Registration No. 33-31267
As filed with the Securities and Exchange Commission on April 30, 1997
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 11 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 13 X
(Check appropriate box or boxes)
TEMPLETON GLOBAL OPPORTUNITIES TRUST
(Exact Name of Registrant as Specified in Charter)
700 CENTRAL AVENUE, PO BOX 33030, ST. PETERSBURG, FLORIDA 33701-8030
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number: (813) 823-8712
Jeffrey L. Steele
Dechert Price & Rhoads
1500 K Street, NW
WASHINGTON, DC 20005
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
immediately upon filing pursuant to paragraph (b) of Rule 485
X on May 1, 1997 pursuant to paragraph (b) of Rule 485
60 days after filing pursuant to paragraph (a)(1) of Rule 485
on pursuant to paragraph (a)(1) of Rule 485
75 days after filing pursuant to paragraph (a)(2) of Rule 485
on pursuant to paragraph (a)(2) of Rule 485
this post-effective amendment designates a new effective
date for a previously filed post-effective amendment
- -------------------------------------------------------------------------------
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, 1996 on February 27, 1997.
<PAGE>
TEMPLETON GLOBAL OPPORTUNITIES TRUST
CROSS-REFERENCE SHEET
PART A
<TABLE>
<CAPTION>
N-1A LOCATION IN
ITEM NO. ITEM REGISTRATION STATEMENT
<S> <C> <C>
1 Cover page Cover Page
2 Synopsis Expense Summary
3 Condensed Financial "Financial Highlights";
Information "How Does the Fund
Measure Performance?"
4 General Description "How Is the Fund Organized?";
of Registrant "How Does the Fund Invest Its Assets?";
"What Are the Fund's Potential Risks?"
5 Management of the Fund "Who Manages the Fund?"
5A Management's Discussion Contained in Registrant's Annual
of Fund Performance Report to Shareholders
6 Capital Stock and Other "How is the Fund Organized?"; "Services
Securities to Help You Manage Your Account"; "What
Distributions Might I Received From the Fund?";
"How Taxation Affects the Fund and its
Shareholders?"
7 Purchase of Securities "How Do I Buy Shares?"; "May I Exchange
Being Offered Shares for Shares of Another Fund?";
"Transaction Procedures and Special
Requirements"; "Services to Help You Manage
Your Account"; "Who Manages the Fund?" "Useful
Terms and Definitions"
8 Redemption or Repurchase "May I Exchange Shares for Shares of Another
Fund?"; "How Do I Sell Shares?"; "Transaction
Procedures and Special Requirements"? "Services
to Help You Manage Your Account"
9 Pending Legal Procedures Not Applicable
</TABLE>
<PAGE>
TEMPLETON GLOBAL OPPORTUNITIES TRUST
CROSS-REFERENCE SHEET
FORM N-1A
PART B
<TABLE>
<CAPTION>
N-1A LOCATION IN
ITEM NO. ITEM REGISTRATION STATEMENT
<S> <C> <C>
10 Cover Page Cover Page
11 Table of Contents Table of Contents
12 General Information and Not Applicable
History
13 Investment Objectives and "How Does the Fund Invest Its Assets?";
Policies "Investment Restrictions"; "What Are the
Fund's Potential Risks?"
14 Management of the "Officers and Trustees"; "Investment
Registrant Management and Other Services"
15 Control Persons and "Officers and Trustees"; "Investment
Principal Holders of Management and Other Services"; "Miscellaneous
Securities Information?"
16 Investment Advisory and "Investment Advisory and Other Services";
Other Services "The Fund's Underwriter"
17 Brokerage Allocation and "How Does the Fund Buy Securities
Other Practices For Its Portfolio?"
18 Capital Stock and Other "Miscellaneous Information"; "See Prospectus
Securities "How Is The Fund Organized?"
19 Purchase, Redemption and "How Do I Buy, Sell and Exchange Shares?";
Pricing of Securities "How Are Fund Shares Valued?";
Being Offered "Financial Statements"
20 Tax Status "Additional Information on Distributions
and Taxes"
21 Underwriters "The Fund's Underwriter"
22 Calculation of Performance "How Does the Fund Measure Performance?"
Data
23 Financial Statements Financial Statements
</TABLE>
<PAGE>
PART A
PROSPECTUS
<PAGE>
Prospectus & Application
===============================================================================
Templeton
Global
Opportunities Trust
---------------
May 1, 1997
Investment Strategy: Global Growth
[LOGO OF FRANKLIN TEMPLETON APPEARS HERE]
- -------------------------------------------------------------------------------
This prospectus describes Templeton Global Opportunities Trust (the "Fund"). It
contains information you should know before investing in the Fund. Please keep
it for future reference.
The Fund may invest up to 25% of its total assets in high-yield, high-risk debt
instruments that are predominantly speculative. Please see "What Are the Fund's
Potential Risks?"
The Fund has a Statement of Additional Information ("SAI"), dated May 1, 1997,
which may be amended from time to time. It includes more information about the
Fund's procedures and policies. It has been filed with the SEC and is
incorporated by reference into this prospectus. For a free copy or a larger
print version of this prospectus, call 1-800/DIAL BEN or write the Fund at the
address shown.
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed
by, any bank, and are not federally insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other agency of the U.S.
government. Shares of the Fund involve investment risks, including the possible
loss of principal.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SEC OR ANY STATE SECURITIES COMMISSION NOR HAS THE SEC OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TEMPLETON
GLOBAL
OPPORTUNITIES
TRUST
- -------------------------------------------------------------------------------
This prospectus is not an offering of the securities herein described in any
state, jurisdiction or country in which the offering is not authorized. No sales
representative, dealer, or other persons is authorized to give any information
or make any representations other than those contained in this prospectus.
Further information may be obtained from Distributors.
<PAGE>
TEMPLETON
GLOBAL
OPPORTUNITIES
TRUST
- -------------------------------------------------------------------------------
May 1, 1997
When reading this prospectus, you will see certain terms beginning with
capital letters. This means the term is explained in our glossary section.
700 Central Avenue
P.O. Box 33030
St. Petersburg, FL 33733-8030
1-800/DIAL BEN
TABLE OF CONTENTS
<TABLE>
<S> <C>
ABOUT THE FUND
Expense Summary............................................................. 2
Financial Highlights........................................................ 4
How does the Fund Invest its Assets?........................................ 5
What are the Fund's Potential Risks?........................................ 11
Who Manages the Fund?....................................................... 15
How does the Fund Measure Performance?...................................... 18
How Taxation Affects the Fund and its Shareholders.......................... 18
How is the Fund Organized?.................................................. 19
ABOUT YOUR ACCOUNT
How Do I Buy Shares?........................................................ 20
May I Exchange Shares for Shares of Another Fund?........................... 27
How Do I Sell Shares?....................................................... 30
What Distributions Might I Receive from the Fund?........................... 33
Transaction Procedures and Special Requirements............................. 35
Services to Help You Manage Your Account.................................... 39
What If I Have Questions About My Account?.................................. 41
GLOSSARY
Useful Terms and Definitions................................................ 43
</TABLE>
<PAGE>
ABOUT THE FUND
EXPENSE SUMMARY
This table is designed to help you understand the costs of investing in the
Fund. It is based on the historical expenses of each class for the fiscal year
ended December 31, 1996. The Fund's actual expenses may vary.
<TABLE>
<CAPTION>
A.SHAREHOLDER TRANSACTION EXPENSES+ CLASS I CLASS II
<S> <C> <C>
Maximum Sales Charge
(as a percentage of Offering Price) 5.75% 1.99%
Paid at time of purchase 5.75%++ 1.00%+++
Paid at redemption++++ NONE 0.99%
Exchange Fee (per transaction) $5.00* $5.00*
B.ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.80% 0.80%
Rule 12b-1 Fees 0.25%** 1.00%**
Other Expenses 0.40% 0.40%
------- -------
Total Fund Operating Expenses 1.45% 2.20%
------- -------
</TABLE>
C.EXAMPLE
Assume the annual return for each class is 5%, operating expenses are as
described above, and you sell your shares after the number of years shown.
These are the projected expenses for each $1,000 that you invest in the
Fund.
<TABLE>
<CAPTION>
One Year Three Years Five Years Ten Years
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS I $71*** $101 $132 $221
CLASS II $42 $ 78 $127 $261
</TABLE>
For the same Class II investment, you would pay projected expenses of $32
if you did not sell your shares at the end of the first year. Your
projected expenses for the remaining periods would be the same.
THIS IS JUST AN EXAMPLE. IT DOES NOT REPRESENT PAST OR FUTURE EXPENSES OR
RETURNS. ACTUAL EXPENSES AND RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN.
The Fund pays its operating expenses. The effects of these expenses are
reflected in the Net Asset Value or dividends of each class and are not
directly charged to your account.
+If your transaction is processed through your Securities Dealer, you may be
charged a fee by your Securities Dealer for this service.
++There is no front-end sales charge if you invest $1 million or more in Class
I shares.
+++Although Class II has a lower front-end sales charge than Class I, its Rule
12b-1 fees are higher. Over time you may pay more for Class II shares. Please
see "How Do I Buy Shares? - Deciding Which Class to Buy."
2 . Templeton Global Opportunities Trust
<PAGE>
++++A Contingent Deferred Sales Charge may apply to any Class II purchase if
you sell the shares within 18 months and to Class I purchases of $1 million or
more if you sell the shares within one year. A Contingent Deferred Sales
Charge may also apply to purchases by certain retirement plans that qualify to
buy Class I shares without a front-end sales charge. The charge is 1% of the
value of the shares sold or the Net Asset Value at the time of purchase,
whichever is less. The number in the table shows the charge as a percentage of
Offering Price. While the percentage is different depending on whether the
charge is shown based on the Net Asset Value or the Offering Price, the dollar
amount paid by you would be the same. See "How Do I Sell Shares? - Contingent
Deferred Sales Charge" for details.
*$5.00 fee is only for Market Timers. We process all other exchanges without a
fee.
**The combination of front-end sales charges and Rule 12b-1 fees could cause
long-term shareholders to pay more than the economic equivalent of the maximum
front-end sales charge permitted under the NASD's rules.
***Assumes a Contingent Deferred Sales Charge will not apply.
Templeton Global Opportunities Trust . 3
<PAGE>
FINANCIAL HIGHLIGHTS
This table summarizes the Fund's financial history. The information has been
audited by McGladrey & Pullen, LLP, the Fund's independent auditors. Their
audit report covering each of the most recent five years appears in the
financial statements in the Fund's Annual Report to Shareholders for the fiscal
year ended December 31, 1996. The Annual Report to Shareholders also includes
more information about the Fund's performance. For a free copy, please call
Fund Information.
Class I Shares
<TABLE>
<CAPTION>
Year Ended December 31 1996 1995 1994 1993 1992 1991 1990/1/
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance
(For a share outstanding
throughout the period)
Net asset value,
beginning of period $ 12.57 $ 11.84 $ 14.46 $ 10.75 $ 10.94 $ 8.36 $ 9.40
-------- -------- -------- -------- -------- -------- --------
Income from investment
operations:
Net investment income .30 .16 .09 .12 .14 .17 .27
Net realized and
unrealized gain (loss) 2.69 1.33 (.63) 3.97 .61 2.59 (1.04)
-------- -------- -------- -------- -------- -------- --------
Total from investment
operations 2.99 1.49 (.54) 4.09 .75 2.76 (.77)
-------- -------- -------- -------- -------- -------- --------
Distributions:
Dividends from net
investment income (.30) (.16) (.09) (.11) (.14) (.01) (.27)
Amount in excess of net
investment income (.06) -- -- -- -- -- --
Distributions from net
realized gains (.58) (.60) (1.99) (.27) (.65) (.17) --
Amount in excess of net
realized gains -- -- -- -- (.15) -- --
-------- -------- -------- -------- -------- -------- --------
Total distributions (.94) (.76) (2.08) (.38) (.94) (.18) (.27)
-------- -------- -------- -------- -------- -------- --------
Change in net asset
value 2.05 .73 (2.62) 3.71 (.19) 2.58 (1.04)
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of
period $ 14.62 $ 12.57 $ 11.84 $ 14.46 $ 10.75 $ 10.94 $ 8.36
======== ======== ======== ======== ======== ======== ========
Total return/2/ 24.19% 12.87% (4.09)% 38.13% 6.85% 31.16% (8.19)%
Ratios/Supplemental Data
Net assets, end of
period (000) $634,478 $510,777 $476,822 $410,747 $248,807 $200,848 $159,018
Ratio of expenses to
average net assets 1.45% 1.52% 1.53% 1.51% 1.63% 1.76% 1.64%/3/
Ratio of net investment
income to average net
assets 2.10% 1.19% 0.71% 1.07% 1.36% 1.63% 3.55%/3/
Portfolio turnover rate 18.54% 15.54% 37.31% 40.56% 22.03% 21.02% 15.92%
Average commission rate
paid (per share) $ .0028
</TABLE>
/1/For the period February 28, 1990 (commencement of operations) to December
31, 1990.
/2/Total return does not reflect sales commissions. Not annualized for periods
of less than one year.
/3/Annualized.
4 . Templeton Global Opportunities Trust
<PAGE>
Class II Shares
<TABLE>
<CAPTION>
Year Ended December 31 1996 1995/1/
- --------------------------------------------------------------------------
<S> <C> <C>
Per Share Operating Performance
(For a share outstanding throughout the period)
Net asset value, beginning of period $ 12.53 $12.26
------- ------
Income from investment operations:
Net investment income .24 .02
Net realized and unrealized gain 2.63 .88
------- ------
Total from investment operations 2.87 .90
------- ------
Distributions:
Dividends from net investment income (.24) (.12)
Amount in excess of net investment income (.06) --
Distributions from net realized gains (.58) (.51)
------- ------
Total distributions (.88) (.63)
------- ------
Change in net asset value 1.99 .27
------- ------
Net asset value, end of period $ 14.52 $12.53
======= ======
Total return/2/ 23.28% 7.43%
Ratios/Supplemental Data
Net assets, end of period (000) $11,622 $2,264
Ratio of expenses to average net assets 2.20% 2.22%/3/
Ratio of net investment income to average net assets 1.12% (.01)%/3/
Portfolio turnover rate 18.54% 15.54%
Average commission rate paid (per share) $ .0028
</TABLE>
/1/For the period May 1, 1995 (commencement of sales) to December 31, 1995.
/2/Total return does not reflect sales commissions or the contingent deferred
sales charge. Not annualized for periods less than one year.
/3/Annualized.
HOW DOES THE FUND INVEST ITS ASSETS?
THE FUND'S INVESTMENT OBJECTIVE
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. The objective is a fundamental policy of the Fund
and may not be changed without shareholder approval. Of course, there is no
assurance that the Fund's objective will be achieved.
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, bonds selling at a discount and structured investments. 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 U.S.).
As non-fundamental policies, no more than 5% of the Fund's assets will be
invested in structured investments and no more than 25% of the Fund's assets
will be invested in debt securities rated lower than Baa by Moody's or BBB by
S&P. The Fund will not invest in debt securities rated lower than Caa by
Templeton Global Opportunities Trust . 5
<PAGE>
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 "What Are the Fund's Potential Risks?" 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
bonds to benefit from increases in the market price of the securities into
which they are convertible.
Whenever, in the judgment of TICI or InterCapital, 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 by S&P or, if unrated, of comparable quality
as determined by TICI or InterCapital; 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
6 . Templeton Global Opportunities Trust
<PAGE>
10% of its assets in securities with a limited trading market. The investment
objective and policies described above, as well as the investment restrictions
set forth in the SAI, are fundamental policies except as otherwise indicated,
and 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 exchange contracts, and futures contracts
and related options. When deemed appropriate by TICI or InterCapital, 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 "How Does
the Fund Invest Its Assets?" in the SAI.
The Fund does not intend to emphasize short-term trading profits and usually
expects to have a portfolio turnover rate not exceeding 100%.
TYPES OF SECURITIES IN WHICH THE FUND MAY INVEST
The Fund is authorized to use the various securities and investment techniques
described below. Although these strategies are regularly used by some
investment companies and other institutional investors in various markets, some
of these strategies cannot at the present time be used to a significant extent
by the Fund in some of the markets in which the Fund will invest and may not be
available for extensive use in the future.
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 at a specified
time and price. The repurchase price is in excess of the purchase price by an
amount which reflects an agreed-upon rate of return, which is not tied to the
coupon rate on the underlying security. Under the 1940 Act, repurchase
agreements are considered to be loans collateralized by the underlying security
and therefore will be fully collateralized. However, if the seller should
default on its obligation to repurchase the underlying security, the Fund may
experience delay or difficulty in its ability to dispose of the underlying
security
Templeton Global Opportunities Trust . 7
<PAGE>
and might incur a loss if the value of the security declines, as well as incur
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 or gains 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 U.S. 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,
8 . Templeton Global Opportunities Trust
<PAGE>
or hold a call at the same or lower exercise price, for the same exercise
period, and on the same securities as the written call.
A put is covered if the Fund maintains liquid assets with a value equal to the
exercise price in a segregated account, or holds a put on the same underlying
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 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 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, known as
"variation margin," to cover any additional obligation it may have under the
Templeton Global Opportunities Trust . 9
<PAGE>
contract. In addition, when the Fund enters into a futures contract, it will
segregate assets or "cover" its position in accordance with the 1940 Act. See
"How Does the Fund Invest Its Assets? - Futures Contracts" in the SAI.
The Fund may not commit more than 5% of its total assets to initial margin
deposits on futures contracts 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 U.S.
corporation. Generally, depositary receipts in registered form are designed for
use in the U.S. securities market and depositary receipts in bearer form are
designed for use in securities markets outside the U.S. Depositary receipts may
not necessarily be denominated in the same currency as the underlying
securities into which they may be converted. Depositary receipts may be issued
pursuant to sponsored or unsponsored programs. In sponsored programs, an issuer
has made arrangements to have its securities traded in the form of depositary
receipts. In unsponsored programs, the issuer may not be directly involved in
the creation of the program. Although regulatory requirements with respect to
sponsored and unsponsored programs are generally similar, in some cases it may
be easier to obtain financial information from an issuer that has participated
in the creation of a sponsored program. Accordingly, there may be less
information 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.
OTHER POLICIES AND RESTRICTIONS. The Fund has a number of additional investment
restrictions that limit its activities to some extent. Some of these
restrictions may only be changed with shareholder approval. For a list of these
10 . Templeton Global Opportunities Trust
<PAGE>
restrictions and more information about the Fund's investment policies, please
see "How does the Fund Invest its Assets?" and "Investment Restrictions" in the
SAI.
Each of the Fund's policies and restrictions discussed in this prospectus and
in the SAI is considered at the time the Fund makes an investment. The Fund is
generally not required to sell a security because of a change in circumstances.
WHAT ARE THE FUND'S POTENTIAL RISKS?
You should understand that all investments involve risk and there can be no
guarantee against loss resulting from an investment in the Fund, nor can there
be any assurance that the Fund's investment 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 of the Fund will
fluctuate with movements in the broader equity and bond markets. A decline in
the stock market of any country in which the Fund is invested may also be
reflected in declines in the price of 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 stock markets and currency
valuations, and these may occur unpredictably in the future. The value of debt
securities held by the Fund generally will vary inversely with changes in
prevailing interest rates. Additionally, investment decisions made by TICI or
InterCapital 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
developing 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), foreign investment controls on
daily stock market movements, default in foreign government securities,
political or social instability, or diplomatic developments which could affect
investments in securities of issuers in foreign nations. Some countries may
withhold portions
Templeton Global Opportunities Trust . 11
<PAGE>
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 U.S. 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. The Fund may encounter difficulties or be unable to vote proxies,
exercise shareholder rights, pursue legal remedies, and obtain judgments in
foreign courts.
Brokerage commissions, custodial services, and other costs relating to
investment in foreign countries are generally more expensive than in the U.S.
Foreign securities markets also have different clearance and settlement
procedures, and in certain markets there have been times when settlements have
been unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result in
temporary periods when assets of the Fund are uninvested and no return is
earned thereon. The inability of the Fund to make intended security purchases
due to settlement problems could cause the Fund to miss attractive investment
opportunities. Inability to dispose of portfolio securities due to settlement
problems could result either in losses to the Fund due to subsequent declines
in value of the portfolio security or, if the Fund has entered into a contract
to sell the security, could result in possible liability to the purchaser.
In many foreign countries, there is less government supervision and regulation
of business and industry practices, stock exchanges, brokers and listed
companies than in the U.S. There is an increased risk, therefore, of uninsured
loss due to lost, stolen, or counterfeit stock certificates. In addition, the
foreign securities markets of many of the countries in which the Fund may
invest may also be smaller, less liquid and subject to greater price volatility
than those in the U.S. These risks are often heightened for investments in
developing markets. See "What Are the Fund's Potential Risks?" in the SAI.
Prior governmental approval of non-domestic investments may be required under
certain circumstances in some developing countries, and the extent of foreign
investment in domestic companies may be subject to limitation in other
developing countries. Foreign ownership limitations also may be imposed by the
charters of individual companies in developing countries to prevent, among
other concerns, violation of foreign investment limitations.
Repatriation of investment income, capital and proceeds of sales by foreign
investors may require governmental registration and/or approval in some
12 . Templeton Global Opportunities Trust
<PAGE>
developing countries. The Fund could be adversely affected by delays in or a
refusal to grant any required governmental registration or approval for such
repatriation.
Further, the economies of developing countries generally are heavily dependent
upon international trade and, accordingly, have been and may continue to be
adversely affected by trade barriers, exchange controls, managed adjustments in
relative currency values and other protectionist measures imposed or negotiated
by the countries with which they trade. These economies also have been and may
continue to be adversely affected by economic conditions in the countries with
which they trade.
As a non-fundamental policy, the Fund will limit its investments in Russian
securities to 5% of its total assets. Russian securities involve additional
significant risks, including political and social uncertainty (for example,
regional conflicts and risk of war), currency exchange rate volatility,
pervasiveness of corruption and crime in the Russian economic system, delays in
settling portfolio transactions and risk of loss arising out of Russia's system
of share registration and custody. For more information on these risks and
other risks associated with Russian securities, please see "What Are the Fund's
Potential Risks?" in the SAI.
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 spread 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 or gains 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 TICI's
and/or InterCapital's ability to correctly predict movements in the securities
or foreign currency markets and no assurance can be given that either's
judgment will be
Templeton Global Opportunities Trust . 13
<PAGE>
correct. Successful use of options on securities or securities indices is
subject to similar risk considerations.
The Fund may invest up to 25% of its total assets in high-yield, high-risk debt
instruments, commonly known as junk bonds, 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 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.
14 . Templeton Global Opportunities Trust
<PAGE>
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.
WHO MANAGES THE FUND?
THE BOARD. The Board oversees the management of the Fund and elects its
officers. The officers are responsible for the Fund's day-to-day operations.
The Board also monitors the Fund to ensure no material conflicts exist between
the Fund's classes of shares. While none is expected, the Board will act
appropriately to resolve any material conflict that may arise.
INVESTMENT MANAGER. TICI manages the Fund's assets and makes its investment
decisions. TICI also performs similar services for other funds. It is wholly
owned by Resources, a publicly owned company engaged in the financial services
industry through its subsidiaries. Charles B. Johnson and Rupert H. Johnson,
Jr. are the principal shareholders of Resources. Together, TICI and its
affiliates manage over $188 billion in assets. The Templeton organization has
been investing globally since 1940. TICI and its affiliates have offices in
Argentina, Australia, Bahamas, Canada, France, Germany, Hong Kong, India,
Italy, Korea, Luxembourg, Poland, Russia, Singapore, South Africa, Taiwan,
United Kingdom, U.S., and Vietnam. Please see "Investment Management and Other
Services" and "Miscellaneous Information" in the SAI for information on
securities transactions and a summary of the Fund's Code of Ethics.
Under an agreement with TICI, InterCapital is the sub-advisor of the Fund.
InterCapital provides TICI with investment management advice and assistance.
InterCapital also provides TICI with analyses regarding economic and market
conditions, asset allocation, foreign currency matters and the advisability of
entering into foreign exchange contracts. InterCapital's activities are subject
to the Board's review and control, as well as TICI's instruction and
supervision.
PORTFOLIO MANAGEMENT. The lead portfolio manager for the Fund since 1993 is
Howard J. Leonard. Mr. Leonard is an executive vice president of TICI. He holds
a BBA in finance/economics from the Temple University School of Business
Administration. Mr. Leonard is a Chartered Financial Analyst and a member of
the Financial Analysts of Philadelphia, the Financial Analysts Federation and
the International Society of Security Analysts. Before joining the Templeton
organization in 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
Templeton Global Opportunities Trust . 15
<PAGE>
Provident National Bank as a security analyst covering a variety of industries.
As a portfolio manager and research analyst, Mr. Leonard currently manages both
institutional and mutual fund accounts of global and international mandates. He
has research responsibility for the global forest products and investment
management industries, and also follows the following countries: Indonesia,
Switzerland, Brazil and India.
Gary P. Motyl and Mark R. Beveridge exercise secondary portfolio management
responsibilities for the Fund. Mr. Motyl is an executive vice president of
TICI. He holds a BS in finance from Lehigh University and an MBA in finance
from Pace University. He is a Chartered Financial Analyst. Prior to joining the
Templeton organization in 1981, Mr. Motyl worked from 1974 to 1979 as a
security analyst with Standard & Poor's Corporation, and as a research analyst
and portfolio manager from 1979 to 1981 with Landmark First Mortgage Bank,
where he had responsibility for equity research and managed several pension and
profit sharing plans. His research responsibilities with Templeton include the
global automobile industry, the U.S. utility industry and country coverage of
Germany. Mr. Beveridge is a senior vice president of TICI. He holds a BBA in
finance from the University of Miami. He is a Chartered Financial Analyst and a
Chartered Investment Counselor, and a member of the South Florida Society of
Financial Analysts and the International Society of Financial Analysts. Before
joining the Templeton organization in 1985 as a security analyst, Mr. Beveridge
was a principal with a financial accounting software firm based in Miami,
Florida. He is currently a portfolio manager with research responsibilities for
appliances and household durables, industrial components, waste management and
business and public services. He also has country coverage of Argentina.
