Registration No. 33-31267 and 811-5914
As filed with the Securities and Exchange Commission on March 1, 1999
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. 14 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 16 X
TEMPLETON GLOBAL OPPORTUNITIES TRUST
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(Exact Name of Registrant as Specified in Charter)
500 E BROWARD BOULEVARD, FORT LAUDERDALE, FLORIDA 33394
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(Address of Principal Executive Offices) (Zip Code)
(954) 527-7500
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(Registrant's Telephone Number, Including Area Code)
Deborah R. Gatzek, 777 Mariners Island Blvd., San Mateo, CA 94404
------------------------------------------------------------------
(Name and Address of Agent for Service of Process)
It is proposed that this filing will become effective (check appropriate box):
immediately upon filing pursuant to paragraph (b) of Rule 485
on (DATE) pursuant to paragraph (b) of Rule 485
60 days after filing pursuant to paragraph (a)(1) of Rule 485
X on MAY 1, 1999 pursuant to paragraph (a)(1) of Rule 485
75 days after filing pursuant to paragraph (a)(2) of Rule 485
on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
this post-effective amendment designates a new effective
date for a previously filed post-effective amendment
PAGE
PART A
CLASS A, B & C
PROSPECTUS
PAGE
PROSPECTUS
TEMPLETON GLOBAL OPPORTUNITIES TRUST
CLASS A, B & C
INVESTMENT STRATEGY Global Growth
MAY 1, 1999
[Insert Franklin Templeton Ben Head]
LIKE ALL MUTUAL FUND SHARES, THE SEC HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
PAGE
CONTENTS
THE FUND
[Begin callout]
INFORMATION ABOUT THE FUND YOU SHOULD KNOW BEFORE INVESTING
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[insert page #] Goal and Strategies
[insert page #] Main Risks
[insert page #] Performance
[insert page #] Fees and Expenses
[insert page #] Management
[insert page #] Distributions and Taxes
[insert page #] Financial Highlights
YOUR ACCOUNT
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INFORMATION ABOUT SALES CHARGES, ACCOUNT TRANSACTIONS AND SERVICES
[End callout]
[insert page #] Choosing a Share Class
[insert page #] Buying Shares
[insert page #] Investor Services
[insert page #] Selling Shares
[insert page #] Account Policies
[insert page #] Questions
FOR MORE INFORMATION
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WHERE TO LEARN MORE ABOUT THE FUND
[End callout]
Back Cover
PAGE
THE FUND
[Insert graphic of bullseye and arrows] GOAL AND STRATEGIES
GOAL The fund's investment goal is long-term capital growth.
PRINCIPAL INVESTMENTS Under normal market conditions, the fund will invest
primarily in the equity securities of companies located anywhere in the world,
including emerging markets. At least 65% of its total assets will be invested in
issuers located in at least three countries (including the U.S.).
[Begin callout]
The fund invests primarily in a globally diversified portfolio of common stocks.
[End callout]
Equity securities generally entitle the holder to participate in a company's
general operating results. These include common stocks and preferred stocks. The
fund also invests in American, European, and Global Depositary Receipts, which
are certificates typically issued by a bank or trust company that give their
holders the right to receive securities issued by a foreign or domestic company.
Depending upon current market conditions, the fund generally invests a portion
of its total assets in debt securities of companies and governments located
anywhere in the world. Debt securities represent an obligation of the issuer to
repay a loan of money to it, and generally provide for the payment of interest.
These include bonds, notes, and debentures.
PAGE
The Templeton investment philosophy is "bottom-up," value-oriented and
long-term. In choosing investments, the fund's manager will focus on the market
price of a company's securities relative to its evaluation of the company's
long-term earnings, asset value and cash flow potential. A company's historical
value measures, including price/earnings ratio, profit margins, and liquidation
value, will also be considered.
The fund may invest up to 25% of its total assets in debt securities that are
below investment grade. Investment grade securities are rated in one of the top
four ratings categories by independent rating organizations such as Standard &
Poor's Corporation (S&P) and Moody's Investors Service, Inc. (Moody's). The fund
may buy securities that are rated at least Caa by Moody's or CCC by S&P or
unrated securities the fund's manager determines are comparable. Generally lower
rated securities pay higher yields than more highly rated securities to
compensate investors for the higher risk.
To help protect its portfolio against adverse changes in foreign currency
exchange rates, the fund may buy and sell foreign currencies, enter into forward
foreign currency contracts, and buy and sell put and call options on foreign
currencies.
TEMPORARY INVESTMENTS The manager may take a temporary defensive position when
the securities trading markets or the economies of countries where the fund
invests are experiencing excessive volatility or a prolonged general decline, or
other adverse conditions exist. Under these circumstances, the fund may be
unable to pursue its investment goal, because it may not invest or may invest
substantially less in global stocks.
[Insert graphic of chart with line going up and down] MAIN RISKS
[Begin callout]
Because the stocks the fund holds fluctuate in price, the value of your
investment in the fund will go up and down. This means you could lose money over
short or even extended periods.
[End callout]
PAGE
STOCKS While stocks have historically outperformed other asset classes over the
long term, they tend to go up and down more dramatically over the shorter term.
These price movements may result from factors affecting individual companies,
industries or the securities market as a whole.
FOREIGN SECURITIES Securities of companies and governments located outside the
U.S. may offer significant opportunities for gain, but they also involve
additional risks that can increase the potential for losses in the fund.
Investments in Depositary Receipts also involve some or all of the following
risks.
COUNTRY. General securities market movements in any country where the fund has
investments are likely to affect the value of the securities the fund owns that
trade in that country. These movements will affect the fund's share price and
fund performance.
The political, economic and social structures of some countries the fund invests
in may be less stable and more volatile than those in the U.S. The risks of
investing in these countries include the possibility of the imposition of
exchange controls, currency devaluations, foreign ownership limitations,
expropriation, restrictions on removal of currency or other assets,
nationalization of assets, punitive taxes and certain custody and settlement
risks.
The fund's investments in developing or emerging markets are subject to all of
the risks of foreign investing generally, and have additional heightened risks
due to a lack of legal, business and social frameworks to support securities
markets. Foreign securities markets, including emerging markets, may have
substantially lower trading volumes than U.S. markets, resulting in less
liquidity and more volatility than experienced in the U.S. Short-term volatility
in these markets can be disconcerting, and declines of 40% to 50% are not
unusual.
COMPANY. Foreign companies are not subject to the same disclosure, accounting,
auditing and financial reporting standards and practices as U.S. companies, and
their securities may not be as liquid as securities of similar U.S. companies.
Foreign stock exchanges, trading systems, brokers and companies generally have
less government supervision and regulation than in the U.S. The fund may have
greater difficulty voting proxies, exercising shareholder rights, pursuing legal
remedies, and obtaining judgments with respect to foreign investments in foreign
courts than with respect to U.S. companies in U.S. courts.
PAGE
CURRENCY Many of the fund's investments are denominated in foreign currencies.
Changes in foreign currency exchange rates will affect the value of what the
fund owns and the fund's share price. Generally, when the U.S. dollar rises in
value against a foreign currency, an investment in that country loses value
because that currency is worth fewer U.S. dollars. Devaluation of a currency by
a country's government or banking authority also will have a significant impact
on the value of any securities denominated in that currency. Currency markets
generally are not as regulated as securities markets.
EURO. On January 1, 1999, the European Monetary Union (EMU) introduced a new
single currency, the euro, which will replace the national currency for
participating member countries. If the fund holds investments in countries with
currencies replaced by the euro, the investment process, including trading,
foreign exchange, payments, settlements, cash accounts, custody and accounting
will be impacted.
Because this change to a single currency is new and untested, the establishment
of the euro may result in market volatility. For the same reason, it is not
possible to predict the impact of the euro on the business or financial
condition of European issuers which the fund may hold in its portfolio, and
their impact on fund performance. To the extent the fund holds non-U.S. dollar
(euro or other) denominated securities, it will still be exposed to currency
risk due to fluctuations in those currencies versus the U.S. dollar.
LIQUIDITY The fund may have difficulty disposing of some securities because
there may be a thin trading market for a particular security at any given time.
Reduced liquidity may have an adverse impact on market price and the fund's
ability to dispose of particular securities when necessary to meet the fund's
liquidity needs or in response to a specific economic event, such as a
deterioration in the creditworthiness of an issuer. Reduced liquidity in the
secondary market for certain securities may also make it more difficult for the
fund to obtain market quotations based on actual trades for purposes of valuing
the fund's portfolio.
PAGE
INTEREST RATE When interest rates rise, fixed-income securities prices fall. The
opposite is also true: fixed-income securities prices rise when interest rates
fall. Generally, interest rates rise during times of inflation or a growing
economy, and will fall during an economic slowdown or recession. Securities with
longer maturities usually are more sensitive to interest rate changes than
securities with shorter maturities.
[Begin callout]
Changes in global interest rates affect the prices of the fund's debt
securities. If rates rise, the value of all the fund's debt securities will fall
and so too will the fund's share price and fund performance. This means you
could lose money.
[End callout]
INCOME Since the fund can only distribute what it earns, the fund's
distributions to its shareholders may decline when interest rates fall.
CREDIT There is the possibility that an issuer will be unable to make interest
payments or repay principal. Changes in an issuer's financial strength or in a
security's credit rating may affect its value and, thus, impact the value of
fund shares and fund performance. Securities rated below investment grade,
sometimes called "junk bonds," generally have more risk than higher-rated
securities.
DERIVATIVE SECURITIES Derivative investments are those whose values are
dependent upon the performance of one or more other securities or investments or
indices. Option transactions, foreign currency exchange transactions and futures
contracts are considered derivative investments. To the extent the fund enters
into these transactions, their success will depend upon the manager's ability to
predict pertinent market movements.
YEAR 2000 When evaluating current and potential portfolio positions, Year 2000
is one of the factors the fund's manager considers.
PAGE
The manager will rely upon public filings and other statements made by companies
about their Year 2000 readiness. Issuers in countries outside the U.S.,
particularly in emerging markets, may not be required to make the same level of
disclosure about Year 2000 readiness as is required in the U.S. The manager, of
course, cannot audit each company and its major suppliers to verify their Year
2000 readiness.
If a company in which the fund is invested is adversely affected by Year 2000
problems, it is likely that the price of its securities will also be adversely
affected. A decrease in the value of one or more of the fund's portfolio
holdings will have a similar impact on the fund's performance. Please see page
[#] for more information.
More detailed information about the fund, its policies (including temporary
investments), and risks can be found in the fund's Statement of Additional
Information (SAI).
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Mutual fund shares 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. Mutual fund shares involve investment risks, including the possible
loss of principal.
[End callout]
PAGE
[Insert graphic of a bull and a bear] PERFORMANCE
This bar chart and table show the volatility of the fund's returns, which is one
indicator of the risks of investing in the fund. The bar chart shows changes in
the fund's returns from year to year over the past 8 calendar years. The table
shows how the fund's average annual total returns compare to those of a
broad-based securities market index. Of course, past performance cannot predict
or guarantee future results.
CLASS A ANNUAL TOTAL RETURNS1
[Insert bar graph]
33.32% 6.85% 38.13% -4.01% 12.77% 24.19% 14.53% -0.61%
91 92 93 94 95 96 97 98
YEAR
[Begin callout]
BEST QUARTER:
Q1 '91 14.85%
WORST QUARTER:
Q3 '98 -15.66%
[End callout]
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended December 31, 1998
SINCE
INCEPTION
1 YEAR 5 YEARS (1/19/90)
- --------------------------------------------------------------------------
Templeton Global Opportunities -6.29% 7.60% 11.29%
Fund - Class A2
MSCI AC World Free Index3 21.97% 14.78% 10.56%
SINCE
INCEPTION
1 YEAR (5/1/95)
- --------------------------------------------------------------------------
Templeton Global Opportunities -3.21% 11.13%
Fund - Class C2
MSCI AC World Free Index3 21.97% 16.80%
1. Figures do not reflect sales charges. If they did, returns would be lower. As
of March 31, 1999, the fund's year-to-date return was []%.
2. Figures reflect sales charges. All fund performance assumes reinvestment of
dividends and capital gains. January 1, 1993, Class A implemented a Rule 12b-1
plan, which affects subsequent performance.
3. Source: Standard & Poor's(R) Micropal. The MSCI AC World Free Index measures
the performance of securities located in 48 countries including emerging markets
in Latin America, Asia, and Eastern Europe. One cannot invest directly in an
index, nor is an index representative of the fund's portfolio.
PAGE
[Insert graphic of percentage sign] FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<CAPTION>
CLASS A/1/ CLASS B/2/ CLASS C/1/
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum sales charge (load) as a
percentage of offering price 5.75% 4.00% 1.99%
Load imposed on purchases 5.75% None 1.00%
Maximum deferred sales charge (load) None/3/ 4.00% 0.99%/4/
Exchange fee/5/ $5.00 $5.00 $5.00
</TABLE>
Please see "Choosing a Share Class" on page [#] for an explanation of how and
when these sales charges apply.
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS A/1/ CLASS B/2/ CLASS C/1/
- ----------------------------------------------------------------------------- --------------
<S> <C> <C> <C>
Management fees 0.80% 0.80% 0.80%
Distribution and service
(12b-1) fees/6/ 0.25% 1.00% 1.00%
Other expenses 0.36% 0.36% 0.36%
-----------------------------------------------
Total annual fund operating expenses 1.41% 2.16% 2.16%
===============================================
</TABLE>
1. Before January 1, 1999, Class A shares were designated Class I and Class C
shares were designated Class II.
2. The fund began offering Class B shares on January 1, 1999. Annual fund
operating expenses are based on the expenses for Class A and C for the fiscal
year ended December 31, 1998. The distribution and service (12b-1) fees are
based on the maximum fees allowed under Class B's Rule 12b-1 plan.
3. Except for investments of $1 million or more (see page [#])and purchases by
certain retirement plans without an initial sales charge.
4. This is equivalent to a charge of 1% based on net asset value.
5. This fee is only for market timers (see page [#]).
6. Because of the distribution and service (12b-1) fees, over the long term you
may indirectly pay more than the equivalent of the maximum permitted initial
sales charge.
PAGE
EXAMPLE
This example can help you compare the cost of investing in the fund with the
cost of investing in other mutual funds.
The example assumes you invest $10,000 for the periods shown and then sell all
of your shares at the end of those periods. The example also assumes your
investment has a 5% return each year and the fund's operating expenses remain
the same. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A $710/1/ $996 $1,302 $2,169
CLASS B
Assuming you sold your shares
at the end of the period $619 $976 $1,359 $1,937/2/
Assuming you stayed in the fund $219 $676 $1,159 $1,937/2/
CLASS C $415/3/ $769 $1,248 $2,568
</TABLE>
1. Assumes a contingent deferred sales charge (CDSC) will not apply.
2. Assumes conversion of Class B shares to Class A shares after eight years,
lowering your annual expenses from that time on.
3. For the same Class C investment, your costs would be $317 if you did not sell
your shares at the end of the first year. Your costs for the remaining periods
would be the same.
PAGE
[Insert graphic of briefcase] MANAGEMENT
Templeton Investment Counsel (Investment Counsel), 500 East Broward Blvd., is
the fund's investment manager. Together, Investment Counsel and its affiliates
manage over $220 billion in assets.
The fund's lead portfolio manager is:
HOWARD J. LEONARD CFA, EXECUTIVE VICE PRESIDENT OF INVESTMENT COUNSEL
Mr. Leonard has been a manager of the fund since 1993. He joined the Franklin
Templeton Group in 1989.
The following individuals have secondary portfolio management responsibilities:
GARY P. MOTYL CFA, DIRECTOR AND EXECUTIVE VICE PRESIDENT OF INVESTMENT COUNSEL
Mr. Motyl has been a manager of the fund since 1995. He joined the Franklin
Templeton Group in 1981.
MARK R. BEVERIDGE CFA, SENIOR VICE PRESIDENT OF INVESTMENT COUNSEL
Mr. Beveridge has been a manager of the fund since 1993. He joined the Franklin
Templeton Group in 1985.
The fund pays the manager a fee for managing the fund's assets and making its
investment decisions. For the fiscal year ended December 31, 1998, the fund paid
0.80% of its average daily net assets to the manager.
YEAR 2000 PROBLEM The fund's business operations depend on a worldwide network
of computer systems that contain date fields, including securities trading
systems, securities transfer agent operations and stock market links. Many of
the systems currently use a two digit date field to represent the date, and
unless these systems are changed or modified, they may not be able to
distinguish the Year 1900 from the Year 2000 (commonly referred to as the Year
2000 problem). In addition, the fact that the Year 2000 is a leap year may
create difficulties for some systems.
When the Year 2000 arrives, the fund's operations could be adversely affected if
the computer systems used by the manager, its service providers and other third
parties it does business with are not Year 2000 ready. For example, the fund's
portfolio and operational areas could be impacted, including securities trade
processing, interest and dividend payments, securities pricing, shareholder
account services, reporting, custody functions and others. The fund could
experience difficulties in effecting transactions if any of its foreign
subcustodians, or if foreign broker-dealers or foreign markets are not ready for
Year 2000.
The fund's manager and its affiliated service providers are making a concerted
effort to take steps they believe are reasonably designed to address their Year
2000 problems. Of course, the fund's ability to reduce the effects of the Year
2000 problem is also very much dependent upon the efforts of third parties over
which the fund and its manager may have no control.
PAGE
[Insert graphic of dollar signs and stacks of coins] DISTRIBUTIONS AND TAXES
INCOME AND CAPITAL GAINS DISTRIBUTIONS The fund intends to pay a dividend at
least annually representing substantially all of its net investment income and
any net realized capital gains. The amount of this distribution will vary and
there is no guarantee the fund will pay dividends.
To receive a distribution, you must be a shareholder on the record date. The
record date for the fund's distributions will vary. Please keep in mind that if
you invest in the fund shortly before the record date of a distribution, any
distribution will lower the value of the fund's shares by the amount of the
distribution and you will receive some of your investment back in the form of a
taxable distribution. If you would like information on upcoming record dates for
the fund's distributions, please call 1-800/DIAL BEN(R).
TAX CONSIDERATIONS In general, fund distributions are taxable to you as either
ordinary income or capital gains. This is true whether you reinvest your
distributions in additional shares of the fund or receive them in cash. Any
capital gains the fund distributes are taxable to you as long-term capital gains
no matter how long you have owned your shares.
[Begin callout]
BACKUP WITHHOLDING
By law, the fund must withhold 31% of your taxable distributions and proceeds if
you do not provide your correct taxpayer identification number (TIN) or certify
that your TIN is correct, or if the IRS instructs the fund to do so.
[End callout]
Every January, you will receive a statement that shows the tax status of
distributions you received for the previous year. Distributions declared in
December but paid in January are taxable as if they were paid in December.
When you sell your shares of the fund, you may have a capital gain or loss. For
tax purposes, an exchange of your fund shares for shares of a different Franklin
Templeton fund is the same as a sale. The individual tax rate on any gain from
the sale or exchange of your shares depends on how long you have held your
shares.
