Fund
Franklin Ohio Insured Tax-Free
Income Fund
FUNDS SEEKING HIGH CURRENT
INCOME AND STABILITY OF
PRINCIPAL
Franklin Adjustable Rate
Securities Fund
Franklin Adjustable U.S.
Government Securities Fund
Franklin Short-Intermediate U.S.
Government Securities Fund
FUND SEEKING HIGH AFTER-TAX
INCOME FOR CORPORATIONS
Franklin Corporate Qualified
Dividend Fund
MONEY MARKET FUNDS SEEKING
SAFETY OF PRINCIPAL AND INCOME
Franklin Money Fund
Franklin Federal Money Fund
Franklin California Tax-Exempt
Money Fund
Franklin Tax-Exempt Money
Fund
Franklin New York Tax-Exempt
Money Fund
IFT Franklin U.S. Treasury
Money Market Portfolio
FUNDS FOR
NON-U.S. INVESTORS
FRANKLIN PARTNERS FUNDS(R)
Franklin Tax-Advantaged
High Yield Securities Fund
Franklin Tax-Advantaged
International Bond Fund
Franklin Tax-Advantaged U.S.
Government Securities Fund
30
<PAGE>
NOTES
-----
31
<PAGE>
TEMPLETON GLOBAL
OPPORTUNITIES TRUST
PRINCIPAL UNDERWRITER:
Franklin Templeton
Distributors, Inc.
700 Central Avenue
St. Petersburg,
Florida 33701-3628
Account Services
1-800-354-9191
Fund Information
1-800-292-9293
Institutional Services
1-800-321-8563
This Prospectus is not
an offering of the
securities herein
described in any state
in which the offering
is not authorized. No
sales representative,
dealer, or other person
is authorized to give
any information or make
any representations
other than those
contained in this
Prospectus. Further
information may be
obtained from the
Principal Underwriter.
[RECYCLED PAPER LOGO TL15 P 04/95
APPEARS HERE]
TEMPLETON
GLOBAL
OPPORTUNITIES TRUST
Prospectus
April 1, 1995
[LOGO OF FRANKLIN TEMPLETON APPEARS HERE]
TEMPLETON GLOBAL OPPORTUNITIES TRUST
THIS STATEMENT OF ADDITIONAL INFORMATION DATED
APRIL 1, 1995, IS NOT A PROSPECTUS. IT SHOULD
BE READ IN CONJUNCTION WITH THE PROSPECTUS OF
TEMPLETON GLOBAL OPPORTUNITIES TRUST DATED
APRIL 1, 1995, WHICH MAY BE OBTAINED WITHOUT
CHARGE UPON REQUEST TO THE PRINCIPAL UNDERWRITER,
FRANKLIN TEMPLETON DISTRIBUTORS, INC.,
700 CENTRAL AVENUE, P.O. BOX 33030,
ST. PETERSBURG, FLORIDA 33733-8030
TOLL FREE TELEPHONE: (800) 237-0738
TABLE OF CONTENTS
General Information and History -Independent Accountants
Investment Objective and Policies -Reports to Shareholders
-Investment Policies Brokerage Allocation
-Repurchase Agreements Purchase, Redemption and
-Debt Securities Pricing of Shares
-Futures Contracts -Ownership and Authority
-Options on Securities or Indices Disputes
-Foreign Currency Hedging -Tax Deferred Retirement Plans
Transactions -Letter of Intent
-Investment Restrictions -Purchases at Net Asset Value
-Risk Factors Tax Status
-Trading Policies -Distributions
-Personal Securities Transactions -Options and Hedging
Management of the Fund Transactions
Principal Shareholders -Currency Fluctuations--
Investment Management and Other "Section 988" Gains
Services or Losses
-Investment Management Agreement -Sale of Shares
-Management Fees -Foreign Taxes
-Templeton Investment Counsel, -Backup Withholding
Inc. -Foreign Shareholders
-Sub-Advisory Agreement -Other Taxation
-Business Manager Principal Underwriter
-Custodian and Transfer Agent Description of Shares
-Legal Counsel Performance Information
Financial Statements
GENERAL INFORMATION AND HISTORY
Templeton Global Opportunities Trust (the "Fund") was
organized as a Massachusetts business trust on October 2, 1989,
and is registered under the Investment Company Act of 1940 (the
"1940 Act") as an open-end diversified management investment
company.
INVESTMENT OBJECTIVE AND POLICIES
Investment Policies. The Fund's investment objective and
policies are described in the Prospectus under the heading
"General Description -- Investment Objective and Policies."
Repurchase Agreements. Repurchase agreements are contracts
under which the buyer of a security simultaneously commits to
resell the security to the seller at an agreed upon price and
date. Under a repurchase agreement, the seller is required to
maintain the value of the securities subject to the repurchase
agreement at not less than their repurchase price. Templeton
Investment Counsel, Inc. (the "Investment Manager") will monitor
the value of such securities daily to determine that the value
equals or exceeds the repurchase price. Repurchase agreements
may involve risks in the event of default or insolvency of the
seller, including possible delays or restrictions upon the Fund's
ability to dispose of the underlying securities. The Fund will
enter into repurchase agreements only with parties who meet
creditworthiness standards approved by the Board of Trustees,
i.e., banks or broker-dealers which have been determined by the
Investment Manager to present no serious risk of becoming
involved in bankruptcy proceedings within the time frame
contemplated by the repurchase transaction.
Debt Securities. The Fund may invest in debt securities
which are rated at least Caa by Moody's or CCC by S&P or deemed
to be of comparable quality by the Investment Manager. As an
operating policy, the Fund will invest no more than 5% of its
assets in debt securities rated lower than Baa by Moody's or BBB
by S&P. The market value of debt securities generally varies in
response to changes in interest rates and the financial condition
of each issuer. During periods of declining interest rates, the
value of debt securities generally increases. Conversely, during
periods of rising interest rates, the value of such securities
generally declines. These changes in market value will be
reflected in the Fund's net asset value.
Bonds rated Caa by Moody's are of poor standing. Such
securities may be in default or there may be present elements of
danger with respect to principal or interest. Bonds rated CCC by
S&P are regarded, on balance, as speculative. Such securities
will have some quality and protective characteristics, but these
are outweighed by large uncertainties or major risk exposures to
adverse conditions.
Although they may offer higher yields than do higher rated
securities, low rated and unrated debt securities generally
involve greater volatility of price and risk of principal and
income, including the possibility of default by, or bankruptcy
of, the issuers of the securities. In addition, the markets in
which low rated and unrated debt securities are traded are more
limited than those in which higher rated securities are traded.
The existence of limited markets for particular securities may
diminish the Fund's ability to sell the securities at fair value
either to meet redemption requests or to respond to a specific
economic event such as a deterioration in the creditworthiness of
the issuer. Reduced secondary market liquidity for certain low
rated or unrated debt securities may also make it more difficult
for the Fund to obtain accurate market quotations for the
purposes of valuing the Fund's portfolio. Market quotations are
generally available on many low rated or unrated securities only
from a limited number of dealers and may not necessarily
represent firm bids of such dealers or prices for actual
sales.
Adverse publicity and investor perceptions, whether or not
based on fundamental analysis, may decrease the values and
liquidity of low rated debt securities, especially in a thinly
traded market. Analysis of the creditworthiness of issuers of
low rated debt securities may be more complex than for issuers of
higher rated securities, and the ability of the Fund to achieve
its investment objective may, to the extent of investment in low
rated debt securities, be more dependent upon such
creditworthiness analysis than would be the case if the Fund were
investing in higher rated securities.
Low rated debt securities may be more susceptible to real or
perceived adverse economic and competitive industry conditions
than investment grade securities. The prices of low rated debt
securities have been found to be less sensitive to interest rate
changes than higher rated investments, but more sensitive to
adverse economic downturns or individual corporate developments.
A projection of an economic downturn or of a period of rising
interest rates, for example, could cause a decline in low rated
debt securities prices because the advent of a recession could
lessen the ability of a highly leveraged company to make
principal and interest payments on its debt securities. If the
issuer of low rated debt securities defaults, the Fund may incur
additional expenses to seek recovery.
The Fund may accrue and report interest on high yield bonds
structured as zero coupon bonds or pay-in-kind securities as
income even though it receives no cash interest until the
security's maturity or payment date. In order to qualify for
beneficial tax treatment, the Fund must distribute substantially
all of its income to shareholders (see "Tax Status"). Thus, the
Fund may have to dispose of its portfolio securities under
disadvantageous circumstances to generate cash or leverage itself
by borrowing cash, so that it may satisfy the distribution
requirement.
Recent legislation, which requires federally-insured savings
and loan associations to divest their investments in low rated
debt securities, may have a material adverse effect on the Fund's
net asset value and investment practices.
Futures Contracts. The Fund may purchase and sell financial
futures contracts. Although some financial futures contracts
call for making or taking delivery of the underlying securities,
in most cases these obligations are closed out before the
settlement date. The closing of a contractual obligation is
accomplished by purchasing or selling an identical offsetting
futures contract. Other financial futures contracts by their
terms call for cash settlements.
The Fund may also buy and sell index futures contracts with
respect to any stock index traded on a recognized stock exchange
or board of trade. An index futures contract is a contract to
buy or sell units of an index at a specified future date at a
price agreed upon when the contract is made. The stock index
futures contract specifies that no delivery of the actual stocks
making up the index will take place. Instead, settlement in cash
must occur upon the termination of the contract, with the
settlement being the difference between the contract price and
the actual level of the stock index at the expiration of the
contract.
At the time the Fund purchases a futures contract, an amount
of cash, U.S. Government securities, or other highly liquid debt
securities equal to the market value of the futures contract will
be deposited in a segregated account with the Fund's custodian.
When writing a futures contract, the Fund will maintain with its
custodian liquid assets that, when added to the amounts deposited
with a futures commission merchant or broker as margin, are equal
to the market value of the instruments underlying the contract.
Alternatively, the Fund may "cover" its position by owning the
instruments underlying the contract (or, in the case of an index
futures contract, a portfolio with a volatility substantially
similar to that of the index on which the futures contract is
based), or holding a call option permitting the Fund to purchase
the same futures contract at a price no higher than the price of
the contract written by the Fund (or at a higher price if the
difference is maintained in liquid assets with the Fund's
custodian).
Options on Securities or Indices. The Fund may write
covered call and put options and purchase call and put options on
securities or stock indices that are traded on United States and
foreign exchanges and in the over-the-counter markets.
An option on a security is a contract that gives the
purchaser of the option, in return for the premium paid, the
right to buy a specified security (in the case of a call option)
or to sell a specified security (in the case of a put option)
from or to the writer of the option at a designated price during
the term of the option. An option on a securities index gives
the purchaser of the option, in return for the premium paid, the
right to receive from the seller cash equal to the difference
between the closing price of the index and the exercise price of
the option.
The Fund may write a call or put option only if the option
is "covered." A call option on a security written by the Fund is
"covered" if the Fund owns the underlying security covered by the
call or has an absolute and immediate right to acquire that
security without additional cash consideration (or for additional
cash consideration held in a segregated account by its custodian)
upon conversion or exchange of other securities held in its
portfolio. A call option on a security is also covered if the
Fund holds a call on the same security and in the same principal
amount as the call written where the exercise price of the call
held (a) is equal to or less than the exercise price of the call
written or (b) is greater than the exercise price of the call
written if the difference is maintained by the Fund in cash or
high grade U.S. Government securities in a segregated account
with its custodian. A put option on a security written by the
Fund is "covered" if the Fund maintains cash or fixed income
securities with a value equal to the exercise price in a
segregated account with its custodian, or else holds a put on the
same security and in the same principal amount as the put written
where the exercise price of the put held is equal to or greater
than the exercise price of the put written.
The Fund will cover call options on stock indices that it
writes by owning securities whose price changes, in the opinion
of the Investment Manager, are expected to be similar to those of
the index, or in such other manner as may be in accordance with
the rules of the exchange on which the option is traded and
applicable laws and regulations. Nevertheless, where the Fund
covers a call option on a stock index through ownership of
securities, such securities may not match the composition of the
index. In that event, the Fund will not be fully covered and
could be subject to risk of loss in the event of adverse changes
in the value of the index. The Fund will cover put options on
stock indices that it writes by segregating assets equal to the
option's exercise price, or in such other manner as may be in
accordance with the rules of the exchange on which the option is
traded and applicable laws and regulations.
The Fund will receive a premium from writing a put or call
option, which increases the Fund's gross income in the event the
option expires unexercised or is closed out at a profit. If the
value of a security or an index on which the Fund has written a
call option falls or remains the same, the Fund will realize a
profit in the form of the premium received (less transaction
costs) that could offset all or a portion of any decline in the
value of the portfolio securities being hedged. If the value of
the underlying security or index rises, however, the Fund will
realize a loss in its call option position, which will reduce the
benefit of any unrealized appreciation in the Fund's investments.
By writing a put option, the Fund assumes the risk of a decline
in the underlying security or index. To the extent that the
price changes of the portfolio securities being hedged correlate
with changes in the value of the underlying security or index,
writing covered put options on indices or securities will
increase the Fund's losses in the event of a market decline,
although such losses will be offset in part by the premium
received for writing the option.
The Fund may also purchase put options to hedge its
investments against a decline in value. By purchasing a put
option, the Fund will seek to offset a decline in the value of
the portfolio securities being hedged through appreciation of the
put option. If the value of the Fund's investments does not
decline as anticipated, or if the value of the option does not
increase, the Fund's loss will be limited to the premium paid for
the option plus related transaction costs. The success of this
strategy will depend, in part, on the accuracy of the correlation
between the changes in value of the underlying security or index
and the changes in value of the Fund's security holdings being
hedged.
The Fund may purchase call options on individual securities
to hedge against an increase in the price of securities that the
Fund anticipates purchasing in the future. Similarly, the Fund
may purchase call options on a securities index to attempt to
reduce the risk of missing a broad market advance, or an advance
in an industry or market segment, at a time when the Fund holds
uninvested cash or short-term debt securities awaiting
investment. When purchasing call options, the Fund will bear the
risk of losing all or a portion of the premium paid if the value
of the underlying security or index does not rise.
There can be no assurance that a liquid market will exist
when the Fund seeks to close out an option position. Trading
could be interrupted, for example, because of supply and demand
imbalances arising from a lack of either buyers or sellers, or
the options exchange could suspend trading after the price has
risen or fallen more than the maximum specified by the exchange.
Although the Fund may be able to offset to some extent any
adverse effects of being unable to liquidate an option position,
the Fund may experience losses in some cases as a result of such
inability.
Foreign Currency Hedging Transactions. In order to hedge
against foreign currency exchange rate risks, the Fund may enter
into forward foreign currency exchange contracts and foreign
currency futures contracts, as well as purchase put or call
options on foreign currencies, as described below. The Fund may
also conduct its foreign currency exchange transactions on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign
currency exchange market.
The Fund may enter into forward foreign currency exchange
contracts ("forward contracts") to attempt to minimize the risk
to the Fund from adverse changes in the relationship between the
U.S. dollar and foreign currencies. A forward contract is an
obligation to purchase or sell a specific currency for an agreed
price at a future date which is individually negotiated and
privately traded by currency traders and their customers. The
Fund may enter into a forward contract, for example, when it
enters into a contract for the purchase or sale of a security
denominated in a foreign currency in order to "lock in" the U.S.
dollar price of the security. In addition, for example, when the
Fund believes that a foreign currency may suffer or enjoy a
substantial movement against another currency, it may enter into
a forward contract to sell an amount of the former foreign
currency approximating the value of some or all of the Fund's
portfolio securities denominated in such foreign currency. This
second investment practice is generally referred to as "cross-
hedging." Because in connection with the Fund's forward foreign
currency transactions an amount of the Fund's assets equal to the
amount of the purchase will be held aside or segregated to be
used to pay for the commitment, the Fund will always have cash,
cash equivalents or high quality debt securities available
sufficient to cover any commitments under these contracts or to
limit any potential risk. The segregated account will be marked-
to-market on a daily basis. While these contracts are not
presently regulated by the Commodity Futures Trading Commission
("CFTC"), the CFTC may in the future assert authority to regulate
forward contracts. In such event, the Fund's ability to utilize
forward contracts in the manner set forth above may be
restricted. Forward contracts may limit potential gain from a
positive change in the relationship between the U.S. dollar and
foreign currencies. Unanticipated changes in currency prices may
result in poorer overall performance for the Fund than if it had
not engaged in such contracts.
