TEMPLETON
INSTITUTIONAL FUNDS, INC. PROSPECTUS -- MAY 1, 1995
- --------------------------------------------------------------------------------
INVESTMENT Templeton Institutional Funds, Inc. (the 'Company') is an open-
OBJECTIVES AND end management investment company currently consisting of five
POLICIES separate series (the 'Funds'). The Company is primarily
designed as an investment medium for financial institutions
(such as banks, savings institutions and credit unions);
pension, profit sharing and employee benefit plans and trusts;
endowments, foundations and corporations; and individuals who
meet the Company's minimum $5 million investment requirement.
GROWTH SERIES seeks to achieve long-term capital growth by investing in
stocks and debt obligations of companies and governments of any nation.
FOREIGN EQUITY SERIES seeks to achieve long-term capital growth by investing
in stocks and debt obligations of companies and governments outside the United
States.
EMERGING MARKETS SERIES seeks to achieve long-term capital growth by
investing in securities of issuers of countries having emerging markets.
GLOBAL FIXED INCOME SERIES seeks to achieve high total return by investing
primarily in a portfolio of fixed-income securities (including debt securities
and preferred stock) of U.S. and foreign issuers.
FOREIGN EQUITY (SOUTH AFRICA FREE) SERIES seeks to achieve long-term capital
growth by investing in stocks and debt obligations of companies and governments
outside both the U.S. and South Africa.
INVESTMENTS IN EMERGING MARKETS INVOLVES CERTAIN CONSIDERATIONS WHICH ARE
NOT NORMALLY INVOLVED IN INVESTMENT IN SECURITIES OF U.S. COMPANIES, AND AN
INVESTMENT IN THE FUNDS MAY BE CONSIDERED SPECULATIVE. THE FUNDS MAY BORROW
MONEY FOR INVESTMENT PURPOSES, WHICH MAY INVOLVE GREATER RISK AND ADDITIONAL
COSTS TO THE FUNDS. IN ADDITION, THE FUNDS MAY INVEST UP TO 10% OF THEIR ASSETS
IN RESTRICTED SECURITIES, WHICH MAY INVOLVE GREATER RISK AND INCREASED FUND
EXPENSES.
- --------------------------------------------------------------------------------
PURCHASE OF Please complete and return the Institutional Account
SHARES Application Form. If you need assistance in completing this
Form, please call our Account Services Department. The Funds'
Shares may be purchased at a price equal to their net asset
value, subject to certain minimum initial purchase
requirements. See 'How to Buy Shares of the Funds.'
- --------------------------------------------------------------------------------
PROSPECTUS This Prospectus sets forth concisely information about the
INFORMATION Funds that a prospective investor ought to know before
investing. Investors are advised to read and retain this
Prospectus for future reference. A Statement of Additional
Information ('SAI') dated May 1, 1995 has been filed with the
Securities and Exchange Commission (the 'SEC') and is
incorporated in its entirety by reference in and made a part of
this Prospectus. The SAI is available without charge upon
request to Franklin Templeton Distributors, Inc., P.O. Box
33030, St. Petersburg, Florida 33733-8030 or by calling
1-800-368-3677.
- --------------------------------------------------------------------------------
ACCOUNT SERVICES -- 1-800-321-8563
- --------------------------------------------------------------------------------
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK; FURTHER, SUCH SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
EXPENSE TABLE..................................... 3
FINANCIAL HIGHLIGHTS.............................. 4
GENERAL DESCRIPTION............................... 9
INVESTMENT OBJECTIVES AND POLICIES................ 9
Growth Series..................................... 10
Foreign Equity Series............................. 10
Emerging Markets Series........................... 10
Global Fixed Income Series........................ 11
Foreign Equity (South Africa Free) Series......... 11
INVESTMENT TECHNIQUES............................. 12
Temporary Investments............................. 12
Debt Securities................................... 12
Repurchase Agreements............................. 12
Borrowing......................................... 12
Loans of Portfolio Securities..................... 13
Options on Securities or Indices.................. 13
Forward Foreign Currency Contracts and
Options on Foreign Currencies................... 13
Futures Contracts................................. 14
Swap Agreements................................... 14
Closed-End Investment Companies................... 15
Depositary Receipts............................... 15
RISK FACTORS...................................... 15
HOW TO BUY SHARES OF THE FUNDS.................... 17
Purchases by Telephone............................ 18
Purchases by Mail................................. 18
Letter of Intent.................................. 19
Group Purchases................................... 19
Account Statements................................ 19
<CAPTION>
PAGE
----
<S> <C>
Templeton STAR Service............................ 20
EXCHANGE PRIVILEGE................................ 20
Exchanges by Telephone............................ 20
Exchanges by Mail................................. 20
General........................................... 20
Exchanges by Timing Accounts...................... 20
HOW TO SELL SHARES OF THE FUNDS................... 21
Redemptions by Telephone.......................... 22
TELEPHONE TRANSACTIONS............................ 23
Verification Procedures........................... 23
General........................................... 23
MANAGEMENT OF THE FUNDS........................... 23
Investment Managers............................... 23
Business Manager.................................. 25
Transfer Agent.................................... 25
Custodian......................................... 25
Expenses.......................................... 25
Brokerage Commissions............................. 25
GENERAL INFORMATION............................... 25
Description of Shares/Share Certificates.......... 25
Meetings of Shareholders.......................... 25
Dividends and Distributions....................... 25
Federal Tax Information........................... 26
Account Inquiries................................. 26
Performance Information........................... 26
Statements and Reports............................ 26
WITHHOLDING INFORMATION........................... 27
CORPORATE RESOLUTION.............................. 28
The Franklin Templeton Group...................... 29
</TABLE>
2
<PAGE>
EXPENSE TABLE
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
GLOBAL
(as a percentage of average net assets) FOREIGN EMERGING FIXED
GROWTH EQUITY MARKETS INCOME
SERIES SERIES SERIES SERIES
----------- ------------ ------------- -----------
<S> <C> <C> <C> <C>
Management Fees....................................................... 0.70% 0.70% 1.25% 0.55%
Other Expenses (audit, legal, business management, transfer agent and
custodian)(after expense reimbursement)*............................ 0.25% 0.25% 0.35% 0.45%
Total Fund Operating Expenses (after expense
reimbursement)*..................................................... 0.95% 0.95% 1.60% 1.00%
<CAPTION>
ANNUAL FUND OPERATING EXPENSES FOREIGN
EQUITY
(as a percentage of average net assets) (SOUTH AFRICA
FREE)
SERIES
------------------
<S> <C>
Management Fees....................................................... 0.70%
Other Expenses (audit, legal, business management, transfer agent and
custodian)(after expense reimbursement)*............................ 0.30%
Total Fund Operating Expenses (after expense
reimbursement)*..................................................... 1.00%
</TABLE>
EXAMPLE: You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS
----------- ------------ ------------
<S> <C> <C> <C>
Growth Series.......................................... $ 10 $ 30 $ 53
Foreign Equity Series.................................. $ 10 $ 30 $ 53
Emerging Markets Series................................ $ 16 $ 50 $ 87
Global Fixed Income Series............................. $ 10 $ 32 $ 55
Foreign Equity (South Africa Free) Series.............. $ 10 $ 32 $ 55
<CAPTION>
10 YEARS
-------------
<S> <C>
Growth Series.......................................... $ 117
Foreign Equity Series.................................. $ 117
Emerging Markets Series................................ $ 190
Global Fixed Income Series............................. $ 122
Foreign Equity (South Africa Free) Series.............. $ 122
<FN>
- ------------------------
*The Business Manager, Templeton Global Investors, Inc., voluntarily agreed to
limit the total expenses (excluding interest, taxes, brokerage commissions and
extraordinary expenses) of each Fund to an annual rate of 1.0% (1.6% for
Emerging Markets Series) of the Fund's average net assets until December 31,
1995. During the fiscal period ended December 31, 1994, this expense
limitation arrangement resulted in a reduction in expenses for Global Fixed
Income Series, Emerging Markets Series and Foreign Equity (South Africa Free)
Series. If this policy were not in effect, the Funds' Total Fund Operating
Expenses would be as follows: 12.15% for Global Fixed Income Series; 1.66% for
Emerging Markets Series; and 1.05% for Foreign Equity (South Africa Free)
Series. If the policy were not in effect, the estimated expenses on a $1,000
investment in the Funds (assuming 5% annual return) would be as follows:
Global Fixed Income Series -- $117 for one year, $327 for three years, $508
for five years and $858 for ten years; and Foreign Equity (South Africa Free)
Series -- $11 for one year, $33 for three years, $58 for five years and $128
for ten years; Emerging Markets Series -- $17 for one year, $52 for three
years, $90 for five years and $197 for ten years. As long as this temporary
expense limitation continues, it may lower each Fund's expenses. The expense
limitation may be terminated or revised at any time after December 31, 1995,
at which time each Fund's expenses may increase, depending on the total assets
of the Fund. For a more detailed discussion of the Funds' fees and expenses,
see 'Management of the Funds.'
</FN>
</TABLE>
The information in the table above is an estimate based on the Funds'
expenses as of the end of the most recent fiscal year. The table is
provided for purposes of assisting current and prospective Shareholders in
understanding the various costs and expenses that an investor in the Funds
will bear, directly or indirectly. The information in the table does not
reflect an administrative service fee of $5.00 per exchange for market timing
or allocation service accounts. THE 5% ANNUAL RETURN AND ANNUAL EXPENSES
SHOULD NOT BE CONSIDERED A REPRESENTATION OF ACTUAL OR EXPECTED FUND
PERFORMANCE OR EXPENSES, BOTH OF WHICH MAY VARY. For a more detailed
discussion of the Funds' fees and expenses, see 'Management of the Funds.'
3
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables of Financial Highlights have been audited by McGladrey
& Pullen, LLP, independent certified public accountants, for the periods
indicated in their report which is incorporated by reference and which appears
in each Fund's 1994 Annual Report to Shareholders. These statements should be
read in conjunction with the other financial statements and notes thereto
included in each Fund's 1994 Annual Report to Shareholders, which contains
further information about the Fund's performance, and which is available to
shareholders upon request and without charge.
GROWTH SERIES
<TABLE>
<CAPTION>
PERIOD FROM
MAY 3, 1993
YEAR ENDED (COMMENCEMENT
DECEMBER 31, OF OPERATIONS) TO
1994 DECEMBER 31, 1993
---------------------- ----------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period.......................................... $ 11.80 $ 10.00
---------------------- ----------------------
Income from investment operations:
Net investment income....................................................... .20 .06
Net realized and unrealized gain............................................ (.36) 1.94
---------------------- ----------------------
Total from investment operations.......................................... (.16) 2.00
---------------------- ----------------------
Distributions:
Dividends from net investment income........................................ (.20) (.05)
Distributions from net realized gains....................................... (.50) (.15)
---------------------- ----------------------
Total distributions....................................................... (.70) (.20)
---------------------- ----------------------
Change in net asset value for period.......................................... (.86) 1.80
---------------------- ----------------------
Net asset value, end of period................................................ $ 10.94 $ 11.80
---------------------- ----------------------
---------------------- ----------------------
TOTAL RETURN*................................................................. (1.32)% 20.04%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000)............................................... $ 194,059 $ 184,013
Ratio of expenses to average net assets....................................... 0.95% 1.00%**
Ratio of net investment income to average net assets.......................... 1.69% 1.19%**
Portfolio turnover rate....................................................... 17.23% 17.32%
<FN>
- ------------------------
* Not annualized for periods less than one year.