Fund distributions and gains from the sale or exchange of your shares will
generally be subject to state and local income tax. Any foreign taxes paid by
the fund on its investments may be passed through to you as a foreign tax
credit. Non-U.S. investors may be subject to U.S. withholding and estate tax.
You should consult your tax advisor about the federal, state, local or foreign
tax consequences of your investment in the fund.
PAGE
[Insert graphic of a dollar bill] FINANCIAL HIGHLIGHTS
This table presents the fund's financial performance for the past five years.
This information has been audited by McGladrey & Pullen, LLP.
<TABLE>
<CAPTION>
CLASS A YEAR ENDED DECEMBER 31,
- --------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ---------------------------------------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA ($)
Net asset value, 15.32 14.62 12.57 11.84 14.46
beginning of year
------------- ------------- ------------- ------------- -------------
Net investment income .39 .38 .30 .16 .09
Net realized and unrealized (.48) 1.70 2.69 1.33 (.63)
gains (losses)
------------- ------------- ------------- ------------- -------------
Total from investment operations (.09) 2.08 2.99 1.49 (.54)
------------- ------------- ------------- ------------- -------------
Distributions from net (.32) (.37) (.30) (.16) (.09)
investment income
In excess of net investment -- -- (.06) -- --
income
Distributions from net (.28) (1.01) (.58) (.60) (1.99)
realized gains
------------- ------------- ------------- ------------- -------------
Total distributions (.60) (1.38) (.94) (.76) (2.08)
------------- ------------- ------------- ------------- -------------
Net asset value, end of year 14.63 15.32 14.62 12.57 11.84
------------- ------------- ------------- ------------- -------------
Total return (%)/1/ (.61) 14.53 24.19 12.87 (4.09)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year 656,108 786,219 634,478 510,777 476,822
($ x 1,000)
Ratios to average net
Assets: (%)
Expenses 1.41 1.37 1.45 1.52 1.53
Net investment income 2.38 2.30 2.10 1.19 .71
Portfolio turnover rate (%) 3.09 26.21 18.54 15.54 37.31
<CAPTION>
CLASS C
- ---------------------------------------------- ------------- ------------- ------------- -------------
1998 1997 1996 1995/2/
- ---------------------------------------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
PER SHARE DATA ($)
Net asset value, 15.17 14.52 12.53 12.26
Beginning of year
------------- ------------- ------------- -------------
Net investment income (loss) .24 .18 .24 .02
Net realized and unrealized (.43) 1.77 2.63 .88
gains (losses)
------------- ------------- ------------- -------------
Total from investment operations (.19) 1.95 2.87 .90
------------- ------------- ------------- -------------
Distributions from net (.20) (.29) (.24) (.12)
investment income
In excess of net investment -- -- (.06) --
income
Distributions from net (.28) (1.01) (.58) (.51)
realized gains
------------- ------------- ------------- -------------
Total distributions (.48) (1.30) (.88) (.63)
------------- ------------- ------------- -------------
Net asset value, end of year 14.50 15.17 14.52 12.53
------------- ------------- ------------- -------------
Total return (%)/1/ (1.29) 13.74 23.28 7.43
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year 33,423 38,627 11,622 2,264
($ x 1,000)
Ratios to average net
Assets: (%)
Expenses 2.16 2.12 2.20 2.223
Net investment income(loss) 1.62 .93 1.12 (.01)/3/
Portfolio turnover rate (%) 3.09 26.21 18.54 15.54
</TABLE>
1. Total return does not reflect sales commissions or the contingent sales
charge and is not annualized.
2. For the period May 1, 1995 (effective date) to December 31, 1995.
3. Annualized.
PAGE
YOUR ACCOUNT
[Insert graphic of pencil marking an "X"] CHOOSING A SHARE CLASS
Each class has its own sales charge and expense structure, allowing you to
choose the class that best meets your situation. Your investment representative
can help you decide.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
/bullet/ Initial sales charge of /bullet/ No initial sales charge /bullet/ Initial sales charge
5.75% or less of 1%
/bullet/ Deferred sales charge of 1% /bullet/ Deferred sales charge of 4% /bullet/ Deferred sales charge
charge of 1% on purchases on less on shares you sell of 1% on shares you
of $1 million or more sold within six years sell within 18 months
within 12 months
/bullet/ Lower annual expenses than /bullet/ Higher annual expenses than /bullet/ Higher annual expenses than
Class B or C due to lower Class A (same as Class C) Class A (same as Class B)
distribution fees due to higher distribution due to higher distribution
fees. Automatic conversion fees. No conversion to Class
to Class A shares after A shares, so annual expenses
eight years, reducing future do not decrease.
annual expenses.
</TABLE>
BEFORE JANUARY 1, 1999, CLASS A SHARES WERE DESIGNATED CLASS I AND CLASS C
SHARES WERE DESIGNATED CLASS II. THE FUND BEGAN OFFERING CLASS B SHARES ON
JANUARY 1, 1999.
PAGE
SALES CHARGES - CLASS A
<TABLE>
<CAPTION>
THE SALES CHARGE
MAKES UP THIS % OF WHICH EQUALS THIS % OF
WHEN YOU INVEST THIS AMOUNT THE OFFERING PRICE YOUR NET INVESTMENT
- ------------------------------------------------ ------------------------------ -----------
<S> <C> <C>
Under $50,000 5.75 6.10
$50,000 but under $100,000 4.50 4.71
$100,000 but under $250,000 3.50 3.63
$250,000 but under $500,000 2.50 2.56
$500,000 but under $1 million 2.00 2.04
</TABLE>
INVESTMENTS OF $1 MILLION OR MORE If you invest $1 million or more, either as a
lump sum or through our cumulative quantity discount or letter of intent
programs (see page [#]), you can buy Class A shares without an initial sales
charge. However, there is a 1% contingent deferred sales charge (CDSC) on any
shares you sell within 12 months of purchase. The way we calculate the CDSC is
the same for each class (please see page [#]).
DISTRIBUTION AND SERVICE (12B-1) FEES Class A has a distribution plan, sometimes
known as a Rule 12b-1 plan, that allows the fund to pay distribution fees of up
to 0.25% per year to those who sell and distribute Class A shares and provide
other services to shareholders. Because these fees are paid out of Class A's
assets on an on-going basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
SALES CHARGES - CLASS B
IF YOU SELL YOUR SHARES
WITHIN THIS MANY YEARS AFTER THIS % IS DEDUCTED FROM YOUR
BUYING THEM PROCEEDS AS A CDSC
- -----------------------------------------------------------------------
1 Year 4
2 Years 4
3 Years 3
4 Years 3
5 Years 2
6 Years 1
7 Years 0
With Class B shares, there is no initial sales charge. However, there is a CDSC
if you sell your shares within six years, as described in the table above. The
way we calculate the CDSC is the same for each class (please see page [#]).
After 8 years, your Class B shares automatically convert to Class A shares,
lowering your annual expenses from that time on.
MAXIMUM PURCHASE AMOUNT The maximum amount you may invest in Class B shares at
one time is $249,999. We invest any investment of $250,000 or more in Class A
shares, since a reduced initial sales charge is available and Class A's annual
expenses are lower.
RETIREMENT PLANS Class B shares are not available to all retirement plans. Class
B shares are only available to IRAs (of any type), Franklin Templeton Trust
Company 403(b) plans, and Franklin Templeton Trust Company qualified plans with
participant or earmarked accounts.
DISTRIBUTION AND SERVICE (12B-1) FEES Class B has a distribution plan, sometimes
known as a Rule 12b-1 plan, that allows the fund to pay distribution and other
fees of up to 1% per year for the sale of Class B shares and for services
provided to shareholders. Because these fees are paid out of Class B's assets on
an on-going basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
PAGE
SALES CHARGES - CLASS C
<TABLE>
<CAPTION>
THE SALES CHARGE
MAKES UP THIS % OF WHICH EQUALS THIS % OF
WHEN YOU INVEST THIS AMOUNT THE OFFERING PRICE YOUR NET INVESTMENT
- -----------------------------------------------------------------------------
<S> <C> <C>
Under $1 million 1.00 1.01
</TABLE>
WE INVEST ANY INVESTMENT OF $1 MILLION OR MORE IN CLASS A SHARES, SINCE THERE IS
NO INITIAL SALES CHARGE AND CLASS A'S ANNUAL EXPENSES ARE LOWER.
CDSC There is a 1% contingent deferred sales charge (CDSC) on any Class C shares
you sell within 18 months of purchase. The way we calculate the CDSC is the same
for each class (please see below).
PAGE
DISTRIBUTION AND SERVICE (12B-1) FEES Class C has a distribution plan, sometimes
known as a Rule 12b-1 plan, that allows the fund to pay distribution and other
fees of up to 1% per year for the sale of Class C shares and for services
provided to shareholders. Because these fees are paid out of Class C's assets on
an on-going basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
CONTINGENT DEFERRED SALES CHARGE (CDSC) - CLASS A, B & C
The CDSC for each class is based on the current value of the shares being sold
or their net asset value when purchased, whichever is less. There is no CDSC on
shares you acquire by reinvesting your dividends.
[Begin callout]
The HOLDING PERIOD FOR THE CDSC begins on the day you buy your shares. Your
shares will age one month on that same date the next month and each following
month.
For example, if you buy shares on the 18th of the month, they will age one month
on the 18th day of the next month and each following month.
[End callout]
To keep your CDSC as low as possible, each time you place a request to sell
shares we will first sell any shares in your account that are not subject to a
CDSC. If there are not enough of these to meet your request, we will sell the
shares in the order they were purchased. We will use this same method if you
exchange your shares into another Franklin Templeton Fund (please see page [#]
for exchange information).
SALES CHARGE REDUCTIONS AND WAIVERS
If you qualify for any of the sales charge reductions or waivers below, please
let us know at the time you make your investment to help ensure you receive the
lower sales charge.
QUANTITY DISCOUNTS We offer several ways for you to combine your purchases in
the Franklin Templeton Funds to take advantage of the lower sales charges for
large purchases of Class A shares.
[Begin callout]
The FRANKLIN TEMPLETON FUNDS include all of the Franklin Templeton U.S.
registered mutual funds, except Franklin Valuemark Funds, Templeton Capital
Accumulator Fund, Inc., and Templeton Variable Products Series Fund.
[End callout]
/bullet/ CUMULATIVE QUANTITY DISCOUNT - lets you combine all of your shares in
the Franklin Templeton Funds for purposes of calculating the sales
charge. You may also combine the shares of your spouse, and your
children or grandchildren, if they are under the age of 21. Certain
company and retirement plan accounts may also be included.
/BUULET/ LETTER OF INTENT (LOI) - expresses your intent to buy a stated dollar
amount of shares over a 13-month period and lets you receive the same
sales charge as if all shares had been purchased at one time. We will
reserve a portion of your shares to cover any additional sales charge
that may apply if you do not buy the amount stated in your LOI.
TO SIGN UP FOR THESE PROGRAMS, COMPLETE THE APPROPRIATE SECTION OF YOUR ACCOUNT
APPLICATION.
REINSTATEMENT PRIVILEGE If you sell shares of a Franklin Templeton Fund, you may
reinvest some or all of the proceeds within 365 days without an initial sales
charge. The proceeds must be reinvested within the same share class, except
proceeds from the sale of Class B shares will be reinvested in Class A shares.
PAGE
If you paid a CDSC when you sold your Class A or C shares, we will credit your
account with the amount of the CDSC paid but a new CDSC will apply. For Class B
shares reinvested in Class A, a new CDSC will not apply, although your account
will not be credited with the amount of any CDSC paid when you sold your Class B
shares.
Proceeds immediately placed in a Franklin Bank Certificate of Deposit (CD) also
may be reinvested without an initial sales charge if you reinvest them within
365 days from the date the CD matures, including any rollover.
This privilege does not apply to shares you buy and sell under our exchange
program. Shares purchased with the proceeds from a money fund may be subject to
a sales charge.
WAIVERS FOR INVESTMENTS FROM CERTAIN PAYMENTS Class A shares may be purchased
without an initial sales charge or CDSC by investors who reinvest within 365
days:
/bullet/ certain payments received under an annuity contract that offers a
Franklin Templeton insurance fund option
bullet/ distributions from an existing retirement plan invested in the
Franklin Templeton Funds
/bullet/ dividend or capital gain distributions from a real estate investment
trust sponsored or advised by Franklin Properties, Inc.
/bullet/ redemption proceeds from a repurchase of Franklin Floating Rate Trust
shares held continuously for at least 12 months
/bullet/ redemption proceeds from Class A of any Templeton Global Strategy
Fund, if you are a qualified investor. If you paid a CDSC when you
sold your shares, we will credit your account with the amount of the
CDSC paid but a new CDSC will apply.
WAIVERS FOR CERTAIN INVESTORS Class A shares also may be purchased without an
initial sales charge or CDSC by various individuals and institutions, including:
PAGE
/bullet/ certain trust companies and bank trust departments investing $1
million or more in assets over which they have full or shared
investment discretion
/bullet/ government entities that are prohibited from paying mutual fund sales
charges
/bullet/ certain unit investment trusts and their holders reinvesting trust
distributions
/bullet/ group annuity separate accounts offered to retirement plans
/bullet/ employees and other associated persons or entities of Franklin
Templeton or of certain dealers
/bullet/ any investor who is currently a Class Z shareholder of Franklin Mutual
Series Fund Inc. (Mutual Series), or who is a former Mutual Series
Class Z shareholder who had an account in any Mutual Series fund on
October 31, 1996, or who sold his or her shares of Mutual Series Class
Z within the past 365 days
/bullet/ Chilean retirement plans that meet the requirements for retirement
plans described below
IF YOU THINK YOU MAY BE ELIGIBLE FOR A SALES CHARGE WAIVER,
CALL YOUR INVESTMENT REPRESENTATIVE OR CALL SHAREHOLDER SERVICES
AT 1-800/632-2301 FOR MORE INFORMATION.
PAGE
CDSC WAIVERS The CDSC for each class generally will be waived:
/bullet/ to pay account fees
/bullet/ to make payments through systematic withdrawal plans, up to 1%
monthly, 3% quarterly, 6% semiannually or 12% annually depending on
the frequency of your plan
/bullet/ for redemptions of Class A shares by investors who purchased $1
million or more without an initial sales charge if Franklin Templeton
Distributors, Inc. did not make any payment to the securities dealer
of record in connection with the purchase
/bullet/ for redemptions by Franklin Templeton Trust Company employee benefit
plans or employee benefit plans serviced by ValuSelect(R) (not
applicable to Class B)
/bullet/ for IRA distributions due to death or disability or upon periodic
distributions based on life expectancy (for Class B, this applies to
all retirement plan accounts, not only IRAs)
/bullet/ to return excess contributions (and earnings, if applicable) from
retirement plan accounts
/bullet/ for redemptions following the death of the shareholder or beneficial
owner
/bullet/ for participant initiated distributions from employee benefit plans
or participant initiated exchanges among investment choices in
employee benefit plans (not applicable to Class B)
PAGE
RETIREMENT PLANS Certain retirement plans may buy Class A shares without an
initial sales charge. To qualify, the plan must be sponsored by an employer:
/bullet/ with at least 100 employees, or
/bullet/ with retirement plan assets of $1 million or more, or
/bullet/ that agrees to invest at least $500,000 in the Franklin Templeton
Funds over a 13-month period
A CDSC may apply. Retirement plans other than SIMPLEs, SEPs, or plans that
qualify under section 401 of the Internal Revenue Code also must qualify under
our group investment program to buy Class A shares without an initial sales
charge. Any retirement plan that does not qualify to buy Class A shares without
an initial sales charge and that was a shareholder of the fund on or before
February 1, 1995, may buy Class A shares with a maximum initial sales charge of
4% (as a percentage of the offering price).
FOR MORE INFORMATION, CALL YOUR INVESTMENT REPRESENTATIVE OR
RETIREMENT PLAN SERVICES AT 1-800/527-2020.
GROUP INVESTMENT PROGRAM Allows established groups of 11 or more investors to
invest as a group. For sales charge purposes, the group's investments are added
together. There are certain other requirements and the group must have a purpose
other than buying fund shares at a discount.
page
[Insert graphic of a paper with lines
and someone writing] BUYING SHARES
MINIMUM INVESTMENTS
- -------------------------------------------------------------------------------
INITIAL ADDITIONAL
- -------------------------------------------------------------------------------
Regular accounts $1,000 $50
- -------------------------------------------------------------------------------
UGMA/UTMA accounts $100 $50
- -------------------------------------------------------------------------------
Retirement accounts no minimum no minimum
(other than IRAs, IRA rollovers, Education
IRAs or Roth IRAs)
- -------------------------------------------------------------------------------
IRAs, IRA rollovers, Education IRAs or
Roth IRAs $250 $50
- -------------------------------------------------------------------------------
Broker-dealer sponsored wrap account
programs $250 $50
- -------------------------------------------------------------------------------
Full-time employees, officers, trustees
and directors of Franklin Templeton
entities, and their immediate family
members $100 $50
- -------------------------------------------------------------------------------
PAGE
ACCOUNT APPLICATION If you are opening a new account, please complete and sign
the enclosed account application. Make sure you indicate the share class you
have chosen. If you do not indicate a class, we will invest your purchase in
Class A shares. To save time, you can sign up now for services you may want on
your account by completing the appropriate sections of the application (see the
next page).
BUYING SHARES
<TABLE>
<CAPTION>
- ------------------------------ ------------------------------------------- -------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ------------------------------ ------------------------------------------- -------------------------------------------
<S> <C> <C>
[Insert graphic of hands
shaking]
Contact your investment representative Contact your investment representative
THROUGH YOUR INVESTMENT
REPRESENTATIVE
- ------------------------------ ------------------------------------------- -------------------------------------------
Make your check payable to Templeton Make your check payable to Templeton
[Insert graphic of envelope] Global Opportunities Trust. Global Opportunities Trust. Include your
account number on the check.
BY MAIL Mail the check and your signed
application to Investor Services. Fill out the deposit slip from your
account statement. If you do not have
a slip, include a note with your name,
the fund name, and your account number.
Mail the check and deposit slip or
note to nvestor Services.
- ------------------------------ ------------------------------------------- -------------------------------------------
[Insert graphic of three Call to receive a wire control number Call to receive a wire control number and
lightning bolts] and wire instructions. wire instructions.
Wire the funds and mail your signed To make a same day wire investment,
application to Investor Services. Please please call us by 1:00 p.m. pacific time
BY WIRE include the wire control number or your and make sure your wire arrives by 3:00
new account number on the application. p.m.
1-800/632-2301
(or 1-650/312-2000 collect) To make a same day wire investment,
please call us by 1:00 p.m. pacific time
and make sure your wire arrives by 3:00
p.m.
- ------------------------------ ------------------------------------------- -------------------------------------------
[Insert graphic of two Call Shareholder Services at the number Call Shareholder Services at the number
arrows pointing in below or send signed written below or our automated TeleFACTS system
opposite directions] instructions. The TeleFACTS system or send signed written instructions.
cannot be used to open a new account.