The Fund may purchase and write put and call options on
foreign currencies for the purpose of protecting against declines
in the dollar value of foreign portfolio securities and against
increases in the dollar cost of foreign securities to be
acquired. As in the case with other kinds of options, however,
the writing of an option on foreign currency will constitute only
a partial hedge, up to the amount of the premium received, and
the Fund could be required to purchase or sell foreign currencies
at disadvantageous exchange rates, thereby incurring losses. The
purchase of an option on foreign currency may constitute an
effective hedge against fluctuation in exchange rates, although,
in the event of rate movements adverse to the Fund's position,
the Fund may forfeit the entire amount of the premium plus
related transaction costs. Options on foreign currencies to be
written or purchased by the Fund will be traded on U.S. and
foreign exchanges or over-the-counter.
The Fund may enter into exchange-traded contracts for the
purchase or sale for future delivery of foreign currencies
("foreign currency futures"). This investment technique will be
used only to hedge against anticipated future changes in exchange
rates which otherwise might adversely affect the value of the
Fund's portfolio securities or adversely affect the prices of
securities that the Fund intends to purchase at a later date.
The successful use of foreign currency futures will usually
depend on the Investment Manager's ability to forecast currency
exchange rate movements correctly. Should exchange rates move in
an unexpected manner, the Fund may not achieve the anticipated
benefits of foreign currency futures or may realize losses.
Investment Restrictions. The Fund has imposed upon itself
certain investment restrictions, which together with the
investment policies are fundamental policies except as otherwise
indicated. No changes in the Fund's investment policies or
investment restrictions (except those which are not fundamental
policies) can be made without approval of the Shareholders. For
this purpose, the provisions in the 1940 Act require the
affirmative vote of the lesser of either (a) 67% or more of the
Shares present at a Shareholders' meeting at which more than 50%
of the outstanding Shares are present or represented by proxy or
(b) more than 50% of the outstanding Shares of the Fund.
In accordance with these restrictions, the Fund will not:
1. Invest in real estate or mortgages on real estate (although
the Fund may invest in marketable securities secured by real
estate or interests therein or issued by companies or
investment trusts which invest in real estate or interest
therein); invest in interests (other than debentures or
equity stock interests) in oil, gas or other mineral
exploration or development programs; purchase or sell
commodity contracts except stock index futures contracts;
invest in other open-end investment companies or, as an
operating policy approved by the Board of Trustees, invest
in closed-end investment companies.
2. Purchase or retain securities of any company in which
Trustees or Officers of the Fund or of its Investment
Manager, individually owning more than 1/2 of 1% of the
securities of such company, in the aggregate own more than
5% of the securities of such company.
3. Invest more than 5% of its total assets in the securities of
any one issuer (exclusive of U.S. Government securities).
4. Purchase more than 10% of any class of securities of any one
company, including more than 10% of its outstanding voting
securities, or invest in any company for the purpose of
exercising control or management.
5. Act as an underwriter; issue senior securities except as set
forth in investment restriction 7 below; or purchase on
margin or sell short (but the Fund may make margin payments
in connection with options on securities or securities
indices, foreign currencies, futures contracts and related
options, and forward contracts and related options).
6. Loan money, apart from the purchase of a portion of an issue
of publicly distributed bonds, debentures, notes and other
evidences of indebtedness, although the Fund may enter into
repurchase agreements and lend its portfolio securities.
7. Borrow money, except that the Fund may borrow money from
banks in an amount not exceeding 10% of the value of the
Fund's total assets (not including the amount borrowed), or
pledge, mortgage or hypothecate its assets for any purpose,
except to secure borrowings and then only to an extent not
greater than 15% of the Fund's total assets. Arrangements
with respect to margin for futures contracts, forward
contracts and related options are not deemed to be a pledge
of assets.
8. Invest more than 5% of the value of the Fund's total assets
in securities of issuers which have been in continuous
operation less than three years.
9. Invest more than 5% of the Fund's total assets in warrants,
whether or not listed on the New York or American Stock
Exchange, including no more than 2% of its total assets
which may be invested in warrants that are not listed on
those exchanges. Warrants acquired by the Fund in units or
attached to securities are not included in this restriction.
10. Invest more than 15% of the Fund's total assets in
securities of foreign issuers that are not listed on a
recognized United States or foreign securities exchange,
including no more than 10% of its total assets in restricted
securities, securities that are not readily marketable,
repurchase agreements having more than seven days to
maturity, and over-the-counter options purchased by the
Fund. Assets used as cover for over-the-counter options
written by the Fund are considered not readily marketable.
11. Invest more than 25% of the Fund's total assets in a single
industry.
12. Participate on a joint or a joint and several basis in any
trading account in securities. (See "Investment Objective
and Policies--Trading Policies" as to transactions in the
same securities for the Fund and other Templeton Funds and
clients.)
Whenever any investment policy or investment restriction
states a maximum percentage of the Fund's assets which may be
invested in any security or other property, it is intended that
such maximum percentage limitation be determined immediately
after and as a result of the Fund's acquisition of such security
or property. Assets are calculated as described in the
Prospectus under the heading "How to Buy Shares of the Fund." If
the Fund receives from an issuer of securities held by the Fund
subscription rights to purchase securities of that issuer, and if
the Fund exercises such subscription rights at a time when the
Fund's portfolio holdings of securities of that issuer would
otherwise exceed the limits set forth in investment restrictions
3 or 11 above, it will not constitute a violation if, prior to
receipt of securities upon exercise of such rights, and after
announcement of such rights, the Fund has sold at least as many
securities of the same class and value as it would receive on
exercise of such rights.
Risk Factors. The Fund has an unlimited right to purchase
securities in any developed foreign country, and may invest up to
25% of its total assets in securities in underdeveloped
countries. Investors should consider carefully the substantial
risks involved in securities of companies and governments of
foreign nations, which are in addition to the usual risks
inherent in domestic investments. There may be less publicly
available information about foreign companies comparable to the
reports and ratings published about companies in the United
States. Foreign companies are not generally subject to uniform
accounting, auditing and financial reporting standards, and
auditing practices and requirements may not be comparable to
those applicable to United States companies. Foreign markets
have substantially less volume than the New York Stock Exchange
and securities of some foreign companies are less liquid and more
volatile than securities of comparable United States companies.
Commission rates in foreign countries, which are generally fixed
rather than subject to negotiation as in the United States, are
likely to be higher. In many foreign countries there is less
government supervision and regulation of stock exchanges, brokers
and listed companies than in the United States.
Investments in companies domiciled in developing countries
may be subject to potentially higher risks than investments in
developed countries. These risks include (i) less social,
political and economic stability; (ii) the small current size of
the markets for such securities and the currently low or
nonexistent volume of trading, which result in a lack of
liquidity and in greater price volatility; (iii) certain national
policies which may restrict the Fund's investment opportunities,
including restrictions on investment in issuers or industries
deemed sensitive to national interests; (iv) foreign taxation;
(v) the absence of developed structures governing private or
foreign investment or allowing for judicial redress for injury to
private property; (vi) the absence, until recently in certain
Eastern European countries, of a capital market structure or
market-oriented economy; and (vii) the possibility that recent
favorable economic developments in Eastern Europe may be slowed
or reversed by unanticipated political or social events in such
countries.
Despite the recent dissolution of the Soviet Union, the
Communist Party may continue to exercise a significant or, in
some countries, dominant role in certain Eastern European
countries. To the extent of the Communist Party's influence,
investments in such countries will involve risks of
nationalization, expropriation and confiscatory taxation. The
communist governments of a number of Eastern European countries
expropriated large amounts of private property in the past, in
many cases without adequate compensation, and there can be no
assurance that such expropriation will not occur in the future.
In the event of such expropriation, the Fund could lose a
substantial portion of any investments it has made in the
affected countries. Further, no accounting standards exist in
Eastern European countries. Finally, even though certain Eastern
European currencies may be convertible into U.S. dollars, the
conversion rates may be artificial to the actual market values
and may be adverse to Fund Shareholders.
The Fund endeavors to buy and sell foreign currencies on as
favorable a basis as practicable. Some price spread on currency
exchange (to cover service charges) may be incurred, particularly
when the Fund changes investments from one country to another or
when proceeds of the sale of Shares in U.S. dollars are used for
the purchase of securities in foreign countries. Also, some
countries may adopt policies which would prevent the Fund from
transferring cash out of the country, withhold portions of
interest and dividends at the source, or impose other taxes, with
respect to the Fund's investments in securities of issuers of
that country. Although the management places the Fund's
investments only in foreign nations which it considers as having
relatively stable and friendly governments, there is the
possibility of expropriation, nationalization, confiscatory or
other taxation, foreign exchange controls (which may include
suspension of the ability to transfer currency from a given
country), default in foreign government securities, political or
social instability or diplomatic developments that could affect
investments in securities of issuers in foreign nations.
The Fund may be affected either unfavorably or favorably by
fluctuations in the relative rates of exchange between the
currencies of different nations, by exchange control regulations
and by indigenous economic and political developments. Through
the Fund's flexible policy, management endeavors to avoid
unfavorable consequences and to take advantage of favorable
developments in particular nations where from time to time it
places the Fund's investments.
The exercise of this flexible policy may include decisions
to purchase securities with substantial risk characteristics and
other decisions such as changing the emphasis on investments from
one nation to another and from one type of security to another.
Some of these decisions may later prove profitable and others may
not. No assurance can be given that profits, if any, will exceed
losses.
The Trustees consider at least annually the likelihood of
the imposition by any foreign government of exchange control
restrictions which would affect the liquidity of the Fund's
assets maintained with custodians in foreign countries, as well
as the degree of risk from political acts of foreign governments
to which such assets may be exposed. The Trustees also consider
the degree of risk involved through the holding of portfolio
securities in domestic and foreign securities depositories (see
"Investment Management and Other Services--Custodian and Transfer
Agent"). However, in the absence of willful misfeasance, bad
faith or gross negligence on the part of the Investment Manager,
any losses resulting from the holding of the Fund's portfolio
securities in foreign countries and/or with securities
depositories will be at the risk of the Shareholders. No
assurance can be given that the Trustees' appraisal of the risks
will always be correct or that such exchange control restrictions
or political acts of foreign governments might not occur.
The Fund's ability to reduce or eliminate its futures and
related options positions will depend upon the liquidity of the
secondary markets for such futures and options. The Fund intends
to purchase or sell futures and related options only on exchanges
or boards of trade where there appears to be an active secondary
market, but there is no assurance that a liquid secondary market
will exist for any particular contract or at any particular time.
Use of stock index futures and related options for hedging may
involve risks because of imperfect correlations between movements
in the prices of the futures or related options and movements in
the prices of the securities being hedged. Successful use of
futures and related options by the Fund for hedging purposes also
depends upon the Investment Manager's ability to predict
correctly movements in the direction of the market, as to which
no assurance can be given.
Trading Policies. The Investment Manager and its affiliated
companies serve as investment manager to other investment
companies and private clients. Accordingly, the respective
portfolios of these funds and clients may contain many or some of
the same securities. When any two or more of these funds or
clients are engaged simultaneously in the purchase or sale of the
same security, the transactions will be placed for execution in a
manner designed to be equitable to each party. The larger size
of the transaction may affect the price of the security and/or
the quantity which may be bought or sold for each party. If the
transaction is large enough, brokerage commissions may be
negotiated below those otherwise chargeable.
Sale or purchase of securities, without payment of brokerage
commissions, fees (except customary transfer fees) or other
remuneration in connection therewith, may be effected between any
of these funds, or between funds and private clients, under
procedures adopted pursuant to Rule 17a-7 under the 1940 Act.
Personal Securities Transactions. Access persons of the
Franklin Templeton Group, as defined in SEC Rule 17(j) under the
1940 Act, who are employees of Franklin Resources, Inc. or their
subsidiaries, are permitted to engage in personal securities
transactions subject to the following general restrictions and
procedures: (1) The trade must receive advance clearance from a
Compliance Officer and must be completed within 24 hours after
this clearance; (2) Copies of all brokerage confirmations must be
sent to the Compliance Officer and within 10 days after the end
of each calendar quarter, a report of all securities transactions
must be provided to the Compliance Officer; (3) In addition to
items (1) and (2), access persons involved in preparing and
making investment decisions must file annual reports of their
securities holdings each January and also inform the Compliance
Officer (or other designated personnel) if they own a security
that is being considered for a fund or other client transaction
or if they are recommending a security in which they have an
ownership interest for purchase or sale by a fund or other
client.
MANAGEMENT OF THE FUND
The name, address, principal occupation during the past five
years and other information with respect to each of the Trustees
and Principal Executive Officers of the Fund are as follows:
Name, Address and Principal Occupation
Offices with Fund During the Past Five Years
JOHN M. TEMPLETON* Chairman of the Board of other
Lyford Cay Templeton Funds; president of
Nassau, Bahamas First Trust Bank, Ltd., Nassau,
Chairman of the Board Bahamas; and previously chairman
of the board and employee of
Templeton, Galbraith &
Hansberger Ltd. (prior to
October 30, 1992).
RUPERT H. JOHNSON, JR.* Executive vice president and
777 Mariners Island Blvd. director of Franklin Resources,
San Mateo, California Inc.; president and director,
Trustee Franklin Advisers, Inc.; execut-
ive vice president and director,
Franklin Templeton Distributors,
Inc.; director, Franklin
Administrative Services, Inc.;
director or trustee of other
Templeton funds; and officer
and/or director, trustee or
managing general partner, as the
case may be, of most other
subsidiaries of Franklin
Resources, Inc., and of most of
the investment companies in the
Franklin Group of Funds.
WILLIAM YOUNG BOYD II Owner and operator of Boyd
Apartado Postal 805 Steamship Corporation; a
Panama 1, Panama director or trustee of other
Trustee Templeton Funds.
CONSTANTINE DEAN TSERETOPOULOS Physician, Lyford Cay Hospital
Lyford Cay Hospital (July 1987-present); Cardiology
P.O. Box N-7776 Fellow, University of Maryland
Nassau, Bahamas (July 1985 - July 1987); Inter-
Trustee nal Medicine Intern, Greater
Baltimore Medical Center
(July 1982 - July
1985); a director or trustee of
other Templeton Funds.
FRANK J. CROTHERS President, Atlantic Equipment &
P.O. Box N-3238 Power Ltd; a director or trustee
Nassau, Bahamas of other Templeton Funds.
Trustee
HARRIS J. ASHTON Chairman of the board, president
Metro Center, 1 Station Place and chief executive officer of
Stamford, Connecticut General Host Corporation
Trustee nurseu and craft centers);
director of RBC Holdings Inc.
(a bank holding company) and
Bar-S Foods; director or
trustee of other Templeton
Funds; and director, trustee or
managing general partner, as the
case may be, for most of the
investment companies in the
Franklin Templeton Group of
Funds.
S. JOSEPH FORTUNATO Member of the law firm of
200 Campus Drive Ptiney, Hardin, Kipp & Szuch;
Florham Park, New Jersey director of General Host
Trustee Corporation; director or
trustee of other Templeton
Funds; and director, trustee or
managing general partner, as the
case may be, for most of the
investment companies in the
Franklin Group of Funds.
FRED R. MILLSAPS A director or trustee of other
2665 N.E. 37th Drive Templeton Funds; manager of
Fort Lauderdale, Florida personal investments (1978-
Trustee present); chairman and chief
executive officer of Landmark
Banking Corporation (1969-1978);
financial vice president of
Florida Power and Light (1965-
1969); vice president of Federal
Reserve Bank of Atlanta (1958-
1965); and director of various
business and nonprofit
organizations.
ANDREW H. HINES, JR. Consultant, Triangle Consulting
150 2nd Avenue N. Group; chairman of the board and
St. Petersburg, Florida chief executive officer of
Trustee Florida Progress Corporation
(1982 - February 1990) and
director of various of its
subsidiaries; chairman and
director of Precise Power
Corporation; Executive-in-
Residence of Eckerd College
(1991-present); director of
Checkers Drive-In Restaurants,
Inc.; a director or trustee of
other Templeton Funds.
JOHN G. BENNETT, JR. A director or trustee of other
3 Radnor Corporate Center Templeton Funds; founder,
Suite 150 chairman of the board, and
100 Matsonford Road president of the Foundation or
Radnor, Pennsylvania of the New Era Philanthropy;
Trustee president and chairman of the
boards of the
Evelyn M. Bennett Memorial
Foundation and NEP International
Trust; chairman of the board and
chief executive officer of The
Bennett Group International,
Ltd.; chairman of the boards
of Human Service Systems, Inc.
and Multi-Media Communicators,
Inc.; a directors or trustee
or many
national and international
organizations, universities, and
grant-making foundations serving
in various executive board
capacities; member of the Public
Policy Committee of the
Advertising Council.