** Annualized.
</FN>
</TABLE>
4
<PAGE>
FOREIGN EQUITY SERIES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------------------------------------------
1994 1993dagger 1992dagger 1991
---------- ---------------- ---------------- ---------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period................ $ 13.32 $ 10.05 $ 10.63 $ 10.16
---------- ---------------- ---------------- ---------
Income from investment operations:
Net investment income............................. .20 .23 .27 .31
Net realized and unrealized gain (loss)........... (.16) 3.19 (.41) 1.30
---------- ---------------- ---------------- ---------
Total from investment operations................ .04 3.42 (.14) 1.61
---------- ---------------- ---------------- ---------
Distributions:
Dividends from net investment income.............. (.19) (.09) (.24) (.44)
Distributions from net realized gains............. (.31) (.06) (.20) (.70)
---------- ---------------- ---------------- ---------
Total distributions............................. (.50) (.15) (.44) (1.14)
---------- ---------------- ---------------- ---------
Change in net asset value for the period............ (.46) 3.27 (.58) .47
---------- ---------------- ---------------- ---------
Net asset value, end of period...................... $ 12.86 $ 13.32 $ 10.05 $ 10.63
---------- ---------------- ---------------- ---------
---------- ---------------- ---------------- ---------
TOTAL RETURN*....................................... 0.24% 34.03% (1.33)% 16.13%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000)..................... $1,093,227 $ 407,970 $ 566 $ 1,181
Ratio of expenses to average net assets............. 0.95% 1.03% 8.82% 9.15%
Ratio of expenses, net of reimbursement, to
average net assets................................ 0.95% 1.00% 1.00% 1.00%
Ratio of net investment income to average net
assets.............................................. 2.03% 1.73% 2.38% 2.47%
Portfolio turnover rate............................. 7.90% 42.79% 8.45% 76.16%
<CAPTION>
PERIOD FROM
OF OPERATIONS) TO
DECEMBER 31, 1990
----------------------
<S> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period................ $ 10.00
----------------------
Income from investment operations:
Net investment income............................. .12
Net realized and unrealized gain (loss)........... .04
----------------------
Total from investment operations................ .16
----------------------
Distributions:
Dividends from net investment income.............. --
Distributions from net realized gains............. --
----------------------
Total distributions............................. --
----------------------
Change in net asset value for the period............ .16
----------------------
Net asset value, end of period...................... $ 10.16
----------------------
----------------------
TOTAL RETURN*....................................... 1.60%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000)..................... $ 1,015
Ratio of expenses to average net assets............. 9.24%**
Ratio of expenses, net of reimbursement, to
average net assets................................ 1.00%**
Ratio of net investment income to average net
assets.............................................. 5.77%**
Portfolio turnover rate............................. 0.00%
<FN>
- ------------------------
* Not annualized for periods less than one year.
** Annualized.
dagger Based on average shares outstanding.
</FN>
</TABLE>
5
<PAGE>
EMERGING MARKETS SERIES
<TABLE>
<CAPTION>
PERIOD FROM
MAY 3, 1993
(COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
DECEMBER 31, 1994 DECEMBER 31, 1993
---------------------- ----------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period.......................................... $ 13.22 $ 10.00
---------------------- ----------------------
Income from investment operations:
Net investment income....................................................... .17 .04
Net realized and unrealized gain............................................ (1.65) 3.25
---------------------- ----------------------
Total from investment operations.......................................... (1.48) 3.29
---------------------- ----------------------
Distributions:
Dividends from net investment income........................................ (.17) (.04)
Distributions from net realized gains....................................... (.36) (.03)
---------------------- ----------------------
Total distributions....................................................... (.53) (.07)
---------------------- ----------------------
Change in net asset value for the period...................................... (2.01) 3.22
---------------------- ----------------------
Net asset value, end of period................................................ $ 11.21 $ 13.22
---------------------- ----------------------
---------------------- ----------------------
TOTAL RETURN*................................................................. (11.39)% 32.93%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000)................................................. $ 582,878 $ 422,433
Ratio of expenses to average net assets....................................... 1.66% 1.60%**
Ratio of expenses, net of reimbursement, to average net assets................ 1.60% 1.60%**
Ratio of net investment income to average net assets.......................... 1.59% 0.91%**
Portfolio turnover rate....................................................... 12.51% 9.42%
<FN>
- ------------------------
* Not annualized for periods less than one year.
** Annualized.
</FN>
</TABLE>
6
<PAGE>
GLOBAL FIXED INCOME SERIES
<TABLE>
<CAPTION>
PERIOD FROM
MAY 3, 1993
(COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
DECEMBER 31, 1994 DECEMBER 31, 1993
---------------------- ----------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period.......................................... $ 9.93 $ 10.00
---------------------- ----------------------
Income from investment operations:
Net investment income....................................................... 2.74 .25
Net realized and unrealized gain (loss)..................................... (3.04) (.11)
---------------------- ----------------------
Total from investment operations.......................................... (.30) .14
---------------------- ----------------------
Distributions:
Dividends from net investment income........................................ (1.61) (.16)
Distributions in excess of net realized gains............................... -- (.05)
Return of capital........................................................... (.09) --
---------------------- ----------------------
Total distributions....................................................... 1.70 (.21)
---------------------- ----------------------
Change in net asset value for the period...................................... (2.00) (.07)
---------------------- ----------------------
Net asset value, end of period................................................ $ 7.93 $ 9.93
---------------------- ----------------------
---------------------- ----------------------
TOTAL RETURN*................................................................. (2.97)% 1.36%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000)............................................... $ 98 $ 712
Ratio of expenses to average net assets....................................... 12.15% 9.70%**
Ratio of expenses, net of reimbursement, to average net assets................ 1.00% 1.00%**
Ratio of net investment income to average net assets.......................... 5.61% 4.91%**
Portfolio turnover rate....................................................... 346.26% 252.80%
<FN>
- ------------------------
* Not annualized for periods less than one year.
** Annualized.
</FN>
</TABLE>
7
<PAGE>
FOREIGN EQUITY (SOUTH AFRICA FREE) SERIES
<TABLE>
<CAPTION>
PERIOD FROM
MAY 3, 1993
(COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
DECEMBER 31, 1994 DECEMBER 31, 1993
---------------------- ----------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period.......................................... $ 12.50 $ 10.00
---------------------- ----------------------
Income from investment operations:
Net investment income....................................................... .32 .10
Net realized and unrealized gain............................................ (.55) 2.77
---------------------- ----------------------
Total from investment operations.......................................... (.23) 2.87
---------------------- ----------------------
Distributions:
Dividends from net investment income........................................ (.21) (.06)
Distributions from net realized gains....................................... (3.93) (.31)
---------------------- ----------------------
Total distributions....................................................... (4.14) (.37)
---------------------- ----------------------
Change in net asset value..................................................... (4.37) 2.50
---------------------- ----------------------
Net asset value, end of year.................................................. $ 8.13 $ 12.50
---------------------- ----------------------
---------------------- ----------------------
TOTAL RETURN*................................................................. (1.94)% 28.81%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000)............................................... $ 39,576 $ 93,006
Ratio of expenses to average net assets....................................... 1.05% 1.01%**
Ratio of expenses, net of reimbursement, to average net assets................ 1.00% 1.00%**
Ratio of net investment income to average net assets.......................... 2.04% 1.58%**
Portfolio turnover rate....................................................... 34.26% 82.52%
<FN>
- ------------------------
* Not annualized for periods less than one year.
** Annualized.
</FN>
</TABLE>
8
<PAGE>
GENERAL DESCRIPTION
Templeton Institutional Funds, Inc. (the 'Company') was incorporated under
the laws of Maryland on July 6, 1990, and is registered under the Investment
Company Act of 1940 (the '1940 Act') as an open-end management investment
company. The Company is primarily designed as an investment medium for financial
institutions (such as banks, savings institutions and credit unions); pension,
profit sharing and employee benefit plans and trusts; endowments, foundations
and corporations; and individuals who meet the Company's minimum $5 million
investment requirement. The Company offers to such institutional and individual
investors an alternative to direct investment in securities, with the benefits
of diversification of portfolio investments, professional portfolio management
by Templeton Investment Counsel, Inc. ('TICI'), the investment manager of Growth
Series, Foreign Equity Series, and Foreign Equity (South Africa Free) Series,
Templeton Investment Management (Hong Kong) Limited ('Templeton (Hong Kong)'),
the investment manager of Emerging Markets Series, and the Templeton Global Bond
Managers division of TICI ('TGBM'), the investment manager of Global Fixed
Income Series (collectively, the 'Investment Managers'), and the relative
convenience of investing in and redeeming Fund Shares as opposed to purchasing
and selling individual securities.
INVESTMENT OBJECTIVES AND POLICIES
The Company offers five separate series of Shares (the 'Funds'). Global
Fixed Income Series, a non-diversified Fund, has as its investment objective
high total return. Each of the other Funds is a diversified Fund and has as its
investment objective long-term capital growth; any income realized by these
Funds will be incidental. There can be no assurance that any of the Funds will
achieve its investment objective.
The Funds are subject to investment restrictions that are described under
the heading 'Investment Restrictions' in the SAI. Those investment restrictions
so designated and the investment objective of each Fund are 'fundamental
policies' of the Company, which means that they may not be changed without a
majority vote of Shareholders of the affected Fund. With the exception of
investment objectives and those restrictions specifically identified as
fundamental, all investment policies and practices described in this Prospectus
and in the SAI are not fundamental, meaning that the Board of Directors may
change them without Shareholder approval.
Each Fund, except Global Fixed Income Series, may invest no more than 5% of
its total assets in securities issued by any one company or government,
exclusive of U.S. Government securities. Although a Fund may invest up to 25% of
its assets in a single industry, the Funds have no present intention of doing
so. Whenever, in the judgment of a Fund's Investment Manager, market or economic
conditions warrant, each Fund may adopt a temporary defensive position and may
invest without limit in money market securities denominated in U.S. dollars or
in the currency of any foreign country. See 'Investment Techniques--Temporary
Investments.'
Under normal circumstances, each Fund will invest at least 65% of its total
assets in issuers domiciled in at least three different nations (one of which
may be the United States).
Growth Series, Foreign Equity Series, Emerging Markets Series and Foreign
Equity (South Africa Free) Series each invests for long-term growth of capital
and does not intend to place emphasis upon short-term trading profits.
Accordingly, each of these Funds expects to have a portfolio turnover rate of
less than 50%. TGBM or TICI may engage in short-term trading in the portfolio of
Global Fixed Income Series when such trading is considered consistent with the
Fund's investment objective. Also, a security may be sold and another of
comparable quality simultaneously purchased to take advantage of what an
Investment Manager believes to be a temporary disparity in the normal yield
relationship between the two securities. As a result of its investment policies,
under certain market conditions, the portfolio turnover rate of Global Fixed
Income Series may be higher than that of other mutual funds, and may be as high
as 300%. Because a higher turnover rate increases transaction costs and may
increase capital gains, the Investment Managers carefully weigh the anticipated
benefits of short-term investment against these consequences.
Certain types of investments and investment techniques are described in
greater detail under 'Investment Techniques' in this Prospectus and in the SAI.
9
<PAGE>
GROWTH SERIES. Growth Series seeks to achieve long-term capital growth
through a flexible policy of investing in stocks and debt obligations of
companies and governments of any nation, including developing nations. Although
Growth Series generally invests in common stock, it may also invest in preferred
stocks and certain debt securities that offer the potential for capital growth.
(See 'Investment Techniques--Debt Securities.') In selecting securities for
Growth Series, TICI attempts to identify those companies in various countries
and industries where economic and political factors, including currency
movements, are likely to produce above-average opportunities for capital
appreciation.
Growth Series may not invest more than 5% of its assets in warrants
(exclusive of warrants acquired in units or attached to securities) nor more
than 10% of its total assets in securities which are not publicly traded or
which cannot be readily resold because of legal or contractual restrictions, or
which are not otherwise readily marketable (including repurchase agreements
having more than seven days remaining to maturity) ('illiquid securities').
Growth Series may also lend its portfolio securities and borrow money for
investment purposes (i.e., 'leverage' its portfolio). In addition, Growth Series
may enter into transactions in options on securities, securities indices and
foreign currencies, forward foreign currency contracts, and futures contracts
and related options. Any income generated by these techniques will be used to
offset Fund expenses. When deemed appropriate by TICI, Growth Series may invest
cash balances in repurchase agreements and other money market investments to
maintain liquidity in an amount to meet expenses or for day-to-day operating
purposes. These investment techniques are described below and under the heading
'Investment Objectives and Policies' in the SAI.
FOREIGN EQUITY SERIES. Foreign Equity Series seeks to achieve long-term
capital growth through a flexible policy of investing in equity securities and
debt obligations of companies and governments outside the United States. Foreign
Equity Series will invest at least 65% of its total assets in equity securities.
'Equity securities,' as used herein, refers to common stock, preferred stock,
securities convertible into common or preferred stock, and warrants or rights to
subscribe to or purchase such securities. Foreign Equity Series may also invest
up to 35% of its total assets in debt securities (see 'Investment
Techniques--Debt Securities') when, in the judgment of TICI, the capital
appreciation available through such investment outweighs the potential for
capital growth through investment in stocks. In selecting securities for Foreign
Equity Series, TICI attempts to identify those companies in various countries
and industries where economic and political factors, including currency
movements, are likely to produce above-average opportunities for capital
appreciation.
Foreign Equity Series may not invest more than 5% of its assets in warrants
(excluding warrants acquired in units or attached to securities) nor more than
10% of its total assets in illiquid securities.
Foreign Equity Series may also use the various investment techniques
described below under 'Investment Techniques' and under the heading 'Investment
Objectives and Policies' in the SAI.
EMERGING MARKETS SERIES. Emerging Markets Series seeks to achieve long-term
capital growth by investing primarily in equity securities of issuers in
countries having emerging markets. Under normal conditions at least 65% of
Emerging Markets Series' total assets will be invested in emerging market equity
securities. Templeton (Hong Kong) may, from time to time, use various methods of
selecting securities for Emerging Markets Series' portfolio, and may also employ
and rely on independent or affiliated sources of information and ideas in
connection with management of the portfolio.