BY EXCHANGE
(Please see page # for information on (Please see page # for information on
exchanges.) exchanges.)
TeleFACTS(R)
1-800/247-1753
(around-the-clock
access)
- ------------------------------ ------------------------------------------- -------------------------------------------
</TABLE>
FRANKLIN TEMPLETON INVESTOR SERVICES 100 FOUNTAIN PARKWAY, P.O. BOX 33030,
ST. PETERSBURG, FL 33733-8030
CALL TOLL-FREE: 1-800/632-2301
(MONDAY THROUGH FRIDAY 5:30 A.M. TO 5:00 P.M., PACIFIC TIME
SATURDAY 6:30 A.M. TO 2:30 P.M., PACIFIC TIME)
PAGE
[Insert graphic of person with a headset] INVESTOR SERVICES
AUTOMATIC INVESTMENT PLAN This plan offers a convenient way for you to invest in
the fund by automatically transferring money from your checking or savings
account each month to buy shares. The minimum investment to open an account with
an automatic investment plan is $50 ($25 for an Education IRA). To sign up,
complete the appropriate section of your account application.
DISTRIBUTION OPTIONS You may reinvest distributions you receive from the fund in
an existing account in the same share class/*/ of the fund or another Franklin
Templeton Fund. Initial sales charges and CDSCs will not apply if you reinvest
your distributions within 365 days. You can also have your distributions
deposited in a bank account, or mailed by check. Deposits to a bank account may
be made by electronic funds transfer.
[Begin callout]
For Franklin Templeton Trust Company retirement plans, special forms may be
needed to receive distributions in cash. Please call 1-800/527-2020 for
information.
[End callout]
Please indicate on your application the distribution option you have chosen,
otherwise we will reinvest your distributions in the same share class of the
fund.
*Class B and C shareholders may reinvest their distributions in Class A shares
of any Franklin Templeton money fund.
RETIREMENT PLANS Franklin Templeton offers a variety of retirement plans for
individuals and businesses. These plans require separate applications and their
policies and procedures may be different than those described in this
prospectus. For more information, including a free retirement plan brochure or
application, please call Retirement Plan Services at 1-800/527-2020.
PAGE
TELEFACTS(R) Our TeleFACTS system offers around-the-clock access to information
about your account or any Franklin Templeton Fund. This service is available
from touch-tone phones at 1-800/247-1753. For a free TeleFACTS brochure, call
1-800/DIAL BEN.
TELEPHONE PRIVILEGES You will automatically receive telephone privileges when
you open your account, allowing you and your investment representative to sell
or exchange your shares and make certain other changes to your account by phone.
For accounts with more than one registered owner, telephone privileges also
allow the fund to accept written instructions signed by only one owner for
transactions and account changes that could otherwise be made by phone. For all
other transactions and changes, all registered owners must sign the
instructions.
As long as we take certain measures to verify telephone requests, we will not be
responsible for any losses that may occur from unauthorized requests. Of course,
you can decline telephone exchange or redemption privileges on your account
application.
EXCHANGE PRIVILEGE You can exchange shares between most Franklin Templeton Funds
within the same class/*/, generally without paying any additional sales charges.
If you exchange shares held for less than six months, however, you may be
charged the difference between the initial sales charge of the two funds if the
difference is more than 0.25%. If you exchange shares from a money fund, a sales
charge may apply no matter how long you have held the shares.
[Begin callout]
An EXCHANGE is really two transactions: a sale of one fund and the purchase of
another. In general, the same policies that apply to purchases and sales apply
to exchanges, including minimum investment amounts. Exchanges also have the same
tax consequences as ordinary sales and purchases.
[End callout]
Generally exchanges may only be made between identically registered accounts,
unless you send written instructions with a signature guarantee. Any CDSC will
continue to be calculated from the date of your initial investment and will not
be charged at the time of the exchange. The purchase price for determining a
CDSC on exchanged shares will be the price you paid for the original shares. If
you exchange shares subject to a CDSC into a Class A money fund, the time your
shares are held in the money fund will not count towards the CDSC holding
period.
If you exchange your Class B shares for the same class of shares of another
Franklin Templeton Fund, the time your shares are held in that fund will count
towards the eight year period for automatic conversion to Class A shares.
Frequent exchanges can interfere with fund management or operations and drive up
costs for all shareholders. To protect shareholders, there are limits on the
number and amount of exchanges you may make (please see "Market Timers" on page
[#]).
*Certain Class Z shareholders of Franklin Mutual Series Fund Inc. may exchange
into Class A without any sales charge. Advisor Class shareholders of another
Franklin Templeton Fund also may exchange into Class A without any sales charge.
Advisor Class shareholders who exchange their shares for Class A shares and
later decide they would like to exchange into another fund that offers Advisor
Class may do so.
SYSTEMATIC WITHDRAWAL PLAN This plan allows you to automatically sell your
shares and receive regular payments from your account. A CDSC may apply to
withdrawals that exceed certain amounts. Certain terms and minimums apply.
To sign up, complete the appropriate section of your application.
PAGE
[Insert graphic of a certificate] SELLING SHARES
You can sell your shares at any time.
SELLING SHARES IN WRITING Requests to sell $100,000 or less can generally be
made over the phone or with a simple letter. Sometimes, however, to protect you
and the fund we will need written instructions signed by all registered owners,
with a signature guarantee for each owner, if:
[Begin callout]
A SIGNATURE GUARANTEE helps protect your account against fraud. You can obtain a
signature guarantee at most banks and securities dealers.
A notary public CANNOT provide a signature guarantee.
[End callout]
/bullet/ you are selling more than $100,000 worth of shares
/bullet/ you want your proceeds paid to someone who is not a registered owner
/bullet/ you want to send your proceeds somewhere other than the address of
record, or preauthorized bank or brokerage firm account
We may also require a signature guarantee on instructions we receive from an
agent, not the registered owners, or when we believe it would protect the fund
against potential claims based on the instructions received.
SELLING RECENTLY PURCHASED SHARES If you sell shares recently purchased with a
check or draft, we may delay sending you the proceeds until your check or draft
has cleared, which may take seven business days or more. A certified or
cashier's check may clear in less time.
REDEMPTION PROCEEDS Your redemption check will be sent within seven days after
we receive your request in proper form. We are not able to receive or pay out
cash in the form of currency. Redemption proceeds may be delayed if we have not
yet received your signed account application.
RETIREMENT PLANS You may need to complete additional forms to sell shares in a
Franklin Templeton Trust Company retirement plan. For participants under age
59 1/2, tax penalties may apply. Call Retirement Plan Services at 1-800/527-2020
for details.
PAGE
SELLING SHARES
<TABLE>
<CAPTION>
- ----------------------------------- --------------------------------------------
TO SELL SOME OR ALL OF YOUR SHARES
- ----------------------------------- --------------------------------------------
<S> <C>
[Insert graphic of hands shaking]
THROUGH YOUR INVESTMENT Contact your investment representative
REPRESENTATIVE
- ----------------------------------- --------------------------------------------
[Insert graphic of envelope] Send written instructions and endorsed shar
certificates (if you hold share
certificates) to Investor Services.
Corporate, partnership or trust accounts
BY MAIL may need to send additional documents.
Specify the fund, the account number and the
dollar value or number of shares you wish to
sell. If you own both Class A and B shares,
also specify the class of shares, otherwise
we will sell your Class A shares first. Be
sure to include all necessary signatures and
any additional documents, as well as
signature guarantees if required.
A check will be mailed to the name(s) and
address on the account, or otherwise
according to your written instructions.
- ----------------------------------- -------------------------------------------
[Insert graphic of phone] As long as your transaction is for $100,000
or less, you do not hold share certificates
and you have not changed your address by
BY PHONE phone within the last 15 days, you can sell
your shares by phone.
1-800/632-2301 A check will be mailed to the name(s) and
address on the account. Written instructions,
with a signature guarantee, are required to
send the check to another address or to make
it payable to another person.
- ----------------------------------- -------------------------------------------
[Insert graphic of three You can call or write to have redemption
lightning bolts] proceeds of $1,000 or morewired to a bank or
escrow account. See the policies above for
selling shares by mail or phone.
Before requesting a bank wire, please make
sure we have your bank account information
on file. If we do not have this information,
you will need to send written instructions
BY WIRE with your bank's name and address, your bank
account number, the ABA routing number, and a
signature guarantee.
Requests received in proper form by 1:00 p.m.
pacific time will be wired the next business
day.
- ----------------------------------- --------------------------------------------
[Insert graphic of two arrows Obtain a current prospectus for the fund you
pointing in opposite directions] are considering.
Call Shareholder Services at the number below
or our automated TeleFACTS system, or send
BY EXCHANGE signed written instructions. See the policies
above for selling shares by mail or phone.
TeleFACTS(R) 1-800/247-1753
(around-the-clock access) If you hold share certificates, you will need
to return them to the fund before your
exchange can be processed.
- ----------------------------------- -------------------------------------------
</TABLE>
FRANKLIN TEMPLETON INVESTOR SERVICES 100 FOUNTAIN PARKWAY, P.O. BOX 33030,
ST. PETERSBURG, FL 33733-8030
CALL TOLL-FREE: 1-800/632-2301
(MONDAY THROUGH FRIDAY 5:30 A.M. TO 5:00 P.M., PACIFIC TIME
SATURDAY 6:30 A.M. TO 2:30 P.M., PACIFIC TIME)
PAGE
[Insert graphic of paper and pen] ACCOUNT POLICIES
CALCULATING SHARE PRICE The fund calculates the net asset value per share (NAV)
each business day at the close of trading on the New York Stock Exchange
(normally 1:00 p.m. pacific time). Each class's NAV is calculated by dividing
its net assets by the number of its shares outstanding.
[Begin callout]
When you buy shares, you pay the offering price. The offering price is the NAV
plus any applicable sales charge.
When you sell shares, you receive the NAV minus any applicable contingent
deferred sales charge (CDSC).
[End callout]
The fund's assets are generally valued at their market value. If market prices
are unavailable, or if an event occurs after the close of the trading market
that materially affects the values, assets may be valued at their fair value. If
the fund holds securities listed primarily on a foreign exchange that trades on
days when the fund is not open for business, the value of your shares may change
on days that you cannot buy or sell shares.
Requests to buy and sell shares are processed at the NAV next calculated after
we receive your request in proper form.
ACCOUNTS WITH LOW BALANCES If the value of your account falls below $250 ($50
for employee and UGMA/UTMA accounts) because you sell some of your shares, we
may mail you a notice asking you to bring the account back up to its applicable
minimum investment amount. If you choose not to do so within 30 days, we may
close your account and mail the proceeds to the address of record. You will not
be charged a CDSC if your account is closed for this reason.
STATEMENTS AND REPORTS You will receive confirmations and account statements
that show your account transactions. You will also receive the fund's financial
reports every six months. To reduce fund expenses, we try to identify related
shareholders in a household and send only one copy of the financial reports. If
you need additional copies, please call 1-800/DIAL BEN.
If there is a dealer or other investment representative of record on your
account, he or she will also receive confirmations, account statements and other
information about your account directly from the fund.
PAGE
STREET OR NOMINEE ACCOUNTS You may transfer your shares from the street or
nominee name account of one dealer to another, as long as both dealers have an
agreement with Franklin Templeton Distributors, Inc. We will process the
transfer after we receive authorization in proper form from your delivering
securities dealer.
JOINT ACCOUNTS Unless you specify a different registration, accounts with two or
more owners are registered as "joint tenants with rights of survivorship" (shown
as "Jt Ten" on your account statement). To make any ownership changes to a joint
account, all owners must agree in writing, regardless of the law in your state.
MARKET TIMERS The fund may restrict or refuse exchanges by market timers. If
accepted, each exchange by a market timer will be charged $5. You will be
considered a market timer if you have (i) requested an exchange out of the fund
within two weeks of an earlier exchange request, or (ii) exchanged shares out of
the fund more than twice in a calendar quarter, or (iii) exchanged shares equal
to at least $5 million, or more than 1% of the fund's net assets, or (iv)
otherwise seem to follow a timing pattern. Shares under common ownership or
control are combined for these limits.
ADDITIONAL POLICIES Please note that the fund maintains additional policies and
reserves certain rights, including:
/bullet/ The fund may refuse any order to buy shares, including any purchase
under the exchange privilege.
/bullet/ At any time, the fund may change its investment minimums or waive
or lower its minimums for certain purchases.
/bullet/ The fund may modify or discontinue the exchange privilege on 60 days'
notice.
/bullet/ You may only buy shares of a fund eligible for sale in your
state or jurisdiction.
/bullet/ In unusual circumstances, we may temporarily suspend redemptions,
or postpone the payment of proceeds, as allowed by federal securities
laws.
/bullet/ For redemptions over a certain amount, the fund reserves the right to
make payments in securities or other assets of the fund, in the case
of an emergency or if the payment by check or wire would be harmful to
existing shareholders.
/bullet/ To permit investors to obtain the current price, dealers are
responsible for transmitting all orders to the fund promptly.
DEALER COMPENSATION Qualifying dealers who sell fund shares may receive sales
commissions and other payments. These are paid by Franklin Templeton
Distributors, Inc. (Distributors) from sales charges, distribution and service
(12b-1) fees and its other resources.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMISSION (%) --- 4.00 2.00
Investment under $50,000 5.00 --- ---
$50,000 but under $100,000 3.75 --- ---
$100,000 but under $250,000 2.80 --- ---
$250,000 but under $500,000 2.00 --- ---
$500,000 but under $1 million 1.60 --- ---
$1 million or more up to 1.00/1/ --- ---
12B-1 FEE TO DEALER 0.25 0.25/2/ 1.00/3/
</TABLE>
A dealer commission of up to 1% may be paid on Class A NAV purchases by certain
retirement plans /1/ and up to 0.25% on Class A NAV purchases by certain trust
companies and bank trust departments, eligible governmental authorities, and
broker-dealers or others on behalf of clients participating in comprehensive fee
programs. For certain retirement plans that do not qualify to buy Class A shares
at NAV but that qualify to buy Class A shares with a maximum initial sales
charge of 4%, a dealer commission of 3.2% may be paid.
1. During the first year after purchase, dealers may not be eligible to receive
the 12b-1 fee.
2. Dealers may be eligible to receive up to 0.25% from the date of purchase.
After 8 years, Class B shares convert to Class A shares and dealers may then
receive the 12b-1 fee applicable to Class A.
3. Dealers may be eligible to receive up to 0.25% during the first year after
purchase and may be eligible to receive the full 12b-1 fee starting in the 13th
month.
PAGE
[Insert graphic of question mark]QUESTIONS
If you have any questions about the fund or your account, you can write to us at
100 Fountain Parkway, P.O. Box 33030, St. Petersburg, FL 33733-8030. You can
also call us at one of the following numbers. For your protection and to help
ensure we provide you with quality service, all calls may be monitored or
recorded.
<TABLE>
<CAPTION>
HOURS (PACIFIC TIME,
DEPARTMENT NAME TELEPHONE NUMBER MONDAY THROUGH FRIDAY)
- ----------------------------------- ----------------------------- -------------------------------------------
<S> <C> <C>
Shareholder Services 1-800/632-2301 5:30 a.m. to 5:00 p.m.
6:30 a.m. to 2:30 p.m. (Saturday)
Fund Information 1-800/DIAL BEN 5:30 a.m. to 8:00 p.m.
(1-800/342-5236) 6:30 a.m. to 2:30 p.m. (Saturday)
Retirement Plan Services 1-800/527-2020 5:30 a.m. to 5:00 p.m.
Dealer Services 1-800/524-4040 5:30 a.m. to 5:00 p.m.
Institutional Services 1-800/321-8563 6:00 a.m. to 5:00 p.m.
TDD (hearing impaired) 1-800/851-0637 5:30 a.m. to 5:00 p.m.
</TABLE>
PAGE
FOR MORE INFORMATION
You can learn more about the fund in the following documents:
ANNUAL/SEMIANNUAL REPORT TO SHAREHOLDERS
Includes a discussion of recent market conditions and fund strategies, financial
statements, detailed performance information, portfolio holdings, and the
auditor's report.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
Contains more information about the fund, its investments and policies. It is
incorporated by reference (is legally a part of this prospectus).
For a free copy of the current annual/semiannual report or the SAI, please
contact your investment representative or call us at the number below.
FRANKLIN(R)TEMPLETON(R)
1-800/DIAL BEN(R) (1-800/342-5236)
TDD (Hearing Impaired) 1-800/851-0637
www.franklin-templeton.com
You can also obtain information about the fund by visiting the SEC's Public
Reference Room in Washington D.C. (phone 1-800/SEC-0330) or by sending your
request and a duplicating fee to the SEC's Public Reference Section, Washington,
DC 20549-6009. You can also visit the SEC's Internet site at http://www.sec.gov.
Investment Company Act file #811-5914
PAGE
PART B
CLASS A, B & C
STATEMENT OF
ADDITIONAL INFORMATION
PAGE
TEMPLETON GLOBAL OPPORTUNITIES TRUST
CLASS A, B & C
STATEMENT OF
ADDITIONAL INFORMATION
MAY 1, 1999
100 FOUNTAIN PARKWAY, P.O. BOX 33030
ST. PETERSBURG, FL 33733-8030 1-800/DIAL BEN(R)
This Statement of Additional Information (SAI) is not a prospectus. It contains
information in addition to the information in the fund's prospectus. The fund's
prospectus, dated May 1, 1999, which we may amend from time to time, contains
the basic information you should know before investing in the fund. You should
read this SAI together with the fund's prospectus.
The audited financial statements and auditor's report in the trust's Annual
Report to Shareholders, for the fiscal year ended December 31, 1998, are
incorporated by reference (are legally a part of this SAI).
For a free copy of the current prospectus or annual report, contact your
investment representative or call 1-800/DIAL BEN (1-800/342-5236).
CONTENTS
Goal and Strategies
Risks
Officers and Trustees
Management and Other Services
Portfolio Transactions
Distributions and Taxes
Organization, Voting Rights and Principal Holders
Buying and Selling Shares
Pricing Shares
The Underwriter
Performance
Miscellaneous Information
Description of Bond Ratings
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MUTUAL FUNDS, ANNUITIES, AND OTHER INVESTMENT PRODUCTS:
/bullet/ ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY OF THE
U.S. GOVERNMENT;
/bullet/ ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY,
ANY BANK;
/bullet/ ARE SUBJECT TO INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
- -------------------------------------------------------------------------------
PAGE
GOAL AND STRATEGIES
- ------------------------------------------------------------------------------
The fund's investment goal is long-term capital growth. This goal is
fundamental, which means it may not be changed without shareholder approval.
Although the fund may invest without percentage limitation in domestic or
foreign securities, it may only invest up to 40% of its total assets in
securities of issuers located in developing countries. The fund may invest up to
5% of its total assets in securities issued by any one company or foreign
government. The fund may invest any amount of its assets in U.S. government
securities. The fund may invest in any industry, although it will not
concentrate (invest more than 25% of its total assets) in any one industry. The
fund may invest up to 15% of its total assets in foreign securities that are not
listed on a recognized U.S. or foreign securities exchange, including up to 10%
of its total assets in restricted securities, securities that are not readily
marketable, repurchase agreements with more than seven days to maturity, and
over-the-counter options bought by the fund.
