Registration No. 33-35779
As filed with the Securities and Exchange Commission on April 29, 1996
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No.9 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 11 X
(Check appropriate box or boxes)
TEMPLETON INSTITUTIONAL FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
700 CENTRAL AVENUE, P.O. BOX 33030, ST. PETERSBURG, FLORIDA 33733-8030
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number: (813) 823-8712
Thomas M. Mistele
700 Central Avenue
P.O. Box 33030
ST. PETERSBURG, FLORIDA 33733-8030
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
immediately upon filing pursuant to paragraph (b) of Rule 485
X on MAY 1, 1996 pursuant to paragraph (b) of Rule 485
------------
60 days after filing pursuant to paragraph (a)(1) of Rule 485
on pursuant to paragraph (a)(1) of Rule 485
75 days after filing pursuant to paragraph (a)(2) of Rule 485
on pursuant to paragraph (a)(2) of Rule 485
this post-effective amendment designates a new effective
date for a previously filed post-effective amendment
- -----------------------------------------------------------------------------
The Registrant has registered an indefinite number of shares of beneficial
interest under the Securities Act of 1933 pursuant to Rule 24f-2 under the
Investment Company Act of 1940, and filed its Rule 24f-2 Notice for the fiscal
year ended December 31, 1995 on February 28, 1996.
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TEMPLETON INSTITUTIONAL FUNDS, INC.
CROSS-REFERENCE SHEET
REQUIRED BY RULE 495
UNDER THE SECURITIES ACT OF 1933
PART A
ITEM NO. CAPTION
1 Cover Page
2 Expense Table
3 Financial Highlights
4 General Description, Investment
Objectives and Policies
5 Management of the Funds
5A See Annual Report to Shareholders
6 General Information
7 How to Buy Shares of the Funds
8 How to Sell Shares of the Funds
9 Not Applicable
PART B
10 Cover Page
11 Table of Contents
12 General Information and History
13 Investment Objectives and Policies
14 Management of the Funds
15 Principal Shareholders
16 Investment Management and Other
Services
17 Brokerage Allocation
18 Description of Shares; Part A
19 Purchase, Redemption and Pricing of
Shares
20 Tax Status
21 Principal Underwriter
22 Performance Information
23 Financial Statements
TEMPLETON
INSTITUTIONAL FUNDS, INC. PROSPECTUS -- MAY 1, 1996
- --------------------------------------------------------------------------------
INVESTMENT Templeton Institutional Funds, Inc. (the 'Company') is an
OBJECTIVES AND open-end management investment company currently consisting of
POLICIES four 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.
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 Shareholder 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, 1996 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.
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SHAREHOLDER SERVICES -- 1-800-321-8563
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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. SHARES OF THE FUNDS INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF CAPITAL.
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
TABLE OF CONTENTS
PAGE
----
EXPENSE TABLE..................................... 3
FINANCIAL HIGHLIGHTS.............................. 4
GENERAL DESCRIPTION............................... 8
INVESTMENT OBJECTIVES AND POLICIES................ 8
Growth Series..................................... 9
Foreign Equity Series............................. 9
Emerging Markets Series........................... 9
Global Fixed Income Series........................ 10
INVESTMENT TECHNIQUES............................. 10
Temporary Investments............................. 10
Debt Securities................................... 11
Repurchase Agreements............................. 11
Borrowing......................................... 11
Loans of Portfolio Securities..................... 11
Options on Securities or Indices.................. 12
Forward Foreign Currency Contracts and
Options on Foreign Currencies................... 12
Futures Contracts................................. 13
Swap Agreements................................... 13
Closed-End Investment Companies................... 13
Depositary Receipts............................... 14
RISK FACTORS...................................... 14
HOW TO BUY SHARES OF THE FUNDS.................... 16
Purchases by Telephone............................ 17
Purchases by Mail................................. 17
Letter of Intent.................................. 18
Group Purchases................................... 18
Account Statements................................ 18
TeleFACTS/Registered Trademark/................... 18
PAGE
----
EXCHANGE PRIVILEGE................................ 19
Exchanges by Telephone............................ 19
Exchanges by Mail................................. 19
General........................................... 19
Exchanges by Timing Accounts...................... 19
HOW TO SELL SHARES OF THE FUNDS................... 20
Redemptions by Telephone.......................... 21
TELEPHONE TRANSACTIONS............................ 22
Verification Procedures........................... 22
General........................................... 22
MANAGEMENT OF THE FUNDS........................... 22
Investment Managers............................... 22
Business Manager.................................. 24
Transfer Agent.................................... 24
Custodian......................................... 24
Expenses.......................................... 24
Brokerage Commissions............................. 24
GENERAL INFORMATION............................... 24
Description of Shares/Share Certificates.......... 24
Meetings of Shareholders.......................... 25
Dividends and Distributions....................... 25
Federal Tax Information........................... 25
Account Inquiries................................. 25
Performance Information........................... 26
Statements and Reports............................ 26
WITHHOLDING INFORMATION........................... 27
CORPORATE RESOLUTION.............................. 28
The Franklin Templeton Group...................... 29
2
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 fee reduction)*......................... 0.18% 0.18% 0.27% 0.45%
Total Fund Operating Expenses (after fee reduction)*.................. 0.88% 0.88% 1.52% 1.00%
</TABLE>
EXAMPLE: You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual rate of return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Growth Series.......................................... $ 9 $ 28 $ 49 $ 108
Foreign Equity Series.................................. $ 9 $ 28 $ 49 $ 108
Emerging Markets Series................................ $ 15 $ 48 $ 83 $ 181
Global Fixed Income Series............................. $ 10 $ 32 $ 55 $ 122
</TABLE>
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*Each Fund's Investment Manager has voluntarily agreed to reduce the investment
management fee to the extent necessary 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. If such fee reduction is insufficient to so limit a
Fund's total expenses, the Funds' Business Manager, Templeton Global
Investors, Inc., has voluntarily agreed to reduce its fees and, to the extent
necessary, assume other Fund expenses so as to so limit a Fund's total
expenses. If this policy were not in effect, the Global Fixed Income Series'
'Other Expenses' and 'Total Fund Operating Expenses' would be % and
41.34%, respectively, and you would pay the following expenses on a $1,000
investment, assuming 5% annual return and redemption at the end of each time
period: $338 for one year, $691 for three years, $834 for five years, and $922
for 10 years. As long as this temporary expense limitation continues, it may
lower a Fund's expenses and increase its total return. After December 31,
1996, this expense limitation may be terminated or revised at any time, at
which time the Funds' expenses may increase and their total return may be
reduced, depending on the total assets of the Fund.
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 RATE OF 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
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 1995 Annual Report to Shareholders. These statements should be
read in conjunction with the other financial statements and notes thereto
included in each Fund's 1995 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>
YEAR ENDED DECEMBER 31,
------------------------------------------------
1995 1994
---------------------- ----------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period..................... $ 10.94 $ 11.80
---------------------- ----------------------
Income from investment operations:
Net investment income.................................. .27 .20
Net realized and unrealized gain (loss)................ 1.62 (.36)
---------------------- ----------------------
Total from investment operations..................... 1.89 (.16)
---------------------- ----------------------
Distributions:
Dividends from net investment income................... (.27) (.20)
Distributions from net realized gains.................. (.70) (.50)
---------------------- ----------------------
Total distributions.................................. (.97) (.70)
---------------------- ----------------------
Change in net asset value................................ .92 (.86)
---------------------- ----------------------
Net asset value, end of period........................... $ 11.86 $ 10.94
---------------------- ----------------------
---------------------- ----------------------
TOTAL RETURN*............................................ 17.59% (1.32)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000).......................... $ 226,963 $ 194,059
Ratio of expenses to average net assets.................. .88% 0.95%
Ratio of net investment income to average net assets..... 2.28% 1.69%
Portfolio turnover rate.................................. 30.20% 17.23%
<CAPTION>
PERIOD FROM
MAY 3, 1993
COMMENCEMENT
OF OPERATIONS) TO
DECEMBER 31, 1993
----------------------
<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.................................. .06
Net realized and unrealized gain (loss)................ 1.94
----------------------
Total from investment operations..................... 2.00
----------------------
Distributions:
Dividends from net investment income................... (.05)
Distributions from net realized gains.................. (.15)
----------------------
Total distributions.................................. (.20)
----------------------
Change in net asset value................................ 1.80
----------------------
Net asset value, end of period........................... $ 11.80
----------------------
----------------------
TOTAL RETURN*............................................ 20.04%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000).......................... $ 184,013
Ratio of expenses to average net assets.................. 1.00%**
Ratio of net investment income to average net assets..... 1.19%**
Portfolio turnover rate.................................. 17.32%
</TABLE>
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* Not annualized for periods less than one year.
** Annualized.
4
FOREIGN EQUITY SERIES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------------- ---------------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)
Net asset value, beginning of period.... $ 12.86 $ 13.32 $ 10.05 $ 10.63 $ 10.16
---------- ---------- ---------------- ---------------- ---------
Income from investment operations:
Net investment income................. .31 .20 .23 .27 .31
Net realized and unrealized gain
(loss).............................. 1.35 (.16) 3.19 (.41) 1.30
---------- ---------- ---------------- ---------------- ---------
Total from investment operations.... 1.66 .04 3.42 (.14) 1.61
---------- ---------- ---------------- ---------------- ---------
Distributions:
Dividends from net investment income.. (.31) (.19) (.09) (.24) (.44)
Distributions from net realized gains (.17) (.31) (.06) (.20) (.70)
---------- ---------- ---------------- ---------------- ---------
Total distributions................. (.48) (.50) (.15) (.44) (1.14)
---------- ---------- ---------------- ---------------- ---------
Change in net asset value............... 1.18 (.46) 3.27 (.58) .47
---------- ---------- ---------------- ---------------- ---------
Net asset value, end of period.......... $ 14.04 $ 12.86 $ 13.32 $ 10.05 $ 10.63
---------- ---------- ---------------- ---------------- ---------
---------- ---------- ---------------- ---------------- ---------
TOTAL RETURN*........................... 13.00% 0.24% 34.03% (1.33)% 16.13%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000)......... $1,817,883 $1,093,227 $ 407,970 $ 566 $ 1,181
Ratio of expenses to average net
assets................................ 0.88% 0.95% 1.03% 8.82% 9.15%
Ratio of expenses, net of reimbursement,
to average net assets................. 0.88% 0.95% 1.00% 1.00% 1.00%
Ratio of net investment income to
average net assets.................... 2.70% 2.03% 1.73% 2.38% 2.47%
Portfolio turnover rate................. 20.87% 7.90% 42.79% 8.45% 76.16%
<CAPTION>
PERIOD FROM
OCTOBER 18, 1990
(COMMENCEMENT
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............... .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%
</TABLE>
- ------------------------
* Not annualized for periods less than one year.
** Annualized.
/dagger/ Based on average shares outstanding.
5
EMERGING MARKETS SERIES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------
1995 1994
---------------------- ----------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period..................... $ 11.21 $ 13.22
---------------------- ----------------------
Income from investment operations:
Net investment income.................................. .19 .17
Net realized and unrealized gain (loss)................ (.34) (1.65)
---------------------- ----------------------
Total from investment operations..................... (.15) (1.48)
---------------------- ----------------------
Distributions:
Dividends from net investment income................... (.17) (.17)
Distributions from net realized gains.................. (.14) (.36)
---------------------- ----------------------
Total distributions.................................. (.31) (.53)
---------------------- ----------------------
Change in net asset value................................ (.46) (2.01)
---------------------- ----------------------
Net asset value, end of period........................... $ 10.75 $ 11.21
---------------------- ----------------------
---------------------- ----------------------
TOTAL RETURN*............................................ (1.23)% (11.39)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000).......................... $ 798,515 $ 582,878
Ratio of expenses to average net assets.................. 1.52% 1.66%
Ratio of expenses, net of reimbursement, to average net
assets................................................. 1.52% 1.60%
Ratio of net investment income to average net assets..... 2.00% 1.59%
Portfolio turnover rate.................................. 13.47% 12.51%
<CAPTION>
PERIOD FROM
MAY 3, 1993
(COMMENCEMENT
OF OPERATIONS) TO
DECEMBER 31, 1993
----------------------
<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.................................. .04
Net realized and unrealized gain (loss)................ 3.25
----------------------
Total from investment operations..................... 3.29
----------------------
Distributions:
Dividends from net investment income................... (.04)
Distributions from net realized gains.................. (.03)
----------------------
Total distributions.................................. (.07)
----------------------
Change in net asset value................................ 3.22
----------------------
Net asset value, end of period........................... $ 13.22
----------------------
----------------------
TOTAL RETURN*............................................ 32.93%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000).......................... $ 422,433
Ratio of expenses to average net assets.................. 1.60%**
Ratio of expenses, net of reimbursement, to average net
assets................................................. 1.60%**
Ratio of net investment income to average net assets..... 0.91%**
Portfolio turnover rate.................................. 9.42%
</TABLE>
- ------------------------
* Not annualized for periods less than one year.
** Annualized.
6
<PAGE>
GLOBAL FIXED INCOME SERIES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------
1995 1994
---------------------- ----------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period..................... $ 7.93 $ 9.93
---------------------- ----------------------
Income from investment operations:
Net investment income.................................. .35 2.74
Net realized and unrealized gain (loss)................ .02 (3.04)
---------------------- ----------------------
Total from investment operations..................... .37 (.30)
---------------------- ----------------------
Distributions:
Dividends from net investment income................... (.35) (1.61)
Distributions in excess of net realized gains.......... (.01) --
Return of capital...................................... -- (.09)
---------------------- ----------------------
Total distributions.................................. (.36) 1.70
---------------------- ----------------------
Change in net asset value................................ .01 (2.00)
---------------------- ----------------------
Net asset value, end of period........................... $ 7.94 $ 7.93
---------------------- ----------------------
---------------------- ----------------------
TOTAL RETURN*............................................ 4.67% (2.97)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000).......................... $ 103 $ 98
Ratio of expenses to average net assets.................. 41.34% 12.15%
Ratio of expenses, net of reimbursement, to average net
assets................................................. 1.00% 1.00%
Ratio of net investment income to average net assets..... 4.30% 5.61%
Portfolio turnover rate.................................. -0- 346.26%
<CAPTION>
PERIOD FROM
MAY 3, 1993
(COMMENCEMENT
OF OPERATIONS) TO
DECEMBER 31, 1993
----------------------
<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.................................. .25
Net realized and unrealized gain (loss)................ (.11)
----------------------
Total from investment operations..................... .14
----------------------
Distributions:
Dividends from net investment income................... (.16)
Distributions in excess of net realized gains.......... (.05)
Return of capital...................................... --
----------------------
Total distributions.................................. (.21)
----------------------
Change in net asset value................................ (.07)
----------------------
Net asset value, end of period........................... $ 9.93
----------------------
----------------------
TOTAL RETURN*............................................ 1.36%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000).......................... $ 712
Ratio of expenses to average net assets.................. 9.70%**
Ratio of expenses, net of reimbursement, to average net
assets................................................. 1.00%**
Ratio of net investment income to average net assets..... 4.91%**
Portfolio turnover rate.................................. 252.80%
</TABLE>
- ------------------------
* Not annualized for periods less than one year.
** Annualized.
7
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 and Foreign Equity Series, Templeton Asset Management, Ltd.--Hong Kong
Branch--('Templeton (Singapore)'), 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 four 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, and Emerging Markets 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 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.
8
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 (Singapore) 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
9
warrants or rights to subscribe to or purchase such securities. Determinations
as to eligibility will be made by Templeton (Singapore) 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.
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
10
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, any which may
include structured investments. 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 incur 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 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.
11
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.
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
12
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 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
13
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 in equity securities may also be reflected
in declines in the price of the Shares of the Fund. Changes in prevailing rates
of interest in any of the countries in which a Fund is revested in fixed income
securities will likely affect the value of such holdings and thus the value of
Fund Shares. 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. In addition, changes in currency valuations will affect the price
of the Shares of a Fund. History reflects both decreases and increases in stock
markets and interest rates in individual countries and throughout the world and
in 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.
The Funds have the right to purchase securities in any foreign country,
developed or underdeveloped. 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
14
applicable to United States companies. The Funds may encounter difficulties or
be unable to vote proxies, exercise shareholder rights, pursue legal remedies,
and obtain judgments in foreign courts.
Brokerage commissions, custodial services, and other costs relating to
investment in foreign countries are generally more expensive than in the United
States. Foreign securities 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. Russia's
system of share registration and custody creates certain risks of loss
(including the risk of total loss) that are not normally associated with
investments in other securities markets. These risks and other risks associated
with the Russia securities market are discussed more fully in the SAI under the
caption 'Investment Objectives and Policies--Risk Factors' and investors should
read this section in detail. As a non-fundamental policy, the Fund will limit
its investments in Russian companies to 5% of its total assets.
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.
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.
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.
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
15
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 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
16
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 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, 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
17
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').
TELEFACTS/Registered Trademark/ SYSTEM. From a touch-tone phone, Templeton
and Franklin shareholders may access an automated system (day or night) which
offers the following features. By calling TeleFACTS/Registered Trademark/ system
at 1-800-247-1753, shareholders may obtain account information, current price
and, if available, yield or other performance information specific to a Fund or
any Franklin Templeton Fund. The codes for the Funds, which will be needed to
access information, are: 454, Foreign Equity Series; 455, Growth Series; 456,
Emerging Markets Series; and 458, Global Fixed Income Series. In addition,
Class I and II shareholders of certain funds in the Franklin Templeton Group may
request duplicate confirmation or year-end statements and deposit slips.
Franklin Class I shareholders may process an exchange, within the same class,
into an identically registered Franklin account.
18
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.
If a substantial portion of a Fund's Shareholders should, within a short
period, elect to redeem their Shares of the Fund pursuant to the exchange
privilege, the Fund might have to liquidate portfolio securities it might
otherwise hold and incur the additional costs related to such transactions. On
the other hand, increased use of the exchange privilege may result in periodic
large inflows of money. If this should occur, it is the general policy of the
Funds to initially invest this money in short-term, interest-bearing money
market instruments, unless it is felt that attractive investment opportunities
consistent with each Fund's investment objective exist immediately.
Subsequently, this money will be withdrawn from such short-term money market
instruments and invested in portfolio securities in as orderly a manner as is
possible when attractive investment opportunities arise.
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.
19
The Company reserves the right temporarily or permanently to 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 and 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 potential
ly 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. The request must be 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:
- the proceeds of the redemption are over $50,000;
- the proceeds (in any amount) are to be paid to a party other than
the registered owner(s) of the account;
- 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
- 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: (i) the current address
of one or more joint owners of an account cannot be confirmed, (ii)
multiple owners have a dispute or give inconsistent instructions to
the Company, (iii) the Company has been notified of an adverse
claim, (iv) the instructions received by the Company are given by an
agent, not the actual registered owner, (v) the Company determines
that joint owners who are married to each other are separated or may
be the subject of divorce proceedings, or (vi) 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: (i) national or state banks, savings associations, savings and loan
associations, trust companies, savings banks, industrial loan companies and
credit unions; (ii) national securities exchanges, registered securities
associations and clearing agencies; (iii) securities broker-dealers which are
members of a nationalsecurities exchange or a clearing agency or which have
minimum net capital of $100,000; or (iv) 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(s), with signature(s) guaranteed as
described in Item 3 above; and
20
5. Liquidation requests of corporate, partnership, trust and custodial
accounts, and accounts under court jurisdiction, require the following
documentation to be in proper form:
- Corporation--(i) Signature guaranteed letter of instruction from the
authorized officer(s) of the corporation, and (ii) a corporate
resolution in a form satisfactory to the Transfer Agent;
- Partnership--(i) Signature guaranteed letter of instruction from a
general partner and, if necessary, (ii) pertinent pages from the
partnership agreement identifying the general partners or other
documentation in a form satisfactory to the Transfer Agent;
- Trust--(i) Signature guaranteed letter of instruction from the
trustee(s), and (ii) a copy of the pertinent pages of the trust
document listing the trustee(s) or a certificate of incumbency if
the trustee(s) are not listed on the account registration;
- Custodial (other than a retirement account) -- Signature guaranteed
letter of instruction from the custodian; and
- 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.
A gain or loss for tax purposes generally will be realized upon the redemption,
depending on the tax basis of the Shares redeemed. 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 redemption 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.' A telephone redemption request received
before the scheduled 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.
21
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 and Foreign
Equity Series is Templeton Investment Counsel, Inc., Broward Financial Centre,
Fort Lauderdale, Florida 33394-3091. The Investment Manager of Emerging Markets
Series is Templeton Asset Management Ltd--Hong Kong Branch, 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 (Singapore) 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 56 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, Russia, France, Poland, Italy, India, Vietnam, South America and South
Africa.
22
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 perform similar services for other funds and
accounts and there may be times when the actions taken with respect to a Fund's
portfolio will differ from those taken and the Investment Manager on behalf of
other funds and accounts. Neither the Investment Manager and its affiliates, its
officers, directors or employees, nor the officers and Directors of the Company
are prohibited from investing in securities held by the Funds or other funds and
accounts which are managed or administered by the Investment Managers to the
extent such transactions comply with the Company's Code of Ethics. Please see
'Investment Management and Other Services--Investment Management Agreements' in
the SAI for further information on securities transactions and a summary of the
Company's Code of Ethics.
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%; and
Global Fixed Income Series -- 0.55%.
The lead portfolio manager for Growth Series and Foreign Equity Series is
James E. Chaney, Senior Vice President of Templeton Investment Counsel, Inc.
('TICI'). He holds an MBA with Honors from Columbia University, an MS in
Engineering from Northeastern University and a BS in Engineering from the
University of Massachusetts--Amherst. 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 and Foreign Equity Series. Ms.
Reeves joined the Templeton organization in 1987 as an equity trader and moved
into the research group in 1989. She holds an MBA from Nova University and a BS
in Business Administration from Florida International. 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. He holds an MBA with emphasis in
Finance/Investment Banking from University of Wisconsin--Madison and a BS from
University of Nevada--Reno. At Templeton Quantitative Advisors, Inc., he was
also responsible for management of a small capitalization fund.
The lead portfolio manager for Emerging Markets Series since its inception
is Dr. J. Mark Mobius, Managing Director of Templeton Asset Management Ltd. He
holds a BA in Fine Arts from Boston University, an MA in Mass Communications
from Boston University, and a PhD in Economics from the Massachusetts Institute
of Technology. 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. He holds a BA in
Accounting from Rutgers University. Prior to joining the Templeton organization
in 1987, Mr. Wu worked as an investment analyst, specializing in Hong Kong
companies, with Vickers da Costa. He holds a BS in Economics from the University
of Hong Kong and an MBA in Finance from the University of Oregon. 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.
23
The lead portfolio manager of Global Fixed Income Series since
is Thomas Latta, Vice President of the Templeton Global Bond Managers division
of TICI. Mr. Latta attended the University of Missouri and New York University.
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. Ronald Johnson
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. Mr. Devlin holds a BA from Brandeis
University. 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. Dr. Johnson is Vice
President of the Templeton Global Bond Managers division of TICI. He holds a PhD
and MA in Economics from Stanford University and an MBA in Finance and Bachelor
of Arts in Economics from Adelphi University. Prior to joining the Templeton
organization in 1995, Dr. Johnson was chief strategist and head of research for
JPBT Advisers, Inc. in Miami, where he served as head of the Investment
Management Committee.