MANAGEMENT FEES. During the fiscal year ended December 31, 1996, management
fees totaling 0.80% of the average daily net assets of the Fund were paid to
TICI. Total expenses, including fees paid to TICI, were 1.45% for Class I and
2.20% for Class II. During the same period, TICI paid InterCapital a sub-
advisory fee totaling 0.25% of the average daily net assets of the Fund. This
fee is not a separate expense of the Fund but is paid by TICI from the
management fees it receives from the Fund.
PORTFOLIO TRANSACTIONS. TICI tries to obtain the best execution on all
transactions. If TICI believes more than one broker or dealer can provide the
best execution, it may consider research and related services and the sale of
Fund shares, as well as shares of other funds in the Franklin Templeton Group
of Funds, when selecting a broker or dealer. Please see "How does the Fund Buy
Securities for its Portfolio?" in the SAI for more information.
16 . Templeton Global Opportunities Trust
<PAGE>
ADMINISTRATIVE SERVICES. FT Services provides certain administrative services
and facilities for the Fund. Prior to October 1, 1996, the Fund's Administrator
was Templeton Global Investors, Inc. During the fiscal year ended December 31,
1996, administration fees totaling 0.14% of the average daily net assets of the
Fund were paid. These fees are included in the amount of total expenses shown
above. Please see "Investment Management and Other Services" in the SAI for
more information.
The Rule 12b-1 Plans
Class I and Class II have separate distribution plans or "Rule 12b-1 Plans"
under which they may pay or reimburse Distributors or others for activities
primarily intended to sell shares of the class. These expenses may include,
among others, distribution or service fees paid to Securities Dealers or others
who have executed a servicing agreement with the Fund, Distributors or its
affiliates, printing prospectuses and reports used for sales purposes,
preparing and distributing sales literature and advertisements, and a prorated
portion of Distributors' overhead expenses.
Payments by the Fund under the Class I plan may not exceed 0.25% per year of
Class I's average daily net assets. Expenses not reimbursed in any quarter may
be reimbursed in future quarters or years. This includes expenses not
reimbursed because they exceeded the applicable limit under the plan. As of
December 31, 1996, expenses under the Class I plan that may be reimbursable in
future quarters or years totaled $1,280,292, or 0.20% of Class I's net assets.
During the first year after certain Class I purchases made without a sales
charge, Distributors may keep the Rule 12b-1 fees associated with the purchase.
Under the Class II plan, the Fund may pay Distributors up to 0.75% per year of
Class II's average daily net assets to pay Distributors or others for providing
distribution and related services and bearing certain Class II expenses. All
distribution expenses over this amount will be borne by those who have incurred
them. During the first year after a purchase of Class II shares, Distributors
may keep this portion of the Rule 12b-1 fees associated with the purchase.
The Fund may also pay a servicing fee of up to 0.25% per year of Class II's
average daily net assets under the Class II plan. This fee may be used to pay
Securities Dealers or others for, among other things, helping to establish and
maintain customer accounts and records, helping with requests to buy and sell
shares, receiving and answering correspondence, monitoring dividend payments
from the Fund on behalf of customers, and similar servicing and account
maintenance activities.
Templeton Global Opportunities Trust . 17
<PAGE>
The Rule 12b-1 fees charged to each class are based only on the fees
attributable to that particular class. For more information, please see "The
Fund's Underwriter" in the SAI.
HOW DOES THE FUND MEASURE PERFORMANCE?
From time to time, each class of the Fund advertises its performance. The more
commonly used measure of performance is total return. Performance figures are
usually calculated using the maximum sales charges, but certain figures may not
include sales charges.
Total return is the change in value of an investment over a given period. It
assumes any dividends and capital gains are reinvested.
The investment results of each class will vary. Performance figures are always
based on past performance and do not guarantee future results. For a more
detailed description of how the Fund calculates its performance figures, please
see "How does the Fund Measure Performance?" in the SAI.
HOW TAXATION AFFECTS THE FUND AND ITS SHAREHOLDERS
The following discussion reflects some of the tax considerations that affect
mutual funds and their shareholders. For more information on tax matters
relating to the Fund and its shareholders, see "Additional Information on
Distributions and Taxes" in the SAI.
The Fund has elected and intends to continue to qualify as a regulated
investment company under Subchapter M of the Code. A regulated investment
company generally is not subject to federal income tax on income and 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 to shareholders substantially all of its net
investment income and realized capital gains, 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 on December 31 in the year such distributions were declared. The
Fund will inform shareholders each year of the amount and nature of such income
or gains. Sales or other dispositions of Fund shares generally will give rise
to taxable gain or loss.
18 . Templeton Global Opportunities Trust
<PAGE>
HOW IS THE FUND ORGANIZED?
The Fund is a diversified, open-end management investment company, commonly
called a mutual fund. It was organized as a business trust under the laws of
Massachusetts on October 2, 1989, and is registered with the SEC under the 1940
Act. The Fund offers two classes of shares: Templeton Global Opportunities
Trust - Class I and Templeton Global Opportunities Trust - Class II. All
shares outstanding before the offering of Class II shares are considered Class
I shares. Additional classes of shares may be offered in the future.
Shares of each class represent proportionate interests in the assets of the
Fund and have the same voting and other rights and preferences as any other
class of the Fund for matters that affect the Fund as a whole. For matters that
only affect one class, however, only shareholders of that class may vote. Each
class will vote separately on matters (1) affecting only that class, (2)
expressly required to be voted on separately by state law, or (3) required to
be voted on separately by the 1940 Act.
The Fund has noncumulative voting rights. This gives holders of more than 50%
of the shares voting the ability to elect all of the members of the Board. If
this happens, holders of the remaining shares voting will not be able to elect
anyone to the Board.
The Fund does not intend to hold annual shareholder meetings. It may hold
special meetings, however, for matters requiring shareholder approval under the
1940 Act. A meeting may also be called by the Board in its discretion or for
the purpose of considering the removal of a Board member if requested in
writing to do so by shareholders holding at least 10% of the outstanding
shares. The 1940 Act requires that we help you communicate with other
shareholders in connection with removing members of the Board.
Templeton Global Opportunities Trust . 19
<PAGE>
ABOUT YOUR ACCOUNT
HOW DO I BUY SHARES?
OPENING YOUR ACCOUNT
To open your account, contact your investment representative or complete and
sign the enclosed shareholder application and return it to the Fund with your
check. Please indicate which class of shares you want to buy. If you do not
specify a class, your purchase will be automatically invested in Class I
shares.
<TABLE>
<CAPTION>
MINIMUM
INVESTMENTS*
- ------------------------------
<S> <C>
To Open Your
Account........ $100
To Add to Your
Account........ $ 25
</TABLE>
*We may waive these minimums for retirement plans. We may also refuse any order
to buy shares.
DECIDING WHICH CLASS TO BUY
You should consider a number of factors when deciding which class of shares to
buy. If you plan to buy $1 million or more in a single payment or you qualify
to buy Class I shares without a sales charge, you may not buy Class II shares.
Generally, you should consider buying Class I shares if:
. you expect to invest in the Fund over the long term;
. you qualify to buy Class I shares at a reduced sales charge; or
. you plan to buy $1 million or more over time.
You should consider Class II shares if:
. you expect to invest less than $50,000 in the Franklin Templeton Funds; and
. you plan to sell a substantial number of your shares within approximately six
years or less of your investment.
Class I shares are generally more attractive for long-term investors because of
Class II's higher Rule 12b-1 fees. These may accumulate over time to outweigh
the lower Class II front-end sales charge and result in lower income dividends
for Class II shareholders. If you qualify to buy Class I shares at a reduced
sales charge based upon the size of your purchase or through our Letter of
Intent or cumulative quantity discount programs, but plan to hold your shares
less than approximately six years, you should evaluate whether it is more
economical for you to buy Class I or Class II shares.
20 . Templeton Global Opportunities Trust
<PAGE>
For purchases of $1 million or more, it is considered more beneficial for you
to buy Class I shares since there is no front-end sales charge, even though
these purchases may be subject to a Contingent Deferred Sales Charge. Any
purchase of $1 million or more is therefore automatically invested in Class I
shares. You may accumulate more than $1 million in Class II shares through
purchases over time, but if you plan to do this you should determine whether it
would be more beneficial for you to buy Class I shares through a Letter of
Intent.
Please consider all of these factors before deciding which class of shares to
buy. There are no conversion features attached to either class of shares.
PURCHASE PRICE OF FUND SHARES
For Class I shares, the sales charge you pay depends on the dollar amount you
invest, as shown in the table below. The sales charge for Class II shares is 1%
and, unlike Class I, does not vary based on the size of your purchase.
<TABLE>
<CAPTION>
TOTAL SALES CHARGE
AS A PERCENTAGE OF AMOUNT PAID
------------------- TO DEALER AS A
AMOUNT OF PURCHASE OFFERING NET AMOUNT PERCENTAGE OF
AT OFFERING PRICE PRICE INVESTED OFFERING PRICE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS I
Under $50,000................................ 5.75% 6.10% 5.00%
$50,000 but less than $100,000............... 4.50% 4.71% 3.75%
$100,000 but less than $250,000.............. 3.50% 3.63% 2.80%
$250,000 but less than $500,000.............. 2.50% 2.56% 2.00%
$500,000 but less than $1,000,000............ 2.00% 2.04% 1.60%
$1,000,000 or more*.......................... None None None
CLASS II
Under $1,000,000*............................ 1.00% 1.01% 1.00%
</TABLE>
*A Contingent Deferred Sales Charge of 1% may apply to Class I purchases of $1
million or more and any Class II purchase. Please see "How Do I Sell Shares? -
Contingent Deferred Sales Charge." Please also see "Other Payments to
Securities Dealers" below for a discussion of payments Distributors may make
out of its own resources to Securities Dealers for certain purchases. Purchases
of Class II shares are limited to purchases below $1 million. Please see
"Deciding Which Class to Buy."
SALES CHARGE REDUCTIONS AND WAIVERS
IF YOU QUALIFY TO BUY SHARES UNDER ONE OF THE SALES CHARGE REDUCTION OR
WAIVER CATEGORIES DESCRIBED BELOW, PLEASE INCLUDE A WRITTEN STATEMENT WITH
EACH PURCHASE ORDER EXPLAINING WHICH PRIVILEGE APPLIES. If you don't include
this statement, we cannot guarantee that you will receive the sales charge
reduction or waiver.
CUMULATIVE QUANTITY DISCOUNTS - CLASS I ONLY. To determine if you may pay a
reduced sales charge, the amount of your current Class I purchase is added to
Templeton Global Opportunities Trust . 21
<PAGE>
the cost or current value, whichever is higher, of your existing shares in the
Franklin Templeton Funds, as well as those of your spouse, children under the
age of 21 and grandchildren under the age of 21. If you are the sole owner of a
company, you may also add any company accounts, including retirement plan
accounts. Companies with one or more retirement plans may add together the
total plan assets invested in the Franklin Templeton Funds to determine the
sales charge that applies.
LETTER OF INTENT - CLASS I ONLY. You may buy Class I shares at a reduced sales
charge by completing the Letter of Intent section of the shareholder
application. A Letter of Intent is a commitment by you to invest a specified
dollar amount during a 13 month period. The amount you agree to invest
determines the sales charge you pay on Class I shares.
BY COMPLETING THE LETTER OF INTENT SECTION OF THE SHAREHOLDER APPLICATION, YOU
ACKNOWLEDGE AND AGREE TO THE FOLLOWING:
. You authorize Distributors to reserve 5% of your total intended purchase in
Class I shares registered in your name until you fulfill your Letter.
. You give Distributors a security interest in the reserved shares and appoint
Distributors as attorney-in-fact.
. Distributors may sell any or all of the reserved shares to cover any
additional sales charge if you do not fulfill the terms of the Letter.
. Although you may exchange your shares, you may not sell reserved shares until
you complete the Letter or pay the higher sales charge.
Your periodic statements will include the reserved shares in the total shares
you own. We will pay or reinvest dividend and capital gain distributions on the
reserved shares as you direct. Our policy of reserving shares does not apply to
certain retirement plans.
If you would like more information about the Letter of Intent privilege, please
see "How Do I Buy, Sell and Exchange Shares? - Letter of Intent" in the SAI or
call Shareholder Services.
GROUP PURCHASES - CLASS I ONLY. If you are a member of a qualified group, you
may buy Class I shares at a reduced sales charge that applies to the group as a
whole. The sales charge is based on the combined dollar value of the group
members' existing investments, plus the amount of the current purchase.
. A qualified group is one that:
. Was formed at least six months ago,
22 . Templeton Global Opportunities Trust
<PAGE>
. Has a purpose other than buying Fund shares at a discount,
. Has more than 10 members,
. Can arrange for meetings between our representatives and group members,
. Agrees to include Franklin Templeton Fund sales and other materials in
publications and mailings to its members at reduced or no cost to
Distributors,
. Agrees to arrange for payroll deduction or other bulk transmission of
investments to the Fund, and
. Meets other uniform criteria that allow Distributors to achieve cost savings
in distributing shares.
SALES CHARGE WAIVERS. The Fund's sales charges (front-end and contingent
deferred) will not apply to certain purchases. For waiver categories 1, 2 or 3
below: (i) the distributions or payments must be reinvested within 365 days of
their payment date, and (ii) Class II distributions may be reinvested in
either Class I or Class II shares. Class I distributions may only be
reinvested in Class I shares.
The Fund's sales charges will not apply if you are buying Class I shares with
money from the following sources or Class II shares with money from the
sources in waiver categories 1 or 4:
1. Dividend and capital gain distributions from any Franklin Templeton Fund
or a REIT sponsored or advised by Franklin Properties, Inc.
2. Distributions from an existing retirement plan invested in the Franklin
Templeton Funds.
3. Annuity payments received under either an annuity option or from death
benefit proceeds, only if the annuity contract offers as an investment
option the Franklin Valuemark Funds, the Templeton Variable Annuity Fund,
the Templeton Variable Products Series Fund, or the Franklin Government
Securities Trust. You should contact your tax advisor for information on
any tax consequences that may apply.
4. Redemptions from any Franklin Templeton Fund if you:
. Originally paid a sales charge on the shares,
. Reinvest the money within 365 days of the redemption date, and
. Reinvest the money in the same class of shares.
Templeton Global Opportunities Trust . 23
<PAGE>
An exchange is not considered a redemption for this privilege. The
Contingent Deferred Sales Charge will not be waived if the shares were
subject to a Contingent Deferred Sales Charge when sold. We will credit
your account in shares, at the current value, in proportion to the amount
reinvested for any Contingent Deferred Sales Charge paid in connection
with the earlier redemption, but a new Contingency Period will begin.
If you immediately placed your redemption proceeds in a Franklin Bank CD,
you may reinvest them as described above. The proceeds must be reinvested
within 365 days from the date the CD matures, including any rollover.
5. Redemptions from other mutual funds. This waiver category is only
effective with respect to purchases of Fund shares made prior to June 1,
1997.
If you sold shares of a fund that is not a Franklin Templeton Fund within
the past 60 days, you may invest the proceeds without any sales charge if
(a) the investment objectives were similar to the Fund's, and (b) your
shares in that fund were subject to any front-end or contingent deferred
sales charges at the time of purchase. You must provide a copy of the
statement showing your redemption, and purchase of the Fund's shares prior
to June 1, 1997.
The Fund's sales charges will also not apply to Class I purchases by:
6. Trust companies and bank trust departments agreeing to invest in Franklin
Templeton Funds over a 13 month period at least $1 million of assets held
in a fiduciary, agency, advisory, custodial or similar capacity and over
which the trust companies and bank trust departments or other plan
fiduciaries or participants, in the case of certain retirement plans, have
full or shared investment discretion. We will accept orders for these
accounts by mail accompanied by a check or by telephone or other means of
electronic data transfer directly from the bank or trust company, with
payment by federal funds received by the close of business on the next
business day following the order.
7. Group annuity separate accounts offered to retirement plans.
8. Chilean retirement plans that meet the requirements described under
"Retirement Plans" below.
9. An Eligible Governmental Authority. Please consult your legal and
investment advisors to determine if an investment in the Fund is
permissible and suitable for you and the effect, if any, of payments by
the Fund on arbitrage rebate calculations.
24 . Templeton Global Opportunities Trust
<PAGE>
10. Broker-dealers, registered investment advisors or certified financial
planners who have entered into an agreement with Distributors for clients
participating in comprehensive fee programs.
11. Registered Securities Dealers and their affiliates, for their investment
accounts only.
12. Current employees of Securities Dealers and their affiliates and their
family members, as allowed by the internal policies of their employer.
13. Officers, trustees, directors and full-time employees of the Franklin
Templeton Funds or the Franklin Templeton Group, and their family members,
consistent with our then-current policies.
14. Investment companies exchanging shares or selling assets pursuant to a
merger, acquisition or exchange offer.
15. Accounts managed by the Franklin Templeton Group.
16. Certain unit investment trusts and their holders reinvesting distributions
from the trusts.
RETIREMENT PLANS. Retirement plans that (i) are sponsored by an employer with
at least 100 employees, or (ii) have plan assets of $1 million or more, or
(iii) agree to invest at least $500,000 in the Franklin Templeton Funds over a
13 month period may buy Class I shares without a front-end sales charge.
Retirement plans that are not Qualified Retirement Plans or SEPS, such as
403(b) or 457 plans, must also meet the requirements described under "Group
Purchases - Class I Only" above. For retirement plan accounts opened on or
after May 1, 1997, a Contingent Deferred Sales Charge may apply if the account
is closed within 365 days of the retirement plan account's initial purchase in
the Franklin Templeton Funds. Please see "How Do I Sell Shares? - Contingent
Deferred Sales Charge" for details.
Any retirement plan that does not meet the requirements to buy Class I shares
without a front-end sales charge and that was a shareholder of the Fund on or
before February 1, 1995, may buy shares of the Fund subject to a maximum sales
charge of 4% of the Offering Price, 3.2% of which will be retained by
Securities Dealers.
HOW DO I BUY SHARES IN CONNECTION WITH RETIREMENT PLANS?
Your individual or employer-sponsored retirement plan may invest in the Fund.
Plan documents are required for all retirement plans. Trust Company can provide
the plan documents for you and serve as custodian or trustee.
Templeton Global Opportunities Trust . 25
<PAGE>
Trust Company can provide you with brochures containing important information
about its plans. To establish a Trust Company retirement plan, you will need
an application other than the one included in this prospectus. For a
retirement plan brochure or application, please call our Retirement Plans
Department.
Please consult your legal, tax or retirement plan specialist before choosing a
retirement plan. Your investment representative or advisor can help you make
investment decisions within your plan.
OTHER PAYMENTS TO SECURITIES DEALERS
The payments described below may be made to Securities Dealers who initiate
and are responsible for Class II purchases and certain Class I purchases made
without a sales charge. The payments are subject to the sole discretion of
Distributors, and are paid by Distributors or one of its affiliates and not by
the Fund or its shareholders.
1. Class II purchases - up to 1% of the purchase price.
2. Class I purchases of $1 million or more - up to 1% of the amount invested.
3. Class I purchases made without a front-end sales charge by certain
retirement plans described under "Sales Charge Reductions and Waivers -
Retirement Plans" above - up to 1% of the amount invested. For retirement
plan accounts opened on or after May 1, 1997, a Contingent Deferred Sales
Charge will not apply to the account if the Securities Dealer chooses to
receive a payment of 0.25% or less or if no payment is made.
4. Class I purchases by trust companies and bank trust departments, Eligible
Governmental Authorities, and broker-dealers or others on behalf of clients
participating in comprehensive fee programs - up to 0.25% of the amount
invested.
5. Class I purchases by Chilean retirement plans - up to 1% of the amount
invested.
A Securities Dealer may receive only one of these payments for each qualifying
purchase. Securities Dealers who receive payments in connection with
investments described in paragraphs 1, 2 or 5 above or a payment of up to 1%
for investments described in paragraph 3 will be eligible to receive the Rule
12b-1 fee associated with the purchase starting in the thirteenth calendar
month after the purchase.
26 . Templeton Global Opportunities Trust
<PAGE>
FOR BREAKPOINTS THAT MAY APPLY AND INFORMATION ON ADDITIONAL COMPENSATION
PAYABLE TO SECURITIES DEALERS IN CONNECTION WITH THE SALE OF FUND SHARES,
PLEASE SEE "HOW DO I BUY, SELL AND EXCHANGE SHARES? - OTHER PAYMENTS TO
SECURITIES DEALERS" IN THE SAI.
MAY I EXCHANGE SHARES FOR SHARES OF ANOTHER FUND?
We offer a wide variety of funds. If you would like, you can move your
investment from your Fund account to an existing or new account in another
Franklin Templeton Fund (an "exchange"). Because it is technically a sale and a
purchase of shares, an exchange is a taxable transaction.
If you own Class I shares, you may exchange into any of our money funds except
Franklin Templeton Money Fund II ("Money Fund II"). Money Fund II is the only
money fund exchange option available to Class II shareholders. Unlike our other
money funds, shares of Money Fund II may not be purchased directly and no
drafts (checks) may be written on Money Fund II accounts.
Before making an exchange, please read the prospectus of the fund you are
interested in. This will help you learn about the fund, its investment
objective and policies, and its rules and requirements for exchanges. For
example, some Franklin Templeton Funds do not accept exchanges and others may
have different investment minimums. Some Franklin Templeton Funds do not offer
Class II shares.
<TABLE>
<CAPTION>
METHOD STEPS TO FOLLOW
- --------------------------------------------------------------------------
<C> <S>
BY MAIL 1. Send us written instructions signed by all account
owners
2. Include any outstanding share certificates for the
shares you're exchanging
- --------------------------------------------------------------------------
BY PHONE Call Shareholder Services or TeleFACTS(R)
If you do not want the ability to exchange by phone
to apply to your account, please let us know.
- --------------------------------------------------------------------------
THROUGH YOUR DEALER Call your investment representative
- --------------------------------------------------------------------------
</TABLE>
Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to exchange shares.
WILL SALES CHARGES APPLY TO MY EXCHANGE?
You generally will not pay a front-end sales charge on exchanges.
If you have held your shares less than six months, however, you will pay the
percentage difference between the sales charge you previously paid and the
applicable sales charge of the new fund. If you have never paid a sales charge
on your shares because, for example, they have always been held in a money
fund,
Templeton Global Opportunities Trust . 27
<PAGE>
you will pay the Fund's applicable sales charge no matter how long you have
held your shares. These charges may not apply if you qualify to buy shares
without a sales charge.
We will not impose a Contingent Deferred Sales Charge when you exchange shares.
Any shares subject to a Contingent Deferred Sales Charge at the time of
exchange, however, will remain so in the new fund. See the discussion on
Contingent Deferred Sales Charges below and under "How Do I Sell Shares?"
CONTINGENT DEFERRED SALES CHARGE - CLASS I. For accounts with Class I shares
subject to a Contingent Deferred Sales Charge, shares are exchanged into the
new fund in the order they were purchased. If you exchange Class I shares into
one of our money funds, the time your shares are held in that fund will not
count towards the completion of any Contingency Period.
CONTINGENT DEFERRED SALES CHARGE - CLASS II. For accounts with Class II shares
subject to a Contingent Deferred Sales Charge, shares are exchanged into the
new fund proportionately based on the amount of shares subject to a Contingent
Deferred Sales Charge and the length of time the shares have been held. For
example, suppose you own $1,000 in shares that have never been subject to a
Contingent Deferred Sales Charge, such as shares from the reinvestment of
dividends and capital gains ("free shares"), $2,000 in shares that are no
longer subject to a Contingent Deferred Sales Charge because you have held them
for longer than 18 months ("matured shares"), and $3,000 in shares that are
still subject to a Contingent Deferred Sales Charge ("CDSC liable shares"). If
you exchange $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.
Likewise, CDSC liable shares purchased at different times will be exchanged
into a new fund proportionately. For example, assume you purchased $1,000 in
shares 3 months ago, 6 months ago, and 9 months ago. If you exchange $1,500
into a new fund, $500 will be exchanged from shares purchased at each of these
three different times.
While Class II shares are exchanged proportionately, they are redeemed in the
order purchased. In some cases, this means exchanged shares may be CDSC liable
even though they would not be subject to a Contingent Deferred Sales Charge if
they were sold. We believe the proportional method of exchanging Class II
shares more closely reflects the expectations of Class II shareholders if
shares are sold during the Contingency Period. The tax consequences of a sale
or exchange are determined by the Code and not by the method used by the Fund
to transfer shares.
28 . Templeton Global Opportunities Trust
<PAGE>
If you exchange your Class II shares for shares of Money Fund II, the time your
shares are held in that fund will count towards the completion of any
Contingency Period.
EXCHANGE RESTRICTIONS
Please be aware that the following restrictions apply to exchanges:
. You may only exchange shares within the SAME CLASS, except as noted below.
. The accounts must be identically registered. You may, however, exchange shares
from a Fund account requiring two or more signatures into an identically
registered money fund account requiring only one signature for all
transactions. PLEASE NOTIFY US IN WRITING IF YOU DO NOT WANT THIS OPTION TO BE
AVAILABLE ON YOUR ACCOUNT. Additional procedures may apply. Please see
"Transaction Procedures and Special Requirements."
. Trust Company IRA or 403(b) retirement plan accounts may exchange shares as
described above. Restrictions may apply to other types of retirement plans.
Please contact our Retirement Plans Department for information on exchanges
within these plans.
. The fund you are exchanging into must be eligible for sale in your state.
. We may modify or discontinue our exchange policy if we give you 60 days'
written notice.
. Your exchange may be restricted or refused if you: (i) request an exchange
out of the Fund within two weeks of an earlier exchange request, (ii) exchange
shares out of the Fund more than twice in a calendar quarter, or (iii)
exchange shares equal to at least $5 million, or more than 1% of the Fund's
net assets. Shares under common ownership or control are combined for these
limits. If you exchange shares as described in this paragraph, you will be
considered a Market Timer. Each exchange by a Market Timer, if accepted, will
be charged $5.00. Some of our funds do not allow investments by Market Timers.
Because excessive trading can hurt Fund performance and shareholders, we may
refuse any exchange purchase if (i) we believe the Fund would be harmed or
unable to invest effectively, or (ii) the Fund receives or anticipates
simultaneous orders that may significantly affect the Fund.
LIMITED EXCHANGES BETWEEN DIFFERENT CLASSES OF SHARES
Certain funds in the Franklin Templeton Funds offer classes of shares not
offered by the Fund, such as "Advisor Class" or "Class Z" shares. Because the
Fund does
Templeton Global Opportunities Trust . 29
<PAGE>
not currently offer an Advisor Class, you may exchange Advisor Class shares of
any Franklin Templeton Fund for Class I shares of the Fund at Net Asset Value.