EQUITY SECURITIES generally entitle the holder to participate in a company's
general operating results. These include common stock, preferred stock,
convertible securities, warrants, and rights. The purchaser of an equity
security typically receives an ownership interest in the company as well as
certain voting rights. The owner of an equity security may participate in a
company's success through the receipt of dividends, which are distributions of
earnings by the company to its owners. Equity security owners may also
participate in a company's success or lack of success through increases or
PAGE
decreases in the value of the company's shares as traded in the public trading
market for such shares. Equity securities generally take the form of common
stock or preferred stock. Preferred stockholders typically receive greater
dividends but may receive less appreciation than common stockholders and may
have greater voting rights as well. Equity securities may also include
convertible securities, warrants or rights. Convertible securities typically are
debt securities or preferred stocks which are convertible into common stock
after certain time periods or under certain circumstances. Warrants or rights
give the holder the right to purchase a common stock at a given time for a
specified price.
DEBT SECURITIES represent an obligation of the issuer to repay a loan of money
to it, and generally provide for the payment of interest. These include bonds,
notes, and debentures; commercial paper; time deposits; bankers' acceptances;
and structured investments. A debt security typically has a fixed payment
schedule that obligates the issuer to pay interest to the lender and to return
the lender's money over a certain time period. A company typically meets its
payment obligations associated with its outstanding debt securities before it
declares and pays any dividend to holders of its equity securities. Bonds,
notes, debentures and commercial paper differ in the length of the issuer's
payment schedule, with bonds carrying the longest repayment schedule and
commercial paper the shortest.
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.
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 debt
securities generally declines. These changes in market value will be reflected
in the fund's net assets value.
Independent rating organizations rate debt securities based upon their
assessment of the financial soundness of the issuer. Generally, a lower rating
indicates higher risk. The fund may buy debt securities that are rated Caa by
Moody's Investors Service, Inc. (Moody's) or CCC by Standard & Poor's
Corporation (S&P) or better, or unrated debt that it determines to be of
comparable quality. As an operating policy, the fund will not invest more than
25% of its total assets in non-investment grade securities (rated lower than Baa
by Moody's or BBB by S&P).
PAGE
STRUCTURED INVESTMENTS As a non-fundamental policy, no more than 5% of the
fund's assets will be invested in structured investments. These 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
PAGE
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.
DEPOSITARY RECEIPTS Depositary receipts are certificates that give their holders
the right to receive securities (i) of a foreign issuer deposited in a U.S. bank
or trust company (American Depositary Receipts or ADRs); or (ii) of a foreign or
U.S. issuer deposited in a foreign bank or trust company (Global Depositary
Receipts, GDRs, or European Depositary Receipts, EDRs).
REPURCHASE AGREEMENTS The fund will generally have a portion of its assets in
cash or cash equivalents for a variety of reasons including waiting for a
special investment opportunity or taking a defensive position. To earn income on
this portion of its assets, the fund may enter into repurchase agreements with
certain banks and broker-dealers. Under a repurchase agreement, the fund agrees
to buy a U.S. government security from one of these issuers and then to sell the
security back to the issuer after a short period of time (generally, less than
seven days) at a higher price. The bank or broker-dealer must transfer to the
fund's custodian securities with an initial value of at least 102% of the dollar
amount invested by the fund in each repurchase agreement.
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 the creditworthiness standards approved by
the fund's board of directors, I.E. banks or broker-dealers that have been
determined by the manager to present no serious risk of becoming involved in
bankruptcy proceedings within the time frame contemplated by the repurchase
transaction.
LOANS OF PORTFOLIO SECURITIES The fund may lend to banks and broker-dealers
portfolio securities with an aggregate market value of up to one-third of its
total assets. These 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 retains all or a portion
PAGE
of the interest received on investment of the cash collateral or receives a fee
from the borrower. The fund may terminate the loans at any time and obtain the
return of the securities loaned within five business days. The fund will
continue to receive any interest or dividends paid on the loaned securities and
will continue to have voting rights with respect to the securities. However, as
with other extensions of credit, there are risks of delay in recovery or even
loss of rights in collateral should the borrower fail.
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.
FUTURES CONTRACTS Changes in interest rates, securities prices, or foreign
currency valuations may affect the value of the fund's investments. To reduce
exposure to these factors, the fund may buy and sell financial futures
contracts, stock index futures contracts, foreign currency futures contracts,
and options on any of these contracts. A financial futures contract is an
agreement to buy or sell a specific security or commodity at a specified future
date and price. A futures contract on a foreign currency is an agreement to buy
or sell a specific amount of a currency for a set price on a future date. The
fund may not commit more than 5% of its total assets to initial margin deposits
on futures contracts and related options. In addition, the value of the
securities on which the futures contracts are based will not exceed 25% of the
fund's total assets.
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.
PAGE
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 buy and sell options on securities
and securities indices to earn additional income and/or to help protect its
portfolio against market and/or exchange rate movements, although it presently
has not intention of doing so. 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. The fund will
limit the sale of options on its securities to 15% or less of its total assets.
The fund may only buy options if the total premiums it paid for such options is
5% or less of its total assets.
PAGE
An option on a security is a contract that gives the purchaser of the option, in
return for the premium paid, the right to buy a specified security (in the case
of a call option) or to sell a specified security (in the case of a put option)
from or to the writer of the option at a designated price during the term of the
option. An option on a securities index gives the purchaser of the option, in
return for the premium paid, the right to receive from the seller cash equal to
the difference between the closing price of the index and the exercise price of
the option.
The fund may write a call or put option only if the option is "covered." A call
option on a security written by the fund is "covered" if the fund owns the
underlying security covered by the call or has an absolute and immediate right
to acquire that security without additional cash consideration (or for
additional cash consideration held in a segregated account by its custodian)
upon conversion or exchange of other securities held in its portfolio. A call
option on a security is also covered if the fund holds a call on the same
security and in the same principal amount as the call written where the exercise
price of the call held (a) is equal to or less than the exercise price of the
call written or (b) is greater than the exercise price of the call written if
the difference is maintained by the fund in cash or high grade U.S. government
securities in a segregated account with its custodian. A put option on a
security written by the fund is "covered" if the fund maintains cash or fixed
income securities with a value equal to the exercise price in a segregated
account with its custodian, or else holds a put on the same security and in the
same principal amount as the put written where the exercise price of the put
held is equal to or greater than the exercise price of the put written.
The fund will cover call options on stock indices that it writes by owning
securities whose price changes, in the opinion of Investment Counsel, 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
PAGE
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,
PAGE
the fund will bear the risk of losing all or a portion of the premium paid if
the value of the underlying security or index does not rise.
There can be no assurance that a liquid market will exist when the fund seeks to
close out an option position. Trading could be interrupted, for example, because
of supply and demand imbalances arising from a lack of either buyers or sellers,
or the options exchange could suspend trading after the price has risen or
fallen more than the maximum specified by the exchange. Although the fund may be
able to offset to some extent any adverse effects of being unable to liquidate
an option position, the fund may experience losses in some cases as a result of
such inability.
FOREIGN CURRENCY HEDGING TRANSACTIONS In order to hedge against foreign currency
exchange rate risks, the fund may enter into forward foreign currency exchange
contracts and foreign currency futures contracts, as well as buy and sell put or
call options on foreign currencies, as described below. The fund may only commit
up to 20% of its total assets to forward foreign currency contracts. 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
PAGE
contracts are not presently regulated by the Commodity Futures Trading
Commission, 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 Investment Counsel'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.
SHORT-TERM TRADING AND PORTFOLIO TURNOVER The fund invests for long-term capital
growth and does not invest to emphasize short-term trading profits. It is
PAGE
anticipated, therefore, that the fund's annual portfolio turnover rate generally
will be below 50%, although this rate may be higher or lower, in relation to
market conditions. A portfolio turnover rate of less than 50% means that in a
one year period, less than one-half of the fund's portfolio is changed.
TEMPORARY INVESTMENTS When the manager believes that the securities trading
markets or the economy are experiencing excessive volatility or a prolonged
general decline, or other adverse conditions exist, it may invest the fund's
portfolio in a temporary defensive manner. Under such circumstances, the fund
may invest up to 100% of its assets in money market securities denominated in
the currency of any nation. These may include (i) short-term (maturities of less
than 12 months) and medium-term (maturities of up to 5 years) securities issued
or guaranteed by the U.S. or a foreign government, their agencies or
instrumentalities; (ii) finance company and corporate commercial paper, and
other short-term corporate obligations, rated A by S&P or Prime-1 by Moody's or,
if unrated, determined by the fund to be of comparable quality; and (iii)
repurchase agreements with banks and broker-dealers. For temporary defensive
purposes, the fund may also invest up to 25% of its total assets in obligations
of banks (CDs, time deposits, and bankers' acceptances). The fund, however, will
only invest up to 10% of its total assets in time deposits subject to an early
withdrawal penalty.
INVESTMENT RESTRICTIONS The fund has adopted the following restrictions as
fundamental policies. This means they may only be changed if the change is
approved by (i) more than 50% of the fund's outstanding shares or (ii) 67% or
more of the fund's shares present at a shareholder meeting if more than 50% of
the fund's outstanding shares are represented at the meeting in person or by
proxy, whichever is less.
The fund may not:
1. Purchase the securities of any one issuer (except securities issued by the
United States of America or any instrumentality thereof) if, immediately after
and as a result of such purchase, the market value of the holdings of the fund
in the securities of such issuer would exceed 5% of the market value of the
fund's total net assets.
PAGE
2. Purchase the securities of any issuer if such purchase would cause more than
10% of the outstanding voting securities of such issuer, or more than 10% of the
outstanding voting securities of any one class of such issuer, to be held in the
fund's portfolio.
3. Concentrate investments in any particular industry; therefore, the fund will
not purchase a security if, as a result of such purchase, more than 25% of its
assets will be invested in a particular industry.
4. Purchase any securities on margin or sell securities short.
5. Purchase or retain the securities of any regulated investment company;
except to the extent the fund invests its uninvested daily cash balances in
shares of Franklin Money Fund and other money market funds in the Franklin Group
of Funds provided (i) its purchases and redemptions of such money market fund
shares may not be subject to any purchase or redemption fees, (ii) its
investments may not be subject to duplication of management fees, nor to any
charge related to the expense of distributing the fund's shares (as determined
under Rule 12b-1, as amended under the federal securities laws) and (iii)
provided aggregate investments by the fund in any such money market fund do not
exceed (A) the greater of (i) 5% of the fund's total net assets or (ii) $2.5
million, or (B) more than 3% of the outstanding shares of any such money market
fund.
6. Invest more than 15% of the fund's total assets in the securities of all
issuers in the aggregate, the respective businesses of which have been in
continuous operation for less than three years. As a non-fundamental policy, the
fund has determined to limit such investments to 5% of its total assets.
7. Purchase or retain investments in securities of any issuer in which trustees
or officers of the fund have a substantial financial interest. The fund, as a
non-fundamental policy, will not purchase the securities of any issuer if any
officer, trustee or employee of the fund is an officer, director or security
holder of such issuer and owns beneficially more than 1/2 of 1% of the
securities of such issuer, and if all of such persons owning more than 1/2 of 1%
own more than 5% of the outstanding securities of such issuer.
8. Borrow money, except as a temporary measure for extraordinary purposes, and
then not in excess of 10% of the total assets of the fund taken at cost or
value, whichever is less, and provided that immediately after any such borrowing
there is an asset coverage (meaning the ratio which the value of the total
PAGE
assets of the fund, less all liabilities and indebtedness of the fund not
represented by such borrowing, bears to the aggregate amount of such borrowing)
of at least 300% for all borrowings of the fund.
9. Lend any money or assets of the fund, except through the purchase of a
portion of an issue of debt securities distributed privately by federal, state
or municipal government agencies, and then not in excess of 10% of the total
assets of the fund taken at cost or value, whichever is less, or to the extent
the entry into a repurchase agreement may be deemed a loan. For the purpose of
this policy, the purchase by the fund of a portion of an issue of publicly
distributed corporate or governmental bonds, debentures or other debt securities
shall not be deemed to be the lending of money by the fund.
10. Mortgage or pledge any of the fund's assets. The escrow arrangements
involved in the fund's option writing activities are not deemed to be a mortgage
or pledge of its assets.
11. Act as a securities underwriter or investor in real estate or commodities,
other than the fund's investments in derivative securities, including financial
futures and options on financial futures.
12. Purchase or sell any securities other than shares of the fund from or to the
manager or any officer or director of the manager of the fund.
13. Invest in the securities of companies for the purpose of exercising control.
14. Issue securities senior to the fund's presently authorized common stock.
In addition to these fundamental policies, it is the fund's present policy
(which may be changed without shareholder approval) not to: invest in oil, gas
or other mineral exploration or development programs; engage in joint or joint
and several trading accounts in securities, except that it may participate in
joint repurchase arrangements and may combine orders to buy or sell securities
with other orders to obtain lower brokerage commissions; invest in any security
that would be restricted from sale to the public without registration under the
PAGE
Securities Act of 1933 if, as a result of such purchase, more than 5% of the
fund's total assets would be invested in such securities; or invest more than
10% of its assets in securities, including restricted securities, which are not
readily marketable. The fund's investments in warrants, if any, other than those
acquired by the fund as a part of a unit, valued at the lower of cost or market,
will not exceed 5% of the value of the fund's net assets, including not more
than 2% which are not listed on the New York or American Stock Exchange.
If a bankruptcy or other extraordinary event occurs concerning a particular
security owned by the fund, the fund may receive stock, real estate, or other
investments that the fund would not, or could not, buy. In this case, the fund
intends to dispose of the investment as soon as practicable while maximizing the
return to shareholders.
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.
RISKS
- -------------------------------------------------------------------------------
FOREIGN SECURITIES RISK The fund has an unlimited right to purchase securities
in any developed foreign country, and may invest up to 40% 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 or 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 markets 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.
PAGE
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.
EMERGING MARKETS. Investments in companies domiciled in developing countries may
be subject to potentially higher risks than investments in developed countries.
These risks include (i) less social, political and economic stability; (ii) the
small current size of the markets for such securities and the currently low or
nonexistent volume of trading, which result in a lack of liquidity and in
greater price volatility; (iii) certain national policies which may restrict the
fund's investment opportunities, including restrictions on investment in issuers
or industries deemed sensitive to national interests; (iv) foreign taxation; (v)
the absence of developed legal structures governing private or foreign
investment or allowing for judicial redress for injury to private property; (vi)
the absence, until recently in certain some developing 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 developing countries may involve risks of nationalization,
expropriation and confiscatory taxation. For example, 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
PAGE
standards exist in certain developing countries. Finally, even though the
currencies of some developing countries, such as certain Eastern European
countries, 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.
RUSSIAN SECURITIES. Investing in Russian companies 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. These
risks include, together with Russia's continuing political and economic
instability and the slow-paced development of its market economy, the following:
(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, insider trading, 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, a return to the centrally planned economy
that existed prior to the dissolution of the Soviet Union, or the
nationalization of privatized enterprises; (h) the risks of investing in
securities with substantially less liquidity and in issuers having significantly
smaller market capitalizations, when compared to securities and issuers in more
developed markets; (i) the difficulties associated in obtaining accurate market
valuations of many Russian securities, based partly on the limited amount of
publicly available information; (j) the financial condition of Russian
companies, including large amounts of inter-company debt which may create a
payments crisis on a national scale; (k) dependency on exports and the
corresponding importance of international trade; (l) the risk that the Russian
tax system will not be reformed to prevent inconsistent, retroactive and/or
PAGE
exorbitant taxation or, in the alternative, the risk that a reformed tax system
may result in the inconsistent and unpredictable enforcement of the new tax
laws; and (m) possible difficulty in identifying a buyer of securities held by
the fund due to the underdeveloped nature of the securities markets; (n) the
possibility that pending legislation could restrict the levels of foreign
investment in certain industries, thereby limiting the number of investment
opportunities in Russia; (o) the risk that pending legislation would confer to
Russian courts the exclusive jurisdiction to resolve disputes between foreign
investors and the Russian government, instead of bringing such disputes before
an internationally-accepted third-country arbitrator; and (p) the difficulty in
obtaining information about the financial condition of Russian issuers, in light
of the different disclosure and accounting standards applicable to Russian
companies.
There is little long-term historical data on Russian securities markets because
they are relatively new and a substantial proportion of securities transactions
in Russia are privately negotiated outside of stock exchanges. Because of the
recent formation of the securities markets as well as the underdeveloped state
of the banking and telecommunications systems, settlement, clearing and
registration of securities transactions are subject to significant risks.
Ownership of shares (except where shares are held through depositories that meet
the requirements of the 1940 Act) is defined according to entries in the
company's share register and normally evidenced by extracts from the register or
by formal share certificates. However, there is no central registration system
for shareholders and these services are carried out by the companies themselves
or by registrars located throughout Russia. These registrars are not necessarily
subject to effective state supervision nor are they licensed with any
governmental entity 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
PAGE
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
500 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. In addition, so-called "financial-industrial groups" have emerged in
recent years that seek to deter outside investors from interfering in the
management of companies they control. These practices may prevent the fund from
investing in the securities of certain Russian companies deemed suitable by the
manager. Further, this also could cause a delay in the sale of Russian company
securities by the fund if a potential purchaser is deemed unsuitable, which may
expose the fund to potential loss on the investment.
CURRENCY RISK The fund's management 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, or withhold portions of interest and
dividends at the source. There is the possibility of cessation of trading on
national exchanges, expropriation, nationalization or confiscatory taxation,
withholding and other foreign taxes on income or other amounts, foreign exchange
controls (which may include suspension of the ability to transfer currency from
a given country), default in foreign government securities, political or social
instability, or diplomatic developments 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.
PAGE
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.
EURO RISK. On January 1, 1999, the European Monetary Union (EMU) introduced a
new single currency, the euro, which will replace the national currency for
participating member countries. The transition and the elimination of currency
risk among EMU countries may change the economic environment and behavior of
investors, particularly in European markets.
Franklin Resources, Inc. has created an interdepartmental team to handle all
euro-related changes to enable the Franklin Templeton Funds to process
transactions accurately and completely with minimal disruption to business
activities. While the implementation of the euro could have a negative effect on
the fund, the fund's manager and its affiliated services providers are taking
steps they believe are reasonably designed to address the euro issue.
INTEREST RATE RISK To the extent the fund invests in debt securities, changes in
interest rates in any country where the fund is invested will affect the value
of the fund's portfolio and, consequently, its share price. Rising interest
rates, which often occur during times of inflation or a growing economy, are
likely to cause the face value of a debt security to decrease, having a negative
effect on the value of the fund's shares. Of course, interest rates have
increased and decreased, sometimes very dramatically, in the past. These changes
are likely to occur again in the future at unpredictable times.