Emerging Markets Series considers countries having emerging markets to be
all countries that are generally considered to be developing or emerging
countries by the International Bank for Reconstruction and Development (more
commonly referred to as the World Bank) and the International Finance
Corporation, as well as countries that are classified by the United Nations or
otherwise regarded by their authorities as developing. Currently, the countries
not included in this category are Ireland, Spain, New Zealand, Australia, the
United Kingdom, Italy, the Netherlands, Belgium, Austria, France, Canada,
Germany, Denmark, the United States, Sweden, Finland, Norway, Japan and
Switzerland. In addition, as used in this Prospectus, emerging market equity
securities means (i) equity securities of companies the principal securities
trading market for which is an emerging market country, as defined above, (ii)
equity securities, traded in any market, of companies that derive 50% or more of
their total revenue from either goods or services produced in such emerging
market countries or sales made in such emerging market countries or (iii) equity
securities of companies organized under the laws of, and with a principal office
in, an emerging market country. 'Equity securities,' as used herein, refers to
common stock, preferred stock, securities convertible into common or preferred
stock, and
10
<PAGE>
warrants or rights to subscribe to or purchase such securities. Determinations
as to eligibility will be made by Templeton (Hong Kong) based on publicly
available information and inquiries made to the companies. (See 'Risk Factors'
for a discussion of the nature of information publicly available for non-U.S.
companies.) Emerging Markets Series will at all times, except during defensive
periods, maintain investments in at least three countries having emerging
markets.
Emerging Markets Series seeks to benefit from economic and other
developments in emerging markets. The investment objective of Emerging Markets
Series reflects the belief that investment opportunities may result from an
evolving long-term international trend favoring more market-oriented economies,
a trend that may especially benefit certain countries having emerging markets.
This trend may be facilitated by local or international political, economic or
financial developments that could benefit the capital markets of emerging market
countries. Certain emerging market countries, (such as Malaysia, Mexico and
Thailand) which may be in the process of developing more market-oriented
economies, may experience relatively high rates of economic growth. Other
countries (such as Portugal and Spain), although having relatively mature
emerging markets, may also be in a position to benefit from local or
international developments encouraging greater market orientation and
diminishing governmental intervention in economic affairs.
Emerging Markets Series may invest up to 35% of its total assets in debt
securities that offer the potential for capital growth (See 'Investment
Techniques--Debt Securities.') Emerging Markets Series may also use the various
investment techniques described below under 'Investment Techniques' and under
the heading 'Investment Objectives and Policies' in the SAI.
GLOBAL FIXED INCOME SERIES. Global Fixed Income Series' investment
objective is to provide high total return by investing primarily in a portfolio
of fixed-income securities, including debt securities and preferred stock of
U.S. and foreign issuers. In the pursuit of its objective of high total return,
Global Fixed Income Series will seek both income and capital appreciation. As
part of the investment selection process, TGBM may identify interest rate
trends, currency movements, and changes in the credit standing of individual
issuers, among other factors, in the various markets around the world by
analyzing economic, financial, social, political, monetary and fiscal trends and
policies.
Global Fixed Income Series will normally invest at least 65% of its total
assets in one or more of the following investments: (i) debt securities that are
issued or guaranteed as to interest and principal by the U.S. government, its
agencies, authorities or instrumentalities ('U.S. Government securities'); (ii)
debt obligations issued or guaranteed by a foreign sovereign government or one
of its agencies or political subdivisions; (iii) debt obligations issued or
guaranteed by supra-national organizations, which are chartered to promote
economic development and are supported by various governments and governmental
entities; (iv) U.S. and foreign corporate debt securities; and (v) debt
obligations of U.S. or foreign banks, savings and loan associations and bank
holding companies. Global Fixed Income Series' policy of investing at least 65%
of its total assets in these securities may, in some market conditions, limit
its ability to achieve its objective of total return. Debt securities purchased
by Global Fixed Income Series will meet the credit criteria set forth below
under 'Investment Techniques--Debt Securities.' The average maturity of the debt
securities in Global Fixed Income Series' portfolio will fluctuate depending on
TGBM's judgment as to future interest rate changes. With respect to up to 35% of
its total assets, Global Fixed Income Series may (i) invest in dividend-paying
common stock of U.S. and foreign corporations; (ii) invest in preferred equity
securities, including those debt securities which may have equity features, such
as conversion or exchange rights, or which carry warrants to purchase common
stock or other equity interests; and (iii) engage in transactions involving the
various investment techniques described below under the heading 'Investment
Techniques' and under the heading 'Investment Objectives and Policies' in the
SAI.
FOREIGN EQUITY (SOUTH AFRICA FREE) SERIES. Foreign Equity (South Africa
Free) Series seeks to achieve long-term capital growth through a flexible policy
of investing in stocks and debt obligations of companies and governments outside
both the United States and South Africa. Its investment policies are identical
to those of Foreign Equity Series, except that its portfolio will include none
of the following securities: (1) any obligation or security of any South African
corporation, or any South African government owned corporation, or of the South
African government; (2) any obligation or security of any international/global
company with direct investment, defined as holding 10% or more of the equity in
an active South African company, or employees in South Africa; and (3) any
obligation or security of any international/global company that has contracts or
licensing, distribution, franchising,
11
<PAGE>
technological or trademark agreements with companies in South Africa. For the
purpose of Foreign Equity (South Africa Free) Series, TICI will utilize the list
of companies meeting the above criteria as compiled annually by the Investor
Research Center, Inc.
INVESTMENT TECHNIQUES
Each Fund is authorized to use certain of the various investment techniques
described below. Although these strategies are regularly used by some investment
companies and other institutional investors in various markets, some of these
strategies cannot at the present time be used to a significant extent by the
Funds in some of the markets in which the Funds will invest and may not be
available for extensive use in the future.
TEMPORARY INVESTMENTS. For temporary defensive purposes, each Fund may
invest up to 100% of its total assets in the following money market securities,
denominated in U.S. dollars or in the currency of any foreign country, issued by
entities organized in the United States or any foreign country: short-term (less
than twelve months to maturity) and medium-term (not greater than five years to
maturity) obligations issued or guaranteed by the U.S. Government or the
governments of foreign countries, their agencies or instrumentalities; finance
company and corporate commercial paper, and other short-term corporate
obligations, in each case rated Prime-1 by Moody's or A or better by S&P or, if
unrated, of comparable quality as determined by each Fund's Investment Manager;
obligations (including certificates of deposit, time deposits and bankers'
acceptances) of banks having total assets in excess of $1 billion; and
repurchase agreements with banks and broker-dealers with respect to such
securities. In addition, for temporary defensive purposes, each Fund may invest
up to 25% of its total assets in obligations (including certificates of deposit,
time deposits and bankers' acceptances) of U.S. and foreign banks; provided that
a Fund will limit its investment in time deposits for which there is a penalty
for early withdrawal to 10% of its total assets.
DEBT SECURITIES. Each of the Funds may invest a portion of its assets in
debt securities, including bonds, notes, debentures, commercial paper,
certificates of deposit, time deposits and bankers' acceptances. Debt securities
purchased by the Funds may be rated as low as C by S&P or Moody's or, if
unrated, of comparable quality as determined by each Fund's Investment Manager.
As an operating policy, which may be changed by the Board of Directors without
Shareholder approval, each Fund will limit its investment in debt securities
rated below BBB by S&P or Baa by Moody's (and unrated debt securities determined
by a Fund's Investment Manager to be of comparable quality) to 5% of its total
assets. The Board may consider a change in this operating policy if, in its
judgment, economic conditions change such that a higher level of investment in
high risk, lower quality debt securities would be consistent with the interests
of the Funds and their Shareholders. Commercial paper purchased by the Funds
will meet the credit quality criteria set forth under 'Investment Objectives and
Policies' in the SAI. Certain debt securities can provide the potential for
capital appreciation based on various factors such as changes in interest rates,
economic and market conditions, improvement in an issuer's ability to repay
principal and pay interest, and ratings upgrades. Each of the Funds may invest
in debt or preferred securities which have equity features, such as conversion
or exchange rights, or which carry warrants to purchase common stock or other
equity interests. Such equity features enable the holder of the bond or
preferred security to benefit from increases in the market price of the
underlying equity.
REPURCHASE AGREEMENTS. When a Fund acquires a security from a U.S. bank or
a registered broker-dealer, it may simultaneously enter into a repurchase
agreement, wherein the seller agrees to repurchase the security at a specified
time and price. The repurchase price is in excess of the purchase price by an
amount which reflects an agreed-upon rate of return, which is not tied to the
coupon rate on the underlying security. Under the 1940 Act, repurchase
agreements are considered to be loans collateralized by the underlying security
and therefore will be fully collateralized. However, if the seller should
default on its obligation to repurchase the underlying security, a Fund may
experience delay or difficulty in exercising its rights to realize upon the
security and might incur a loss if the value of the security declines, as well
as disposition costs in liquidating the security.
BORROWING. Each Fund may borrow up to one-third of the value of its total
assets from banks to increase its holdings of portfolio securities. Under the
1940 Act, a 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 a 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 a Fund's net asset value, and money borrowed will be
subject to interest and other costs (which may include
12
<PAGE>
commitment fees and/or the cost of maintaining minimum average balances) which
may or may not exceed the income received or capital appreciation realized from
the securities purchased with borrowed funds.
LOANS OF PORTFOLIO SECURITIES. Each Fund may lend to broker-dealers
portfolio securities with an aggregate market value of up to one-third of its
total assets to generate income. Such loans must be secured by collateral
(consisting of any combination of cash, U.S. Government securities or
irrevocable letters of credit) in an amount at least equal (on a daily
marked-to-market basis) to the current market value of the securities loaned. A
Fund may terminate the loans at any time and obtain the return of the securities
loaned within five business days. A Fund will continue to receive any interest
or dividends paid on the loaned securities and will continue to retain any
voting rights with respect to the securities. Loans of portfolio securities
involve the risk of default by the counter-party to the loan transaction, which
could involve delay or difficulty in a Fund's exercise of its right to realize
upon the collateral for such loans, as well as transaction costs.
OPTIONS ON SECURITIES OR INDICES. In order to hedge against market shifts,
each Fund may purchase put and call options on securities or securities indices.
In addition, each Fund may seek to generate income to offset operating expenses
and/or may hedge a portion of its portfolio investments through writing (i.e.,
selling) covered put and call options. Options purchased or written by the Funds
will be traded on United States and foreign exchanges or in the over-the-counter
markets. An option on a security is a contract that permits the purchaser of the
option, in return for the premium paid, the right to buy a specified security
(in the case of a call option) or to sell a specified security (in the case of a
put option) from or to the writer of the option at a designated price during the
term of the option. An option on a securities index permits the purchaser of the
option, in return for the premium paid, the right to receive from the seller
cash equal to the difference between the closing price of the index and the
exercise price of the option. A Fund may write a call or put option only if the
option is 'covered.' This means that so long as a Fund is obligated as the
writer of a call option, it will own the underlying securities subject to the
call, or hold a call at the same exercise price, for the same exercise period,
and on the same securities as the written call. A put is covered if a Fund
maintains liquid assets with a value equal to the exercise price in a segregated
account, or holds a put on the same underlying securities at an equal or greater
exercise price. The value of the underlying securities on which options may be
written at any one time will not exceed 25% of the total assets of a Fund. A
Fund will not purchase put or call options if the aggregate premium paid for
such options would exceed 5% of its total assets at the time of purchase.
FORWARD FOREIGN CURRENCY CONTRACTS AND OPTIONS ON FOREIGN CURRENCIES. The
Funds will normally conduct foreign currency exchange transactions either on a
spot (i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market, or through entering into forward contracts to purchase or sell
foreign currencies. The Funds will generally not enter into forward contracts
with terms of greater than one year. 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 Funds will generally enter into forward contracts only under two
circumstances. First, when a Fund enters into a contract for the purchase or
sale of a security denominated in a foreign currency, it may desire to 'lock' in
the U.S. dollar price of the security in relation to another currency by
entering into a forward contract to buy the amount of foreign currency needed to
settle the transaction. Second, when a Fund's Investment Manager believes that
the currency of a particular foreign country may suffer or enjoy a substantial
movement against another currency, it may enter into a forward contract to sell
or buy the former foreign currency (or another currency which acts as a proxy
for that currency) approximating the value of some or all of the Fund's
portfolio securities denominated in such foreign currency. This second
investment practice is generally referred to as 'cross-hedging.' A Fund's
forward transactions may call for the delivery of one foreign currency in
exchange for another foreign currency and may at times not involve currencies in
which its portfolio securities are then denominated. The Funds have no specific
limitation on the percentage of assets they may commit to forward contracts,
subject to their stated investment objectives and policies, except that a Fund
will not enter into a forward contract if the amount of assets set aside to
cover the contract would impede portfolio management or the Fund's ability to
meet redemption requests. Although forward contracts will be used primarily to
protect the Funds from adverse currency movements, they also involve the risk of
loss in the event that
anticipated currency movements will not be accurately
predicted.