If you do so and you later decide you would like to exchange into a fund that
offers an Advisor Class, you may exchange your Class I shares for Advisor Class
shares of that fund. Beginning on or about May 27, 1997, certain shareholders
of Class Z shares of Franklin Mutual Series Fund Inc. may also exchange their
Class Z shares for Class I shares of the Fund at Net Asset Value.
HOW DO I SELL SHARES?
You may sell (redeem) your shares at any time.
<TABLE>
<CAPTION>
METHOD STEPS TO FOLLOW
- ------------------------------------------------------------------------------
<C> <S>
BY MAIL 1. Send us written instructions signed by all account
owners
2. Include any outstanding share certificates for the
shares you are selling
3. Provide a signature guarantee if required
4. Corporate, partnership and trust accounts may need to
send additional documents. Accounts under court
jurisdiction may have other requirements.
- ------------------------------------------------------------------------------
BY WIRE 1. You must sign up for the wire feature before using it.
(Available for To sign up, send us written instructions, with a
requests of $1,000, signature guarantee. To avoid any delay in processing,
up to $50,000) the instructions should include:
. The name, address and telephone number of the bank
where you want the proceeds sent
. Your bank account number
. The Federal Reserve ABA routing number
. If you are using a savings and loan or credit union,
the name of the corresponding bank and the account
number
2. Call Shareholder Services for wire instructions
3. If we receive your request in proper form before 1:00
p.m. Pacific time, your wire payment will be sent the
next business day. For requests received in proper
form after 1:00 p.m. Pacific time, the payment will be
sent the second business day.
You may have redemption proceeds wired to an escrow
account without preauthorized instructions.
- ------------------------------------------------------------------------------
</TABLE>
30 . Templeton Global Opportunities Trust
<PAGE>
<TABLE>
<CAPTION>
METHOD STEPS TO FOLLOW
- ------------------------------------------------------------------------------
<C> <S>
BY PHONE Call Shareholder Services
Telephone requests will be accepted:
. If the request is $50,000 or less. Institutional
accounts may exceed $50,000 by completing a separate
agreement. Call Institutional Services to receive a
copy.
. If there are no share certificates issued for the
shares you want to sell or you have already returned
them to the Fund
. Unless you are selling shares in a Trust Company
retirement plan account
. Unless the address on your account was changed by phone
within the last 15 days
If you do not want the ability to redeem by phone to
apply to your account, please let us know. If you later
decide you would like this option, send us written
instructions, with a signature guarantee.
- ------------------------------------------------------------------------------
THROUGH YOUR DEALER Call your investment representative
- ------------------------------------------------------------------------------
</TABLE>
If you redeem your shares by mail or phone, we will send your redemption check
within seven days after we receive your request in proper form. If you would
like the check to be sent to an address other than the address of record or to
be made payable to someone other than the registered owners on the account,
send us written instructions signed by all account owners, with a signature
guarantee. We are not able to receive or pay out cash in the form of currency.
The wiring of redemption proceeds is a special service that we make available
whenever possible. By offering this service to you, however, the Fund is not
bound to meet any redemption request in less than the seven day period
prescribed by law. Neither the Fund nor its agents shall be liable to you or
any other person if, for any reason, a redemption request by wire is not
processed as described in this section.
If you sell shares you recently purchased with a check or draft, we may delay
sending you the proceeds for up to 15 days or more to allow the check or draft
to clear. A certified or cashier's check may clear in less time.
Under unusual circumstances, we may suspend redemptions or postpone payment for
more than seven days as permitted by federal securities law.
Templeton Global Opportunities Trust . 31
<PAGE>
Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to sell shares.
TRUST COMPANY RETIREMENT PLAN ACCOUNTS
To comply with IRS regulations, you need to complete additional forms before
selling shares in a Trust Company retirement plan account. Tax penalties
generally apply to any distribution from these plans to a participant under age
59 1/2, unless the distribution meets an exception stated in the Code. To
obtain the necessary forms, please call our Retirement Plans Department.
CONTINGENT DEFERRED SALES CHARGE
For Class I purchases, if you did not pay a front-end sales charge because you
invested $1 million or more or agreed to invest $1 million or more under a
Letter of Intent, a Contingent Deferred Sales Charge may apply if you sell all
or a part of your investment within the Contingency Period. Once you have
invested $1 million or more, any additional Class I investments you make
without a sales charge may also be subject to a Contingent Deferred Sales
Charge if they are sold within the Contingency Period. For any Class II
purchase, a Contingent Deferred Sales Charge may apply if you sell the shares
within the Contingency Period. The charge is 1% of the value of the shares sold
or the Net Asset Value at the time of purchase, whichever is less.
Certain retirement plan accounts opened on or after May 1, 1997, and that
qualify to buy Class I shares without a front-end sales charge may also be
subject to a Contingent Deferred Sales Charge if the retirement plan account is
closed within 365 days of the account's initial purchase in the Franklin
Templeton Funds.
We will first redeem any shares in your account that are not subject to the
charge. If there are not enough of these to meet your request, we will redeem
shares subject to the charge in the order they were purchased.
Unless otherwise specified, when you request to sell a stated DOLLAR AMOUNT, we
will redeem additional shares to cover any Contingent Deferred Sales Charge.
For requests to sell a stated NUMBER OF SHARES, we will deduct the amount of
the Contingent Deferred Sales Charge, if any, from the sale proceeds.
WAIVERS. We waive the Contingent Deferred Sales Charge for:
. Exchanges
. Account fees
32 . Templeton Global Opportunities Trust
<PAGE>
. Sales of shares purchased pursuant to a sales charge waiver
. Sales of shares purchased without a front-end sales charge by certain
retirement plan accounts if (i) the account was opened before May 1, 1997, or
(ii) the Securities Dealer of record received a payment from Distributors of
0.25% or less, or (iii) Distributors did not make any payment in connection
with the purchase, as described under "How Do I Buy Shares? - Other Payments
to Securities Dealers"
. Redemptions by the Fund when an account falls below the minimum required
account size
. Redemptions following the death of the shareholder or beneficial owner
. Redemptions through a systematic withdrawal plan set up before February 1,
1995
. Redemptions through a systematic withdrawal plan set up on or after February
1, 1995, at a rate of up to 1% a month of an account's Net Asset Value. For
example, if you maintain an annual balance of $1 million in Class I shares,
you can redeem up to $120,000 annually through a systematic withdrawal plan
free of charge. Likewise, if you maintain an annual balance of $10,000 in
Class II shares, $1,200 may be redeemed annually free of charge.
. Distributions from individual retirement plan accounts due to death or
disability or upon periodic distributions based on life expectancy
. Tax-free returns of excess contributions from employee benefit plans
. Distributions from employee benefit plans, including those due to termination
or plan transfer
. Redemptions by Trust Company employee benefit plans or employee benefit plans
serviced by ValuSelect
. Participant initiated distributions from employee benefit plans or
participant initiated exchanges among investment choices in employee benefit
plans
WHAT DISTRIBUTIONS MIGHT I RECEIVE FROM THE FUND?
The Fund intends to pay a dividend at least annually representing substantially
all of its net investment income and any net realized capital gains.
Dividends and capital gains are calculated and distributed the same way for
each class. The amount of any income dividends per share will differ, however,
generally due to the difference in the Rule 12b-1 fees of Class I and Class II.
Templeton Global Opportunities Trust . 33
<PAGE>
Dividend payments are not guaranteed, are subject to the Board's discretion and
may vary with each payment. THE FUND DOES NOT PAY "INTEREST" OR GUARANTEE ANY
FIXED RATE OF RETURN ON AN INVESTMENT IN ITS SHARES.
If you buy shares shortly before the record date, please keep in mind that any
distribution will lower the value of the Fund's shares by the amount of the
distribution and you will then receive a portion of the price you paid back in
the form of a taxable distribution.
DISTRIBUTION OPTIONS
You may receive your distributions from the Fund in any of these ways:
1. BUY ADDITIONAL SHARES OF THE FUND - You may buy additional shares of the
same class of the Fund (without a sales charge or imposition of a Contingent
Deferred Sales Charge) by reinvesting capital gain distributions, dividend
distributions, or both. If you own Class II shares, you may also reinvest your
distributions in Class I shares of the Fund. This is a convenient way to
accumulate additional shares and maintain or increase your earnings base.
2. BUY SHARES OF OTHER FRANKLIN TEMPLETON FUNDS - You may direct your
distributions to buy the same class of shares of another Franklin Templeton
Fund (without a sales charge or imposition of a Contingent Deferred Sales
Charge). If you own Class II shares, you may also direct your distributions to
buy Class I shares of another Franklin Templeton Fund. Many shareholders find
this a convenient way to diversify their investments.
3. RECEIVE DISTRIBUTIONS IN CASH - You may receive capital gain distributions,
dividend distributions, or both in cash. If you have the money sent to another
person or to a checking account, you may need a signature guarantee.
TO SELECT ONE OF THESE OPTIONS, PLEASE COMPLETE SECTIONS 6 AND 7 OF THE
SHAREHOLDER APPLICATION INCLUDED WITH THIS PROSPECTUS OR TELL YOUR INVESTMENT
REPRESENTATIVE WHICH OPTION YOU PREFER. IF YOU DO NOT SELECT AN OPTION, WE WILL
AUTOMATICALLY REINVEST DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS IN THE SAME
CLASS OF THE FUND. For Trust Company retirement plans, special forms are
required to receive distributions in cash. You may change your distribution
option at any time by notifying us by mail or phone. Please allow at least
seven days before the record date for us to process the new option.
34 . Templeton Global Opportunities Trust
<PAGE>
TRANSACTION PROCEDURES AND SPECIAL REQUIREMENTS
HOW AND WHEN SHARES ARE PRICED
The Fund is open for business each day the NYSE is open. We determine the Net
Asset Value per share of each class as of the scheduled close of the NYSE,
generally 4:00 p.m. Eastern time. You can find the prior day's closing Net
Asset Value and Offering Price for each class in many newspapers.
The Net Asset Value of all outstanding shares of each class is calculated on a
pro rata basis. It is based on each class' proportionate participation in the
Fund, determined by the value of the shares of each class. Each class, however,
bears the Rule 12b-1 fees payable under its Rule 12b-1 plan. To calculate Net
Asset Value per share of each class, the assets of each class are valued and
totaled, liabilities are subtracted, and the balance, called net assets, is
divided by the number of shares of the class outstanding. The Fund's assets are
valued as described under "How are Fund Shares Valued?" in the SAI.
The Price We Use When You Buy or Sell Shares
You buy shares at the Offering Price of the class you wish to purchase, unless
you qualify to buy shares at a reduced sales charge or with no sales charge.
The Offering Price of each class is based on the Net Asset Value per share of
the class and includes the maximum sales charge. We calculate it to two decimal
places using standard rounding criteria. You sell shares at Net Asset Value.
The Net Asset Value we use when you buy or sell shares is the one next
calculated after we receive your transaction request in proper form. If you buy
or sell shares through your Securities Dealer, however, we will use the Net
Asset Value next calculated after your Securities Dealer receives your request,
which is promptly transmitted to the Fund. Your redemption proceeds will not
earn interest between the time we receive the order from your dealer and the
time we receive any required documents.
PROPER FORM
An order to buy shares is in proper form when we receive your signed
shareholder application and check. Written requests to sell or exchange shares
are in proper form when we receive written instructions signed by all
registered owners, with a signature guarantee if necessary. We must also
receive any outstanding share certificates for those shares.
Templeton Global Opportunities Trust . 35
<PAGE>
WRITTEN INSTRUCTIONS
Written instructions must be signed by all registered owners. To avoid any
delay in processing your transaction, they should include:
. Your name,
. The Fund's name,
. The class of shares,
. A description of the request,
. For exchanges, the name of the fund you're exchanging into,
. Your account number,
. The dollar amount or number of shares, and
. A telephone number where we may reach you during the day, or in the evening
if preferred.
SIGNATURE GUARANTEES
For our mutual protection, we require a signature guarantee in the following
situations:
1) You wish to sell over $50,000 worth of shares,
2) You want the proceeds to be paid to someone other than the registered
owners,
3) The proceeds are not being sent to the address of record, preauthorized bank
account, or preauthorized brokerage firm account,
4) We receive instructions from an agent, not the registered owners,
5) We believe a signature guarantee would protect us against potential claims
based on the instructions received.
A signature guarantee verifies the authenticity of your signature. YOU SHOULD
BE ABLE TO OBTAIN A SIGNATURE GUARANTEE FROM A BANK, BROKER, CREDIT UNION,
SAVINGS ASSOCIATION, CLEARING AGENCY, OR SECURITIES EXCHANGE OR ASSOCIATION. A
NOTARIZED SIGNATURE IS NOT SUFFICIENT.
SHARE CERTIFICATES
We will credit your shares to your Fund account. We do not issue share
certificates unless you specifically request them. This eliminates the costly
problem of replacing lost, stolen or destroyed certificates. If a certificate
is lost, stolen or destroyed, you may have to pay an insurance premium of up to
2% of the value of the certificate to replace it.
36 . Templeton Global Opportunities Trust
<PAGE>
Any outstanding share certificates must be returned to the Fund if you want to
sell or exchange those shares or if you would like to start a systematic
withdrawal plan. The certificates should be properly endorsed. You can do this
either by signing the back of the certificate or by completing a share
assignment form. For your protection, you may prefer to complete a share
assignment form. In this case, you should send the certificate and assignment
form in separate envelopes.
TELEPHONE TRANSACTIONS
You may initiate many transactions by phone. Please refer to the sections of
this prospectus that discuss the transaction you would like to make or call
Shareholder Services.
When you call, we will request personal or other identifying information to
confirm that instructions are genuine. We will also record calls. We will not
be liable for following instructions communicated by telephone if we reasonably
believe they are genuine. For your protection, we may delay a transaction or
not implement one if we are not reasonably satisfied that the instructions are
genuine. If this occurs, we will not be liable for any loss.
If our lines are busy or you are otherwise unable to reach us by phone, you may
wish to ask your investment representative for assistance or send us written
instructions, as described elsewhere in this prospectus. If you are unable to
execute a transaction by telephone, we will not be liable for any loss.
TRUST COMPANY RETIREMENT PLAN ACCOUNTS. We cannot accept instructions to sell
shares or change distribution options on Trust Company retirement plans by
phone. While you may exchange shares of Trust Company IRA and 403(b) retirement
accounts by phone, certain restrictions may be imposed on other retirement
plans.
To obtain any required forms or more information about distribution or transfer
procedures, please call our Retirement Plans Department.
ACCOUNT REGISTRATIONS AND REQUIRED DOCUMENTS
When you open an account, we need you to tell us how you want your shares
registered. How you register your account will affect your ownership rights and
ability to make certain transactions. If you have questions about how to
register your account, you should consult your investment representative or
legal advisor. Please keep the following information in mind when registering
your account.
Templeton Global Opportunities Trust . 37
<PAGE>
JOINT OWNERSHIP. If you open an account with two or more owners, we register
the account as "joint tenants with rights of survivorship" unless you tell us
otherwise. An account registered as "joint tenants with rights of survivorship"
is shown as "Jt Ten" on your account statement. For any account with two or
more owners, ALL owners must sign instructions to process transactions and
changes to the account. Even if the law in your state says otherwise, we cannot
accept instructions to change owners on the account unless all owners agree in
writing. If you would like another person or owner to sign for you, please send
us a current power of attorney.
GIFTS AND TRANSFERS TO MINORS. You may set up a custodial account for a minor
under your state's Uniform Gifts/Transfers to Minors Act. Other than this form
of registration, a minor may not be named as an account owner.
TRUSTS. You should register your account as a trust only if you have a valid
written trust document. This avoids future disputes or possible court action
over who owns the account.
REQUIRED DOCUMENTS. For corporate, partnership and trust accounts, please send
us the following documents when you open your account. This will help avoid
delays in processing your transactions while we verify who may sign on the
account.
<TABLE>
<CAPTION>
TYPE OF ACCOUNT DOCUMENTS REQUIRED
- ------------------------------------------------------------------------------
<C> <S>
CORPORATION Corporate Resolution
- ------------------------------------------------------------------------------
PARTNERSHIP 1. The pages from the partnership agreement that identify the
general partners, or
2. A certification for a partnership agreement
- ------------------------------------------------------------------------------
TRUST 1. The pages from the trust document that identify the
trustees, or
2. A certification for trust
- ------------------------------------------------------------------------------
</TABLE>
STREET OR NOMINEE ACCOUNTS. If you have Fund shares held in a "street" or
"nominee" name account with your Securities Dealer, you may transfer the shares
to the street or nominee name account of another Securities Dealer. Both
dealers must have an agreement with Distributors or we cannot process the
transfer. Contact your Securities Dealer to initiate the transfer. We will
process the transfer after we receive authorization in proper form from your
delivering Securities Dealer. Accounts may be transferred electronically
through the NSCC. For accounts registered in street or nominee name, we may
take instructions directly from the Securities Dealer or your nominee.
38 . Templeton Global Opportunities Trust
<PAGE>
ELECTRONIC INSTRUCTIONS. If there is a Securities Dealer or other
representative of record on your account, we are authorized to use and execute
electronic instructions. We will accept electronic instructions directly from
your dealer or representative without further inquiry. Electronic instructions
may be processed through the services of the NSCC, which currently include the
NSCC's "Networking," "Fund/SERV," and "ACATS" systems, or through
Franklin/Templeton's PCTrades II(TM) System.
TAX IDENTIFICATION NUMBER
The IRS requires us to have your correct Social Security or tax identification
number on a signed shareholder application or applicable tax form. Federal law
requires us to withhold 31% of your taxable distributions and sale proceeds if
(i) you have not furnished a certified correct taxpayer identification number,
(ii) you have not certified that withholding does not apply, (iii) the IRS or a
Securities Dealer notifies the Fund that the number you gave us is incorrect,
or (iv) you are subject to backup withholding.
We may refuse to open an account if you fail to provide the required tax
identification number and certifications. We may also close your account if the
IRS notifies us that your tax identification number is incorrect. If you
complete an "awaiting TIN" certification, we must receive a correct tax
identification number within 60 days of your initial purchase to keep your
account open.
KEEPING YOUR ACCOUNT OPEN
Due to the relatively high cost of maintaining a small account, we may close
your account if the value of your shares is less than $50. We will only do this
if the value of your account fell below this amount because you voluntarily
sold your shares and your account has been inactive (except for the
reinvestment of distributions) for at least six months. Before we close your
account, we will notify you and give you 30 days to increase the value of your
account to $100.
SERVICES TO HELP YOU MANAGE YOUR ACCOUNT
AUTOMATIC INVESTMENT PLAN
Our automatic investment plan offers a convenient way to invest in the Fund.
Under the plan, you can have money transferred automatically from your checking
account to the Fund each month to buy additional shares. If you are interested
in this program, please refer to the shareholder application included with this
prospectus or contact your investment representative. The market value of the
Fund's shares may fluctuate and a systematic investment plan such as this will
not assure a profit or protect against a loss. You may discontinue the program
at any time by notifying Investor Services by mail or phone.
Templeton Global Opportunities Trust . 39
<PAGE>
SYSTEMATIC WITHDRAWAL PLAN
Our systematic withdrawal plan allows you to sell your shares and receive
regular payments from your account on a monthly, quarterly, semiannual or
annual basis. The value of your account must be at least $5,000 and the minimum
payment amount for each withdrawal must be at least $50. For retirement plans
subject to mandatory distribution requirements, the $50 minimum will not apply.
If you would like to establish a systematic withdrawal plan, please complete
the systematic withdrawal plan section of the shareholder application included
with this prospectus and indicate how you would like to receive your payments.
You may choose to direct your payments to buy the same class of shares of
another Franklin Templeton Fund or have the money sent directly to you, to
another person, or to a checking account.
You will generally receive your payment by the end of the month in which a
payment is scheduled. When you sell your shares under a systematic withdrawal
plan, it is a taxable transaction.
To avoid paying sales charges on money you plan to withdraw within a short
period of time, you may not want to set up a systematic withdrawal plan if you
plan to buy shares on a regular basis. Shares sold under the plan may also be
subject to a Contingent Deferred Sales Charge. Please see "Contingent Deferred
Sales Charge" under "How Do I Sell Shares?"
You may discontinue a systematic withdrawal plan, change the amount and
schedule of withdrawal payments, or suspend one payment by notifying us in
writing at least seven business days before the end of the month preceding a
scheduled payment. Please see "How Do I Buy, Sell and Exchange Shares? -
Systematic Withdrawal Plan" in the SAI for more information.
TELEFACTS(R)
From a touch-tone phone, you may call our TeleFACTS system (day or night) at 1-
800/247-1753 to:
. obtain information about your account;
. obtain price and performance information about any Franklin Templeton Fund;
. exchange shares between identically registered Franklin accounts; and
. request duplicate statements and deposit slips for Franklin accounts.
40 . Templeton Global Opportunities Trust
<PAGE>
You will need the code number for each class to use TeleFACTS. The code number
is 415 for Class I and 515 for Class II.
STATEMENTS AND REPORTS TO SHAREHOLDERS
We will send you the following statements and reports on a regular basis:
. Confirmation and account statements reflecting transactions in your account,
including additional purchases and dividend reinvestments. PLEASE VERIFY THE
ACCURACY OF YOUR STATEMENTS WHEN YOU RECEIVE THEM.
. Financial reports of the Fund will be sent every six months. To reduce Fund
expenses, we attempt to identify related shareholders within a household and
send only one copy of a report. Call Fund Information if you would like an
additional free copy of the Fund's financial reports or an interim quarterly
report.
Institutional Accounts
Additional methods of buying, selling or exchanging shares of the Fund may be
available to institutional accounts. Institutional investors may also be
required to complete an institutional account application. For more
information, call Institutional Services.
AVAILABILITY OF THESE SERVICES
The services above are available to most shareholders. If, however, your shares
are held by a financial institution, in a street name account, or networked
through the NSCC, the Fund may not be able to offer these services directly to
you. Please contact your investment representative.
WHAT IF I HAVE QUESTIONS ABOUT MY ACCOUNT?
If you have any questions about your account, you may write to Investor
Services at 700 Central Avenue, P.O. Box 33030, St. Petersburg, Florida
33733-8030. The Fund and Distributors are also located at this address. The
investment manager, TICI, is located at 500 East Broward Boulevard,
Fort Lauderdale, FL 33394-3091. The sub-advisor, InterCapital, is located at
Templeton Global Opportunities Trust . 41
<PAGE>
Two World Trade Center, New York, NY 10048. You may also contact us by phone at
one of the numbers listed below.
<TABLE>
<CAPTION>
HOURS OF OPERATION (EASTERN TIME)
DEPARTMENT NAME TELEPHONE NO. (MONDAY THROUGH FRIDAY)
- --------------------------------------------------------------------------
<S> <C> <C>
Shareholder
Services 1-800/632-2301 8:30 a.m. to 8:00 p.m.
Dealer Services 1-800/524-4040 8:30 a.m. to 8:00 p.m.
Fund Information 1-800/DIAL BEN 8:30 a.m. to 11:00 p.m.
(1-800/342-5236) 9:30 a.m. to 5:30 p.m. (Saturday)
Retirement Plans 1-800/527-2020 8:30 a.m. to 8:00 p.m.
Institutional Services 1-800/321-8563 9:00 a.m. to 8:00 p.m.
TDD (hearing impaired) 1-800/851-0637 8:30 a.m. to 8:00 p.m.
</TABLE>
Your phone call may be monitored or recorded to ensure we provide you with high
quality service. You will hear a regular beeping tone if your call is being
recorded.
42 . Templeton Global Opportunities Trust
<PAGE>
Glossary
USEFUL TERMS AND DEFINITIONS
1940 ACT - Investment Company Act of 1940, as amended
BOARD - The Board of Trustees of the Fund
CD - Certificate of deposit
CLASS I AND CLASS II - The Fund offers two classes of shares, designated "Class
I" and "Class II." The two classes have proportionate interests in the Fund's
portfolio. They differ, however, primarily in their sales charge structures and
Rule 12b-1 plans.
CODE - Internal Revenue Code of 1986, as amended
CONTINGENCY PERIOD - For Class I shares, the 12 month period during which a
Contingent Deferred Sales Charge may apply. For Class II shares, the
contingency period is 18 months. Regardless of when during the month you
purchased shares, they will age one month on the last day of that month and
each following month.
CONTINGENT DEFERRED SALES CHARGE (CDSC) - A sales charge of 1% that may apply
if you sell your shares within the Contingency Period.
DISTRIBUTORS - Franklin/Templeton Distributors, Inc., the Fund's principal
underwriter. The SAI lists the officers and Board members who are affiliated
with Distributors. See "Officers and Trustees."
ELIGIBLE GOVERNMENTAL AUTHORITY - Any state or local government or any
instrumentality, department, authority or agency thereof that has determined
the Fund is a legally permissible investment and that can only buy shares of
the Fund without paying sales charges.
FRANKLIN TEMPLETON FUNDS - The U.S. registered mutual funds in the Franklin
Group of Funds(R) and the Templeton Group of Funds except Franklin Valuemark
Funds, Franklin Government Securities Trust, Templeton Capital Accumulator
Fund, Inc., Templeton Variable Annuity Fund, and Templeton Variable Products
Series Fund
FRANKLIN TEMPLETON GROUP - Franklin Resources, Inc., a publicly owned holding
company, and its various subsidiaries
FRANKLIN TEMPLETON GROUP OF FUNDS - All U.S. registered investment companies in
the Franklin Group of Funds(R) and the Templeton Group of Funds
FT SERVICES - Franklin Templeton Services, Inc., the Fund's administrator
Templeton Global Opportunities Trust . 43
<PAGE>
INTERCAPITAL - Dean Witter InterCapital, Inc., the Fund's sub-advisor
INVESTOR SERVICES - Franklin/Templeton Investor Services, Inc., the Fund's
shareholder servicing and transfer agent
IRS - Internal Revenue Service
LETTER - Letter of Intent
MARKET TIMERS - Market Timers generally include market timing or allocation
services, accounts administered so as to buy, sell or exchange shares based on
predetermined market indicators, or any person or group whose transactions seem
to follow a timing pattern.
MOODY'S - Moody's Investors Service, Inc.
NASD - National Association of Securities Dealers, Inc.