GORDON S. MACKLIN Chairman of White River
8212 Burning Tree Road Corporation (information
Bethesda, Maryland services); director of Infovest
Trustee Corporation, Fund America
Enterprise Holdings, Inc.,
Martin Marietta Corporation, MCI
Communications Corporation and
Medimmune, Inc.; director or
trustee of other Templeton
Funds; director, trustee, or
managing general partner, as t
the case may be, of most of the
investment companies
in the Franklin Group of
Funds; formerly: chairman,
Hambrecht and Quist Group;
director, H&Q Healthcare
Investors; and president,
National Association of Sec-
urities Dealers, Inc.
NICHOLAS F. BRADY* A director or trustee of other
The Bullitt House Templeton Funds; chairman of
102 East Dover Street Templeton Emerging Markets
Easton, Maryland Investment Trust PLC; chair-
Trustee man and president of Darby
Advisors, Inc.(an investment
firm) since January, 1993;
director of the H.J. Heinz Com-
pany, Capital Cities/ABC, Inc.
and the Christiana Companies;
Secretary of the United States
Department of the Treasury from
1988 to January,
1993; chairman of the board of
Dillon, Read & Co. Inc.
(investment banking) prior
thereto.
MARTIN L. FLANAGAN Senior vice president, treasurer
777 Mariners Island Blvd. and chief financial officer of
San Mateo, California Franklin Resources, Inc.;
President director and executive vice
president of Templeton
Investment Counsel and
Templeton Global Investors,
Inc.; president or vice
president of Templeton Funds;
accountant, Arthur Andersen &
Company (1982-1983);
member of the International
Society of Financial Analysts
and the American Institute of
Certified Public Accountants.
CHARLES B. JOHNSON President, chief executive
777 Mariners Island Blvd. officer, and director, Franklin
San Mateo, California Resources, Inc.; chairman of the
Vice President board, Franklin Templeton
Distributors, Inc.; chairman of
the board and director, Franklin
Advisers, Inc.; director,
Franklin Administrative Ser-
vices, Inc. and General
Host Corporation; director
of Templeton Global Investors,
Inc.; director or trustee of
other Templeton Funds; and
officer and director, trustee
or managing general partner,
as the case may be, of most
other subsidiaries of
Franklin Resources, Inc. and of
most of the investment companies
in the Franklin Group of
Funds.
HOWARD J. LEONARD Vice president, Portfolio
500 East Broward Blvd. Management/Research, of the
Fort Lauderdale, Florida Investment Manager (1989-pre-
Vice President sent); formerly, director,
investment research, First
Pennsylvania Bank (1986-1989)
and security analyst,
Provident National Bank (1981-
1985).
JOHN R. KAY Vice president of the Templeton
500 East Broward Blvd. Funds; vice president and
Fort Lauderdale, Florida treasurer of Templeton Global
Vice President Investors, Inc. and Templeton
Worldwide, Inc.; assistant vice
president of Franklin Templeton
Distributors, Inc.; formerly,
vice president and controller
of the Keystone Group, Inc.
MARK G. HOLOWESKO President and director of
Lyford Cay Templeton Galbraith & Hansberger
Nassau, Bahamas Ltd.; director of global equity
Vice President research for Templeton World-
wide, Inc.; president
or vice president of the
Templeton Funds; investment
administrator with Roy West
Trust Corporation (Bahamas)
Limited (1984-1985).
THOMAS M. MISTELE Senior vice president of
Templeton
700 Central Avenue Global Investors, Inc.; vice
St. Petersburg, Florida president of Franklin Templeton
Secretary Distributors, Inc.; secretary of
the Templeton Funds; attorney,
Dechert Price & Rhoads (1985 -
1988) and Freehill, Holling-
dale & Page (1988);
judicial clerk, U.S.
District Court (Eastern District
of Virginia) (1984 - 1985).
JAMES R. BAIO Certified public accountant;
500 East Broward Blvd. treasurer of the Templeton
Fort Lauderdale, Florida Funds; senior vice president
Treasurer of Templeton Worldwide
Inc., Templeton Global
Investors, Inc., and Templeton
Funds Trust Company; formerly,
senior tax manager of Ernst &
Young (certified public
accountants)(1977-1989).
JACK L. COLLINS Assistant treasurer of the
700 Central Avenue Templeton Funds; assistant vice
St. Petersburg, Florida president of Franklin Templeton
Assistant Treasurer Investor Services, Inc.; former
partner of Grant Thornton,
independent public
accountants.
JEFFREY L. STEELE Partner, Dechert Price & Rhoads.
1500 K Street, N.W.
Washington, D.C.
Assistant Secretary
<PAGE> ______________________
* These Trustees are "interested persons" of the Fund as that
term is defined in the 1940 Act. Mr. Brady and Franklin
Resources, Inc. are limited partners of Darby Overseas
Partners, L.P. ("Darby Overseas"). Mr. Brady established
Darby Overseas in February, 1994, and is Chairman and a
shareholder of the corporate general partner of Darby
Overseas. In addition, Darby Overseas and Templeton,
Galbraith & Hansberger, Ltd. are limited partners of Darby
Emerging Markets Fund, L.P.
As indicated above, certain of the Trustees and Officers
hold positions with other funds in the Franklin Group of Funds
and the Templeton Family of Funds. Each fund in the Templeton
Family of Funds pays its independent directors/trustees and Mr.
Brady an annual retainer and/or fees for attendance at board and
committee meetings, the amount of which is based on the level of
assets in the fund. Accordingly, the Fund pays each independent
Trustee and Mr. Brady an annual retainer of $100. Trustees are
reimbursed for any expenses incurred in attending meetings.
During the fiscal year ended December 31, 1994, pursuant to the
compensation arrangement then in effect, fees totalling $22,175
were paid by the Trust to Messrs. Ashton ($2,325), Bennett
($2,325), Boyd ($1,000), Brady ($2,325), Crothers ($2,025),
Fortunato ($2,325), Hines ($2,325), Macklin ($2,325), Millsaps
($2,325), and Tseretopoulos ($2,825). For the fiscal year ended
December 31, 1994, pursuant to the compensation arrangement then
in effect, Messrs. Ashton, Bennett, Boyd, Brady, Crothers,
Fortunato, Hines, Johnson, Macklin, Millsaps, Templeton and
Tseretopoulos received total fees of $__________, $105,625,
$4,000, $86,125, $12,850, $__________, $106,125, $__________,
$__________, 106,125, $__________, and $12,850, respectively,
from the various Franklin and Templeton funds for which they
serve as directors, trustees, or managing general partners. No
Officer or Trustee received any other compensation directly from
the Fund.
PRINCIPAL SHAREHOLDERS
As of ____________, 1995, there were __________ Shares of
the Fund outstanding, of which _______ Shares (____%) were owned
beneficially, directly or indirectly, by all the Trustees and
officers of the Fund as a group. As of that date, to the
knowledge of management, no person owned beneficially 5% or more
of the outstanding Shares.
INVESTMENT MANAGEMENT AND OTHER SERVICES
Investment Management Agreement. The Investment Manager of
the Fund is Templeton Investment Counsel, Inc., a Florida
corporation with offices in Fort Lauderdale, Florida. The
Investment Management Agreement, dated October 30, 1992, was
approved by Shareholders of the Fund on October 30, 1992, was
last approved by the Board of Trustees at a meeting held on
February 24, 1995, and will continue through April 30, 1996. The
Investment Management Agreement will continue from year to year
thereafter, subject to approval annually by the Board of Trustees
or by vote of the holders of a majority of the outstanding shares
of the Fund (as defined in the 1940 Act) and also, in either
event, with the approval of a majority of those Trustees who are
not parties to the Investment Management Agreement or interested
persons of any such party in person at a meeting called for the
purpose of voting on such approval.
The Agreement requires the Investment Manager to manage the
investment and reinvestment of the Fund's assets. The Investment
Manager is not required to furnish any personnel, overhead items
or facilities for the Fund, including daily pricing or trading
desk facilities, although such expenses are paid by investment
advisers of some other investment companies.
The Investment Management Agreement provides that the
Investment Manager will select brokers and dealers for execution
of the Fund's portfolio transactions consistent with the Fund's
brokerage policies (see "Brokerage Allocation"). Although the
services provided by broker-dealers in accordance with the
brokerage policies incidentally may help reduce the expenses of
or otherwise benefit the Investment Manager and other investment
advisory clients of the Investment Manager and of its affiliates,
as well as the Fund, the value of such services is indeterminable
and the Investment Manager's fee is not reduced by any offset
arrangement by reason thereof.
When the Investment Manager determines to buy or sell the
same security for the Fund that the Investment Manager or one or
more of its affiliates has selected for one or more of its other
clients or for clients of its affiliates, the orders for all such
securities transactions are placed for execution by methods
determined by the Investment Manager, with approval by the Board
of Trustees, to be impartial and fair, in order to seek good
results for all parties. See "Investment Objective and Policies
-- Trading Policies." Records of securities transactions of
persons who know when orders are placed by the Fund are available
for inspection at least four times annually by the compliance
officer of the Fund so that the non-interested Trustees (as
defined in the 1940 Act) can be satisfied that the procedures are
generally fair and equitable to all parties.
The Investment Management Agreement provides that the
Investment Manager shall have no liability to the Fund or any
Shareholder of the Fund for any error of judgment, mistake of
law, or any loss arising out of any investment or other act or
omission in the performance by the Investment Manager of its
duties under the Agreement, except liability resulting from
willful misfeasance, bad faith or gross negligence on the
Investment Manager's part or reckless disregard of its duties
under the Agreement. The Agreement will terminate automatically
in the event of its assignment, and may be terminated by the Fund
at any time without payment of any penalty on 60 days' written
notice, with the approval of a majority of the Trustees in office
at the time or by vote of a majority of the outstanding voting
securities of the Fund (as defined in the 1940 Act.)
Management Fees. For its services, the Fund pays the
Investment Manager a monthly fee equal on an annual basis to
0.80% of its average daily net assets during the year. Each
class of Shares of the Fund pays a portion of the fee, determined
by the proportion of the Fund that it represents. During the
fiscal years ended December 31, 1994, 1993, and 1992, the
Investment Manager (and, prior to October 30, 1992, Templeton,
Galbraith & Hansberger Ltd., the Fund's previous investment
manager) received from the Fund fees of $__________, $2,483,650,
and $1,825,898, respectively.
The Investment Manager will comply with any applicable state
regulations which may require the Investment Manager to make
reimbursements to the Fund in the event that the Fund's aggregate
operating expenses, including the advisory fee, but generally
excluding distribution expenses, interest, taxes, brokerage
commissions and extraordinary expenses, are in excess of specific
applicable limitations. The strictest rule currently applicable
to the Fund is 2.5% of the first $30,000,000 of net assets, 2.0%
of the next $70,000,000 of net assets and 1.5% of the remainder.
Templeton Investment Counsel, Inc. The Investment Manager
is an indirect wholly owned subsidiary of Franklin Resources,
Inc. ("Franklin"), a publicly traded company whose shares are
listed on the New York Stock Exchange. Charles B. Johnson (an
officer of the Fund), Rupert H. Johnson, Jr., and R. Martin
Wiskemann are principal shareholders of Franklin and own,
respectively, approximately 20%, 16% and 9.2% of its outstanding
shares. Messrs. Charles B. Johnson and Rupert H. Johnson, Jr.
are brothers.
Sub-Advisory Agreement. Under a Sub-Advisory Agreement
between the Investment Manager and Dean Witter InterCapital Inc.
("Dean Witter InterCapital"), Dean Witter InterCapital provides
the Investment Manager with investment advisory assistance and
portfolio management advice with respect to the Fund's portfolio.
Dean Witter InterCapital provides the Investment Manager on an
ongoing basis with analyses regarding economic and market
conditions, asset allocation, foreign currency matters and the
advisability of entering into foreign exchange contracts. For
its services, the Investment Manager pays to Dean Witter
InterCapital a fee in U.S. dollars at an annual rate of 0.25% of
the Fund's average daily net assets. During the fiscal years
ended December 31, 1994, 1993, and 1992, Dean Witter InterCapital
(and, prior to January, 1993, the InterCapital Division of Dean
Witter Reynolds Inc., the Fund's previous sub-adviser) received
under the Sub-Advisory Agreement fees of $_______, $776,141, and
$570,539, respectively.
The Sub-Advisory Agreement provides that it will terminate
automatically in the event of its assignment and that it may be
terminated by the Fund on 60 days' written notice to the
Investment Manager and to Dean Witter InterCapital, without
penalty, provided that such termination by the Fund is approved
by the vote of a majority of the Fund's Board of Trustees or by
vote of a majority of the Fund's outstanding Shares. The
Agreement also provides that it may be terminated by either the
Investment Manager or Dean Witter InterCapital upon not less than
60 days' written notice to the other party. The Sub-Advisory
Agreement, dated October 30, 1992, was approved by the Fund's
Shareholders on October 30, 1992, was last approved by the Board
of Trustees at a meeting held on February 24, 1995, and will run
through April 30, 1996. The Agreement will continue from year to
year thereafter, subject to approval annually by the Board of
Trustees or by vote of a majority of the outstanding Shares of
the Fund (as defined in the 1940 Act) and also, in either event,
with the approval of a majority of those Trustees who are not
parties to the Agreement or interested persons of any such party
in person at a meeting called for the purpose of voting on such
approval. Dean Witter InterCapital is relieved of liability to
the Fund for any act or omission in the course of its performance
under the Sub-Advisory Agreement, in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of
its obligations under the Agreement.
Business Manager. Templeton Global Investors, Inc. performs
certain administrative functions as Business Manager for the
Fund, including:
o providing office space, telephone, office equipment and
supplies for the Fund;
o paying compensation of the Fund's officers for services
rendered as such;
o authorizing expenditures and approving bills for
payment on behalf of the Fund;
o supervising preparation of annual and semi-annual
reports to Shareholders, notices of dividends, capital
gains distributions and tax credits, and attending to
correspondence and other special communications with
individual Shareholders;
o daily pricing of the Fund's investment portfolio and
supervising publication of daily quotations of the bid
and asked prices of the Fund's Shares, earnings reports
and other financial data;
o providing trading desk facilities for the Fund;
o monitoring relationships with organizations serving the
Fund, including custodians, transfer agents and
printers;
o supervising compliance by the Fund with recordkeeping
requirements under the 1940 Act and regulations
thereunder, with state regulatory requirements,
maintaining books and records for the Fund (other than
those maintained by the Custodian and Transfer Agent),
preparing and filing tax reports other than the Fund's
income tax returns;
o monitoring the qualifications of tax deferred
retirement plans providing for investment in Shares of
the Fund; and
o providing executive, clerical and secretarial help
needed to carry out these responsibilities.
For its services, the Business Manager receives a monthly
fee equal on an annual basis to 0.15% of the first $200,000,000
of the Fund's average daily net assets, reduced to 0.135%
annually of the Fund's net assets in excess of $200,000,000,
further reduced to 0.1% annually of such net assets in excess of
$700,000,000, and further reduced to 0.075% annually of such net
assets in excess of $1,200,000,000. Each class of Shares pays a
portion of the fee, determined by the proportion of the Fund that
it represents. Since the Business Manager's fee covers services
often provided by investment advisers to other funds, the Fund's
combined expenses for advisory and administrative services are
higher than those paid by most other investment companies.
During the fiscal years ended December 31, 1994, 1993, and 1992,
the Business Manager (and, prior to April 1, 1993, Templeton
Funds Management, Inc., the Fund's previous business manager)
received business management fees of $_________, $449,118, and
$338,120, respectively.
The Business Manager is relieved of liability to the Fund
for any act or omission in the course of its performance under
the Business Management Agreement, in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of
its duties and obligations under the Agreement. The Agreement
may be terminated by the Fund at any time on 60 days' written
notice without payment of penalty, provided that such termination
by the Fund shall be directed or approved by vote of a majority
of the Trustees of the Fund in office at the time or by vote of a
majority of the outstanding voting securities of the Fund, and
shall terminate automatically and immediately in the event of its
assignment.
Templeton Global Investors, Inc. is a wholly owned
subsidiary of Franklin.
Custodian and Transfer Agent. The Chase Manhattan Bank,
N.A., serves as Custodian of the Fund's assets, which are
maintained at the Custodian's principal office, MetroTech Center,
Brooklyn, New York 11245, and at the offices of its branches and
agencies throughout the world. The Custodian has entered into
agreements with foreign sub-custodians approved by the Trustees
pursuant to Rule 17f-5 under the 1940 Act. The Custodian, its
branches and sub-custodians generally domestically, and
frequently abroad, do not actually hold certificates for the
securities in their custody, but instead have book records with
domestic and foreign securities depositories, which in turn have
book records with the transfer agents of the issuers of the
securities. Compensation for the services of the Custodian is
based on a schedule of charges agreed on from time to time.