13
<PAGE>
The Funds may purchase and write put and call options on foreign currencies
for the purpose of protecting against declines in the U.S. dollar value of
foreign currency denominated portfolio securities and against increases in the
U.S. dollar cost of such securities to be acquired. As in the case of other
kinds of options, however, the writing of an option on a foreign currency
constitutes only a partial hedge, up to the amount of the premium received, and
a Fund could be required to purchase or sell foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The purchase of an
option on a foreign currency may constitute an effective hedge against
fluctuations in exchange rates although, in the event of rate movements adverse
to a Fund's position, it may forfeit the entire amount of the premium plus
related transaction costs. Options on foreign currencies to be written or
purchased by the Funds are traded on U.S. and foreign exchanges or
over-the-counter.
FUTURES CONTRACTS. For hedging purposes only, the Funds may buy and sell
covered financial futures contracts, stock index futures contracts, foreign
currency futures contracts and options on any of the foregoing. A financial
futures contract is an agreement between two parties to buy or sell a specified
debt security at a set price on a future date. An index futures contract is an
agreement to take or make delivery of an amount of cash based on the difference
between the value of the index at the beginning and at the end of the contract
period. A futures contract on a foreign currency is an agreement to buy or sell
a specified amount of a currency for a set price on a future date.
When a Fund enters into a futures contract, it must make an initial deposit,
known as 'initial margin,' as a partial guarantee of its performance under the
contract. As the value of the security, index or currency fluctuates, either
party to the contract is required to make additional margin payments, known as
'variation margin,' to cover any additional obligation it may have under the
contract. In addition, when a Fund enters into a futures contract, it will
segregate assets or 'cover' its position in accordance with the 1940 Act. See
'Investment Objectives and Policies--Futures Contracts' in the SAI.
A Fund may not commit more than 5% of its total assets to initial margin
deposits on futures contracts and related options. The value of the underlying
securities on which futures contracts will be written at any one time will not
exceed 25% of the total assets of a Fund.
SWAP AGREEMENTS. Global Fixed Income Series may enter into interest rate,
index and currency exchange rate swap agreements for purposes of attempting to
obtain a particular desired return at a lower cost to the Fund than if the Fund
had invested directly in an instrument that yielded that desired return. Swap
agreements are two-party contracts entered into primarily by institutional
investors for periods ranging from a few weeks to more than one year. In a
standard 'swap' transaction, two parties agree to exchange the returns (or
differentials in rates of return) earned or realized on particular predetermined
investments or instruments. The gross returns to be exchanged or 'swapped'
between the parties are calculated with respect to a 'notional amount,' i.e.,
the return on or increase in value of a particular dollar amount invested at a
particular interest rate, in a particular foreign currency, or in a 'basket' of
securities representing a particular index. The 'notional amount' of the swap
agreement is only a fictive basis on which to calculate the obligations which
the parties to a swap agreement have agreed to exchange. Global Fixed Income
Series' obligations (or rights) under a swap agreement will generally be equal
only to the net amount to be paid or received under the agreement based on the
relative values of the positions held by each party to the agreement (the 'net
amount'). Global Fixed Income Series' obligations under a swap agreement will be
accrued daily (offset against any amounts owing to the Fund) and any accrued but
unpaid net amounts owed to a swap counterparty will be covered by the
maintenance of a segregated account consisting of cash, U.S. Government
securities, or high grade debt obligations, to avoid any potential leveraging of
the Fund's portfolio. Global Fixed Income Series will not enter into a swap
agreement with any single party if the net amount owed or to be received under
existing contracts with that party would exceed 5% of the Fund's assets.
Whether Global Fixed Income Series' use of swap agreements will be
successful in furthering its investment objective will depend on the ability of
TGBM correctly to predict whether certain types of investments are likely to
produce greater returns than other investments. Because they are two-party
contracts and because they may have terms of greater than seven days, swap
agreements may be considered to be illiquid. Moreover, Global Fixed Income
Series bears the risk of loss of the amount expected to be received under a swap
agreement in the event of the default or bankruptcy of a swap agreement
counterparty. TGBM will cause Global Fixed Income Series to enter into swap
agreements only with counterparties that would be eligible for consideration as
repurchase agreement counterparties under the Funds' repurchase agreement
guidelines. Certain restrictions imposed on
14
<PAGE>
Global Fixed Income Series by the Internal Revenue Code may limit its ability to
use swap agreements. The swap market is a relatively new market and is largely
unregulated. It is possible that developments in the swap market and the laws
relating to swaps, including potential government regulation, could adversely
affect Global Fixed Income Series' ability to terminate existing swap
agreements, to realize amounts to be received under such agreements, or to enter
into swap agreements, or could have tax consequences. See 'Tax Status' in the
SAI for more information regarding the tax considerations relating to swap
agreements.
CLOSED-END INVESTMENT COMPANIES. Some countries have authorized the
formation of closed-end investment companies to facilitate indirect foreign
investment in their capital markets. In accordance with the 1940 Act, each Fund
may invest up to 10% of its total assets in securities of closed-end investment
companies. This restriction on investment in securities of closed-end investment
companies may limit opportunities for a Fund to invest indirectly in certain
emerging markets. Shares of certain closed-end investment companies may at times
be acquired only at market prices representing premiums to their net asset
values. Investment by a Fund in shares of closed-end investment companies would
involve duplication of fees, in that Shareholders would bear both their
proportionate share of expenses of the Fund (including management and advisory
fees) and, indirectly, the expenses of such closed-end investment companies.
DEPOSITARY RECEIPTS. The Funds may purchase sponsored or unsponsored
American Depositary Receipts ('ADRs'), European Depositary Receipts ('EDRs') and
Global Depositary Receipts ('GDRs') (collectively, 'Depositary Receipts'). ADRs
are Depositary Receipts typically issued by a U.S. bank or trust company which
evidence ownership of underlying securities issued by a foreign corporation.
EDRs and GDRs are typically issued by foreign banks or trust companies, although
they also may be issued by U.S. banks or trust companies, and evidence ownership
of underlying securities issued by either a foreign or a United States
corporation. Generally, Depositary Receipts in registered form are designed for
use in the U.S. securities market and Depositary Receipts in bearer form are
designed for use in securities markets outside the United States. Depositary
Receipts may not necessarily be denominated in the same currency as the
underlying securities into which they may be converted. Depositary Receipts may
be issued pursuant to sponsored or unsponsored programs. In sponsored programs,
an issuer has made arrangements to have its securities traded in the form of
Depositary Receipts. In unsponsored programs, the issuer may not be directly
involved in the creation of the program. Although regulatory requirements with
respect to sponsored and unsponsored programs are generally similar, in some
cases it may be easier to obtain financial information from an issuer that has
participated in the creation of a sponsored program. Accordingly, there may be
less information available regarding issuers of securities underlying
unsponsored programs and there may not be a correlation between such information
and the market value of the Depositary Receipts. Depositary Receipts also
involve the risks of other investments in foreign securities, as discussed
below. For purposes of the Funds' investment policies, the Funds' investments in
Depositary Receipts will be deemed to be investments in the underlying
securities.
RISK FACTORS
Shareholders should understand that all investments involve risk and there
can be no guarantee against loss resulting from an investment in the Funds, nor
can there be any assurance that a Fund's investment objective will be attained.
As with any investment in securities, the value of, and income from, an
investment in the Funds can decrease as well as increase, depending on a variety
of factors which may affect the values and income generated by the Funds'
portfolio securities, including general economic conditions and market factors.
Additionally, investment decisions made by the Investment Managers will not
always be profitable or prove to have been correct. In addition to the factors
which affect the value of individual securities, a Shareholder may anticipate
that the value of the Shares of the Funds will fluctuate with movements in the
broader equity and bond markets, as well. A decline in the stock market of any
country in which a Fund is invested may also be reflected in declines in the
price of the Shares of the Fund. Changes in interest rates will affect the value
of a Fund's portfolio and thus its share price. Increased rates of interest
which frequently accompany inflation and/or a growing economy are likely to have
a negative effect on the value of a Fund's Shares. Changes in currency
valuations will also affect the price of the Shares of a Fund. History reflects
both decreases and increases in worldwide stock markets, the prevailing rate of
interest, and currency valuations, and these may reoccur unpredictably in the
future. The Funds are not intended as a complete investment program.
15
<PAGE>
The Funds have the right to purchase securities in any foreign country,
developed or underdeveloped, except that Foreign Equity (South Africa Free)
Series will not invest in South African securities. Investors should consider
carefully the risks associated with investing in foreign securities, which are
in addition to the usual risks inherent in domestic investments. These risks are
often heightened for investments in developing markets, including certain
Eastern European countries. See 'Risk Factors' in the SAI. There is the
possibility of expropriation, nationalization or confiscatory taxation, taxation
of income earned in foreign nations or other taxes imposed with respect to
investments in foreign nations, foreign exchange controls (which may include
suspension of the ability to transfer currency from a given country), foreign
investment controls on daily stock market movements, default in foreign
government securities, political or social instability or diplomatic
developments which could affect investments in securities of issuers in foreign
nations. Some countries may withhold portions of interest and dividends at the
source. In addition, in many countries there is less publicly available
information about issuers than is available in reports about companies in the
United States. Foreign companies are not generally subject to uniform
accounting, auditing and financial reporting standards, and auditing practices
and requirements may not be comparable to those applicable to United States
companies. Further, the Funds may encounter difficulties or be unable to vote
proxies, exercise shareholder rights, pursue legal remedies, and obtain
judgments in foreign courts.
Prior governmental approval of foreign investments may be required under
certain circumstances in some developing countries, and the extent of foreign
investment in domestic companies may be subject to limitation in other
developing countries. Foreign ownership limitations also may be imposed by the
charters of individual companies in developing countries to prevent, among other
concerns, violation of foreign investment limitations.
Repatriation of investment income, capital and proceeds of sales by foreign
investors may require governmental registration and/or approval in some
developing countries. The Funds could be adversely affected by delays in or a
refusal to grant any required governmental registration or approval for such
repatriation.
Further, the economies of developing countries generally are heavily
dependent upon international trade and, accordingly, have been and may continue
to be adversely affected by trade barriers, exchange controls, managed
adjustments in relative currency values and other protectionist measures imposed
or negotiated by the countries with which they trade. These economies also have
been and may continue to be adversely affected by economic conditions in the
countries with which they trade.
Brokerage commissions, custodial services, and other costs relating to
investment in foreign nations, particularly emerging markets, are generally more
expensive than in the United States. Emerging markets have different clearance
and settlement procedures and in certain markets there have been times when
settlements have been unable to keep pace with the volume of securities
transactions, making it difficult to conduct such transactions. Delays in
settlement could result in temporary periods when assets of a Fund are
uninvested and no return is earned thereon. The inability of a Fund to make
intended security purchases due to settlement problems could cause a Fund to
miss attractive investment opportunities. Inability to dispose of a portfolio
security due to settlement problems could result either in losses to a Fund due
to subsequent declines in value of the portfolio security or, if the Fund has
entered into a contract to sell the security, could result in possible liability
to the purchaser.
In many foreign countries there is less government supervision and
regulation of business and industry practices, stock exchanges, brokers and
listed companies than in the United States. There is an increased risk,
therefore, of uninsured loss due to lost, stolen, or counterfeit stock
certificates. In addition, the foreign securities markets of many of the
countries in which the Funds may invest may also be smaller, less liquid, and
subject to greater price volatility than those in the United States. The Funds
may invest in Eastern European countries, which involves special risks that are
described under 'Risk Factors' in the SAI.
The Funds may effect currency exchange transactions on a spot (i.e., cash)
basis at the spot rate prevailing in the foreign exchange market. However, some
price spread on currency exchange (to cover service charges) will be incurred
when a Fund converts assets from one currency to another. Further, the Funds may
be affected either unfavorably or favorably by fluctuations in the relative
rates of exchange between the currencies of different nations. Cross-hedging
transactions by the Funds involve the risk of imperfect correlation between
changes in the values of the currencies to which such transactions relate and
changes in the value of the currency or other asset or liability that is the
subject of the hedge.