PAGE
LOW RATED SECURITIES Bonds rated Caa by Moody's are of poor standing. These
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.
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
goal 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.
PAGE
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. 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.
DERIVATIVE SECURITIES 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 buy or sell futures
and related options only on exchanges or boards of trade where there appears to
be an active secondary market, but there is no assurance that a liquid secondary
market will exist for any particular contract or at any particular time. Use of
stock index futures and related options for hedging may involve risks because of
imperfect correlations between movements in the prices of the futures or related
options and movements in the prices of the securities being hedged. Successful
use of futures and related options by the fund for hedging purposes also depends
upon the manager's ability to predict correctly movements in the direction of
the market, as to which no assurance can be given.
There are several risks associated with transactions in options on securities
and securities indices. For example, there are significant differences between
the securities and options markets that could result in an imperfect correlation
between these markets, causing a given transaction not to achieve its
objectives. A decision as to whether, when and how to use options involves the
exercise of skill and judgment, and even a well-conceived transaction may be
unsuccessful to some degree because of market behavior or unexpected events.
There can be no assurance that a liquid market will exist when the fund seeks to
close out an option position. If the fund were unable to close out an option
that it had purchased on a securities index, it would have to exercise the
option in order to realize any profit or the option may expire worthless. If
trading were suspended in an option purchased by the fund, it would not be able
to close out the option. If restrictions on exercise were imposed, the fund
might be unable to exercise an option it has purchased. Except to the extent
that a call option on an index or a security written by the fund is covered by
an option on the same index or security purchased by the fund, movements in the
index or the price of the security may result in a loss to the fund. However,
such losses may be mitigated by changes in the value of the fund's securities
during the period the option was outstanding.
OFFICERS AND TRUSTEES
- -----------------------------------------------------------------------------
The trust has a board of trustees. The board is responsible for the overall
management of the trust, including general supervision and review of the fund's
investment activities. The board, in turn, elects the officers of the trust who
are responsible for administering the trust's day-to-day operations. The board
also monitors the fund to ensure no material conflicts exist among share
classes. While none is expected, the board will act appropriately to resolve any
material conflict that may arise.
The affiliations of the officers and board members and their principal
occupations for the past five years are shown below.
<TABLE>
<CAPTION>
POSITION(S) HELD
WITH
THE TRUST PRINCIPAL OCCUPATION(S)
NAME, AGE AND ADDRESS DURING THE PAST FIVE YEARS
- ----------------------------------------- --------------------- ----------------------------
<S> <C> <C>
Harris J. Ashton (66)
191 Clapboard Ridge Road
Greenwich, CT 06830
Trustee
PAGE
Director, RBC Holdings, Inc. (bank holding company) and Bar-S Foods (meat
packing company); director or trustee, as the case may be, of 49 of the
investment companies in the Franklin Templeton Group of Funds; and FORMERLY,
President, Chief Executive Officer and Chairman of the Board, General Host
Corporation (nursery and craft centers).
*Nicholas F. Brady (69)
The Bullitt House
102 East Dover Street
Easton, MD 21601
Trustee
Chairman, Templeton Emerging Markets Investment Trust PLC, Templeton Latin
America Investment Trust PLC, Darby Overseas Investments, Ltd. and Darby
Emerging Markets Investments LDC (investment firms) (1994-present); Director,
Templeton Global Strategy Funds, Amerada Hess Corporation (exploration and
refining of natural gas), Christiana Companies, Inc. (operating and investment
companies), and H.J. Heinz Company (processed foods and allied products);
director or trustee, as the case may be, of 21 of the investment companies in
the Franklin Templeton Group of Funds; and FORMERLY, Secretary of the United
States Department of the Treasury (1988-1993) and Chairman of the Board, Dillon,
Read & Co., Inc. (investment banking) (until 1988).
Frank J. Crothers (54)
P.O. Box N-3238
Nassau, Bahamas
Trustee
Chairman, Atlantic Equipment & Power Ltd.; Vice Chairman, Caribbean Utilities
Co., Ltd.; President, Provo Power Corporation; director of various other
business and non-profit organizations; and director or trustee, as the case may
be, of seven of the investment companies in the Franklin Templeton Group of
Funds.
S. Joseph Fortunato (66)
Park Avenue at Morris County
P.O. Box 1945
Morristown, NJ 07962-1945
PAGE
Trustee
Member of the law firm of Pitney, Hardin, Kipp & Szuch; director or trustee, as
the case may be, of 51 of the investment companies in the Franklin Templeton
Group of Funds.
John Wm. Galbraith (77)
360 Central Avenue
Suite 1300
St. Petersburg, FL 33701
Trustee
President, Galbraith Properties, Inc. (personal investment company); Director
Emeritus, Gulf West Banks, Inc. (bank holding company) (1995-present); director
or trustee, as the case may be, of 20 of the investment companies in the
Franklin Templeton Group of Funds; and FORMERLY, Director, Mercantile Bank
(1991-1995), Vice Chairman, Templeton, Galbraith & Hansberger Ltd. (1986-1992),
and Chairman, Templeton Funds Management, Inc. (1974-1991).
Andrew H. Hines, Jr. (76)
150 2nd Avenue N.
St. Petersburg, FL 33701
Trustee
Consultant,Triangle Consulting Group; Executive-in-Residence, Eckerd College
(1991-present); director or trustee, as the case may be, of 22 of the investment
companies in the Franklin Templeton Group of Funds; and FORMERLY, Chairman and
Director, Precise Power Corporation (1990-1997), Director, Checkers Drive-In
Restaurant, Inc. (1994-1997), and Chairman of the Board and Chief Executive
Officer, Florida Progress Corporation (holding company in the energy area)
(1982-1990) and director of various of its subsidiaries.
PAGE
Edith E. Holiday (47)
3239 38th Street, N.W.
Washington, DC 20016
Trustee
Director, Amerada Hess Corporation (exploration and refining of natural gas)
(1993-present), Hercules Incorporated (chemicals, fibers and resins)
(1993-present), Beverly Enterprises, Inc. (health care) (1995-present) and H.J.
Heinz Company (processed foods and allied products) (1994-present); director or
trustee, as the case may be, of 25 of the investment companies in the Franklin
Templeton Group of Funds; and FORMERLY, Chairman (1995-1997) and Trustee
(1993-1997), National Child Research Center, 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).
*Charles B. Johnson (66)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President and Trustee
President, Chief Executive Officer and Director, Franklin Resources, Inc.;
Chairman of the Board and Director, Franklin Advisers, Inc., Franklin Advisory
Services, Inc., Franklin Investment Advisory Services, Inc. and Franklin
Templeton Distributors, Inc.; Director, Franklin/Templeton Investor Services,
Inc. and Franklin Templeton Services, Inc.; officer and/or director or trustee,
as the case may be, of most of the other subsidiaries of Franklin Resources,
Inc. and of 50 of the investment companies in the Franklin Templeton Group of
Funds.
*Rupert H. Johnson, Jr. (58)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President and Trustee
Executive Vice President and Director, Franklin Resources, Inc. and Franklin
Templeton Distributors, Inc.; President and Director, Franklin Advisers, Inc.
and Franklin Investment Advisory Services, Inc.; Senior Vice President and
Director, Franklin Advisory Services, Inc.; Director, Franklin/Templeton
Investor Services, Inc.; and officer and/or director or trustee, as the case may
be, of most of the other subsidiaries of Franklin Resources, Inc. and of 53 of
the investment companies in the Franklin Templeton Group of Funds.
PAGE
Betty P. Krahmer (69)
2201 Kentmere Parkway
Wilmington, DE 19806
Trustee
Director or trustee of various civic associations; director or trustee, as the
case may be, of 21 of the investment companies in the Franklin Templeton Group
of Funds; and FORMERLY, Economic Analyst, U.S. government.
Gordon S. Macklin (70)
8212 Burning Tree Road
Bethesda, MD 20817
Trustee
Director, Fund American Enterprises Holdings, Inc. (holding company), Martek
Biosciences Corporation, MCI WorldCom (information services), MedImmune, Inc.
(biotechnology), Spacehab, Inc. (aerospace services) and Real 3D (software);
director or trustee, as the case may be, of 49 of the investment companies in
the Franklin Templeton Group of Funds; and FORMERLY, Chairman, White River
Corporation (financial services) and Hambrecht and Quist Group (investment
banking), and President, National Association of Securities Dealers, Inc.
Fred R. Millsaps (70)
2665 NE 37th Drive
Fort Lauderdale, FL 33308
Trustee
Manager of personal investments (1978-present); director of various business and
nonprofit organizations; director or trustee, as the case may be, of 22 of the
investment companies in the Franklin Templeton Group of Funds; and FORMERLY,
Chairman and Chief Executive Officer, Landmark Banking Corporation (1969-1978),
Financial Vice President, Florida Power and Light (1965-1969), and Vice
President, Federal Reserve Bank of Atlanta (1958-1965).
PAGE
Constantine Dean Tseretopoulos (45)
Lyford Cay Hospital
P.O. Box N-7776
Nassau Bahamas
Trustee
Physician, Lyford Cay Hospital (1987-present); director of various nonprofit
organizations; director or trustee, as the case may be, of seven of the
investment companies in the Franklin Templeton Group of Funds; and FORMERLY,
Cardiology Fellow, University of Maryland (1985-1987) and Internal Medicine
Intern, Greater Baltimore Medical Center (1982-1985).
James R. Baio (45)
500 East Broward Blvd.
Fort Lauderdale, FL 33394-3091
Treasurer
Certified Public Accountant; Senior Vice President, Templeton Worldwide, Inc.,
Templeton Global Investors, Inc. and Templeton Funds Trust Company; officer of
22 of the investment companies in the Franklin Templeton Group of Funds; and
FORMERLY, Senior Tax Manager, Ernst & Young (certified public accountants)
(1977-1989).
Harmon E. Burns (54)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President
Executive Vice President and Director, Franklin Resources, Inc., Franklin
Templeton Distributors, Inc. and Franklin Templeton Services, Inc.; Executive
Vice President, Franklin Advisers, Inc.; Director, Franklin Investment Advisory
Services, Inc. and Franklin/Templeton Investor Services, Inc.; and officer
and/or director or trustee, as the case may be, of most of the other
subsidiaries of Franklin Resources, Inc. and of 53 of the investment companies
in the Franklin Templeton Group of Funds.
PAGE
Martin L. Flanagan (38)
777 Mariners Island Blvd.
San Mateo, CA 94404
President
Senior Vice President and Chief Financial Officer, Franklin Resources, Inc.,
Franklin/Templeton Investor Services, Inc. and Franklin Mutual Advisers, Inc.;
Executive Vice President and Director, Templeton Worldwide, Inc.; Executive Vice
President, Chief Operating Officer and Director, Templeton Investment Counsel,
Inc.; Executive Vice President and Chief Financial Officer, Franklin Advisers,
Inc.; Chief Financial Officer, Franklin Advisory Services, Inc. and Franklin
Investment Advisory Services, Inc.; President and Director, Franklin Templeton
Services, Inc.; officer and/or director of some of the other subsidiaries of
Franklin Resources, Inc.; and officer and/or director or trustee, as the case
may be, of 53 of the investment companies in the Franklin Templeton Group of
Funds.
Deborah R. Gatzek (50)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President
Senior Vice President and General Counsel, Franklin Resources, Inc.; Senior Vice
President, Franklin Templeton Services, Inc. and Franklin Templeton
Distributors, Inc.; Executive Vice President, Franklin Advisers, Inc.; Vice
President, Franklin Advisory Services, Inc. and Franklin Mutual Advisers, Inc.;
Vice President, Chief Legal Officer and Chief Operating Officer, Franklin
Investment Advisory Services, Inc.; and officer of 54 of the investment
companies in the Franklin Templeton Group of Funds.
Barbara J. Green (51)
500 East Broward Blvd.
Fort Lauderdale, FL 33394-3091
Secretary
Senior Vice President, Templeton Worldwide, Inc. and Templeton Global Investors,
Inc.; officer of 21 of the investment companies in the Franklin Templeton Group
of Funds; and FORMERLY, Deputy Director, Division of Investment Management,
Executive Assistant and Senior Advisor to the Chairman, Counselor 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).
PAGE
Mark G. Holowesko (39)
Lyford Cay
Nassau, Bahamas
Vice President
President, Templeton Global Advisors Limited; Chief Investment Officer, Global
Equity Group; Executive Vice President and Director, Templeton Worldwide, Inc.;
officer of 21 of the investment companies in the Franklin Templeton Group of
Funds; and FORMERLY, Investment Administrator, RoyWest Trust Corporation
(Bahamas) Limited (1984-1985).
Charles E. Johnson (42)
500 East Broward Blvd.
Fort Lauderdale, FL 33394-3091
Vice President
Senior Vice President and Director, Franklin Resources, Inc.; Senior Vice
President, Franklin Templeton Distributors, Inc.; President and Director,
Templeton Worldwide, Inc.; Chairman and Director, Templeton Investment Counsel,
Inc.; Vice President, Franklin Advisers, Inc.; officer and/or director of some
of the other subsidiaries of Franklin Resources, Inc.; and officer and/or
director or trustee, as the case may be, of 34 of the investment companies in
the Franklin Templeton Group of Funds.
John R. Kay (58)
500 East Broward Blvd.
Fort Lauderdale, FL 33394-3091
Vice President
Vice President and Treasurer, Templeton Worldwide, Inc.; Assistant Vice
President, Franklin Templeton Distributors, Inc.; officer of 25 of the
investment companies in the Franklin Templeton Group of Funds; and FORMERLY,
Vice President and Controller, Keystone Group, Inc.
PAGE
Elizabeth M. Knoblock (44)
500 East Broward Blvd.
Fort Lauderdale, FL 33394-3091
Vice President - Compliance
General Counsel, Secretary and Senior Vice President, Templeton Investment
Counsel, Inc.; Senior Vice President, Templeton Global Investors, Inc.; officer
of 21 of the investment companies in the Franklin Templeton Group of Funds; and
FORMERLY, Vice President and Associate General Counsel, Kidder Peabody & Co.
Inc. (1989-1990), Assistant General Counsel, Gruntal & Co., Inc. (1988), Vice
President and Associate General Counsel, Shearson Lehman Hutton Inc. (1988),
Vice President and Assistant General Counsel, E.F. Hutton & Co. Inc.
(1986-1988), and Special Counsel, Division of Investment Management, U.S.
Securities and Exchange Commission (1984-1986).
Howard J. Leonard (39)
500 East Broward Blvd.
Fort Lauderdale, FL 33394-3091
Vice President
Executive Vice President, Portfolio Management/Research, Templeton Investment
Counsel, Inc. (1989-present); and FORMERLY, Director, Investment Research, First
Pennsylvania Bank (1986-1989) and Security Analyst, Provident National Bank
(1981-1985).
</TABLE>
*This board member is considered an "interested person" under federal securities
laws. Mr. Brady's status as an interested person results from his business
affiliations with Franklin Resources, Inc. and Templeton Global Advisors
Limited. Mr. Brady and Franklin Resources, Inc. are both limited partners of
Darby Overseas Partners, L.P. (Darby Overseas). In addition, Darby Overseas and
Templeton Global Advisors Limited are limited partners of Darby Emerging Markets
Fund, L.P.
Note: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers and the father
and uncle, respectively, of Charles E. Johnson.
The trust pays noninterested board members and Mr. Brady an annual retainer of
$[] and a fee of $[] per board meeting attended. Board members who serve on the
audit committee of the trust and other funds in the Franklin Templeton Group of
Funds receive a flat fee of $2,000 per committee meeting attended, a portion of
which is allocated to the trust. Members of a committee are not compensated for
any committee meeting held on the day of a board meeting. Noninterested board
members may also serve as directors or trustees of other funds in the Franklin
Templeton Group of Funds and may receive fees from these funds for their
services. The following table provides the total fees paid to noninterested
board members and Mr. Brady by the trust and by the Franklin Templeton Group of
Funds.
PAGE
<TABLE>
<CAPTION>
NUMBER OF BOARDS IN
TOTAL FEES RECEIVED THE FRANKLIN
TOTAL FEES FROM THE FRANKLIN TEMPLETON GROUP OF
RECEIVED TEMPLETON GROUP OF FUNDS ON WHICH EACH
NAME FROM THE TRUST/1/ FUNDS/2/ SERVES/3/
- -------------------------------- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Harris J. Ashton [] 361,157 49
Nicolas F. Brady [] 140,975 21
Frank Crothers [] 47,700 7
S. Joseph Fortunato [] 367,835 51
John Galbraith [] 134,425 20
Andrew H. Hines, Jr. [] 208,075 22
Edith Holiday [] 211,400 25
Betty Krahmer [] 141,075 21
Gordon Macklin [] 361,157 49
Fred Millsaps [] 210,075 22
Constantine Tseretopoulos 51,500 7
</TABLE>
1. For the fiscal year ended December 31, 1998.
2. For the calendar year ended December 31, 1998.
3. 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 54 registered investment companies, with approximately 164 U.S. based
funds or series.
Noninterested board members 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 or trustee.
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 Franklin Resources, Inc. may be deemed to receive indirect
remuneration by virtue of their participation, if any, in the fees paid to its
subsidiaries.
Board members historically have followed a policy of having substantial
investments in one or more of the funds in the Franklin Templeton Group of
Funds, as is consistent with their individual financial goals. In February 1998,
PAGE
this policy was formalized through adoption of a requirement that each board
member invest one-third of fees received for serving as a director or trustee of
a Templeton fund in shares of one or more Templeton funds and one-third of fees
received for serving as a director or trustee of a Franklin fund in shares of
one or more Franklin funds until the value of such investments equals or exceeds
five times the annual fees paid such board member. Investments in the name of
family members or entities controlled by a board member constitute fund holdings
of such board member for purposes of this policy, and a three year phase-in
period applies to such investment requirements for newly elected board members.
In implementing such policy, a board member's fund holdings existing on February
27, 1998, are valued as of such date with subsequent investments valued at cost.
MANAGEMENT AND OTHER SERVICES
- -------------------------------------------------------------------------------
MANAGER AND SERVICES PROVIDED The fund's manager is Templeton Investment
Counsel, Inc. The manager is wholly owned by Franklin Resources, Inc.
(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.
The manager provides investment research and portfolio management services, and
selects the securities for the fund to buy, hold or sell. The manager also
selects the brokers who execute the fund's portfolio transactions. The manager
provides periodic reports to the board, which reviews and supervises the
manager's investment activities. To protect the fund, the manager and its
officers, directors and employees are covered by fidelity insurance.
The Templeton organization has been investing globally since 1940. The manager
and its affiliates have offices in Argentina, Australia, Bahamas, Brazil, the
British Virgin Islands, Canada, China, Cyprus, France, Germany, Hong Kong,
India, Italy, Japan, Korea, Luxembourg, Mauritius, the Netherlands, Poland,
Russia, Singapore, South Africa, Spain, Sweden, Switzerland, Taiwan, United
Kingdom, and the U.S.