Franklin Templeton Investor Services, Inc. serves as the
Fund's Transfer Agent. Services performed by the Transfer Agent
include processing purchase and redemption orders; making
dividend payments, capital gain distributions and reinvestments;
and handling routine communications with Shareholders. The
Transfer Agent receives from the Fund an annual fee of $13.74 per
Shareholder account plus out-of-pocket expenses. These fees are
adjusted each year to reflect changes in the Department of Labor
Consumer Price Index.
Legal Counsel. Dechert Price & Rhoads, 1500 K Street, N.W.,
Washington, D.C. 20005, is legal counsel for the Fund.
Independent Accountants. McGladrey & Pullen, 555 Fifth
Avenue, New York, New York 10017, serve as independent
accountants for the Fund. Their audit services comprise
examination of the Fund's financial statements and review of the
Fund's filings with the Securities and Exchange Commission and
the Internal Revenue Service.
Reports to Shareholders. The Fund's fiscal year ends on
December 31. Shareholders are provided at least semi-annually
with reports showing the Fund's portfolio and other information,
including an annual report with financial statements audited by
independent accountants.
BROKERAGE ALLOCATION
The Investment Management Agreement provides that the
Investment Manager is responsible for selecting members of
securities exchanges, brokers and dealers (such members, brokers
and dealers being hereinafter referred to as "brokers") for the
execution of the Fund's portfolio transactions and, when
applicable, the negotiation of commissions in connection
therewith. All decisions and placements are made in accordance
with the following principles:
1. Purchase and sale orders are usually placed with
brokers who are selected by the Investment Manager as
able to achieve "best execution" of such orders. "Best
execution" means prompt and reliable execution at the
most favorable securities price, taking into account
the other provisions hereinafter set forth. The
determination of what may constitute best execution and
price in the execution of a securities transaction by a
broker involves a number of considerations, including,
without limitation, the overall direct net economic
result to the Fund (involving both price paid or
received and any commissions and other costs paid), the
efficiency with which the transaction is effected, the
ability to effect the transaction at all where a large
block is involved, availability of the broker to stand
ready to execute possibly difficult transactions in the
future, and the financial strength and stability of the
broker. Such considerations are judgmental and are
weighed by the Investment Manager in determining the
overall reasonableness of brokerage commissions.
2. In selecting brokers for portfolio transactions, the
Investment Manager takes into account its past
experience as to brokers qualified to achieve "best
execution," including brokers who specialize in any
foreign securities held by the Fund.
3. The Investment Manager is authorized to allocate
brokerage business to brokers who have provided
brokerage and research services, as such services are
defined in Section 28(e) of the Securities Exchange Act
of 1934 (the "1934 Act"), for the Fund and/or other
accounts, if any, for which the Investment Manager
exercises investment discretion (as defined in Section
3(a)(35) of the 1934 Act) and, as to transactions as to
which fixed minimum commission rates are not
applicable, to cause the Fund to pay a commission for
effecting a securities transaction in excess of the
amount another broker would have charged for effecting
that transaction, if the Investment Manager in making
the selection in question determines in good faith that
such amount of commission is reasonable in relation to
the value of the brokerage and research services
provided by such broker, viewed in terms of either that
particular transaction or the Investment Manager's
overall responsibilities with respect to the Fund and
the other accounts, if any, as to which it exercises
investment discretion. In reaching such determination,
the Investment Manager is not required to place or
attempt to place a specific dollar value on the
research or execution services of a broker or on the
portion of any commission reflecting either of said
services. In demonstrating that such determinations
were made in good faith, the Investment Manager shall
be prepared to show that all commissions were allocated
and paid for purposes contemplated by the Fund's
brokerage policy; that the research services provide
lawful and appropriate assistance to the Investment
Manager in the performance of its investment decision-
making responsibilities; and that the commissions paid
were within a reasonable range. The determination that
commissions were within a reasonable range shall be
based on any available information as to the level of
commissions known to be charged by other brokers on
comparable transactions, but there shall be taken into
account the Fund's policies that (i) obtaining a low
commission is deemed secondary to obtaining a favorable
securities price, since it is recognized that usually
it is more beneficial to the Fund to obtain a favorable
price than to pay the lowest commission; and (ii) the
quality, comprehensiveness and frequency of research
studies which are provided for the Investment Manager
are useful to the Investment Manager in performing its
advisory services under its Agreement with the Fund.
Research services provided by brokers to the Investment
Manager are considered to be in addition to, and not in
lieu of, services required to be performed by the
Investment Manager under its Contract with the Fund.
Research furnished by brokers through whom the Fund
effects securities transactions may be used by the
Investment Manager for any of its accounts, and not all
such research may be used by the Investment Manager for
the Fund. When execution of portfolio transactions is
allocated to brokers trading on exchanges with fixed
brokerage commission rates, account may be taken of
various services provided by the broker, including
quotations outside the United States for daily pricing
of foreign securities held in the Fund's portfolio.
4. Purchases and sales of portfolio securities within the
United States other than on a securities exchange are
executed with primary market makers acting as
principal, except where, in the judgment of the
Investment Manager, better prices and execution may be
obtained on a commission basis or from other sources.
5. Sales of the Fund's Shares (which shall be deemed to
include also shares of other companies registered under
the 1940 Act which have either the same investment
manager or an investment manager affiliated with the
Investment Manager) made by a broker are one factor,
among others, to be taken into account in deciding to
allocate portfolio transactions (including agency
transactions, principal transactions, purchases in
underwritings or tenders in response to tender offers)
for the account of the Fund to that broker; provided
that the broker shall furnish "best execution," as
defined in paragraph 1 above, and that such allocation
shall be within the scope of the Fund's other policies
as stated above; and provided further, that in every
allocation made to a broker in which the sale of Shares
is taken into account there shall be no increase in the
amount of the commissions or other compensation paid to
such broker beyond a reasonable commission or other
compensation determined, as set forth in paragraph 3
above, on the basis of best execution alone or best
execution plus research services, without taking
account of or placing any value upon such sale of
Shares.
Insofar as known to management, no Trustee or officer of the
Fund has any material direct or indirect interest in any broker
employed by or on behalf of the Fund. Dean Witter Reynolds, Inc.
("Dean Witter"), an affiliate of the Fund's Sub-Adviser, may act
as broker on behalf of the Fund and receive commissions on such
transactions. Franklin Templeton Distributors, Inc., the Fund's
Principal Underwriter, is a registered broker-dealer, but has
never executed any purchase or sale transactions for the Fund's
portfolio or participated in any commissions on any such
transactions, and has no intention of doing so in the future.
The total brokerage commissions on the portfolio transactions for
the Fund during the fiscal years ended December 31, 1994, 1993,
and 1992, and the amount of such commissions on transactions
allocated to Dean Witter on the basis of best execution,
investment information and trading desk services, were as
follows: total commissions (not including any spreads or
concessions on principal transactions) were $1,482,497, $711,144,
and $247,000, respectively; allocated to Dean Witter $0, $0, and
$0, respectively. All portfolio transactions are allocated to
broker-dealers only when their prices and execution, in the good
faith judgment of the Investment Manager, are equal or superior
to the best available within the scope of the Fund's policies.
The Fund will not purchase or sell any securities on the over-
the-counter market from or to Dean Witter acting as principal for
its own account. There is no fixed method used in determining
which broker-dealers receive which order or how many orders.
PURCHASE, REDEMPTION AND PRICING OF SHARES
The Prospectus describes the manner in which the Fund's
Shares may be purchased and redeemed. See "How to Buy Shares of
the Fund" and "How to Sell Shares of the Fund."
Net asset value per Share is determined as of the close of
business on the New York Stock Exchange, which currently is
4:00 p.m. (Eastern Time) every Monday through Friday (exclusive
of national business holidays). The Fund's offices will be
closed, and net asset value will not be calculated, on those days
on which the New York Stock Exchange is closed, which currently
are: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Trading in securities on European and Far Eastern exchanges
and over-the-counter markets is normally completed well before
the close of business in New York on each day on which the New
York Stock Exchange is open. Trading of European or Far Eastern
securities generally, or in a particular country or countries,
may not take place on every New York business day. Furthermore,
trading takes place in various foreign markets on days which are
not business days in New York and on which the Fund's net asset
value is not calculated. The Fund calculates net asset value per
Share, and therefore effects sales, redemptions and repurchases
of its Shares, as of the close of the New York Stock Exchange
once on each day on which that Exchange is open. Such
calculation does not take place contemporaneously with the
determination of the prices of many of the portfolio securities
used in such calculation and if events occur which materially
affect the value of those foreign securities, they will be valued
at fair market value as determined by the management and approved
in good faith by the Board of Trustees.
The Board of Trustees may establish procedures under which
the Fund may suspend the determination of net asset value for the
whole or any part of any period during which (1) the New York
Stock Exchange is closed other than for customary weekend and
holiday closings, (2) trading on the New York Stock Exchange is
restricted, (3) an emergency exists as a result of which disposal
of securities owned by the Fund is not reasonably practicable or
it is not reasonably practicable for the Fund fairly to determine
the value of its net assets, or (4) for such other period as the
Securities and Exchange Commission may by order permit for the
protection of the holders of the Fund's Shares.
The Fund will not effect redemptions of its Shares in assets
other than cash, except in accordance with applicable provisions
of the 1940 Act.
Ownership and Authority Disputes. In the event of disputes
involving multiple claims of ownership or authority to control a
shareholder's account, the Fund has the right (but has no
obligation) to: (a) freeze the account and require the written
agreement of all persons deemed by the Fund to have a potential
property interest in the account, prior to executing instructions
regarding the account; or (b) interplead disputed funds or
accounts with a court of competent jurisdiction. Moreover, the
Fund may surrender ownership of all or a portion of an account to
the Internal Revenue Service in response to a Notice of Levy.
In addition to the special purchase plans described in the
Prospectus, other special purchase plans also are available:
Tax Deferred Retirement Plans. The Fund offers its
Shareholders the opportunity to participate in the following
types of retirement plans:
o For individuals whether or not covered by other
qualified plans;
o For simplified employee pensions;
o For employees of tax-exempt organizations; and
o For corporations, self-employed individuals and
partnerships.
Capital gains and income received by the foregoing plans
generally are exempt from taxation until distribution from the
plans. Investors considering participation in any such plan
should review specific tax laws relating thereto and should
consult their attorneys or tax advisers with respect to the
establishment and maintenance of any such plan. Additional
information, including the fees and charges with respect to all
of these plans, is available upon request to the Principal
Underwriter. No distribution under a retirement plan will be
made until Templeton Funds Trust Company receives the
participant's election on IRS Form W-4P (available on request
from Templeton Funds Trust Company) and such other documentation
as it deems necessary as to whether or not U.S. income tax is to
be withheld from such distribution.
Individual Retirement Account (IRA). All individuals
(whether or not covered by qualified private or governmental
retirement plans) may purchase Shares of the Fund pursuant to an
Individual Retirement Account. However, contributions to an IRA
by an individual who is covered by a qualified private or
governmental plan may not be tax-deductible depending on the
individual's income. Custodial services for Individual
Retirement Accounts are available through Templeton Funds Trust
Company. Disclosure statements summarizing certain aspects of
Individual Retirement Accounts are furnished to all persons
investing in such accounts, in accordance with Internal Revenue
Service regulations.
Simplified Employee Pensions (SEP-IRA). For employers who
wish to establish a simplified form of employee retirement
program investing in Shares of the Fund, there are available
Simplified Employee Pensions invested in IRA Plans. Details and
materials relating to these Plans will be furnished upon request
to the Principal Underwriter.
Retirement Plan for Employees of Tax-Exempt Organizations
(403(b)). Employees of public school systems and certain types
of charitable organizations may enter into a deferred
compensation arrangement for the purchase of Shares of the Fund
without being taxed currently on the investment. Contributions
which are made by the employer through salary reduction are
excludable from the gross income of the employee. Such deferred
compensation plans, which are intended to qualify under Section
403(b) of the Internal Revenue Code, are available through the
Principal Underwriter. Custodial services are provided by
Templeton Funds Trust Company.
Qualified Plan for Corporations, Self-Employed Individuals
and Partnerships. For employers who wish to purchase Shares of
the Fund in conjunction with employee retirement plans, there is
a prototype master plan which has been approved by the Internal
Revenue Service. A "Section 401(k) plan" is also available.
Templeton Funds Trust Company furnishes custodial services for
these Plans. For further details, including custodian fees and
Plan administration services, see the master plan and related
material which is available from the Principal Underwriter.
Letter of Intent. Purchasers who intend to invest $50,000
or more in Class I Shares of the Fund or any other fund in the
Franklin Templeton Group (except Templeton Capital Accumulator
Fund, Inc., Templeton Variable Annuity Fund, Templeton Variable
Products Series Fund, Franklin Valuemark Funds and Franklin
Government Securities Trust) within 13 months (whether in one
lump sum or in installments, the first of which may not be less
than 5% of the total intended amount and each subsequent
installment not less than $25 unless the investor is a qualifying
employee benefit plan (the "Benefit Plan"), including automatic
investment and payroll deduction plans), and to beneficially hold
the total amount of such Class I Shares fully paid for and
outstanding simultaneously for at least one full business day
before the expiration of that period, should execute a Letter of
Intent ("LOI") on the form provided in the Shareholder
Application in the Prospectus. Payment for not less than 5% of
the total intended amount must accompany the executed LOI unless
the investor is a Benefit Plan. Except for purchases of Shares
by a Benefit Plan, those Class I Shares purchased with the first
5% of the intended amount stated in the LOI will be held as
"Escrowed Shares" for as long as the LOI remains unfulfilled.
Although the Escrowed Shares are registered in the investor's
name, his full ownership of them is conditional upon fulfillment
of the LOI. No Escrowed Shares can be redeemed by the investor
for any purpose until the LOI is fulfilled or terminated. If the
LOI is terminated for any reason other than fulfillment, the
Transfer Agent will redeem that portion of the Escrowed Shares
required and apply the proceeds to pay any adjustment that may be
appropriate to the sales commission on all Class I Shares
(including the Escrowed Shares) already purchased under the LOI
and apply any unused balance to the investor's account. The LOI
is not a binding obligation to purchase any amount of Shares, but
its execution will result in the purchaser paying a lower sales
charge at the appropriate quantity purchase level. A purchase
not originally made pursuant to an LOI may be included under a
subsequent LOI executed within 90 days of such purchase. In this
case, an adjustment will be made at the end of 13 months from the
effective date of the LOI at the net asset value per Share then
in effect, unless the investor makes an earlier written request
to the Principal Underwriter upon fulfilling the purchase of
Shares under the LOI. In addition, the aggregate value of any
Shares purchased prior to the 90-day period referred to above may
be applied to purchases under a current LOI in fulfilling the
total intended purchases under the LOI. However, no adjustment
of sales charges previously paid on purchases prior to the 90-day
period will be made.
If an LOI is executed on behalf of a benefit plan (such
plans are described under "How to Buy Shares of the Fund--Net
Asset Value Purchases" in the Prospectus), the level and any
reduction in sales charge for these employee benefit plans will
be based on actual plan participation and the projected
investments in the Franklin Templeton Group (except Templeton
Capital Accumulator Fund, Inc., Templeton Variable Annuity Fund,
Templeton Variable Products Series Fund, Franklin Valuemark Funds
and Franklin Government Securities Trust) under the LOI. Benefit
Plans are not subject to the requirement to reserve 5% of the
total intended purchase, or to any penalty as a result of the
early termination of a plan, nor are Benefit Plans entitled to
receive retroactive adjustments in price for investments made
before executing LOIs.
Purchases at Net Asset Value. The following amounts will be
paid by FTD, from its own resources, to securities dealers who
initiate and are responsible for purchases of $1 million or more
and for purchases made at net asset value by certain designated
retirement plans (excluding IRA and IRA rollovers), certain trust
companies and trust departments of banks and certain retirement
plans of organizations with collective retirement plan assets of
$10 million or more: 1.00% on sales of $1 million but less $2
million, plus 0.80% on sales of $2 million but less than $3
million, plus 0.50% on sales of $3 million but less than $50
million, plus 0.25% on sales of $50 million but less than $100
million, plus 0.15% on sales of $100 million or more. Dealer
concession breakpoints are reset every 12 months for purposes of
additional purchases.
As described in the Prospectus, FTD or its affiliates may
make payments, from its own resources, to securities dealers
responsible for certain purchases at net asset value. As a
condition of such payments, FTD or its affiliates may require
reimbursement from such securities dealers with respect to
certain redemptions made within 12 months of the calendar month
following purchase as well as other conditions, all of which may
be imposed by an agreement between FTD, or its affiliates, and
the securities dealer.