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, 1995, expenses as a
percentage of each Fund's average net assets (net of fee reduction) amounted to
Foreign Equity Series, .88%; Growth Series, .88%; Emerging Markets Series,
1.52%; and Global Fixed Income 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 700 million Shares, par value $0.01 per Share, of which 355 million
Shares have been allocated to Foreign Equity Series, 120 million Shares have
been allocated to Growth Series, 215 million Shares have been allocated to
Emerging Markets Series and 10 million Shares have been allocated to Global
Fixed Income 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.
Shares for an initial investment, as well as subsequent investments,
including the reinvestment of dividends and capital gain distributions, are
generally credited to an account in the name of an investor on the books of the
Funds without the issuance of a share certificate. Maintaining shares in
uncertificated form (also known as 'plan balance') minimizes the risk of loss or
theft of a
24
share certificate. No charge is made for the issuance of one certificate for all
or some of the Shares purchased in a single order. A lost, stolen or destroyed
certificate cannot be replaced without obtaining a sufficient indemnity bond.
The cost of such a bond, which is generally borne by the Shareholder, can be 2%
or more of the value of the lost, stolen or destroyed certificates. A
certificate will be issued if requested by the Shareholder or by the securities
dealer.
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
time to time, 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 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 net 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. Sales or other dispositions of each Fund's
Shares generally will give rise to taxable gain or loss. Each Fund may be
required to withhold federal income tax at the rate of 31% of all taxable
distributions (including redemptions) paid to Shareholders who fail to provide
the Fund with their correct taxpayer identification number or to make required
certifications. A more detailed description of tax consequences to Shareholders
is contained in the SAI under the heading 'Tax Status.'
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. Transcripts of Shareholder accounts less than three-years old
are provided on request without charge; requests for transactions going back
more than three years from the date the request is received by the Transfer
Agent are subject to a fee of up to $15 per account.
25
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 1, 5 and 10 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 'Performance Information' in the SAI.
STATEMENTS AND REPORTS. The Company's fiscal year ends on December 31.
Annual reports (containing financial statements audited by independent auditors
and additional information regarding the Funds' performance) and semiannual
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--telephone 1-800-321-8563. The Company
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
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 Internal Revenue Service ('IRS').
OBTAINING A NUMBER. If you do not have a Social Security Number/Taxpayer
Identification Number ('SSN/TIN'), you must obtain Form SS-5 or Form SS-4 from
your local Social Security or IRS office and apply for one. If you have checked
the 'Awaiting TIN' box and signed the certification, withholding will apply to
payments relating to your account unless you provide a certified TIN within 60
days.
WHAT SSN/TIN TO GIVE. Please refer to the following guidelines:
<TABLE>
ACCOUNT TYPE GIVE SSN OF ACCOUNT TYPE GIVE TAXPAYER ID # OF
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- - Individual Individual - Trust, Estate, or Trust, Estate, or
Pension Plan Trust Pension Plan Trust
- ----------------------------------------------------------------------------------------------------------------------
- - Joint Individual Actual owner of account, or - Corporation, Partnership, Corporation, Partnership, or
if combined funds, the or other organization other organization
first-named individual
- ----------------------------------------------------------------------------------------------------------------------
- - Unif. Gift/Transfer to Minor - Broker nominee Broker nominee
Minor
- ----------------------------------------------------------------------------------------------------------------------
- - Sole Proprietor Owner of business
- ----------------------------------------------------------------------------------------------------------------------
- - 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:
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 An entity registered at all times under
section 501(a), or an individual the Investment Company Act of 1940
retirement plan
A registered dealer in securities or
commodities registered in the U.S. or
a U.S. possession
IRS PENALTIES. If you do not supply us with your SSN/TIN, you will be subject to
an IRS $50 penalty unless your failure is due to reasonable cause and not
willful neglect. If you fail to report certain income on your Federal income tax
return, you will be treated as negligent and subject to an IRS 20% penalty on
any underpayment of tax attributable to such negligence, unless there was
reasonable cause for the resulting underpayment and you acted in good faith. If
you falsify information on this form or make any other false statement resulting
in no backup withholding on an account which should be subject to backup
withholding, you may be subject to an IRS $500 penalty and certain criminal
penalties including fines and imprisonment.
SUBSTITUTE W-8 INSTRUCTIONS INFORMATION
EXEMPT FOREIGN PERSON. Check the 'Exempt Foreign Person' box if you qualify as a
non-resident alien or foreign entity that is not subject to certain U.S.
information return reporting or to backup withholding rules. Dividends paid to
your account may be subject to withholding of up to 30%. 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 IRS 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
FOR CORPORATE SHAREHOLDERS--FORM OF RESOLUTION
It will be necessary for corporate shareholders to provide a certified copy of a
resolution or other certificate of authority to authorize the purchase as well
as sale (redemption) of shares and withdrawals by checks or drafts. You may use
the following form of resolution or you may prefer to use your own. It is
understood that the Fund, Franklin Templeton Distributors, Inc., Franklin
Templeton Investor Services, Inc., the custodian bank and their affiliates may
rely upon these authorizations until revoked or amended by written notice
delivered by registered or certified mail to the Fund.
CERTIFIED COPY OF RESOLUTION (Corporation or Association)
The undersigned hereby certifies and affirms that he/she is the duly elected
____________________________ of _____________________________________________
TITLE CORPORATE NAME
a ____________________________ organized under the laws of the State of ______
TYPE OF ORGANIZATION STATE
and the 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
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
Greater European Fund
Growth Fund
Growth and Income Fund
Income Fund
Japan Fund
Latin America 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
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 5/96
TIFI
- ------------------------------------------------
TEMPLETON
INSTITUTIONAL
FUNDS, INC.
MAY 1, 1996
PROSPECTUS
TEMPLETON INSTITUTIONAL FUNDS, INC.
THIS STATEMENT OF ADDITIONAL INFORMATION DATED MAY
1, 1996, AS AMENDED SEPTEMBER 29, 1995, IS NOT A
PROSPECTUS.
IT SHOULD BE READ IN CONJUNCTION WITH THE
PROSPECTUS OF TEMPLETON INSTITUTIONAL FUNDS, INC.
DATED MAY 1, 1996, AS AMENDED FROM TIME TO TIME,
WHICH MAY BE OBTAINED WITHOUT CHARGE UPON REQUEST
TO THE PRINCIPAL UNDERWRITER,
FRANKLIN TEMPLETON DISTRIBUTORS, INC.,
700 CENTRAL AVENUE, P.O. BOX 33030,
ST. PETERSBURG, FLORIDA 33733-8030
TOLL FREE TELEPHONE: 1-800/DIAL BEN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
General Information and History.................... 1 -Investment Management Agreements..............27
Investment Objectives and -Management Fees...............................29
Policies......................................... 1 -The Investment Managers.......................30
-Investment Policies.............................. 1 -Business Manager..............................30
-Repurchase Agreements............................ 2 -Custodian and Transfer Agent..................32
-Debt Securities................................. 2 -Legal Counsel.................................32
-Structured Investments.......................... 4 -Independent Accountants.......................33
-Futures Contracts................................ 5 -Reports to Shareholders.......................33
-Options on Securities or Indices................. 5 Brokerage Allocation............................33
-Foreign Currency Hedging Transactions............ 8 Purchase, Redemption and
-Investment Restrictions.......................... 9 Pricing of Shares.............................36
-Risk Factors.....................................11 -Ownership and Authority Disputes..............37
-Trading Policies.................................16 -Redemptions in Kind . . . . . . ..............37
-Personal Securities Transactions.................16 Tax Status......................................38
Management of the Company..........................17 Principal Underwriter...........................43
Director Compensation..............................24 Description of Shares...........................44
Principal Shareholders.............................25 Performance Information.........................44
Investment Management and Other Financial Statements............................48
Services........................................ 27
</TABLE>
GENERAL INFORMATION AND HISTORY
Templeton Institutional Funds, Inc. (the "Company") was organized as a
Maryland corporation 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 currently offers four five series of Shares: Growth Series,
Foreign Equity Series, Emerging Markets Series, and Global Fixed Income Series
and Foreign Equity (South Africa Free) Series (collectively, the "Funds").
INVESTMENT OBJECTIVES AND POLICIES
INVESTMENT POLICIES. The Funds' Investment Objectives and Policies are
described in the Prospectus under the heading "Investment Objectives and
Policies." Each Fund may invest a portion of its assets, and may invest without
limit for defensive purposes, in commercial paper which, at the date of
investment, must be rated A-1 by Standard & Poor's Corporation ("S&P") or
Prime-1 by Moody's Investors Service, Inc. ("Moody's") or, if not rated, be
issued by a company which at the date of investment has an outstanding debt
issue rated AAA or AA by S&P or Aaa or Aa by Moody's.
REPURCHASE AGREEMENTS. Repurchase agreements are contracts under which
the buyer of a security simultaneously commits to resell the security to the
seller at an agreed-upon price and date. Under a repurchase agreement, the
seller is required to maintain the value of the securities subject to the
repurchase agreement at not less than their repurchase price. Each Fund's
investment manager (Templeton Investment Counsel, Inc. ("TICI") in the case of
Growth Series and Foreign Equity Series and Foreign Equity (South Africa Free)
Series; Templeton Asset Management Ltd.- Hong Kong Branch ("Templeton
(Singapore)") in the case of Emerging Markets Series; and the Templeton Global
Bond Managers division of TICI ("TGBM") in the case of Global Fixed Income
Series) (collectively, the "Investment Managers") will monitor the value of such
securities daily to determine that the value equals or exceeds the repurchase
price. Repurchase agreements may involve risks in the event of default or
insolvency of the seller, including possible delays or restrictions upon a
Fund's ability to dispose of the underlying securities. A Fund will enter into
repurchase agreements only with parties who meet creditworthiness standards
approved by the Company's Directors, I.E., banks or broker-dealers which have
been determined by a Fund's Investment Manager to present no serious risk of
becoming involved in bankruptcy proceedings within the time frame contemplated
by the repurchase transaction.
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 a Fund may be rated as low as C by S&P or Moody's or, if unrated,
of comparable quality as determined by the 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 lower than BBB by S&P or Baa by Moody's 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 Policies" above.
The market value of debt securities generally varies in response to
changes in interest rates and the financial condition of each issuer. During
periods of declining interest rates, the value of debt securities generally
increases. Conversely, during periods of rising interest rates, the value of
such securities generally declines. These changes in market value will be
reflected in the Funds' net asset value.
Although they may offer higher yields than do higher rated securities,
low rated and unrated debt securities generally involve greater volatility of
price and risk of principal and income, including the possibility of default by,
or bankruptcy of, the issuers of the securities. In addition, the markets in
which low rated and unrated debt securities are traded are more limited than
those in which higher rated securities are traded. The existence of limited
markets for particular securities may diminish a Fund's ability to sell the
securities at fair value either to meet redemption requests or to respond to a
specific economic event such as a deterioration in the creditworthiness of the
issuer. Reduced secondary market liquidity for certain low rated or unrated debt
securities may also make it more difficult for a Fund to obtain accurate market
quotations for the purposes of valuing the Fund's portfolio. Market quotations
are generally available on many low rated or unrated securities only from a
limited number of dealers and may not necessarily represent firm bids of such
dealers or prices for actual sales.
Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the values and liquidity of low rated debt
securities, especially in a thinly traded market. Analysis of the
creditworthiness of issuers of low rated debt securities may be more complex
than for issuers of higher rated securities, and the ability of a Fund to
achieve its investment objective may, to the extent of investment in low rated
debt securities, be more dependent upon such creditworthiness analysis than
would be the case if the Fund were investing in higher rated securities.
Low rated debt securities may be more susceptible to real or perceived
adverse economic and competitive industry conditions than investment grade
securities. The prices of low rated debt securities have been found to be less
sensitive to interest rate changes than higher rated investments, but more
sensitive to adverse economic downturns or individual corporate developments. A
projection of an economic downturn or of a period of rising interest rates, for
example, could cause a decline in low rated debt securities prices because the
advent of a recession could lessen the ability of a highly leveraged company to
make principal and interest payments on its debt securities. If the issuer of
low rated debt securities defaults, a Fund may incur additional expenses to seek
recovery.
The Funds may accrue and report interest on high yield bonds structured
as zero coupon bonds or pay-in-kind securities as income even though it receives
no corresponding cash payment until a later time, generally the security's
maturity date. In order to qualify for beneficial tax treatment, a Fund must
distribute substantially all of its net investment income to shareholders on an
annual basis (see "Tax Status"). Thus, a Fund may have to dispose of its
portfolio securities under disadvantageous circumstances to generate cash, or
leverage itself by borrowing cash, so that it may satisfy the distribution
requirement.
Congressional legislation, which requires federally insured savings and
loan associations to divest their investments in low rated debt securities, may
have a material adverse effect on a Fund's net asset value and investment
practices.
STRUCTURED INVESTMENTS. Included among the issuers of debt securities
in which the Funds may invest are entities organized and operated solely for the
purpose of restructuring the investment characteristics of various securities.
These entities are typically organized by investment banking firms which receive
fees in connection with establishing each entity and arranging for the placement
of its securities. This type of restructuring involves the deposit with or
purchase by an entity, such as a corporation or trust, of specified instruments
and the issuance by that entity of one or more classes of securities
("Structured Investments") backed by, or representing interests in, the
underlying instruments. The cash flow on the underlying instruments may be
apportioned among the newly issued Structured Investments to create securities
with different investment characteristics such as varying maturities, payment
priorities or interest rate provisions; the extent of the payments made with
respect to Structured Investments is dependent on the extent of the cash flow on
the underlying instruments. Because Structured Investments of the type in which
the Funds anticipate investing typically involve no credit enhancement, their
credit risk will generally be equivalent to that of the underlying instruments.
The Funds are permitted to invest in a class of Structured Investments
that is either subordinated or unsubordinated to the right of payment of another
class. Subordinated Structured Investments typically have higher yields and
present greater risks than unsubordinated Structured Investments. Although a
Fund's purchase of subordinated Structured Investments would leave a similar
economic effect to that of borrowing against the underlying securities, the
purchase will not be deemed to be leverage for purposes of the limitations
placed on the extent of a Fund's assets that may be used for borrowing
activities.
Certain issuers of Structured Investments may be deemed to be
"investment companies" as defined in the 1940 Act. As a result, a Fund's
investment in these Structured Investments may be limited by the restrictions
contained in the 1940 Act. Structured Investments are typically sold in private
placement transactions, and there currently is no active trading market for
Structured Investments. To the extent such investments are illiquid, they will
be subject to the Funds' restrictions on investment in illiquid securities.
FUTURES CONTRACTS. The Funds may purchase and sell financial futures
contracts. Although some financial futures contracts call for making or taking
delivery of the underlying securities, in most cases these obligations are
closed out before the settlement date. The closing of a contractual obligation
is accomplished by purchasing or selling an identical offsetting futures
contract. Other financial futures contracts by their terms call for cash
settlements.
The Funds may also buy and sell index futures contracts with respect to
any stock index traded on a recognized stock exchange or board of trade. An
index futures contract is a contract to buy or sell units of an index at a
specified future date at a price agreed upon when the contract is made. The
stock index futures contract specifies that no delivery of the actual stocks
making up the index will take place. Instead, settlement in cash must occur upon
the termination of the contract, with the settlement being the difference
between the contract price and the actual level of the stock index at the
expiration of the contract.
At the time a Fund purchases a futures contract, an amount of cash,
U.S. Government securities, or other highly liquid debt securities equal to the
market value of the futures contract will be deposited in a segregated account
with the Fund's Custodian. When writing a futures contract, a Fund will maintain
with its Custodian liquid assets that, when added to the amounts deposited with
a futures commission merchant or broker as margin, are equal to the market value
of the instruments underlying the contract. Alternatively, a Fund may "cover"
its position by owning the instruments underlying the contract (or, in the case
of an index futures contract, a portfolio with a volatility substantially
similar to that of the index on which the futures contract is based), or holding
a call option permitting the Fund to purchase the same futures contract at a
price no higher than the price of the contract written by the Fund (or at a
higher price if the difference is maintained in liquid assets with the Fund's
Custodian).
OPTIONS ON SECURITIES OR INDICES. The Funds may write (I.E., sell)
covered put and call options and purchase put and call options on securities or
securities indices that are traded on United States and foreign exchanges or in
the over-the-counter markets.
An option on a security is a contract that gives the purchaser of the
option, in return for the premium paid, the right to buy a specified security
(in the case of a call option) or to sell a specified security (in the case of a
put option) from or to the writer of the option at a designated price during the
term of the option. An option on a securities index gives the purchaser of the
option, in return for the premium paid, the right to receive from the seller
cash equal to the difference between the closing price of the index and the
exercise price of the option.
A Fund may write a call or put option only if the option is "covered."
A call option on a security written by a Fund is "covered" if the Fund owns the
underlying security covered by the call or has an absolute and immediate right
to acquire that security without additional cash consideration (or for
additional cash consideration held in a segregated account by its Custodian)
upon conversion or exchange of other securities held in its portfolio. A call
option on a security is also covered if a Fund holds a call on the same security
and in the same principal amount as the call written where the exercise price of
the call held (a) is equal to or less than the exercise price of the call
written or (b) is greater than the exercise price of the call written if the
difference is maintained by the Fund in cash or high grade U.S. Government
securities in a segregated account with its Custodian. A put option on a
security written by a Fund is "covered" if the Fund maintains cash or
fixed-income securities with a value equal to the exercise price in a segregated
account with its Custodian, or else holds a put on the same security and in the
same principal amount as the put written where the exercise price of the put
held is equal to or greater than the exercise price of the put written.
A Fund will cover call options on stock indices that it writes by
owning securities whose price changes, in the opinion of the Fund's Investment
Manager, are expected to be similar to those of the index, or in such other
manner as may be in accordance with the rules of the exchange on which the
option is traded and applicable laws and regulations. Nevertheless, where a Fund
covers a call option on a stock index through ownership of securities, such
securities may not match the composition of the index. In that event, a Fund
will not be fully covered and could be subject to risk of loss in the event of
adverse changes in the value of the index. A Fund will cover put options on
stock indices that it writes by segregating assets equal to the option's
exercise price, or in such other manner as may be in accordance with the rules
of the exchange on which the option is traded and applicable laws and
regulations.
A Fund will receive a premium from writing a put or call option, which
increases the Fund's gross income in the event the option expires unexercised or
is closed out at a profit. If the value of a security or an index on which a
Fund has written a call option falls or remains the same, the Fund will realize
a profit in the form of the premium received (less transaction costs) that could
offset all or a portion of any decline in the value of the portfolio securities
being hedged. If the value of the underlying security or index rises, however, a
Fund will realize a loss in its call option position, which will reduce the
benefit of any unrealized appreciation in the Fund's investments. By writing a
put option, a Fund assumes the risk of a decline in the underlying security or
index. To the extent that the price changes of the portfolio securities being
hedged correlate with changes in the value of the underlying security or index,
writing covered put options on indices or securities will increase a Fund's
losses in the event of a market decline, although such losses will be offset in
part by the premium received for writing the option.
A Fund may also purchase put options to hedge its investments against a
decline in value. By purchasing a put option, a Fund will seek to offset a
decline in the value of the portfolio securities being hedged through
appreciation of the put option. If the value of a Fund's investments does not
decline as anticipated, or if the value of the option does not increase, the
Fund's loss will be limited to the premium paid for the option plus related
transaction costs. The success of this strategy will depend, in part, on the
accuracy of the correlation between the changes in value of the underlying
security or index and the changes in value of a Fund's security holdings being
hedged.
A Fund may purchase call options on individual securities to hedge
against an increase in the price of securities that the Fund anticipates
purchasing in the future. Similarly, a Fund may purchase call options on a
securities index to attempt to reduce the risk of missing a broad market
advance, or an advance in an industry or market segment, at a time when the Fund
holds uninvested cash or short-term debt securities awaiting investment. When
purchasing call options, a Fund will bear the risk of losing all or a portion of
the premium paid if the value of the underlying security or index does not rise.
There can be no assurance that a liquid market will exist when a Fund
seeks to close out an option position. Trading could be interrupted, for
example, because of supply and demand imbalances arising from a lack of either
buyers or sellers, or the options exchange could suspend trading after the price
has risen or fallen more than the maximum specified by the exchange. Although a
Fund may be able to offset to some extent any adverse effects of being unable to
liquidate an option position, the Fund may experience losses in some cases as a
result of such inability.
FOREIGN CURRENCY HEDGING TRANSACTIONS. In order to hedge against
foreign currency exchange rate risks, the Funds may enter into forward foreign
currency exchange contracts and foreign currency futures contracts, as well as
purchase put or call options on foreign currencies, as described below. The
Funds may also conduct their foreign currency exchange transactions on a spot
(I.E., cash) basis at the spot rate prevailing in the foreign currency exchange
market.
A Fund may enter into forward foreign currency exchange contracts
("forward contracts") to attempt to minimize the risk to the Fund from adverse
changes in the relationship between the U.S. dollar and foreign currencies. A
forward contract is an obligation to purchase or sell a specific currency for an
agreed price at a future date which is individually negotiated and privately
traded by currency traders and their customers. A Fund may enter into a forward
contract, for example, when it enters into a contract for the purchase or sale
of a security denominated in a foreign currency in order to "lock in" the U.S.
dollar price of the security. In addition, for example, when a Fund believes
that a foreign currency may suffer a substantial decline against the U.S.
dollar, it may enter into a forward contract to sell an amount of that foreign
currency approximating the value of some or all of the Fund's portfolio
securities denominated in such foreign currency, or when a Fund believes that
the U.S. dollar may suffer a substantial decline against a foreign currency, it
may enter into a forward contract to buy that foreign currency for a fixed
dollar amount. This second investment practice is generally referred to as
"cross-hedging." Because in connection with a Fund's forward foreign currency
transactions an amount of the Fund's assets equal to the amount of the purchase
will be held aside or segregated to be used to pay for the commitment, a Fund
will always have cash, cash equivalents or high quality debt securities
available sufficient to cover any commitments under these contracts or to limit
any potential risk. The segregated account will be marked-to-market on a daily
basis. While these contracts are not presently regulated by the Commodity
Futures Trading Commission ("CFTC"), the CFTC may in the future assert authority
to regulate forward contracts. In such event, a Fund's ability to utilize
forward contracts in the manner set forth above may be restricted. Forward
contracts may limit potential gain from a positive change in the relationship
between the U.S. dollar and foreign currencies. Unanticipated changes in
currency prices may result in poorer overall performance for a Fund than if it
had not engaged in such contracts.
The Funds may purchase and write put and call options on foreign
currencies for the purpose of protecting against declines in the dollar value of
foreign portfolio securities and against increases in the dollar cost of foreign
securities to be acquired. As is the case with other kinds of options, however,
the writing of an option on foreign currency will constitute only a partial
hedge, up to the amount of the premium received, and a Fund could be required to
purchase or sell foreign currencies at disadvantageous exchange rates, thereby
incurring losses. The purchase of an option on foreign currency may constitute
an effective hedge against fluctuation in exchange rates, although, in the event
of rate movements adverse to a Fund's position, the Fund may forfeit the entire
amount of the premium plus related transaction costs. Options on foreign
currencies to be written or purchased by a Fund will be traded on U.S. and
foreign exchanges or over-the-counter.
The Funds may enter into exchange-traded contracts for the purchase or
sale for future delivery of foreign currencies ("foreign currency futures").