NET ASSET VALUE (NAV) - The value of a mutual fund is determined by deducting
the fund's liabilities from the total assets of the portfolio. The net asset
value per share is determined by dividing the net asset value of the fund by
the number of shares outstanding.
NSCC - National Securities Clearing Corporation
NYSE - New York Stock Exchange
OFFERING PRICE - The public offering price is based on the Net Asset Value per
share of the class and includes the front-end sales charge. The maximum front-
end sales charge is 5.75% for Class I and 1% for Class II.
QUALIFIED RETIREMENT PLANS - An employer sponsored pension or profit-sharing
plan that qualifies under section 401 of the Code. Examples include 401(k),
money purchase pension, profit sharing and defined benefit plans.
REIT - Real Estate Investment Trust
RESOURCES - Franklin Resources, Inc.
SAI - Statement of Additional Information
S&P - Standard & Poor's Ratings Service, a division of The McGraw-Hill
Companies, Inc.
SEC - U.S. Securities and Exchange Commission
SECURITIES DEALER - A financial institution that, either directly or through
affiliates, has an agreement with Distributors to handle customer orders and
accounts with the Fund. This reference is for convenience only and does not
indicate a legal conclusion of capacity.
44 . Templeton Global Opportunities Trust
<PAGE>
SEP - An employer sponsored simplified employee pension plan established under
section 408(k) of the Code
TELEFACTS(R) - Franklin Templeton's automated customer servicing system
TICI - Templeton Investment Counsel, Inc., the Fund's investment manager
TRUST COMPANY - Franklin Templeton Trust Company. Trust Company is an affiliate
of Distributors and both are wholly owned subsidiaries of Resources.
U.S. - United States
WE/OUR/US - Unless the context indicates a different meaning, these terms refer
to the Fund and/or Investor Services, Distributors, or other wholly owned
subsidiaries of Resources.
Templeton Global Opportunities Trust . 45
<PAGE>
INSTRUCTIONS AND IMPORTANT NOTICE
SUBSTITUTE W-9 INSTRUCTIONS INFORMATION
GENERAL. Backup withholding is not an additional tax. Rather, the tax liability
of persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained from the IRS.
OBTAINING A NUMBER. If you do not have a Social Security Number/Taxpayer
Identification Number or you do not know your SSN/TIN, you must obtain Form SS-
5 or Form SS-4 from your local Social Security or IRS office and apply for one.
If you have checked the "Awaiting TIN" box and signed the certification,
withholding will apply to payments relating to your account unless you provide
a certified TIN within 60 days.
WHAT SSN/TIN TO GIVE. Please refer to the following guidelines:
<TABLE>
<CAPTION>
GIVE EMPLOYER ID
ACCOUNT TYPE GIVE SSN OF ACCOUNT TYPE # OF
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
. Individual Individual . Trust, Es- Trust, Estate,
tate, or Pen- or Pension Plan
sion Plan Trust
Trust
- --------------------------------------------------------------------------------
. Joint Indi- Owner who will . Corporation, Corporation,
vidual be paying tax Partnership, Partnership, or
or or other other
first-named organization organization
individual
- --------------------------------------------------------------------------------
. Unif. Gift/ Minor . Broker nomi- Broker nominee
Transfer to nee
Minor
- --------------------------------------------------------------------------------
. Sole Proprie- Owner of busi-
tor ness
- --------------------------------------------------------------------------------
. Legal Guard- Ward, Minor, or
ian Incompetent
- --------------------------------------------------------------------------------
</TABLE>
EXEMPT RECIPIENTS. Please provide your TIN and check the "Exempt Recipient" box
if you are an exempt recipient. Exempt recipients include:
A corporation 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
under section 501(a), or an An exempt charitable remainder
individual retirement plan trust or a non-exempt trust
described in section 4947(a)(1)
A registered dealer in
securities or commodities An entity registered at all
registered in the U.S. or a times under the Investment
U.S. possession Company Act of 1940
46 . Templeton Global Opportunities Trust
<PAGE>
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
Templeton Global Opportunities Trust . 47
<PAGE>
"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.
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.
48 . Templeton Global Opportunities Trust
<PAGE>
RESOLUTION SUPPORTING AUTHORITY OF
CORPORATE /ASSOCIATION SHAREHOLDER
- --------------------------------------------------------------------------------
INSTRUCTION:
It will be necessary for corporate/association shareholders to provide a
certified copy of a resolution or other certificate of authority supporting the
authority of designated officers of the corporation/association to issue oral
and written instruction on behalf of the corporation/association for the
purchase, sale (redemption), transfer and/or exchange of Franklin Templeton
Fund shares. You may use the following form of resolution or you may prefer to
use your own.
CERTIFIED COPY OF RESOLUTION (Corporation or Association)
The undersigned hereby certifies and affirms that he/she is the duly elected
__________________of______________________a__________________________________
Title Corporate Name Type of Organization
organized under the laws of the State of______________________and that the
State
following is a true and correct copy of a resolution adopted by the Board of
Directors by unanimous written consent (a copy of which is attached) or at a
meeting duly called and held on_____________________, 19__.
"RESOLVED that ___________________________________________________________
Name of Corporation/Association
(the "Company") is authorized to invest the Company's assets in one or
more investment companies (mutual funds) whose shares are distributed by
Franklin/Templeton Distributors, Inc. ("Distributors"). Each such
investment company, or series therof, is referred to as a "Franklin
Templeton Fund" or "Fund."
FURTHER RESOLVED, that any (enter number) __________ of the following
officers of this Company (acting alone, if one, or acting together, if
more than one) is/are authorized to issue oral or written instructions
(including the signing of drafts in the case of draft accessed money fund
accounts) on behalf of the Company for the purchase, sale (redemption),
transfer and/or exchange of Fund shares and to execute any Fund
application(s) and agreements pertaining to Fund shares registered or to
be registered to the Company (referred to as a "Company Instruction");
and, that this authority shall continue until Franklin/ Templeton
Investor Services, Inc. ("Investor Services") receives written notice of
revocation or amendment delivered by registered mail. The
Templeton Global Opportunities Trust . 49
<PAGE>
Company's officers authorized to act on behalf of the Company under this
resolution are (enter officer titles only):
-------------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(referred to as the "Authorized Officers").
FURTHER RESOLVED, that Investor Services may rely on the most recently
provided incumbency certificate delivered by the Company to Investor
Services to identify those individuals who are the incumbent Authorized
Officers and that Investor Services shall have no independent duty to
determine if there has been any change in the individuals serving as
incumbent Authorized Officers.
FURTHER RESOLVED, that the Company ("Indemnitor") undertakes and agrees
to indemnify and hold harmless Distributors, each affiliate of
Distributors, each Franklin Templeton Fund and their officers, employees
and agents (referred to hereafter collectively as the "Indemnitees") from
and against any and all liability, loss, suits, claims, costs, damages
and expenses of whatever amount and whatever nature (including without
limitation reasonable attorneys' fees, whether for consultation and
advice or representation in litigation at both the trial and appellate
level) any Indemnitee may sustain or incur by reason of, in consequence
of, or arising from or in connection with any action taken or not taken
by an Indemnitee in good faith reliance on a Company Instruction given as
authorized under this resolution."
The undersigned further certifies that the below named persons, whose
signatures appear opposite their names, are the incumbent Authorized Officers
(as that term is defined in the above resolution) who have been duly elected to
the office identified beside their name(s) (attach additional list if
necessary).
<TABLE>
<S> <C>
X
- ---------------------------------- ---------------
Name/title (please print or type) Signature
X
- ---------------------------------- ---------------
Name/title (please print or type) Signature
X
- ---------------------------------- ---------------
Name/title (please print or type) Signature
X
- ---------------------------------- ---------------
Name/title (please print or type) Signature
</TABLE>
Certified from minutes
X
- --------------------------------------------------------------------------------
Signature
- --------------------------------------------------------------------------------
Name/title (please print or type)
CORPORATE SEAL (if appropriate)
50 . Templeton Global Opportunities Trust
<PAGE>
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Templeton Global Opportunities Trust . 51
<PAGE>
This page intentionally left blank.
52 . Templeton Global Opportunities Trust
<PAGE>
This page intentionally left blank.
Templeton Global Opportunities Trust . 53
<PAGE>
FRANKLIN TEMPLETON GROUP OF FUNDS
LITERATURE REQUEST p Call 1-800/DIAL BEN (1-800/342-5236) today for a free
descriptive brochure and prospectus on any of the funds listed below. The
prospectus contains more complete information, including fees, charges and
expenses, and should be read carefully before investing or sending money.
GLOBAL GROWTH
Franklin Global Health Care Fund
Franklin Templeton Japan Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton Global Infrastructure Fund
Templeton Global Opportunities Trust
Templeton Global Real Estate Fund
Templeton Global Smaller Companies Fund
Templeton Greater European Fund
Templeton Growth Fund
Templeton Latin America Fund
Templeton Pacific Growth Fund
Templeton World Fund
GLOBAL GROWTH AND INCOME
Franklin Global Utilities Fund
Franklin Templeton German Government Bond Fund
Franklin Templeton Global Currency Fund
Mutual European Fund
Templeton Global Bond Fund
Templeton Growth and Income Fund
GLOBAL INCOME
Franklin Global Government Income Fund
Franklin Templeton Hard Currency Fund
Franklin Templeton High Income Currency Fund
Templeton Americas Government Securities Fund
GROWTH
Franklin Blue Chip Fund
Franklin California Growth Fund
Franklin DynaTech Fund
Franklin Equity Fund
Franklin Gold Fund
Franklin Growth Fund
Franklin MidCap Growth Fund
Franklin Small Cap Growth Fund
Mutual Discovery Fund
GROWTH AND INCOME
Franklin Asset Allocation Fund
Franklin Balance Sheet Investment Fund
Franklin Convertible Securities Fund
Franklin Equity Income Fund
Franklin Income Fund
Franklin MicroCap Value Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Rising Dividends Fund
Franklin Strategic Income Fund
Franklin Utilities Fund
Franklin Value Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Shares Fund
Templeton American Trust, Inc.
FUND ALLOCATOR SERIES
Franklin Templeton Conservative Target Fund
Franklin Templeton Moderate Target Fund
Franklin Templeton Growth Target Fund
INCOME
Franklin Adjustable Rate Securities Fund
Franklin Adjustable U.S. Government Securities Fund
Franklin's AGE High Income Fund
Franklin Investment Grade Income Fund
Franklin Short-Intermediate U.S. Government Securities Fund
Franklin U.S. Government Securities Fund
Franklin Money Fund
Franklin Federal Money Fund
FOR CORPORATIONS:
Franklin Corporate Qualified Dividend Fund
FRANKLIN FUNDS SEEKING
TAX-FREE INCOME
Federal Intermediate-Term Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund
Puerto Rico Tax-Free Income Fund
Tax-Exempt Money Fund
FRANKLIN STATE-SPECIFIC FUNDS
SEEKING TAX-FREE INCOME
Alabama
Arizona*
Arkansas**
California*
Colorado
Connecticut
Florida*
Georgia
Hawaii**
Indiana
Kentucky
Louisiana
Maryland
Massachusetts***
Michigan*
Minnesota***
Missouri
New Jersey
New York*
North
Carolina
Ohio***
Oregon
Pennsylvania
Tennessee**
Texas
Virginia
Washington**
VARIABLE ANNUITIES+
Franklin Valuemark*
Franklin Templeton Valuemark Income Plus
(an immediate annuity)
*Two or more fund options available: long-term portfolio, intermediate-term
portfolio, a portfolio of insured municipal securities, and/or a high yield
portfolio (CA) and a money market portfolio (CA and NY).
**The fund may invest up to 100% of its assets in bonds that pay interest
subject to the federal alternative minimum tax.
***Portfolio of insured municipal securities.
+Franklin Valuemark and Franklin Templeton Valuemark Income Plus are issued by
Allianz Life Insurance Company of North America or by its wholly owned
subsidiary, Preferred Life Insurance Company of New York, and distributed by
NALAC Financial Plans, LLC.
FGF 02/97 [LOGO OF RECYCLED PAPER APPEARS HERE] Printed on recycled paper
TL415.P 05/97
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
TEMPLETON GLOBAL
OPPORTUNITIES TRUST
STATEMENT OF
ADDITIONAL INFORMATION LOGO
700 CENTRAL AVENUE, P.O. BOX 33030
MAY 1, 1997 ST. PETERSBURG, FL 33733-8030 1-800/DIAL BEN
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONTENTS PAGE
<S> <C>
How Does the Fund Invest its Assets?.... 2
What Are the Fund's Potential Risks?.... 5
Investment Restrictions................. 8
Officers and Trustees................... 9
Investment Management and
Other Services........................ 15
How Does the Fund Buy Securities
for its Portfolio?.................... 16
How Do I Buy, Sell and Exchange
Shares?............................... 17
How Are Fund Shares Valued?............. 20
Additional Information on
Distributions and Taxes............... 21
The Fund's Underwriter.................. 25
How Does the Fund Measure
Performance?.......................... 27
Miscellaneous Information............... 29
Financial Statements.................... 30
Useful Terms and Definitions............ 30
Appendix................................ 31
Description of Ratings................ 31
</TABLE>
- -------------------------------------------------------------------------------
When reading this SAI, you will see certain terms beginning with capital
letters. This means the term is explained under "Useful Terms and Definitions."
- -------------------------------------------------------------------------------
The Templeton Global Opportunities Trust (the "Fund") is a diversified,
open-end management investment company. The Fund's investment objective is
long-term capital growth. The Fund seeks to achieve its objective through a
flexible policy of investing in global securities.
The Prospectus, dated May 1, 1997, as may be amended from time to time, contains
the basic information you should know before investing in the Fund. For a free
copy, call 1-800/DIAL BEN or write the Fund at the address shown.
THIS SAI IS NOT A PROSPECTUS. IT CONTAINS INFORMATION IN ADDITION TO AND IN MORE
DETAIL THAN SET FORTH IN THE PROSPECTUS. THIS SAI IS INTENDED TO PROVIDE YOU
WITH ADDITIONAL INFORMATION REGARDING THE ACTIVITIES AND OPERATIONS OF THE FUND,
AND SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS.
MUTUAL FUNDS, ANNUITIES, AND OTHER INVESTMENT PRODUCTS:
- ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY OF THE U.S. GOVERNMENT;
- ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY
BANK;
- ARE SUBJECT TO INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
1
<PAGE>
HOW DOES THE FUND INVEST ITS ASSETS?
- ---------------------------------------------------------
The following provides more detailed information about some of the securities
the Fund may buy and its investment policies. You should read it together with
the section in the Prospectus entitled "How does the Fund Invest its Assets?"
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. TICI 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 TICI or InterCapital 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 TICI or
InterCapital. 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 "Additional
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Information on Distributions and Taxes"). 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.
Structured Investments. Included among the issuers of debt securities in which
the Fund may invest are entities organized and operated solely for the purpose
of restructuring the investment characteristics of various securities. These
entities are typically organized by investment banking firms which receive fees
in connection with establishing each entity and arranging for the placement of
its securities. This type of restructuring involves the deposit with or purchase
by an entity, such as a corporation or trust, of specified instruments and the
issuance by that entity of one or more classes of securities ("structured
investments") backed by, or representing interests in, the underlying
instruments. The cash flows on the underlying instruments may be apportioned
among the newly issued structured investments to create securities with
different investment characteristics such as varying maturities, payment
priorities or interest rate provisions; the extent of the payments made with
respect to structured investments is dependent on the extent of the cash flows
on the underlying instruments. Because structured investments of the type in
which the Fund anticipates investing typically involve no credit enhancement,
their credit risk will generally be equivalent to that of the underlying
instruments.
The Fund is permitted to invest in a class of structured investments that is
either subordinated or unsubordinated to the right of payment of another class.
Subordinated structured investments typically have higher yields and present
greater risks than unsubordinated structured investments. Although the Fund's
purchase of subordinated structured investments would have a similar economic
effect to that of borrowing against the underlying securities, the purchase will
not be deemed to be leveraged for purposes of the limitations placed on the
extent of the Fund's assets that may be used for borrowing activities.
Certain issuers of structured investments may be deemed to be "investment
companies" as defined in the 1940 Act. As a result, a Fund's investment in these
structured investments may be limited by the restrictions contained in the 1940
Act. Structured investments are typically sold in private placement
transactions, and there currently is no active trading market for structured
investments. To the extent such investments are illiquid, they will be subject
to the Fund's restrictions on investments in illiquid securities.
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 U.S. 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
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<PAGE>
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 TICI or InterCapital, 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
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<PAGE>
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 CFTC, it 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 TICI's or InterCapital'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.
WHAT ARE THE FUND'S POTENTIAL RISKS?
- ---------------------------------------------------------
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
developing 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 U.S. 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. The Fund, therefore, may encounter
difficulty in obtaining market quotations for purposes of valuing its portfolio
and calculating its Net Asset Value. Foreign mar-
5
<PAGE>
kets have substantially less volume than the NYSE and securities of some foreign
companies are less liquid and more volatile than securities of comparable U.S.
companies. Commission rates in foreign countries, which are generally fixed
rather than subject to negotiation as in the U.S., 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 U.S.
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.
In addition, many countries in which the Fund may invest have experienced
substantial, and in some periods extremely high, rates of inflation for many
years. Inflation and rapid fluctuations in inflation rates have had and may
continue to have negative effects on the economies and securities markets of
certain countries. Moreover, the economies of some developing countries may
differ favorably or unfavorably from the U.S. economy in such respects as growth
of gross domestic product, rate of inflation, currency depreciation, capital
reinvestment, resource self-sufficiency and balance of payments position.
Investments in Eastern European countries may involve risks of nationalization,
expropriation and confiscatory taxation. The communist governments of a number
of Eastern European countries expropriated large amounts of private property in
the past, in many cases without adequate compensation, and there can be no
assurance that such expropriation will not occur in the future. In the event of
such expropriation, the Fund could lose a substantial portion of any investments
it has made in the affected countries. Further, no accounting standards exist in
Eastern European countries. Finally, even though certain Eastern European
currencies may be convertible into U.S. dollars, the conversion rates may be
artificial to the actual market values and may be adverse to Fund shareholders.
Investing in Russian securities involves a high degree of risk and special
considerations not typically associated with investing in the U.S. securities
markets, and should be considered highly speculative. Such risks include: (a)
delays in settling portfolio transactions and risk of loss arising out of
Russia's system of share registration and custody; (b) the risk that it may be
impossible or more difficult than in other countries to obtain and/or enforce a
judgment; (c) pervasiveness of corruption and crime in the Russian economic
system; (d) currency exchange rate volatility and the lack of available currency
hedging instruments; (e) higher rates of inflation (including the risk of social
unrest associated with periods of hyper-inflation); (f) controls on foreign
investment and local practices disfavoring foreign investors and limitations on
repatriation of invested capital, profits and dividends, and on the Fund's
ability to exchange local currencies for U.S. dollars; (g) the risk that the
government of Russia or other executive or legislative bodies may decide not to
continue to support the economic reform programs implemented since the
dissolution of the Soviet Union and could follow radically different political
and/or economic policies to the detriment of investors, including
non-market-oriented policies such as the support of certain industries at the
expense of other sectors or investors, or a return to the centrally planned
economy that existed prior to the dissolution of the Soviet Union; (h) the
financial condition of Russian companies, including large amounts of
inter-company debt which may create a payments crisis on a national scale; (i)
dependency on exports and the corresponding importance of international trade;
(j) the risk that the Russian tax system will not be reformed to prevent
inconsistent, retroactive and/or exorbitant taxation; and (k) possible
difficulty in identifying a purchaser of securities held by the Fund due to the
underdeveloped nature of the securities markets.
There is little historical data on Russian securities markets because they are
relatively new and a substantial proportion of securities transactions in Russia
are privately negotiated outside of stock exchanges. Because of the recent
formation of the securities markets as well as the underdeveloped state of the
banking and telecommunications systems, settlement, clearing and registration of
secu-
6
<PAGE>
rities transactions are subject to significant risks. Ownership of shares
(except where shares are held through depositories that meet the requirements of
the 1940 Act) is defined according to entries in the company's share register
and normally evidenced by extracts from the register or by formal share
certificates. However, there is no central registration system for shareholders
and these services are carried out by the companies themselves or by registrars
located throughout Russia. These registrars are not necessarily subject to
effective state supervision and it is possible for the Fund to lose its
registration through fraud, negligence or even mere oversight. While the Fund
will endeavor to ensure that its interest continues to be appropriately recorded
either itself or through a custodian or other agent inspecting the share
register and by obtaining extracts of share registers through regular
confirmations, these extracts have no legal enforceability and it is possible
that subsequent illegal amendment or other fraudulent act may deprive the Fund
of its ownership rights or improperly dilute its interests. In addition, while
applicable Russian regulations impose liability on registrars for losses
resulting from their errors, it may be difficult for the Fund to enforce any
rights it may have against the registrar or issuer of the securities in the
event of loss of share registration. Furthermore, although a Russian public
enterprise with more than 1,000 shareholders is required by law to contract out
the maintenance of its shareholder register to an independent entity that meets
certain criteria, in practice this regulation has not always been strictly
enforced. Because of this lack of independence, management of a company may be
able to exert considerable influence over who can purchase and sell the
company's shares by illegally instructing the registrar to refuse to record
transactions in the share register. This practice may prevent the Fund from
investing in the securities of certain Russian issuers deemed suitable by TICI
or InterCapital. Further, this also could cause a delay in the sale of Russian
securities by the Fund if a potential purchaser is deemed unsuitable, which may
expose the Fund to potential loss on the investment.
The Fund endeavors to buy and sell foreign currencies on as favorable a basis as
practicable. Some price spread on currency exchange (to cover service charges)
may be incurred, particularly when the Fund changes investments from one country
to another or when proceeds of the sale of shares in U.S. dollars are used for
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 cessation of trading on national exchanges,
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. Some countries in which the Fund may invest may also have fixed or
managed currencies that are not free-floating against the U.S. dollar. Further,
certain currencies may not be internationally traded. Certain of these
currencies have experienced a steady devaluation relative to the U.S. dollar.
Any devaluations in the currencies in which the Fund's portfolio securities are
denominated may have a detrimental impact on the Fund. Through the Fund's
flexible policy, management endeavors to avoid unfavorable consequences and to
take advantage of favorable developments in particular nations where from time
to time it places the Fund's investments.
The exercise of this flexible policy may include decisions to purchase
securities with substantial risk characteristics and other decisions such as
changing the emphasis on investments from one nation to another and from one
type of security to another. Some of these decisions may later prove profitable
and others may not. No assurance can be given that profits, if any, will exceed
losses.
The 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. However, in the absence of willful misfeasance, bad
faith or gross negligence on the part of TICI or InterCapital, any losses
resulting from the holding of the Fund's port-
7
<PAGE>
folio 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
TICI's or InterCapital's ability to predict correctly movements in the direction
of the market, as to which no assurance can be given.
INVESTMENT RESTRICTIONS
- ---------------------------------------------------------
The Fund has adopted the following restrictions as fundamental policies. These
restrictions may not be changed without the approval of a majority of the
outstanding voting securities of the Fund. Under the 1940 Act, this means the
approval of (i) more than 50% of the outstanding shares of the Fund or (ii) 67%
or more of the shares of the Fund present at a shareholder meeting if more than
50% of the outstanding shares of the Fund are represented at the meeting in
person or by proxy, whichever is less.
The Fund MAY 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 TICI, individually own more than 1/2 of 1% of the
securities of such company or, 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 NYSE 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
8
<PAGE>
on a recognized U.S. 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 "How Does the Fund Buy Securities For Its Portfolio?" as
to transactions in the same securities for the Fund and other Franklin
Templeton Group of Funds and clients.)
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.
If a percentage restriction is met at the time of investment, a later increase
or decrease in the percentage due to a change in the value or liquidity of
portfolio securities or the amount of assets will not be considered a violation
of any of the foregoing restrictions.
OFFICERS AND TRUSTEES
- --------------------------------------------------------------------------------
The Board has the responsibility for the overall management of the Fund,
including general supervision and review of its investment activities. The
Board, in turn, elects the officers of the Fund who are responsible for
administering the Fund's day-to-day operations. The affiliations of the officers
and Board members and their principal occupations for the past five years are
shown below. Members of the Board who are considered "interested persons" of the
Fund under the 1940 Act are indicated by an asterisk (*).
<TABLE>
<CAPTION>
Positions and
Offices
Name, Age and Address with the Fund Principal Occupation During the Past Five Years
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
HARRIS J. ASHTON Trustee Chairman of the board, president and chief
Metro Center executive officer of General Host Corporation
1 Station Place (nursery and craft centers); a director of RBC
Stamford, Connecticut Holdings (U.S.A.) Inc. (a bank holding company)
Age 64 and Bar-S Foods; and director or trustee of 55
of the investment companies in the Franklin
Templeton Group of Funds.
- ---------------------------------------------------------------------------------------------------
* NICHOLAS F. BRADY Trustee Chairman of Templeton Emerging Markets
The Bullitt House Investment Trust PLC; chairman of Templeton
102 East Dover Street Latin America Investment Trust PLC; chairman of
Easton, Maryland Darby Overseas Investments, Ltd. (an investment
Age 67 firm) (1994-present); chairman and director of
Templeton Central and Eastern European
Investment Company; director of the Amerada
Hess Corporation, Christiana Companies, and the
H.J. Heinz Company; formerly, secretary of the
U.S. Department of the Treasury (1988-1993);
chairman of the board of Dillon, Read & Co.
Inc. (investment banking) prior to 1988; and
director or trustee of 23 of the investment
companies in the Franklin Templeton Group of
Funds.
- ---------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Positions and
Offices
Name, Age and Address with the Fund Principal Occupation During the Past Five Years
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
FRANK J. CROTHERS Trustee President and chief executive officer of
P.O. Box N-3238 Atlantic Equipment & Power Ltd.; vice chairman
Nassau, Bahamas of Caribbean Utilities Co., Ltd.; president of
Age 52 Provo Power Corporation; a director of various
other business and nonprofit organizations; and
director or trustee of 4 of the investment
companies in the Franklin Templeton Group of
Funds.
- ---------------------------------------------------------------------------------------------------
S. JOSEPH FORTUNATO Trustee Member of the law firm of Pitney, Hardin, Kipp
200 Campus Drive & Szuch; a director of General Host Corporation
Florham Park, New Jersey (nursery and craft centers); and director or
Age 65 trustee of 57 of the investment companies in
the Franklin Templeton Group of Funds.