TAX STATUS
The Fund intends to qualify annually and to elect to be
treated as a regulated investment company under the Internal
Revenue Code of 1986, as amended (the "Code").
To qualify as a regulated investment company, the Fund must,
among other things, (a) derive in each taxable year at least 90%
of its gross income from dividends, interest, payments with
respect to securities loans and gains from the sale or other
disposition of stock, securities or foreign currencies, or other
income (including gains from options, futures contracts, and
forward contracts) derived with respect to its business of
investing in such stock, securities or currencies; (b) derive
less than 30% of its gross income from the sale or other
disposition of certain assets (namely, (i) stock or securities,
(ii) options, futures, and forward contracts (other than those on
foreign currencies), and (iii) foreign currencies (including
options, futures, and forward contracts on such currencies) not
directly related to the Fund's principal business of investing in
stocks or securities (or options and futures with respect to
stocks and securities)) held less than three months (the "30%
Limitation"); (c) diversify its holdings so that, at the end of
each quarter of the taxable year, (i) at least 50% of the market
value of the Fund's assets is represented by cash, U.S.
Government securities, the securities of other regulated
investment companies and other securities, with such other
securities of any one issuer limited for the purposes of this
calculation to an amount not greater than 5% of the value of the
Fund's total assets and not greater than 10% of the outstanding
voting securities of such issuer, and (ii) not more than 25% of
the value of its total assets is invested in the securities of
any one issuer (other than U.S. Government securities or the
securities of other regulated investment companies) or of any two
or more issuers that the Fund controls and that are determined to
be engaged in the same business or similar or related business;
and (d) distribute at least 90% of its investment company taxable
income (which includes, among other items, dividends, interest
and net short-term capital gains in excess of net long-term
capital losses, but does not include net long-term capital gains
in excess of net short-term capital losses) each taxable year.
As a regulated investment company, the Fund generally will
not be subject to U.S. Federal income tax on its investment
company taxable income (which includes, among other items,
dividends, and the excess of net short-term capital gains over
net long-term capital losses) and net capital gains (net long-
term capital gains in excess of net short-term capital losses),
if any, that it distributes to Shareholders. The Fund intends to
distribute to its Shareholders, at least annually, substantially
all of its investment company taxable income and net capital
gains. Amounts not distributed on a timely basis in accordance
with a calendar year distribution requirement are subject to a
nondeductible 4% excise tax. To prevent imposition of the tax,
the Fund must distribute during each calendar year an amount
equal to the sum of (1) at least 98% of its ordinary income (not
taking into account any capital gains or losses) for the calendar
year, (2) at least 98% of its capital gains in excess of its
capital losses (adjusted for certain ordinary losses) for the
twelve-month period ending on October 31 of the calendar year,
and (3) any ordinary income and capital gains for previous years
that was not distributed during those years. A distribution will
be treated as having been received on December 31 of the current
calendar year if it is declared by the Fund in October, November
or December with a record date in such a month and paid by the
Fund during January of the following calendar year. Such
distributions will be taxable to Shareholders in the calendar
year in which the distributions are declared, rather than the
calendar year in which the distributions are received. To
prevent application of the excise tax, the Fund intends to make
its distributions in accordance with the calendar year
distribution requirement.
Some of the debt securities that may be acquired by a Fund
may be treated as debt securities that are originally issued at a
discount. Original issue discount can generally be defined as
the difference between the price at which a security was issued
and its stated redemption price at maturity. Although no cash
income is actually received by the Fund in a given year, original
issue discount on a taxable debt security earned in that given
year generally is treated for Federal income tax purposes as
interest and, therefore, such income would be subject to the
distribution requirements of the Code.
Some of the debt securities may be purchased by the Fund at
a discount which exceeds the original issue discount on such debt
securities, if any. This additional discount represents market
discount for Federal income tax purposes. The gain realized on
the disposition of any taxable debt security having market
discount will be treated as ordinary income to the extent it does
not exceed the accrued market discount on such debt security.
Generally, market discount accrues on a daily basis for each day
the debt security is held by the Fund at a constant rate over the
time remaining to the debt security's maturity or, at the
election of the Fund, at a constant yield to maturity which takes
into account the semi-annual compounding of interest.
Exchange control regulations that may restrict repatriation
of investment income, capital, or the proceeds of securities
sales by foreign investors may limit the Fund's ability to make
sufficient distributions to satisfy the 90% and calendar year
distribution requirements. See "Risk Factors" section of the
SAI.
The Fund may invest in shares of foreign corporations which
may be classified under the Code as passive foreign investment
companies (PFICs"). In general, a foreign corporation is
classified as a PFIC if at least one-half of its assets
constitute investment-type assets or 75% or more of its gross
income is investment-type income. If the Fund receives a so-
called "excess distribution" with respect to PFIC stock, the Fund
itself may be subject to tax on a portion of the excess
distribution, whether or not the corresponding income is
distributed by the Fund to Shareholders. In general, under the
PFIC rules, an excess distribution is treated as having been
realized ratably over the period during which the Fund held the
PFIC shares. The Fund itself will be subject to tax on the
portion, if any, of an excess distribution that is so allocated
to prior Fund taxable years and an interest factor will be added
to the tax, as if the tax had been payable in such prior taxable
years. Certain distributions from a PFIC as well as gain from
the sale of PFIC shares are treated as excess distributions.
Excess distributions are characterized as ordinary income even
though, absent application of the PFIC rules, certain excess
distributions might have been classified as capital gain.
The Fund may be eligible to elect alternative tax treatment
with respect to PFIC shares. Under an election that currently
may be available in some circumstances, the Fund generally would
be required to include in its gross income its share of the
earnings of a PFIC on a current basis, regardless of whether
distributions are received from the PFIC in a given year. If
this election were made, the special rules, discussed above,
relating to the taxation of excess distributions, would not
apply. In addition, another election may be available that would
involve marking to market the Fund's PFIC shares at the end of
each taxable year (and on certain other dates prescribed in the
Code), with the result that unrealized gains are treated as
though they were realized. If this election were made, tax at
the Fund level under the PFIC rules would generally be
eliminated, but the Fund could, in limited circumstances, incur
nondeductible interest charges. The Fund's intention to qualify
annually as a regulated investment company may limit its
elections with respect to PFIC shares.
Because the application of the PFIC rules may affect, among
other things, the character of gains, the amount of gain or loss
and the timing of the recognition of income with respect to PFIC
shares, as well as subject the Fund itself to tax on certain
income from PFIC shares, the amount that must be distributed to
Shareholders, and which will be taxed to Shareholders as ordinary
income or long-term capital gain, may be increased or decreased
substantially as compared to a fund that did not invest in PFIC
shares.
Distributions. Dividends paid out of the Fund's investment
company taxable income will be taxable to a Shareholder as
ordinary income. Because a portion of the Fund's income may
consist of dividends paid by U.S. corporations, a portion of the
dividends paid by the Fund may be eligible for the corporate
dividends-received deduction. However, the alternative minimum
tax applicable to corporations may reduce the benefit of the
dividends-received deduction. Distributions of net capital
gains, if any, designated by the Fund as capital gain dividends
are taxable as long-term capital gains, regardless of how long
the Shareholder has held the Fund's Shares, and are not eligible
for the dividends-received deduction. All dividends and
distributions are taxable to Shareholders, whether or not
reinvested in Shares of the Fund. Shareholders receiving
distributions in the form of newly-issued Shares generally will
have a cost basis in each Share received equal to the net asset
value of a Share of the Fund on the distribution date.
Shareholders will be notified annually as to the U.S. federal tax
status of distributions, and Shareholders receiving distributions
in the form of newly-issued Shares will receive a report as to
the net asset value of the Shares received.
Distributions by the Fund reduce the net asset value of the
Fund Shares. Should a distribution reduce the net asset value
below a Shareholder's cost basis, the distribution nevertheless
would be taxable to the Shareholder as ordinary income or capital
gain as described above, even though, from an investment
standpoint, it may constitute a partial return of capital. In
particular, investors should be careful to consider the tax
implication of buying Shares just prior to a distribution by the
Fund. The price of Shares purchased at that time includes the
amount of the forthcoming distribution, but the distribution will
generally be taxable to them.
If the Fund retains net capital gains for reinvestment, the
Fund may elect to treat such amounts as having been distributed
to Shareholders. As a result, the Shareholders would be subject
to tax on undistributed net capital gains, would be able to claim
their proportionate share of the Federal income taxes paid by the
Fund on such gains as a credit against their own Federal income
tax liabilities, and would be entitled to an increase in their
basis in their Fund Shares.
Options and Hedging Transactions. Certain options, futures
contracts and forward contracts in which the Fund may invest are
"section 1256 contracts." Gains or losses on section 1256
contracts generally are considered 60% long-term and 40% short-
term capital gains or losses ("60/40"); however, foreign currency
gains or losses (as discussed below) arising from certain section
1256 contracts may be treated as ordinary income or loss. Also,
section 1256 contracts held by the Fund at the end of each
taxable year (and, in some cases, for purposes of the 4% excise
tax, on October 31 of each year) are "marked-to-market" with the
result that unrealized gains or losses are treated as though they
were realized.
Generally, the hedging transactions undertaken by the Fund
may result in "straddles" for Federal income tax purposes. The
straddle rules may affect the character of gains (or losses)
realized by the Fund. In addition, losses realized by the Fund
on positions that are part of a straddle may be deferred under
the straddle rules, rather than being taken into account in
calculating the taxable income for the taxable year in which the
losses are realized. Because only a few regulations implementing
the straddle rules have been promulgated, the tax consequences to
the Fund of hedging transactions are not entirely clear. The
hedging transactions may increase the amount of short-term
capital gain realized by the Fund which is taxed as ordinary
income when distributed to Shareholders.
The Fund may make one or more of the elections available
under the Code which are applicable to straddles. If the Fund
makes any of the elections, the amount, character and timing of
the recognition of gains or losses from the affected straddle
positions will be determined under rules that vary according to
the election(s) made. The rules applicable under certain of the
elections may operate to accelerate the recognition of gains or
losses from the affected straddle positions.
Because application of the straddle rules may affect the
character of gains or losses, defer losses and/or accelerate the
recognition of gains or losses from the affected straddle
positions, the amount which must be distributed to Shareholders
and which will be taxed to Shareholders as ordinary income or
long-term capital gain, may be increased or decreased as compared
to a fund that did not engage in such hedging transactions.
Requirements relating to the Fund's tax status as a
regulated investment company may limit the extent to which the
Fund will be able to engage in transactions in options, futures
contracts and forward contracts.
Currency Fluctuations--"Section 988" Gains or Losses. Under
the Code, gains or losses attributable to fluctuations in
exchange rates which occur between the time the Fund accrues
income or other receivables or accrues expenses or other
liabilities denominated in a foreign currency and the time the
Fund actually collects such receivables or pays such liabilities
generally are treated as ordinary income or ordinary loss.
Similarly, on disposition of debt securities denominated in a
foreign currency and on disposition of certain futures contracts,
forward contracts and options, gains or losses attributable to
fluctuations in the value of foreign currency between the date of
acquisition of the security or contract and the date of
disposition also are treated as ordinary gain or loss. These
gains or losses, referred to under the Code as "section 988"
gains or loses, may increase, decrease or eliminate the amount of
the Fund's investment company taxable income to be distributed to
its Shareholders as ordinary income.
Sale of Shares. Upon the sale, exchange or other taxable
disposition of Shares of the Fund, a Shareholder may realize a
capital gain or loss which will be long-term or short-term,
generally depending upon the Shareholder's holding period for the
Shares. Any loss realized on a sale or exchange will be
disallowed to the extent the Shares disposed of are replaced
(including replacement through the reinvestment of dividends and
capital gain distributions in a Fund) within a period of 61 days
beginning 30 days before and ending 30 days after disposition of
the Shares. In such a case, the basis of the Shares acquired
will be adjusted to reflect the disallowed loss. Any loss
realized by a Shareholder on a disposition of Fund Shares held by
the Shareholder for six months or less will be treated as a long-
term capital loss to the extent of any distributions of capital
gain dividends received by the Shareholder with respect to such
Shares.
Under certain circumstances, the sales charge incurred in
acquiring Shares of the Fund may not be taken into account in
determining the gain or loss on the disposition of those Shares.
This rule applies if (1) the Shareholder incurs a sales charge in
acquiring stock of a regulated investment company, (2) Shares of
the Fund are exchanged within 90 days after the date they were
purchased, and (3) the new Shares are acquired without a sales
charge or at a reduced sales charge under a "reinvestment right"
received upon the initial purchase of Shares of stock. In that
case, the gain or loss recognized on the exchange will be
determined by excluding from the tax basis of the Shares
exchanged all or a portion of the amount of sales charge incurred
in acquiring the Shares. This exclusion applies to the extent
that the otherwise applicable sales charge with respect to the
newly acquired Shares is reduced as a result of having incurred
the sales charge initially. Instead, the portion of the sales
charge affected by this rule will be treated as an amount paid
for the new Shares.
Foreign Taxes. Income received by the Fund from sources
within foreign countries may be subject to withholding and other
income or similar taxes imposed by such countries. If more than
50% of the value of the Fund's total assets at the close of its
taxable year consists of securities of foreign corporations, the
Fund will be eligible and intends to elect to "pass-through" to
the Fund's Shareholders the amount of foreign taxes paid by the
Fund. Pursuant to this election, a Shareholder will be required
to include in gross income (in addition to taxable dividends
actually received) his pro rata share of the foreign taxes paid
by the Fund, and will be entitled either to deduct (as an
itemized deduction) his pro rata share of foreign taxes in
computing his taxable income or to use it as a foreign tax credit
against his U.S. Federal income tax liability, subject to
limitations. No deduction for foreign taxes may be claimed by a
Shareholder who does not itemize deductions, but such a
Shareholder may be eligible to claim the foreign tax credit (see
below). Each Shareholder will be notified within 60 days after
the close of the Fund's taxable year whether the foreign taxes
paid by the Fund will "pass-through" for that year.
Generally, a credit for foreign taxes is subject to the
limitation that it may not exceed the Shareholder's U.S. tax
attributable to his or her foreign source taxable income. For
this purpose, if the pass-through election is made, the source of
the Fund's income flows through to its Shareholders. With
respect to the Fund, gains from the sale of securities will be
treated as derived from U.S. sources and certain currency
fluctuation gains, including fluctuation gains from foreign
currency denominated debt securities, receivables and payables,
will be treated as ordinary income derived from U.S. sources.
The limitation on the foreign tax credit is applied separately to
foreign source passive income (as defined for purposes of the
foreign tax credit), including the foreign source passive income
passed through by the Fund. Because of changes made by the Tax
Reform Act of 1986, Shareholders may be unable to claim a credit
for the full amount of their proportionate share of the foreign
taxes paid by the Fund. Foreign taxes may not be deducted in
computing alternative minimum taxable income and the foreign tax
credit can be used to offset only 90% of the alternative minimum
tax (as computed under the Code for purposes of this limitation)
imposed on corporations and individuals. If the Fund is not
eligible to make the election to "pass through" to its
Shareholders its foreign taxes, the foreign taxes it pays will
reduce investment company taxable income and the distributions by
the Fund will be treated as United States source income.
Backup Withholding. The Fund may be required to withhold
U.S. Federal income tax at the rate of 31% ("backup withholding")
of all taxable distributions payable to Shareholders who fail to
provide the Fund with their correct taxpayer identification
number or to make required certifications, where the Fund or
Shareholder has been notified by the Internal Revenue Service
that they are subject to backup withholding, or when required to
do so, the Shareholder fails to certify that he is not subject to
backup withholding. Corporate Shareholders and certain other
Shareholders specified in the Code generally are exempt from such
backup withholding. Backup withholding is not an additional tax.
Any amounts withheld may be credited against the Shareholder's
U.S. Federal income tax liability.
Foreign Shareholders. The tax consequences to a foreign
Shareholder of an investment in the Fund may differ from those
described herein. Foreign Shareholders are advised to consult
their own tax advisers with respect to the particular tax
consequences to them of an investment in the Fund.
Other Taxation. The foregoing discussion relates only to
U.S. Federal income tax law as applicable to U.S. persons (i.e.,
U.S. citizens and residents and U.S. domestic corporations,
partnerships, trusts and estates). Distributions by the Fund
also may be subject to state, local and foreign taxes, and their
treatment under state and local income tax laws may differ from
U.S. Federal income tax treatment. Shareholders should consult
their tax advisors with respect to particular questions of U.S.
Federal, state and local taxation. Shareholders who are not U.S.
persons should consult their tax advisors regarding U.S. and
foreign tax consequences of ownership of Shares of the Fund,
including the likelihood that distributions to them would be
subject to withholding of U.S. Federal income tax at a rate of
30% (or at a lower rate under a tax treaty).