This investment technique will be used only to hedge against anticipated future
changes in exchange rates which otherwise might adversely affect the value of a
Fund's portfolio securities or adversely affect the prices of securities that a
Fund intends to purchase at a later date. The successful use of foreign currency
futures will usually depend on the ability of a Fund's Investment Manager to
forecast currency exchange rate movements correctly. Should exchange rates move
in an unexpected manner, a Fund may not achieve the anticipated benefits of
foreign currency futures or may realize losses.
INVESTMENT RESTRICTIONS. Each Fund has imposed upon itself certain
Investment Restrictions set forth below, which, together with its Investment
Objective are fundamental policies. No changes in a Fund's Investment Objective
or these Investment Restrictions can be made without the approval of the Fund's
Shareholders. For this purpose, the provisions of the 1940 Act require the
affirmative vote of the lesser of either (A) 67% or more of the Shares of a Fund
present at a Shareholder's meeting at which more than 50% of the outstanding
Shares are present or represented by proxy or (B) more than 50% of the
outstanding Shares of the Fund.
Each Fund will not:
1. Invest in real estate or mortgages on real estate (although a
Fund may invest in marketable securities secured by real
estate or interests therein or issued by companies or
investment trusts which invest in real estate or interests
therein); invest in other open-end investment companies except
as permitted by the 1940 Act; invest in interests (other than
debentures or equity stock interests) in oil, gas or other
mineral exploration or development programs; or purchase or
sell commodity contracts (except futures contracts as
described in the Prospectus).
2. Purchase or retain securities of any company in which
Directors or officers of the Company or of the Fund's
Investment Manager, individually owning more than 1/2 of 1% of
the securities of such company, in the aggregate own more than
5% of the securities of such company.
3. Purchase any security (other than obligations of the U.S.
Government, its agencies or instrumentalities) if, as a
result, as to 75% of the Fund's total assets (i) more than 5%
of the Fund's total assets would then be invested in
securities of any single issuer, or (ii) the Fund would then
own more than 10% of the voting securities of any single
issuer; provided, however, that this restriction does not
apply to the Global Fixed Income Series.
4. Act as an underwriter; issue senior securities except as set
forth in investment restriction 6 below; or purchase on margin
or sell short (but a Fund may make margin payments in
connection with options on securities or securities indices
and foreign currencies; futures contracts and related options;
and forward contracts and related options).
5. Loan money apart from the purchase of a portion of an issue of
publicly distributed bonds, debentures, notes and other
evidences of indebtedness, although a Fund may buy from a bank
or broker-dealer United States government obligations with a
simultaneous agreement by the seller to repurchase them within
no more than seven days at the original purchase price plus
accrued interest and loan its portfolio securities.
6. Borrow money, except that a Fund may borrow money from banks
in an amount not exceeding 33-1/3% of the value of its total
assets (including the amount borrowed).
7. Invest more than 5% of the value of its total assets in
securities of issuers which have been in continuous operation
less than three years.
8. Invest more than 5% of its total assets in warrants, whether
or not listed on the New York or American Stock Exchange,
including no more than 2% of its total assets which may be
invested in warrants that are not listed on those exchanges.
Warrants acquired by the Fund in units or attached to
securities are not included in this Restriction.
9. Invest more than 25% of its total assets in a single industry.
10. Participate on a joint or a joint and several basis in any
trading account in securities. (See "Investment Objectives and
Policies -- Trading Policies" as to transactions in the same
securities for a Fund and/or other mutual funds with the same
or affiliated advisers.)
In addition, the Company has undertaken with a state securities
commission, as a non-fundamental policy which may be changed without shareholder
approval, to limit the investment by each Series in illiquid and restricted
securities (excluding securities eligible for resale pursuant to Rule 144A under
the Securities Act of 1933) to no more than 15% of the Series' net assets at the
time of purchase.
Whenever any Investment Policy or Investment Restriction states a
maximum percentage of a Fund's assets which may be invested in any security or
other property, it is intended that such maximum percentage limitation be
determined immediately after and as a result of a Fund's acquisition of such
security or property. Assets are calculated as described in the Prospectus under
the heading "Purchase of Shares." If a Fund receives from an issuer of
securities held by the Fund subscription rights to purchase securities of that
issuer, and if the Fund exercises such subscription rights at a time when the
Fund's portfolio holdings of securities of that issuer would otherwise exceed
the limits set forth in Investment Restrictions 3 or 9 above, it will not
constitute a violation if, prior to receipt of securities upon exercise of such
rights, and after announcement of such rights, the Fund has sold at least as
many securities of the same class and value as it would receive on exercise of
such rights.
RISK FACTORS. Each Fund has the right to purchase securities in any
foreign country, developed or developing. Investors should consider carefully
the substantial risks involved in securities of companies and governments of
foreign nations, which are in addition to the usual risks inherent in domestic
investments.
There may be less publicly available information about foreign
companies comparable to the reports and ratings published about companies in the
United States. Foreign companies are not generally subject to uniform
accounting, auditing and financial reporting standards, and auditing practices
and requirements may not be comparable to those applicable to United States
companies. The Funds, therefore, may encounter difficulty in obtaining market
quotations for purposes of valuing its portfolio and calculating its net asset
value. Foreign markets have substantially less volume than the New York Stock
Exchange ("NYSE"), and securities of some foreign companies are less liquid and
more volatile than securities of comparable United States companies. Commission
rates in foreign countries, which are generally fixed rather than subject to
negotiation as in the United States, are likely to be higher. In many foreign
countries there is less government supervision and regulation of stock
exchanges, brokers and listed companies than in the United States.
Investments in companies domiciled in developing countries may be
subject to potentially higher risks than investments in developed countries.
These risks include (i) less social, political and economic stability; (ii) the
small current size of the markets for such securities and the currently low or
nonexistent volume of trading, which result in a lack of liquidity and in
greater price volatility; (iii) certain national policies which may restrict a
Fund's investment opportunities, including restrictions on investment in issuers
or industries deemed sensitive to national interests; (iv) the absence of
developed legal structures governing private or foreign investment or allowing
for judicial redress for injury to private property; (v) the absence, until
recently in certain Eastern European countries, of a capital market structure or
market-oriented economy; and (vi) the possibility that recent favorable economic
developments in Eastern Europe may be slowed or reversed by unanticipated
political or social events in such countries.
In addition, many countries in which the Funds may invest have
experienced substantial, and in some periods extremely high, rates of inflation
for many years. Inflation and rapid fluctuations in inflation rates have had and
may continue to have negative effects on the economies and securities markets of
certain countries. Moreover, the economies of some developing countries may
differ favorably or unfavorably from the United States economy in such respects
as growth of gross domestic product, rate of inflation, currency depreciation,
capital reinvestment, resources self-sufficiency and balance of payments
position.
Investments in Eastern European countries may involve risks of
nationalization, expropriation and confiscatory taxation. ^ The communist
governments of a number of Eastern European countries expropriated large amounts
of private property in the past, in many cases without adequate compensation,
and there can be no assurance that such expropriation will not occur in the
future. In the event of such expropriation, a Fund could lose a substantial
portion of any investments it has made in the affected countries. Finally, even
though certain Eastern European currencies may be convertible into U.S. dollars,
the conversion rates may be artificial to the actual market values and may be
adverse to Fund Shareholders. Further, no accounting standards exist in Eastern
European countries.
Investing in Russian companies involves a high degree of risk and
special considerations not typically associated with investing in the United
States securities markets, and should be considered highly speculative. Such
risks include: (1) delays in settling portfolio transactions and risk of loss
arising out of Russia's system of share registration and custody; (2) the risk
that it may be impossible or more difficult than in other countries to obtain
and/or enforce a judgment; (3) pervasiveness of corruption and crime in the
Russian economic system; (4) currency exchange rate volatility and the lack of
available currency hedging instruments; (5) higher rates of inflation (including
the risk of social unrest associated with periods of hyper-inflation); (6)
controls on foreign investment and local practices disfavoring foreign investors
and limitations on repatriation of invested capital, profits and dividends, and
on a Fund's ability to exchange local currencies for U.S. dollars; (7) the risk
that the government of Russia or other executive or legislative bodies may
decide not to continue to support the economic reform programs implemented since
the dissolution of the Soviet Union and could follow radically different
political and/or economic policies to the detriment of investors, including
non-market-oriented policies such as the support of certain industries at the
expense of other sectors or investors, or a return to the centrally planned
economy that existed prior to the dissolution of the Soviet Union; (8) the
financial condition of Russian companies, including large amounts of
inter-company debt which may create a payments crisis on a national scale; (9)
dependency on exports and the corresponding importance of international trade;
(10) the risk that the Russian tax system will not be reformed to prevent
inconsistent, retroactive and/or exorbitant taxation; and (11) possible
difficulty in identifying a purchaser of securities held by a Fund due to the
underdeveloped nature of the securities markets.
There is little historical data on Russian securities markets because
they are relatively new and a substantial proportion of securities transactions
in Russia are privately negotiated outside of stock exchanges. Because of the
recent formation of the securities markets as well as the underdeveloped state
of the banking and telecommunications systems, settlement, clearing and
registration of securities transactions are subject to significant risks.
Ownership of shares (except where shares are held through depositories that meet
the requirements of the 1940 Act) is defined according to entries in the
company's share register and normally evidenced by extracts from the register or
by formal share certificates. However, there is no central registration system
for shareholders and these services are carried out by the companies themselves
or by registrars located throughout Russia. These registrars are not necessarily
subject to effective state supervision and it is possible for a Fund to lose its
registration through fraud, negligence or even mere oversight. While each Fund
will endeavor to ensure that its interest continues to be appropriately recorded
either itself or through a custodian or other agent inspecting the share
register and by obtaining extracts of share registers through regular
confirmations, these extracts have no legal enforceability and it is possible
that subsequent illegal amendment or other fraudulent act may deprive the Fund
of its ownership rights or improperly dilute its interests. In addition, while
applicable Russian regulations impose liability on registrars for losses
resulting from their errors, it may be difficult for a Fund to enforce any
rights it may have against the registrar or issuer of the securities in the
event of loss of share registration. Furthermore, although a Russian public
enterprise with more than 1,000 shareholders is required by law to contract out
the maintenance of its shareholder register to an independent entity that meets
certain criteria, in practice this regulation has not always been strictly
enforced. Because of this lack of independence, management of a company may be
able to exert considerable influence over who can purchase and sell the
company's shares by illegally instructing the registrar to refuse to record
transactions in the share register. This practice may prevent a Fund from
investing in the securities of certain Russian companies deemed suitable by its
Investment Manager. Further, this also could cause a delay in the sale of
Russian company securities by a Fund if a potential purchaser is deemed
unsuitable, which may expose the Fund to potential loss on the investment.
Each Fund endeavors to buy and sell foreign currencies on as favorable
a basis as practicable. Some price spread in currency exchange (to cover service
charges) will be incurred, particularly when a Fund changes investments from one
country to another or when proceeds of the sale of Shares in U.S. dollars are
used for the purchase of securities in foreign countries. Also, some countries
may adopt policies which would prevent a Fund from transferring cash out of the
country or withhold portions of interest and dividends at the source. There is
the possibility of cessation of trading on national exchanges, expropriation,
nationalization or confiscatory taxation, withholding and other foreign taxes on
income or other amounts, foreign exchange controls (which may include suspension
of the ability to transfer currency from a given country), default in foreign
government securities, political or social instability, or diplomatic
developments which could affect investments in securities of issuers in foreign
nations.
The Funds may be affected either unfavorably or favorably by
fluctuations in the relative rates of exchange between the currencies of
different nations, by exchange control regulations and by indigenous economic
and political developments. Some countries in which the Funds may invest may
also have fixed or managed currencies that are not free-floating against the
U.S. dollar. Further, certain currencies may not be internationally traded.
Certain of these currencies have experienced a steady devaluation relative to
the U.S. dollar. Any devaluations in the currencies in which a Fund's portfolio
securities are denominated may have a detrimental impact on that Fund. Through
the flexible policy of the Funds, the Investment Managers endeavor to avoid
unfavorable consequences and to take advantage of favorable developments in
particular nations where from time to time they place the investments of the
Funds.
The exercise of this flexible policy may include decisions to purchase
securities with substantial risk characteristics and other decisions such as
changing the emphasis on investments from one nation to another and from one
type of security to another. Some of these decisions may later prove profitable
and others may not. No assurance can be given that profits, if any, will exceed
losses.
The Directors consider at least annually the likelihood of the
imposition by any foreign government of exchange control restrictions which
would affect the liquidity of the Funds' assets maintained with custodians in
foreign countries, as well as the degree of risk from political acts of foreign
governments to which such assets may be exposed. The Directors also consider the
degree of risk involved through the holding of portfolio securities in domestic
and foreign securities depositories (see "Investment Management and Other
Services -- Custodian and Transfer Agent"). However, in the absence of willful
misfeasance, bad faith or gross negligence on the part of a Fund's Investment
Manager, any losses resulting from the holding of a Fund's portfolio securities
in foreign countries and/or with securities depositories will be at the risk of
the Shareholders. No assurance can be given that the Directors' appraisal of the
risks will always be correct or that such exchange control restrictions or
political acts of foreign governments will not occur.
A Fund's ability to reduce or eliminate its futures and related options
positions will depend upon the liquidity of the secondary markets for such
futures and options. The Funds intend to purchase or sell futures and related
options only on exchanges or boards of trade where there appears to be an active
secondary market, but there is no assurance that a liquid secondary market will
exist for any particular contract or at any particular time. Use of stock index
futures and related options for hedging may involve risks because of imperfect
correlations between movements in the prices of the futures or related options
and movements in the prices of the securities being hedged. Successful use of
futures and related options by a Fund for hedging purposes also depends upon the
ability of that Fund's Investment Manager's to predict correctly movements in
the direction of the market, as to which no assurance can be given.
TRADING POLICIES. The Investment Managers and their affiliated
companies serve as investment advisers to other investment companies and private
clients. Accordingly, the respective portfolios of certain of these funds and
clients may contain many or some of the same securities. When certain funds or
clients are engaged simultaneously in the purchase or sale of the same security,
the trades may be aggregated for execution and then allocated in a manner
designed to be equitable to each party. The larger size of the transaction may
affect the price of the security and/or the quantity which may be bought or sold
for each party. If the transaction is large enough, brokerage commissions in
certain countries may be negotiated below those otherwise chargeable.
Sale or purchase of securities, without payment of brokerage
commissions, fees (except customary transfer fees) or other remuneration in
connection therewith, may be effected between any of these funds, or between
funds and private clients, under procedures adopted by the Company's Board of
Directors pursuant to Rule 17a-7 under the 1940 Act.
PERSONAL SECURITIES TRANSACTIONS. Access persons of the Franklin
Templeton Group, as defined in SEC Rule 17(j) under the 1940 Act, who are
employees of Franklin Resources, Inc. or their subsidiaries, are permitted to
engage in personal securities transaction subject to the following general
restrictions and procedures: (1) The trade must receive advance clearance from a
Compliance Officer and must be completed within 24 hours after 1 this clearance;
(2) Copies of all brokerage confirmations must be sent to the Compliance Officer
and within 10 days after the end of each calendar quarter, a report of all
securities transactions must be provided to the Compliance Officer; (3) In
addition to items (1) and (2), access persons involved in preparing and making
investment decisions must file annual reports of their securities holdings each
January and also inform the Compliance Officer (or other designated personnel)
if they own a security that is being considered for a fund or other client
transaction or if they are recommending a security in which they have an
ownership interest for purchase or sale by a fund or other client.
MANAGEMENT OF THE COMPANY MANAGEMENT OF THE COMPANY
The name, address, principal occupation during the past five years and
other information with respect to each of the Directors and principal executive
officers of the Company is as follows:
NAME, ADDRESS AND PRINCIPAL OCCUPATION
OFFICES WITH COMPANY DURING THE PAST FIVE YEARS
HARRIS J. ASHTON Chairman of the Board, President and Chief Executive
Metro Center Officer of General Host Corporation (nursery and craft
1 Station Place centers); and a Director of RBC Holdings (U.S.A.) Inc.
Stamford, Connecticut (a bank holding company) and Bar-S Foods. Age 63.
Director
NICHOLAS F. BRADY* Chairman of Templeton Emerging Markets Investment Trust
102 East Dover Street PLC; Chairman of Templeton Latin America Investment
Easton, Maryland Trust PLC; Chairman of Darby Overseas Investments, Ltd.
(an investment firm) (1994-present); Director of the
Director Amerada Hess Corporation, Capital Cities/ABC, Inc.,
ChristianaCompanies, and the H.J. Heinz Company;
Secretary of the United States Department of the
Treasury (1988-January 1993); and Chairman of the Board
of Dillon, Read & Co. Inc. (investment banking) prior
thereto. Age 66.
FRANK J. CROTHERS President and Chief Executive Officer of Atlantic
P.O. Box N-3238 Equipment & Power Ltd; Vice Chairman of Caribbean
Nassau, Bahamas Utilities Co., Ltd.; President of Provo Power
Corporation;
Director and a director of various other business and nonprofit
organizations. Age 51.
S. JOSEPH FORTUNATO Member of the law firm of Pitney, Hardin, Kipp & Szuch;
200 Campus Drive and a director of General Host Corporation. Age 63.
Florham Park, New Jersey
Director
JOHN WM. GALBRAITH President of Galbraith Properties, Inc. (personal
360 Central Avenue investment company); Director of Gulfwest Banks, Inc.
Suite 1300 (bank holding company) (1995-present) and Mercantile
St. Petersburg, Florida Bank (1991-present); Vice Chairman of Templeton,
Galbraith &
Director Hansberger Ltd. (1986-1992); and Chairman of Templeton
Funds Management, Inc. (1974-1991). Age 74.
ANDREW H. HINES, JR. Consultant for the Triangle Consulting Group; Chairman
150 2nd Avenue N. of the Board and Chief Executive Officer of Florida
St. Petersburg, Florida Progress Corporation (1982-February 1990) and Director
of various
Director of its subsidiaries;
Chairman and Director
of Precise Power
Corporation;
executive-in-residence
of Eckerd College
(1991-present); and a
Director of Checkers
Drive-In Restaurants,
Inc. Age 73.
CHARLES B. JOHNSON* President, Chief Executive Officer, and Director of
777 Mariners Island Blvd.Franklin Resources, Inc.; Chairman of the Board and
San Mateo, California Director of Franklin Advisers, Inc. and Franklin
Templeton
Chairman of the Board Distributors, Inc.; director of General Host
and Vice President Corporation and Templeton Global Investors, Inc.; and
officer and
director, trustee or
managing general
partner, as the case
may be, of most other
subsidiaries of
Franklin and of 55 of
the investment
companies in the
Franklin Templeton
Group. Age 63.
BETTY P. KRAHMER Director or trustee of various civic associations;
2201 Kentmere Parkway formerly, economic analyst, U.S. Government. Age 66.
Wilmington, DE
Director
GORDON S. MACKLIN Chairman of White River Corporation (information
8212 Burning Tree Road services); Director of Fund America Enterprises
Bethesda, Maryland Holdings, Inc., Lockheed Martin Corporation, MCI
Communications
Director Corporation, Fusion Systems Corporation, Infovest
Corporation, and Medimmune, Inc.; and formerly:
Chairman of Hambrecht and Quist Group; Director of H&Q
Healthcare
Investors; and President of the National Association of
Securities Dealers, Inc. Age 67.
FRED R. MILLSAPS Manager of personal investments (1978-present);
2665 N.E. 37th Drive Chairman and Chief Executive Officer of Landmark
Fort Lauderdale, Florida Banking Corporation (1969-1978); Financial Vice
President of
Director Florida Power and Light
(1965-1969); Vice
President of The
Federal Reserve Bank of
Atlanta (1958-1965);
and a director of
various business and
nonprofit
organizations.
Age 67.
CONSTANTINE DEAN
TSERETOPOULOS Physician, Lyford Cay Hospital (July 1987-present);
Lyford Cay Hospital Cardiology Fellow, University of Maryland (July 1985-
P.O. Box N-7776 July 1987); Internal Medicine Intern, Greater Baltimore
Nassau, Bahamas Medical Center (July 1982-July 1985). Age 42.
Director
DONALD F. REED Executive Vice President of Templeton Worldwide, Inc.;
4 King Street West President of Templeton Investment Counsel, Inc.;
Toronto, Ontario President and Chief Executive Officer of Templeton
Canada Management Limited; co-founder and Director of
International Society
President of Financial Analysts;
Chairman of Canadian
Council of Financial
Analysts; formerly,
President and Director,
Reed Monahan Nicolishen
Investment Counsel
(1982-1989). Age 51.
HARMON E. BURNS Executive Vice President, Secretary and Director of
777 Mariners Island
Blvd. Franklin Resources, Inc.; Director and Executive Vice
San Mateo, California President of Franklin Templeton Distributors, Inc.;
Vice President Executive Vice President of Franklin Advisers, Inc.;
Director of Franklin Templeton Investor Services, Inc.;
officer and/or director, as the case may be, of other
subsidiaries of Franklin Resources, Inc.; and officer
and/or director or trustee of 61 of the investment
companies in the Franklin Templeton Group of Funds.
Age 51.
RUPERT H. JOHNSON, JR. Executive Vice President, Secretary and Director of
777 Mariners Island Blvd.Franklin Resources, Inc.; Executive Vice President of
San Mateo, California Franklin Templeton Distributors, Inc.; Executive Vice
Vice President President of Franklin Advisers, Inc.; Director of
Franklin Templeton Investor Services, Inc.; officer
and/or director, as the case may be, of other
subsidiaries of
Franklin Resources, Inc.; and officer and/or director
or trustee of 61 of the investment companies in the
Franklin Templeton Group of Funds. Age 55.
DEBORAH R. GATZEK Senior Vice President and General Counsel of Franklin
777 Mariners Island
Blvd. Resources, Inc.; Senior Vice President of Franklin
San Mateo, California Templeton Distributors, Inc.; Vice President of
Franklin
Vice President Advisers, Inc. and officer of 61 of the investment
companies in the Franklin Templeton Group of Funds.
Age 47.
CHARLES E. JOHNSON Senior Vice President and Director of Franklin
500 East Broward Blvd. Resources, Inc.; Senior Vice President of Franklin
Ft. Lauderdale, Florida Templeton Distributors, Inc.; President and Director
of Templeton
Vice President Worldwide, Inc. and Franklin Institutional Services
Corporation; Chairman of the Board of Templeton
Investment Counsel, Inc.; vice president and/or
director, as the case
may be, for some of the subsidiaries of Franklin
Resources, Inc.; and an officer and/or director, as the
case may be, of 24 of the investment companies in the
Franklin Templeton Group. Age 39.
MARK G. HOLOWESKO President, Chief Executive Officer and Director of
Lyford Cay Templeton Global Advisors Limited; Chief Investment
Nassau, Bahamas Officer of global equity research for Templeton
Worldwide,
Vice President Inc.;
president or vice
president of the
Templeton Funds;
formerly, investment
administrator with Roy
West Trust Corporation
(Bahamas) Limited
(1984-1985). Age 36.
MARTIN L. FLANAGAN Senior Vice President, Treasurer and Chief Financial
777 Mariners Island
Blvd. Officer of Franklin Resources, Inc.; Director and
San Mateo, California Executive Vice President of Templeton Investment
Counsel,
Vice President Inc.; Director, President and Chief Executive Officer
of Templeton Global Investors, Inc.; director or
trustee and
president or vice president of the Templeton Funds;
accountant with Arthur Andersen & Company (1982-1983);
and a member of the International Society of Financial
Analysts and the American Institute of Certified
Public Accountants. Age 35.