The manager and its affiliates manage numerous other investment companies and
accounts. The manager may give advice and take action with respect to any of the
PAGE
other funds it manages, or for its own account, that may differ from action
taken by the manager on behalf of the fund. Similarly, with respect to the fund,
the manager is not obligated to recommend, buy or sell, or to refrain from
recommending, buying or selling any security that the manager and access
persons, as defined by applicable federal securities laws, may buy or sell for
its or their own account or for the accounts of any other fund. The manager is
not obligated to refrain from investing in securities held by the fund or other
funds it manages. Of course, any transactions for the accounts of the manager
and other access persons will be made in compliance with the fund's code of
ethics.
Under the fund's code of ethics, employees of the Franklin Templeton Group who
are access persons may 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 by the close
of the business day following the day clearance is granted; (ii) copies of all
brokerage confirmations and statements must be sent to a compliance officer;
(iii) all brokerage accounts must be disclosed on an annual basis; and (iv)
access persons involved in preparing and making investment decisions must, in
addition to (i), (ii) and (iii) 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.
MANAGEMENT FEES The fund pays the manager a fee equal to an annual rate of 0.80%
of its average daily net assets. The fee is computed according to the terms of
the management agreement. Each class of the fund's shares pays its proportionate
share of the fee. Under a sub-advisory agreement that was terminated as of June
1, 1997, Investment Counsel paid InterCapital a sub-advisory fee equal to an
annual rate of 0.25% of the fund's average daily net assets. This fee was not a
separate expense of the fund but was paid by Investment Counsel from the
management fees it received from the fund.
For the last three fiscal years ended December 31, the fund paid the following
management fees:
PAGE
Management Fees Paid ($)
- ------------------ --------------------------------
1998 6,239,270
1997 6,354,032
1996 4,616,385
MANAGEMENT AGREEMENT The management agreement is in effect until April 30, 1999.
It may 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
management 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 on 60 days' written notice to Investment Counsel, or by Investment
Counsel on 60 days' written notice to the fund, and will automatically terminate
in the event of its assignment, as defined in the 1940 Act.
ADMINISTRATOR AND SERVICES PROVIDED Franklin Templeton Services, Inc. (FT
Services) has an agreement with the fund to provide certain administrative
services and facilities for the fund. FT Services is wholly owned by Resources
and is an affiliate of the fund's manager and principal underwriter.
The administrative services FT Services provides include preparing and
maintaining books, records, and tax and financial reports, and monitoring
compliance with regulatory requirements.
ADMINISTRATION FEES The fund pays FT Services a monthly fee equal to an annual
rate of:
/bullet/ 0.15% of the fund's average daily net assets up to $200 million;
/bullet/ 0.135% of average daily net assets over $200 million up to $700
million;
/bullet/ 0.10% of average daily net assets over $700 million up to $1.2
billion; and
/bullet/ 0.075% of average daily net assets over $1.2 billion.
During the last three fiscal years ended December 31, the fund paid the
following administration fees:
PAGE
Administration Fees Paid ($)
---------------- ----------------------------------------------------
1998 1,054,909
1997 1,069,254
1996 809,015/1/
1. Before October 1, 1996, Templeton Global Investors, Inc. provided
administrative services to the fund.
SHAREHOLDER SERVICING AND TRANSFER AGENT Franklin/Templeton Investor Services,
Inc. (Investor Services) is the fund's shareholder servicing agent and acts as
the fund's transfer agent and dividend-paying agent. Investor Services is
located at 100 Fountain Parkway, P.O. Box 33030, St. Petersburg, FL 33733-8030.
For its services, Investor Services receives a fixed fee per account. The fund
may also reimburse Investor Services for certain out-of-pocket expenses, which
may include payments by Investor Services to entities, including affiliated
entities, that provide sub-shareholder services, recordkeeping and/or transfer
agency services to beneficial owners of the fund. The amount of reimbursements
for these services per benefit plan participant fund account per year may not
exceed the per account fee payable by the fund to Investor Services in
connection with maintaining shareholder accounts.
CUSTODIAN The Chase Manhattan Bank, at its principal office at MetroTech Center,
Brooklyn, NY 11245, and at the offices of its branches and agencies throughout
the world, acts as custodian of the fund's assets. As foreign custody manager,
the bank selects and monitors foreign sub-custodian banks, selects and evaluates
non-compulsory foreign depositories, and furnishes information relevant to the
selection of compulsory depositories.
AUDITOR McGladrey & Pullen, LLP, 555 Fifth Avenue, New York, NY 10017, is the
fund's independent auditor. The auditor gives an opinion on the financial
statements included in the trust's Annual Report to Shareholders and reviews the
trust's registration statement filed with the U.S. Securities and Exchange
Commission (SEC).
PAGE
PORTFOLIO TRANSACTIONS
- ------------------------------------------------------------------------------
The manager 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, the manager 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 is negotiated between
the manager 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. The manager 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 the
manager, 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.
The manager may pay certain brokers commissions that are higher than those
another broker may charge, if the manager 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 the manager's overall responsibilities to client accounts over
which it exercises investment discretion. The services that brokers may provide
to the manager 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 the manager in carrying out its investment advisory
responsibilities. These services may not always directly benefit the fund. They
must, however, be of value to the manager 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 the manager receives from dealers effecting transactions in
portfolio securities. The allocation of transactions in order to obtain
additional research services allows the manager to supplement its own research
PAGE
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, the manager 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.
Because Franklin Templeton Distributors, Inc. (Distributors) is a member of the
National Association of Securities Dealers, Inc., it may sometimes receive
certain fees when the fund tenders portfolio securities pursuant to a
tender-offer solicitation. To recapture 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 the manager 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 the manager 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 the
manager, 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 may improve execution and reduce transaction costs to the
fund.
During the last three fiscal years ended December 31, the fund paid the
following brokerage commissions:
Brokerage Commissions ($)
---------------- --------------------------------
1998 2,087,224
1997 1,068,549
1996 557,462
As of [], 199[], the fund did not own securities of its regular broker-dealers.
PAGE
DISTRIBUTIONS AND TAXES
- -------------------------------------------------------------------------------
DISTRIBUTIONS OF NET INVESTMENT INCOME The fund receives income generally in the
form of dividends and interest on its investments. This income, less expenses
incurred in the operation of the fund, constitutes the fund's net investment
income from which dividends may be paid to you. Any distributions by the fund
from such income will be taxable to you as ordinary income, whether you take
them in cash or in additional shares.
DISTRIBUTIONS OF CAPITAL GAINS The fund may derive capital gains and losses in
connection with sales or other dispositions of its portfolio securities.
Distributions from net short-term capital gains will be taxable to you as
ordinary income. Distributions from net long-term capital gains will be taxable
to you as long-term capital gain, regardless of how long you have held your
shares in the fund. Any net capital gains realized by the fund generally will be
distributed once each year, and may be distributed more frequently, if
necessary, in order to reduce or eliminate excise or income taxes on the fund.
EFFECT OF FOREIGN INVESTMENTS ON DISTRIBUTIONS Most foreign exchange gains
realized on the sale of debt securities are treated as ordinary income by the
fund. Similarly, foreign exchange losses realized by the fund on the sale of
debt securities are generally treated as ordinary losses by the fund. These
gains when distributed will be taxable to you as ordinary dividends, and any
losses will reduce the fund's ordinary income otherwise available for
distribution to you. This treatment could increase or reduce the fund's ordinary
income distributions to you, and may cause some or all of the fund's previously
distributed income to be classified as a return of capital.
The fund may be subject to foreign withholding taxes on income from certain of
its foreign securities. If more than 50% of the fund's total assets at the end
of the fiscal year are invested in securities of foreign corporations, the fund
may elect to pass-through to you your pro rata share of foreign taxes paid by
the fund. If this election is made, the year-end statement you receive from the
fund will show more taxable income than was actually distributed to you.
However, you will be entitled to either deduct your share of such taxes in
computing your taxable income or (subject to limitations) claim a foreign tax
PAGE
credit for such taxes against your U.S. federal income tax. The fund will
provide you with the information necessary to complete your individual income
tax return if it makes this election.
INFORMATION ON THE TAX CHARACTER OF DISTRIBUTIONS The fund will inform you of
the amount of your ordinary income dividends and capital gains distributions at
the time they are paid, and will advise you of their tax status for federal
income tax purposes shortly after the close of each calendar year. If you have
not held fund shares for a full year, the fund may designate and distribute to
you, as ordinary income or capital gain, a percentage of income that is not
equal to the actual amount of such income earned during the period of your
investment in the fund.
ELECTION TO BE TAXED AS A REGULATED INVESTMENT COMPANY The fund has elected to
be treated as a regulated investment company under Subchapter M of the Internal
Revenue Code, has qualified as such for its most recent fiscal year, and intends
to so qualify during the current fiscal year. As a regulated investment company,
the fund generally pays no federal income tax on the income and gains it
distributes to you. The board reserves the right not to maintain the
qualification of the fund as a regulated investment company if it determines
such course of action to be beneficial to shareholders. In such case, the fund
will be subject to federal, and possibly state, corporate taxes on its taxable
income and gains, and distributions to you will be taxed as ordinary dividend
income to the extent of the fund's earnings and profits.
EXCISE TAX DISTRIBUTION REQUIREMENTS To avoid federal excise taxes, the Internal
Revenue Code requires the fund to distribute to you by December 31 of each year,
at a minimum, the following amounts: 98% of its taxable ordinary income earned
during the calendar year; 98% of its capital gain net income earned during the
twelve month period ending October 31; and 100% of any undistributed amounts
from the prior year. The fund intends to declare and pay these amounts in
December (or in January that are treated by you as received in December) to
avoid these excise taxes, but can give no assurances that its distributions will
be sufficient to eliminate all taxes.
PAGE
REDEMPTION OF FUND SHARES Redemptions and exchanges of fund shares are taxable
transactions for federal and state income tax purposes. If you redeem your fund
shares, or exchange your fund shares for shares of a different Franklin
Templeton Fund, the IRS will require that you report a gain or loss on your
redemption or exchange. If you hold your shares as a capital asset, the gain or
loss that you realize will be capital gain or loss and will be long-term or
short-term, generally depending on how long you hold your shares. Any loss
incurred on the redemption or exchange of shares held for six months or less
will be treated as a long-term capital loss to the extent of any long-term
capital gains distributed to you by the fund on those shares.
All or a portion of any loss that you realize upon the redemption of your fund
shares will be disallowed to the extent that you buy other shares in the fund
(through reinvestment of dividends or otherwise) within 30 days before or after
your share redemption. Any loss disallowed under these rules will be added to
your tax basis in the new shares you buy.
DEFERRAL OF BASIS If you redeem some or all of your shares in the fund, and then
reinvest the sales proceeds in the fund or in another Franklin Templeton Fund
within 90 days of buying the original shares, the sales charge that would
otherwise apply to your reinvestment may be reduced or eliminated. The IRS will
require you to report gain or loss on the redemption of your original shares in
the fund. In doing so, all or a portion of the sales charge that you paid for
your original shares in the fund will be excluded from your tax basis in the
shares sold (for the purpose of determining gain or loss upon the sale of such
shares). The portion of the sales charge excluded will equal the amount that the
sales charge is reduced on your reinvestment. Any portion of the sales charge
excluded from your tax basis in the shares sold will be added to the tax basis
of the shares you acquire from your reinvestment.
U.S. GOVERNMENT OBLIGATIONS Many states grant tax-free status to dividends paid
to you from interest earned on direct obligations of the U.S. government,
subject in some states to minimum investment requirements that must be met by
the fund. Investments in Government National Mortgage Association or Federal
National Mortgage Association securities, bankers' acceptances, commercial paper
and repurchase agreements collateralized by U.S. government securities do not
generally qualify for tax-free treatment. The rules on exclusion of this income
are different for corporations.
PAGE
DIVIDENDS RECEIVED DEDUCTION FOR CORPORATIONS If you are a corporate
shareholder, you should note that only a small percentage of the dividends paid
by the fund for the most recent fiscal year qualified for the dividends-received
deduction. In some circumstances, you will be allowed to deduct these qualified
dividends, thereby reducing the tax that you would otherwise be required to pay
on these dividends. The dividends-received deduction will be available only with
respect to dividends designated by the fund as eligible for such treatment. All
dividends (including the deducted portion) must be included in your alternative
minimum taxable income calculation.
INVESTMENT IN COMPLEX SECURITIES The fund may invest in complex securities.
These investments may be subject to numerous special and complex tax rules.
These rules could affect whether gains and losses recognized by the fund are
treated as ordinary income or capital gain, accelerate the recognition of income
to the fund and/or defer the fund's ability to recognize losses, and, in limited
cases, subject the fund to U.S. federal income tax on income from certain of its
foreign securities. In turn, these rules may affect the amount, timing or
character of the income distributed to you by the fund.
ORGANIZATION, VOTING RIGHTS AND PRINCIPAL HOLDERS
- -------------------------------------------------------------------------------
The fund is a diversified, open-end management investment company, commonly
called a mutual fund. The trust was organized as a Massachusetts business trust
on October 2, 1989, and is registered with the SEC.
As a shareholder of a Massachusetts business trust, you could, under certain
circumstances, be held personally liable as a partner for its obligations. The
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
PAGE
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 that you would incur financial loss on
account of shareholder liability is limited to the unlikely circumstance in
which both inadequate insurance exists and the fund itself is unable to meet its
obligations.
The fund currently offers three classes of shares, Class A, Class B, and Class
C. Before January 1, 1999, Class A shares were designated Class I and Class C
shares were designated Class II. The fund began offering Class B shares on
January 1, 1999. The fund may offer additional classes of shares in the future.
The full title of each class is:
/bullet/ Templeton Global Opportunities Fund - Class A
/bullet/ Templeton Global Opportunities Fund - Class B
/bullet/ Templeton Global Opportunities Fund - Class C
Shares of each class represent proportionate interests in the fund's assets. On
matters that affect the fund as a whole, each class has the same voting and
other rights and preferences as any other class. On matters that affect only one
class, only shareholders of that class may vote. Each class votes separately on
matters affecting only that class, or expressly required to be voted on
separately by state or federal law.
The trust has noncumulative voting rights. For board member elections, 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 trust does not intend to hold annual shareholder meetings. The trust may
hold special meetings, however, for matters requiring shareholder approval. A
meeting may be called by the board to consider the removal of a board member if
requested in writing by shareholders holding at least 10% of the outstanding
shares. In certain circumstances, we are required to help you communicate with
PAGE
other shareholders about the removal of a board member. A special meeting may
also be called by the board in its discretion.
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 of February 5, 1999, the officers and board members, as a group, owned of
record and beneficially less than 1% of the outstanding shares of each class.
The board members may own shares in other funds in the Franklin Templeton Group
of Funds.
BUYING AND SELLING SHARES
- -----------------------------------------------------------------------------
The fund continuously offers its shares through securities dealers who have an
agreement with Franklin Templeton Distributors, Inc. (Distributors). A
securities dealer includes any 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. Banks and financial institutions that
sell shares of the fund may be required by state law to register as securities
dealers.
For investors outside the U.S., the offering of fund shares may be limited in
many jurisdictions. An investor who wishes to buy shares of the fund should
determine, or have a broker-dealer determine, the applicable laws and
regulations of the relevant jurisdiction. Investors are responsible for
compliance with tax, currency exchange or other regulations applicable to
redemption and purchase transactions in any jurisdiction to which they may be
subject. Investors should consult appropriate tax and legal advisors to obtain
information on the rules applicable to these transactions.
PAGE
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.
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.
If you buy shares through the reinvestment of dividends, the shares 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.
INITIAL SALES CHARGES The maximum initial sales charge is 5.75% for Class A and
1% for Class C. There is no initial sales charge for Class B.
The initial sales charge for Class A shares may be reduced for certain large
purchases, as described in the prospectus. We offer several ways for you to
combine your purchases in the Franklin Templeton Funds to take advantage of the
lower sales charges for large purchases. The Franklin Templeton Funds include
the U.S. registered mutual funds in the Franklin Group of Funds(R) and the
Templeton Group of Funds except Franklin Valuemark Funds, Templeton Capital
Accumulator Fund, Inc., and Templeton Variable Products Series Fund.
CUMULATIVE QUANTITY DISCOUNT. For purposes of calculating the sales charge on
Class A shares, you may combine the amount of your current purchase with the
cost or current value, whichever is higher, of your existing shares in the
Franklin Templeton Funds. You may also combine the shares of your spouse,
children under the age of 21 or 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
PAGE
together the total plan assets invested in the Franklin Templeton Funds to
determine the sales charge that applies.
LETTER OF INTENT (LOI). You may buy Class A shares at a reduced sales charge by
completing the letter of intent section of your account 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. By completing the letter of intent section of the application, you
acknowledge and agree to the following:
/bullet/ You authorize Distributors to reserve 5% of your total intended
purchase in Class A shares registered in your name until you fulfill
your LOI. Your periodic statements will include the reserved shares in
the total shares you own, and we will pay or reinvest dividend and
capital gain distributions on the reserved shares according to the
distribution option you have chosen.
/bullet/ You give Distributors a security interest in the reserved shares and
appoint Distributors as attorney-in-fact.
/bullet/ 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 LOI.
/bullet/ Although you may exchange your shares, you may not sell reserved
shares until you complete the LOI or pay the higher sales charge.
After you file your LOI with the fund, you may buy Class A shares at the sales
charge applicable to the amount specified in your LOI. 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. Any Class A purchases you made within 90 days before you filed your
LOI may also qualify for a retroactive reduction in the sales charge. If you
file your LOI with the fund before a change in the fund's sales charge, you may
complete the LOI at the lower of the new sales charge or the sales charge in
effect when the LOI was filed.
Your holdings in the Franklin Templeton Funds acquired more than 90 days before
you filed your LOI will be counted towards the completion of the LOI, but they
PAGE
will not be entitled to a retroactive reduction 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 LOI have been completed.
If the terms of your LOI are met, the reserved shares will be deposited to an
account in your name or delivered to you or as you direct. If the amount of your
total purchases, less redemptions, is more than the amount specified in your LOI
and is an amount that would qualify for a further sales charge reduction, a
retroactive price adjustment will be made by Distributors and the securities
dealer through whom purchases were made. The price adjustment will be made on
purchases made within 90 days before and on those made after you filed your LOI
and will be applied towards the purchase of additional shares at the offering
price applicable to a single purchase or the dollar amount of the total
purchases.
If the amount of your total purchases, less redemptions, is less than the amount
specified in your LOI, the sales charge will be adjusted upward, depending on
the actual amount purchased (less redemptions) during the period. You will need
to send Distributors an amount equal to the difference in the actual dollar
amount of sales charge paid and the amount of sales charge that would have
applied to the total purchases if the total of the purchases had been made at
one time. Upon payment of this amount, 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, we will redeem an appropriate number of reserved shares to realize
the difference. If you redeem the total amount in your account before you
fulfill your LOI, we will deduct the additional sales charge due from the sale
proceeds and forward the balance to you.
For LOIs filed 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 LOI. These plans are not subject to the requirement to reserve 5% of
the total intended purchase or to the policy on upward adjustments in sales
charges described above, or to any penalty 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 LOI.