PRINCIPAL UNDERWRITER
Franklin Templeton Distributors, Inc. ("FTD" or the
"Principal Underwriter"), 700 Central Avenue, P.O. Box 33030, St.
Petersburg, Florida 33733, toll free telephone (800) 237-0738, is
the Principal Underwriter of the Fund's Shares. FTD is a wholly
owned subsidiary of Franklin.
The Fund, pursuant to Rule 12b-1 under the 1940 Act, has
adopted Distribution Plans (the "Plans"). Under the Plan adopted
with respect to Class I Shares, the Fund may reimburse FTD
monthly (subject to a limit of 0.25% per annum of the Fund's
average daily net assets attributable to Class I Shares) for
FTD's costs and expenses in connection with any activity which is
primarily intended to result in the sale of Fund Shares. Under
the Plan adopted with respect to Class II Shares, each Fund may
reimburse FTD monthly (subject to a limit of 1.00% per annum of
the Fund's average daily assets attributable to Class II Shares
of which up to 0.25% of such net assets may be paid to dealers
for personal service and/or maintenance of Shareholder accounts)
for FTD's costs and expenses in connection with any activity
which is primarily intended to result in the sale of the Funds'
Shares. The Plans are reimbursement type plans which do not
provide for the payment of interest or carrying charges as
distribution expenses. Payments to FTD could be for various
types of activities, including (1) printing and advertising
expenses, (2) payments to employees or agents of FTD who engage
in or support distribution of Shares, (3) the costs of preparing,
printing and distributing prospectuses and reports to prospective
investors, (4) expenses of organizing and conducting sales
seminars, (5) expenses relating to selling and servicing efforts,
(6) payments to broker-dealers who provide certain services of
value to the Fund's Shareholders (sometimes referred to as a
"trail fee"), and (7) such other similar services as the Fund's
Board of Trustees determines to be reasonably calculated to
result in the sale of Shares. Under the Plans, the costs and
expenses not reimbursed in any one given month (including costs
and expenses not reimbursed because they exceeded the percentage
limit applicable to each class of Shares) may be reimbursed in
subsequent months or years.
During the fiscal year ended December 31, 1994, FTD incurred
costs and expenses of $________ in connection with distribution
of the Class I Shares of the Fund. During the same period, the
Fund made reimbursements pursuant to the Class I Plan in the
amount of $_______. As indicated above, unreimbursed expenses,
which amounted to $________ for Class I Shares of the Fund, may
be reimbursed by the Fund during the fiscal year ending December
31, 1995 or in subsequent years. In the event that a Plan is
terminated, the Fund will not be liable to FTD for any
unreimbursed expenses that had been carried forward from previous
months or years. During the fiscal year ended December 31, 1994,
FTD spent, pursuant to the Plan, the following amounts on:
compensation to dealers, $1,147,133; wholesaler costs and
expenses, $19,346; sales promotion, $128,417; printing, $181,782;
and advertising, $10,165.
The Distribution Agreement provides that the Principal
Underwriter will use its best efforts to maintain a broad and
continuous distribution of the Fund's Shares among bona fide
investors and may sign selling agreements with responsible
dealers, as well as sell to individual investors. The Shares are
sold only at the Offering Price in effect at the time of sale,
and the Fund receives not less than the full net asset value of
the Shares sold. The discount between the Offering Price and the
net asset value may be retained by the Principal Underwriter or
it may reallow all or any part of such discount to dealers.
During the fiscal years ended December 31, 1994, 1993, and 1992,
FTD (and, prior to June 1, 1993, Templeton Funds Distributor,
Inc.) retained of such discount $771,208, $414,599, $453,968, or
approximately 16.13%, 15%, and 23.0%, respectively, of the gross
sales commissions. The Principal Underwriter in all cases buys
Shares from the Fund acting as principal for its own account.
Dealers generally act as principal for their own account in
buying Shares from the Principal Underwriter. No agency
relationship exists between any dealer and the Fund or the
Principal Underwriter.
The Distribution Agreement provides that the Fund shall pay
the costs and expenses incident to registering and qualifying its
Shares for sale under the Securities Act of 1933 and under the
applicable blue sky laws of the jurisdictions in which the
Principal Underwriter desires to distribute such Shares, and for
preparing, printing and distributing prospectuses and reports to
Shareholders. The Principal Underwriter pays the cost of
printing additional copies of prospectuses and reports to
Shareholders used for selling purposes, although the Principal
Underwriter may recoup these costs from payments it receives
under the Distribution Plan. (The Fund pays costs of
preparation, set-up and initial supply of its prospectus for
existing Shareholders.)
The Distribution Agreement is subject to renewal from year
to year in accordance with the provisions of the 1940 Act and
terminates automatically in the event of its assignment. The
Agreement may be terminated without penalty by either party upon
60 days' written notice to the other, provided termination by the
Fund shall be approved by the Board of Trustees or a majority (as
defined in the 1940 Act) of the Shareholders. The Principal
Underwriter is relieved of liability for any act or omission in
the course of its performance of the Agreement, in the absence of
willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations.
FTD is the principal underwriter for the other Templeton
Funds.
DESCRIPTION OF SHARES
The Shares have non-cumulative voting rights, so that the
holders of a plurality of the Shares voting for the election of
Trustees at a meeting at which 50% of the outstanding Shares are
present can elect all the Trustees and, in such event, the
holders of the remaining Shares voting for the election of
Trustees will not be able to elect any person or persons to the
Board of Trustees.
The Declaration of Trust provides that the holders of not
less than two-thirds of the outstanding Shares of the Fund may
remove a person serving as Trustee either by declaration in
writing or at a meeting called for such purpose. The Trustees
are required to call a meeting for the purpose of considering the
removal of a person serving as Trustee if requested in writing to
do so by the holders of not less than 10% of the outstanding
Shares of the Fund. In addition, the Fund is required to assist
Shareholder communication in connection with the calling of
Shareholder meetings to consider removal of a Trustee.
Under Massachusetts law, Shareholders could, under certain
circumstances, be held personally liable for the obligations of
the Fund. However, the Declaration of Trust disclaims liability
of the Shareholders, Trustees or officers of the Fund for acts or
obligations of the Fund, which are binding only on the assets and
property of the Fund. The Declaration of Trust provides for
indemnification out of Fund property for all loss and expense of
any Shareholder held personally liable for the obligations of the
Fund. The risk of a Shareholder incurring financial loss on
account of Shareholder liability is limited to circumstances in
which the Fund itself would be unable to meet its obligations
and, thus, should be considered remote.
PERFORMANCE INFORMATION
The Fund may, from time to time, include its total return in
advertisements or reports to Shareholders or prospective
investors. Quotations of average annual total return for the
Fund will be expressed in terms of the average annual compounded
rate of return for periods in excess of one year or the total
return for periods less than one year of a hypothetical
investment in the Fund over a period of one year (or, if less, up
to the life of the Fund) calculated pursuant to the following
formula: P(1 + T)n = ERV (where P = a hypothetical initial
payment of $1,000, T = the average annual total return for
periods of one year or more or the total return for periods of
less than one year, n = the number of years, and ERV = the ending
redeemable value of a hypothetical $1,000 payment made at the
beginning of the period). All total return figures reflect the
deduction of a proportional share of Fund expenses on an annual
basis, and assume that all dividends and distributions are
reinvested when paid. The Fund's average annual total return for
the one-year period ended December 31, 1994 and for the period
from February 28, 1990 (commencement of operations) through
December 31, 1994 were (9.52)% and 10.42%, respectively.
Performance information for the Fund may be compared, in
reports and promotional literature, to: (i) the Standard &
Poor's 500 Stock Index, Dow Jones Industrial Average, or other
unmanaged indices so that investors may compare the Fund's
results with those of a group of unmanaged securities widely
regarded by investors as representative of the securities market
in general; (ii) other groups of mutual funds tracked by Lipper
Analytical Services, Inc., a widely used independent research
firm which ranks mutual funds by overall performance, investment
objectives and assets, or tracked by other services, companies,
publications, or persons who rank mutual funds on overall
performance or other criteria; and (iii) the Consumer Price Index
(measure of inflation) to assess the real rate of return from an
investment in the Fund. Unmanaged indices may assume the
reinvestment of dividends but generally do not reflect deduction
for administrative and management costs and expenses.
Performance information for the Fund reflects only the
performance of a hypothetical investment in the Fund during the
particular time period on which the calculations are based.
Performance information should be considered in light of the
Fund's investment objective and policies, characteristics and
quality of the portfolio and the market conditions during the
given time period, and should not be considered as a
representation of what may be achieved in the future.
From time to time, the Fund and the Investment Manager may
also refer to the following information:
(1) The Investment Manager's and its affiliates' market
share of international equities managed in mutual funds
prepared or published by Strategic Insight or a similar
statistical organization.
(2) The performance of U.S. equity and debt markets
relative to foreign markets prepared or published by
Morgan Stanley Capital International or a similar
financial organization.
(3) The capitalization of U.S. and foreign stock markets as
prepared or published by the International Finance
Corp., Morgan Stanley Capital International or a
similar financial organization.
(4) The geographic distribution of the Fund's portfolio.
(5) The gross national product and populations, including
age characteristics, of various countries as published
by various statistical organizations.
(6) To assist investors in understanding the different
returns and risk characteristics of various
investments, the Fund may show historical returns of
various investments and published indices (e.g.,
Ibbotson Associates, Inc. Charts and Morgan Stanley
EAFE - Index).
(7) The major industries located in various jurisdictions
as published by the Morgan Stanley Index.
(8) Rankings by DALBAR Surveys, Inc. with respect to mutual
fund shareholder services.
(9) Allegorical stories illustrating the importance of
persistent long-term investing.
(10) The Fund's portfolio turnover rate and its ranking
relative to industry standards as published by Lipper
Analytical Services, Inc. or Morningstar, Inc.
(11) A description of the Templeton organization's
investment management philosophy and approach,
including its worldwide search for undervalued or
"bargain" securities and its diversification by
industry, nation and type of stocks or other
securities.
(12) Quotations from the Templeton organization's founder,
Sir John Templeton,* advocating the virtues of
diversification and long-term investing, including the
following:
o "Never follow the crowd. superior performance is
possible only if you invest differently from the
crowd."
o "Diversify by company, by industry and by
country."
o "Always maintain a long-term perspective."
o "Invest for maximum total real return."
o "Invest - don't trade or speculate."
o "Remain flexible and open-minded about types of
investment."
o "Buy low."
o "When buying stocks, search for bargains among
quality stocks."
o "Buy value, not market trends or the economic
outlook."
______________________
* Sir John Templeton, who currently serves as Chairman of the
Fund's Board, is not involved in investment decisions, which
are made by the Fund's Investment Manager.
o "Diversify. In stocks and bonds, as in much else,
there is safety in numbers."
o "Do your homework or hire wise experts to help
you."
o "Aggressively monitor your investments."
o "Don't panic."
o "Learn from your mistakes."
o "Outperforming the market is a difficult task."
o "An investor who has all the answers doesn't even
understand all the questions."
o "There's no free lunch."
o "And now the last principle: Do not be fearful or
negative too often."
In addition, the Fund and the Investment Manager may also
refer to the number of shareholders in the Fund or the aggregate
number of shareholders in the Franklin Templeton Group or the
dollar amount of fund and private account assets under management
in advertising materials.
FINANCIAL STATEMENTS
The financial statements contained in the Fund's
December 31, 1994 Annual Report to Shareholders are incorporated
herein by reference.
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements: Incorporated by reference
from Registrant's 1994 Annual Report:
Investment Portfolio as of December 31, 1994
Independent Auditor's Report
Statement of Assets and Liabilities as of December
31, 1994
Statement of Operations for fiscal year ended
December 31, 1994
Statement of Changes in Net Assets for the years
ended December 31, 1994 and 1993
(b) Exhibits
(1) (A) Amended and Restated Declaration of
Trust1
(B) Establishment and Designation of Classes
of Shares of Beneficial Interest
(2) By-Laws2
(3) Not Applicable
(4) Specimen Security3
(5) (A) Investment Management Agreement4
(B) Sub-advisory Agreement4
(6) Distribution Agreement1
(7) Not Applicable
(8) Custody Agreement5
(9) (A) Transfer Agent Agreement4
(B) Business Management Agreement1
(C) Shareholder Sub-Accounting Services
Agreement4
(D) Sub-Transfer Agent Services Agreement4
(10) Opinion and consent of counsel (filed with
Rule 24f-2 Notice)
(11) Opinion and consent of independent public
accountants
(12) Not Applicable
(13) Letter concerning initial capital3
(14) Not Applicable
(15)(A) Distribution Plan -- Class I Shares
(B) Distribution Plan -- Class II Shares
(16) Schedule showing computation of performance
quotations provided in response to Item 22
(unaudited)
____________________
1 Filed with Post-Effective Amendment No. 7 to the
Registration Statement on March 2, 1994.
2 Filed with the Registrant's initial Registration Statement
on October 2, 1989.
3 Filed with Pre-Effective Amendment No. 2 to the Registration
Statement on January 19, 1990.
4 Filed with Post-Effective Amendment No. 6 to the
Registration Statement on March 2, 1993.
5 Filed with Pre-Effective Amendment No. 1 to the Registration
Statement on December 22, 1989.
Item 25. Persons Controlled by or Under Common Control with
Registrant
None
Item 26. Number of Holders of Securities
Number of
Title of Class Recordholders
Shares of Beneficial Interest, 41,806 as of
par value $0.01 per Share: January 31,
1995
Item 27. Indemnification.
Reference is made to Article IV of the Registrant's
Declaration of Trust, which is filed herewith.
Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to
trustees, officers and controlling persons of the
Registrant by the Registrant pursuant to the
Declaration of Trust or otherwise, the Registrant is
aware that in the opinion of the Securities and
Exchange Commission, such indemnification is against
public policy as expressed in the Act and, therefore,
is unenforceable. In the event that a claim for
indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or
paid by trustees, officers or controlling persons of
the Registrant in connection with the successful
defense of any act, suit or proceeding) is asserted by
such trustees, officers or controlling persons in
connection with the shares being registered, the
Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against
public policy as expressed in the Act and will be
governed by the final adjudication of such issues.
Item 28. Business and Other Connections of Investment Adviser
and its Officers and Directors
The business and other connections of Registrant's
Investment Manager and Sub-adviser are described in
Part B of this Registration Statement.
For information relating to the officers and directors
of the Investment Manager and Sub-Adviser, reference is
made to Form ADV filed under the Investment Advisers
Act of 1940 by Templeton Investment Counsel, Inc. and
Dean Witter InterCapital Inc.
Item 29. Principal Underwriters
(a) Franklin Templeton Distributors, Inc. also acts as
principal underwriter of shares of Templeton
Growth Fund, Inc., Templeton Funds, Inc.,
Templeton Smaller Companies Growth Fund, Inc.,
Templeton Income Trust, Templeton Real Estate
Securities Fund, Templeton Capital Accumulator
Fund, Inc., Templeton Developing Markets Trust,
Templeton American Trust, Inc., Templeton
Institutional Funds, Inc., Templeton Variable
Products Series Fund, Templeton Global Investment
Trust, Templeton Variable Annuity Fund, AGE High
Income Fund, Inc., Franklin Balance Sheet
Investment Fund, Franklin California Tax Free
Income Fund, Inc., Franklin California Tax Free
Trust, Franklin Custodian Funds, Inc., Franklin
Equity Fund, Franklin Federal Money Fund, Franklin
Federal Tax-Free Income Fund, Franklin Gold Fund,
Franklin International Trust, Franklin Investors
Securities Trust, Franklin Managed Trust, Franklin
Money Fund, Franklin Municipal Securities Trust,
Franklin New York Tax-Free Income Fund, Franklin
New York Tax-Free Trust, Franklin Premier Return
Fund, Franklin Real Estate Securities Fund,
Franklin Strategic Series, Franklin Tax-Advantaged
High Yield Securities Fund, Franklin Tax-
Advantaged International Bond Fund, Franklin Tax-
Advantaged U.S. Government Securities Fund,
Franklin Tax Exempt Money Fund, Franklin Tax-Free
Trust, Franklin/Templeton Japan Fund, and
Institutional Fiduciary Trust.