DANIEL L. JACOBS Executive vice president and director of Templeton
500 East Broward Blvd. Investment Counsel, Inc.; director of Templeton Global
Fort Lauderdale, Florida Investors, Inc.; and president or vice president of
Vice President certain of the Templeton Funds. Age 43.
JAMES E. CHANEY Vice President, Portfolio Management/Research of
Templeton
500 East Broward Blvd. Investment Counsel, Inc.; formerly, Vice President of
Fort Lauderdale, Florida Equities, GE Investments (1987-1991); consulting
engineer
Vice President and project manager, Camp, Dresser & McKee, Inc.
(January 1985-July 1985) and American British
Consultants
(1983-1984). Age 39.
J. MARK MOBIUS Managing Director of Templeton Asset Management,
Ltd. -
Two Exchange Square Hong Kong Branch; portfolio manager for various
Hong Kong Templeton advisory affiliates; President of
International Investment
Vice President Trust Company Limited (investment manager of Taiwan
R.O.C.
Fund) (1986-1987); and a Director of Vickers de Costa,
Hong Kong (1983-1986). Age 59.
THOMAS LATTA Vice President of the Templeton Global Bond Managers
500 East Broward Blvd. division of Templeton Investment Counsel, Inc.; vice
Fort Lauderdale, Florida president of various Templeton Funds; formerly,
portfolio manager,
Vice President
Forester & Hairston
(1988-1991); and
investment adviser,
Merrill Lynch, Pierce,
Fenner & Smith Inc.
(1981-1988). Age 35.
JOHN R. KAY Vice President of the Templeton Funds; Vice President
500 East Broward Blvd. and Treasurer of Templeton Global Investors, Inc. and
Fort Lauderdale, Florida Templeton Worldwide, Inc.; Assistant Vice President of
Vice President Franklin Templeton Distributors, Inc.; formerly, Vice
President and Controller of the Keystone Group, Inc.
Age 55.
THOMAS M. MISTELE Senior Vice President of Templeton Global Investors,
700 Central Avenue Inc., Vice President of Franklin Templeton
Distributors, Inc.;
St. Petersburg, Florida Secretary of the Templeton Funds; formerly, attorney,
Secretary Dechert Price & Rhoads
(1985-1988) and
Freehill, Hollingdale &
Page (1988); and
judicial clerk, U.S.
District Court (Eastern
District of Virginia)
(1984-1985). Age 42.
JAMES R. BAIO Certified Public Accountant; Treasurer of the
500 East Broward Blvd. Templeton Funds; Senior Vice President of Templeton
Worldwide, Inc.,Fort Lauderdale, Florida
Templeton Global Investors, Inc., and Templeton Funds
Treasurer Trust Company;
formerly, senior tax
manager with Ernst &
Young (certified public
accountants)
(1977-1989). Age 41.
JACK L. COLLINS Assistant treasurer of the Templeton Funds; assistant
700 Central Avenue vice president of Franklin Templeton Distributors,
St. Petersburg, Florida Inc.; formerly, partner with Grant Thornton
(international
Assistant Treasurer certified public accountants). Age 66.
JEFFREY L. STEELE Partner, Dechert Price & Rhoads. Age 50.
1500 K Street, N.W.
Washington, D.C.
Assistant Secretary
- 24 -
- ------------------------
* These are Directors who are "interested persons" of the Company as that
term is defined in the 1940 Act.^ Mr. Brady and Franklin Resources,
Inc. are limited partners of Darby Overseas Partners, L.P.
("Darby Overseas"). Mr. Brady established Darby Overseas in
February, 1994, and is Chairman and a shareholder of the corporate
general partner of Darby Overseas. In addition, Darby Overseas and
Templeton, Galbraith & Hansberger, Ltd. Global Advisors Limited are
limited partners of Darby Emerging
Markets Fund, L.P.
There are no family relationships between any of the Directors.
DIRECTOR COMPENSATION
All of the Company's officers and Directors also hold positions with
other investment companies in the Franklin Templeton Group. No compensation is
paid by the Company to any officer or director who is an officer, director or
employee of the Investment Managers or their affiliates. Each Templeton Fund
pays its independent directors and trustees and Mr. Brady an annual retainer
and/or fees for attendance at Board and Committee meetings, the amount of which
is based on the level of assets in each fund. Accordingly, the Company currently
pays the independent Directors and Mr. Brady an annual retainer of $6000.00 and
a fee of $500.00 per meeting attended of the Board and its Committees. The
independent Directors and Mr. Brady are reimbursed for any expenses incurred in
attending meetings, paid pro rata by each Franklin Templeton Fund in which they
serve. No pension or retirement benefits are accrued as part of Company
expenses.
The following table shows the total compensation paid to the Directors
by the Company and by all investment companies in the Franklin Templeton Group:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
NUMBER OF TOTAL COMPENSATION
NAME AGGREGATE FRANKLIN TEMPLETON FROM ALL FUNDS IN
OF COMPENSATION FUND BOARDS ON WHICH FRANKLIN TEMPLETON
DIRECTOR FROM THE COMPANY* DIRECTOR SERVES GROUP*
Harris J. Ashton $8,000 56 $327,925
Nicholas F. Brady 8,000 24 98,225
Frank J. Crothers 8,902 4 22,975
S. Joseph Fortunato 8,000 58 344,745
John Wm. Galbraith 6,000 23 70,100
Andrew H. Hines, Jr. 8,000 24 106,325
Betty P. Krahmer 6,000 24 93,475
Gordon S. Macklin 8,000 53 321,525
Fred R. Millsaps 8,743 24 104,325
Constantine Dean 8,902 4 22,975
Tseretopoulos
- ---------------
</TABLE>
* For the fiscal year ended December 31, 1995
PRINCIPAL SHAREHOLDERS
As of March 29, 1996, there were 17,882,868 Shares of Growth Series
outstanding, of which no Shares were owned beneficially, directly or indirectly,
by Directors or officers of the Company. As of March 29, 1996, there were
142,966,001 Shares of Foreign Equity Series outstanding, of which no Shares were
owned beneficially, directly or indirectly, by the Directors or officers of the
Company. As of March 29, 1996, there were 90,100,958 Shares of Emerging Markets
Series outstanding, of which no Shares were owned beneficially, directly or
indirectly, by the Directors or officers of the Company. As of March 29, 1996,
there were 12,977 Shares of Global Fixed Income Series outstanding, of which no
Shares were owned beneficially, directly or indirectly, by the Directors or
officers of the Company. As of March 31, 1995, there were 4,652,327 Shares of
Foreign Equity (South Africa Free) Series outstanding, of which no Shares were
owned beneficially, directly or indirectly, by the Directors or officers of the
Company.
Set forth below is information regarding persons who owned 5% or more
of the outstanding Shares of the Funds. As of March 29, 1996, no person owned
beneficially or of record 5% or more of the outstanding Shares of Foreign Equity
Series.no person owned beneficially or of record 5% or more of the outstanding
Share. CC Penco, 200 Barrister Bldg., 155 E. Market Street, Indianapolis, IN
46204-3294, owned 7,184,330 Shares (7% of the outstanding Shares). As of March
29, 1996, the following persons owned 5% or more of the outstanding Shares of
Growth Series: Princeton Theological Seminary, P.O. Box 821, Princeton, New
Jersey 08542-0803, owned 12,745,271 Shares (71% of the outstanding Shares);
Peter Norton, on behalf of the Norton Family Trust, 225 Arizona Avenue, Santa
Monica, California 90401-1210, owned 1,159,085 Shares (6% of the outstanding
Shares) and Utah State Retirement Board Defined Contribution Plan, 540 East 200
South, Salt Lake City, UT 84102-2099, owned 1,446,562 (8% of the outstanding
Shares). As of March 29, 1996, the following persons owned 5% or more of the
outstanding Shares of Emerging Markets Series: Northern Trust Company, on behalf
of Utah Retirement Systems, P.O. Box 92956, Chicago, Illinois 60675, owned
5,416,499 Shares (6% of the outstanding Shares); Caisse De Depot Et Placements
Du Quebec, Attn: Philippe Halley C.A., 1981 McGill College Avenue, Montreal,
Quebec H3A 3C7, Canada, owned 5,137,051 Shares (5% of outstanding Shares); New
York State Common Retirement Fund, Alfred E. Smith State Office Building, Sixth
Floor, Albany, New York 12236, owned 11,847,789 Shares (13% of the outstanding
Shares); and Wendel & Co., c/o Bank of New York-Mutual Fund Sec., Wall Street
Station, PO Box 1066, New York, NY 10286, owned 4,516,967 (5% of the outstanding
Shares) Bankers Trust Company, on behalf of American National Can Master
Retirement Trust, P.O. Box 1742, Church Street Station, New York, New York
10008, owned 3,055,375 Shares (5% of the outstanding Shares). As of March 29,
1996, the following persons owned 5% or more of the outstanding Shares of Global
Fixed Income Series: Templeton Global Investors, Inc., 500 East Broward Blvd.,
Fort Lauderdale, Florida 33394-3091, owned 12,977 Shares (100% of the
outstanding Shares). As of March 31, 1995, the following persons owned 5% or
more of outstanding Shares of Foreign Equity (South Africa Free) Series: Mott
Children's Health Center, 806 Tuuri Place, Flint, Michigan 48503, owned
1,208,826 Shares (25% of the outstanding Shares); Northern Trust Company, F/B/O
Dallas Museum of Art, P.O. Box 92956, Chicago, IL 60675-2956, owned 650,546
Shares (13% of the outstanding Shares); Wachovia Bank of North Carolina, on
behalf of Atlanta Gas Light Company Retirement Plan, 301 North Main Street,
Winston-Salem, North Carolina 27150, owned 1,008,793 Shares (21% of the
outstanding Shares); Lutheran Charities Foundation, 709 S. Laclede Station Road,
St. Louis, MO 63119 owned 436,789 Shares (9% of the outstanding Shares); The
Childrens Hospital Foundation, 1129 East 17th Avenue, Denver, CO 80218 owned
803,497 Shares (17% of the outstanding Shares); and Promedica Health Care
Foundation, 2142 North Cove Boulevard, Toledo, OH 43606, owned 335,105 Shares
(7% of the outstanding Shares).
- 55 -
INVESTMENT MANAGEMENT AND OTHER SERVICES
INVESTMENT MANAGEMENT AGREEMENTS. The Investment Manager of Growth
Series and Foreign Equity Series and Foreign Equity (South Africa Free) Series
is Templeton Investment Counsel, Inc., a Florida corporation with offices at
Broward Financial Centre, Fort Lauderdale, Florida 33394-3091. The Investment
Management Agreement between TICI and the Company on behalf of Foreign Equity
Series, dated October 30, 1992, and amended and restated on February 25, 1994,
was approved by Templeton Funds Management, Inc. ("TFM"), as sole Shareholder of
that Fund, on October 30, 1992, and was last approved by the Board of Directors
at a meeting held on February 23, 1996, to run through April 30, 1997. The
Investment Management Agreement between TICI and the Company on behalf of Growth
Series and Foreign Equity (South Africa Free) Series, dated May 3, 1993, was
approved by Templeton Global Investors, Inc. ("TGI"), as sole Shareholder of
each of those Funds, on April 30, 1993, and amended and restated on February 25,
1994, and was last approved by the Board of Directors at a meeting held on
February 23, 1996, to run through April 30, 1997.
The Investment Manager of Emerging Markets Series is the Hong Kong
office of Templeton Asset Management Ltd.- Hong Kong Branch, a Singapore
corporation at Two Exchange Square, Suite 908, Hong Kong, 20 Raffles Place,
Ocean Tower, Singapore. On September 29, 1995, the Investment Manager assumed
the investment management duties of Templeton Investment Management (Hong Kong)
Limited, a Hong Kong company, with respect to the Emerging Markets Series under
the Investment Management Agreement. The Investment Management Agreement between
Templeton (Singapore) and the Company on behalf of Emerging Markets Series,
dated May 3, 1993, and amended and restated on February 25, 1994, was approved
by TGI as sole shareholder of Emerging Markets Series on April 30, 1993, and was
last approved by the Board of Directors on February 23, 1996 to run through
April 30, 1997.
The Investment Manager of Global Fixed Income Series is TICI through
its Templeton Global Bond Managers division. The Investment Management Agreement
between TGBM and the Company on behalf of Global Fixed Income Series, dated May
3, 1993, and amended and restated on February 25, 1994 was approved by TGI, as
sole Shareholder of Global Fixed Income Series, on April 30, 1993, and was last
approved by the Board of Directors on February 23, 1996 to run through April 30,
1997.
Each of the Investment Management Agreements will continue from year to
year after its initial term, subject to approval annually by the Board of
Directors or by vote of a majority of the outstanding Shares of each Fund (as
defined in the 1940 Act) and also, in either event, with the approval of a
majority of those Directors who are not parties to the Agreement or interested
persons of any such party in person at a meeting called for the purpose of
voting on such approval.
Each Investment Management Agreement requires a Fund's Investment
Manager to manage the investment and reinvestment of each Fund's assets. In so
doing, without cost to the Funds, the Investment Managers may receive certain
research services described below. The Investment Managers are not required to
furnish any personnel, overhead items or facilities for the Fund, including
daily pricing or trading desk facilities.
Each Investment Management Agreement provides that a Fund's Investment
Manager will select brokers and dealers for execution of the Fund's portfolio
transactions consistent with the Fund's brokerage policy (see "Brokerage
Allocation"). Although the services provided by broker-dealers in accordance
with the brokerage policy incidentally may help reduce the expenses of or
otherwise benefit the Investment Managers and other investment advisory clients
of the Investment Managers and of their affiliates, as well as the Funds, the
value of such services is indeterminable, and the Investment Managers' fees are
not reduced by any offset arrangement by reason thereof.
When the Investment Manager of a Fund determines to buy or sell the
same securities for the Fund that the Investment Manager or certain of its
affiliates have selected for one or more of the Investment Manager's other
clients or for clients of its affiliates, the orders for all such securities
trades may be placed for execution by methods determined by the Investment
Manager, with approval by the Board of Directors, to be impartial and fair, in
order to seek good results for all parties (see "Investment Objectives and
Policies -- Trading Policies"). Records of securities transactions of persons
who know when orders are placed by the Funds are available for inspection at
least four times annually by the compliance officer of the Company so that the
non-interested Directors (as defined in the 1940 Act) can be satisfied that the
procedures are generally fair and equitable for all parties.
The Investment Managers also provide management services to numerous
other investment companies or funds and accounts pursuant to management
agreements with each fund or account. The Investment Managers may give advice
and take action with respect to any of the other funds and accounts it manages,
or for its own account, which may differ from action taken by an Investment
Manager on behalf of a Fund. Similarly, with respect to a Fund, an Investment
Manager is not obligated to recommend, purchase or sell, or to refrain from
recommending, purchasing or selling any security that the Investment Manager and
access persons, as defined by the 1940 Act, may purchase or sell for its or
their own account or for the accounts of any other fund or account. Furthermore,
the Investment Managers are not obligated to refrain from investing in
securities held by a Fund or other funds or accounts which they manage or
administer. Any transactions for the accounts of the Investment Managers and
other access persons will be made in compliance with the Company's Code of
Ethics as described in the section "Investment Objectives and Policies --
Personal Securities Transactions."
Each Investment Management Agreement further provides that a Fund's
Investment Manager shall have no liability for any error of judgment, mistake of
law, or any loss arising out of any investment or other act or omission in the
performance by the Investment Manager of its duties under the Investment
Management Agreement or for any loss or damage resulting from the imposition by
any government of exchange control restrictions which might affect the liquidity
of the Fund's assets, or from acts or omissions of custodians or securities
depositories, or from any wars or political acts of any foreign governments to
which such assets might be exposed, except for any liability, loss or damage
resulting from willful misfeasance, bad faith or gross negligence on the
Investment Manager's part or reckless disregard of its duties under the
Investment Management Agreement. Each Investment Management Agreement will
terminate automatically in the event of its assignment, and may be terminated by
the Company on behalf of a Fund at any time without payment of any penalty on 60
days' written notice, with the approval of a majority of the Directors of the
Company in office at the time or by vote of a majority of the outstanding Shares
of the affected Fund (as defined in the 1940 Act).
MANAGEMENT FEES. Growth Series and Foreign Equity Series and Foreign
Equity (South Africa Free) Series each pays TICI a monthly fee equal on an
annual basis to 0.70% of its average daily net assets during the year. During
the fiscal years ended December 31, 1995, 1994, and 1993 and 1992, TICI (and,
prior to October 30, 1992, Templeton, Galbraith & Hansberger Ltd., the previous
investment manager of Foreign Equity Series) received from Foreign Equity Series
fees of $9,916,869, $5,740,479, and $1,000,116 and $7,796, respectively. During
the fiscal years ended December 31, 1995 and 1994 and for the period from May 3,
1993 (commencement of operations) to December 31, 1993, TICI received from
Growth Series fees of $1,469,015, $1,365,883 and $573,848, respectively. During
the fiscal year ended December 31, 1994 and for the period from May 3, 1993
(commencement of operations) to December 31, 1994, TICI received from Foreign
Equity (South Africa Free) Series fees of $485,980 and $404,511, respectively.
Emerging Markets Series pays Templeton (Singapore) a monthly fee equal on an
annual basis to 1.25% of its average daily net assets during the year. This fee
is higher than advisory fees paid by most other U.S. investment companies,
primarily because investing in equity securities of companies in emerging
markets, which are not widely followed by professional analysts, requires
Templeton (Singapore) to invest additional time and incur added expense in
developing specialized resources, including research facilities. During the
fiscal years ended December 31, 1995 and 1994 and during the period from May 3,
1993 (commencement of operations) to December 31, 1993, the Investment Manager
Templeton Investment Management (Hong Kong) Limited, the Fund's previous
investment manager, received from Emerging Markets Series fees of $8,488,442,
$6,669,935 and $1,578,353, respectively. Global Fixed Income Series pays TGBM a
monthly fee equal on an annual basis to 0.55% of its average daily net assets
during the year. During the fiscal years ended December 31, 1995 and 1994 and
during the period from May 3, 1993 (commencement of operations) to December 31,
1993, TGBM received from Global Fixed Income Series fees of $555, $2,453 and
$1,974, respectively. Each of the Investment Managers will comply with any
applicable state regulations which may require it to make reimbursements to a
Fund in the event that the Fund's aggregate operating expenses, including the
management fee, but generally excluding interest, taxes, brokerage commissions
and extraordinary expenses, are in excess of specific applicable limitations.
The strictest rule currently applicable to the Funds is 2.5% of the first
$30,000,000 of net assets, 2% of the next $70,000,000 of net assets and 1.5% of
the remainder.
THE INVESTMENT MANAGERS. The Investment Managers are indirect wholly
owned subsidiaries of Franklin Resources, Inc. ("Franklin"), a publicly traded
company whose shares are listed on the NYSE. Charles B. Johnson (a Director and
officer of the Company)and Rupert H. Johnson, Jr. and R. Martin Wiskemann are
principal shareholders of Franklin and own, respectively, approximately 20% and
16% and 9.2% of its outstanding shares.
Messrs. Charles B. Johnson and Rupert H. Johnson, Jr. are brothers.
<PAGE>
BUSINESS MANAGER. Templeton Global Investors, Inc. performs certain
administrative functions for the Company including:
o providing office space, telephone, office equipment and
supplies for the Company;
o paying all compensation of the Company's officers;
o authorizing expenditures and approving bills for payment on
behalf of the Company;
o supervising preparation of annual and semiannual reports to
Shareholders, notices of dividends, capital gains
distributions and tax credits, and attending to routine
correspondence and other communications with individual
Shareholders;
o daily pricing of the Funds' investment portfolios and
preparing and supervising publication of daily quotations of
the bid and asked prices of the Funds' Shares, earnings
reports and other financial data;
o providing trading desk facilities for the Funds;
o monitoring relationships with organizations serving the
Company, including custodians, transfer agents and printers;
o supervising compliance by the Company with recordkeeping
requirements under the 1940 Act and regulations thereunder and
with state regulatory requirements, maintaining books and
records for the Funds (other than those maintained by the
custodian and transfer agent); and preparing and filing tax
reports other than the Funds' income tax returns; and
o providing executive, clerical and secretarial help needed to
carry out these responsibilities.
For its services, the Business Manager receives a monthly fee equal on
an annual basis to 0.15% of the first $200,000,000 of the combined average daily
net assets of the Funds, reduced to 0.135% annually of such net assets in excess
of $200,000,000, further reduced to 0.1% annually of such net assets in excess
of $700,000,000, and further reduced to 0.075% annually of such net assets in
excess of $1,200,000,000. Since the Business Manager's fee covers services often
provided by investment advisers to other funds, the Funds' combined expenses for
advisory and administrative services (except those of Global Fixed Income
Series) are higher than those of most other investment companies. During the
fiscal years ended December 31, 1995, 1994 and 1993 and 1992, the Business
Manager (and, prior to April 1, 1993, Templeton Funds Management, Inc., the
Company's previous business manager) received fees of $1,412,755, $912,500,and
$201,527 and $1,671, respectively for business management services to Foreign
Equity Series. During the fiscal years ended December 31, 1995 and 1994 and for
the period of May 3, 1993 (commencement of operations) to December 31, 1993, the
Business Manager received fees of $208,881, $216,577 and $114,812, respectively,
for business management services to Growth Series. For the fiscal years ended
December 31, 1995 and 1994 and for the period of May 3, 1993 (commencement of
operations) to December 31, 1993, the Business Manager received fees of
$681,225, $589,648 and $176,839, respectively, for business management services
to Emerging Markets Series. For the fiscal years ended December 31, 1995 and
1994 and for the period of May 3, 1993 (commencement of operations) to December
31, 1993, the Business Manager received $98, $495 and $503, respectively for
business management services to Global Fixed Income Series. For the fiscal year
ended December 31, 1994 and for the period of May 3, 1993 (commencement of
operations) to December 31, 1993, the Business Manager received $77,383 and
$81,019, respectively, for business management services to Foreign Equity (South
Africa Free) Series.
The Business Manager has voluntarily agreed to limit the total expenses
(excluding interest, taxes, brokerage commissions and extraordinary expenses) of
each Fund to an annual rate of 1% (1.6% for Emerging Markets Series) of the
Fund's average net assets until December 31, 1996. As long as this temporary
expense limitation continues, it may lower each Fund's expenses and increase its
total return. The expense limitation may be terminated or revised at any time
after December 31, 1996, at which time each Fund's expenses may increase and its
total return may be reduced, depending on the total assets of the Fund.
The Business Manager is relieved of liability to the Company and to the
Funds for any act or omission in the course of its performance under the
Business Management Agreement in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of its duties and obligations. The
Business Management Agreement may be terminated by the Company at any time on 60
days' written notice without payment of penalty, provided that such termination
by the Company shall be directed or approved by vote of a majority of the
Directors of the Company in office at the time or by vote of a majority of the
outstanding voting securities of the Funds (as defined in the 1940 Act), and
shall terminate automatically and immediately in the event of its assignment.
The Business Manager is an indirect wholly owned subsidiary of
Franklin.