- ---------------------------------------------------------------------------------------------------
JOHN Wm. GALBRAITH Trustee President of Galbraith Properties, Inc.
360 Central Avenue (personal investment company); director of Gulf
Suite 1300 West Banks, Inc. (bank holding company)
St. Petersburg, Florida (1995-present); formerly, director of
Age 75 Mercantile Bank (1991-1995); vice chairman of
Templeton, Galbraith & Hansberger Ltd.
(1986-1992); chairman of Templeton Funds
Management, Inc. (1974-1991); and director or
trustee of 22 of the investment companies in
the Franklin Templeton Group of Funds.
- ---------------------------------------------------------------------------------------------------
ANDREW H. HINES, JR. Trustee Consultant for the Triangle Consulting Group;
150 Second Avenue N. chairman and director of Precise Power
St. Petersburg, Florida Corporation; executive-in-residence of Eckerd
Age 74 College (1991-present); director of Checkers
Drive-In Restaurants, Inc.; formerly, chairman
of the board and chief executive officer of
Florida Progress Corporation (1982-1990) and
director of various of its subsidiaries; and
director or trustee of 24 of the investment
companies in the Franklin Templeton Group of
Funds.
- ---------------------------------------------------------------------------------------------------
EDITH E. HOLIDAY Trustee Director (1993-present) of Amerada Hess
3239 38th Street, N.W. Corporation and Hercules Incorporated; director
Washington, D.C. of Beverly Enterprises, Inc. (1995-present) and
Age 44 H.J. Heinz Company (1994-present); chairman
(1995-present) and trustee (1993-present) of
National Child Research Center; formerly,
assistant to the President of the United States
and Secretary of the Cabinet (1990-1993),
general counsel to the United States Treasury
Department (1989-1990), and counselor to the
Secretary and Assistant Secretary for Public
Affairs and Public Liaison -- United States
Treasury Department (1988-1989); and director
or trustee of 15 of the investment companies in
the Franklin Templeton Group of Funds.
- ---------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Positions and
Offices
Name, Age and Address with the Fund Principal Occupation During the Past Five Years
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
* CHARLES B. JOHNSON Trustee, Chairman President, chief executive officer, and
777 Mariners Island Blvd. of the Board and director of Franklin Resources, Inc.; chairman
San Mateo, California Vice President of the board and director of Franklin Advisers,
Age 64 Inc. and Franklin Templeton Distributors, Inc.;
director of General Host Corporation (nursery
and craft centers) and Franklin Templeton
Investor Services, Inc.; and officer and/or
director, trustee or managing general partner,
as the case may be, of most other subsidiaries
of Franklin Resources, Inc. and 56 of the
investment companies in the Franklin Templeton
Group of Funds.
- ---------------------------------------------------------------------------------------------------
* RUPERT H. JOHNSON, JR. Trustee and Vice Executive vice president and director of
777 Mariners Island Blvd. President Franklin Resources, Inc. and Franklin Templeton
San Mateo, California Distributors, Inc.; president and director of
Age 56 Franklin Advisers, Inc.; director of Franklin
Templeton Investor Services, Inc.; and officer
and/or director, trustee or managing general
partner, as the case may be, of most other
subsidiaries of Franklin Resources, Inc. and 60
of the investment companies in the Franklin
Templeton Group of Funds.
- ---------------------------------------------------------------------------------------------------
BETTY P. KRAHMER Trustee Director or trustee of various civic
2201 Kentmere Parkway associations; formerly, economic analyst, U.S.
Wilmington, Delaware government; and director or trustee of 23 of
Age 67 the investment companies in the Franklin
Templeton Group of Funds.
- ---------------------------------------------------------------------------------------------------
GORDON S. MACKLIN Trustee Chairman of White River Corporation
8212 Burning Tree Road (information services); director of Fund
Bethesda, Maryland America Enterprises Holdings, Inc., MCI
Age 69 Communications Corporation, Fusion Systems
Corporation, Infovest Corporation, MedImmune,
Inc., Source One Mortgage Services Corporation,
and Shoppers Express, Inc. (on-line shopping
service); formerly, chairman of Hambrecht and
Quist Group; director of H&Q Healthcare
Investors and Lockheed Martin Corporation;
president of the National Association of
Securities Dealers, Inc.; and director or
trustee of 52 of the investment companies in
the Franklin Templeton Group of Funds.
- ---------------------------------------------------------------------------------------------------
FRED R. MILLSAPS Trustee Manager of personal investments (1978-present);
2665 N.E. 37th Drive director of various business and non-profit
Fort Lauderdale, Florida organizations; formerly, chairman and chief
Age 68 executive officer of Landmark Banking
Corporation (1969-1978); financial vice
president of Florida Power and Light
(1965-1969); vice president of The Federal
Reserve Bank of Atlanta (1958-1965); and
director or trustee of 24 of the investment
companies in the Franklin Templeton Group of
Funds.
- ---------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Positions and
Offices
Name, Age and Address with the Fund Principal Occupation During the Past Five Years
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
CONSTANTINE DEAN Trustee Physician, Lyford Cay Hospital (July
TSERETOPOULOS 1987-present); director of various non-profit
Lyford Cay Hospital organizations; formerly, cardiology fellow,
P.O. Box N-7776 University of Maryland (1985-1987); internal
Nassau, Bahamas medicine intern, Greater Baltimore Medical
Age 43 Center (1982-1985); and director or trustee of
4 of the investment companies in the Franklin
Templeton Group of Funds.
- ---------------------------------------------------------------------------------------------------
MARTIN L. FLANAGAN President Senior vice president, treasurer and chief
777 Mariners Island Blvd. financial officer of Franklin Resources, Inc.;
San Mateo, California director and executive vice president of
Age 36 Templeton Investment Counsel, Inc.; a member of
the International Society of Financial Analysts
and the American Institute of Certified Public
Accountants; formerly, with Arthur Andersen &
Company (1982-1983); and officer and/or
director, as the case may be, of other
subsidiaries of Franklin Resources, Inc.; and
officer and/or director or trustee of 60 of the
investment companies in the Franklin Templeton
Group of Funds.
- ---------------------------------------------------------------------------------------------------
HARMON E. BURNS Vice President Executive vice president, secretary and
777 Mariners Island Blvd. director of Franklin Resources, Inc.; executive
San Mateo, California vice president and director of Franklin
Age 52 Templeton Distributors, Inc.; executive vice
president of Franklin Advisers, Inc.; officer
and/or director, as the case may be, of other
subsidiaries of Franklin Resources, Inc.; and
officer and/or director or trustee of 60 of the
investment companies in the Franklin Templeton
Group of Funds.
- ---------------------------------------------------------------------------------------------------
CHARLES E. JOHNSON Vice President Senior vice president and director of Franklin
500 East Broward Blvd. Resources, Inc.; senior vice president of
Fort Lauderdale, Florida Franklin Templeton Distributors, Inc.;
Age 40 president and chief executive officer of
Templeton Worldwide, Inc.; president and
director of Franklin Institutional Services
Corporation; chairman of the board of Templeton
Investment Counsel, Inc.; officer and/or
director, as the case may be, of other
subsidiaries of Franklin Resources, Inc.; and
officer and/or director or trustee of 39 of the
investment companies in the Franklin Templeton
Group of Funds.
- ---------------------------------------------------------------------------------------------------
DEBORAH R. GATZEK Vice President Senior vice president and general counsel of
777 Mariners Island Blvd. Franklin Resources, Inc.; senior vice president
San Mateo, California of Franklin Templeton Distributors, Inc.; vice
Age 48 president of Franklin Advisers, Inc.; and
officer of 60 of the investment companies in
the Franklin Templeton Group of Funds.
- ---------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Positions and
Offices
Name, Age and Address with the Fund Principal Occupation During the Past Five Years
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
HOWARD J. LEONARD Vice President Executive vice president, portfolio management/
500 East Broward Blvd. research, of Templeton Investment Counsel, Inc.
Fort Lauderdale, Florida (1989-present); formerly, director, investment
Age 37 research for First Pennsylvania Bank
(1986-1989) and security analyst for Provident
National Bank (1981-1985).
- ---------------------------------------------------------------------------------------------------
JOHN R. KAY Vice President Vice president and treasurer of Templeton
500 East Broward Blvd. Worldwide, Inc.; assistant vice president of
Fort Lauderdale, Florida Franklin Templeton Distributors, Inc.;
Age 56 formerly, vice president and controller of the
Keystone Group, Inc.; and officer of 27 of the
investment companies in the Franklin Templeton
Group of Funds.
- ---------------------------------------------------------------------------------------------------
MARK G. HOLOWESKO Vice President President and director of Templeton Global
Lyford Cay Advisors Limited; chief investment officer of
Nassau, Bahamas global equity research for Templeton Worldwide,
Age 37 Inc.; president or vice president of the
Templeton Funds; formerly, investment
administrator with Roy West Trust Corporation
(Bahamas) Limited (1984-1985); and officer of
23 of the investment companies in the Franklin
Templeton Group of Funds.
- ---------------------------------------------------------------------------------------------------
JAMES R. BAIO Treasurer Certified public accountant; senior vice
500 East Broward Blvd. president of Templeton Worldwide, Inc. and
Fort Lauderdale, Florida Templeton Funds Trust Company; formerly, senior
Age 42 tax manager with Ernst & Young (certified
public accountants) (1977-1989); and officer of
24 of the investment companies in the Franklin
Templeton Group of Funds.
- ---------------------------------------------------------------------------------------------------
ELIZABETH M. KNOBLOCK Vice President - General counsel, secretary and a senior vice
500 East Broward Blvd. Compliance president of Templeton Investment Counsel,
Fort Lauderdale, Florida Inc.; formerly, vice president and associate
Age 42 general counsel of Kidder Peabody & Co. Inc.
(1989-1990), assistant general counsel of
Gruntal & Co., Inc. (1988), vice president and
associate general counsel of Shearson Lehman
Hutton Inc. (1988), vice president and
assistant general counsel of E.F. Hutton & Co.
Inc. (1986-1988), and special counsel of the
division of investment management of the
Securities and Exchange Commission (1984-1986);
and officer of 23 of the investment companies
in the Franklin Templeton Group of Funds.
- ---------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Positions and
Offices
Name, Age and Address with the Fund Principal Occupation During the Past Five Years
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
BARBARA J. GREEN Secretary Senior vice president of Templeton Worldwide,
500 East Broward Blvd. Inc. and an officer of other subsidiaries of
Fort Lauderdale, Florida Templeton Worldwide, Inc.; formerly, deputy
Age 49 director of the Division of Investment
Management, executive assistant and senior
advisor to the chairman, counsellor to the
chairman, special counsel and attorney fellow,
U.S. Securities and Exchange Commission
(1986-1995), attorney, Rogers & Wells, and
judicial clerk, U.S. District Court (District
of Massachusetts); and secretary of 23 of the
investment companies in the Franklin Templeton
Group of Funds.
- ---------------------------------------------------------------------------------------------------
</TABLE>
*Nicholas F. Brady, Charles B. Johnson and Rupert H. Johnson, Jr. are
"interested persons" of the Fund under the 1940 Act, which limits the percentage
of interested persons that can comprise a fund's board. Charles B. Johnson and
Rupert H. Johnson, Jr. are interested persons due to their ownership interest in
Resources. Mr. Brady's status as an interested person results from his business
affiliation with Resources and Templeton Global Advisors Limited ("TGAL"). Mr.
Brady and Resources are both limited partners of Darby Overseas Partners, L.P.
("Darby Overseas"). Mr. Brady established Darby Overseas in February 1994, and
is Chairman and shareholder of the corporate general partner of Darby Overseas.
In addition, Darby Overseas and TGAL are limited partners of Darby Emerging
Markets Fund, L.P. The remaining Board members of the Fund are not interested
persons (the "independent members of the Board").
The table above shows the officers and Board members who are affiliated with
Distributors and TICI. Nonaffiliated members of the Board and Mr. Brady are
currently paid an annual retainer and/or fees for attendance at Board and
committee meetings. Currently, the Fund pays the nonaffiliated Board members and
Mr. Brady an annual retainer of $4,000, a fee of $350 per Board meeting, and its
portion of a flat fee of $2,000 for each audit committee meeting and/or
nominating and compensation committee meeting attended. As shown above, some of
the nonaffiliated Board members also serve as directors, trustees or managing
general partners of other investment companies in the Franklin Templeton Group
of Funds. They may receive fees from these funds for their services. The
following table provides the total fees paid to nonaffiliated Board members and
Mr. Brady by the Fund and by other funds in the Franklin Templeton Group of
Funds.
<TABLE>
<CAPTION>
TOTAL FEES NUMBER OF BOARDS IN
TOTAL FEES RECEIVED FROM THE THE FRANKLIN TEMPLETON
RECEIVED FROM FRANKLIN TEMPLETON GROUP OF FUNDS ON
NAME THE FUND* GROUP OF FUNDS* WHICH EACH SERVES**
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Harris J. Ashton..................... $ 5,750 $339,592 55
Nicholas F. Brady.................... 5,750 119,275 23
Frank J. Crothers.................... 5,921 29,550 4
S. Joseph Fortunato.................. 5,750 356,412 57
John Wm. Galbraith................... 5,050 102,475 22
Andrew H. Hines, Jr.................. 5,890 130,525 24
Edith E. Holiday ***................. 1,350 15,450 15
Betty P. Krahmer..................... 5,750 119,275 23
Gordon S. Macklin.................... 5,750 331,542 52
Fred R. Millsaps..................... 5,890 130,525 24
Constantine Dean Tseretopoulos....... 5,921 29,550 4
</TABLE>
*For the fiscal year ended December 31, 1996.
**We base the number of boards on the number of registered investment companies
in the Franklin Templeton Group of Funds. This number does not include the total
number of series or funds within each investment company for which the Board
members are responsible. The Franklin Templeton Group of Funds currently
includes 62 registered investment companies, with approximately 170 U.S. based
funds or series.
***Ms. Holiday was elected a trustee of the Fund on December 3, 1996.
14
<PAGE>
Nonaffiliated members of the Board and Mr. Brady are reimbursed for expenses
incurred in connection with attending board meetings, paid pro rata by each fund
in the Franklin Templeton Group of Funds for which they serve as director,
trustee or managing general partner. No officer or Board member received any
other compensation, including pension or retirement benefits, directly or
indirectly from the Fund or other funds in the Franklin Templeton Group of
Funds. Certain officers or Board members who are shareholders of Resources may
be deemed to receive indirect remuneration by virtue of their participation, if
any, in the fees paid to its subsidiaries.
As of April 1, 1997, the officers and Board members, as a group, owned of record
and beneficially 17,069 Class I shares, or less than 1% of the total outstanding
Class I shares of the Fund. Many of the Board members also own shares in other
funds in the Franklin Templeton Group of Funds. Charles B. Johnson and Rupert H.
Johnson, Jr. are brothers and the father and uncle, respectively, of Charles E.
Johnson.
INVESTMENT MANAGEMENT AND
OTHER SERVICES
- ---------------------------------------------------------
Investment Manager and Services Provided. The Fund's investment manager is TICI.
TICI provides investment research and portfolio management services, including
the selection of securities for the Fund to buy, hold or sell and the selection
of brokers through whom the Fund's portfolio transactions are executed. TICI's
activities are subject to the review and supervision of the Board to whom TICI
renders periodic reports of the Fund's investment activities. TICI and its
officers, directors and employees are covered by fidelity insurance for the
protection of the Fund.
TICI and its affiliates act as investment manager to numerous other investment
companies and accounts. TICI may give advice and take action with respect to any
of the other funds it manages, or for its own account, that may differ from
action taken by TICI on behalf of the Fund. Similarly, with respect to the Fund,
TICI is not obligated to recommend, buy or sell, or to refrain from
recommending, buying or selling any security that TICI and access persons, as
defined by the 1940 Act, may buy or sell for its or their own account or for the
accounts of any other fund. TICI is not obligated to refrain from investing in
securities held by the Fund or other funds that it manages. Of course, any
transactions for the accounts of TICI and other access persons will be made in
compliance with the Fund's Code of Ethics. Please see "Miscellaneous
Information - Summary of Code of Ethics."
Under an agreement with TICI, InterCapital is the Fund's sub-advisor.
InterCapital provides TICI with investment management advice and assistance.
InterCapital provides TICI, 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.
Management Fees. Under its management agreement, the Fund pays TICI a monthly
fee equal to an annual rate of 0.80% of its average daily net assets during the
year. Each class pays its proportionate share of the management fee. Under the
sub-advisory agreement, TICI pays InterCapital a sub-advisory fee, in U.S.
dollars, at an annual rate of 0.25% of the Fund's average daily net assets. This
fee is not a separate expense of the Fund but is paid by TICI from the
management fees it receives from the Fund.
For the fiscal years ended December 31, 1996, 199, and 1994, management fees
totaling $4,616,385, $4,042,935 and $3,794,011, respectively, were paid to TICI.
For the same periods, TICI paid InterCapital sub-advisory fees of $1,442,620,
$1,263,417 and $1,185,628, respectively.
Management Agreements. The management and sub-advisory agreements are in effect
until April 30, 1998. They may continue in effect for successive annual periods
if their continuance is specifically approved at least annually by a vote of the
Board or by a vote of the holders of a majority of the Fund's outstanding voting
securities, and in either event by a majority vote of the Board members who are
not parties to either agreement or interested persons of any such party (other
than as members of the Board), cast in person at a meeting called for that
purpose. The management agreement may be terminated without penalty at any time
by the Board or by a vote of the holders of a majority of the Fund's outstanding
voting securities, or by TICI on 60 days' written notice, and will automatically
terminate in the event of its assignment, as defined in the 1940 Act. The
sub-advisory agreement may be terminated without penalty at any time by the
Board or by vote of the holders of a majority of the Fund's outstanding voting
securities, or by either TICI or InterCapital on not less than 60 days' written
notice, and will automatically terminate in the event of its assignment, as
defined in the 1940 Act.
15
<PAGE>
Administrative Services. FT Services provides certain administrative services
and facilities for the Fund. These include preparing and maintaining books,
records, and tax and financial reports, and monitoring compliance with
regulatory requirements. FT Services is a wholly owned subsidiary of Resources.
Prior to October 1, 1996, the Fund's administrator was Templeton Global
Investors, Inc.
Under its administration agreement, the Fund pays FT Services a monthly
administration fee equal to an annual rate of 0.15% of the Fund's average daily
net assets up to $200 million, 0.135% of average daily net assets over $200
million up to $700 million, 0.10% of average daily net assets over $700 million
up to $1.2 billion, and 0.075% of average daily net assets over $1.2 billion.
During the fiscal years ended December 31, 1996, 1995, and 1994, administration
fees totaling $809,015, $712,244 and $670,170, respectively, were paid.
Shareholder Servicing Agent. Investor Services, a wholly owned subsidiary of
Resources, is the Fund's shareholder servicing agent and acts as the Fund's
transfer agent and dividend-paying agent. Investor Services is compensated on
the basis of a fixed fee per account.
Custodian. The Chase Manhattan Bank, at its principal office at MetroTech
Center, Brooklyn, New York, 11245, and at the offices of its branches and
agencies throughout the world, acts as custodian of the Fund's assets. The
custodian does not participate in decisions relating to the purchase and sale of
portfolio securities.
Auditors. McGladrey & Pullen, LLP, 555 Fifth Avenue, New York, New York, 10017,
are the Fund's independent auditors. During the fiscal year ended December 31,
1996, their auditing services consisted of rendering an opinion on the financial
statements of the Fund included in the Fund's Annual Report to Shareholders for
the fiscal year ended December 31, 1996, and review of the Fund's filings with
the SEC.
HOW DOES THE FUND BUY
SECURITIES FOR ITS PORTFOLIO?
- ---------------------------------------------------------
TICI selects brokers and dealers to execute the Fund's portfolio transactions in
accordance with criteria set forth in the management agreement and any
directions that the Board may give.
When placing a portfolio transaction, TICI seeks to obtain prompt execution of
orders at the most favorable net price. For portfolio transactions on a
securities exchange, the amount of commission paid by the Fund is negotiated
between TICI and the broker executing the transaction. The determination and
evaluation of the reasonableness of the brokerage commissions paid are based to
a large degree on the professional opinions of the persons responsible for
placement and review of the transactions. These opinions are based on the
experience of these individuals in the securities industry and information
available to them about the level of commissions being paid by other
institutional investors of comparable size. TICI will ordinarily place orders to
buy and sell over-the-counter securities on a principal rather than agency basis
with a principal market maker unless, in the opinion of TICI, a better price and
execution can otherwise be obtained. Purchases of portfolio securities from
underwriters will include a commission or concession paid by the issuer to the
underwriter, and purchases from dealers will include a spread between the bid
and ask price.
TICI may pay certain brokers commissions that are higher than those another
broker may charge, if TICI determines in good faith that the amount paid is
reasonable in relation to the value of the brokerage and research services it
receives. This may be viewed in terms of either the particular transaction or
TICI's overall responsibilities to client accounts over which it exercises
investment discretion. The services that brokers may provide to TICI include,
among others, supplying information about particular companies, markets,
countries, or local, regional, national or transnational economies, statistical
data, quotations and other securities pricing information, and other information
that provides lawful and appropriate assistance to TICI in carrying out its
investment advisory responsibilities. These services may not always directly
benefit the Fund. They must, however, be of value to TICI in carrying out its
overall responsibilities to its clients.
It is not possible to place a dollar value on the special executions or on the
research services TICI receives from dealers effecting transactions in portfolio
securities. The allocation of transactions in order to obtain additional
research services permits TICI to supplement its own research and analysis
activities and to receive the views and information of individuals and research
staffs of other securities firms. As long as it is lawful and appropriate to do
so, TICI and its affiliates may use this research and data in their investment
advisory capacities with other clients. If the Fund's officers are satisfied
that the best execution is obtained, the sale of Fund shares, as well as shares
of other funds in the Franklin Templeton Group of Funds, may also be considered
a factor in the selection of broker-dealers to execute the Fund's portfolio
transactions.
16
<PAGE>
Because Distributors is a member of the NASD, it may sometimes receive certain
fees when the Fund tenders portfolio securities pursuant to a tender-offer
solicitation. As a means of recapturing brokerage for the benefit of the Fund,
any portfolio securities tendered by the Fund will be tendered through
Distributors if it is legally permissible to do so. In turn, the next management
fee payable to TICI will be reduced by the amount of any fees received by
Distributors in cash, less any costs and expenses incurred in connection with
the tender.
If purchases or sales of securities of the Fund and one or more other investment
companies or clients supervised by TICI are considered at or about the same
time, transactions in these securities will be allocated among the several
investment companies and clients in a manner deemed equitable to all by TICI,
taking into account the respective sizes of the funds and the amount of
securities to be purchased or sold. In some cases this procedure could have a
detrimental effect on the price or volume of the security so far as the Fund is
concerned. In other cases it is possible that the ability to participate in
volume transactions and to negotiate lower brokerage commissions will be
beneficial to the Fund.
Dean Witter Reynolds, Inc., an affiliate of InterCapital, may act as broker on
behalf of the Fund and receive commissions. During the fiscal years ended
December 31, 1996, 1995 and 1994, the Fund paid no brokerage commissions on
transactions allocated to Dean Witter Reynolds, Inc. The Fund paid brokerage
commissions totaling $577,462, $946,788 and $1,482,497 for the fiscal years
ended December 31, 1996, 1995 and 1994, respectively.
As of December 31, 1996, the Fund did not own securities of its regular
broker-dealers.
HOW DO I BUY, SELL AND EXCHANGE SHARES?
- ---------------------------------------------------------
ADDITIONAL INFORMATION ON BUYING SHARES
The Fund continuously offers its shares through Securities Dealers who have an
agreement with Distributors. Securities Dealers may at times receive the entire
sales charge. A Securities Dealer who receives 90% or more of the sales charge
may be deemed an underwriter under the Securities Act of 1933, as amended.
Securities laws of states where the Fund offers its shares may differ from
federal law. Banks and financial institutions that sell shares of the Fund may
be required by state law to register as Securities Dealers. Financial
institutions or their affiliated brokers may receive an agency transaction fee
in the percentages indicated in the table under "How Do I Buy Shares? - Purchase
Price of Fund Shares" in the Prospectus.
When you buy shares, if you submit a check or a draft that is returned unpaid to
the Fund we may impose a $10 charge against your account for each returned item.
Under agreements with certain banks in Taiwan, Republic of China, the Fund's
shares are available to these banks' trust accounts without a sales charge. The
banks may charge service fees to their customers who participate in the trusts.
A portion of these service fees may be paid to Distributors or one of its
affiliates to help defray expenses of maintaining a service office in Taiwan,
including expenses related to local literature fulfillment and communication
facilities.
Class I shares of the Fund may be offered to investors in Taiwan through
securities advisory firms known locally as Securities Investment Consulting
Enterprises. In conformity with local business practices in Taiwan, Class I
shares may be offered with the following schedule of sales charges:
<TABLE>
<CAPTION>
SALES
SIZE OF PURCHASE - U.S. DOLLARS CHARGE
- --------------------------------------- ------
<S> <C>
Under $30,000.......................... 3.0%
$30,000 but less than $50,000.......... 2.5%
$50,000 but less than $100,000......... 2.0%
$100,000 but less than $200,000........ 1.5%
$200,000 but less than $400,000........ 1.0%
$400,000 or more....................... 0%
</TABLE>
Other Payments to Securities Dealers. Distributors may pay the following
commissions, out of its own resources, to Securities Dealers who initiate and
are responsible for purchases of Class I shares of $1 million or more: 1% on
sales of $1 million to $2 million, plus 0.80% on sales over $2 million to $3
million, plus 0.50% on sales over $3 million to $50 million, plus 0.25% on sales
over $50 million to $100 million, plus 0.15% on sales over $100 million.
Either Distributors or one of its affiliates may pay the following amounts, out
of its own resources, to Securities Dealers who initiate and are responsible for
purchases of Class I shares by certain retirement plans without a front-end
sales charge, as discussed in the Prospectus: 1% on sales of $500,000 to $2
million, plus 0.80% on sales over $2 million to $3 million, plus 0.50% on sales
over $3 million to $50 million, plus 0.25% on sales over $50 million to $100
million, plus 0.15% on sales over $100 million. Distributors may make these
payments in the form of contingent advance payments, which may be recovered from
the Securities Dealer or set off against other payments due to the dealer
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<PAGE>
if shares are sold within 12 months of the calendar month of purchase. Other
conditions may apply. All terms and conditions may be imposed by an agreement
between Distributors, or one of its affiliates, and the Securities Dealer.