16
<PAGE>
Global Fixed Income Series is a 'non-diversified' Fund, which means the Fund
is not limited in the proportion of its assets that may be invested in the
securities of a single issuer. However, Global Fixed Income Series intends to
conduct its operations so as to qualify as a 'regulated investment company' for
purposes of the Internal Revenue Code of 1986, as amended (the 'Code'), which
generally will relieve the Fund of any liability for Federal income tax to the
extent its earnings are distributed to Shareholders. See 'Federal Tax
Information.' To so qualify, among other requirements, Global Fixed Income
Series will limit its investments so that, at the close of each quarter of the
taxable year, (i) not more than 25% of the market value of the Fund's total
assets will be invested in the securities of a single issuer, and (ii) with
respect to 50% of the market value of its total assets, not more than 5% of the
market value of its total assets will be invested in the securities of a single
issuer and the Fund will not own more than 10% of the outstanding voting
securities of a single issuer. Global Fixed Income Series' investments in U.S.
Government securities are not subject to these limitations. Because Global Fixed
Income Series, as a non-diversified fund, may invest in a smaller number of
individual issuers than a diversified investment company, and may be more
susceptible to any single economic, political or regulatory occurrence, an
investment in the Fund may present greater risk to an investor than an
investment in a diversified fund.
The Funds are authorized to invest in medium quality or high-risk, lower
quality debt securities (see 'Investment Techniques--Debt Securities').
High-risk, lower quality debt securities, commonly referred to as 'junk bonds,'
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 obligation and may be in default. Unrated debt securities are not
necessarily of lower quality than rated securities but they may not be
attractive to as many buyers. Regardless of rating levels, all debt securities
considered for purchase (whether rated or unrated) will be carefully analyzed by
a Fund's Investment Manager to insure, to the extent possible, that the planned
investment is sound. The Funds may, from time to time, purchase defaulted debt
securities if, in the opinion of a Fund's Investment Manager, the issuer may
resume interest payments in the near future. A Fund will not invest more than
10% of its total assets in defaulted debt securities, which may be illiquid.
Leveraging by means of borrowing may exaggerate the effect of any increase
or decrease in the value of portfolio securities on a Fund's net asset value,
and money borrowed will be subject to interest and other costs (which may
include commitment fees and/or the cost of maintaining minimum average balances)
which may or may not exceed the income received from the securities purchased
with borrowed funds.
Successful use of futures contracts and related options is subject to
special risk considerations. A liquid secondary market for any futures or
options contract may not be available when a futures or options position is
sought to be closed. In addition, there may be an imperfect correlation between
movements in the securities or foreign currency on which the futures or options
contract is based and movements in the securities or currency in a Fund's
portfolio. Successful use of futures or options contracts is further dependent
on the ability of a Fund's Investment Manager to correctly predict movements in
the securities or foreign currency markets and no assurance can be given that
its judgement will be correct. Successful use of options on securities or stock
indices is subject to similar risk considerations. In addition, by writing
covered call options, a Fund gives up the opportunity, while the option is in
effect, to profit from any price increase in the underlying security above the
option exercise price.
There are further risk factors, including possible losses through the
holding of securities in domestic and foreign custodian banks and depositories,
described elsewhere in this Prospectus and in the SAI.
HOW TO BUY SHARES OF THE FUNDS
Shares of the Funds may be purchased at net asset value without a sales
charge through any broker that has a dealer agreement with Franklin Templeton
Distributors, Inc. ('FTD'), the Principal Underwriter of the Shares of the
Funds, or directly from FTD, upon receipt by FTD of an Institutional Account
Application Form and payment.
There is no minimum initial or subsequent investment for any employee stock,
bonus, pension or profit-sharing plan that meets the requirements for
qualification under Section 401 of the Code including salary reduction plans
qualified under Section 401(k) of the Code, subject to minimum requirements with
respect to number of employees or amount of purchase, which may be established
by FTD. Currently, those criteria require that the employer establishing the
plan have 200 or more employee
17
<PAGE>
participants or that the amount invested or to be invested during the subsequent
13-month period in the Funds or any other funds in the Franklin Group of Funds
or the Templeton Family of Funds (the 'Franklin Templeton Group') must total at
least $1 million. Shares of the Funds may be purchased by trust companies and
bank trust departments for funds over which they exercise exclusive
discretionary investment authority and which are held in a fiduciary, agency,
advisory, custodial or similar capacity. Trust companies and bank trust
departments making such purchases may be required to register as dealers
pursuant to state law. Such purchases are subject to minimum requirements with
respect to amount of purchase, which may be established by FTD. Currently, those
criteria require that the amount invested or to be invested during the
subsequent 13-month period in the Funds or other funds in the Franklin Templeton
Group must total at least $1 million. The minimum initial investment for all
other investors is $5 million ($25 for subsequent investments). The cost or
current value (whichever is higher) of an investor's shares of other funds in
the Franklin Templeton Group will be included for purposes of determining
compliance with the minimum investment amount, provided that at least $1 million
is invested in the Funds.
PURCHASES BY TELEPHONE. Shares of the Funds may be purchased by telephone,
and paid for by wire, in the following manner:
1. Call the Franklin Templeton Institutional Services Department at
1-800-321-8563 or 1-415-312-3600 to advise of the intention to wire funds for
investment. The call must be received prior to 4:00 p.m. Eastern time to receive
that day's price. Each Fund will supply a wire control number for the
investment. It is necessary to obtain a new wire control number every time money
is wired into an account in a Fund. Wire control numbers are effective for one
transaction only and cannot be used more than once. Wired money which is not
properly identified with a currently effective wire control number will be
returned to the bank from which it was wired and will not be credited to the
Shareholder's account.
2. On the next business day, wire funds to Bank of America, ABA Routing No.
121000358, for credit to account no. 1493304779. Be sure to include the wire
control number, the investor's Franklin or Templeton account number and account
registration. Wired funds received by the bank and reported by the bank to the
Fund by the close of the Federal Reserve Wire System are available for credit on
that day. Later wires are credited the following business day. In order to
maximize efficient Fund management, investors are urged to place and wire their
investments as early in the day as possible.
If the purchase is not to an existing account, send a completed
Institutional Account Application Form to the Fund in which the investment is
being made, at the following address for proper credit: Franklin Templeton
Institutional Services, 777 Mariners Island Boulevard, P.O. Box 7777, San
Mateo, California 94403-7777.
PURCHASES BY MAIL. Shares of the Funds may be purchased by mail, and paid
for by check, Federal Reserve draft or negotiable bank draft in the following
manner:
1. For an initial investment, send a completed Institutional Account
Application Form to Franklin Templeton Institutional Services, 777 Mariners
Island Boulevard, P.O. Box 7777, San Mateo, California 94403-7777.
2. Make the check, Federal Reserve draft or negotiable bank draft payable to
the Fund in which the investment is being made.
3. Send the check, Federal Reserve draft or negotiable bank draft to
Franklin Templeton Institutional Services, 777 Mariners Island Boulevard, P.O.
Box 7777, San Mateo, California 94403-7777. Investments in good order and
received by the Fund prior to 4:00 p.m. Eastern time on any business day will
receive the price next calculated on that day. Items received after 4:00 p.m.
Eastern time will receive the price calculated on the next business day.
Orders mailed to FTD by dealers or individual investors do not require
advance notice. Checks or negotiable bank drafts must be in U.S. currency drawn
on a commercial bank in the U.S. and, if over $100,000, may not be deemed to
have been received until the proceeds have been collected, unless the check is
certified or issued by such bank. Any subscription may be rejected by FTD or by
the Company.
The net asset value of the Shares of each Fund is determined as of the
scheduled closing time of the New York Stock Exchange ("NYSE") (generally 4:00
p.m., New York time) on each day the NYSE is open for trading, by dividing the
value of the Fund's securities plus any cash and other assets (including accrued
interest and dividends receivable) less all liabilities (including
18
<PAGE>
accrued expenses) by the number of Shares outstanding, adjusted to the nearest
whole cent. A security listed or traded on a recognized stock exchange or NASDAQ
is valued at its last sale price on the principal exchange on which the security
is traded. The value of a foreign security is determined in its national
currency as of the close of trading on the foreign exchange on which it is
traded, or as of the scheduled closing time of the NYSE (generally 4:00 p.m.,
New York time), if that is earlier, and that value is then converted into its
U.S. dollar equivalent at the foreign exchange rate in effect at noon, New York
time, on the day the value of the foreign security is determined. If no sale is
reported at that time, the mean between the current bid and asked price is used.
Occasionally, events which affect the values of such securities and such
exchange rates may occur between the times at which they are determined and the
close of the NYSE, and will therefore not be reflected in the computation of a
Fund's net asset value. If events materially affecting the value of such
securities occur during such period, then these securities will be valued at
fair value as determined by the management and approved in good faith by the
Board of Directors. All other securities for which over-the-counter market
quotations are readily available are valued at the mean between the current bid
and asked price. Securities for which market quotations are not readily
available and other assets are valued at fair value as determined by the
management and approved in good faith by the Board of Directors.
Investors should promptly check the confirmation advice that is mailed after
each purchase (or redemption) in order to insure that it has been accurately
recorded in the investor's account.
Shares of the Funds may be purchased with 'in-kind' securities, if approved
in advance by the Company. Securities used to purchase Fund Shares must be
appropriate investments for that Fund, consistent with its investment objective,
policies and limitations, as determined by the Company, and must have readily
available market quotations. The securities will be valued in accordance with
the Company's policy for calculating net asset value (as set forth above),
determined as of the close of the day on which the securities are received by
the Company in salable form. A prospective Shareholder will receive Shares of
the applicable Fund next computed after such receipt. To obtain the approval of
the Company, prospective investors are directed to call 1-800-321-8563.
Investors who are affiliated persons of the Company (as defined in the 1940 Act)
may not purchase Shares in this manner in the absence of SEC approval.
If an investment in the Funds is made through a broker that has executed a
dealer agreement with respect to the Templeton Funds, FTD or one of its
affiliates may make a payment out of its own resources to such dealer in an
amount not to exceed 0.25% of the amount invested. Dealers may contact the
Franklin Templeton Institutional Services Department for additional information.
LETTER OF INTENT. An initial investment of less than $5 million may be made
if the investor executes a Letter of Intent ('LOI') which expresses the
investor's intention to invest at least $5 million within a 13-month period in
the Franklin Templeton Group, including at least $1 million in the Funds. See
the Institutional Account Application Form. The minimum initial investment under
an LOI is $1 million. If the investor does not invest at least $5 million in
Shares of the Funds or other funds in the Franklin Templeton Group within the
13-month period, the Shares actually purchased will be involuntarily redeemed
and the proceeds sent the investor at the address of record. Any redemptions
made by the Shareholder during the 13-month period will be subtracted from the
amount of the purchases for purposes of determining whether the terms of the LOI
have been completed.
GROUP PURCHASES. Any other investor, including a private investment vehicle
such as a family trust or foundation, who is a member of a qualified group may
also purchase Shares of the Funds if the group as a whole meets the minimum
initial investment of $5 million, at least $1 million of which is invested or to
be invested in the Funds. The minimum initial investment is based upon the
aggregate dollar value of Shares previously purchased and still owned by the
group, plus the amount of the current purchase. A 'qualified group' is one which
(i) has formalized operations which have been in existence for more than six
months, (ii) has a purpose other than acquiring Fund Shares, and (iii) satisfies
uniform criteria, such as centralized accounting and communications, which
enable FTD to realize economies of scale in its costs of distributing Shares.
ACCOUNT STATEMENTS. Shareholder accounts are opened in accordance with the
Shareholder's registration instructions. Transactions in the account, such as
additional investments and dividend reinvestments, will be reflected on regular
confirmation statements from Franklin Templeton Investor Services, Inc. (the
'Transfer Agent').
19
<PAGE>
TEMPLETON STAR SERVICE. Shareholders may check the current prices of
Shares, account balances/values, a description of the last transaction, and
duplicate account statements, 24 hours a day, 365 days a year, with Templeton
STAR Service by calling 1-800-654-0123 from a touch-tone telephone. A fund code
and the Shareholder's account number are necessary for accessing information
(other than Share prices) from Templeton STAR Service. The Funds' codes are as
follows: Foreign Equity Series, 454; Growth Series, 455; Emerging Markets
Series, 456; Global Fixed Income Series, 458; Foreign Equity (South Africa Free)
Series, 459.
EXCHANGE PRIVILEGE
A Shareholder may exchange Shares of any of the Funds into other Funds in
the Company or into other funds in the Franklin Templeton Group (except
Templeton American Trust, Inc., Templeton Capital Accumulator Fund, Inc.,
Templeton Variable Annuity Fund, Templeton Variable Products Series Fund and
Franklin Valuemark II).
Exchange purchases are subject to the minimum investment requirements of the
fund purchased and exchanges of shares from the Funds are subject to applicable
sales charges on the fund being purchased, unless the shares were held in the
original Fund for at least six months prior to executing the exchange. All
exchanges are permitted only after at least 15 days have elapsed from the date
of the purchase of the Shares to be exchanged.