CUSTODIAN AND TRANSFER AGENT. The Chase Manhattan Bank, N.A. serves as
Custodian of the Funds' assets, which are maintained at the Custodian's
principal office, MetroTech Center, Brooklyn, New York 11245, and at the offices
of its branches and agencies throughout the world. The Custodian has entered
into agreements with foreign sub-custodians approved by the Directors pursuant
to Rule 17f-5 under the 1940 Act. The Custodian, its branches and sub-custodians
generally do not hold certificates for the securities in their custody, but
instead have book records with domestic and foreign securities depositories,
which in turn have book records with the transfer agents of the issuers of the
securities. Compensation for the services of the Custodian is based on a
schedule of charges agreed on from time to time.
Franklin Templeton Investor Services, Inc. serves as the Funds'
Transfer Agent. Services performed by the Transfer Agent include processing
purchase, transfer and redemption orders; making dividend payments, capital
gains distributions and reinvestments; and handling all routine communications
with Shareholders. The Transfer Agent receives from each Fund an annual fee of
$14.08 per Shareholder account ($15.14 per Shareholder Account for Global Fixed
Income Series) plus out-of-pocket expenses, such fee to be adjusted each year to
reflect changes in the Department of Labor Consumer Price Index.
LEGAL COUNSEL. Dechert Price & Rhoads, Washington, D.C., is legal
counsel for the Company.
INDEPENDENT ACCOUNTANTS. The firm of McGladrey & Pullen, LLP, 555 Fifth
Avenue, New York, New York 10017, serves as independent accountants for the
Company. In addition to reporting annually on the financial statements of the
Funds, the accountants review certain filings of the Funds with the Securities
and Exchange Commission ("SEC") and prepare the Company's Federal and state
corporation tax returns.
REPORTS TO SHAREHOLDERS. The Company's fiscal year ends on December 31.
Shareholders will be provided at least semiannually with reports showing the
portfolios of the Funds and other information, including an annual report with
financial statements audited by independent accountants. Shareholders who would
like to receive an interim quarterly report may phone the Fund Information
Department at 1-800/DIAL BEN.
BROKERAGE ALLOCATION
The Investment Management Agreement for each Fund provides that the
Fund's Investment Manager is responsible for selecting members of securities
exchanges, brokers and dealers (such members, brokers and dealers being
hereinafter referred to as "brokers") for the execution of the Fund's portfolio
transactions and, when applicable, the negotiation of commissions in connection
therewith. It is not the duty of a Fund's Investment Manager, nor does it have
any obligation, to provide a trading desk for the Fund's portfolio transactions.
All decisions and placements are made in accordance with the following
principles:
1. Purchase and sale orders will usually be placed with brokers
who are selected by the Investment Managers as able to achieve "best execution"
of such orders. "Best execution" means prompt and reliable execution at the
most favorable securities price, taking into account the other provisions
hereinafter set forth. The determination of what may constitute best execution
and price in the execution of a securities transaction by a broker involves a
number of considerations, including, without limitation, the overall direct net
economic result to the Funds (involving both price paid or received and any
commissions and other costs paid), the efficiency with which the transaction is
effected, the ability to effect the transaction at all where a large block is
involved, availability of the broker to stand ready to execute possibly
difficult transactions in the future, and the financial strength and stability
of the broker. Such considerations are judgmental and are weighed by the
Investment Managers in determining the overall reasonableness of brokerage
commissions.
2. In selecting brokers for portfolio transactions, each Fund's
Investment Manager takes into account its past experience as
to brokers qualified to achieve "best execution," including
brokers who specialize in any foreign securities held by the
Fund.
3. The Investment Managers are authorized to allocate brokerage
business to brokers who have provided brokerage and research services, as such
services are defined in Section 28(e) of the Securities Exchange Act of 1934
(the "1934 Act"), for the Funds and/or other accounts, if any, for which the
Investment Managers exercise investment discretion (as defined in Section
3(a)(35) of the 1934 Act) and, as to transactions as to which fixed minimum
commission rates are not applicable, to cause a Fund to pay a commission for
effecting a securities transaction in excess of the amount another broker would
have charged for effecting that transaction, if the Investment Manager for that
Fund determines in good faith that such amount of commission is reasonable in
relation to the value of the brokerage and research services provided by such
broker, viewed in terms of either that particular transaction or the Investment
Manager's overall responsibilities with respect to the Fund and the other
accounts, if any, as to which it exercises investment discretion. In reaching
such determination, the Investment Managers are not required to place or attempt
to place a specific dollar value on the research or execution services of a
broker or on the portion of any commission reflecting either of said services.
In demonstrating that such determinations were made in good faith, the
Investment Manager of a Fund shall be prepared to show that all commissions
were allocated and paid for purposes contemplated by the Fund's brokerage
policy; that commissions were paid only for products or services which provide
lawful and appropriate assistance to the Investment Manager in the performance
of its investment decision-making responsibilities; and that the commissions
paid were within a reasonable range. The determination that commissions were
within a reasonable range shall be based on any available information as to the
level of commissions known to be charged by other brokers on comparable
transactions, but there shall be taken into account the Company's policies that
(i) obtaining a low commission is deemed secondary to obtaining a favorable
securities price, since it is recognized that usually it is more beneficial to
the Funds to obtain a favorable price than to pay the lowest commission; and
(ii) the quality, comprehensiveness and frequency of research studies which are
provided for the Funds and the Investment Managers are useful to the Investment
Managers in performing advisory services under their Investment Management
Agreements with the Company. Research services provided by brokers to the
Investment Managers are considered to be in addition to, and not in lieu of,
services required to be performed by the Investment Managers under their
Agreements. Research furnished by brokers through whom the Funds effect
securities transactions may be used by the Investment Managers for any of their
accounts, and not all such research may be used by the Investment Managers for
the Funds. When execution of portfolio transactions is allocated to brokers
trading on exchanges with fixed brokerage commission rates, account may be taken
of various services provided by the broker, including quotations outside the
United States for daily pricing of foreign securities held in the Funds'
portfolios.
4. Purchases and sales of portfolio securities within the United
States other than on a securities exchange shall be executed
with primary market makers acting as principal except where,
in the judgment of a Fund's Investment Manager, better prices
and execution may be obtained on a commission basis or from
other sources.
5. Sales of the Funds' Shares (which shall be deemed to include
also shares of other investment companies registered under the 1940 Act which
have either the same investment adviser or an investment adviser affiliated with
any Fund's Investment Manager) made by a broker are one factor among others to
be taken into account in deciding to allocate portfolio transactions(including
agency transactions, principal transactions, purchases in underwritings or
tenders in response to tender offers) for the account of a Fund to that broker;
provided that the broker shall furnish "best execution" as defined in paragraph
1 above, and that such allocation shall be within the scope of the Fund's
policies as stated above; and provided further, that in every allocation made to
a broker in which the sale of Shares is taken into account there shall be no
increase in the amount of the commissions or other compensation paid to such
broker beyond a reasonable commission or other compensation determined, as set
forth in paragraph 3 above, on the basis of best execution alone or best
execution plus research services, without taking account of or placing any value
upon such sale of Shares.
Insofar as known to management, no Director or Officer of the Company,
nor the Investment Managers or the Principal Underwriter or any person
affiliated with any of them, has any material direct or indirect interest in any
broker employed by or on behalf of a Fund. Franklin Templeton Distributors,
Inc., the Principal Underwriter for the Funds, is a registered broker-dealer,
but has never executed any purchase or sale transactions for a Fund's portfolio
or participated in commissions on any such transactions, and has no intention of
doing so in the future.
During the fiscal years ended December 31, 1995, 1994, and 1993 and
1992, Foreign Equity Series paid brokerage commissions of $2,779,325,
$1,856,075, and $1,220,225, and $0, respectively. During the fiscal years ended
December 31, 1995 and 1994 and for the period from May 3, 1993 (commencement of
operations) to December 31, 1993, Growth Series paid brokerage commissions of
$302,096, $196,751 and $324,895, respectively. For the fiscal years ended
December 31, 1995 and 1994 and for the period from May 3, 1993 (commencement of
operations) to December 31, 1993, Emerging Markets Series paid brokerage
commissions of $1,949,885, $1,442,148 and $1,111,391, respectively. For the
fiscal years ended December 31, 1995 and 1994 and for the period from May 3,
1993 (commencement of operations) to December 31, 1993, Global Fixed Income
Series paid brokerage commissions of $ 0, $ 0, and $0, respectively. For the
fiscal year ended December 31, 1994 and for the period May 3, 1993 (commencement
of operations) to December 31, 1993, Foreign Equity (South Africa Free) Series
paid brokerage commissions of $129,880 and $208,358, respectively. There is no
fixed method used in determining which broker-dealers receive which order or how
many orders.
PURCHASE, REDEMPTION AND PRICING OF SHARES
The Prospectus describes the manner in which the Funds' Shares may be
purchased and redeemed. See "How to Buy Shares of the Funds," "How to Sell
Shares of the Funds" and "Exchange Privilege."
Net asset value per Share is determined as of the scheduled closing
time of the NYSE (generally 4:00 p.m., New York time), every Monday through
Friday (exclusive of national business holidays). The Company's offices will be
closed, and net asset value will not be calculated, on those days on which the
NYSE is closed, which currently are: New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
Trading in securities on European and Far Eastern securities exchanges
and over-the-counter markets is normally completed well before the close of
business in New York on each day on which the NYSE is open. Trading of European
or Far Eastern securities generally, or in a particular country or countries,
may not take place on every New York business day. Furthermore, trading takes
place in various foreign markets on days which are not business days in New York
and on which each Fund's net asset value is not calculated. The Funds calculate
net asset value per Share, and therefore effect sales and redemptions of their
Shares, as of the close of the NYSE once on each day on which that Exchange is
open. Such calculation does not take place contemporaneously with the
determination of the prices of many of the portfolio securities used in such
calculation, and if events occur which materially affect the value of those
foreign securities, they will be valued at fair market value as determined by
the management and approved in good faith by the Board of Directors.
The Board of Directors may establish procedures under which the Company
may suspend the determination of net asset value for the whole or any part of
any period during which (1) the NYSE is closed other than for customary weekend
and holiday closings, (2) trading on the NYSE is restricted, (3) an emergency
exists as a result of which disposal of securities owned by a Fund is not
reasonably practicable or it is not reasonably practicable for a Fund fairly to
determine the value of its net assets, or (4) for such other period as the SEC
may by order permit for the protection of the holders of a Fund's Shares.
OWNERSHIP AND AUTHORITY DISPUTES. In the event of disputes involving
multiple claims of ownership or authority to control a Shareholder's account,
each Fund has the right (but has no obligation) to: (1) freeze the account and
require the written agreement of all persons deemed by the Fund to have a
potential property interest in the account, prior to executing instructions
regarding the account; or (2) interplead disputed funds or accounts with a court
of competent jurisdiction. Moreover, the Fund may surrender ownership of all or
a portion of an account to the Internal Revenue Service ("IRS") in response to a
Notice of Levy.
REDEMPTIONS IN KIND. Redemption proceeds are normally paid in cash;
however, a Fund may pay the redemption price in whole or in 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. In such circumstances, the
securities distributed would be valued at the price used to compute a Fund's net
asset value. 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.
TAX STATUS
Each Fund intends normally to pay a dividend at least once annually
representing substantially all of its net investment income and to distribute at
least annually any net realized capital gains. By so doing and meeting certain
diversification of assets and other requirements of the Internal Revenue Code of
1986, as amended (the "Code"), each Fund intends to qualify as a regulated
investment company under the Code. The status of a Fund as a regulated
investment company does not involve government supervision of management or of
its investment practices or policies. As a regulated investment company, a Fund
generally will be relieved of liability for United States Federal income tax on
that portion of its net investment income and net realized capital gains which
it distributes to its Shareholders. Amounts not distributed on a timely basis in
accordance with a calendar year distribution requirement also are subject to a
nondeductible 4% excise tax. To prevent application of the excise tax, the Funds
intend to make distributions in accordance with the calendar year distribution
requirement.
Dividends of net investment income and of short-term capital gains (the
excess of net short-term capital gains over net long-term capital losses) are
taxable to Shareholders as ordinary income. Distributions from the Funds are not
expected to qualify for the corporate dividends-received deduction.
Distributions of net long-term capital gains (the excess of net long-term
capital gains over net short-term capital losses) designated by a Fund as
capital gain dividends are taxable to Shareholders as long-term capital gains,
regardless of the length of time the Fund's Shares have been held by a
Shareholder, and are not eligible for the dividends-received deduction.
Generally, dividends and distributions are taxable to Shareholders, whether or
not reinvested in Shares of a Fund. Any distributions that are not from a Fund's
investment company taxable income or net capital gain may be characterized as a
return of capital to Shareholders or, in some cases, as capital gain.
Shareholders will be notified annually as to the Federal tax status of dividends
and distributions they receive and any tax withheld thereon.
Income received by a Fund from sources within a foreign country may be
subject to withholding taxes and other taxes imposed by that country. Tax
conventions between certain countries and the U.S. may reduce or eliminate such
taxes.
If, at the close of any fiscal year, more than 50% of the value of a
Fund's total assets is invested in securities of foreign corporations (as to
which no assurance can be given), the Fund generally may elect pursuant to
Section 853 of the Code to pass through to its Shareholders the foreign income
and similar taxes paid by the Fund in order to enable such Shareholders to take
a credit (or deduction) for foreign income taxes paid by the Fund. In that case,
a Shareholder must include in his gross income on his Federal income tax return
both dividends received by him from the Fund and the amount which the Fund
advises him is his pro rata portion of foreign income taxes paid with respect
to, or withheld from, dividends, interest, or other income of the Fund from its
foreign investments. The Shareholder may then subtract from his Federal income
tax the amount of such taxes withheld, or else treat such foreign taxes as an
itemized deduction from his gross income; however, the above-described tax
credit and deduction are subject to certain limitations. Foreign taxes may not
be deducted in computing alternative taxable income and may at most offset (as a
credit) 90% of the alternative minimum tax. The foregoing is only a general
description of the foreign tax credit. Because application of the credit depends
on the particular circumstances of each Shareholder, Shareholders are advised to
contact their own tax advisers.
The Funds may invest in shares of foreign corporations which may be
classified under the Code as passive foreign investment companies ("PFICs"). In
general, a foreign corporation is classified as a PFIC for a taxable year if at
least one-half of its assets constitute investment-type assets or 75% or more of
its gross income is investment-type income. If a Fund receives a so-called
"excess distribution" with respect to PFIC stock, the Fund itself may be subject
to a tax on a portion of the excess distribution, whether or not the
corresponding income is distributed by the Fund to Shareholders. In general,
under the PFIC rules, an excess distribution is treated as having been realized
ratably over the period during which a Fund held the PFIC shares. A Fund itself
will be subject to tax on the portion, if any, of an excess distribution that is
so allocated to prior Fund taxable years and an interest factor will be added to
the tax, as if the tax had been payable in such prior taxable years. Certain
distributions from a PFIC as well as gain from the sale of PFIC shares are
treated as excess distributions. Excess distributions are characterized as
ordinary income even though, absent application of the PFIC rules, certain
excess distributions might have been classified as capital gain.
The Funds may be eligible to elect alternative tax treatment with
respect to PFIC shares. Under an election that currently is available in some
circumstances, a Fund generally would be required to include in its gross income
its share of the earnings of a PFIC on a current basis, regardless of whether
distributions are received from the PFIC in a given year. If this election were
made, the special rules, discussed above, relating to the taxation of excess
distributions, would not apply. In addition, another election may be available
that would involve marking to market each Fund's PFIC shares at the end of each
taxable year (and on certain other dates prescribed in the Code), with the
result that unrealized gains are treated as though they were realized. If this
election were made, tax at the fund level under the PFIC rules would generally
be eliminated, but the Funds could, in limited circumstances, incur
nondeductible interest charges. Each Fund's intention to qualify annually as a
regulated investment company may limit its elections with respect to PFIC
shares.
Because the application of the PFIC rules may affect, among other
things, the character of gains, the amount of gain or loss and the timing of the
recognition of income with respect to PFIC stock, as well as subject a Fund
itself to tax on certain income from PFIC stock, the amount that must be
distributed to Shareholders, and which will be taxed to Shareholders as ordinary
income or long-term capital gain, may be increased or decreased substantially as
compared to a fund that did not invest in PFIC stock.
Under the Code, gains or losses attributable to fluctuations in foreign
currency exchange rates which occur between the time a Fund accrues income or
other receivables or accrues expenses or other liabilities denominated in a
foreign currency and the time the Fund actually collects such receivables or
pays such liabilities generally are treated as ordinary income or ordinary loss.
Similarly, on disposition of debt securities denominated in a foreign currency
and on disposition of certain financial contracts and options, gains or losses
attributable to fluctuations in the value of foreign currency between the date
of acquisition of the security or contract and the date of disposition also are
treated as ordinary gain or loss. These gains and losses, referred to under the
Code as "section 988" gains and losses, may increase or decrease the amount of a
Fund's net investment income to be distributed to its Shareholders as ordinary
income. For example, fluctuations in exchange rates may increase the amount of
income that a Fund must distribute in order to qualify for treatment as a
regulated investment company and to prevent application of an excise tax on
undistributed income. Alternatively, fluctuations in exchange rates may decrease
or eliminate income available for distribution. If section 988 losses exceed
other net investment income during a taxable year, a Fund generally would not be
able to make ordinary dividend distributions, or distributions made before the
losses were realized would be recharacterized as return of capital to
Shareholders for Federal income tax purposes, rather than as an ordinary
dividend, reducing each Shareholder's basis in his Fund Shares, or as a capital
gain.
Certain options, futures contracts and forward contracts in which the
Funds may invest are "section 1256 contracts." Gains or losses on section 1256
contracts generally are considered 60% long-term and 40% short-term capital
gains or losses ("60/40"); however, foreign currency gains or losses (as
discussed above) arising from certain section 1256 contracts may be treated as
ordinary income or loss. Also, section 1256 contracts held by a Fund at the end
of each taxable year (and, in some cases, for purposes of the 4% excise tax, on
October 31 of each year) are "marked-to-market" with the result that unrealized
gains or losses are treated as though they were realized.
The hedging transactions undertaken by the Funds may result in
"straddles" for Federal income tax purposes. The straddle rules may affect the
character of gains (or losses) realized by a Fund. In addition, losses realized
by a Fund on positions that are part of a straddle may be deferred under the
straddle rules, rather than being taken into account in calculating the taxable
income for the taxable year in which such losses are realized. Because only a
few regulations implementing the straddle rules have been promulgated, the tax
consequences to the Funds of hedging transactions are not entirely clear. The
hedging transactions may increase the amount of short-term capital gain realized
by the Funds which is taxed as ordinary income when distributed to Shareholders.
Each Fund may make one or more of the elections available under the
Code which are applicable to straddles. If the Fund makes any of the elections,
the amount, character and timing of the recognition of gains or losses from the
affected straddle positions will be determined under rules that vary according
to the elections(s) made. The rules applicable under certain of the elections
may operate to accelerate the recognition of gains or losses from the affected
straddle positions.
Because application of the straddle rules may affect the character of
gains or losses, defer losses and/or accelerate the recognition of gains or
losses from the affected straddle positions, the amount which must be
distributed to Shareholders, and which will be taxed to Shareholders as ordinary
income or long-term capital gain, may be increased or decreased substantially as
compared to a fund that did not engage in such hedging transactions.
Rules governing the tax aspects of swap agreements are in a developing
stage and are not entirely clear in certain respects. Accordingly, while the
Global Fixed Income Series intends to account for such transactions in a manner
deemed by it to be appropriate, the Internal Revenue Service might not
necessarily accept such treatment. If it did not, the status of the Global Fixed
Income Series as a regulated investment company might be affected. The Global
Fixed Income Series intends to monitor developments in this area. Certain
requirements that must be met under the Code in order for the Global Fixed
Income Series to qualify as a regulated investment company may limit the extent
to which it will be able to engage in swap agreements.
Certain requirements that must be met under the Code in order for each
Fund to qualify as a regulated investment company may limit the extent to which
a Fund will be able to engage in transactions in options, futures, forward
contracts and swap agreements.
Some of the debt securities that may be acquired by the Funds may be
subject to the special rules for obligations issued or acquired at a discount.
Generally, under these rules, the amount of the discount is treated as ordinary
income and, depending upon the circumstances, the discount is included in income
(i) over the term of the debt security, even though payment of the discount is
not received until a later time, usually when the debt security matures, or (ii)
upon the disposition of, and any partial payment of principal on, the debt
security.
A Fund generally will be required to distribute dividends to
Shareholders representing discount on debt securities that is currently
includable in income, even though cash representing such income may not have
been received by the Fund. Cash to pay such dividends may be obtained from sales
proceeds of securities held by the Fund or by borrowing.
Upon the sale or exchange of his Shares, a Shareholder generally will
realize a taxable gain or loss depending upon his basis in the Shares. Such gain
or loss will be treated as capital gain or loss if the Shares are capital assets
in the Shareholder's hands, and will be long-term if the Shareholder's holding
period for the Shares is more than one year and generally otherwise will be
short-term. Any loss realized on a sale or exchange of a Fund's Shares will be
disallowed to the extent that the Shares disposed of are replaced (including
replacement through the reinvesting of dividends and capital gain distributions
in the Fund) within a period of 61 days beginning 30 days before and ending 30
days after the disposition of the Shares. In such a case, the basis of the
Shares acquired will be adjusted to reflect the disallowed loss. Any loss
realized by a Shareholder on the sale of Fund Shares held by the Shareholder for
six months or less will be treated for Federal income tax purposes as a
long-term capital loss to the extent of any distributions of long-term capital
gains (designated by the Fund as capital gain dividends) received by the
Shareholder with respect to such Shares.
Each Fund generally will be required to withhold Federal income tax at
a rate of 31% ("backup withholding") from dividends paid, capital gain
distributions, and redemption proceeds to Shareholders if (1) the Shareholder
fails to furnish the Fund with the Shareholder's correct taxpayer identification
number or social security number and to make such certifications as the Fund may
require, (2) the IRS notifies the Shareholder or the Fund that the Shareholder
has failed to report properly certain interest and dividend income to the IRS
and to respond to notices to that effect, or (3) when required to do so, the
Shareholder fails to certify that he is not subject to backup withholding. Any
amounts withheld may be credited against the Shareholder's Federal income tax
liability.
Ordinary dividends and taxable capital gain distributions declared in
October, November or December with a record date in such month and paid during
the following January will be treated as having been paid by a Fund and received
by Shareholders on December 31 of the calendar year in which declared, rather
than the calendar year in which the dividends are actually received.
Distributions from the Funds and dispositions of Fund Shares also may
be subject to state and local taxes. Non-U.S. Shareholders may be subject to
U.S. tax rules that differ significantly from those summarized above.
Shareholders are advised to consult their own tax advisers for details with
respect to the particular tax consequences to them of an investment in the
Funds.
PRINCIPAL UNDERWRITER
Franklin Templeton Distributors, Inc. ("FTD" or the "Principal
Underwriter"), 700 Central Avenue, P.O. Box 33030, St. Petersburg, Florida
33733-8030, toll free telephone (800) 237-0738, is the Principal Underwriter
of the Funds' Shares. FTD is an indirect wholly owned subsidiary of Franklin.
The Distribution Agreement provides that the Principal Underwriter will
use its best efforts to maintain a broad and continuous distribution of the
Funds' Shares among bona fide investors and may sign selling contracts with
responsible dealers, as well as sell to individual investors. The Shares are
sold only at net asset value next determined after receipt of the purchase order
by FTD.