(b) The directors and officers of FTD, located at 700
Central Avenue, P.O. Box 33030, St. Petersburg,
Florida 33733, are as follows:
Position with Position with
Name Underwriter the Registrant
Charles B. Johnson Chairman of the Board Vice President
and Director
Gregory E. Johnson President None
Rupert H. Johnson, Jr. Executive Vice President Trustee
and Director
Harmon E. Burns Executive Vice President None
and Director
Edward V. McVey Senior Vice President None
Kenneth V. Domingues Senior Vice President None
Martin L. Flanagan Senior Vice President Vice President
and Treasurer
William J. Lippman Senior Vice President None
Richard C. Stoker Senior Vice President None
Charles E. Johnson Senior Vice President None
Deborah R. Gatzek Senior Vice President and None
Assistant Secretary
Peter Black Vice President None
James K. Blinn Vice President None
Bernie Buckley Vice President None
Joel Burns Vice President None
Debra Carter Vice President None
Richard O. Conboy Vice President None
Joe Cronin Vice President None
James F. Duryea Vice President None
James A. Escobedo Vice President None
Loretta Fry Vice President None
Robert N. Geppner Vice President None
John Gould Vice President None
Sheppard G. Griswold Vice President None
Mike Hackett Vice President None
Brad N. Hanson Vice President None
Carolyn L. Hennion Vice President None
Andrew Jennings Vice President None
Peter Jones Vice President None
Philip J. Kearns Vice President None
John Leach Vice President None
Ken Leder Vice President None
Jack Lemein Vice President None
John R. McGee Vice President None
Thomas M. Mistele Vice President Secretary
Harry G. Mumford Vice President None
Mike Nardone Vice President None
Thomas H. O'Connor Vice President None
Vivian J. Palmieri Vice President None
Roger Pearson Vice President None
Richard S. Petrell Vice President None
John Phillips Vice President None
Darrell Plocher Vice President None
Dennis Shannon Vice President None
Robert E. Silvani Vice President None
Kent P. Strazza Vice President None
Susan K. Tallarico Vice President None
Leslie M. Kratter Secretary None
(c) Not Applicable (Information on unaffiliated
underwriters).
Item 30. Location of Accounts and Records
The accounts, books, and other documents required to be
maintained by Registrant pursuant to Section 31(a) of
the Investment Company Act of 1940 and rules
promulgated thereunder are in the possession of
Templeton Global Investors, Inc., 500 East Broward
Blvd., Fort Lauderdale, Florida 33394.
Item 31. Management Services
Not Applicable.
Item 32. Undertakings.
(a) Not Applicable.
(b) Not Applicable.
(c) Registrant undertakes to furnish to each person to
whom its Prospectus is provided a copy of its
latest Annual Report, upon request and without
charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933 and the Investment Company Act of 1940, the Registrant
certifies that it meets all the requirements for effectiveness of
the Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Post-Effective
Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City
of Washington in the District of Columbia on the 1st day of
March, 1995.
TEMPLETON GLOBAL OPPORTUNITIES TRUST
(REGISTRANT)
By: Martin L. Flanagan, President*
*By: /s/ Jeffrey L. Steele
attorney-in-fact**
** Power of Attorney is contained herewith.
Pursuant to the requirements of the Securities Act of
1933, this Amendment to the Registration Statement has been
signed below by the following persons in the capacities and on
the date indicated:
Signature Title Date
Martin L. Flanagan* President (Chief March 1, 1995
Executive Officer)
John M. Templeton* Trustee March 1, 1995
Rupert H. Johnson, Jr.* Trustee March 1, 1995
William Young Boyd II* Trustee March 1, 1995
Constantine Dean
Tseretopoulos* Trustee March 1, 1995
Frank J. Crothers* Trustee March 1, 1995
Fred R. Millsaps* Trustee March 1, 1995
Harris J. Ashton* Trustee March 1, 1995
S. Joseph Fortunato* Trustee March 1, 1995
Andrew H. Hines, Jr.* Trustee March 1, 1995
John G. Bennett, Jr.* Trustee March 1, 1995
Gordon S. Macklin* Trustee March 1, 1995
Nicholas F. Brady* Trustee March 1, 1995
James R. Baio* Treasurer (Chief March 1, 1995
Financial and
Accounting Officer)
*By: /s/ Jeffrey L. Steele, Attorney-in-fact**
** Powers of Attorney were previously filed with Registration
Statement No. 33-31267 and are incorporated by reference, or
are contained herewith.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned,
being a duly elected Trustee of Templeton Global Opportunities
Trust (the "Trust"), constitutes and appoints Allan S. Mostoff,
Jeffrey L. Steele, William J. Kotapish and Thomas M. Mistele, and
each of them, his true and lawful attorneys-in-fact and agents
with full power of substitution and resubstitution for him in his
name, place and stead, in any and all capacities, to sign the
Trust's registration statement and any and all amendments
thereto, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every
act and thing requisite and necessary to be done, as fully to all
intents and purposes as he might or could do in person, hereby
ratifying and conforming all that said attorneys-in-fact and
agents, or any of them, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Dated: February 26, 1993
/s/ John M. Templeton
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned,
being a duly elected Trustee of Templeton Global Opportunities
Trust (the "Trust"), constitutes and appoints Allan S. Mostoff,
Jeffrey L. Steele, William J. Kotapish and Thomas M. Mistele, and
each of them, his true and lawful attorneys-in-fact and agents
with full power of substitution and resubstitution for him in his
name, place and stead, in any and all capacities, to sign the
Trust's registration statement and any and all amendments
thereto, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every
act and thing requisite and necessary to be done, as fully to all
intents and purposes as he might or could do in person, hereby
ratifying and conforming all that said attorneys-in-fact and
agents, or any of them, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Dated: February 25, 1994
/s/ Nicholas F. Brady
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned,
being the duly elected Treasurer and Chief Financial Officer of
Templeton Global Opportunities Trust (the "Trust"), constitutes
and appoints Allan S. Mostoff, Jeffrey L. Steele, William J.
Kotapish and Thomas M. Mistele, and each of them, his true and
lawful attorneys-in-fact and agents with full power of
substitution and resubstitution for him in his name, place and
stead, in any and all capacities, to sign the Trust's
registration statement and any and all amendments thereto, and to
file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full
power and authority to do and perform each and every act and
thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying
and conforming all that said attorneys-in-fact and agents, or any
of them, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Dated: February 25, 1994
/s/ James R. Baio
EXHIBIT LIST
Exhibit Number Name of Exhibit
(1)(B) Establishment and Designation
of Classes of Shares of
Beneficial Interest
(5) Amended and Restated
Investment Management
Agreement
(11) Opinion and Consent of
Independent Certified Public
Accountants
(15)(A) Distribution Plan -- Class I
Shares
(15)(B) Distribution Plan -- Class II
Shares
(16) Schedule Showing Computation
of Performance Quotations
Provided in Response to Item
22 (Unaudited)
Establishment and Designation
Of Classes of Shares of Beneficial Interest
Par Value $0.01 Per Share
The undersigned, being a majority of the Trustees of
Templeton Global Opportunities Trust, a Massachusetts business
trust (the "Trust"), acting pursuant to Section 5.12 of the
Declaration of Trust dated October 2, 1989, as previously amended
(the "Declaration of Trust") of the Trust, hereby divide the
shares of beneficial interest of the Trust into two separate
classes, each class to have the following special and relative
rights:
1. The classes shall be designated "Templeton Global
Opportunities Trust Class I" and "Templeton Global Opportunities
Trust Class II."
2. The Trust shall be authorized to invest in cash,
securities, instruments and other property as from time to time
described in the Trust's then currently effective registration
statement under the Securities Act of 1933. Each share of
beneficial interest of the Trust ("Share") shall be redeemable,
shall be entitled to one vote (or fraction thereof in respect of
a fractional Share) on matters on which Shares of the Trust shall
be entitled to vote (subject to paragraph 3 below), shall
represent a pro rata beneficial interest in the assets of the
Trust (subject to paragraph 4 below) and shall be entitled to
receive its pro rata share of net assets of the Trust upon
liquidation of the Trust, all as provided in the Declaration of
Trust.
3. Shareholders of the Trust shall vote together as a
single class on any matter, except to the extent required by the
Investment Company Act of 1940, as amended (the "1940 Act"), or
when the Trustees have determined that the matter affects only
the interests of Shareholders of a particular class of Shares, in
which case only the Shareholders of such class shall be entitled
to vote thereon. Any matter shall be deemed to have been
effectively acted upon with respect to any class as provided in
Rule 18f-2 under the 1940 Act, or any successor rule, and in the
Declaration of Trust.
4. Liabilities, expenses, costs, charges and reserves
related to the distribution of, and other identified expenses
that should properly be allocated to, the Shares of a particular
class may be charged to and borne solely by such class and the
bearing of expenses solely by a class of Shares may be
appropriately reflected (in a manner determined by the Trustees),
and cause differences in, the net asset value attributable to,
and the dividend, redemption and liquidation rights of, the
Shares of different classes. Each allocation of liabilities,
expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon the Shareholders of all classes for
all purposes.
5. Shares of each class of the Trust may vary between
themselves as to rights of redemption and conversion rights, as
may be approved by the Trustees and set forth in the Trust's
then-current prospectus.
6. The Trustees shall have the right at any time and
from time to time to reallocate assets and expenses or to change
the designation of any series or any class thereof hitherto or
hereafter created, or to otherwise change the special and
relative rights of any series or any class thereof, provided that
such change shall not adversely affect to rights of the
Shareholders of such series or class.
IN WITNESS WHEREOF, the undersigned have executed
this instrument this 24th day of February, 1995.
______________________________ _____________________________
John M. Templeton S. Joseph Fortunato
______________________________ ______________________________
F. Bruce Clarke Fred R. Millsaps
______________________________ ______________________________
Hasso-G von Diergardt-Naglo Andrew H. Hines, Jr.
______________________________ ______________________________
Betty P. Krahmer Rupert H. Johnson, Jr.
______________________________ ______________________________
John G. Bennett, Jr. Gordon S. Macklin
______________________________ ______________________________
Harris J. Ashton Nicholas F. Brady
CERTIFICATE
Pursuant to Section 10.1 of the Declaration, the undersigned
Trustee hereby acknowledges and certifies that this instrument is
made in accordance with the provisions of the Declaration, and
shall be effective upon its filing with the Secretary of the
Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the undersigned has executed this
instrument this 24th day of February, 1995.
___________________________________
John M. Templeton
CERTIFICATE
Pursuant to Section 10.1 of the Declaration, the undersigned
Trustee hereby acknowledges and certifies that this instrument is
made in accordance with the provisions of the Declaration, and
shall be effective upon its filing with the Secretary of the
Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the undersigned has executed this
instrument this 24th day of February, 1995.
___________________________________
F. Bruce Clarke
CERTIFICATE
Pursuant to Section 10.1 of the Declaration, the undersigned
Trustee hereby acknowledges and certifies that this instrument is
made in accordance with the provisions of the Declaration, and
shall be effective upon its filing with the Secretary of the
Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the undersigned has executed this
instrument this 24th day of February, 1995.
___________________________________
Hasso-G von Diergardt-Naglo
CERTIFICATE
Pursuant to Section 10.1 of the Declaration, the undersigned
Trustee hereby acknowledges and certifies that this instrument is
made in accordance with the provisions of the Declaration, and
shall be effective upon its filing with the Secretary of the
Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the undersigned has executed this
instrument this 24th day of February, 1995.
___________________________________
Betty P. Krahmer
CERTIFICATE
Pursuant to Section 10.1 of the Declaration, the undersigned
Trustee hereby acknowledges and certifies that this instrument is
made in accordance with the provisions of the Declaration, and
shall be effective upon its filing with the Secretary of the
Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the undersigned has executed this
instrument this 24th day of February, 1995.
___________________________________
John G. Bennett, Jr.
CERTIFICATE
Pursuant to Section 10.1 of the Declaration, the undersigned
Trustee hereby acknowledges and certifies that this instrument is
made in accordance with the provisions of the Declaration, and
shall be effective upon its filing with the Secretary of the
Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the undersigned has executed this
instrument this 24th day of February, 1995.
___________________________________
Harris J. Ashton
CERTIFICATE
Pursuant to Section 10.1 of the Declaration, the undersigned
Trustee hereby acknowledges and certifies that this instrument is
made in accordance with the provisions of the Declaration, and
shall be effective upon its filing with the Secretary of the
Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the undersigned has executed this
instrument this 24th day of February, 1995.
___________________________________
S. Joseph Fortunato
CERTIFICATE
Pursuant to Section 10.1 of the Declaration, the undersigned
Trustee hereby acknowledges and certifies that this instrument is
made in accordance with the provisions of the Declaration, and
shall be effective upon its filing with the Secretary of the
Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the undersigned has executed this
instrument this 24th day of February, 1995.
___________________________________
Fred R. Millsaps
CERTIFICATE
Pursuant to Section 10.1 of the Declaration, the undersigned
Trustee hereby acknowledges and certifies that this instrument is
made in accordance with the provisions of the Declaration, and
shall be effective upon its filing with the Secretary of the
Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the undersigned has executed this
instrument this 24th day of February, 1995.
___________________________________
Andrew H. Hines, Jr.
CERTIFICATE
Pursuant to Section 10.1 of the Declaration, the undersigned
Trustee hereby acknowledges and certifies that this instrument is
made in accordance with the provisions of the Declaration, and
shall be effective upon its filing with the Secretary of the
Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the undersigned has executed this
instrument this 24th day of February, 1995.
___________________________________
Rupert H. Johnson, Jr.
CERTIFICATE
Pursuant to Section 10.1 of the Declaration, the undersigned
Trustee hereby acknowledges and certifies that this instrument is
made in accordance with the provisions of the Declaration, and
shall be effective upon its filing with the Secretary of the
Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the undersigned has executed this
instrument this 24th day of February, 1995.
___________________________________
Gordon S. Macklin
CERTIFICATE
Pursuant to Section 10.1 of the Declaration, the undersigned
Trustee hereby acknowledges and certifies that this instrument is
made in accordance with the provisions of the Declaration, and
shall be effective upon its filing with the Secretary of the
Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the undersigned has executed this
instrument this 24th day of February, 1995.
___________________________________
Nicholas F. Brady
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of the 30th day of October, 1992, and
amended and restated as of February 25, 1994, between TEMPLETON
GLOBAL OPPORTUNITIES TRUST (hereinafter referred to as the
"Trust"), and TEMPLETON INVESTMENT COUNSEL, INC. (hereinafter
referred to as the "Manager").
In consideration of the mutual agreements herein made,
the Trust and the Manager understand and agree as follows:
(1) The Manager agrees, during the life of this
Agreement, to manage the investment and reinvestment of the
Trust's assets consistent with the provisions of the Trust's
Declaration of Trust and the investment policies adopted and
declared by the Trust's Board of Trustees. In pursuance of the
foregoing, the Investment Manager shall make all determinations
with respect to the investment of the Trust's assets and the
purchase and sale of its investment securities, and shall take
all such steps as may be necessary to implement those
determinations.
(2) The Manager may determine to utilize the services
of a Sub-Adviser in providing the investment advisory services
for which the Manager is responsible pursuant to this Agreement,
including supplying research services.
(3) The Manager is not required to furnish any person-
nel, overhead items or facilities for the Trust.
(4) The Manager shall be responsible for selecting
members of securities exchanges, brokers and dealers (such
members, brokers and dealers being hereinafter referred to as
"brokers") for the execution of the Trust's portfolio trans-
actions consistent with the Trust's brokerage policies and, when
applicable, the negotiation of commissions in connection
therewith.