PAGE
GROUP PURCHASES. If you are a member of a qualified group, you may buy Class A
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:
/bullet/ Was formed at least six months ago,
/bullet/ Has a purpose other than buying fund shares at a discount,
/bullet/ Has more than 10 members,
/bullet/ Can arrange for meetings between our representatives and group
members,
/bullet/ Agrees to include Franklin Templeton Fund sales and other materials
in publications and mailings to its members at reduced or no cost to
Distributors,
/bullet/ Agrees to arrange for payroll deduction or other bulk transmission of
investments to the fund, and
/bullet/ Meets other uniform criteria that allow Distributors to achieve cost
savings in distributing shares.
A qualified group does not include a 403(b) plan that only allows salary
deferral contributions, although any such plan that purchased the fund's Class A
shares at a reduced sales charge under the group purchase privilege before
February 1, 1998, may continue to do so.
WAIVERS FOR INVESTMENTS FROM CERTAIN PAYMENTS. Class A shares may be purchased
without an initial sales charge or contingent deferred sales charge (CDSC) by
investors who reinvest within 365 days:
/bullet/ Dividend and capital gain distributions from any Franklin Templeton
Fund. The distributions generally must be reinvested in the same share
PAGE
class. Certain exceptions apply, however, to Class C shareholders who
chose to reinvest their distributions in Class A shares of the fund
before November 17, 1997, and to Advisor Class or Class Z shareholders
of a Franklin Templeton Fund who may reinvest their distributions in
the fund's Class A shares. This waiver category also applies to Class
B and C shares.
/bullet/ Dividend or capital gain distributions from a real estate investment
trust (REIT) sponsored or advised by Franklin Properties, Inc.
/bullet/ Annuity payments received under either an annuity option or from death
benefit proceeds, if the annuity contract offers as an investment
option the Franklin Valuemark Funds or the Templeton Variable Products
Series Fund. You should contact your tax advisor for information on
any tax consequences that may apply.
/bullet/ Redemption proceeds from a repurchase of shares of Franklin Floating
Rate Trust, if the shares were continuously held for at least 12
months.
If you immediately placed your redemption proceeds in a Franklin Bank
CD or a Franklin Templeton money fund, you may reinvest them as
described above. The proceeds must be reinvested within 365 days from
the date the CD matures, including any rollover, or the date you
redeem your money fund shares.
/bullet/ Redemption proceeds from the sale of Class A shares of any of the
Templeton Global Strategy Funds if you are a qualified investor.
If you paid a CDSC when you redeemed your Class A shares from a
Templeton Global Strategy Fund, a new CDSC will apply to your purchase
of fund shares and the CDSC holding period will begin again. We will,
however, credit your fund account with additional shares based on the
CDSC you previously paid and the amount of the redemption proceeds
that you reinvest.
If you immediately placed your redemption proceeds in a Franklin
Templeton money fund, you may reinvest them as described above. The
proceeds must be reinvested within 365 days from the date they are
redeemed from the money fund.
PAGE
/bullet/ Distributions from an existing retirement plan invested in the
Franklin Templeton Funds
WAIVERS FOR CERTAIN INVESTORS. Class A shares may also be purchased without an
initial sales charge or CDSC by various individuals and institutions due to
anticipated economies in sales efforts and expenses, including:
/bullet/ 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.
/bullet/ 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 fund shares without
paying sales charges. 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.
/bullet/ Broker-dealers, registered investment advisors or certified financial
planners who have entered into an agreement with Distributors for
clients participating in comprehensive fee programs
/bullet/ Qualified registered investment advisors who buy through a broker-
dealer or service agent who has entered into an agreement with
Distributors
/bullet/ Registered securities dealers and their affiliates, for their
investment accounts only
PAGE
/bullet/ Current employees of securities dealers and their affiliates and their
family members, as allowed by the internal policies of their employer
/bullet/ 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
/bullet/ Any investor who is currently a Class Z shareholder of Franklin Mutual
Series Fund Inc. (Mutual Series), or who is a former Mutual Series
Class Z shareholder who had an account in any Mutual Series fund on
October 31, 1996, or who sold his or her shares of Mutual Series Class
Z within the past 365 days
/bullet/ Investment companies exchanging shares or selling assets pursuant to
a merger, acquisition or exchange offer
/bullet/ Accounts managed by the Franklin Templeton Group
/bullet/ Certain unit investment trusts and their holders reinvesting
distributions from the trusts
/bullet/ Group annuity separate accounts offered to retirement plans
/bullet/ Chilean retirement plans that meet the requirements described under
"Retirement plans" below
RETIREMENT PLANS. Retirement plans sponsored by an employer (i) with at least
100 employees, or (ii) with retirement plan assets of $1 million or more, or
(iii) that agrees to invest at least $500,000 in the Franklin Templeton Funds
over a 13 month period may buy Class A shares without an initial sales charge.
Retirement plans that are not qualified retirement plans (employer sponsored
pension or profit-sharing plans that qualify under section 401 of the Internal
Revenue Code, including 401(k), money purchase pension, profit sharing and
defined benefit plans), SIMPLEs (savings incentive match plans for employees) or
SEPs (employer sponsored simplified employee pension plans established under
section 408(k) of the Internal Revenue Code) must also meet the group purchase
requirements described above to be able to buy Class A shares without an initial
PAGE
sales charge. We may enter into a special arrangement with a securities dealer,
based on criteria established by the fund, to add together certain small
qualified retirement plan accounts for the purpose of meeting these
requirements.
For retirement plan accounts opened on or after May 1, 1997, a CDSC may apply if
the retirement plan is transferred out of the Franklin Templeton Funds or
terminated within 365 days of the retirement plan account's initial purchase in
the Franklin Templeton Funds.
Any retirement plan that does not meet the requirements to buy Class A shares
without an initial 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 initial
sales charge of 4% of the offering price, 3.2% of which will be retained by
securities dealers.
SALES IN TAIWAN. 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.
The fund's Class A shares 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 A
shares may be offered with the following schedule of sales charges:
Size of Purchase - U.S. Dollars Sales Charge (%)
- ------------------------------------------------------------------------
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
DEALER COMPENSATION 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. Financial
PAGE
institutions or their affiliated brokers may receive an agency transaction fee
in the percentages indicated in the dealer compensation table in the fund's
prospectus.
Distributors may pay the following commissions, out of its own resources, to
securities dealers who initiate and are responsible for purchases of Class A
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 A shares by certain retirement plans without an initial sales
charge: 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 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
PAGE
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 rules of the National Association of Securities Dealers,
Inc.
Distributors routinely sponsors due diligence meetings for registered
representatives during which they receive updates on various Franklin Templeton
Funds and are afforded the opportunity to speak with portfolio managers.
Invitation to these meetings is not conditioned on selling a specific number of
shares. Those who have shown an interest in the Franklin Templeton Funds,
however, are more likely to be considered. To the extent permitted by their
firm's policies and procedures, registered representatives' expenses in
attending these meetings may be covered by Distributors.
CONTINGENT DEFERRED SALES CHARGE (CDSC) If you invest $1 million or more in
Class A shares, either as a lump sum or through our cumulative quantity discount
or letter of intent programs, a CDSC may apply on any shares you sell within 12
months of purchase. For Class C shares, a CDSC may apply if you sell your shares
within 18 months of purchase. The CDSC 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 A shares without an initial sales charge may also be
subject to a CDSC if the retirement plan is transferred out of the Franklin
Templeton Funds or terminated within 365 days of the account's initial purchase
in the Franklin Templeton Funds.
For Class B shares, there is a CDSC if you sell your shares within six years, as
described in the table below. The charge is based on the value of the shares
sold or the net asset value at the time of purchase, whichever is less.
IF YOU SELL YOUR CLASS B SHARES
WITHIN THIS MANY YEARS AFTER THIS % IS DEDUCTED FROM
BUYING THEM YOUR PROCEEDS AS A CDSC
- -----------------------------------------------------------------
1 Year 4
2 Years 4
3 Years 3
4 Years 3
5 Years 2
6 Years 1
7 Years 0
PAGE
CDSC WAIVERS. The CDSC for any share class will generally be waived for:
/bullet/ Account fees
/bullet/ Sales of Class A shares purchased without an initial sales charge by
certain retirement plan accounts if (i) the account was opened before
May 1, 1997, or (ii) the securities dealer of record received a
payment from Distributors of 0.25% or less, or (iii) Distributors did
not make any payment in connection with the purchase, or (iv) the
securities dealer of record has entered into a supplemental agreement
with Distributors
/bullet/ Redemptions of Class A shares by investors who purchased $1 million
or more without an initial sales charge if Distributors did not make
any payment to the securities dealer of record in connection with the
purchase
/bullet/ Redemptions by the fund when an account falls below the minimum
required account size
/bullet/ Redemptions following the death of the shareholder or beneficial owner
/bullet/ Redemptions through a systematic withdrawal plan set up before
February 1, 1995
/bullet/ Redemptions through a systematic withdrawal plan set up on or after
February 1, 1995, up to 1% monthly, 3% quarterly, 6% semiannually or
12% annually of your account's net asset value depending on the
frequency of your plan
/bullet/ Redemptions by Franklin Templeton Trust Company employee benefit
plans or employee benefit plans serviced by ValuSelect(R) (not
applicable to Class B)
/bullet/ Distributions from individual retirement accounts (IRAs) due to death
or disability or upon periodic distributions based on life expectancy
(for Class B, this applies to all retirement plan accounts, not only
IRAs)
PAGE
/bullet/ Returns of excess contributions (and earnings, if applicable) from
retirement plan accounts
/bullet/ Participant initiated distributions from employee benefit plans or
participant initiated exchanges among investment choices in employee
benefit plans (not applicable to Class B)
EXCHANGE PRIVILEGE If you request the exchange of the total value of your
account, declared but unpaid income dividends and capital gain distributions
will be reinvested in the fund and exchanged into the new fund at net asset
value when paid. Backup withholding and information reporting may apply.
If a substantial number of shareholders should, within a short period, sell
their fund shares 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 goal exist
immediately. This money will then be withdrawn from the short-term,
interest-bearing 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 seventh day following the sale. The funds you are seeking to
exchange into may delay issuing shares pursuant to an exchange until that
seventh 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.
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. There are no service charges for establishing or
maintaining a systematic withdrawal plan. Once your plan is established, any
PAGE
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. If the 25th falls on a weekend or holiday, we will process
the redemption on the next business day. 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 CDSC.
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.
You may discontinue a systematic withdrawal plan, change the amount and schedule
of withdrawal payments, or suspend one payment by notifying us by mail or by
phone at least seven business days before the end of the month preceding a
scheduled payment. 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.
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 U.S. Securities and Exchange
Commission (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
PAGE
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.
SHARE CERTIFICATES We will credit your shares to your fund account. We do not
issue share certificates unless you specifically request them. This eliminates
the costly problem of replacing lost, stolen or destroyed certificates. If a
certificate is lost, stolen or destroyed, you may have to pay an insurance
premium of up to 2% of the value of the certificate to replace it.
Any outstanding share certificates must be returned to the fund if you want to
sell or exchange those shares or if you would like to start a systematic
withdrawal plan. The certificates should be properly endorsed. You can do this
either by signing the back of the certificate or by completing a share
assignment form. For your protection, you may prefer to complete a share
assignment form and to send the certificate and assignment form in separate
envelopes.
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.
Distribution or redemption checks sent to you do not earn interest or any other
income during the time the checks remain uncashed. Neither the fund nor its
affiliates will be liable for any loss caused by your failure to cash such
checks. The fund is not responsible for tracking down uncashed checks, unless a
check is returned as undeliverable.
In most cases, if mail is returned as undeliverable we are required to take
certain steps to try to find you free of charge. If these attempts are
unsuccessful, however, we may deduct the costs of any additional 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.
PAGE
The wiring of redemption proceeds is a special service that we make available
whenever possible. By offering this service to you, the fund is not bound to
meet any redemption request in less than the seven day period prescribed by law.
Neither the fund nor its agents shall be liable to you or any other person if,
for any reason, a redemption request by wire is not processed as described in
the prospectus.
Franklin Templeton Investor Services, Inc. (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.
If you buy or sell shares through your securities dealer, we use the net asset
value next calculated after your securities dealer receives your request, which
is promptly transmitted to the fund. 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. 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. Any loss to you resulting from your dealer's failure to transmit your
redemption order to the fund in a timely fashion must be settled between you and
your securities dealer.
Certain shareholder servicing agents may be authorized to accept your
transaction request.
For institutional accounts, there may be additional methods of buying or selling
fund shares than those described in this SAI or in the prospectus.
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.
PAGE
PRICING SHARES
- ------------------------------------------------------------------------------
When you buy shares, you pay the offering price. The offering price is the net
asset value (NAV) per share plus any applicable sales charge, calculated to two
decimal places using standard rounding criteria. When you sell shares, you
receive the NAV minus any applicable CDSC.
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.
The fund calculates the NAV per share of each class each business day at the
close of trading on the New York Stock Exchange (normally 1:00 p.m. pacific
time). The fund does not calculate the NAV on days the New York Stock Exchange
(NYSE) is closed for trading, which include New Year's Day, Martin Luther King
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day.
When determining its NAV, the fund values cash and receivables at their
realizable amounts, and records interest as accrued and dividends on the
ex-dividend date. If market quotations are readily available for portfolio
securities listed on a securities exchange or on the NASDAQ National Market
System, the fund values those securities at the last quoted sale price of the
day or, if there is no reported sale, within the range of the most recent quoted
bid and ask prices. The fund values over-the-counter portfolio securities within
the range of the most recent quoted bid and ask prices. If portfolio securities
trade both in the over-the-counter market and on a stock exchange, the fund
values them according to the broadest and most representative market as
determined by the manager.
The fund values portfolio securities underlying actively traded call options at
their market price as determined above. The current market value of any option
the fund holds is its last sale price on the relevant exchange before the fund
values its assets. If there are no sales that day or if the last sale price is
outside the bid and ask prices, the fund values options within the range of the
PAGE
current closing bid and ask prices if the fund believes the valuation fairly
reflects 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 fund's NAV is not calculated. Thus, the calculation of the fund's NAV
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.
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 use a pricing service, bank or securities dealer to perform any of the
above described functions.
THE UNDERWRITER
- ------------------------------------------------------------------------------
Franklin Templeton Distributors, Inc. (Distributors) acts as the principal
underwriter in the continuous public offering of the fund's shares. Distributors
is located at 777 Mariners Island Blvd., San Mateo, CA 94404.
DISTRIBUTORS is located at 777 Mariners Island Blvd., San Mateo, CA 94404.
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.
The table below shows the aggregate underwriting commissions Distributors
received in connection with the offering of the fund's shares, the net
underwriting discounts and commissions Distributors retained after allowances to
dealers, and the amounts Distributors received in connection with redemptions or
repurchases of shares for the last three fiscal years ended December 31:
<TABLE>
<CAPTION>
Aount Received in
Total Connection wih
Commissions Amount Retained by Redemptions and
Received ($) Distributors ($) Repurchases ($)
- ----------------------------------------------------------------- -------------
<S> <C> <C> <C>
1998 2,087,224 326,934 38,939
1997 2,526,530 292,162 7,564
1996 1,426,146 170,283 2,696
</TABLE>
Distributors may be entitled to reimbursement under the Rule 12b-1 plans, as
discussed below. Except as noted, Distributors received no other compensation
from the fund for acting as underwriter.
DISTRIBUTION AND SERVICE (12B-1) FEES Each class has a separate distribution or
"Rule 12b-1" plan. Under each plan, the fund shall pay or may reimburse
Distributors or others for the expenses of activities that are primarily
intended to sell shares of the class. These expenses may include, among others,
distribution or service fees paid to securities dealers or others who have
executed a servicing agreement with the fund, Distributors or its affiliates; a
prorated portion of Distributors' overhead expenses; and the expenses of
printing prospectuses and reports used for sales purposes, and preparing and
distributing sales literature and advertisements.
The distribution and service (12b-1) fees charged to each class are based only
on the fees attributable to that particular class.
THE CLASS A PLAN. Payments by the fund under the Class A plan may not exceed
0.25% per year of Class A's average daily net assets, payable quarterly.
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, 1998, there were no
unreimbursed expenses under the Class A plan.
PAGE
THE CLASS B AND C PLANS. Under the Class B and C plans, the fund pays
Distributors up to 0.75% per year of the class's average daily net assets,
payable quarterly, to pay Distributors or others for providing distribution and
related services and bearing certain expenses. All distribution expenses over
this amount will be borne by those who have incurred them. The fund may also pay
a servicing fee of up to 025% per year of the class's average daily net assets,
payable quarterly. This fee may be used to pay securities dealers or others for,
among other things, helping to establish and maintain customer accounts and
records, helping with requests to buy and sell shares, receiving and answering
correspondence, monitoring dividend payments from the fund on behalf of
customers, and similar servicing and account maintenance activities.
The expenses relating to each of the Class B and C plans are also used to pay
Distributors for advancing the commission costs to securities dealers with
respect to the initial sale of Class B and C shares. Further, the expenses
relating to the Class B plan may be used by Distributors to pay third party
financing entities that have provided financing to Distributors in connection
with advancing commission costs to securities dealers.
THE CLASS A, B AND C PLANS. 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 National Association of Securities Dealers, Inc.
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
PAGE
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 noninterested
members of the fund's board. The plans and any related agreement may be
terminated at any time, without penalty, by vote of a majority of the
noninterested 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 the manager 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 noninterested board
members, 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, 1998, Distributors' eligible expenditures
for advertising, printing, and payments to underwriters and broker-dealers
pursuant to the plans and the amounts the fund paid Distributors under the plans
were:
PAGE
Distributors' Eligible Amount Paid
Expenses ($) by the Fund ($)
- ------------------------------------------------------------------------------
Class A 2,589,494 1,864,590
Class B N/A N/A
Class C 384,243 369,351
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 return quotations 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 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.
AVERAGE ANNUAL TOTAL RETURN Average annual total return is determined by finding
the average annual rates of return over the periods indicated below that would
equate an initial hypothetical $1,000 investment to its ending redeemable value.
The calculation assumes the maximum initial 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 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 initial sales
charge currently in effect.
When considering the average annual total return quotations for Class A and C
shares, you should keep in mind that the maximum initial sales charge reflected
in each quotation is a one time fee charged on all direct purchases, which will
PAGE
have its greatest impact during the early stages of your investment. This charge
will affect actual performance less the longer you retain your investment in the
fund. The average annual total returns for the indicated periods ended December
31, 1998, were:
1 Year 5 Years Since Inception
(1/19/90)
- -------------------------------------------------------------------
Class A -6.29% 7.60% 11.29%
1 Year Since Inception (5/1/95)
- ----------------------------------------------- -------
Class C -3.21% 11.13%
These figures were calculated according to the SEC formula:
P(1+T)n = ERV
where:
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 each period at the
end of each period
CUMULATIVE TOTAL RETURN Like average annual total return, cumulative total
return assumes the maximum initial 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, is based on the
actual return for a specified period rather than on the average return over the
periods indicated above. The cumulative total returns for the indicated periods
ended December 31, 1998, were:
1 Year 5 Years Since Inception
(1/19/90)
- ----------------------------------------------------------------------------
Class A -6.29% 44.26% 160.35%
1 Year Since Inception (5/1/95)
- -----------------------------------------------------------
Class C -3.21% 47.25
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
PAGE
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.