The Distribution Agreement provides that the Funds shall pay the costs
and expenses incident to registering and qualifying their Shares for sale under
the Securities Act of 1933 and under the applicable Blue Sky laws of the
jurisdictions in which the Principal Underwriter desires to distribute such
Shares, and for preparing, printing and distributing prospectuses and reports to
Shareholders. The Principal Underwriter pays the cost of printing additional
copies of prospectuses and reports to Shareholders used for selling purposes.
(The Funds pay costs of preparation, set-up and initial supply of the prospectus
for existing Shareholders.)
The Distribution Agreement is subject to renewal from year to year in
accordance with the provisions of the 1940 Act and terminates automatically in
the event of its assignment. The Distribution Agreement may be terminated
without penalty by either party upon 60 days' written notice to the other,
provided termination by the Company on behalf of a Fund shall be approved by the
Board of Directors or a majority (as defined in the 1940 Act) of the
Shareholders of that Fund. The Principal Underwriter is relieved of liability
for any act or omission in the course of its performance of the Distribution
Agreement, in the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations.
FTD is the principal underwriter for the other Templeton Funds.
DESCRIPTION OF SHARES
The Shares have non-cumulative voting rights so that the holders of a
plurality of the Shares voting for the election of Directors at a meeting at
which 50% of the outstanding Shares are present can elect all the Directors and
in such event, the holders of the remaining Shares voting for the election of
Directors will not be able to elect any person or persons to the Board of
Directors.
The Company's Bylaws provide that the President or Secretary of the
Company will call a special meeting of Shareholders at the request in writing by
Shareholders owning 10% of the capital stock of the Company issued and
outstanding at the time of the call. In addition, the Company is required to
assist Shareholder communication in connection with the calling of Shareholder
meetings to consider removal of a Director.
PERFORMANCE INFORMATION
Each Fund may, from time to time, include its total return in
advertisements or reports to Shareholders or prospective investors. Quotations
of average annual total return for a Fund will be expressed in terms of the
average annual compounded rate of return for periods in excess of one year or
the total return for periods less than one year of a hypothetical investment in
the Fund over periods of one, five or ten years (up to the life of the Fund)
calculated pursuant to the following formula: P (1 + T)n = ERV (where P = a
hypothetical initial payment of $1,000, T = the average annual total return for
periods of one year or more or the total return for periods of less than one
year, n = the number of years, and ERV = the ending redeemable value of a
hypothetical $1,000 payment made at the beginning of the period). All total
return figures reflect the deduction of a proportional share of Fund expenses on
an annual basis, and assume that all dividends and distributions are reinvested
when paid. The average annual total return of Foreign Equity Series for the one
and five threeyear periods ended December 31, 1995 and for the period from
commencement of operations on October 18, 1990 to December 31, 1995 was 13.00
.24%, 12.70 9.85% and 11.56, 11.23% respectively. The average annual total
return of Growth Series, for the one-year period ending December 31, 1995 and
for the period from commencement of operations on May 3, 1993 to December 31,
1995 was 17.59 -1.32% and 13.26 10.73%, respectively. The average annual total
return of the Emerging Markets Series for the one-year period ending December
31, 1995 and for the period from commencement of operations on May 3, 1993 to
December 31, 1995 was -1.23 -11.39% and 5.86 10.35%, respectively. The average
annual total return for the Global Fixed Income Series for the one-year period
ending December 31, 1995 and for the period from commencement of operations on
May 3, 1993 to December 31, 1995 was 4.67 -2.97% and 1.09 -1.02%, respectively.
The average annual total return of the Foreign Equity (South Africa Free) Series
for the one year period ending December 31, 1994 and for the period from
commencement of operations on May 3, 1993 to December 31, 1994 was -1.94% and
15.12%, respectively.
Performance information for the Funds may be compared, in reports and
promotional literature, to: (i) the Standard & Poor's 500 Stock Index, Dow Jones
Industrial Average, or other unmanaged indices, so that investors may compare a
Fund's results with those of a group of unmanaged securities widely regarded by
investors as representative of the securities market in general; (ii) other
groups of mutual funds tracked by Lipper Analytical Services, a widely used
independent research firm which ranks mutual funds by overall performance,
investment objectives and assets, or tracked by other services, companies,
publications, or persons who rank mutual funds on overall performance or other
criteria; and (iii) the Consumer Price Index (measure for inflation) to assess
the real rate of return from an investment in the Fund. Unmanaged indices may
assume the reinvestment of dividends but generally do not reflect deductions for
administrative and management costs and expenses.
Performance information for a Fund reflects only the performance of a
hypothetical investment in the Fund during the particular time period on which
the calculations are based. Performance information for a Fund should be
considered in light of the Fund's Investment Objective and Policies,
characteristics and quality of the portfolio and the market conditions during
the given time period, and should not be considered as a representation of what
may be achieved in the future.
From time to time, the Company and the Investment Managers may also
refer to the following information:
(1) The Investment Managers' and their affiliates' market share of
international equities managed in mutual funds prepared or
published by Strategic Insight or a similar statistical
organization.
(2) The performance of U.S. equity and debt markets relative to
foreign markets prepared or published by Morgan Stanley Capital International
or a similar financial organization.
(3) The capitalization of U.S. and foreign stock markets as
prepared or published by the International Finance Corporation, Morgan Stanley
Capital International or a similar financial organization.
(4) The geographic and industry distribution of a Fund's
portfolio and a Fund's top ten holdings.
(5) The gross national product and populations, including age
characteristics, literacy rates, foreign investment
improvements due to a liberalization of securities laws and a
reduction of foreign exchange controls, and improving
communication technology, of various countries as published by
various statistical organizations.
(6) To assist investors in understanding the different returns and
risk characteristics of various investments, a Fund may show
historical returns of various investments and published
indices (E.G., Ibbotson Associates, Inc. Charts and Morgan
Stanley EAFE - Index).
(7) The major industries located in various jurisdictions as
published by the Morgan Stanley Index.
(8) Rankings by DALBAR Surveys, Inc. with respect to mutual fund
shareholder services.
(9) Allegorical stories illustrating the importance of persistent
long-term investing.
(10) The Fund's portfolio turnover rate and its ranking relative
to industry standards as published by Lipper Analytical Services, Inc. or
Morningstar, Inc.
(11) A description of the Templeton organization's investment
management philosophy and approach, including its worldwide
search for undervalued or "bargain" securities and its
diversification by industry, nation and type of stocks or
other securities.
(12) The number of Shareholders in a Fund or the aggregate number
of shareholders in the Franklin Templeton Group of Funds or
the dollar amount of Fund and private account assets under
management.
(13) Comparison of the characteristics of various emerging markets,
including population, financial and economic conditions.
(142) Quotations from the Templeton organization's founder,
Sir John Templeton,* advocating the virtues of
diversification and long-term investing, including
the following:
o "Never follow the crowd. Superior performance is
possible only if you invest differently from the
crowd."
o "Diversify by company, by industry and by country."
o "Always maintain a long-term perspective."
o "Invest for maximum total real return."
o "Invest - don't trade or speculate."
o "Remain flexible and open-minded about types of
investment."
o "Buy low."
o "When buying stocks, search for bargains among
quality stocks."
o "Buy value, not market trends or the economic
outlook."
o "Diversify. In stocks and bonds, as in much else,
there is safety in numbers."
o "Do your homework or hire wise experts to help you."
o "Aggressively monitor your investments."
o "Don't panic."
o "Learn from your mistakes."
o "Outperforming the market is a difficult task."
o "An investor who has all the answers doesn't even
understand all the questions."
o "There's no free lunch."
o "And now the last principle: Do not be fearful or
negative too often."
In addition, the Company and the Investment Managers may also refer to
the number of Shareholders in a Fund or the aggregate number of shareholders of
the Franklin Templeton Funds or the dollar amount of fund and private account
assets under management in advertising materials.
FINANCIAL STATEMENTS
The financial statements contained in each Fund's Annual Report to
Shareholders dated December 31, 1995 are incorporated herein by reference.
ZTIFI SAI 05/96
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS
Part A:
Financial Highlights
Part B:
Incorporated by reference to 1995 Annual Reports to
Shareholders of Growth Series, Foreign Equity Series,
Emerging Markets Series, and Global Fixed Income
Series:
Independent Auditor's Report
Statement of Assets and Liabilities as of December
31, 1995
Statement of Operations for fiscal period ended
December 31, 1995
Statement of Changes in Net Assets
Portfolio of Investments as of December 31, 1995
Notes to Financial Statements
(b) EXHIBITS
(1) (a)Articles of Incorporation (b)Articles of
Amendment dated January 11, 1993 (c)Articles
Supplementary dated January 11, 1993
(d)Articles Supplementary dated April 28,
1993 (e)Articles Supplementary dated July 1,
1993 (f)Articles Supplementary dated
September 30, 1993 (g)Articles Supplementary
dated March 1, 1994* (h)Articles
Supplementary dated January 5, 1995* (i)
Articles Supplementary dated January 17,
1996 (j) Articles Supplementary dated April
15, 1996
(2) By-Laws
(3) Not Applicable
(4) Specimen Security***
(5) (a) Amended and Restated Investment
Management Agreement for Foreign Equity
Series
(b)Amended and Restated Investment
Management Agreement for Growth Series
(c)Amended and Restated Investment Management
Agreement for Emerging Markets Series
(d)Amended and Restated Investment
Management Agreement for Global Fixed
Income Series
(6) Distribution Agreement
(7) Not Applicable
(8) Custody Agreement
(9) (a) Form of Transfer Agent Agreement
(b) Business Management Agreement
(10) Opinion and Consent of Counsel--filed with
Rule 24f-2 Notice on February 28, 1996
(11) Opinion and consent of independent public
accountants
(12) Not Applicable
(13) Letter concerning initial capital
(14) Not Applicable
(15) Not Applicable
(16) Schedule showing computation of performance
quotations provided in response to
Item 22*
(27) Financial Data Schedule
- ---------------------
* Filed with Post-Effective Amendment No. 8 to the Registration
Statement on May 1, 1995.
** Filed with Pre-Effective Amendment No. 2 to the Registration
Statement on October 2, 1990.
*** Filed with Pre-Effective Amendment No. 3 to the Registration
Statement on October 17, 1990.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable.
ITEM 26. NUMBER OF RECORD HOLDERS
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Growth Series
Class of Common Shares 26 as of March 29, 1996
Foreign Equity Series
Class of Common Shares 833 as of March 29, 1996
Emerging Markets Series
Class of Common Shares 390 as of March 29, 1996
Global Fixed Income Series
Class of Common Shares 1 as of March 29, 1996
ITEM 27. INDEMNIFICATION.
Reference is made to Articles Eight and Eleven of the
Registrant's Articles of Incorporation.
Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the Registrant
by the Registrant pursuant to the Articles of Incorporation or
otherwise, the Registrant is aware that in the opinion of the
Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act and, therefore,
is unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by
directors, officers or controlling persons of the Registrant
in connection with the successful defense of any act, suit or
proceeding) is asserted by such directors, officers or
controlling persons in connection with the shares being
registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issues.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER AND ITS OFFICERS
AND DIRECTORS
The business and other connections of Registrant's Investment
Managers are described in Part B of this Registration
Statement.
For information relating to the Investment Managers' officers
and directors, reference is made to Forms ADV filed under the
Investment Advisers Act of 1940 by Templeton Investment
Counsel, Inc. and Templeton Asset Management Ltd., which are
incorporated herein by reference.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Franklin Templeton Distributors, Inc. also acts as
principal underwriter of shares of:
Franklin Templeton Japan Fund
Templeton Growth Fund, Inc.
Templeton Funds, Inc.
Templeton Smaller Companies Growth Fund, Inc.
Templeton Income Trust
Templeton Real Estate Securities Fund
Templeton Capital Accumulator Fund, Inc.
Templeton Developing Markets Trust
Templeton American Trust, Inc.
Templeton Global Opportunities Trust
Templeton Variable Products Series Fund
Templeton Global Investment Trust
AGE High Income Fund, Inc. Franklin Balance Sheet
Investment Fund Franklin California Tax Free Income
Fund, Inc. Franklin California Tax Free Trust
Franklin Custodian Funds, Inc. Franklin Equity Fund
Franklin Federal Money Fund Franklin Federal Tax-Free
Income Fund Franklin Gold Fund Franklin Investors
Securities Trust Franklin Managed Trust Franklin
Money Fund Franklin Municipal Securities Trust
Franklin New York Tax-Free Income Fund Franklin New
York Tax-Free Trust Franklin Pennsylvania Investors
Fund Franklin Premier Return Fund Franklin Real
Estate Securities Fund Franklin Strategic Series
Franklin Tax-Advantaged High Yield Securities Fund
Franklin Tax-Advantaged International Bond Fund
Franklin Tax-Advantaged U.S. Government Securities
Fund Franklin Tax Exempt Money Fund Franklin Tax
Exempt Money Fund Franklin Tax-Free Trust Franklin
Templeton Global Trust Franklin Templeton
International Trust Franklin Templeton Money Fund
Trust Franklin Value Investors Trust Institutional
Fiduciary Trust
(b) The directors and officers of FTD, located at 777
Mariners Island Blvd., San Mateo, CA 94404, are as
follows:
<TABLE>
<CAPTION>
<S> <C> <C>
POSITION WITH POSITION WITH
NAME UNDERWRITER THE REGISTRANT
Charles B. Johnson Chairman of the Board Trustee, Vice President and
Chairman
Gregory E. Johnson President None
Rupert H. Johnson, Jr. Executive Vice President and Vice President
Director
Harmon E. Burns Executive Vice President and Vice President
Director
Edward V. McVey Senior Vice President None
Kenneth V. Domingues Senior Vice President None
William J. Lippman Senior Vice President None
Deborah R. Gatzek Senior Vice President and Assistant Vice President
Secretary
Richard C. Stoker Senior Vice President None
Charles E. Johnson Senior Vice President Vice President
500 E. Broward Blvd.
Ft. Lauderdale, Fl
Loretta Fry Vice President None
James K. Blinn Vice President None
Richard O. Conboy Vice President None
Robert N. Geppner Vice President None
James A. Escobedo Vice President None
Mike Hackett Vice President None
Peter Jones Vice President None
700 Central Avenue
St. Petersburg, Fl
Philip J. Kearns Vice President None
Ken Leder Vice President None
Jack Lemein Vice President None
John R. McGee Vice President None
Thomas M. Mistele Vice President Secretary
700 Central Avenue
St. Petersburg, Fl
Harry G. Mumford Vice President None
Vivian J. Palmieri Vice President None
Kent P. Strazza Vice President None
Leslie M. Kratter Secretary None
John R. Kay Assistant Vice President Vice President
500 E. Broward Blvd.
Ft. Lauderdale
Francie Arnone Assistant Vice President None
Heidi Christensen Assistant Vice President None
Alison Hawksley Assistant Vice President None
Annette Mulcaire Assistant Vice President None
Kenneth A. Lewis Treasurer None
Karen DeBellis Assistant Treasurer None
700 Central Avenue
St. Petersburg, Fl
Philip A. Scatena Assistant Treasurer None
</TABLE>
- 62 -
(c) Not Applicable (Information on unaffiliated
underwriters).
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The accounts, books, and other documents required to be
maintained by Registrant pursuant to Section 31(a) of the
Investment Company Act of 1940 and rules promulgated
thereunder are in the possession of Templeton Global
Investors, Inc., 500 East Broward Blvd., Fort Lauderdale,
Florida 33394.
ITEM 31. MANAGEMENT SERVICES
Not Applicable.
ITEM 32. UNDERTAKINGS.
(a) Not Applicable.
(b) Not Applicable.
(c) Registrant undertakes to furnish to each person to
whom its Prospectus is provided a copy of its latest
Annual Report, upon request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant certifies that it has met the
requirement for effectiveness of the Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and certifies that has duly caused this
amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of St. Petersburg, Florida
on the 29th day of April, 1996.
TEMPLETON INSTITUTIONAL FUNDS, INC.
By:
Donald F. Reed, President*
/s/THOMAS M. MISTELE
*By: Thomas M. Mistele,
attorney-in-fact**
Pursuant to the requirements of the Securities Act of 1933,
this amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the date indicated:
SIGNATURE TITLE DATE
Charles B. Johnson* Director April 29, 1996
Constantine Dean Director April 29, 1996
Tseretopoulos*
Frank J. Crothers* Director April 29, 1996
Harris J. Ashton* Director April 29, 1996
S. Joseph Fortunato* Director April 29, 1996
Fred R. Millsaps* Director April 29, 1996
Gordon S. Macklin* Director April 29, 1996
Andrew H. Hines, Jr.* Director April 29, 1996
John Wm. Galbraith* Director April 29, 1996
Nicholas F. Brady* Director April 29, 1996
Betty P. Krahmer* Director April 29, 1996
Donald F. Reed* President April 29, 1996
(Chief Executive
Officer)
James R. Baio* Treasurer (Chief April 29, 1996
Financial and
Accounting Officer)
*By: /s/THOMAS M. MISTELE
Thomas M. Mistele, as attorney-in-fact**
** Powers of Attorney are contained in Post-Effective Amendment No. 4 to
the Registration Statement filed on March 25, 1993, Post-Effective
Amendment No. 5 to the Registration Statement filed on November 4,
1993, Post-Effective Amendment No. 7 to the Registration Statement
filed on March 2, 1994, and herewith.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
FILED
WITH
POST-EFFECTIVE AMENDMENT NO. 9 TO
REGISTRATION STATEMENT
ON
FORM N-1A
TEMPLETON INSTITUTIONAL FUNDS, INC.
EXHIBIT LIST
EXHIBIT NUMBER NAME OF EXHIBIT
(1) (a) Articles of Incorporation
(b) Articles of Amendment dated
January 11, 1993
(c) Articles Supplement dated
January 11, 1993
(d) Articles Supplementary dated
April 28, 1993
(e) Articles Supplementary dated
July 1, 1993
(f) Articles Supplementary dated
September 30, 1993
(i) Articles Supplementary dated
January 17, 1996
(j) Articles Supplementary dated
April 15, 1996
(2) By-Laws
(5) (a) Amended and Restated
Investment Management Agreement
for Foreign Equity Series
(b) Amended and Restated
Investment Management Agreement
for Growth Series
(c) Amended and
Restated Investment Management
Agreement for Emerging Markets
Series
(d) Amended and
Restated Investment Management
Agreement for Global Fixed
Income Series
(6) Distribution Agreement
(8) Custody Agreement
(9) (a) Form of Transfer Agent Agreement
(b) Form of Business Management
Agreement
(11) Consent of Independent Public
Accountants
(27) Financial Data Schedule
* Sir John Templeton sold the Templeton organization to Franklin
Resources, Inc. in October, 1992 and resigned from the Fund's Board on
April 16, 1995. He is no longer involved with the investment
management process.
ARTICLES OF INCORPORATION
OF
TEMPLETON INSTITUTIONAL TRUST, INC.
FIRST: The undersigned, KEITH W. VANDIVORT, whose post office address
is 1500 K Street, N.W., Washington, D.C. 20005, being of full legal age, under
and by virtue of the General Laws of the State of Maryland authorizing the
formation of corporations, is acting as sole incorporator with the intention of
forming a corporation.
SECOND: The name of the Corporation is TEMPLETON INSTITUTIONAL TRUST,
INC.
THIRD: The purposes for which the Corporation is formed are as
follows:
(1) To hold, invest and reinvest its funds, and in connection therewith
to hold part or all of its funds in cash, and to purchase or otherwise acquire,
hold for investment or otherwise write, sell, assign, negotiate, transfer,
exchange or otherwise dispose of or turn to account or realize upon, securities
(which term "securities" shall for the purposes of these Articles of
Incorporation, without limitation of the generality thereof, be deemed to
include any stocks, shares, bonds, debentures, notes, certificates of deposit
issued by banks, mortgages or other obligations or evidences of indebtedness,
and any options, certificates, receipts, warrants or other instruments
representing rights to receive, purchase or subscribe for the same, or
evidencing or representing any other rights or interests therein or in any
property or assets created or issued by any issuer (which term "issuer" shall,
for the purposes of these Articles of Incorporation, without limiting the
generality thereof, be deemed to include any persons, firms, associations,
partnerships, corporations, syndicates, combinations, organizations, governments
or subdivisions, agencies or instrumentalities of any government); and to
exercise, as owner or holder of any securities, all rights, powers and
privileges in respect thereof; and to do any and all acts and things for the
preservation, protection, improvement and enhancement in value of any and all
such securities.
(2) To acquire all or any part of the goodwill, rights, property and
business of any person, firm, association or corporation heretofore or hereafter
engaged in any business similar to any business which the Corporation has the
power to conduct, and to hold, utilize, enjoy and in any manner dispose of the
whole or any part of the rights, property and business so acquired, and to
assume in connection therewith any liabilities of any such person, firm,
association or corporation.
(3) To apply for, obtain, purchase or otherwise acquire, any patents,
copyrights, licenses, trademarks, trade names and the like, which may seem
capable of being used for any of the purposes of the Corporation; and to use,
exercise, develop, grant licenses in respect of, sell and otherwise turn to
account, the same.
(4) To issue and sell shares of its own capital stock in such amounts
and on such terms and conditions, for such purposes and for such amount or kind
of consideration (including without limitation thereto, securities) now or
hereafter permitted by the laws of Maryland and these Articles of Incorporation,
as its Board of Directors may determine.
(5) To purchase or otherwise acquire, hold, dispose of, resell,
transfer, reissue or cancel (all without the vote or consent of the stockholders
of the Corporation) shares of its capital stock in any manner and to the extent
now or hereafter permitted by the laws of said State and by these Articles of
Incorporation.
(6) To conduct its business in all its branches at one or more offices
in Maryland and elsewhere in any part of the world, without restriction or limit
as to extent.
(7) The Corporation shall be authorized to exercise and enjoy all of
the powers, rights and privileges granted to, or conferred upon, corporations by
the General Laws of the State of Maryland now or hereafter in force, and the
enumeration of the foregoing powers shall not be deemed to exclude any powers,
rights or privileges so granted or conferred.
(8) To do any and all such further acts and things and to exercise any
and all such further powers as may be necessary, incidental, relative,
conducive, appropriate or desirable for the accomplishment, carrying out or
attainment of all or any of the foregoing purposes or objects.
The foregoing objects and purposes shall, except as otherwise expressly
provided, be in no way limited or restricted by reference to, or inference from,
the terms of any other clause of this or any other Article of these Articles of
Incorporation, and shall each be regarded as independent and construed as powers
as well as objects and purposes, and the enumeration of specific purposes,
objects and powers shall not be construed to limit or restrict in any manner the
meaning of general terms or the general powers of the Corporation now or
hereafter conferred by the laws of the State of Maryland, nor shall the
expression of one thing be deemed to exclude another, though it be of like
nature, not expressed; provided, however, that the Corporation shall not have
power to carry on within the State of Maryland any business whatsoever the
carrying on of which would preclude it from being classified as an ordinary
business corporation under the laws of said State; nor shall it carry on any
business, or exercise any powers, in any other state, territory, district or
country except to the extent that the same may lawfully be carried on or
exercised under the laws thereof.