EXCHANGES BY TELEPHONE. A Shareholder may exchange Shares of the Funds by
telephone by calling the Franklin Templeton Institutional Services Department at
1-800-321-8563. Telephone exchange instructions must be received by 4:00 p.m.
Eastern time. Shareholders wishing to exchange Shares of the Fund in excess of
$50,000 must complete an Institutional Telephone Privileges Request and
Agreement, as described under 'Telephone Transactions.' Telephonic exchanges can
involve only Shares in non-certificated form. Shares held in certificate form
are not eligible, but may be returned and qualify for these services. All
accounts involved in a telephonic exchange must have the same registration and
dividend option as the account from which the Shares are being exchanged. The
Company and the Transfer Agent will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. Please refer to 'Telephone
Transactions--Verification Procedures.' Forms for declining the telephone
exchange privilege and prospectuses of the other funds in the Franklin Templeton
Group may be obtained from FTD. During periods of drastic economic or market
changes, it is possible that the Telephone Exchange Privilege may be difficult
to implement. In this event, Shareholders should follow the 'Exchanges by Mail'
procedure discussed in this section.
EXCHANGES BY MAIL. A Shareholder may also exchange Shares by submitting
such request in writing to Franklin Templeton Institutional Services, 777
Mariners Island Boulevard, P.O. Box 7777, San Mateo, California 94403-7777, or
by contacting his or her investment dealer. The exchange transaction will be
effected upon receipt of written instructions signed by all Shareholders of
record.
GENERAL. Exchange redemptions and purchases are processed simultaneously at
the net asset values next determined after the exchange order is received. A
gain or loss for tax purposes generally will be realized upon the exchange,
depending on the tax basis of the Shares redeemed.
This exchange privilege is available only in states where shares of the
funds being acquired may legally be sold and may be modified, limited or
terminated at any time by the Company upon sixty (60) days' written notice. A
Shareholder who wishes to make an exchange should first obtain and review a
current prospectus of the fund into which he or she wishes to exchange.
Broker-dealers who process exchange orders on behalf of their customers may
charge a fee for their services. Such fee may be avoided by making requests for
exchange directly to the Transfer Agent.
EXCHANGES BY TIMING ACCOUNTS. In the case of market timing or allocation
services ('Timing Accounts'), FTD will deduct an administrative service fee of
$5.00 per exchange. Timing Accounts generally include accounts administered so
as to redeem or purchase Shares based upon certain predetermined market
indicators. In accordance with the terms of their respective prospectuses,
certain funds in the Franklin Templeton Group do not accept or may place
differing limitations than those described below on exchanges by Timing
Accounts.
20
<PAGE>
The Company reserves the right to temporarily or permanently terminate the
exchange privilege or reject any specific purchase order for any Timing Account
or any person whose transactions seem to follow a timing pattern who: (i) makes
an exchange request out of a Fund within two weeks of an earlier exchange
request out of the Fund, (ii) makes more than two exchanges out of a Fund per
calendar quarter, or (iii) exchanges shares equal in value to at least $5
million, or more than 1% of a Fund's net assets. Accounts under common ownership
or control, including accounts administered so as to redeem or purchase shares
based upon certain predetermined market indicators, will be aggregated for
purposes of the exchange limits.
In addition, the Company reserves the right to refuse the purchase side of
exchange requests by any Timing Account, person, or group if, in the Investment
Manager's judgment, a Fund would be unable to invest effectively in accordance
with its investment objectives and policies, or would otherwise potentially be
adversely affected. A Shareholder's exchanges into a Fund may be restricted or
refused if a Fund receives or anticipates simultaneous orders affecting
significant portions of the Fund's assets. In particular, a pattern of exchanges
that coincides with a 'market timing' strategy may be disruptive to a Fund and
therefore may be refused.
Finally, as indicated above, the Company and FTD reserve the right to refuse
any order for the purchase of Shares.
HOW TO SELL SHARES OF THE FUNDS
Shares will be redeemed, without charge, on request of the Shareholder and
received in 'Proper Order.' 'PROPER ORDER' MEANS THAT THE REQUEST TO REDEEM MUST
MEET ALL OF THE FOLLOWING REQUIREMENTS:
1. Except as provided below under 'Redemptions by Telephone,' it must be in
writing, signed by the Shareholder(s) exactly in the manner as the Shares are
registered, and must specify either the number of Shares, or the dollar amount
of Shares, to be redeemed and sent to Franklin Templeton Institutional Services,
777 Mariners Island Boulevard, P.O. Box 7777, San Mateo, CA 94403-7777;
2. To be considered in proper form, the signature(s) of all registered
owners or designated signers must be guaranteed if the redemption request
involves any of the following:
bullet the proceeds of the redemption are over $50,000;
bullet the proceeds (in any amount) are to be paid to a party other than
the registered owner(s) of the account;
bullet the proceeds (in any amount) are to be sent to an address other than
the address of record, or to a preauthorized bank account or a
brokerage firm account; or
bullet the Company or the Transfer Agent believe that a signature guarantee
would protect against potential claims based on the transfer
instructions, including, for example, when (a) the current address
of one or more joint owners of an account cannot be confirmed, (b)
multiple owners have a dispute or give inconsistent instructions to
the Company, (c) the Company has been notified of an adverse claim,
(d) the instructions received by the Company are given by an agent,
not the actual registered owner, (e) the Company determines that
joint owners who are married to each other are separated or may be
the subject of divorce proceedings, or (f) the authority of a
representative of a corporation, partnership, association, or other
entity has not been established to the satisfaction of the Company.
However, the Company reserves the right to require signature guarantees on
all redemptions. A signature guarantee is required in connection with any
written request for transfer of Shares.
3. Signature guarantees must be provided by an 'eligible guarantor,'
including (1) national or state banks, savings associations, savings and loan
associations, trust companies, savings banks, industrial loan companies and
credit unions; (2) national securities exchanges, registered securities
associations and clearing agencies; (3) securities broker/dealers which are
members of a national securities exchange or a clearing agency or which have
minimum net capital of $100,000; or (4) institutions that participate in the
Securities Transfer Agent Medallion Program ('STAMP') or other recognized
signature medallion program. A notarized signature will not be sufficient for
the request to be in Proper Order.
4. Any outstanding certificates must accompany the request together with a
stock power signed by the Shareholder, with signature(s) guaranteed as described
in Item 3 above; and
21
<PAGE>
5. Liquidation requests of corporate, partnership, trust and custodianship
accounts, and accounts under court jurisdiction, require the following
documentation to be in proper form:
bullet Corporation--(i) Signature guaranteed letter of instruction from the
authorized officer(s) of the corporation, and (ii) a corporate
resolution in a form satisfactory to the Transfer Agent;
bullet Partnership--(i) Signature guaranteed letter of instruction from a
general partner and, if necessary, (ii) pertinent pages from the
partnership agreement identifying the general partners or other
documentation in a form satisfactory to the Transfer Agent;
bullet Trust--(i) Signature guaranteed letter of instruction from the
trustee(s), and (ii) a copy of the pertinent pages of the trust
document listing the trustee(s) or a certificate of incumbency if
the trustee(s) are not listed on the account registration;
bullet Custodial (other than a retirement account) -- Signature guaranteed
letter of instruction from the custodian; and
bullet Accounts under court jurisdiction -- Check court documents and the
applicable state law since these accounts have varying requirements,
depending upon the state of residence.
To avoid delay in redemption or transfer, Shareholders having questions
about these requirements should contact the Franklin Templeton Institutional
Services Department at 1-800-321-8563.
The redemption price will be the net asset value of the Shares next computed
after the redemption request in Proper Order is received by the Transfer Agent.
Payment of the redemption price ordinarily will be made by check (or by wire at
the sole discretion of the Transfer Agent if wire transfer is requested,
including name and address of the bank and the Shareholder's account number to
which payment of the redemption proceeds is to be wired) within seven days after
receipt of the redemption request in Proper Order. However, if Shares have been
purchased by check, the Company will make redemption proceeds available when a
Shareholder's check received for the Shares purchased has been cleared for
payment by the Shareholder's bank, which, depending upon the location of the
Shareholder's bank, could take up to 15 days or more. The check will be mailed
by first-class mail to the Shareholder's registered address (or as otherwise
directed).
Upon any redemption of a portion of a Shareholder's Shares leaving a balance
of unredeemed Shares of less than $1,000 at the current net asset value at the
time of the redemption, the Company may also redeem such balance of Shares and
add the proceeds thereof to the proceeds of the redemption which the Shareholder
requested.
The proceeds of any redemption of Fund Shares held under a 401(k) plan may
be reinvested in certain other Templeton Funds without the imposition of a sales
charge. Prospectuses of the other Templeton Funds and further information may be
obtained by contacting FTD.
Redemption proceeds are normally paid in cash; however, a Fund may pay the
redemption price in whole or part by a distribution in kind of securities from
the portfolio of the Fund, in lieu of cash, in conformity with applicable rules
of the SEC. If shares are redeemed in kind, the redeeming Shareholder might
incur brokerage costs in converting the assets into cash. A Fund is obligated to
redeem Shares solely in cash up to the lesser of $250,000 or 1% of its net
assets during any 90-day period for any one Shareholder.
REDEMPTIONS BY TELEPHONE. Shareholders who file an Institutional Telephone
Privileges Agreement (the 'Agreement'), a copy of which is included in the
Institutional Account Application Form, may redeem Shares of the Funds by
telephone. The Company and the Transfer Agent will employ reasonable procedures
to confirm that instructions given by telephone are genuine. Shareholders,
however, bear the risk of loss in certain cases as described under 'Telephone
Transactions--Verification Procedures.' Telephone redemption requests received
before the schedule closing time of the NYSE (generally 4:00 p.m., New York
time), on any business day will be processed that same day. The redemption
check will be sent within seven days, made payable to all the registered
owners on the account, and will be sent only to the address of record.
Redemption requests by telephone will not be accepted within 30 days
following an address change by telephone. In that case, a Shareholder should
follow the other redemption procedures set forth in this Prospectus.
22
<PAGE>
TELEPHONE TRANSACTIONS
Shareholders of the Funds and their dealer of record, if any, may be able to
execute various transactions by calling the Franklin Templeton Institutional
Services Department at 1-800-321-8563. All Shareholders will be able to: (i)
effect a change in address, (ii) change a dividend option, (iii) transfer Fund
Shares in one account to another identically registered account in the Fund, and
(iv) exchange Shares of a Fund by telephone as described in this Prospectus. In
addition, Shareholders who complete and file an Agreement as described under
'How to Sell Shares of the Funds--Redemptions by Telephone' will be able to
redeem Shares of the Funds.
VERIFICATION PROCEDURES. The Company and the Transfer Agent will employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine. These will include: recording all telephone calls requesting account
activity by telephone, requiring that the caller provide certain personal and/or
account information requested by the telephone service agent at the time of the
call for the purpose of establishing the caller's identification, and sending a
confirmation statement on redemptions to the address of record each time account
activity is initiated by telephone. So long as the Company and the Transfer
Agent follow instructions communicated by telephone which were reasonably
believed to be genuine at the time of their receipt, neither they nor their
affiliates will be liable for any loss to the Shareholder caused by an
unauthorized transaction. Shareholders are, of course, under no obligation to
apply for or accept telephone transaction privileges. In any instance where the
Company or the Transfer Agent is not reasonably satisfied that instructions
received by telephone are genuine, the requested transaction will not be
executed, and neither the Company, the Transfer Agent, nor their affiliates will
be liable for any losses which may occur because of a delay in implementing a
transaction. The Company and the Transfer Agent may be liable for any losses
due to unauthorized or fraudulent instructions in the event such reasonable
procedures are not followed.
GENERAL. During periods of drastic economic or market changes, it is
possible that the telephone transaction privileges will be difficult to execute
because of heavy telephone volume. In such situations, Shareholders may wish to
contact their dealer for assistance, or to send written instructions to the
Company as detailed elsewhere in this Prospectus.
Neither the Company nor the Transfer Agent will be liable for any losses
resulting from the inability of a Shareholder to execute a telephone
transaction.
The telephone transaction privilege may be modified or discontinued by the
Company at any time upon 60 days' written notice to Shareholders.
MANAGEMENT OF THE FUNDS
The Company is managed by its Board of Directors and all powers conferred by
Maryland and other applicable law are exercised by or under authority of the
Board. Information relating to the Directors and officers is set forth under the
heading 'Management of the Company' in the SAI.
INVESTMENT MANAGERS. The Investment Manager of Growth Series, Foreign
Equity Series, and Foreign Equity (South Africa Free) Series is Templeton
Investment Counsel, Inc., Broward Financial Centre, Fort Lauderdale, Florida
33394-3091. The Investment Manager of Emerging Markets Series is Templeton
Investment Management (Hong Kong) Limited, Two Exchange Square, Hong Kong. The
Investment Manager of Global Fixed Income Series is Templeton Investment
Counsel, Inc. through its Templeton Global Bond Managers division. The
Investment Managers manage the investment and reinvestment of the Funds' assets.