OTHER PERFORMANCE QUOTATIONS The fund may also quote the performance of shares
without a sales charge. Sales literature and advertising may quote a cumulative
total return, average annual total return and other measures of performance 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
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 goals and performance results of funds belonging to the Franklin
Templeton Group of Funds. Franklin Resources, Inc. 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 goal, advertisements and other materials about the fund
may discuss certain measures of fund 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 goals and assets, or
PAGE
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 the manager may also refer to the following
information:
/bullet/ The manager's and its affiliates' market share of international
equities managed in mutual funds prepared or published by Strategic
Insight or a similar statistical organization.
/bullet/ The performance of U.S. equity and debt markets relative to foreign
markets prepared or published by Morgan Stanley Capital
International(R) or a similar financial organization.
/bullet/ The capitalization of U.S. and foreign stock markets as prepared or
published by the International Finance Corporation, Morgan Stanley
Capital International(R) or a similar financial organization.
/bullet/ The geographic and industry distribution of the fund's portfolio and
the fund's top ten holdings.
/bullet/ 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.
/bullet/ 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).
/bullet/ The major industries located in various jurisdictions as published by
the Morgan Stanley Index.
/bullet/ Rankings by DALBAR Surveys, Inc. with respect to mutual fund
shareholder services.
PAGE
/bullet/ Allegorical stories illustrating the importance of persistent
long-term investing.
/bullet/ The fund's portfolio turnover rate and its ranking relative to
industry standards as published by Lipper Analytical Services, Inc. or
Morningstar, Inc.
/bullet/ 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.
/bullet/ Comparison of the characteristics of various emerging markets,
including population, financial and economic conditions.
/bullet/ Quotations from the Templeton organization's founder, Sir John
Templeton,* advocating the virtues of diversification and long-term
investing.
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 the fund's performance to the
return on certificates of deposit (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.
- --------------------
* Sir John Templeton sold the Templeton organization to Franklin Resources, Inc.
in October 1992 and resigned from the board on April 16, 1995. He is no longer
involved with the investment management process.
PAGE
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 is one of the
oldest mutual fund organizations and now services more than 3 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, a pioneer in international investing. The Mutual Series team,
known for its value-driven approach to domestic equity investing, became part of
the organization four years later. Together, the Franklin Templeton Group has
over $220 billion in assets under management for more than 7 million U.S. based
mutual fund shareholder and other accounts. The Franklin Templeton Group of
Funds offers 115 U.S. based open-end investment companies to the public. The
fund may identify itself by its NASDAQ symbol or CUSIP number.
PAGE
Currently, there are more mutual funds than there are stocks listed on the New
York Stock Exchange. While many of them have similar investment goals, no two
are exactly alike. Shares of the fund are generally sold through securities
dealers, whose investment representatives are experienced professionals who can
offer advice on the type of investments suitable to your unique goals and needs,
as well as the risks associated with such investments.
The Information Services & Technology division of Franklin Resources, Inc.
(Resources) established a Year 2000 Project Team in 1996. This team has already
begun making necessary software changes to help the computer systems that
service the fund and its shareholders to be Year 2000 compliant. After
completing these modifications, comprehensive tests are conducted in one of
Resources' U.S. test labs to verify their effectiveness. Resources continues to
seek reasonable assurances from all major hardware, software or data-services
suppliers that they will be Year 2000 compliant on a timely basis. Resources is
also beginning to develop a contingency plan, including identification of those
mission critical systems for which it is practical to develop a contingency
plan. However, in an operation as complex and geographically distributed as
Resources' business, the alternatives to use of normal systems, especially
mission critical systems, or supplies of electricity or long distance voice and
data lines are limited.
DESCRIPTION OF BOND RATINGS
- ------------------------------------------------------------------------------
CORPORATE BOND RATINGS
MOODY'S INVESTORS SERVICE, INC. (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 high quality by all standards. Together
with the Aaa group, they comprise what are generally known as high-grade bonds.
PAGE
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 that 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 that 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 protective elements may be lacking
or may be characteristically unreliable over any great length of time. These
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. These 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 that are speculative to a high degree.
These 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
PAGE
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.
STANDARD & POOR'S CORPORATION (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 a 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 these bonds will likely have some quality and protective
characteristics, they 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.
PAGE
D - Debt rated D is in default and payment of interest and/or repayment of
principal is in arrears.
Plus (+) or minus (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
COMMERCIAL PAPER RATINGS
MOODY'S
Moody's commercial paper ratings are opinions of the ability of issuers to repay
punctually their promissory obligations not having an original maturity in
excess of nine months. Moody's employs the following designations, all judged to
be investment grade, to indicate the relative repayment capacity of rated
issuers:
P-1 (Prime-1): Superior capacity for repayment.
P-2 (Prime-2): Strong capacity for repayment.
S&P
S&P's ratings are a current assessment of the likelihood of timely payment of
debt having an original maturity of no more than 365 days. Ratings are graded
into four categories, ranging from "A" for the highest quality obligations to
"D" for the lowest. Issues within the "A" category are delineated with the
numbers 1, 2 and 3 to indicate the relative degree of safety, as follows:
A-1: This designation indicates the degree of safety regarding timely payment is
very strong. A "plus" (+) designation indicates an even stronger likelihood of
timely payment.
A-2: Capacity for timely payment on issues with this designation is strong. The
relative degree of safety, however, is not as overwhelming as for issues
designated A-1.
A-3: Issues carrying this designation have a satisfactory capacity for timely
payment. They are, however, somewhat more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.
PAGE
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS
The following exhibits are incorporated by reference to the previously filed
documents indicated below, except as noted:
(A) ARTICLES OF INCORPORATIONS
( i) Amended and Restated Declaration of Trust /3/
(ii) Establishment and Designation of Classes of Shares of
Beneficial Interest /2/
(B) BY-LAWS
(i) By-Laws /3/
(C) INSTRUMENTS DEFINING RIGHTS OF SECURITY HOLDERS
Not Applicable
(D) INVESTMENT ADVISORY CONTRACTS
( i) Amended and Restated Investment Management
Agreement /2/
(E) UNDERWRITING CONTRACTS
( i) Distribution Agreement /3/
( ii) Form of Dealer Agreement between Registrant and
Franklin Templeton Distributors, Inc. and Securities
Dealers dated March 1, 1998 /6/
(iii) Amendment of Dealer Agreement dated May 15, 1998 /6/
(F) BONUS OR PROFIT SHARING CONTRACTS
Not Applicable
(G) CUSTODIAN AGREEMENTS
( i) Custody Agreement /3/
( ii) Amendment dated March 2, 1998 to the Custody
Agreement /6/
(iii) Amendment No. 2 dated July 23, 1998 to the Custody
Agreement /6/
PAGE
(H) OTHER MATERIAL CONTRACTS
( i) Amended and Restated Transfer Agent Agreement /4/
( ii) Fund Administration Agreement /4/
(iii) Shareholder Sub-Accounting Services Agreement /3/
( iv) Sub-Transfer Agent Services Agreement /3/
(I) LEGAL OPINION
(i) Opinion and Consent of Counsel /5/
(J) OTHER OPINION
(i) Consent of Independent Public Accountants
(K) OMITTED FINANCIAL STATEMENTS
Not Applicable
(L) INITIAL CAPITAL AGREEMENTS
( i) Letter concerning initial capital /1/
(M) RULE 12B-1 PLAN
( i) Distribution Plan -- Class A Shares /2/
( ii) Distribution Plan -- Class C Shares /2/
(iii) Form of Distribution Plan -- Class B Shares /6/
(O) RULE 18F-3 PLAN
( i) Form of Multi Class Plan /2/
(ii) Form of Multi Class Plan - Class B Shares /6/
(P) POWER OF ATTORNEY
(i) Powers of Attorney dated December 11, 1998 /6/
(27) FINANCIAL DATA SCHEDULE
( i) Financial Data Schedule for Templeton Global
Opportunities Trust - Class A
( ii) Financial Data Schedule for Templeton Global
Opportunties Trust - Class C
PAGE
- ---------------------
1. Previously filed with Pre-Effective Amendment No. 2 to the Registration
Statement on January 19, 1990.
2. Previously filed with Post-Effective Amendment No. 8 to the Registration
Statement on April 28, 1995.
3. Previously filed with Post-Effective Amendment No.9 to the Registration
Statement on April 29, 1996.
4. Previously filed with Post-Effective Amendment No. 11 to the Registration
Statement on April 30, 1997.
5. Previously filed with Post-Effective Amendment No.12 to the Registration
Statement on February 27, 1998.
6. Previously filed with Post-Effective Amendment No. 13 to the Registration
Statement on December 31, 1998.
PAGE
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
NONE.
ITEM 25. 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 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT
(a) Templeton Investment Counsel, Inc.
The officers and directors of the Registrant's manager also serve as
officers and/or directors for (1) the manager's corporate parent,
Franklin Resources, Inc., and/or (2) other investment companies in the
Franklin Templeton Group of Funds.
For additional information please see Part B and Schedules A and D of
Form ADV of the Fund's Investment Manager (SEC File 801-15127),
incorporated herein by reference, which sets forth the officers and
directors of the investment manager and information as to any
business, profession, vocation or employment of a substantial nature
engaged in by those officers and directors during the past two years.
ITEM 27. PRINCIPAL UNDERWRITERS
(a) Franklin Templeton Distributors, Inc.("Distributors") also acts
as principal underwriter of shares of:
Templeton American Trust, Inc.
Templeton Capital Accumulator Fund, Inc.
Templeton Developing Markets Trust
Templeton Funds, Inc.
Templeton Global Investment Trust
Templeton Global Real Estate Fund
Templeton Global Smaller Companies Fund, Inc.
Templeton Growth Fund, Inc.
Templeton Income Trust
Templeton Institutional Funds, 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 Floating Rate Trust
Franklin Gold Fund
Franklin High Income Trust
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
Franklin New York Tax-Free Trust
Franklin Real Estate Securities Fund
Franklin Strategic Mortgage Portfolio
Franklin Strategic Series
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 information required by this Item 27 with respect to each
director and officer of Distributors is incorporated by
reference to Part B of this Form N-1A and Schedule A of Form
BD filed by Distributors with the Securities and Exchange
Commission pursuant to the Securities Act of 1934 (SEC File
No. 8-5889)
(c) Registrant's principal underwriter is an affiliated person of
Registrant.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
Certain 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 thereunder are located at
500 East Broward Boulevard. Fort Lauderdale, Florida 33394. Other
records are maintained at the offices of Franklin Templeton
Investor Services, Inc., 100 Fountain Parkway, St. Petersburg,
Florida 33716-1205 and Franklin Resources, Inc., 777 Mariners
Island Boulevard, San Mateo, California 94404.
ITEM 29. MANAGEMENT SERVICES
There are no management-related service contracts not discussed
in Part A or Part B.
ITEM 30. UNDERTAKINGS.
Not Applicable.
PAGE
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of San Mateo, California, on the 1st day of March, 1999.
TEMPLETON DEVELOPING MARKETS TRUST
By:
---------------------------------
J. Mark Mobius, President*
Pursuant to the requirements of the Securities Act of 1933, this
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 March 1, 1999
Martin L. Flanagan Executive Officer)
____________________ Trustee March 1, 1999
Charles B. Johnson*
____________________ Trustee March 1, 1999
Rupert H. Johnson, Jr.*
_____________________ Trustee March 1, 1999
Betty P. Krahmer*
___________________ Trustee March 1, 1999
Constantine Dean
Tseretopoulos*
____________________ Trustee March 1, 1999
Frank J. Crothers*
</TABLE>
PAGE
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -----------------------------------------------------------------------------
<S> <C> <C>
____________________ Trustee March 1, 1999
Fred R. Millsaps*
_____________________
Harris J. Ashton* Trustee March 1, 1999
____________________ Trustee March 1, 1999
S. Joseph Fortunato*
____________________ Trustee March 1, 1999
Andrew H. Hines, Jr.*
____________________ Trustee March 1, 1999
John Wm. Galbraith*
___________________ Trustee March 1, 1999
Gordon S. Macklin*
____________________ Trustee March 1, 1999
Nicholas F. Brady*
____________________ Trustee March 1, 1999
Edith E. Holiday*
____________________ Treasurer (Chief March 1, 1999
James R. Baio* Financial and
Accounting Officer)
</TABLE>
*By: /s/LEIANN NUZUM
---------------------
Leiann Nuzum
Attorney-in-Fact
(Pursuant to Powers of Attorney previously filed).
PAGE
TEMPLETON GLOBAL OPPORTUNITIES TRUST
REGISTRATION STATEMENT
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION LOCATION
<S> <C> <C>
EX-99.(a)(i) Amended and Restated Declaration of Trust *
EX-99.(a)(ii) Establishment and Designation of Classes of Shares of *
Beneficial Interest
EX-99.(b)(i) By-Laws of Templeton Developing Markets Trust *
EX-99.(d)(i) Amended and Restated Investment Management Agreement *
EX-99.(e)(i) Distribution Agreement *
EX-99.(e)(ii) Form of Dealer Agreement between Registrant and *
Franklin Templeton Distributors, Inc. and Securities
Dealers
EX-99.(e)(iii) Amendment of Dealer Agreement *
EX-99.(g)(i) Custody Agreement *
EX-99.(g)(ii) Amendment dated March 2, 1998 to the Custody
Agreement *
EX-99.(g)(iii) Amendment No.2 dated July 23, 1998 to the Custody *
Agreement
EX-99.(h)(i) Amended and Restated Transfer Agent Agreement *
EX-99.(h)(ii) Fund Administration Agreement *
EX-99.(h)(iii) Shareholder Sub-Accounting Services Agreement *
EX-99.(h)(iv) Sub-Transfer Agent Services Agreement *
EX-99.(i)(i) Opinion and Consent Counsel *
EX-99.(j)(i) Consent of Independent Public Accountant Attached
EX-99.(l)(i) Letter concerning initial capital *
EX-99.(m)(i) Distribution Plan - Class A Shares *
EX-99.(m)(ii) Distribution Plan - Class C Shares *
EX-99.(m)(iii) Form of Distribution Plan - Class B Shares *
EX-99.(o)(i) Form of Multi-Class Plan *
EX-99.(o)(ii) Form of Multi-Class Plan - Class B Shares *
EX-99.(p)(i) Power of Attorney dated December 11, 1998 *
EX-27.(i) Financial Data Schedule for Templeton Global Attached
Opportunities Trust - Class A
EX-27.(ii) Financial Data Schedule for Templeton Global Attached
Opportunities Trust - Class C
</TABLE>
* Incorporated by reference.
MCGLADREY & PULLEN, LLP
Certified Public Accountants and Consultants
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use of our report dated January 28, 1999 on the
financial statements of Templeton Global Opportunities Trust referred to
therein, which appears in the 1998 Annual Report to Shareholders, and which is
incorporated herein by reference, in Post-Effective Amendment No. 14 to the
Registration Statement on Form N-1A, 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 "Auditors".
/s/McGladrey & Pullen, LLP
New York, New York
February 26, 1999
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
The schedule contains summary financial information extracted from the
Templeton Global Opportunities Trust, December 31, 1998, 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> TEMPLETON GLOBAL OPPORTUNITIES TRUST-CLASS I
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 607405693
<INVESTMENTS-AT-VALUE> 722356164
<RECEIVABLES> 20195058
<ASSETS-OTHER> 77898
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 742629120
<PAYABLE-FOR-SECURITIES> 50223415
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2874801
<TOTAL-LIABILITIES> 53098216
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 554933792
<SHARES-COMMON-STOCK> 44834593
<SHARES-COMMON-PRIOR> 51332893
<ACCUMULATED-NII-CURRENT> 3690136
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 15956505
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 114950471
<NET-ASSETS> 689530904
<DIVIDEND-INCOME> 16171598
<INTEREST-INCOME> 13374028
<OTHER-INCOME> 0
<EXPENSES-NET> (11285835)
<NET-INVESTMENT-INCOME> 18259791
<REALIZED-GAINS-CURRENT> 16210598
<APPREC-INCREASE-CURRENT> (36288088)
<NET-CHANGE-FROM-OPS> (1817699)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (14111066)
<DISTRIBUTIONS-OF-GAINS> (14629485)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 31019020
<NUMBER-OF-SHARES-REDEEMED> (39210265)
<SHARES-REINVESTED> 1692945
<NET-CHANGE-IN-ASSETS> (135315271)
<ACCUMULATED-NII-PRIOR> 189982
<ACCUMULATED-GAINS-PRIOR> 14908918
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6239270
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (11285835)
<AVERAGE-NET-ASSETS> 742960426
<PER-SHARE-NAV-BEGIN> 15.32
<PER-SHARE-NII> .39
<PER-SHARE-GAIN-APPREC> (.48)
<PER-SHARE-DIVIDEND> (.32)
<PER-SHARE-DISTRIBUTIONS> (.28)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.63
<EXPENSE-RATIO> 1.41
<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, 1998, 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> TEMPLETON GLOBAL OPPORTUNITIES TRUST-CLASS II
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 607405693
<INVESTMENTS-AT-VALUE> 722356164
<RECEIVABLES> 20195058
<ASSETS-OTHER> 77898
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 742629120
<PAYABLE-FOR-SECURITIES> 50223415
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2874801
<TOTAL-LIABILITIES> 53098216
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 554933792
<SHARES-COMMON-STOCK> 2304812
<SHARES-COMMON-PRIOR> 2545984
<ACCUMULATED-NII-CURRENT> 3690136
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 15956505
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 114950471
<NET-ASSETS> 689530904
<DIVIDEND-INCOME> 16171598
<INTEREST-INCOME> 13374028
<OTHER-INCOME> 0
<EXPENSES-NET> (11285835)
<NET-INVESTMENT-INCOME> 18259791
<REALIZED-GAINS-CURRENT> 16210598
<APPREC-INCREASE-CURRENT> (36288088)
<NET-CHANGE-FROM-OPS> (1817699)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (458589)
<DISTRIBUTIONS-OF-GAINS> (723508)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 660394
<NUMBER-OF-SHARES-REDEEMED> (972334)
<SHARES-REINVESTED> 70768
<NET-CHANGE-IN-ASSETS> (135315271)
<ACCUMULATED-NII-PRIOR> 189982
<ACCUMULATED-GAINS-PRIOR> 14908918
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6239270
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (11285835)
<AVERAGE-NET-ASSETS> 36948264
<PER-SHARE-NAV-BEGIN> 15.17
<PER-SHARE-NII> .24
<PER-SHARE-GAIN-APPREC> (.43)
<PER-SHARE-DIVIDEND> (.20)
<PER-SHARE-DISTRIBUTIONS> (.28)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.50
<EXPENSE-RATIO> 2.16
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