FOURTH: The post office address of the principal office of the
Corporation in the State of Maryland is c/o The Corporation Trust Incorporated,
32 South Street, Baltimore, Maryland 21202. The name of the resident agent of
the Corporation is The Corporation Trust Incorporated, a corporation of the
State of Maryland, and the post office address of the resident agent is 32 South
Street, Baltimore, Maryland 21202.
FIFTH:
(1) The total number of shares of stock which the Corporation shall
have the authority to issue is ONE HUNDRED MILLION (100,000,000) Common Shares
of the par value of ONE CENT ($0.01) each and of the aggregate par value of ONE
MILLION DOLLARS ($1,000,000), of which 50,000,000 Shares are classified as
Templeton Trust of Foreign Securities Shares.
(2) At all meetings of stockholders, each stockholder of the
Corporation shall be entitled to one vote for each share of stock standing in
his name on the books of the Corporation on the date fixed in accordance with
the Bylaws for determination of stockholders entitled to vote at such meeting,
irrespective of the class thereof; provided, however, that to the extent class
voting is required under the Investment Company Act of 1940, as amended, or
Maryland law as to any matter submitted to a vote of the stockholders at any
such meeting, those requirements shall apply. Any fractional share shall carry
proportionately all the rights of a whole share, including the right to vote and
the right to receive dividends and distributions.
(3) Each holder of the capital stock of the Corporation upon proper
written request (including signature guarantees if required by the Board of
Directors) to the Corporation accompanied, when stock certificates representing
such shares are outstanding, by surrender of the appropriate stock certificate
or certificates in proper form for transfer, or, such other form as the Board of
Directors may provide, shall be entitled to require the Corporation to redeem
all or any part of the Shares of capital stock standing in the name of such
holder on the books of the Corporation, at the net asset value of such shares,
less any redemption fee fixed by the Board of Directors and payable to the
Corporation not exceeding 1% of the net asset value of the shares redeemed. Any
such redemption fee may be applied in such cases as may be determined by the
Board. The method of computing such net asset value, the time as of which such
net asset value shall be computed and the time within which the Corporation
shall make payment thereof, shall be determined as hereinafter provided in
Article SEVENTH of these Articles of Incorporation. Notwithstanding the
foregoing, the Board of Directors of the Corporation may suspend the right of
the holders of the capital stock of the Corporation to require the Corporation
to redeem shares of such capital stock when permitted or required to do so by
the 1940 Act (which term the "1940 Act" shall for the purposes of these Articles
of Incorporation mean the Investment Company Act of 1940 as from time to time
amended and any rule, regulation or order thereunder).
(4) All shares of the capital stock of the Corporation now or hereafter
authorized shall be subject to redemption and redeemable at the option of the
stockholder, in the sense used in the General Laws of the State of Maryland
authorizing the formation of corporations, at the redemption price for any such
shares, determined in the manner set out in these Articles of Incorporation or
in any amendment thereto. In the absence of any specification as to the purposes
for which shares of the capital stock of the Corporation are redeemed or
repurchased by it, all shares so redeemed or repurchased shall be deemed to be
acquired for retirement in the sense contemplated by the laws of the State of
Maryland and the number of the authorized shares of the capital stock of the
Corporation shall not be reduced by the number of any shares redeemed or
repurchased by it.
(5) Notwithstanding any provision of law requiring any action to be
taken or authorized by the affirmative vote of the holders of a majority, or
other designated proportion of the shares, or to be otherwise taken or
authorized by a vote of the stockholders, such action shall be effective and
valid if taken or authorized by the affirmative vote of the holders of a
majority of the total number of shares outstanding and entitled to vote thereon
pursuant to the provisions of these Articles of Incorporation.
(6) No holder of stock of the Corporation shall, as such holder, have
any right to purchase or subscribe for any shares of the capital stock of the
Corporation of any class or any other security of the Corporation which it may
issue or sell (whether out of the number of shares authorized by these Articles
of Incorporation, or out of any shares of the capital stock of the Corporation
acquired by it after the issue thereof, or otherwise) other than such right, if
any, as the Board of Directors, in its discretion, may determine.
(7) All persons who shall acquire stock in the Corporation shall
acquire the same subject to the provisions of these Articles of Incorporation.
(8) The Board of Directors of the Corporation, subject to any
applicable provisions of the 1940 Act is authorized to classify or to
reclassify, from time to time any unissued shares of stock of the Corporation,
whether now or hereafter authorized, by setting, changing or eliminating the
preference, conversion or rights, voting powers, restrictions or limitations as
to dividends and qualifications or terms and conditions of or rights to require
redemption of the stock and pursuant to such classification, or
reclassification, to increase or decrease the number of authorized shares of any
class, but the number of shares of any class shall not be reduced by the Board
of Directors below the number of shares outstanding.
Without limiting the generality of the foregoing, the dividends and
distributions of investment income and capital gains with respect to the stock
of the Corporation, and with respect to each class that hereafter may be
created, shall be in such amount as may be declared from time to time by the
Board of Directors, and such dividends and distributions may vary from class to
class to such extent and for such purposes as the Board of Directors may deem
appropriate, including, but not limited to, the purpose of complying with
requirements of regulatory or legislative authorities.
SIXTH: The number of Directors of the Corporation shall initially be
two and the names of those who shall act as such until the first annual meeting
or until their successors are duly chosen and qualified are as follows:
Thomas M. Mistele
Daniel Calabria
However, the By-laws of the Corporation may fix the number of Directors
at a number greater than that named in these Articles of Incorporation and may
authorize the Board of Directors, by the vote of a majority of the entire Board
of Directors, to increase or decrease the number of Directors fixed by these
Articles of Incorporation or in the By-laws, within the limits specified in the
By-laws, and subject to the provisions of Maryland law, and to fill the
vacancies created by any such increase in the number of Directors. Unless
otherwise provided by the By-laws of the Corporation, the Directors of the
Corporation need not be stockholders therein.
SEVENTH: The following provisions are hereby adopted for the purpose
of defining, limiting and regulating the powers of the Corporation and the
Directors and stockholders.
(1) The By-laws of the Corporation may divide the Directors of the
Corporation into classes and prescribe the tenure of office of the several
classes, but no class shall be elected for a period shorter than that from the
time of the election following the division into classes until the next annual
meeting and thereafter for a period shorter than the interval between annual
meetings or for a period longer than five years, and the term of office of at
least one class shall expire each year. Notwithstanding the foregoing, no such
division into classes shall be made prior to the first annual meeting of
stockholders of the Corporation.
(2) The holders of shares of the capital stock of the Corporation shall
have only such right to inspect the records, documents, accounts and books of
the Corporation as are provided by Maryland law, subject to reasonable
regulations of the Board of Directors, not contrary .to Maryland law, as to
whether and to what extent, and at what times and places, and under what
conditions and regulations, such rights shall be exercised.
(3) Any Director, or any officer elected or appointed by the Board of
Directors or by any committee of said Board or by the stockholders or otherwise,
may be removed at any time, with or without cause, in such lawful manner as may
be provided in the By-laws of the Corporation.
(4) If the By-laws so provide, the Board of Directors of the
Corporation shall have power to hold their meetings, to have an office or
offices and, subject to the provisions of the laws of Maryland, to keep the
books of the Corporation outside of said State at such places as may from time
to time be designated by them.
(5) In addition to the powers and authority hereinbefore or by statute
expressly conferred upon them, the Board of Directors may exercise all such
powers and do all such acts and things as may be exercised or done by the
Corporation, subject, nevertheless, to the express provisions of the laws of
Maryland, of these Articles of Incorporation and of the By-laws of the
Corporation.
(6) Shares of stock in other corporations shall be voted in person or
by proxy by the President or a Vice-President, or such officer or officers of
the Corporation as the Board of Directors shall designate for the purpose, or by
a proxy or proxies thereunto duly authorized by the Board of Directors, except
as otherwise ordered by vote of the holders of a majority of the shares of the
capital stock of the Corporation outstanding and entitled to vote in respect
thereto.
(7) (a) Subject to the provisions of the 1940 Act, any
director, officer or employee individually, or any partnership of which
any director, officer or employee may be a member, or any corporation
or association of which any director, officer or employee may be an
officer, director, trustee, employee or stockholder, may be a party to,
or may be pecuniarily or otherwise interested in, any contract or
transaction of the Corporation, and in the absence of fraud no contract
or other transaction shall be thereby affected or invalidated; provided
that in case a director, or a partnership, corporation or association
of which a director is a member, officer, director, trustee, employee
or stockholder is so interested, such fact shall be disclosed or shall
have been known to the Board of Directors or a majority thereof; and
any Director of the Corporation who is so interested, or who is also a
director, officer, trustee, employee or stockholder of such other
corporation or association or a member of such partnership which is so
interested, may be counted in determining the existence of a quorum at
any meeting of the Board of Directors of the Corporation which shall
authorize any such contract or transaction, and may vote thereat on any
such contract or transaction, with like force and effect as if he were
not such director, officer, trustee, employee or stockholder of such
other corporation or association or not so interested or a member of a
partnership so interested.
(b) Specifically, but without limitation of the foregoing, the
Corporation may enter into a management or supervisory contract and
other contracts with, and may otherwise do business with Templeton,
Galbraith & Hansberger Ltd., a Cayman Islands corporation, or any of
its subsidiary or affiliated companies, notwithstanding that the Board
of Directors of the Corporation may be composed in part of directors,
officers, partners or employees of any of said companies, and officers
of the Corporation may have been or may be or become directors,
officers, partners or employees of any of said companies, and in the
absence of fraud the Corporation and said companies may deal freely
with each other, and neither such management or supervisory contract
nor any other contract or transaction between the Corporation and any
of said companies shall be invalidated or in any way affected thereby,
nor shall any Director or officer of the Corporation be liable to the
Corporation or to any stockholder or creditor thereof or to any other
person for any loss incurred by it or him under or by reason of any
such contract or transaction, provided that nothing herein shall
protect any director or officer of the Corporation against any
liability to the Corporation or to its security holders to which he
would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of his office. (8) The computation of the net asset value of
each share of capital stock referred to in these Articles of
Incorporation shall be determined as required by the 1940 Act and
except as so required, shall be computed in accordance with the
following rules:
(a) The net asset value of each share of capital stock of the
Corporation duly surrendered to the Corporation for redemption pursuant
to the provisions of paragraph (3) of Article FIFTH of these Articles
of Incorporation shall be determined as of the close of business on the
New York Stock Exchange next succeeding the time when such capital
stock is so surrendered.
(b) The net asset value of each share of the capital stock of
the Corporation for the purpose of the issue of such capital stock
shall be determined as of the close of business on the New York Stock
Exchange next succeeding the receipt of an order to purchase such
share.
(c) Unless and until otherwise determined by the Board of
Directors, the net asset value of the shares shall be computed as of
the close of trading on each day the New York Stock Exchange is open
for trading, by dividing the value of the Corporation's securities plus
any cash and other assets (including accrued interest and dividends
receivable) less all liabilities (including accrued expenses) by the
number of shares outstanding, the result being adjusted to the nearest
whole cent. A security listed or traded on a recognized stock exchange
or NASDAQ shall be valued at its last sale price on the principal
exchange on which the security is traded. The value of a foreign
security shall be determined in its national currency as of the close
of trading on the foreign exchange on which it is traded, or as of 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. All other securities
for which over-the-counter market quotations are readily available
shall be valued at the mean between the last current bid and asked
price. Short-term securities having a maturity of 60 days or less shall
be valued at their amortized cost. Securities for which market
quotations are not readily available and other assets shall be valued
at fair value as determined by the management and approved in good
faith by the Board of Directors.
(d) In addition to the foregoing, the Board of Directors is
empowered, in its absolute discretion, to establish other bases or
times, or both, for determining the net asset value of each share of
stock of the Corporation in accordance with the 1940 Act and to
authorize the voluntary purchase by the Corporation, either directly or
through an agent, of shares of capital stock of the Corporation upon
such terms and conditions and for such consideration as the Board of
Directors shall deem advisable in accordance with the 1940 Act.
(e) Except as otherwise permitted by the 1940 Act, payment of
the net asset value of shares of capital stock of the Corporation
properly surrendered to it for redemption (less any redemption fee)
shall be made by the Corporation within seven days after tender of such
stock to the Corporation for such redemption plus any period of time
during which the right of the holders of the shares of capital stock of
the Corporation to redeem such capital stock has been suspended. Any
such payment may be made in portfolio securities of the Corporation
and/or cash, as the Board of Directors shall deem, advisable, and no
shareholder shall have a right other than as determined by the Board of
Directors, to have his shares redeemed in kind.
(f) The Board of Directors is empowered to cause the
redemption of the shares held in any account if the aggregate net asset
value of such shares (taken at cost or value, as determined by the
Board) is less than $500, or such lesser amount as the Board may fix,
upon such notice to the shareholders in question, with such permission
to increase the investment in question and upon such other terms and
conditions as may be fixed by the Board of Directors in accordance with
the 1940 Act.
(g) In the event that any person advances the organizational
expenses of the Corporation, such advances shall become an obligation
of the Corporation, subject to such terms and conditions as may be
fixed by, and on a date fixed by, or determined in accordance with
criteria fixed by the Board of Directors, to be amortized over a period
or periods to be fixed by the Board.
(h) Whenever any action is taken under this paragraph (8) of
this Article SEVENTH of these Articles of Incorporation under any
authorization.to take action which is permitted by the 1940 Act, such
action shall be deemed to have been properly taken if such action is in
accordance with the construction of the 1940 Act then in effect as
expressed in "no action" letters of the staff of the Securities and
Exchange Commission or any release, rule, regulation or order under the
1940 Act or any decision of a court of competent jurisdiction
notwithstanding that any of the foregoing shall later be found to be
invalid or otherwise reversed or modified by any of the foregoing.
(i) Any action which may be taken by the Board of Directors of
the Corporation under this paragraph (8) of this Article SEVENTH of
these Articles of Incorporation may be taken by the description thereof
in the then effective prospectus relating to the Corporation's shares
under the Securities Act of 1933 rather than by formal resolution of
the Board.
(j) Whenever under this paragraph (8) of this Article SEVENTH
of these Articles of Incorporation the Board of Directors of the
Corporation is permitted or required to place a value on assets of the
Corporation, such action may be delegated by the Board and/or
determined in accordance with a formula determined by the Board, to the
extent permitted by the 1940 Act.
EIGHTH:
(1) The Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was a director, officer or other agent of the Corporation
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith as determined by
independent legal counsel and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful.
(2) For purposes of paragraph (1) of this Article EIGHTH, the
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of NOLO CONTENDERE or its equivalent, shall not, of
itself, create a presumption that any person did not act in good faith as
determined by independent legal counsel and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Corporation, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
(3) The Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the Corporation to procure a judgment in its favor
by reason of the fact that he is or was a director, officer or other agent of
the Corporation against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of such
action or suit if he acted in good faith as determined by independent legal
counsel and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation.
(4) No person shall be indemnified under paragraph (3) of this Article
EIGHTH in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable for negligence or misconduct in the performance
of his duty to the Corporation unless and only to the extent that the court of
law in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which said court shall deem proper, provided such director, officer or
other agent is not found to be grossly negligent in the performance of his duty
to the Corporation and/or adjudged to be liable by reason of his willful
misconduct.
(5) Any indemnification under paragraphs (1) or (3) of this Article
EIGHTH (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer or other agent is proper in the circumstances because such
determination is based upon an opinion of independent legal counsel.
(6) Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the Corporation in advance of the final disposition of
such action, suit or proceeding as authorized by the Board of Directors provided
that (i) such advances shall be limited to amounts used or to be used for the
preparation and/or presentation of a defense to the action, suit or proceeding
(including costs connected with preparation of a settlement); (ii) any advances
must be accompanied by a written promise by, or on behalf of, the person in
question to repay that amount of the advance which exceeds the amount which it
is ultimately determined that he is entitled to receive from the Corporation by
reason of indemnification; (iii) such promise shall be secured by a surety bond
or other suitable insurance; and (iv) such surety bond or other insurance shall
be paid for by the person in question.
(7) The indemnification provided hereunder shall not be deemed
exclusive of any other rights to which those who are required to be, or who may
be, indemnified hereunder might be entitled under any other provision hereof,
agreement, vote of shareholders or vote of disinterested directors or otherwise,
both as to action in his official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has ceased to
be a director, officer or other agent, and shall inure to the benefit of the
heirs, executors and administrators of such a person.
(8) The Corporation may purchase and maintain insurance on behalf of
any person who is or was a director, officer or other agent of the Corporation
against any liability asserted against him and incurred by him in any such
capacity arising out of his status as such. However, in no event will the
Corporation purchase insurance to indemnify any such person for any act for
which the Corporation itself is not permitted to indemnify him.
(9) Nothing herein contained shall protect or purport to protect any
director, officer or other agent of the Corporation against any liability to the
Corporation or to its security holders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office.
NINTH: The duration of the Corporation shall be
perpetual.
TENTH: From time to time, any of the provisions of these Articles of
Incorporation may be amended, altered or repealed, upon the vote of the holders
of a majority of the shares of capital stock of the Corporation at the time
outstanding and entitled to vote, and other provisions which might, under the
laws of the State of Maryland at the time in force, be lawfully contained in
these Articles of Incorporation may be added or inserted upon the vote of the
holders of a majority of the shares of capital stock of the Corporation at the
time outstanding and entitled to vote, and all rights at any time conferred upon
the stockholders of the Corporation by these Articles of Incorporation are
granted subject to the provisions of this Article TENTH.
ELEVENTH: No Director or officer shall have any personal liability to
the Corporation or its stockholders for monetary damages except:
(1) To the extent that it is proved that the person actually received
an improper benefit or profit in money, property, or services, for the amount of
the benefit or profit in money, property, or services actually received.
(2) To the extent that a judgment or other final adjudication adverse
to the person is entered in a proceeding based on a finding in the proceeding
that the person's action, or failure to act, was the result of active and
deliberate dishonesty and was material to the cause of action adjudicated in the
proceeding.
Nothing in this Article ELEVENTH shall protect any Director or officer
of the Corporation against any liability to the Corporation or its stockholders
to which he would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office.
No amendment, modification or repeal of this Article ELEVENTH shall
adversely affect any right or protection of a Director or officer that exists at
the time of such amendment, modification or repeal.
IN WITNESS WHEREOF, the undersigned incorporator of TEMPLETON
INSTITUTIONAL TRUST, INC. hereby executes the foregoing Articles of
Incorporation and acknowledges the same to be his act.
Dated this 6th day of July, 1990.
/s/KEITH W. VANDIVORT
Keith W. Vandivort
TEMPLETON INSTITUTIONAL TRUST, INC.
ARTICLES OF AMENDMENT
Templeton Institutional Trust, Inc., a Maryland corporation having its
principal office in the State of Maryland in Baltimore City, Maryland
(hereinafter the "Corporation"), certifies to the State Department of
Assessments and Taxation of Maryland that:
FIRST: The Articles of Incorporation of the Corporation, as presently
stated, are hereby amended by deleting Article SECOND, and by inserting in its
place the following new article SECOND:
SECOND: The name of the Corporation is Templeton Institutional
Funds, Inc.
SECOND: The amendment to the Articles of Incorporation of the
Corporation as hereinabove set forth has been duly advised by the Board of
Directors and approved by the stockholders in the manner and by the vote
required by law.
IN WITNESS WHEREOF, TEMPLETON INSTITUTIONAL TRUST, INC. has caused
these Articles of Amendment to be signed in its name and on its behalf by its
duly authorized officers who acknowledge that these Articles of Amendment are
the act of the Corporation, that to the best of their knowledge, information and
belief, the matters and facts set forth herein as to authorization and approval
are true in all material respects and that this statement is made under the
penalties of perjury.
Date: January 11, 1993
TEMPLETON INSTITUTIONAL TRUST, INC.
[CORPORATE SEAL]
/s/HAROLD F. MCELRAFT
Harold F. McElraft
Vice President
Attest:
By: /s/THOMAS M. MISTELE
Thomas M. Mistele
Secretary
TEMPLETON INSTITUTIONAL FUNDS, INC.
ARTICLES SUPPLEMENTARY
TEMPLETON INSTITUTIONAL FUNDS, INC., a Maryland corporation
registered as an open-end investment company under the Investment Company Act of
1940 and having its principal office in the State of Maryland in Baltimore City,
Maryland (hereinafter called the "Corporation"), hereby certifies to the State
Department of Assessments and Taxation of Maryland that:
FIRST: The Board of Directors of the Corporation, by
resolution dated January 11, 1993, redesignated as "Templeton Foreign Equity
Series Shares" the 50,000,000 Shares previously classified as "Templeton Trust
of Foreign Securities Shares"; (2) classified 20,000,000 of the authorized
unissued shares of the Corporation as "Templeton Growth Series Shares"; (3)
classified 10,000,000 of the authorized unissued shares of the Corporation as
"Templeton Emerging Markets Series Shares"; (4) classified 10,000,000 of the
authorized unissued shares of the Corporation as "Templeton Smaller Companies
Series Shares"; and (5) classified 10,000,000 of the authorized unissued shares
of the Corporation as "Templeton Foreign Equity (South Africa Free) Series
Shares."
SECOND: The Shares of the Corporation authorized and
classified pursuant to Article First of these Articles Supplementary have been
so authorized and classified by the Board of Directors under the authority
contained in the Charter of the Corporation. The number of Shares of capital
stock of the various classes that the Corporation has authority to issue has
been established by the Board of Directors in accordance with Section 2-105(c)
of the Maryland General Corporation Law.
THIRD: Immediately prior to the effectiveness of the Articles
Supplementary of the Corporation as hereinabove set forth, the Corporation had
the authority to issue 100,000,000 Common Shares of the par value of $0.01 per
Share and having an aggregate par value of $1,000,000, of which the Board of
Directors had classified 50,000,000 Shares as Templeton Trust of Foreign
Securities Shares. As amended hereby, the Corporations's Articles of
Incorporation authorized the issuance of 100,000,000 Common Shares of the par
value of $0.01 per Share and having an aggregate par value of $1,000,000 of
which the Board of Directors has classified 50,000,000 Shares as Templeton
Foreign Equity Series Shares, 20,000,000 as Templeton Growth Series Shares,
10,000,000 Shares as Templeton Emerging Markets Series Shares, 10,000,000 Shares
as Templeton Smaller Companies Series Shares, and 10,000,000 Shares as Templeton
Foreign Equity (South Africa Free) Series Shares. The preferences, rights,
voting powers, restrictions, limitations as to dividends, qualifications, and
terms and conditions of redemption of the various classes of Shares, as set
forth in the Articles of Incorporation of the Corporation, are not changed by
these Articles Supplementary.
IN WITNESS WHEREOF, Templeton Institutional Trust, Inc. has
caused these Articles Supplementary to be signed in its name on its behalf by
its authorized officers who acknowledge that these Articles Supplementary are
the act of the Corporation, that to the best of their knowledge, information and
belief, all matters and facts set forth herein relating to the authorization and
approval of these Articles Supplementary are true in all material respects and
that this statement is made under the penalties of perjury.
Date: January 11, 1993
TEMPLETON INSTITUTIONAL TRUST, INC.
[CORPORATE SEAL]
By: /s/HAROLD F. MCELRAFT
Harold F. McElraft
Vice President
Attest:
/s/THOMAS M. MISTELE
Thomas M. Mistele
Secretary
TEMPLETON INSTITUTIONAL FUNDS, INC.