All decisions and placements shall be made in accor-
dance with the following principles:
A. Purchase and sale orders will usually be placed
with brokers able to achieve "best execution" of
such orders. "Best execution" shall mean prompt
and reliable execution at the most favorable
securities price. The determination of what may
constitute best execution and price in the execu-
tion of a securities transaction by a broker
involves a number of considerations, including,
without limitation, the overall direct net econo-
mic result to the Trust (involving both price paid
or received and any commissions and other costs
paid), the efficiency with which the transaction
is effected, the ability to effect the transaction
at all where a large block is involved, availa-
bility of the broker to stand ready to execute
possibly difficult transactions in the future, and
the financial strength and stability of the
broker. Such considerations are judgmental and
are weighed by the Manager in determining the
overall reasonableness of brokerage commissions;
B. In selecting brokers for portfolio transactions,
the Manager shall take into account its past
experience as to brokers qualified to achieve
"best execution," including brokers who specialize
in any foreign securities held by the Trust;
C. The Manager is authorized to allocate brokerage
and principal business to brokers who have pro-
vided brokerage and research services, as such
services are defined in Section 28(e)(3) of the
Securities Exchange Act of 1934 (the "1934 Act"),
for the Trust and/or other accounts, if any, for
which the Manager exercises investment discretion
(as defined in Section 3(a)(35) of the 1934 Act)
and, as to transactions in which fixed minimum
commission rates are not applicable, to cause the
Trust to pay a commission for effecting a
securities transaction in excess of the amount
another broker would have charged for effecting
that transaction, if the Manager determines in
good faith that such amount of commission is
reasonable in relation to the value of the broker-
age and research services provided by such broker,
viewed in terms of either that particular transac-
tion or the Manager's overall responsibilities
with respect to the Trust and the other accounts,
if any, as to which it exercises investment
discretion. In reaching such determination, the
Manager will not be required to place or attempt
to place a specific dollar value on the research
or execution services of a broker or on the
portion of any commission reflecting either of
said services. In demonstrating that such deter-
minations were made in good faith, the Manager
shall be prepared to show that all commissions
were allocated and paid for purposes contemplated
by the Trust's brokerage policy; that the research
services provide lawful and appropriate assistance
to the Manager in the performance of its
investment decision-making responsibilities; and
that the commissions paid were within a reasonable
range. Whether commissions were within a
reasonable range shall be based on any available
information as to the level of commission known to
be charged by other brokers on comparable transac-
tions, but there shall be taken into account the
Trust's policies that (i) obtaining a low
commission is deemed secondary to obtaining a
favorable securities price, since it is recognized
that usually it is more beneficial to the Trust to
obtain a favorable price than to pay the lowest
commission; and (ii) the quality, comprehensive-
ness and frequency of research studies that are
provided for the Manager are useful to the Manager
in performing its advisory activities under this
Agreement. Research services provided by brokers
to the Manager are considered to be in addition
to, and not in lieu of, services required to be
performed by the Manager under this Agreement;
D. Purchases and sales of portfolio securities within
the United States other than on a securities
exchange shall be executed with primary market
makers acting as principal except where, in the
judgment of the Manager, better prices and
execution may be obtained on a commission basis
or from other sources; and
E. Sales of the Trust's shares (which shall be deemed
to include also shares of other companies
registered under the Investment Company Act of
1940 (the "1940 Act") which have either the same
investment manager or an investment manager
affiliated with the Manager) made by a broker are
one factor among others to be taken into account
in deciding to allocate portfolio transactions
(including agency transactions, principal
transactions, purchases in underwritings or
tenders in response to tender offers) for the
account of the Trust to that broker; provided that
the broker shall furnish "best execution," as
defined in paragraph A above, and that such
allocation shall be within the scope of the
Trust's other policies as stated above; and
provided further, that in every allocation made to
a broker in which the sale of Trust shares is
taken into account, there shall be no increase in
the amount of the commissions or other
compensation paid to such broker beyond a
reasonable commission or other compensation
determined, as set forth in paragraph C above, on
the basis of best execution plus research
services, without taking account of or placing any
value upon such sale of the Trust's shares.
(5) The Trust shall pay to the Manager a monthly fee
in dollars at an annual rate of 0.80% of the Trust's average
daily net assets, payable at the end of each calendar month.
(6) This Agreement shall become effective on
October 30, 1992 and shall continue in effect until
April 30, 1994. If not sooner terminated, this Agreement shall
continue in effect for successive periods of 12 months each
thereafter, provided that each such continuance shall be
specifically approved annually by the vote of a majority of the
Trust's Trustees who are not parties to this Agreement or
"interested persons" (as defined in the Investment Company Act of
1940 (the "1940 Act")) of any such party, cast in person at a
meeting called for the purpose of voting on such approval and
either the vote of (a) a majority of the outstanding voting
shares of the Trust, as defined in the 1940 Act, or (b) a
majority of the Trust's Board of Trustees as a whole.
(7) Notwithstanding the foregoing, this Agreement may
be terminated by either party at any time, without the payment of
any penalty, on sixty (60) days' written notice to the other
party, provided that termination by the Trust is approved by vote
of a majority of the Trust's Board of Trustees in office at the
time or by vote of a majority of the outstanding voting shares of
the Trust.
(8) This Agreement will terminate automatically and
immediately in the event of its "assignment" (as defined in the
1940 Act).
(9) In the event this Agreement is terminated and the
Manager no longer acts as Manager to the Trust, the Manager
reserves the right to withdraw from the Trust the use of the name
"Templeton" or any name misleadingly implying a continuing
relationship between the Trust and the Manager or any of its
affiliates.
(10) The Manager may rely on information reasonably
believed by it to be accurate and reliable. Except as may
otherwise be provided by the 1940 Act, neither the Manager nor
its officers, directors, employees or agents shall be subject to
any liability for any error of judgment, mistake of law, or any
loss arising out of any investment or other act or omission in
the performance by the Manager of its duties under this Agreement
or for any loss or damage resulting from the imposition by any
government of exchange control restrictions which might affect
the liquidity of the Trust's assets, or from acts or omissions of
custodians or securities depositories, or from any war or politi-
cal act of any foreign government to which such assets might be
exposed, except for any liability, loss or damage resulting from
willful misfeasance, bad faith or gross negligence on the
Manager's part or by reason of reckless disregard of the
Manager's duties under this Agreement.
(11) It is understood that the services of the Manager
are not deemed to be exclusive, and nothing in this Agreement
shall prevent the Manager, or any affiliate thereof, from provid-
ing similar services to other investment companies and other
clients, including clients which may invest in the same types of
securities as the Trust, or, in providing such services, from
using information furnished by others. When the Manager
determines to buy or sell the same security for the Trust that
the Manager or one or more of its affiliates has selected for
clients of the Manager or its affiliates, the orders for all such
securities transactions shall be placed for execution by methods
determined by the Manager, with approval by the Trust's Board of
Trustees, to be impartial and fair.
(12) This Agreement shall be construed in accordance
with the laws of the Commonwealth of Massachusetts, provided that
nothing herein shall be construed as being inconsistent with
applicable Federal or state securities laws or any rules,
regulations or orders thereunder.
(13) If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or otherwise,
the remainder of this Agreement shall not be affected thereby
and, to this extent, the provisions of this Agreement shall be
deemed to be severable.
(14) It is understood and expressly stipulated that
neither the holders of shares of the Trust nor any Trustee,
officer, agent or employee of the Trust shall be personally
liable hereunder, nor shall any resort be had to other private
property for the satisfaction of any claim or obligation
hereunder, but the Trust only shall be liable.
(15) Nothing herein shall be construed as constituting
the Manager an agent of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their duly authorized officers and their
respective corporate seals to be hereunto duly affixed and
attested.
TEMPLETON GLOBAL OPPORTUNITIES TRUST
By: ______________________________
John R. Kay
Vice President
ATTEST:
________________________
Thomas M. Mistele
Secretary
TEMPLETON INVESTMENT COUNSEL, INC.
By: _______________________________
Donald F. Reed
President
ATTEST:
_________________________
Elizabeth M. Knoblock
Secretary
Registration No. 33-31267
As filed with the Securities and Exchange Commission on March 2,
1995
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
Pre-Effective Amendment No. ___ / /
Post-Effective Amendment No. 8 / X /
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 10 / X /
TEMPLETON GLOBAL OPPORTUNITIES TRUST
(Exact Name of Registrant as Specified in Charter)
700 Central Avenue, P.O. Box 33030,
St. Petersburg, Florida 33733-8030
(Address of Principal Executive Offices)
Registrant's Telephone Number: (813) 823-8712
Thomas M. Mistele, Esq.
Templeton Global Investors, Inc.
500 East Broward Blvd.
Fort Lauderdale, Florida 33394
(Name and Address of Agent for Service)
Copies to:
Jeffrey L. Steele, Esq.
Dechert Price & Rhoads
1500 K Street, N.W.
Washington, D.C. 20005
It is proposed that this filing will become effective (check
appropriate box):
_____ immediately upon filing pursuant to paragraph (b) or
__X__ on April 1, 1995 pursuant to paragraph (b) or
_____ 60 days after filing pursuant to paragraph (a) or
_____ on (date) pursuant to paragraph (a) of Rule 485
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
The Registrant has registered an indefinite number of shares of
beneficial interest under the Securities Act of 1933 pursuant to
Rule 24f-2 under the Investment Company Act of 1940, and filed
its Rule 24f-2 Notice for the fiscal year ended December 31, 1994
on February 28, 1995.
TEMPLETON GLOBAL OPPORTUNITIES TRUST
CROSS-REFERENCE SHEET
REQUIRED BY RULE 495
UNDER THE SECURITIES ACT OF 1933
Part A
Item No. Caption
1 Cover Page
2 Expense Table
3 Selected Financial Information
4 General Description;
Investment Techniques
5 Management of the Fund
5A See Annual Report to
Shareholders
6 General Information
7 How to Buy Shares of the Fund
8 How to Sell Shares of the Fund
9 Not Applicable
Part B
10 Cover Page
11 Table of Contents
12 General Information and
History
13 Investment Objective and
Policies
14 Management of the Fund
15 Principal Shareholders
16 Investment Management and
Other Services
17 Brokerage Allocation
Part B
Item No. Caption
18 Description of Shares; General
Information, Part A
19 Purchase, Redemption and
Pricing of Shares
20 Tax Status
21 Principal Underwriters
22 Performance Information
23 Financial Statements
DISTRIBUTION PLAN
WHEREAS, Templeton Global Opportunities Trust (the
"Trust") is registered as an open-end diversified management
investment company under the Investment Company Act of 1940 (the
"1940 Act"); and
WHEREAS, the Trust and Franklin Templeton Distributors,
Inc. (the "Selling Company"), a wholly owned subsidiary of
Franklin Resources, Inc. and a broker-dealer registered under the
Securities Exchange Act of 1934, have entered into a Distribution
Agreement pursuant to which the Selling Company will act as
principal underwriter of the Class I Shares of the Trust for sale
to the public; and
WHEREAS, shares of beneficial interest of the Trust are
divided into classes of shares, one of which is designated Class
I; and
WHEREAS, the Board of Trustees of the Trust has
determined to adopt this Distribution Plan (the "Plan"), in
accordance with the requirements of the 1940 Act and has
determined that there is a reasonable likelihood that the Plan
will benefit the Trust and the holders of Class I Shares.
NOW THEREFORE, the Trust hereby adopts, with respect to
its Class I Shares, the Plan on the following terms and
conditions:
1. The Trust will reimburse the Selling Company for
costs and expenses incurred in connection with the distribution
and marketing of the Class I Shares of the Trust. Such
distribution costs and expenses may include: (a) payments to
broker-dealers who provide certain services of value to the
Trust's Class I Shareholders (sometimes referred to as a "trail
fee"); (b) reimbursement of expenses relating to selling and
servicing efforts or of organizing and conducting sales seminars;
(c) payments to employees or agents of the Selling Company who
engage in or support distribution of the Class I Shares; (d)
payment of the costs of preparing, printing and distributing
prospectuses and reports to prospective investors and of printing
and advertising expenses; (e) payment of dealer commissions and
wholesaler compensation in connection with sales of the Trust's
Class I Shares exceeding $1 million (for which the Trust imposes
no sales charge) and interest or carrying charges in connection
therewith; and (f) such other similar services as the Trust's
Board of Trustees determines to be reasonably calculated to
result in the sale of Class I Shares.
The Selling Company will be reimbursed for such costs,
expenses or payments on a monthly basis, subject to a limit of
0.25% per annum of the average daily net assets of the Trust's
Class I Shares. Payments made out of or charged against the
assets of the Class I Shares of the Trust must be in
reimbursement for costs and expenses in connection with any
activity which is primarily intended to result in the sale of the
Trust's Class I Shares. The costs and expenses not reimbursed in
any one given month (including costs and expenses not reimbursed
because they exceeded the limit of 0.25% per annum of the average
daily net assets of the Trust's Class I Shares) may be reimbursed
in subsequent months or years.
2. The Plan shall not take effect with respect to the
Trust's Class I Shares until it has been approved by a vote of at
least a majority (as defined in the 1940 Act) of the outstanding
voting securities of the Class I Shares of the Trust. With
respect to the submission of the Plan for such a vote, it shall
have been effectively approved with respect to the Trust's Class
I Shares if a majority of the outstanding voting securities of
the Class I Shares of the Trust votes for approval of the Plan.
3. The Plan shall not take effect until it has been
approved, together with any related agreements and supplements,
by votes of a majority of both (a) the Board of Trustees of the
Trust, and (b) those Trustees of the Trust who are not
"interested persons" (as defined in the 1940 Act) and have no
direct or indirect financial interest in the operation of the
Plan or any agreements related to it (the "Plan Trustees"), cast
in person at a meeting (or meetings) called for the purpose of
voting on the Plan and such related agreements.
4. The Plan shall continue in effect so long as such
continuance is specifically approved at least annually in the
manner provided for approval of the Plan in paragraph 3.
5. Any person authorized to direct the disposition of
monies paid or payable by the Class I Shares of the Trust
pursuant to the Plan or any related agreement shall provide to
the Trust's Board of Trustees, and the Board shall review, at
least quarterly, a written report of the amounts so expended and
the purposes for which such expenditures were made.
6. Any agreement related to the Plan shall be in
writing and shall provide: (a) that such agreement may be
terminated at any time as to the Trust's Class I Shares, without
payment of any penalty, by vote of a majority of the Plan
Trustees or by vote of a majority of the outstanding voting
securities of the Class I Shares of the Trust, on not more than
sixty days' written notice to any other party to the agreement;
and (b) that such agreement shall terminate automatically in the
event of its assignment.
7. The Plan may be terminated at any time, without
payment of any penalty, by vote of a majority of the Plan
Trustees, or by vote of a majority of the outstanding Class I
Shares of the Trust.
8. The Plan may be amended at any time by the Trust's
Board of Trustees, provided that (a) any amendment to increase
materially the costs which the Class I Shares of the Trust may
bear for distribution pursuant to the Plan shall be effective
only upon approval by a vote of a majority of the Class I Shares
of the Trust, and (b) any material amendments of the terms of the
Plan shall become effective only upon approval as provided in
paragraph 3 hereof.
9. While the Plan is in effect, the selection and
nomination of Trustees who are not "interested persons" (as
defined in the 1940 Act) of the Trust shall be committed to the
discretion of the Trustees who are not interested persons.
10. The Trust shall preserve copies of the Plan, any
related agreement and any report made pursuant to paragraph 5
hereof, for a period of not less than six years from the date of
the Plan, such agreement or report, as the case may be, the first
two years of which shall be in an easily accessible place.
11. It is understood and expressly stipulated that
neither the holders of Class I Shares of the Trust nor any
Trustee, officer, agent or employee of the Trust shall be
personally liable hereunder, nor shall any resort be had to other
private property for the satisfaction of any claim or obligation
hereunder, but the Trust only shall be liable.
IN WITNESS WHEREOF, the Trust has executed this
Distribution Plan on this ___ day of _____, 1995.
TEMPLETON GLOBAL OPPORTUNITIES TRUST
By: _______________________________
John R. Kay
Vice President
DISTRIBUTION PLAN
WHEREAS, Templeton Global Opportunities Trust (the
"Trust") is registered as an open-end diversified management
investment company under the Investment Company Act of 1940 (the
"1940 Act"); and
WHEREAS, the Trust and Franklin Templeton Distributors,
Inc. (the "Selling Company"), a wholly owned subsidiary of
Franklin Resources, Inc. and a broker-dealer registered under the
Securities Exchange Act of 1934, have entered into a Distribution
Agreement pursuant to which the Selling Company will act as
principal underwriter of the Class II Shares of the Trust for
sale to the public; and
WHEREAS, shares of beneficial interest of the Trust are
divided into classes of shares, one of which is designated Class
II; and
WHEREAS, the Board of Trustees of the Trust has
determined to adopt this Distribution Plan (the "Plan"), in
accordance with the requirements of the 1940 Act and has
determined that there is a reasonable likelihood that the Plan
will benefit the Trust and the holders of Class II Shares.
NOW THEREFORE, the Trust hereby adopts, with respect to
its Class II Shares, the Plan on the following terms and
conditions:
EXHIBIT 16
COMPUTATION OF PERFORMANCE QUOTATIONS
PROVIDED IN RESPONSE TO ITEM 22
(UNAUDITED)
Templeton Global Opportunities Trust
Total Return for One Year Ending 12/31/94
P (1 + T)N = ERV
$1000 (1 + T)1 = $904.80
1 + T = .9048
T = (.0952)
T = (9.52%)
Average Annual Total Return Since Inception on January 19, 1990 -
4.94 Years
P (1 + T)N = ERV
$1000 (1 + T)44.94 = $1,615.34
(1 + T)4.94 = 1.61534
1 + T = 1.1042
T = .1042
T = 10.42%
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
TEMPLETON GLOBAL OPPORTUNITIES TRUST, DECEMBER 31, 1994 ANNUAL REPORT AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000856138
<NAME> GLOBAL OPPORTUNITIES TRUST
<S> <C>
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</TABLE>