TICI and Templeton (Hong Kong) are indirect wholly owned subsidiaries of
Franklin Resources, Inc. ('Franklin'). Through its subsidiaries, Franklin is
engaged in various aspects of the financial services industry.
The Investment Managers and their affiliates serve as advisers for a wide
variety of public investment mutual funds and private clients in many nations.
The Templeton organization has been investing globally over the past 52 years
and, with its affiliates, provides investment management and advisory services
to a worldwide client base, including over 4.3 million mutual fund shareholders,
foundations, endowments, employee benefit plans and individuals. The Investment
Managers and their affiliates have approximately 4,100 employees in the United
States, Australia, Scotland, Germany, Hong Kong, Luxembourg, Bahamas, Singapore,
Canada and Russia.
23
<PAGE>
The Investment Managers use a disciplined, long-term approach to value
oriented global and international investing. They have an extensive global
network of investment research sources. Securities are selected for each Fund's
portfolio on the basis of fundamental company-by-company analysis. Many
different selection methods are used for different funds and clients and these
methods are changed and improved by the Investment Managers' research on
superior selection methods.
The Investment Managers do not furnish any other services or facilities for
the Funds, although such expenses are paid by some investment advisers of other
investment companies. As compensation for its services, the Fund pays its
Investment Manager a fee which, during the most recent fiscal year, represented
the following percentage of its average daily net assets: Growth Series --
0.70%; Foreign Equity Series -- 0.70%; Emerging Markets Series -- 1.25%; Global
Fixed Income Series -- 0.55%; and Foreign Equity (South Africa Free) Series --
0.70%.
Currently, the lead portfolio manager for Growth Series, Foreign Equity
Series and Foreign Equity (South Africa Free) Series is James E. Chaney, Senior
Vice President of Templeton Investment Counsel, Inc. ('TICI'). Prior to joining
the Templeton organization in 1991, Mr. Chaney spent six years with GE
Investments, where he was vice president of international equities. In that
capacity he had numerous research responsibilities and also managed several
accounts, including a mutual fund. He also has another seven years' experience
as an international consulting engineer and project manager for Camp, Dresser &
McKee, Inc. and American British Consultants. Lauretta A. Reeves, Vice President
of TICI, and Gary R. Clemons, Vice President of TICI, exercise secondary
portfolio management responsibilities with respect to Growth Series, Foreign
Equity Series and Foreign Equity (South Africa Free) Series. Ms. Reeves joined
the Templeton organization in 1987 as an equity trader and moved into the
research group in 1989. Prior to joining the Templeton organization, Ms. Reeves
was manager of equity trading for the First Equity Corporation of Florida, a
regional brokerage firm. Previously, she worked in similar trading positions
with two other brokerage houses. Prior to joining the Investment Manager in
1993, Mr. Clemons was a research analyst for Templeton Quantitative Advisors,
Inc. in New York. At Templeton Quantitative Advisors, Inc., he was also
responsible for management of a small capitalization fund.
The lead portfolio manager for Emerging Markets Series is Dr. J. Mark
Mobius, Managing Director of Templeton Investment Management (Hong Kong)
Limited. Prior to joining the Templeton organization in 1987, Dr. Mobius was
president of the International Investment Trust Company Limited (investment
manager of Taiwan R.O.C. Fund) (1986-1987) and a director of Vickers da Costa,
Hong Kong (an international securities firm) (1983-1986). Dr. Mobius began
working in Vickers da Costa's Hong Kong office in 1980 and moved to Taiwan in
1983 to open the firm's office there and to direct operations in India,
Indonesia, Thailand, the Philippines, and Korea. Messrs. Allan Lam, Tom Wu and
Eddie Chow exercise secondary portfolio management responsibilities with respect
to Emerging Markets Series. Prior to joining the Templeton organization in 1987,
Mr. Lam worked as an auditor with two international accounting firms in Hong
Kong: Deloitte Haskins & Sells CPA and KPMG Peat Marwick CPA. Prior to joining
the Templeton organization in 1987, Mr. Wu worked as an investment analyst,
specializing in Hong Kong companies, with Vickers da Costa. Prior to joining the
Templeton organization in 1994, Mr. Chow worked in the Credit and Marketing
department of the Overseas Chinese Banking Corporation Limited in Hong Kong. Mr.
Chow has also worked for Dao Heng Bank Limited and Security Pacific Credit (HK)
Limited.
The lead portfolio manager of Global Fixed Income Series is Thomas Latta,
Vice President of the Templeton Global Bond Managers division of TICI. Mr. Latta
joined the Templeton organization in 1991. He is the senior portfolio manager
for developed markets fixed income and has research responsibilities for the
core European markets. Mr. Latta is also responsible for internal fixed income
systems development. Mr. Latta began working in the securities industry in 1981.
His experience includes seven years with Merrill Lynch where he was part of an
investment team to the Saudi Arabian Monetary Authority in Riyadh, Saudi Arabia.
While at Merrill Lynch, Mr. Latta also acted as an advisor to investment
managers concerning the modeling and application of interest rate strategies in
fixed income portfolios. Mr. Neil S. Devlin and Mr. Tom Dickson exercise
secondary portfolio management responsibilities with respect to Global Fixed
Income Series. Mr. Devlin is Executive Vice President of the Templeton Global
Bond Managers division of TICI. Prior to joining the Templeton organization in
1987, Mr. Devlin was a portfolio manager and bond analyst with Constitutional
Capital Management of Boston. While there, he managed a portion of the Bank of
New England's pension money, a number of trust and corporate pension accounts,
and began and managed a mortgage-backed securities fund for the Bank. Before
that, Mr. Devlin was a bond trader and research analyst for the Bank of New
England.
24
<PAGE>
Mr. Dickson joined the Templeton organization in 1994 and he serves as a fixed
income analyst and manager of the fixed income trading desk. Prior to joining
Templeton, Mr. Dickson worked as a fixed income analyst and trader for Franklin
Advisors, Inc. for two years. Further information concerning the Investment
Managers is included under the heading 'Investment Management and Other
Services' in the SAI.
BUSINESS MANAGER. Templeton Global Investors, Inc. provides certain
administrative facilities and services for the Funds, including payment of
salaries of officers, preparation and maintenance of books and records,
preparation of tax reports, preparation of financial reports and monitoring
compliance with regulatory requirements. For its services, the Company pays the
Business Manager a monthly fee equivalent on an annual basis to 0.15% of
combined average daily net assets of the Funds during the year, reduced to
0.135% of such net assets in excess of $200 million, further reduced to 0.10% of
such net assets in excess of $700 million, and further reduced to 0.075% of such
net assets in excess of $1,200 million. The combined investment management and
business management fees paid by each of the Funds except Global Fixed Income
Series are higher than those paid by most other investment companies.
TRANSFER AGENT. Franklin Templeton Investor Services, Inc. serves as
transfer agent and dividend disbursing agent for the Funds.
CUSTODIAN. The Chase Manhattan Bank, N.A. serves as custodian of the Funds'
assets.
EXPENSES. For the fiscal year ended December 31, 1994, expenses as a
percentage of each Fund's average net assets (net of reimbursement) amounted to
Foreign Equity Series, .95%; Growth Series, .95%; Emerging Markets Series,
1.60%; Global Fixed Income Series, 1%; and Foreign Equity (South Africa Free)
Series, 1.00%.
BROKERAGE COMMISSIONS. The Company's brokerage policies are described under
the heading 'Brokerage Allocation' in the SAI. The Company's brokerage policies
provide that the receipt of research services from a broker and the sale of
Shares by a broker are factors which may be taken into account in allocating
securities transactions, so long as the prices and execution provided by the
broker equal the best available within the scope of the Company's brokerage
policies.
GENERAL INFORMATION
DESCRIPTION OF SHARES/SHARE CERTIFICATES. The Company's authorized capital
consists of 520 million Shares, par value $0.01 per Share, of which 160 million
Shares have been allocated to Foreign Equity Series, 120 million Shares have
been allocated to Growth Series, 200 million Shares have been allocated to
Emerging Markets Series, 10 million Shares have been allocated to Global Fixed
Income Series and 30 million Shares have been allocated to Foreign Equity (South
Africa Free) Series. The Board of Directors is authorized, in its discretion, to
classify and allocate the unissued Shares of the Company, each such class to
represent a different portfolio of securities. Each Share entitles the holder to
one vote.
The Fund will not ordinarily issue certificates for Shares purchased. Share
certificates representing whole (not fractional) Shares are issued only upon the
specific request of the Shareholder made in writing to the Transfer Agent. No
charge is made for the issuance of one certificate for all or some of the Shares
purchased in a single order.
MEETINGS OF SHAREHOLDERS. The Company is not required to hold annual
meetings of Shareholders and may elect not to do so. The Company will call a
special meeting of Shareholders when requested to do so by Shareholders holding
at least 10% of the Company's outstanding Shares.
DIVIDENDS AND DISTRIBUTIONS. Each Fund except Global Fixed Income Series
intends to pay a dividend at least annually representing substantially all of
the Fund's net investment income and any net realized capital gains. Global
Fixed Income Series intends normally to pay a monthly dividend representing all
or substantially all of its net investment income and to distribute at least
annually any net realized capital gains. Income dividends and capital gain
distributions paid by a Fund, other than on those Shares whose owners keep them
registered in the name of a broker-dealer, are automatically reinvested on the
payment date in whole or fractional Shares of the Fund at net asset value as of
the ex-dividend date, unless a Shareholder makes a written request for payments
in cash. The processing date for the reinvestment of dividends may vary from
month to month, and does not affect the amount or value of the shares acquired.
Income dividends and capital gain distributions will be paid in cash on Shares
during
25
<PAGE>
the time that their owners keep them registered in the name of a broker-dealer,
unless the broker-dealer has made arrangements with the Transfer Agent for
reinvestment.
Prior to purchasing Shares of a Fund, the impact of dividends or capital
gain distributions which have been declared but not yet paid should be carefully
considered. Any dividend or capital gain distribution paid shortly after a
purchase by a Shareholder prior to the record date will have the effect of
reducing the per Share net asset value of the Shares by the amount of the
dividend or distribution. All or a portion of such dividend or distribution,
although in effect a return of capital, generally will be subject to tax.
Checks are forwarded by first-class mail to the address of record. The
proceeds of any such checks which are not accepted by the addressee and returned
to the Company will be reinvested for the Shareholder's account in whole or
fractional Shares at net asset value next computed after the check has been
received by the Transfer Agent. Subsequent distributions automatically will be
reinvested at net asset value as of the ex-dividend date in additional whole or
fractional Shares.
FEDERAL TAX INFORMATION. Each Fund intends to elect to be treated and to
qualify each year as a regulated investment company under Subchapter M of the
Code. A regulated investment company generally is not subject to Federal income
tax on income and gains distributed in a timely manner to its shareholders.
Earnings of a Fund not distributed on a timely basis in accordance with a
calendar year distribution requirement are subject to a nondeductible 4% excise
tax. To prevent imposition of this tax, each Fund intends to comply with this
distribution requirement. Each Fund intends to distribute substantially all of
its net investment income and realized capital gains to Shareholders, which
generally will be taxable income or capital gains in their hands. Distributions
declared in October, November or December to Shareholders of record on a date in
such month and paid during the following January will be treated as having been
received by Shareholders on December 31 in the year such distributions were
declared, rather than the calendar year in which the distributions are actually
received. The Company will inform Shareholders each year of the amount and
nature of such income or gains. A more detailed description of tax consequences
to Shareholders is contained in the SAI under the heading 'Tax Status.'
ACCOUNT INQUIRIES. Shareholder account inquiries will be answered promptly.
They should be addressed to Franklin Templeton Institutional Services, 777
Mariners Island Boulevard, P.O. Box 7777, San Mateo, CA 94403-7777 -- telephone
1-800-321-8563.
PERFORMANCE INFORMATION. Each Fund may include its total return in
advertisements or reports to Shareholders or prospective investors. Quotations
of average annual total return will be expressed in terms of the average annual
compounded rate of return on a hypothetical investment in a Fund over a period
of one, five and ten years (or up to the life of the Fund), will reflect the
deduction of a proportional share of Fund expenses (on an annual basis), and
will assume that all dividends and distributions are reinvested when paid. Total
return may be expressed in terms of the cumulative value of an investment in a
Fund at the end of a defined period of time. For a description of the methods
used to determine total return for the Funds, see the SAI.
STATEMENTS AND REPORTS. The Company's fiscal year ends on December 31.