These breakpoints are reset every 12 months for purposes of additional
purchases.
Distributors and/or its affiliates provide financial support to various
Securities Dealers that sell shares of the Franklin Templeton Group of Funds.
This support is based primarily on the amount of sales of fund shares. The
amount of support may be affected by: total sales; net sales; levels of
redemptions; the proportion of a Securities Dealer's sales and marketing efforts
in the Franklin Templeton Group of Funds; a Securities Dealer's support of, and
participation in, Distributors' marketing programs; a Securities Dealer's
compensation programs for its registered representatives; and the extent of a
Securities Dealer's marketing programs relating to the Franklin Templeton Group
of Funds. Financial support to Securities Dealers may be made by payments from
Distributors' resources, from Distributors' retention of underwriting
concessions and, in the case of funds that have Rule 12b-1 plans, from payments
to Distributors under such plans. In addition, certain Securities Dealers may
receive brokerage commissions generated by fund portfolio transactions in
accordance with the NASD's rules.
Letter of Intent. You may qualify for a reduced sales charge when you buy Class
I shares, as described in the Prospectus. At any time within 90 days after the
first investment that you want to qualify for a reduced sales charge, you may
file with the Fund a signed shareholder application with the Letter of Intent
section completed. After the Letter is filed, each additional investment will be
entitled to the sales charge applicable to the level of investment indicated on
the Letter. Sales charge reductions based on purchases in more than one Franklin
Templeton Fund will be effective only after notification to Distributors that
the investment qualifies for a discount. Your holdings in the Franklin Templeton
Funds acquired more than 90 days before the Letter is filed, will be counted
towards completion of the Letter but will not be entitled to a retroactive
downward adjustment in the sales charge. Any redemptions you make during the 13
month period, except in the case of certain retirement plans, will be subtracted
from the amount of the purchases for purposes of determining whether the terms
of the Letter have been completed. If the Letter is not completed within the 13
month period, there will be an upward adjustment of the sales charge, depending
on the amount actually purchased (less redemptions) during the period. The
upward adjustment does not apply to certain retirement plans. If you execute a
Letter before a change in the sales charge structure of the Fund, you may
complete the Letter at the lower of the new sales charge structure or the sales
charge structure in effect at the time the Letter was filed.
As mentioned in the Prospectus, five percent (5%) of the amount of the total
intended purchase will be reserved in Class I shares of the Fund registered in
your name until you fulfill the Letter. This policy of reserving shares does not
apply to certain retirement plans. If total purchases, less redemptions, equal
the amount specified under the Letter, the reserved shares will be deposited to
an account in your name or delivered to you or as you direct. If total
purchases, less redemptions, exceed the amount specified under the Letter and is
an amount that would qualify for a further quantity discount, a retroactive
price adjustment will be made by Distributors and the Securities Dealer through
whom purchases were made pursuant to the Letter (to reflect such further
quantity discount) on purchases made within 90 days before and on those made
after filing the Letter. The resulting difference in Offering Price will be
applied to the purchase of additional shares at the Offering Price applicable to
a single purchase or the dollar amount of the total purchases. If the total
purchases, less redemptions, are less than the amount specified under the
Letter, you will remit to Distributors an amount equal to the difference in the
dollar amount of sales charge actually paid and the amount of sales charge that
would have applied to the aggregate purchases if the total of the purchases had
been made at a single time. Upon remittance, the reserved shares held for your
account will be deposited to an account in your name or delivered to you or as
you direct. If within 20 days after written request the difference in sales
charge is not paid, the redemption of an appropriate number of reserved shares
to realize the difference will be made. In the event of a total redemption of
the account before fulfillment of the Letter, the additional sales charge due
will be deducted from the proceeds of the redemption, and the balance will be
forwarded to you.
If a Letter is executed on behalf of certain retirement plans, the level and any
reduction in sales charge for these plans will be based on actual plan
participation and the projected investments in the Franklin Templeton Funds
under the Letter. These plans are not subject to the requirement to reserve 5%
of the total intended purchase, or to any penalty
18
<PAGE>
as a result of the early termination of a plan, nor are these plans entitled to
receive retroactive adjustments in price for investments made before executing
the Letter.
Reinvestment Date. Shares acquired through the reinvestment of dividends will be
purchased at the Net Asset Value determined on the business day following the
dividend record date (sometimes known as the "ex-dividend date"). The processing
date for the reinvestment of dividends may vary and does not affect the amount
or value of the shares acquired.
ADDITIONAL INFORMATION ON EXCHANGING SHARES
If you request the exchange of the total value of your account, declared but
unpaid income dividends and capital gain distributions will be exchanged into
the new fund and will be invested at Net Asset Value. Backup withholding and
information reporting may apply. Information regarding the possible tax
consequences of an exchange is included in the tax section in this SAI and in
the Prospectus.
If a substantial number of shareholders should, within a short period, sell
their shares of the Fund under the exchange privilege, the Fund might have to
sell portfolio securities it might otherwise hold and incur the additional costs
related to such transactions. On the other hand, increased use of the exchange
privilege may result in periodic large inflows of money. If this occurs, it is
the Fund's general policy to initially invest this money in short-term,
interest-bearing money market instruments, unless it is believed that attractive
investment opportunities consistent with the Fund's investment objectives exist
immediately. This money will then be withdrawn from the short-term money market
instruments and invested in portfolio securities in as orderly a manner as is
possible when attractive investment opportunities arise.
The proceeds from the sale of shares of an investment company are generally not
available until the fifth business day following the sale. The funds you are
seeking to exchange into may delay issuing shares pursuant to an exchange until
that fifth business day. The sale of Fund shares to complete an exchange will be
effected at Net Asset Value at the close of business on the day the request for
exchange is received in proper form. Please see "May I Exchange Shares for
Shares of Another Fund?" in the Prospectus.
ADDITIONAL INFORMATION ON SELLING SHARES
Systematic Withdrawal Plan. There are no service charges for establishing or
maintaining a systematic withdrawal plan. Once your plan is established, any
distributions paid by the Fund will be automatically reinvested in your account.
Payments under the plan will be made from the redemption of an equivalent amount
of shares in your account, generally on the 25th day of the month in which a
payment is scheduled.
Redeeming shares through a systematic withdrawal plan may reduce or exhaust the
shares in your account if payments exceed distributions received from the Fund.
This is especially likely to occur if there is a market decline. If a withdrawal
amount exceeds the value of your account, your account will be closed and the
remaining balance in your account will be sent to you. Because the amount
withdrawn under the plan may be more than your actual yield or income, part of
the payment may be a return of your investment.
The Fund may discontinue a systematic withdrawal plan by notifying you in
writing and will automatically discontinue a systematic withdrawal plan if all
shares in your account are withdrawn or if the Fund receives notification of the
shareholder's death or incapacity.
Through Your Securities Dealer. If you sell shares through your Securities
Dealer, it is your dealer's responsibility to transmit the order to the Fund in
a timely fashion. Any loss to you resulting from your dealer's failure to do so
must be settled between you and your Securities Dealer.
Redemptions in Kind. The Fund has committed itself to pay in cash (by check) all
requests for redemption by any shareholder of record, limited in amount,
however, during any 90-day period to the lesser of $250,000 or 1% of the value
of the Fund's net assets at the beginning of the 90-day period. This commitment
is irrevocable without the prior approval of the SEC. In the case of redemption
requests in excess of these amounts, the Board reserves the right to make
payments in whole or in part in securities or other assets of the Fund, in case
of an emergency, or if the payment of such a redemption in cash would be
detrimental to the existing shareholders of the Fund. In these circumstances,
the securities distributed would be valued at the price used to compute the
Fund's net assets and you may incur brokerage fees in converting the securities
to cash. The Fund does not intend to redeem illiquid securities in kind. If this
happens, however, you may not be able to recover your investment in a timely
manner.
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<PAGE>
GENERAL INFORMATION
If dividend checks are returned to the Fund marked "unable to forward" by the
postal service, we will consider this a request by you to change your dividend
option to reinvest all distributions. The proceeds will be reinvested in
additional shares at Net Asset Value until we receive new instructions.
If mail is returned as undeliverable or we are unable to locate you or verify
your current mailing address, we may deduct the costs of our efforts to find you
from your account. These costs may include a percentage of the account when a
search company charges a percentage fee in exchange for its location services.
All checks, drafts, wires and other payment mediums used to buy or sell shares
of the Fund must be denominated in U.S. dollars. We may, in our sole discretion,
either (a) reject any order to buy or sell shares denominated in any other
currency or (b) honor the transaction or make adjustments to your account for
the transaction as of a date and with a foreign currency exchange factor
determined by the drawee bank.
Special Services. Investor Services may pay certain financial institutions that
maintain omnibus accounts with the Fund on behalf of numerous beneficial owners
for recordkeeping operations performed with respect to such owners. For each
beneficial owner in the omnibus account, the Fund may reimburse Investor
Services an amount not to exceed the per account fee that the Fund normally pays
Investor Services. These financial institutions may also charge a fee for their
services directly to their clients.
Certain shareholder servicing agents may be authorized to accept your
transaction request.
HOW ARE FUND SHARES VALUED?
- ---------------------------------------------------------
We calculate the Net Asset Value per share of each class as of the scheduled
close of the NYSE, generally 4:00 p.m. Eastern time, each day that the NYSE is
open for trading. As of the date of this SAI, the Fund is informed that the NYSE
observes the following holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
For the purpose of determining the aggregate net assets of the Fund, cash and
receivables are valued at their realizable amounts. Interest is recorded as
accrued and dividends are recorded on the ex-dividend date. Portfolio securities
listed on a securities exchange or on the NASDAQ National Market System for
which market quotations are readily available are valued at the last quoted sale
price of the day or, if there is no such reported sale, within the range of the
most recent quoted bid and ask prices. Over-the-counter portfolio securities are
valued within the range of the most recent quoted bid and ask prices. Portfolio
securities that are traded both in the over-the-counter market and on a stock
exchange are valued according to the broadest and most representative market as
determined by TICI.
Portfolio securities underlying actively traded call options are valued at their
market price as determined above. The current market value of any option held by
the Fund is its last sale price on the relevant exchange before the time when
assets are valued. Lacking any sales that day or if the last sale price is
outside the bid and ask prices, options are valued within the range of the
current closing bid and ask prices if the valuation is believed to fairly
reflect the contract's market value.
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed well before the close of business
of the NYSE on each day that the NYSE is open. Trading in European or Far
Eastern securities generally, or in a particular country or countries, may not
take place on every NYSE business day. Furthermore, trading takes place in
various foreign markets on days that are not business days for the NYSE and on
which the Net Asset Value of each class is not calculated. Thus, the calculation
of the Net Asset Value of each class does not take place contemporaneously with
the determination of the prices of many of the portfolio securities used in the
calculation and, if events materially affecting the values of these foreign
securities occur, the securities will be valued at fair value as determined by
management and approved in good faith by the Board.
Generally, trading in corporate bonds, U.S. government securities and money
market instruments is substantially completed each day at various times before
the scheduled close of the NYSE. The value of these securities used in computing
the Net Asset Value of each class is determined as of such times. Occasionally,
events affecting the values of these securities may occur between the times at
which they are determined and the scheduled close of the NYSE that will not be
reflected in the computation of the Net Asset Value of each class. If events
materially affecting the values of these securities occur during this period,
the securities will be valued at their fair value as determined in good faith by
the Board.
20
<PAGE>
Other securities for which market quotations are readily available are valued at
the current market price, which may be obtained from a pricing service, based on
a variety of factors including recent trades, institutional size trading in
similar types of securities (considering yield, risk and maturity) and/or
developments related to specific issues. Securities and other assets for which
market prices are not readily available are valued at fair value as determined
following procedures approved by the Board. With the approval of the Board, the
Fund may utilize a pricing service, bank or Securities Dealer to perform any of
the above described functions.
ADDITIONAL INFORMATION ON
DISTRIBUTIONS AND TAXES
- ---------------------------------------------------------
DISTRIBUTIONS
You may receive two types of distributions from the Fund:
1. Income dividends. The Fund receives income generally in the form of
dividends, interest and other income derived from its investments. This income,
less the expenses incurred in the Fund's operations, is its net investment
income from which income dividends may be distributed. Thus, the amount of
dividends paid per share may vary with each distribution.
2. Capital gain distributions. The Fund may derive capital gains or losses in
connection with sales or other dispositions of its portfolio securities.
Distributions by the Fund derived from net short-term and net long-term capital
gains (after taking into account any capital loss carryforward or post October
loss deferral) may generally be made twice each year, once in December and once
following the end of the Fund's fiscal year. The Fund may adjust the timing of
these distributions for operational or other reasons.
TAXES
As stated in the Prospectus, the Fund has elected and qualified to be treated as
a regulated investment company under Subchapter M of 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
21
<PAGE>
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.
The Board reserves the right not to maintain the qualification of the Fund as a
regulated investment company if it determines this course of action to be
beneficial to shareholders. In that case, the Fund will be subject to federal
and possibly state corporate taxes on its taxable income and gains, and
distributions to shareholders will be taxable to the extent of the Fund's
available earnings and profits.
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 semiannual 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 "What Are the Fund's Potential
Risks?" 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
22
<PAGE>
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.
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. Generally, dividends and distributions are taxable to shareholders,
whether received in cash or reinvested in shares of the Fund. Any distributions
that are not from the Fund's investment company taxable income or net capital
gain may be characterized as a return of capital to shareholders or, in some
cases, capital gain. 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 may 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.
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
23
<PAGE>
engage in such hedging transactions. Requirements relating to the Fund's tax
status as a regulated investment company may limit the extent to which the Fund
will be able to engage in transactions in options, futures contracts and forward
contracts.
Under the Code, gains or losses attributable to fluctuations in exchange rates
which occur between the time the Fund accrues income or other receivables or
accrues expenses or other liabilities denominated in a foreign currency and the
time the Fund actually collects such receivables or pays such liabilities
generally are treated as ordinary income or ordinary loss. Similarly, on
disposition of debt securities denominated in a foreign currency and on
disposition of certain financial contracts, forward contracts and options, gains
or losses attributable to fluctuations in the value of foreign currency between
the date of acquisition of the security or contract and the date of disposition
also are treated as ordinary gain or loss. These gains 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. If section 988 losses exceed
other net investment income during a taxable year, the Fund generally would not
be able to make ordinary dividend distributions, or distributions made before
the losses were realized would be recharacterized as return of capital to
shareholders for federal income tax purposes, rather than as an ordinary
dividend, reducing each shareholder's basis in his Fund shares, or as a capital
gain.
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.
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 "passthrough" 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-denomi-
24
<PAGE>
nated 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 U.S. source income.
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 IRS 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. 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.
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).
THE FUND'S UNDERWRITER
- ---------------------------------------------------------
Pursuant to an underwriting agreement, Distributors acts as principal
underwriter in a continuous public offering for each class of the Fund's shares.
The underwriting agreement will continue in effect for successive annual periods
if its continuance is specifically approved at least annually by a vote of the
Board or by a vote of the holders of a majority of the Fund's outstanding voting
securities, and in either event by a majority vote of the Board members who are
not parties to the underwriting agreement or interested persons of any such
party (other than as members of the Board), cast in person at a meeting called
for that purpose. The underwriting agreement terminates automatically in the
event of its assignment and may be terminated by either party on 60 days'
written notice.
Distributors pays the expenses of the distribution of Fund shares, including
advertising expenses and the costs of printing sales material and prospectuses
used to offer shares to the public. The Fund pays the expenses of preparing and
printing amendments to its registration statements and prospectuses (other than
those necessitated by the activities of Distributors) and of sending
prospectuses to existing shareholders.
In connection with the offering of the Fund's shares, aggregate underwriting
commissions for the fiscal years ended December 31, 1996, 1995 and 1994, were
$1,426,146, $1,396,552, and $4,010,842, respectively. After allowances to
dealers, Distributors retained $170,283, $223,955 and $771,208 in net
underwriting discounts, commissions and compensation received in connection with
redemptions or repurchases of shares, for the respective years. Distributors may
be entitled to reimbursement under the Rule 12b-1 plan for each class, as
discussed below. Except as noted, Distributors received no other compensation
from the Fund for acting as underwriter.
THE RULE 12B-1 PLANS
Class I and Class II have separate distribution plans or "Rule 12b-1 plans" that
were adopted pursuant to Rule 12b-1 of the 1940 Act.
25
<PAGE>
The Class I Plan. Under the Class I plan, the Fund may pay up to a maximum of
.25% per year of Class I's average daily net assets, payable quarterly, for
expenses incurred in the promotion and distribution of Class I shares.
The Class II Plan. Under the Class II plan, the Fund pays up to 0.75% per year
of Class II's average daily net assets, payable quarterly, for distribution and
related expenses. These fees may be used to compensate Distributors or others
for providing distribution and related services and bearing certain Class II
expenses. All distribution expenses over this amount will be borne by those who
have incurred them without reimbursement by the Fund.
Under the Class II plan, the Fund also pays an additional 0.25% per year of
Class II's average daily net assets, payable quarterly, as a servicing fee.
The Class I and Class II Plans. In addition to the payments that Distributors
or others are entitled to under each plan, to the extent the Fund, TICI or
Distributors or other parties on behalf of the Fund, TICI or Distributors make
payments that are deemed to be for the financing of any activity primarily
intended to result in the sale of shares of each class within the context of
Rule 12b-1 under the 1940 Act, then such payments shall be deemed to have been
made pursuant to the plan. The terms and provisions of each plan relating to
required reports, term, and approval are consistent with Rule 12b-1.
In no event shall the aggregate asset-based sales charges, which include
payments made under each plan, plus any other payments deemed to be made
pursuant to a plan, exceed the amount permitted to be paid under the rules of
the NASD.
To the extent fees are for distribution or marketing functions, as distinguished
from administrative servicing or agency transactions, certain banks will not be
entitled to participate in the plans as a result of applicable federal law
prohibiting certain banks from engaging in the distribution of mutual fund
shares. These banking institutions, however, are permitted to receive fees under
the plans for administrative servicing or for agency transactions. If you are a
customer of a bank that is prohibited from providing these services, you would
be permitted to remain a shareholder of the Fund, and alternate means for
continuing the servicing would be sought. In this event, changes in the services
provided might occur and you might no longer be able to avail yourself of any
automatic investment or other services then being provided by the bank. It is
not expected that you would suffer any adverse financial consequences as a
result of any of these changes.
Each plan has been approved in accordance with the provisions of Rule 12b-1. The
plans are renewable annually by a vote of the Board, including a majority vote
of the Board members who are not interested persons of the Fund and who have no
direct or indirect financial interest in the operation of the plans, cast in
person at a meeting called for that purpose. It is also required that the
selection and nomination of such Board members be done by the non-interested
members of the Board. The plans and any related agreement may be terminated at
any time, without penalty, by vote of a majority of the non-interested Board
members on not more than 60 days' written notice, by Distributors on not more
than 60 days' written notice, by any act that constitutes an assignment of the
management agreement with TICI or by vote of a majority of the outstanding
shares of the class. Distributors or any dealer or other firm may also terminate
their respective distribution or service agreement at any time upon written
notice.
The plans and any related agreements may not be amended to increase materially
the amount to be spent for distribution expenses without approval by a majority
of the outstanding shares of the class, and all material amendments to the plans
or any related agreements shall be approved by a vote of the non-interested
members of the Board, cast in person at a meeting called for the purpose of
voting on any such amendment.
Distributors is required to report in writing to the Board at least quarterly on
the amounts and purpose of any payment made under the plans and any related
agreements, as well as to furnish the Board with such other information as may
reasonably be requested in order to enable the Board to make an informed
determination of whether the plans should be continued.
For the fiscal year ended December 31, 1996, the total amounts paid by the Fund
pursuant to the Class I and Class II plans were $1,425,391 and $71,350,
respectively, which were used for the following purposes:
<TABLE>
<CAPTION>
CLASS
CLASS I II
- ----------------------------------------------------
<S> <C> <C>
Advertising................... $ 14,589 $ 130
Printing and mailing of
prospectuses other than to
current shareholders........ $ 33,188 $ 413
Payments to underwriters...... $ 45,075 $51,938
Payments to broker-dealers.... $1,332,539 $18,869
Other......................... $ 0 $ 0
</TABLE>
26
<PAGE>
HOW DOES THE FUND MEASURE PERFORMANCE?
- ---------------------------------------------------------
Performance quotations are subject to SEC rules. These rules require the use of
standardized performance quotations or, alternatively, that every
non-standardized performance quotation furnished by the Fund be accompanied by
certain standardized performance information computed as required by the SEC.
Average annual total returnquotations used by the Fund are based on the
standardized methods of computing performance mandated by the SEC. If a Rule
12b-1 plan is adopted, performance figures reflect fees from the date of the
plan's implementation. An explanation of these and other methods used by the
Fund to compute or express performance for each class follows. Regardless of the
method used, past performance does not guarantee future results, and is an
indication of the return to shareholders only for the limited historical period
used.
TOTAL RETURN
Average Annual Total Return. Average annual total return is determined by
finding the average annual rates of return over one-, five- and ten-year
periods, or fractional portion thereof, that would equate an initial
hypothetical $1,000 investment to its ending redeemable value. The calculation
assumes the maximum front-end sales charge is deducted from the initial $1,000
purchase, and income dividends and capital gain distributions are reinvested at
Net Asset Value. The quotation assumes the account was completely redeemed at
the end of each one-, five- and ten-year period and the deduction of all
applicable charges and fees. If a change is made to the sales charge structure,
historical performance information will be restated to reflect the maximum
front-end sales charge currently in effect.
The average annual total return for Class I for the one-and five-year periods
ended December 31, 1996, and for the period from February 28, 1990 (commencement
of operations) through December 31, 1996, was 17.03%, 13.33%, and 12.64%,
respectively. The average annual total return for Class II for the one-year
period ended December 31, 1996 and for the period from May 1, 1995 (inception
of Class II) to December 31, 1996, was 21.02% and 17.63%, respectively.
These figures were calculated according to the SEC formula:
P(1+T)(n) = ERV
where:
<TABLE>
<S> <C> <C>
P = a hypothetical initial payment of
$1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a
hypothetical $1,000 payment made at
the beginning of the one-, five- or
ten-year periods at the end of the
one-, five- or ten-year periods (or
fractional portion thereof)
</TABLE>
Cumulative Total Return. Like average annual total return, cumulative total
return assumes the maximum front-end sales charge is deducted from the initial
$1,000 purchase, and income dividends and capital gain distributions are
reinvested at Net Asset Value. Cumulative total return, however, will be based
on the actual return for each class for a specified period rather than on the
average return over one-, five- and ten-year periods, or fractional portion
thereof. The cumulative total return for Class I for the one- and five-year
periods ended December 31, 1996 and for the period from February 28, 1990
(commencement of operations), through December 31, 1996, was 17.03%, 86.97%, and
128.70%, respectively. The cumulative total return for Class II for the one-year
period ended December 31, 1996 and for the period from May 1, 1995 (inception of
Class II) to December 31, 1996, was 21.02% and 31.16%, respectively.
VOLATILITY
Occasionally statistics may be used to show the Fund's volatility or risk.
Measures of volatility or risk are generally used to compare the Fund's Net
Asset Value or performance to a market index. One measure of volatility is beta.
Beta is the volatility of a fund relative to the total market, as represented by
an index considered representative of the types of securities in which the fund
invests. A beta of more than 1.00 indicates volatility greater than the market
and a beta of less than 1.00 indicates volatility less than the market. Another
measure of volatility or risk is standard deviation. Standard deviation is used
to measure variability of Net Asset Value or total return around an average over
a specified period of time. The idea is that greater volatility means greater
risk undertaken in achieving performance.
27
<PAGE>
OTHER PERFORMANCE QUOTATIONS
The Fund may also quote the performance of shares without a sales charge. Sales
literature and advertising may quote a current distribution rate, yield,
cumulative total return, average annual total return and other measures of
performance as described elsewhere in this SAI with the substitution of Net
Asset Value for the public Offering Price.
Sales literature referring to the use of the Fund as a potential investment for
Individual Retirement Accounts (IRAs), Business Retirement Plans, and other
tax-advantaged retirement plans may quote a total return based upon compounding
of dividends on which it is presumed no federal income tax applies.
The Fund may include in its advertising or sales material information relating
to investment objectives and performance results of funds belonging to the
Franklin Templeton Group of Funds. Resources is the parent company of the
advisors and underwriter of the Franklin Templeton Group of Funds.
COMPARISONS
To help you better evaluate how an investment in the Fund may satisfy your
investment objective, advertisements and other materials about the Fund may
discuss certain measures of each class' performance as reported by various
financial publications. Materials may also compare performance (as calculated
above) to performance as reported by other investments, indices, and averages.
These comparisons may include, but are not limited to, the following examples:
(i) unmanaged indices so that you 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 that
ranks mutual funds by overall performance, investment objectives and assets, or
tracked by other services, companies, publications, or persons who rank mutual
funds on overall performance or other criteria; and (iii) the Consumer Price
Index (measure for inflation) to assess the real rate of return from an
investment in the Fund. Unmanaged indices may assume the reinvestment of
dividends but generally do not reflect deductions for administrative and
management costs and expenses.
From time to time, the Fund and TICI may also refer to the following
information:
(a) TICI's and its affiliates' market share of international equities managed in
mutual funds prepared or published by Strategic Insight or a similar
statistical organization.
(b) 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.
(c) The capitalization of U.S. and foreign stock markets as prepared or
published by the International Finance Corporation, Morgan Stanley Capital
International or a similar financial organization.
(d) The geographic and industry distribution of the Fund's portfolio and the
Fund's top ten holdings.
(e) The gross national product and populations, including age characteristics,
literacy rates, foreign investment improvements due to a liberalization of
securities laws and a reduction of foreign exchange controls, and improving
communication technology, of various countries as published by various
statistical organizations.
(f) 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).
(g) The major industries located in various jurisdictions as published by the
Morgan Stanley Index.
(h) Rankings by DALBAR Surveys, Inc. with respect to mutual fund shareholder
services.
(i) Allegorical stories illustrating the importance of persistent long-term
investing.
(j) The Fund's portfolio turnover rate and its ranking relative to industry
standards as published by Lipper Analytical Services, Inc. or Morningstar,
Inc.