Annual reports (containing fin
ncial statements audited by independent auditors
and additional information regarding the Funds' performance) and semi-annual
reports (containing unaudited financial information) are sent to Shareholders
each year. Additional copies may be obtained, without charge, upon request to
Franklin Templeton Institutional Services. The Fund also sends to each
Shareholder a confirmation statement after every transaction that affects the
Shareholder's account and a year-end historical confirmation statement.
26
<PAGE>
INSTRUCTIONS AND IMPORTANT NOTICE
SUBSTITUTE W-9 INSTRUCTIONS INFORMATION
GENERAL. Backup withholding is not an additional tax. Rather, the tax liability
of persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained from the IRS.
OBTAINING A NUMBER. If you do not have a Social Security Number/Taxpayer
Identification Number, you must obtain Form SS-5 or Form SS-4 from your local
Social Security or IRS office and apply for one. If you have checked the
'Awaiting TIN' box and signed the certification, withholding will apply to
payments relating to your account unless you provide a certified TIN within 60
days.
WHAT SSN/TIN TO GIVE. Please refer to the following guidelines:
<TABLE>
<CAPTION>
ACCOUNT TYPE GIVE SSN OF ACCOUNT TYPE GIVE TAXPAYER ID # OF
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
bullet Individual Individual bullet Trust, Estate, or Trust, Estate, or
Pension Plan Trust Pension Plan Trust
- --------------------------------------------------------------------------------------------------------------------------------
bullet Joint Individual Owner who will be paying tax bullet Corporation, Partnership, Corporation, Partnership, or
or first-named individual or other organization other organization
- --------------------------------------------------------------------------------------------------------------------------------
bullet Unif. Gift/Transfer to Minor bullet Broker nominee Broker nominee
Minor
- --------------------------------------------------------------------------------------------------------------------------------
bullet Sole Proprietor Owner of business
- --------------------------------------------------------------------------------------------------------------------------------
bullet Legal Guardian Ward, Minor, or Incompetent
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
EXEMPT RECIPIENTS. Please provide your TIN and check the 'Exempt Recipient' box
if you are an exempt recipient. Exempt recipients generally include:
<TABLE>
<S> <C>
A corporation A real estate investment trust
A financial institution A common trust fund operated by a bank under section 584(a)
An organization exempt from tax under section 501(a), An entity registered at all times under the Investment
or an individual retirement plan Company Act of 1940
A registered dealer in securities or commodities
registered in the U.S. or a U.S. possession
</TABLE>
IRS PENALTIES. If you do not supply us with your SSN/TIN, you will be subject to
an IRS $50 penalty unless your failure is due to reasonable cause and not
willful neglect. If you fail to report certain income on your Federal income tax
return, you will be treated as negligent and subject to an IRS 20% penalty on
any underpayment of tax attributable to such negligence, unless there was
reasonable cause for the resulting underpayment and you acted in good faith. If
you falsify information on this form or make any other false statement resulting
in no backup withholding on an account which should be subject to backup
withholding, you may be subject to an IRS $500 penalty and certain criminal
penalties including fines and imprisonment.
SUBSTITUTE W-8 INSTRUCTIONS INFORMATION
EXEMPT FOREIGN PERSON. Check the 'Exempt Foreign Person' box if you qualify as a
non-resident alien or foreign entity that is not subject to certain U.S.
information return reporting or to backup withholding rules. Dividends paid to
your account may be subject to withholding of up to 30%. Generally, you are an
'Exempt Foreign Person' if you are not (1) a citizen or resident of the U.S., or
(2) a U.S. corporation, partnership, estate, or trust. In the case of an
individual, an 'Exempt Foreign Person' is one who has been physically present in
the U.S. for less than 31 days during the current calendar year. An individual
who is physically present in the U.S. for at least 31 days during the current
calendar year will still be treated as an 'Exempt Foreign Person,' provided that
the total number of days physically present in the current calendar year and the
two preceding calendar years does not exceed 183 days (counting all of the days
in the current calendar year, only one-third of the days in the first preceding
calendar year and only one-sixth of the days in the second preceding calendar
year). In addition, lawful permanent residents or green card holders may not be
treated as 'Exempt Foreign Persons.' If you are an individual or an entity, you
must not now be, or at this time expect to be, engaged in a U.S. trade or
business with respect to which any gain derived from transactions effected by
the Fund/Payer during the calendar year is effectively connected to the U.S.
PERMANENT ADDRESS. The Shareholder Application must contain your permanent
address if you are an 'Exempt Foreign Person.' If you are an individual, provide
your permanent address. If you are a partnership or corporation, provide the
address of your principal office. If you are an estate or trust, provide the
address of your permanent residence or the principal office of any fiduciary.
NOTICE OF CHANGE IN STATUS. If you become a U.S. citizen or resident after you
have provided certification of your foreign status, or if you cease to be an
'Exempt Foreign Person,' you must notify the Fund/Payer within 30 days of your
change in status. Reporting will then begin on the account(s) listed, and backup
withholding may also begin unless you certify to the Fund/Payer that (1) the
taxpayer identification number you have given is correct, and (2) the Internal
Revenue Service has not notified you that you are subject to backup withholding
because you failed to report certain interest or dividend income. You must use
Form W-9, 'Payer's Request for Taxpayer Identification Number and
Certification,' to make these certifications. If an account is no longer active,
you do not have to notify a Fund/Payer or broker of your change in status unless
you also have another account with the same Fund/Payer that is still active. If
you receive interest from more than one Fund/Payer or have dealings with more
than one broker or barter exchange, file a certificate with each. If you have
more than one account with the same Fund/Payer, the Fund/Payer may require you
to file a separate certificate for each account.
WHEN TO FILE. File these certifications with the Fund before a payment is made
to you, unless you have already done this in either of the two preceding
calendar years. Only certifications that are in proper order will be treated as
having been filed with the Fund.
HOW OFTEN YOU MUST FILE. This certificate generally remains in effect for three
calendar years. A Fund/Payer or broker, however, may require that a new
certificate be filed each time a payment is made. On joint accounts for which
each joint owner is a foreign person, each must provide a certification of
foreign status.
27
<PAGE>
FOR CORPORATE SHAREHOLDERS--FORM OF RESOLUTION
It will be necessary for corporate shareholders to provide a certified copy of a
resolution or other certificate of authority to authorize the purchase as well
as sale (redemption) of shares and withdrawals by checks or drafts. You may use
the following form of resolution or you may prefer to use your own. It is
understood that the Fund, Franklin Templeton Distributors, Inc., Franklin
Templeton Investor Services, Inc., the custodian bank and their affiliates may
rely upon these authorizations until revoked or amended by written notice
delivered by registered or certified mail to the Fund.
CERTIFIED COPY OF RESOLUTION (Corporation or Association)
The undersigned hereby certifies and affirms that he/she is the duly elected ___
TITLE
of _____________________________________________________________________________
CORPORATE NAME
a ____________________ organized under the laws of the State of ______ and the
TYPE OF ORGANIZATION STATE
following is a true and correct copy of a resolution adopted by the Board of
Directors at a meeting duly called and held on _______________________________
DATE
RESOLVED, that the _________________________________________________ of this
OFFICERS' TITLES
Corporation or Association are authorized to open an account in the name of
the Corporation or Association with one or more of the Franklin Group of
Funds or Templeton Family of Funds (collectively, the 'Funds') and to
deposit such funds of this Corporation or Association in this account as
they deem necessary or desirable; that the persons authorized below may
endorse checks and other instruments for deposit to said account or
accounts; and
FURTHER RESOLVED, that any of the following ______ officers are authorized
NUMBER
to sign any share assignment on behalf of this Corporation or Association
and to take any other actions as may be necessary to sell or redeem its
shares in the Funds or to sign checks or drafts withdrawing funds from the
account; and
FURTHER RESOLVED, that this Corporation or Association shall hold harmless,
indemnify, and defend the Funds, their custodian bank, Franklin Templeton
Distributors, Inc., Franklin Templeton Investor Services, Inc., and their
affiliates, from any claim, loss or liability resulting in whole or in part,
directly or indirectly, from their reliance from time to time upon any
certifications by the secretary or any assistant secretary of this
Corporation or Association as to the names of the individuals occupying such
offices and their acting in reliance upon these resolutions until actual
receipt by them of a certified copy of a resolution of the Board of
Directors of the Corporation or Association modifying or revoking any or all
such resolutions.
The undersigned further certifies that the below named persons, whose signatures
appear opposite their names and office titles, are duly elected officers of the
Corporation or Association. (Attach additional list if necessary)
_______________________________________ ________________________________
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
_______________________________________ ________________________________
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
_______________________________________ ________________________________
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
_______________________________________ ________________________________
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
_______________________________________ ________________________________
NAME OF CORPORATION OR ASSOCIATION DATE
Certified from minutes _________________________________________________________
NAME AND TITLE
CORPORATE SEAL (if appropriate)
28
<PAGE>
THE FRANKLIN TEMPLETON GROUP
Literature Request -- Call today for a free descriptive brochure and prospectus
on any of the funds listed below. The prospectus contains more complete
information, including fees, charges and expenses, and should be read carefully
before investing or sending money.
TEMPLETON FUNDS
American Trust
American Government Securities Fund
Developing Markets Trust
Foreign Fund
Global Infrastructure Fund
Global Opportunities Trust
Global Rising Dividends Fund
Growth Fund
Income Fund
Japan Fund
Money Fund
Real Estate Securities Fund
Smaller Companies Growth Fund
World Fund
FRANKLIN FUNDS
SEEKING TAX-FREE INCOME
Federal Intermediate Term
Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund***
Puerto Rico Tax-Free Income Fund
FRANKLIN STATE-SPECIFIC FUNDS
SEEKING TAX-FREE INCOME
Alabama
Arizona*
Arkansas**
California*
Colorado
Connecticut
Florida*
Georgia
Hawaii**
Indiana
Kentucky
Louisiana
Maryland
Massachusetts***
Michigan***
Minnesota***
Missouri
New Jersey
New York*
North Carolina
Ohio***
Oregon
Pennsylvania
Tennessee**
Texas
Virginia
Washington**
FRANKLIN FUNDS
SEEKING CAPITAL GROWTH
California Growth Fund
DynaTech Fund
Equity Fund
Global Health Care Fund
Gold Fund
Growth Fund
International Equity Fund
Pacific Growth Fund
Real Estate Securities Fund
Small Cap Growth Fund
FRANKLIN FUNDS SEEKING
GROWTH AND INCOME
Balance Sheet Investment Fund
Convertible Securities Fund
Equity Income Fund
Global Utilities Fund
Income Fund
Premier Return Fund
Rising Dividends Fund
Strategic Income Fund
Utilities Fund
FRANKLIN FUNDS SEEKING
HIGH CURRENT INCOME
AGE High Income Fund
German Government Bond Fund
Global Government Income Fund
Investment Grade Income Fund
U.S. Government Securities Fund
FRANKLIN FUNDS SEEKING HIGH CURRENT
INCOME AND STABILITY OF PRINCIPAL
Adjustable Rate Securities Fund
Adjustable U.S. Government Securities Fund
Short-Intermediate U.S. Government Securities Fund
FRANKLIN FUNDS FOR NON-U.S. INVESTORS
Tax-Advantaged High Yield Securities Fund
Tax-Advantaged International Bond Fund
Tax-Advantaged U.S. Government Securities Fund
FRANKLIN TEMPLETON INTERNATIONAL
CURRENCY FUNDS
Global Currency Fund
Hard Currency Fund
High Income Currency Fund
FRANKLIN MONEY MARKET FUNDS
California Tax-Exempt Money Fund
Federal Money Fund
IFT U.S. Treasury Money Market Portfolio
Money Fund
New York Tax-Exempt Money Fund
Tax-Exempt Money Fund
FRANKLIN FUND FOR CORPORATIONS
Corporate Qualified Dividend Fund
FRANKLIN TEMPLETON VARIABLE ANNUITIES
Franklin Valuemark
Franklin Templeton Valuemark Income
Plus (an intermediate annuity)
Toll-free 1-800/DIAL BEN (1-800/342-5236)
* Two or more fund options available: Long-term portfolio, intermediate-term
portfolio, a portfolio of municipal securities, and a high yield portfolio
(CA).
** The fund may invest up to 100% of its assets in bonds that pay interest
subject to the federal alternative minimum tax.
*** Portfolio of insured municipal securities.
29
<PAGE>
TIFI
- ------------------------------------------------
TEMPLETON
INSTITUTIONAL
FUNDS, INC.
MAY 1, 1995
PROSPECTUS
<PAGE>
This prospectus does not constitute an offering
in any jurisdiction in which such offering may
not lawfully be made. No person is authorized
to make any representation in connection with
this offering, other than those contained in
this prospectus.
Principal Underwriter:
Franklin Templeton Distributors, Inc.
700 Central Avenue
St. Petersburg, Florida 33701
Institutional Services: 800-321-8563
Fund Information: 800-368-3677
TLINS P 5/95