(k) 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.
(l) The number of shareholders in the Fund or the aggregate number of
shareholders of the open-end investment companies in the Franklin Templeton
Group of Funds or the dollar amount of
28
<PAGE>
fund and private account assets under management.
(m) Comparison of the characteristics of various emerging markets, including
population, financial and economic conditions.
(n) Quotations from the Templeton organization's founder, Sir John Templeton*,
advocating the virtues of diversification and long-term investing, including
the following:
- "Never follow the crowd. Superior performance is possible only if you
invest differently from the crowd."
- "Diversify by company, by industry and by country."
- "Always maintain a long-term perspective."
- "Invest for maximum total real return."
- "Invest - don't trade or speculate."
- "Remain flexible and open-minded about types of investment."
- "Buy low."
- "When buying stocks, search for bargains among quality stocks."
- "Buy value, not market trends or the economic outlook."
- "Diversify. In stocks and bonds, as in much else, there is safety in
numbers."
- "Do your homework or hire wise experts to help you."
- "Aggressively monitor your investments."
- "Don't panic."
- "Learn from your mistakes."
- "Outperforming the market is a difficult task."
- "An investor who has all the answers doesn't even understand all the
questions."
- "There's no free lunch."
- "And now the last principle: Do not be fearful or negative too often."
From time to time, advertisements or information for the Fund may include a
discussion of certain attributes or benefits to be derived from an investment in
the Fund. The advertisements or information may include symbols, headlines, or
other material that highlights or summarizes the information discussed in more
detail in the communication.
Advertisements or information may also compare a class' performance to the
return on CDs or other investments. You should be aware, however, that an
investment in the Fund involves the risk of fluctuation of principal value, a
risk generally not present in an investment in a CD issued by a bank. For
example, as the general level of interest rates rise, the value of the Fund's
fixed-income investments, if any, as well as the value of its shares that are
based upon the value of such portfolio investments, can be expected to decrease.
Conversely, when interest rates decrease, the value of the Fund's shares can be
expected to increase. CDs are frequently insured by an agency of the U.S.
government. An investment in the Fund is not insured by any federal, state or
private entity.
In assessing comparisons of performance, you should keep in mind that the
composition of the investments in the reported indices and averages is not
identical to the Fund's portfolio, the indices and averages are generally
unmanaged, and the items included in the calculations of the averages may not be
identical to the formula used by the Fund to calculate its figures. In addition,
there can be no assurance that the Fund will continue its performance as
compared to these other averages.
MISCELLANEOUS INFORMATION
- ---------------------------------------------------------
The Fund may help you achieve various investment goals such as accumulating
money for retirement, saving for a down payment on a home, college costs and
other long-term goals. The Franklin College Costs Planner may help you in
determining how much money must be invested on a monthly basis in order to have
a projected amount available in the future to fund a child's college education.
(Projected college cost estimates are based upon current costs published by the
College Board.) The Franklin Retirement Planning Guide leads you through the
steps to start a retirement savings program. Of course, an investment in the
Fund cannot guarantee that these goals will be met.
The Fund is a member of the Franklin Templeton Group of Funds, one of the
largest mutual fund organizations in the U.S., and may be considered in a
program for diversification of assets. Founded in 1947, Franklin, one of the
oldest mutual fund organizations, has managed mutual funds for over 49 years and
now services more than 2.7 million shareholder accounts. In 1992, Franklin, a
leader in managing fixed-income mutual funds and an innovator in creating
domestic equity funds, joined forces with Templeton Worldwide, Inc., a pioneer
in international investing. Mutual Series Fund Inc., known for its value-driven
approach to domestic equity investing, became part of the organization
* John Templeton sold the Templeton organization to Resources in October, 1992
and resigned from the Board on April 16, 1995. He is no longer involved with the
investment management process.
29
<PAGE>
four years later. Together, the Franklin Templeton Group has over $188 billion
in assets under management for more than 5.2 million U.S. based mutual fund
shareholder and other accounts. The Franklin Templeton Group of Funds offers 122
U.S. based open-end investment companies to the public. The Fund may identify
itself by its NASDAQ symbol or CUSIP number.
The Dalbar Surveys, Inc. broker-dealer survey has ranked Franklin number one in
service quality for five of the past nine years.
As of April 1, 1997, the principal shareholder of the Fund, beneficial or of
record, was as follows:
<TABLE>
<CAPTION>
SHARE
NAME AND ADDRESS AMOUNT PERCENTAGE
- -------------------------------------------------
CLASS II
<S> <C> <C>
Merrill Lynch, Pierce, 79,353 6%
Fenner & Smith, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-3424
</TABLE>
From time to time, the number of Fund shares held in the "street name" accounts
of various Securities Dealers for the benefit of their clients or in centralized
securities depositories may exceed 5% of the total shares outstanding. To the
best knowledge of the Fund, no other person holds beneficially or of record more
than 5% of the outstanding shares of any class.
As a shareholder of a Massachusetts business trust, you could, under certain
circumstances, be held personally liable as a partner for its obligations. The
Fund's Agreement and Declaration of Trust, however, contains an express
disclaimer of shareholder liability for acts or obligations of the Fund. The
Declaration of Trust also provides for indemnification and reimbursement of
expenses out of the Fund's assets if you are held personally liable for
obligations of the Fund. The Declaration of Trust provides that the Fund shall,
upon request, assume the defense of any claim made against you for any act or
obligation of the Fund and satisfy any judgment thereon. All such rights are
limited to the assets of the Fund. The Declaration of Trust further provides
that the Fund may maintain appropriate insurance (for example, fidelity bonding
and errors and omissions insurance) for the protection of the Fund, its
shareholders, trustees, officers, employees and agents to cover possible tort
and other liabilities. Furthermore, the activities of the Fund as an investment
company, as distinguished from an operating company, would not likely give rise
to liabilities in excess of the Fund's total assets. Thus, the risk of you
incurring financial loss on account of shareholder liability is limited to the
unlikely circumstances in which both inadequate insurance exists and the Fund
itself is unable to meet its obligations.
In the event of disputes involving multiple claims of ownership or authority to
control your 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, before executing
instructions regarding the account; (b) interplead disputed funds or accounts
with a court of competent jurisdiction; or (c) surrender ownership of all or a
portion of the account to the IRS in response to a Notice of Levy.
Summary of Code of Ethics. Employees of the Franklin Templeton Group who are
access persons under the 1940 Act are permitted to engage in personal securities
transactions subject to the following general restrictions and procedures: (i)
the trade must receive advance clearance from a compliance officer and must be
completed within 24 hours after clearance; (ii) copies of all brokerage
confirmations must be sent to a 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; and (iii) access persons involved in
preparing and making investment decisions must, in addition to (i) and (ii)
above, file annual reports of their securities holdings each January and 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.
FINANCIAL STATEMENTS
- ---------------------------------------------------------
The audited financial statements contained in the Annual Report to Shareholders
of the Fund, for the fiscal year ended December 31, 1996, including the
auditors' report, are incorporated herein by reference.
USEFUL TERMS AND DEFINITIONS
- ---------------------------------------------------------
1940 Act - Investment Company Act of 1940, as amended.
Board - The Board of Trustees of the Fund.
CD - Certificate of deposit.
Class I and Class II - Certain funds in the Franklin Templeton Funds offer two
classes of shares, designated "Class I" and "Class II." The two classes have
proportionate interests in the same portfolio of investment securities. They
differ, however, prima-
30
<PAGE>
rily in their sales charge structures and Rule 12b-1 plans.
Code - Internal Revenue Code of 1986, as amended.
Distributors - Franklin/Templeton Distributors, Inc., the Fund's principal
underwriter.
Franklin Templeton Funds - The U.S. registered mutual funds in the Franklin
Group of Funds(R) and the Templeton Group of Funds except Franklin Valuemark
Funds, Franklin Government Securities Trust, Templeton Capital Accumulator Fund,
Inc., Templeton Variable Annuity Fund, and Templeton Variable Products Series
Fund.
Franklin Templeton Group - Franklin Resources, Inc., a publicly owned holding
company, and its various subsidiaries.
Franklin Templeton Group of Funds - All U.S. registered investment companies in
the Franklin Group of Funds(R) and the Templeton Group of Funds.
FT Services - Franklin Templeton Services, Inc., the Fund's administrator.
InterCapital - Dean Witter InterCapital Inc., the Fund's sub-advisor, located at
Two World Trade Center, New York, NY 10048.
Investor Services - Franklin/Templeton Investor Services, Inc., the Fund's
shareholder servicing and transfer agent.
IRS - Internal Revenue Service.
Letter - Letter of Intent.
Moody's - Moody's Investors Service, Inc.
NASD - National Association of Securities Dealers, Inc.
Net Asset Value (NAV) - The value of a mutual fund is determined by deducting
the fund's liabilities from the total assets of the portfolio. The net asset
value per share is determined by dividing the net asset value of the fund by the
number of shares outstanding.
NYSE - New York Stock Exchange.
Offering Price - The public offering price is based on the Net Asset Value per
share of the class and includes the front-end sales charge. The maximum
front-end sales charge is 5.75% for Class I and 1% for Class II.
Prospectus - The prospectus for the Fund dated May 1, 1997, as may be amended
from time to time.
Resources - Franklin Resources, Inc.
SAI - Statement of Additional Information.
S&P - Standard & Poor's Ratings Service, a division of The McGraw-Hill
Companies, Inc.
SEC - U.S. Securities and Exchange Commission.
Securities Dealer - A financial institution that, either directly or through
affiliates, has an agreement with Distributors to handle customer orders and
accounts with the Fund. This reference is for convenience only and does not
indicate a legal conclusion of capacity.
TICI - Templeton Investment Counsel, Inc., the Fund's investment manager.
U.S. - United States.
We/Our/Us - Unless a different meaning is indicated by the context, these terms
refer to the Fund and/or Investor Services, Distributors, or other wholly-owned
subsidiaries of Resources.
APPENDIX
DESCRIPTION OF RATINGS
- ---------------------------------------------------------
CORPORATE BOND RATINGS
Moody's
Aaa - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt-
edged." Interest payments are protected by a large or exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa - Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group they comprise what are generally known as high grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large, fluctuation of protective elements may be of greater amplitude, or
there may be other elements present which make the long-term risks appear
somewhat larger.
A - Bonds rated A possess many favorable investment attributes and are
considered upper medium grade obligations. Factors giving security to principal
and interest are considered adequate but elements may be present which suggest a
susceptibility to impairment sometime in the future.
Baa - Bonds rated Baa are considered medium grade obligations. They are neither
highly protected nor poorly secured. Interest payments and principal security
appear adequate for the present but certain
31
<PAGE>
protective elements may be lacking or may be characteristically unreliable over
any great length of time. Such bonds lack outstanding investment characteristics
and in fact have speculative characteristics as well.
Ba - Bonds rated Ba are judged to have predominantly speculative elements and
their future cannot be considered well assured. Often the protection of interest
and principal payments is very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B - Bonds rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
Caa - Bonds rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.
Ca - Bonds rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
C - Bonds rated C are the lowest rated class of bonds and can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond ratings. The modifier 1
indicates that the security ranks in the higher end of its generic rating
category; modifier 2 indicates a mid-range ranking; and modifier 3 indicates
that the issue ranks in the lower end of its generic rating category.
S&P
AAA - This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay principal and interest.
AA - Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong and, in the majority of instances,
differ from AAA issues only in small degree.
A - Bonds rated A have a strong capacity to pay principal and interest, although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this category
than for bonds in the A category.
BB, B, CCC, CC - Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligations. BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
C - Bonds rated C are typically subordinated debt to senior debt that is
assigned an actual or implied CCC- rating. The C rating may also reflect the
filing of a bankruptcy petition under circumstances where debt service payments
are continuing. The C1 rating is reserved for income bonds on which no interest
is being paid.
D - Debt rated D is in default and payment of interest and/or repayment of
principal is in arrears.
32
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS: Incorporated by reference from Registrant's
1996 Annual Report:
Independent Auditor's Report
Investment Portfolio as of December 31, 1996
Statement of Assets and Liabilities as of December 31, 1996
Statement of Operations for fiscal year ended December
31, 1996
Statement of Changes in Net Assets for the years ended
December 31, 1996 and 1995
Notes to Financial Statements
(b) EXHIBITS
(1) (A) Amended and Restated Declaration of Trust 3
(B) Establishment and Designation of Classes of Shares of
Beneficial Interest 1
(2) By-Laws 3
(3) Not Applicable
(4) Specimen Security 2
(5) (A) Amended and Restated Investment Management Agreement 1
(B) Sub-advisory Agreement 3
(6) Distribution Agreement 3
(7) Not Applicable
(8) Custody Agreement 3
(9) (A) Amended and Restated Transfer Agent Agreement
(B) Fund Administration Agreement
(C) Shareholder Sub-Accounting Services Agreement 3
(D) Sub-Transfer Agent Services Agreement 3
(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 capital 2
(14) Not Applicable
<PAGE>
(15)(A) Distribution Plan -- Class I Shares 1
(B) Distribution Plan -- Class II Shares 1
(16) Schedule showing computation of performance quotations
provided in response to Item 22 (unaudited) 1
(18) Form of Multiclass Plan 1
(27) Financial Data Schedule
- -------------------
1 Filed with Post-Effective Amendment No. 8 to the Registration Statement
on April 28, 1995.
2 Filed with Pre-Effective Amendment No. 2 to the Registration Statement
on January 19, 1990.
3 Filed with Post-Effective Amendment No. 9 to the Registration Statement
on April 29, 1996.
<PAGE>
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, 41,896 as of
par value $0.01 per Share - March 31, 1997
Class I
Shares of Beneficial Interest, 1,618 as of
par value $0.01 per Share - March 31, 1997
Class II:
ITEM 27. INDEMNIFICATION.
Reference is made to Article IV of the Registrant's Declaration of
Trust, which is filed herewith.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers and controlling persons
of the Registrant by the Registrant pursuant to the Declaration of Trust or
otherwise, the Registrant is aware that in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the Act and, therefore, is unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by trustees, officers or
controlling persons of the Registrant in connection with the successful
defense of any act, suit or proceeding) is asserted by such trustees,
officers or controlling persons in connection with the shares being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issues.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER AND ITS
OFFICERS AND DIRECTORS
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.
<PAGE>
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Franklin Templeton Distributors, Inc. also acts as principal
underwriter of shares of:
Franklin Templeton Japan Fund
Templeton American Trust, Inc.
Templeton Capital Accumulator Fund, Inc.
Templeton Developing Markets Trust
Templeton Funds, Inc.
Templeton Global Investment Trust
Templeton Growth Fund, Inc.
Templeton Income Trust
Templeton Institutional Funds, Inc.
Templeton Global Real Estate Fund
Templeton Global Smaller Companies Fund, Inc.
Templeton Variable Products Series Fund
Franklin Asset Allocation 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 High Income Fund
Franklin Investors Securities Trust
Franklin Managed Trust
Franklin Money Fund
Franklin Mutual Series Fund, Inc.
Franklin Municipal Securities Trust
Franklin New York Tax-Free Income Fund, Inc.
Franklin New York Tax-Free Trust
Franklin Real Estate Securities Fund
Franklin Strategic Mortgage Portfolio
Franklin Strategic Series
Franklin Tax-Advantaged High Yield Securities Fund
Franklin Tax-Advantaged International Bond Fund
Franklin Tax-Advantaged U.S. Government Securitie Fund
Franklin Tax Exempt Money Fund
Franklin Tax-Free Trust
Franklin Templeton Fund Allocator Series
Franklin Templeton Global Trust
Franklin Templeton International Trust
Franklin Templeton Money Fund Trust
Franklin Value Investors Trust
Institutional Fiduciary Trust
(b) The directors and officers of FTD, located at 777 Mariners Island
Blvd., San Mateo, California 94404, are as follows:
<PAGE>
<TABLE>
<CAPTION>
NAME POSITION WITH UNDERWRITER POSITION WITH THE REGISTRANT
<S> <C> <C>
Charles B. Johnson Chairman of the Board and Director Vice President and Chairman of the Board
Gregory E. Johnson President None
Rupert H. Johnson, Jr. Executive Vice President and Director Trustee and Vice President
Harmon E. Burns Executive Vice President and Director Vice President
Daniel T. O'Lear Executive Vice President None
Peter Jones Executive Vice President None
700 Central Avenue
St. Petersburg, FL
Edward V. McVey Senior Vice President None
Kenneth A. Lewis Treasurer None
Richard C. Stoker Senior Vice President None
Charles E. Johnson Senior Vice President Vice President
500 E Broward Blvd.
Ft. Lauderdale, FL
Deborah R. Gatzek Senior Vice President and Assistant Vice President
Secretary
Richard O. Conboy Senior Vice President None
H. G. Mumford Senior Vice President None
James K. Blinn Vice President None
Jimmy A. Escobedo Vice President None
Loretta Fry Vice President None
Robert N. Geppner Vice President None
Mike Hackett Vice President None
Bert W. Feuss Vice President None
Philip J. Kearns Vice President None
Ken Leder Vice President None
Jack Lemein Vice President None
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NAME POSITION WITH UNDERWRITER POSITION WITH THE REGISTRANT
<S> <C> <C>
John R. McGee Vice President None
Vivian J. Palmieri Vice President None
Kent P. Strazza Vice President None
Sarah Stypa Vice President None
Laura Komar Vice President None
Francie Arnone Assistant Vice President None
Alison Hawksley Assistant Vice President None
John R. Kay Assistant Vice President Vice President
500 E Broward Blvd.
Ft. Lauderdale, FL
Susan Thompson Assistant Vice President None
Virginia Marans Assistant Vice President None
Bernadette Marion Howard Assistant Vice President None
Leslie M. Kratter Secretary None
Philip A. Scatena Assistant Treasurer None
Karen DeBellis Assistant Treasurer Assistant Treasurer
700 Central Avenue
St. Petersburg, FL
</TABLE>
(c) Not Applicable (Information on unaffiliated underwriters).
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The accounts, books, and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940
and rules promulgated thereunder are in the possession of Franklin
Templeton Services, Inc., 500 East Broward Blvd., Fort Lauderdale, Florida
33394.
ITEM 31. MANAGEMENT SERVICES
Not Applicable.
<PAGE>
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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all the requirements
for effectivenessof 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 District of Columiba on the 30th day of
April, 1997.
TEMPLETON GLOBAL OPPORTUNITIES TRUST
(REGISTRANT)
By:
Martin L. Flanagan, President*
*By:/s/JEFFREY L. STEELE
Jeffrey L. Steele
attorney-in-fact**
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed below by the following persons in the
capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
____________________ President (Chief April 30, 1997
Martin L. Flanagan* Executive Officer)
____________________ Trustee April 30, 1997
Charles B. Johnson*
____________________ Trustee April 30, 1997
Rupert H. Johnson, Jr.*
____________________ Trustee April 30, 1997
Betty P. Krahmer*
___________________ Trustee April 30, 1997
Constantine Dean Tseretopoulos*
<PAGE>
____________________ Trustee April 30, 1997
Frank J. Crothers*
___________________ Trustee April 30, 1997
Fred R. Millsaps*
____________________ Trustee April 30, 1997
Harris J. Ashton*
____________________ Trustee April 30, 1997
S. Joseph Fortunato*
____________________ Trustee April 30, 1997
Andrew H. Hines, Jr.*
____________________ Trustee April 30, 1997
John Wm. Galbraith*
____________________ Trustee April 30, 1997
Gordon S. Macklin*
____________________ Trustee April 30, 1997
Nicholas F. Brady*
____________________ Trustee April 30, 1997
Edith E. Holiday*
____________________ Treasurer (Chief April 30, 1997
James R. Baio* Financial and
Accounting Officer)
</TABLE>
*By/s/JEFFREY L. STEELE:
Jeffrey L. Steele
Attorney-in-fact**
** Powers of Attorney are filed herewith.
<PAGE>
POWER OF ATTORNEY
The undersigned officers and Trustees of TEMPLETON GLOBAL OPPORTUNITIES TRUST
(the "Registrant") hereby appoint Allan S. Mostoff, Jeffrey L. Steele, William
J. Kotapish, Deborah R. Gatzek, Barbara J. Green, Larry L. Greene, and John K.
Carter (with full power to each of them to act alone) his attorney-in-fact and
agent, in all capacities, to execute, and to file any of the documents referred
to below relating to Post-Effective Amendments to the Registrant's registration
statement on Form N-1A under the Investment Company Act of 1940, as amended, and
under the Securities Act of 1933 covering the sale of shares by the Registrant
under prospectuses becoming effective after this date, including any amendment
or amendments increasing or decreasing the amount of securities for which
registration is being sought, with all exhibits and any and all documents
required to be filed with respect thereto with any regulatory authority. Each of
the undersigned grants to each of said attorneys, full authority to do every act
necessary to be done in order to effectuate the same as fully, to all intents
and purposes as he could do if personally present, thereby ratifying all that
said attorneys-in-fact and agents, may lawfully do or cause to be done by virtue
hereof.
The undersigned officers and Trustees hereby execute this Power of Attorney as
of this 12th day of December, 1996
/s/HARRIS J. ASHTON /s/CHARLES B. JOHNSON
- ------------------------------- ---------------------------------
Harris J. Ashton, Trustee Charles B. Johnson, Trustee
/s/NICHOLAS F. BRADY /s/RUPERT H. JOHNSON, JR.
- -------------------------------- -----------------------------------
Nicholas F. Brady, Trustee Rupert H. Johnson, Jr., Trustee
/s/FRANK J. CROTHERS /s/BETTY P. KRAHMER
-------------------------------- ------------------------------------
Frank J. Crothers, Trustee Betty P. Krahmer, Trustee
/s/S. JOSEPH FORTUNATO /s/GORDON S. MACKLIN
- -------------------------------- -------------------------------------
S. Joseph Fortunato, Trustee Gordon S. Macklin, Trustee
/s/JOHN WM. GALBRAITH /s/FRED R. MILLSAPS
- --------------------------------- -----------------------------------
John Wm. Galbraith, Trustee Fred R. Millsaps, Trustee
/s/ANDREW H. HINES, JR. /s/CONSTANTINE D. TSERETOPOULOS
- --------------------------------- -----------------------------------
Andrew H. Hines, Jr., Trustee Constantine D. Tseretopoulos, Trustee
/s/EDITH E. HOLIDAY /s/MARTIN L. FLANAGAN
- --------------------------------- -------------------------------------
Edith E. Holiday, Trustee Martin L. Flanagan, President
/s/JAMES R. BAIO
- ------------------------------
James R. Baio, Treasurer
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
FILED WITH
POST-EFFECTIVE AMENDMENT NO. 11 TO
REGISTRATION STATEMENT
ON
FORM N-1A
TEMPLETON GLOBAL OPPORTUNITIES TRUST
<PAGE>
EXHIBIT LIST
EXHIBIT NUMBER NAME OF EXHIBIT
(9)(A) Amended and Restated Transfer Agent Agreement
(9)(B) Fund Administration Agreement
(11) Opinion and consent of independent public accountants
(27) Financial Data Schedule
TRANSFER AGENT AGREEMENT BETWEEN
TEMPLETON GLOBAL OPPORTUNITIES TRUST AND
FRANKLIN TEMPLETON INVESTOR SERVICES, INC.
AGREEMENT dated as of September 1, 1993, and amended and restated as of
August 10, 1995 and July 1, 1996, between TEMPLETON GLOBAL OPPORTUNITIES TRUST,
a registered open-end investment company with offices at 700 Central Avenue, St.
Petersburg, Florida 33701 (the "Fund") and FRANKLIN TEMPLETON INVESTOR SERVICES,
INC., a registered transfer agent with offices at 700 Central Avenue, St.
Petersburg, Florida 33701 ("FTIS").
W I T N E S S E T H:
That for and in consideration of the mutual promises hereinafter set
forth, the Fund and FTIS agree as follows:
1. DEFINITIONS. Whenever used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall have the following
meanings:
(a) "Declaration of Trust" shall mean the Declaration of Trust of the Fund as
the same may be amended from time to time;
(b) "Authorized Person" shall be deemed to include any person, whether or not
such person is an officer or employee of the Fund, duly authorized to give Oral
Instructions or Written Instructions on behalf of the Fund as indicated in a
certificate furnished to FTIS pursuant to Section 4(c) hereof as may be received
by FTIS from time to time;
(c) "Custodian" refers to the custodian and any sub-custodian of all securities
and other property which the Fund may from time to time deposit, or cause to be
deposited or held under the name or account of such custodian pursuant to the
Custody Agreement;
(d) "Oral Instructions" shall mean instructions, other than written
instructions, actually received by FTIS from a person reasonably believed by
FTIS to be an Authorized Person;
(e) "Shares" refers to shares of beneficial interest par value $.01 of the Fund;
and
(f) "Written Instructions" shall mean a written communication signed by a person
reasonably believed by FTIS to be an Authorized Person and actually received by
FTIS.
2. APPOINTMENT OF FTIS. The Fund hereby appoints and constitutes FTIS as
transfer agent for Shares of the Fund and as shareholder servicing agent for the
Fund, and FTIS accepts such appointment and agrees to perform the duties
hereinafter set forth.
3. COMPENSATION.
(a) The Fund will compensate or cause FTIS to be compensated for the performance
of its obligations hereunder in accordance with the fees set forth in the
written schedule of fees annexed hereto as Schedule A and incorporated herein.
Schedule A does not include out-of-pocket disbursements of FTIS for which FTIS
shall be entitled to bill the Fund separately. FTIS will bill the Fund as soon
as practicable after the end of each calendar month, and said billings will be
detailed in accordance with Schedule A. The Fund will promptly pay to FTIS the
amount of such billing.
Out-of-pocket disbursements shall include, but shall not be limited to, the
items specified in the written schedule of out-of-pocket expenses annexed hereto
as Schedule B and incorporated herein. Schedule B may be modified by FTIS upon
not less than 30 days' prior written notice to the Fund. Unspecified
out-of-pocket expenses shall be limited to those out-of-pocket expenses
reasonably incurred by FTIS in the performance of its obligations hereunder.
Reimbursement by the Fund for expenses incurred by FTIS in any month shall be
made as soon as practicable after the receipt of an itemized bill from FTIS.
Out-of-pocket disbursements may also include payments made by FTIS to entities
including affiliated entities which provide sub-shareholder services,
recordkeeping and/or transfer agency services to beneficial owners of the Fund,
where such services are substantially similar to the services provided by FTIS
to account holders of record. The amount of these disbursements per benefit plan
participant fund account per year shall not exceed the per account transfer
agency fees payable by the Fund to FTIS in connection with maintaining actual
shareholder accounts. On an annual basis, FTIS shall provide a report to the
Board showing, with respect to each entity receiving such fees, the number of
beneficial owners serviced by such entity and the value of the assets in the
Fund represented by such accounts.
(b) Any compensation agreed to hereunder may be adjusted from time to time by
attaching to Schedule A of this Agreement a revised Fee Schedule.
4. DOCUMENTS. In connection with the appointment of FTIS, the Fund shall, on or
before the date this Agreement goes into effect, but in any case, within a
reasonable period of time for FTIS to prepare to perform its duties hereunder,
deliver or cause to be delivered to FTIS the following documents:
(a) If applicable, a specimen of the certificate for Shares of the Fund;
(b) All account application forms and other documents relating to Shareholder
accounts or to any plan, program or service offered by the Fund;
(c) A certificate identifying the Authorized Persons and specimen signatures of
Authorized Persons who will sign Written Instructions; and
(d) All documents and papers necessary under the laws of Florida, under the
Fund's Declaration of Trust, and as may be required for the due performance of
FTIS's duties under this Agreement or for the due performance of additional
duties as may from time to time be agreed upon between the Fund and FTIS.
5. DISTRIBUTIONS PAYABLE IN SHARES. In the event that the Board of Trustees of
the Trust shall declare a distribution payable in Shares, the Trust shall
deliver or cause to be delivered to FTIS written notice of such declaration
signed on behalf of the Trust by an officer thereof, upon which FTIS shall be
entitled to rely for all purposes, certifying (i) the number of Shares involved,
and (ii) that all appropriate action has been taken.
6. DUTIES OF THE TRANSFER AGENT. FTIS shall be responsible for administering
and/or performing transfer agent functions; for acting as service agent in
connection with dividend and distribution functions; and for performing
shareholder account and administrative agent functions in connection with the
issuance, transfer and redemption or repurchase (including coordination with the
Custodian) of Shares. The operating standards and procedures to be followed
shall be determined from time to time by agreement between the Fund and FTIS.
Without limiting the generality of the foregoing, FTIS agrees to perform the
specific duties listed on Schedule C.
7. RECORDKEEPING AND OTHER INFORMATION. FTIS shall create and maintain all
necessary records in accordance with all applicable laws, rules and regulations.
8. OTHER DUTIES. In addition, FTIS shall perform such other duties and
functions, and shall be paid such amounts therefor, as may from time to time be
agreed upon in writing between the Fund and FTIS. Such other duties and
functions shall be reflected in a written amendment to Schedule C, and the
compensation for such other duties and functions shall be reflected in a written
amendment to Schedule A.
9. RELIANCE BY TRANSFER AGENT; INSTRUCTIONS.
(a) FTIS will be protected in acting upon Written or Oral Instructions
reasonably believed to have been executed or orally communicated by an
Authorized Person and will not be held to have any notice of any change of
authority of any person until receipt of a Written Instruction thereof from an
officer of the Fund. FTIS will also be protected in processing Share
certificates which it reasonably believes to bear the proper manual or facsimile
signatures of the officers of the Fund and the proper countersignature of FTIS.
(b) At any time FTIS may apply to any Authorized Person of the Fund for Written
Instructions and may seek advice at the Fund's expense from legal counsel for
the Fund or from its own legal counsel, with respect to any matter arising in
connection with this Agreement, and it shall not be liable for any action taken
or not taken or suffered by it in good faith in accordance with such Written
Instructions or in accordance with the opinion of counsel for the Fund or for
FTIS. Written Instructions requested by FTIS will be provided by the Fund within
a reasonable period of time. In addition, FTIS, or its officers, agents or
employees, shall accept Oral Instructions or Written Instructions given to them
by any person representing or acting on behalf of the Fund only if said
representative is known by FTIS, or its officers, agents or employees, to be an
Authorized Person.
10. ACTS OF GOD, ETC. FTIS will not be liable or responsible for delays or
errors by reason of circumstances beyond its control, including acts of civil or
military authority, national emergencies, labor difficulties, fire, mechanical
breakdown beyond its control, flood or catastrophe, acts of God, insurrection,
war, riots or failure beyond its control of transportation, communication or
power supply.
11. DUTY OF CARE AND INDEMNIFICATION. The Fund will indemnify FTIS against and
hold it harmless from any and all losses, claims, damages, liabilities or
expenses (including reasonable counsel fees and expenses) resulting from any
claim, demand, action or suit not resulting from willful misfeasance, bad faith
or gross negligence on the part of FTIS, and arising out of, or in connection
with, its duties hereunder. In addition, the Fund will indemnify FTIS against
and hold it harmless from any and all losses, claims, damages, liabilities or
expenses (including reasonable counsel fees and expenses) resulting from any
claim, demand, action or suit as a result of: (i) any action taken in accordance
with Written or Oral Instructions, or any other instructions or Share
certificates reasonably believed by FTIS to be genuine and to be signed,
countersigned or executed, or orally communicated by an Authorized Person; (ii)
any action taken in accordance with written or oral advice reasonably believed
by FTIS to have been given by counsel for the Fund or by its own counsel; (iii)
any action taken as a result of any error or omission in any record (including
but not limited to magnetic tapes, computer printouts, hard copies and microfilm
copies) delivered, or caused to be delivered by the Fund to FTIS in connection
with this Agreement; or (iv) any action taken in accordance with oral
instructions given under the Telephone Exchange and Redemption Privileges, as
described in the Fund's current prospectus, when believed by FTIS to be genuine.
In any case in which the Fund may be asked to indemnify or hold FTIS harmless,
the Fund shall be advised of all pertinent facts concerning the situation in
question and FTIS will use reasonable care to identify and notify the Fund
promptly concerning any situation which presents or appears likely to present a
claim for indemnification against the Fund. The Fund shall have the option to
defend FTIS against any claim which may be the subject of this indemnification,
and, in the event that the Fund so elects, such defense shall be conducted by
counsel chosen by the Fund and satisfactory to FTIS, and thereupon the Fund
shall take over complete defense of the claim and FTIS shall sustain no further
legal or other expenses in such situation for which it seeks indemnification
under this Section 11. FTIS will not confess any claim or make any compromise in
any case in which the Fund will be asked to provide indemnification, except with
the Fund's prior written consent. The obligations of the parties hereto under
this Section shall survive the termination of this Agreement.
12. TERM AND TERMINATION.
(a) This Agreement shall be effective as of the date first written above and
shall continue through April 30, 1997 and thereafter shall continue
automatically for successive annual periods ending on April 30 of each year,
provided such continuance is specifically approved at least annually by (i) the
Fund's Board of Trustees or (ii) a vote of a "majority" (as defined in the
Investment Company Act of 1940 (the "1940 Act")) of the Fund's outstanding
voting securities, provided that in either event the continuance is also
approved by a majority of the Board of Trustees who are not "interested persons"
(as defined in the 1940 Act) of any party to this Agreement, by vote cast in
person at a meeting called for the purpose of voting such approval;
(b) Either party hereto may terminate this Agreement by giving to the other
party a notice in writing specifying the date of such termination, which shall
be not less than 60 days after the date of receipt of such notice. In the event
such notice is given by the Fund, it shall be accompanied by a resolution of the
Board of Trustees of the Fund, certified by the Secretary of the Fund,
designating a successor transfer agent or transfer agents. Upon such termination
and at the expense of the Fund, FTIS will deliver to such successor a certified
list of shareholders of the Fund (with names and addresses), an historical
record of the account of each Shareholder and the status thereof, and all other
relevant books, records, correspondence, and other data established or
maintained by FTIS under this Agreement in a form reasonably acceptable to the
Fund, and will cooperate in the transfer of such duties and responsibilities,
including provisions for assistance from FTIS's personnel in the establishment
of books, records and other data by such successor or successors.
13. AMENDMENT. This Agreement may not be amended or modified in any manner
except by a written agreement executed by both parties.
14. SUBCONTRACTING. The Fund agrees that FTIS may, in its discretion,
subcontract for certain of the services described under this Agreement or the
Schedules hereto; provided that the appointment of any such agent shall not
relieve FTIS of its responsibilities hereunder.
15. MISCELLANEOUS.
(a) Any notice or other instrument authorized or required by this Agreement to
be given in writing to the Fund or FTIS shall be sufficiently given if addressed
to that party and received by it at its office set forth below or at such other
place as it may from time to time designate in writing.
To the Fund:
Templeton Global Opportunities Trust
700 Central Avenue
St. Petersburg, Florida 33701
To FTIS:
Franklin Templeton Investor Services, Inc.
700 Central Avenue
St. Petersburg, Florida 33701
(b) This Agreement shall extend to and shall be binding upon the parties hereto,
and their respective successors and assigns; provided, however, that this
Agreement shall not be assignable without the written consent of the other
party.
(c) This Agreement shall be construed in accordance with the laws of the State
of California.
(d) This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original; but such counterparts shall, together,
constitute only one instrument.
(e) The captions of this Agreement are included for convenience of reference
only and in no way define or delimit any of the provisions hereof or otherwise
affect their construction or effect.
(f) It is understood and expressly stipulated that neither the holders of Shares
of the Fund nor any Trustee, officer, agent or employee of the Fund shall be
personally liable hereunder, nor shall any resort be had to other private
property for the satisfaction of any claim or obligation hereunder, but the Fund
only shall be liable.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective corporate officers thereunder duly authorized as of the day
and year first above written.
TEMPLETON GLOBAL OPPORTUNITIES TRUST
BY:/s/JOHN R. KAY
John R. Kay
Vice President
FRANKLIN TEMPLETON INVESTOR SERVICES, INC.
BY:/s/ROBERT W. SMITH, III
Robert W. Smith
Senior Vice President
<PAGE>
A-1
Schedule A
FEES
Shareholder account maintenance $14.54, adjusted as
(per annum, prorated payable of February 1 of each
monthly) year to reflect changes in the
Department of Labor Consumer
Price Index.
Cash withdrawal program No charge to the Fund.
Retirement plans No charge to the Fund
Wire orders or express mailings $15.00 fee may be charged for each
of redemption proceeds wire order and each express
mailing.
February 1, 1997
<PAGE>
B-1
Schedule B
OUT-OF-POCKET EXPENSES
The Fund shall reimburse FTIS monthly for the following out-of-pocket
expenses:
o postage and mailing
o forms
o outgoing wire charges
o telephone
o Federal Reserve charges for check clearance
o if applicable, magnetic tape and freight
o retention of records
o microfilm/microfiche
o stationary
o insurance
o if applicable, terminals, transmitting lines and any expenses
incurred in connection with such terminals and lines
o all other miscellaneous expenses reasonably incurred by FTIS
The Fund agrees that postage and mailing expenses will be paid on the
day of or prior to mailing as agreed with FTIS. In addition, the Fund will
promptly reimburse FTIS for any other expenses incurred by FTIS as to which the
Fund and FTIS mutually agree that such expenses are not otherwise properly borne
by FTIS as part of its duties and obligations under the Agreement.
<PAGE>
Schedule C
DUTIES
AS TRANSFER AGENT FOR INVESTORS IN THE FUND, FTIS WILL:
o Record in its transfer record, countersign as transfer agent,
and deliver certificates signed manually or by facsimile, by
the President or a Vice-President and by the Secretary or the
Assistant Secretary of the Fund, in such names and for such
number of authorized but hitherto unissued Shares of the Fund
as to which FTIS shall receive instructions; and
o Transfer on its records from time to time, when presented to
it for that purpose, certificates of said Shares, whether now
outstanding or hereafter issued, when countersigned by a duly
authorized transfer agent, and upon the cancellation of the
old certificates, record and countersign new certificates for
a corresponding aggregate number of Shares and deliver said
new certificates.
AS SHAREHOLDER SERVICE AGENT FOR INVESTORS IN THE FUND, FTIS WILL:
o Receive from the Fund, from the Fund's Principal Underwriter
or from a Shareholder, on a form acceptable to FTIS,
information necessary to record sales and redemptions and to
generate sale and/or redemption confirmations;
o Mail sale and/or redemption confirmations using standard
forms;
o Accept and process cash payments from investors, clear checks
which represent payments for the purchase of Shares;
o Requisition Shares in accordance with instructions of the
Principal Underwriter of the Shares of the Fund;
o Produce periodic reports reflecting the accounts receivable
and the paid pending (free stock) items;
o Open, maintain and close Shareholder accounts;
o Establish registration of ownership of Shares in accordance
with generally accepted form;
o Maintain monthly records of (i) issued Shares and (ii) number
of Shareholders and their aggregate Shareholdings classified
according to their residence in each State of the United
States or foreign country;
o Accept and process telephone exchanges and redemptions for
Shares in accordance with the Fund's Telephone Exchange and
Redemption Privileges as described in the Fund's current
prospectus.
o Maintain and safeguard records for each Shareholder showing
name(s), address, number of any certificates issued, and
number of Shares registered in such name(s), together with
continuous proof of the outstanding Shares, and dealer
identification, and reflecting all current changes. On
request, provide information as to an investor's qualification
for Cumulative Quantity Discount. Provide all accounts with
confirmation statements reflecting the most recent
transactions, and also provide year-end historical
confirmation statements;
o Provide on request a duplicate set of records for file
maintenance in the Fund's office in St. Petersburg, Florida;
o Out of money received in payment for Share sales, pay to the
Fund's Custodian Account with the Custodian, the net asset
value per Share and pay to the Principal Underwriter its
commission;
o Redeem Shares and prepare and mail (or wire) liquidation
proceeds;
o Pass upon the adequacy of documents submitted by a Share-
holder or his legal representative to substantiate the
transfer of ownership of Shares from the registered owner
to transferees;
o From time to time, make transfers upon the books of the Fund
in accordance with properly executed transfer instructions
furnished to FTIS and make transfers of certificates for such
Shares as may be surrendered for transfer properly endorsed,
and countersign new certificates issued in lieu thereof;
o Upon receipt of proper documentation, place stop transfers,
obtain necessary insurance forms, and reissue replacement
certificates against lost, stolen or destroyed Share
certificates;
o Check surrendered certificates for stop transfer restrictions.
Although FTIS cannot insure the genuineness of certificates
surrendered for cancellation, it will employ all due
reasonable care in deciding the genuineness of such
certificates and the guarantor of the signature(s) thereon;
o Cancel surrendered certificates and record and countersign
new certificates;
o Certify outstanding Shares to auditors;
o In connection with any meeting of Shareholders, upon receiving
appropriate detailed instructions and written materials
prepared by the Fund and proxy proofs checked by the Fund,
print proxy cards; deliver to Shareholders all reports,
prospectuses, proxy cards and related proxy materials of
suitable design for enclosing; receive and tabulate executed
proxies; and furnish a list of Shareholders for the meeting;
o Answer routine correspondence and telephone inquiries about
individual accounts. Prepare monthly reports for
correspondence volume and correspondence data necessary for
the Fund's Semi-Annual Report on Form N-SAR;
o Prepare and mail dealer commission statements and checks;
o Maintain and furnish the Fund and its Shareholders with such
information as the Fund may reasonably request for the purpose
of compliance by the Fund with the applicable tax and
securities laws of applicable jurisdictions;
o Mail confirmations of transactions to investors and dealers
in a timely fashion;
o Pay or reinvest income dividends and/or capital gains
distributions to Shareholders of record, in accordance with
the Fund's and/or Shareholder's instructions, provided that:
(a) The Fund shall notify FTIS in writing
promptly upon declaration of any such
dividend and/or distribution, and in any
event at least forty-eight (48) hours before
the record date;
(b) Such notification shall include the
declaration date, the record date, the
payable date, the rate, and, if applicable,
the reinvestment date and the reinvestment
price to be used; and
(c) Prior to the payable date, the Fund shall
furnish FTIS with sufficient fully and
finally collected funds to make such
distribution;
o Prepare and file annual United States information returns of
dividends and capital gains distributions (Form 1099) and mail
payee copies to Shareholders; report and pay United States
income taxes withheld from distributions made to nonresidents
of the United States, and prepare and mail to Shareholders the
notice required by the U.S. Internal Revenue Code as to
realized capital gains distributed and/or retained, and their
proportionate share of any foreign taxes paid by the Fund;
o Prepare transfer journals;
o Set up wire order trades on file;
o Receive payment for trades and update the trade file;
o Produce delinquency and other trade file reports;
o Provide dealer commission statements and payments thereof for
the Principal Underwriter;
o Sort and print shareholder information by state, social code,
price break, etc.; and
o Mail promptly the Statement of Additional Information of the
Fund to each Shareholder who requests it, at no cost to the
Shareholder.
In connection with the Fund's Cash Withdrawal Program, FTIS will:
o Make payment of amounts withdrawn periodically by the
Shareholder pursuant to the Program by redeeming Shares, and
confirm such redemptions to the Shareholder; and
o Provide confirmations of all redemptions, reinvestment of
dividends and distributions, and any additional investments in
the Program, including a summary confirmation at the year-end.
In connection with Tax Deferred Retirement Plans involving the Fund,
FTIS will:
o Receive and process applications, accept contributions,
record Shares issued and dividends reinvested;
o Make distributions when properly requested; and
o Furnish reports to regulatory authorities as required.
FUND ADMINISTRATION AGREEMENT BETWEEN
TEMPLETON GLOBAL OPPORTUNITES TRUST
AND
FRANKLIN TEMPLETON SERVICES, INC.
AGREEMENT dated as of October 1, 1996, between Templeton Global
Opportunities Trust (the "Fund"), an investment company registered under
the Investment Company Act of 1940 ("1940 Act"), and Franklin Templeton
Services, Inc. ("FTS" or "Administrator").
In consideration of the mutua promises herein made, the parties hereby
agree as follows:
(1) The Administrator agrees, during the life of this Agreement, to provide
the following services to the Fund:
(a) providing office space, telephone, office equipment and supplies for
the Fund;
(b) providing trading desk facilities for the Fund, unless these facilities
are provided by the Fund's investment adviser;
(c) authorizing expenditures and approving bills for payment on behalf of
the Fund;
(d) supervising preparation of periodic reports to shareholders, notices of
dividends, capital gains distributions and tax credits; and attending to
routine correspondence and ther communications with individual
shareholders when asked to do so by the Fund's shareholder servicing agent
or other agents of the Fund;
(e) coordinating the daily pricing of the Fund's investment portfolio,
including collecting quotations from pricing services engaged by the Fund;
providing fund accounting services, including preparing and supervising
publication of daily net asset value quotations, periodic earnings reports
and other financial data; and coordinating trade settlements;
(f) monitoring relationships with organizations serving the Fund, including
custodians, transfer agents, public accounting firms, law firms, printers
and other third party service providers;
(g) supervising compliance by the Fund with recordkeeping requirements
under the federal securities laws, including the 1940 Act and the rules and
regulations thereunder, and under other applicable state and federal laws;
and maintaining books and records for the Fund (other than those maintained
by the custodian and transfer agent);
(h) preparing and filing of tax reports including the Fund's income tax
returns, and monitoring the Fund's compliance with subchapter M of the
Internal Revenue Code, as amended, and other applicable tax laws and
regulations;
(i) monitoring the Fund's compliance with: 1940 Act and other federal
securities laws, and rules and regulations thereunder; state and foreign
laws and regulations applicable to the operation of investment companies;
the Fund's investment objectives, policies and restrictions; and the Code
of Ethics and other policies adopted by the Fund's Board of Trustees
("Board") or by the Fund's investment adviser and applicable to the Fund;
(j) providing executive, clerical and secretarial personnel needed to carry
out the above responsibilities;
(k) preparing and filing regulatory reports, including without limitation
Forms N-1A and N-SAR, proxy statements, information statements and U.S. and
foreign ownership reports; and
(l) providing support services incidental to carrying out these duties.
Nothing in this Agreement shall obligate the Fund to pay any compensation to the
officers of the Fund. Nothing in this Agreement shall obligate FTS to pay for
the services of third parties, including attorneys, auditors, printers, pricing
services or others, engaged directly by the Fund to perform services on behalf
of the Fund.
(2) The Fund agrees, during the life of this Agreement, to pay to FTS
as compensation for the foregoing a monthly fee equal on an annual basis to
0.15% of the first $200 million of the average daily net assets of each Fund
during the month preceding each payment, reduced as follows: on such net assets
in excess of $200 million up to $700 million, a monthly fee equal on an annual
basis to 0.135%; on such net assets in excess of $700 million up to $1.2
billion, a monthly fee equal on an annual basis to 0.10%; and on such net assets
in excess of $1.2 billion, a monthly fee equal on an annual basis to 0.075%.
From time to time, FTS may waive all or a portion of its fees provided for
hereunder and such waiver shall be treated as a reduction in the purchase price
of its services. FTS shall be contractually bound hereunder by the terms of any
publicly announced waiver of its fee, or any limitation of each affected Fund's
expenses, as if such waiver or limitation were fully set forth herein.
(3) This Agreement shall remain in full force and effect through for
one year after its execution and thereafter from year to year to the extent
continuance is approved annually by the Board of the Fund.
(4) This Agreement may be terminated by the Fund at any time on sixty
(60) days' written notice without payment of penalty, provided that such
termination by the Fund shall be directed or approved by the vote of a majority
of the Board of the Fund in office at the time or by the vote of a majority of
the outstanding voting securities of the Fund (as defined by the 1940 Act); and
shall automatically and immediately terminate in the event of its assignment (as
defined by the 1940 Act).
(5) In the absence of willful misfeasance, bad faith or gross
negligence on the part of FTS, or of reckless disregard of its duties and
obligations hereunder, FTS shall not be subject to liability for any act or
omission in the course of, or connected with, rendering services hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their duly authorized officers.
FRANKLIN TEMPLETON SERVICES, INC.
By:/s/MARTIN L. FLANAGAN
-------------------------
Martin L. Flanagan
President
TEMPLETON GLOBAL OPPORTUNITES TRUST
By:/s/JOHN R. KAY
----------------------
John R. Kay
Vice President
MCGLADREY & PULLEN, LLP
Certified Public Accountants and Consultants
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use of our report dated January 31, 1997
on the financial statements of Templeton Global Opportunities Trust. referred to
therein, which appears in the 1996 Annual Report to Shareholders, and which is
incorporated herein by reference, in Post-Effective Amendment No. 11 to the
Registration Statement on Form N1-A, File No. 33-31267, as filed with the
Securities and Exchange Commission.
We also consent to the reference to our firm in the Prospectus
under the caption "Financial Highlights" and in the Statement of Additional
Information under the caption "Independent Accountants".
/s/McGladrey & Pullen, LLP
New York, New York
April 21, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
The schedule contains summary financial information extracted from the
Templeton Global Opportunities Trust December 31, 1996 annual report
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000856138
<NAME> TEMPLETON GLOBAL OPPORTUNITIES TRUST
<SERIES>
<NUMBER> 001
<NAME> CLASS 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 513770000
<INVESTMENTS-AT-VALUE> 646269716
<RECEIVABLES> 20859526
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 59382
<TOTAL-ASSETS> 667188624
<PAYABLE-FOR-SECURITIES> 19432008
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1657024
<TOTAL-LIABILITIES> 21089032
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 504992806
<SHARES-COMMON-STOCK> 43399931
<SHARES-COMMON-PRIOR> 40649446
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (2559436)
<ACCUMULATED-NET-GAINS> 11166506
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 132499716
<NET-ASSETS> 646099592
<DIVIDEND-INCOME> 15768527
<INTEREST-INCOME> 4704920
<OTHER-INCOME> 0
<EXPENSES-NET> 8396635
<NET-INVESTMENT-INCOME> 12076812
<REALIZED-GAINS-CURRENT> 29013863
<APPREC-INCREASE-CURRENT> 83861546
<NET-CHANGE-FROM-OPS> 124952221
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (14646844)
<DISTRIBUTIONS-OF-GAINS> (23782315)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7047189
<NUMBER-OF-SHARES-REDEEMED> (6755860)
<SHARES-REINVESTED> 2459156
<NET-CHANGE-IN-ASSETS> 133058578
<ACCUMULATED-NII-PRIOR> 696816
<ACCUMULATED-GAINS-PRIOR> 5802194
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4616385
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 8396635
<AVERAGE-NET-ASSETS> 569960185
<PER-SHARE-NAV-BEGIN> 12.57
<PER-SHARE-NII> .30
<PER-SHARE-GAIN-APPREC> 2.69
<PER-SHARE-DIVIDEND> (.36)
<PER-SHARE-DISTRIBUTIONS> (.58)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.62
<EXPENSE-RATIO> 1.45
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
The schedule contains summary financial information extracted from the
Templeton Global Opportunities Trust December 31, 1996 annual report and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000856138
<NAME> TEMPLETON GLOBAL OPPORTUNITIES TRUST
<SERIES>
<NUMBER> 002
<NAME> CLASS 2
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 513770000
<INVESTMENTS-AT-VALUE> 646269716
<RECEIVABLES> 20859526
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 59382
<TOTAL-ASSETS> 667188624
<PAYABLE-FOR-SECURITIES> 19432008
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1657024
<TOTAL-LIABILITIES> 21089032
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 504992806
<SHARES-COMMON-STOCK> 800226
<SHARES-COMMON-PRIOR> 180646
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (2559436)
<ACCUMULATED-NET-GAINS> 11166506
<OVERDISTRIBUTION-GAINS> 0
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<DIVIDEND-INCOME> 15768527
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<REALIZED-GAINS-CURRENT> 29013863
<APPREC-INCREASE-CURRENT> 83861546
<NET-CHANGE-FROM-OPS> 124952221
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (210256)
<DISTRIBUTIONS-OF-GAINS> (343200)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 610014
<NUMBER-OF-SHARES-REDEEMED> (25995)
<SHARES-REINVESTED> 35561
<NET-CHANGE-IN-ASSETS> 133058578
<ACCUMULATED-NII-PRIOR> 696816
<ACCUMULATED-GAINS-PRIOR> 5802194
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4616385
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 8396635
<AVERAGE-NET-ASSETS> 7087913
<PER-SHARE-NAV-BEGIN> 12.53
<PER-SHARE-NII> .24
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<PER-SHARE-DIVIDEND> (.30)
<PER-SHARE-DISTRIBUTIONS> (.58)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.52
<EXPENSE-RATIO> 2.20
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