ARTICLES SUPPLEMENTARY
TEMPLETON INSTITUTIONAL FUNDS, INC., a Maryland corporation
registered as an open-end investment company under the Investment Company Act of
1940 and having its principal office in the State of Maryland in Baltimore City,
Maryland (hereinafter called the "Corporation"), hereby certifies to the State
Department of Assessments and Taxation of Maryland that:
FIRST: The Board of Directors of the Corporation, by
resolution dated January 11, 1993, redesignated as "Templeton Global Fixed
Income Series Shares" 10,000,000 of the 50,000,000 Shares previously classified
as "Templeton Foreign Equity Series Shares."
SECOND: The Shares of the Corporation authorized and
classified pursuant to Article First of these Articles Supplementary have been
so authorized and classified by the Board of Directors under the authority
contained in the Charter of the Corporation. The number of Shares of capital
stock of the various classes that the Corporation has authority to issue has
been established by the Board of Directors in accordance with Section 2-105(c)
of the Maryland General Corporation Law.
THIRD: Immediately prior to the effectiveness of the Articles
Supplementary of the Corporation as hereinabove set forth, the Corporation had
the authority to issue 100,000,000 Common Shares of the par value of $0.01 per
Share and having an aggregate par value of $1,000,000, of which the Board of
Directors had classified 50,000,000 Shares as Templeton Foreign Equity Series
Shares, 20,000,000 as Templeton Growth Series Shares, 10,000,000 Shares as
Templeton Emerging Markets Series Shares, 10,000,000 Shares as Templeton Smaller
Companies Series Shares, and 10,000,000 Shares as Templeton Foreign Equity
(South Africa Free) Series Shares. As amended hereby, the Corporation's Articles
of Incorporation authorize the issuance of 100,000,000 Common Shares of the par
value of $0.01 per Share and having an aggregate par value of $1,000,000, of
which the Board of Directors has classified 40,000,000 Shares as Templeton
Foreign Equity Series Shares, 20,000,000 Shares as Templeton Growth Series
Shares, 10,000,000 Shares as Templeton Emerging Markets Series Shares,
10,000,000 Shares as Templeton Smaller Companies Series Shares, 10,000,000
Shares as Templeton Global Fixed Income Series Shares, and 10,000,000 Shares as
Templeton Foreign Equity (South Africa Free) Series Shares. The preferences,
rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption of the various classes of
Shares, as set forth in the Articles of Incorporation of the Corporation, are
not changed by these Articles Supplementary.
IN WITNESS WHEREOF, Templeton Institutional Funds, Inc. has
caused these Articles Supplementary to be signed in its name on its behalf by
its authorized officers who acknowledge that these Articles Supplementary are
the act of the Corporation, that to the best of their knowledge, information and
belief, all matters and facts set forth herein relating to the authorization and
approval of these Articles Supplementary are true in all material respects and
that this statement is made under the penalties of perjury.
Date: April 28, 1993
TEMPLETON INSTITUTIONAL FUNDS, INC.
[CORPORATE SEAL]
By: /s/HAROLD F. MCELRAFT
Harold F. McElraft
Vice President
Attest:
/s/THOMAS M. MISTELE
Thomas M. Mistele
Secretary
TEMPLETON INSTITUTIONAL FUNDS, INC.
ARTICLES SUPPLEMENTARY
TEMPLETON INSTITUTIONAL FUNDS, INC., a Maryland corporation
registered as an open-end investment company under the Investment Company Act of
1940 and having its principal office in the State of Maryland in Baltimore City,
Maryland (hereinafter called the "Corporation"), hereby certifies to the State
Department of Assessments and Taxation of Maryland that:
FIRST: The Board of Directors of the Corporation, by
resolution dated July 1, 1993, increased the number of Authorized Shares of the
Corporation from 100,000,000 Shares to 200,000,000 Shares, and classified the
Shares as indicated in Article Third below.
SECOND: The Shares of the Corporation authorized and
classified pursuant to Article First of these Articles Supplementary have been
so authorized and classified by the Board of Directors under the authority
contained in the Charter of the Corporation. The number of Shares of capital
stock of the various classes that the Corporation has authority to issue has
been established by the Board of Directors in accordance with Section 2-105(c)
of the Maryland General Corporation Law.
THIRD: Immediately prior to the effectiveness of the Articles
Supplementary of the Corporation as hereinabove set forth, the Corporation had
the authority to issue 100,000,000 Common Shares of the par value of $0.01 per
Share and having an aggregate par value of $1,000,000, of which the Board of
Directors had classified 40,000,000 Shares as Templeton Foreign Equity Series
Shares, 20,000,000 as Templeton Growth Series Shares, 10,000,000 Shares as
Templeton Emerging Markets Series Shares, 10,000,000 Shares as Templeton Smaller
Companies Series Shares, 10,000,000 Shares as Templeton Global Fixed Income
Series Shares, and 10,000,000 Shares as Templeton Foreign Equity (South Africa
Free) Series Shares.. As amended hereby, the Corporations's Articles of
Incorporation authorized the issuance of 200,000,000 Common Shares of the par
value of $0.01 per Share and having an aggregate par value of $2,000,000 of
which the Board of Directors has classified 80,000,000 Shares as Templeton
Foreign Equity Series Shares, 40,000,000 as Templeton Growth Series Shares,
20,000,000 Shares as Templeton Emerging Markets Series Shares, 20,000,000 Shares
as Templeton Smaller Companies Series Shares, 20,000,000 Shares as Templeton
Global Fixed Income Series Shares, and 20,000,000 Shares as Templeton Foreign
Equity (South Africa Free) Series Shares. The preferences, rights, voting
powers, restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption of the various classes of Shares, as set forth in the
Articles of Incorporation of the Corporation, are not changed by these Articles
Supplementary.
IN WITNESS WHEREOF, Templeton Institutional Funds, Inc. has
caused these Articles Supplementary to be signed in its name on its behalf by
its authorized officers who acknowledge that these Articles Supplementary are
the act of the Corporation, that to the best of their knowledge, information and
belief, all matters and facts set forth herein relating to the authorization and
approval of these Articles Supplementary are true in all material respects and
that this statement is made under the penalties of perjury.
Date: July 1, 1993
TEMPLETON INSTITUTIONAL FUNDS, INC.
[CORPORATE SEAL]
By: /s/HAROLD F. MCELRAFT
Harold F. McElraft
Vice President
Attest:
/s/THOMAS M. MISTELE
Thomas M. Mistele
Secretary
TEMPLETON INSTITUTIONAL FUNDS, INC.
ARTICLES SUPPLEMENTARY
TEMPLETON INSTITUTIONAL FUNDS, INC., a Maryland corporation
registered as an open-end investment company under the Investment Company Act of
1940 and having its principal office in the State of Maryland in Baltimore City,
Maryland (hereinafter called the "Corporation"), hereby certifies to the State
Department of Assessments and Taxation of Maryland that:
FIRST: The Board of Directors of the Corporation, by
resolution dated September 30, 1993, reclassified as "Templeton Emerging Markets
Series Shares: 10,000,000 of the 20,000,000 Shares previously classified as
"Templeton Smaller Companies Series Shares" and 10,000,000 of the 20,000,000
Shares previously classified as "Templeton Global Fixed Income Series Shares."
SECOND: Immediately prior to the effectiveness of the Articles
Supplementary of the Corporation as hereinabove set forth, the Corporation had
the authority to issue 200,000,000 Common Shares of the par value of $0.01 per
Share and having an aggregate par value of $2,000,000, of which the Board of
Directors had classified 80,000,000 Shares as Templeton Foreign Equity Series
Shares, 40,000,000 as Templeton Growth Series Shares, 20,000,000 Shares as
Templeton Emerging Markets Series Shares, 20,000,000 Shares as Templeton Smaller
Companies Series Shares, 20,000,000 Shares as Templeton Global Fixed Income
Series Shares, and 20,000,000 Shares as Templeton Foreign Equity (South Africa
Free) Series Shares.. As amended hereby, the Corporations's Articles of
Incorporation authorized the issuance of 200,000,000 Common Shares of the par
value of $0.01 per Share and having an aggregate par value of $2,000,000 of
which the Board of Directors has classified 80,000,000 Shares as Templeton
Foreign Equity Series Shares, 40,000,000 as Templeton Growth Series Shares,
40,000,000 Shares as Templeton Emerging Markets Series Shares, 10,000,000 Shares
as Templeton Smaller Companies Series Shares, 10,000,000 Shares as Templeton
Global Fixed Income Series Shares, and 20,000,000 Shares as Templeton Foreign
Equity (South Africa Free) Series Shares. The preferences, rights, voting
powers, restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption of the various classes of Shares, as set forth in the
Articles of Incorporation of the Corporation, are not changed by these Articles
Supplementary.
THIRD: The Shares of the Corporation authorized and classified
pursuant to Article First of these Articles Supplementary have been so
authorized and classified by the Board of Directors under the authority
contained in the Charter of the Corporation. The number of Shares of capital
stock of the various classes that the Corporation has authority to issue has
been established by the Board of Directors in accordance with Section 2-105(c)
of the Maryland General Corporation Law.
IN WITNESS WHEREOF, Templeton Institutional Funds, Inc. has
caused these Articles Supplementary to be signed in its name on its behalf by
its authorized officers who acknowledge that these Articles Supplementary are
the act of the Corporation, that to the best of their knowledge, information and
belief, all matters and facts set forth herein relating to the authorization and
approval of these Articles Supplementary are true in all material respects and
that this statement is made under the penalties of perjury.
Date: September 30, 1993
TEMPLETON INSTITUTIONAL FUNDS, INC.
[CORPORATE SEAL]
By: /s/HAROLD F. MCELRAFT
Harold F. McElraft
Vice President
Attest:
/s/THOMAS M. MISTELE
Thomas M. Mistele
Secretary
TEMPLETON INSTITUTIONAL FUNDS, INC.
ARTICLES SUPPLEMENTARY
TEMPLETON INSTITUTIONAL FUNDS, INC., a Maryland corporation
registered under the Investment Company Act of 1940 and having its principal
office in the State of Maryland in Baltimore City, Maryland (hereinafter called
the "Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The Board of Directors of the Corporation, at a meeting
duly convened and held on December 5, 1995, adopted a resolution to increase the
total number of Shares of stock which the Corporation shall have the authority
to issue to SEVEN HUNDRED MILLION (700,000,000) Common Shares of the par value
$0.01 per Share and having an aggregate par value of SEVEN MILLION DOLLARS
($7,000,000).
SECOND: Immediately prior to the effectiveness of the Articles
Supplementary of the Corporation as hereinabove set forth, the Corporation had
authority to issue five hundred twenty million (520,000,000) shares of common
stock, par value $0.01 per Share, and having an aggregate par value of
$5,200,000 of which the Board of Directors had (i) classified 160,000,000 Shares
as Foreign Equity Series shares of Common Stock, (ii) classified 120,000,000
Shares as Growth Series shares of Common Stock, (iii) classified 200,000,000
Shares as Emerging Markets Series shares of Common Stock (iv) classified
10,000,000 Shares as Global Fixed Income Series shares of Common Stock, and (v)
classified 30,000,000 Shares as Foreign Equity (South Africa Free) Series shares
of Common Stock. As amended hereby, the Corporation's Articles of Incorporation
authorize the issuance of 700,000,000 Common Shares of the par value of $0.01
per Share and having an aggregate par value of $7,000,000, of which the Board of
Directors has classified 340,000,000 Shares as Foreign Equity Series shares,
120,000,000 Shares as Growth Series shares, 200,000,000 Shares as Emerging
Markets Series shares, classified 10,000,000 Shares as Global Fixed Income
Series shares, and classified 30,000,000 Shares as Foreign Equity (South Africa
Free) Series shares. The preferences, rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption of the two classes of shares, as set forth in the Articles of
Incorporation of the Corporation as heretofore amended and supplemented, are not
changed by these Articles Supplementary.
THIRD: The Shares of the Corporation authorized and classified
pursuant to Article First of these Articles Supplementary have been so
authorized and classified by the Board of Directors under the authority
contained in the Charter of the Corporation. The total number of Shares of
capital stock the Corporation has authority to issue has been increased by the
Board of Directors in accordance with Section 2-105(c) of the Maryland General
Corporation Law.
<PAGE>
IN WITNESS WHEREOF, Templeton Institutional Funds, Inc. has
caused these Articles Supplementary to be signed in its name on its behalf by
its authorized officers who acknowledge that these Articles Supplementary are
the act of the Corporation, that to the best of their knowledge, information and
belief, all matters and facts set forth herein relating to the authorization and
approval of these Articles Supplementary are true in all material respects and
that this statement is made under the penalties of perjury.
Date: December 6, 1995
TEMPLETON INSTITUTIONAL FUNDS, INC.
[CORPORATE SEAL]
By: /s/JOHN R. KAY
John R. Kay
Vice President
Attest:
/s/THOMAS M. MISTELE
Thomas M. Mistele
Secretary
4
TEMPLETON INSTITUTIONAL FUNDS, INC.
ARTICLES SUPPLEMENTARY
TEMPLETON INSTITUTIONAL FUNDS, INC., a Maryland corporation
registered under the Investment Company Act of 1940 and having its principal
office in the State of Maryland in Baltimore City, Maryland (hereinafter called
the "Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
WHEREAS: The Directors of the Corporation, at a meeting duly
convened and held on December 5, 1995, have unanimously approved an Agreement
and Plan of Reorganization providing for the acquisition of all or substantially
all of the assets of the Series of Shares known as Templeton Institutional
Funds, Inc. Foreign Equity (South Africa Free) Series ("South Africa Free
Series") by Templeton Institutional Funds, Inc. Foreign Equity Series ("Foreign
Equity Series") in exchange for shares of Foreign Equity Series; and
WHEREAS: The acquisition of the South Africa Free Series was
approved by a majority of the votes entitled to be cast by the stockholders of
South Africa Free Series entitled to vote thereon at a meeting held on January
29, 1996. Accordingly, the acquisition of the South Africa Free Series by the
Foreign Equity Series has been duly advised by the Board of Directors and
approved by the stockholders of South Africa Free Series.
FIRST: Immediately prior to the effectiveness of the Articles
Supplementary of the Corporation, the Corporation had authority to issue seven
hundred million (700,000,000) shares of common stock, par value $0.01 per Share,
and having an aggregate par value of $7,000,000 of which the Board of Directors
had (i) classified 340,000,000 Shares as Foreign Equity Series shares of Common
Stock, (ii) classified 120,000,000 Shares as Growth Series shares of Common
Stock, (iii) classified 200,000,000 Shares as Emerging Markets Series shares of
Common Stock (iv) classified 10,000,000 Shares as Global Fixed Income Series
shares of Common Stock, and (v) classified 30,000,000 Shares as Foreign Equity
(South Africa Free) Series shares of Common Stock. As amended hereby, the
Corporation's Articles of Incorporation authorize the issuance of 700,000,000
Common Shares of the par value of $0.01 per Share and having an aggregate par
value of $7,000,000, of which the Board of Directors has classified 355,000,000
Shares as Foreign Equity Series shares, 120,000,000 Shares as Growth Series
shares, 215,000,000 Shares as Emerging Markets Series shares, and classified
10,000,000 Shares as Global Fixed Income Series shares. The preferences, rights,
voting powers, restrictions, limitations as to dividends, qualifications, and
terms and conditions of redemption of the two classes of shares, as set forth in
the Articles of Incorporation of the Corporation as heretofore amended and
supplemented, are not changed by these Articles Supplementary.
SECOND: The Shares of the Corporation authorized and
classified pursuant to Article First of these Articles Supplementary have been
so authorized and classified by the Board of Directors under the authority
contained in the Charter of the Corporation. The total number of Shares of
capital stock the Corporation has authority to issue has been reallocated by the
Board of Directors in accordance with Section 2-105(c) of the Maryland General
Corporation Law.
IN WITNESS WHEREOF, Templeton Institutional Funds, Inc. has
caused these Articles Supplementary to be signed in its name on its behalf by
its authorized officers who acknowledge that these Articles Supplementary are
the act of the Corporation, that to the best of their knowledge, information and
belief, all matters and facts set forth herein relating to the authorization and
approval of these Articles Supplementary are true in all material respects and
that this statement is made under the penalties of perjury.
Date: April 15, 1996
TEMPLETON INSTITUTIONAL FUNDS, INC.
[CORPORATE SEAL]
By:/s/JOHN R. KAY
John R. Kay
Vice President
Attest:
/s/THOMAS M. MISTELE
Thomas M. Mistele
Secretary
BY-LAWS
-of-
TEMPLETON INSTITUTIONAL TRUST, INC.
BY-LAW-ONE: NAME OF COMPANY, LOCATION OF OFFICES AND SEAL.
ARTICLE L.L. NAME. The name of the Company is
Templeton Institutional Trust, Inc.
ARTICLE 1.2. PRINCIPAL OFFICES. The principal office
of the Company in the State of Maryland shall be located in Baltimore, Maryland.
The Company may, in addition, establish and maintain such other offices and
places of business within or outside the State of Maryland as the Board of
Directors may from time to time determine.
ARTICLE 1.3. SEAL. The corporate seal of the Company
shall be circular in form and shall bear the name of the Company, the year of
its incorporation and the words "Corporate Seal, Maryland." The form of the seal
shall be subject to alteration by the Board of Directors and the seal may be
used by causing it or a facsimile to be impressed or affixed or printed or
otherwise reproduced. Any officer or Director of the Company shall have
authority to affix the corporate seal of the Corporation to any document
requiring the same.
BY-LAW-TWO: STOCKHOLDERS.
ARTICLE 2.1. PLACE OF MEETINGS. All meetings of the Stockholders shall be held
at such place within the United States, whether within or outside the State of
Maryland as the Board of Directors shall determine, which shall be stated in the
notice of the meeting or in a duly executed waiver of notice thereof.
ARTICLE 2.2. ANNUAL MEETING'. The annual meeting of the Stockholders of the
Company shall be held on a date between November 15 and December 15 of every
year, as fixed from time to time by the Board of Directors, at which time the
Stockholders shall elect a Board of Directors by a plurality vote, and transact
such other business as may properly come before the meeting. Any business of the
Company may be transacted at the annual meeting without being specially
designated in the notice except as otherwise provided by statute or by the
Articles of Incorporation or these By-Laws.
ARTICLE 2.3. SPECIAL MEETING'S. Special meetings of the Stockholders for any
purpose or purposes, unless otherwise prescribed by statute or by the Articles
of Incorporation, may be called by resolution of the Board of Directors or by
the President, and shall be called by the President or Secretary at the request
in writing of a majority of the Board of Directors or at the request in writing
by Stockholders owning 25% in amount of the entire capital stock of the Company
issued and outstanding at the time of the call. Such request shall state the
purpose or purposes of the proposed meeting. Business transacted at special
meetings shall be confined to the objects stated in the call. ARTICLE 2.4.
NOTICE. Written notice of every meeting of Stockholders, stating the purpose or
purposes for which the meeting is called, the time when and the place where it
is to be held, shall be served, either personally or by mail, not less than ten
nor more than ninety days before the meeting, upon each Stockholder as of the
record date fixed for the meeting and who is entitled to vote at such meeting.
If mailed (1) such notice shall be directed to a Stockholder at his address as
it shall appear on the books of the Company (unless he shall have filed with the
Transfer Agent of the Company a written request that notices intended for him be
mailed to some other address, in which case it shall be mailed to the address
designated in such request) and (2) such notice shall be deemed to have been
given as of the date when it is deposited in the United States mail with first
class postage thereon prepaid. Irregularities in the notice or in the giving
thereof, as well as the accidental omission to give notice of any meeting to, or
the non-receipt of any such notice by, any of the Stockholders shall not
invalidate any action otherwise properly taken by or at any such meeting.
ARTICLE 2.5. QUORUM. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall be requisite and shall constitute a quorum at all meetings of the
Stockholders for the transaction of business except as otherwise provided by
statute, by the Articles of Incorporation or by these By-Laws. If a quorum shall
not be present or represented, the Stockholders entitled to vote thereat,
present in person or represented by proxy, shall have the power to adjourn the
meeting from time to time, without notice other than announcement at the meeting
to a date not more than 120 days after the original record date until a quorum
shall be present or represented. At such adjourned meeting at which a quorum
shall be present or represented any business may be transacted which might have
been transacted at the meeting as originally notified.
ARTICLE 2.6. VOTE OF THE MEETING. When a quorum is present or represented at any
meeting, the vote of the holders of a majority of the stock entitled to vote
thereat present in person or represented by proxy shall decide any question
brought before such meeting, unless the question is one upon which by express
provisions of applicable statutes, of the Articles of Incorporation, or of these
By-Laws, a different vote is required, in which case such express provisions
shall govern and control the decision of such question.
ARTICLE 2.7. VOTING RIgHTS OF STOCKHOLDERS. Each Stockholder of record having
the right to vote shall be entitled at every meeting of the Stockholders of the
Company to one vote for each share of stock having voting power standing in the
name of such Stockholder on the books of the Company on the record date fixed in
accordance with Article 6.5 of these By-Laws, with pro-rata voting rights for
any fractional shares, and such votes may be cast either in person or by written
proxy.
ARTICLE 2.8. PROXIES. Every proxy must be executed in writing by the Stockholder
or by his duly authorized attorney in-fact. No proxy shall be valid after the
expiration of eleven months from the date of its execution unless it shall have
specified therein its duration. Every proxy shall be revocable at the pleasure
of the person executing it or of his personal representatives or assigns.
Proxies shall be delivered prior to the meeting to the Secretary of the Company
or to the person acting as Secretary of the meeting before being voted. A proxy
with respect to stock held in the name of two or more persons shall be valid if
executed by one of them unless at or prior to exercise of such proxy the Company
receives a specific written notice to the contrary from any one of them. A proxy
purporting to be executed by or on behalf of a stockholder shall be deemed valid
unless challenged at or prior to its exercise.
ARTICLE 2.9. STOCK LEDGER AND LIST OF STOCKHOLDERS. It shall be the duty of the
Secretary or Assistant Secretary of the Company to cause an original or
duplicate stock ledger to be maintained at the office of the Company's transfer
agent.
ARTICLE 2.10. Action without Meeting. Any action to be taken by stockholders may
be taken without a meeting if (1)all stockholders entitled to vote on the matter
consent to the action in writing, (2) all stockholders entitled to notice of the
meeting but not entitled to vote at it sign a written waiver of any right to
dissent and (3) said consents and waivers are filed with the records of the
meetings of stockholders. Such consent shall be treated for all purposes as a
vote of the meeting.
BY-LAW-THREE: DIRECTORS.
ARTICLE 3.1. Board of 3 to 15 Directors. The Board of Directors shall consist of
not less than three (3) nor more than fifteen (15) Directors, all of whom shall
be of full age and at least 40% of whom shall be persons who are not interested
persons of the Company as defined in the Investment Company Act of 1940,
provided that prior to the issuance of stock by the Company, the Board of
Directors may consist of less than three (3) Directors, subject to the
provisions of Maryland law. Directors shall be elected at each annual meeting of
the Stockholders and each Director shall be elected to serve for one year and
until his successor shall be elected and shall qualify or until his earlier
death, resignation or removal. Directors need not be Stockholders. The Directors
shall have power from time to time, and at any time when the Stockholders as
such are not assembled in a meeting, regular or special, to increase or decrease
their own number. If the number of Directors be increased, the additional
Directors may be elected by a majority of the Directors in office at the time of
the increase. If such additional Directors are not so elected by the Directors
in office at the time they increase the number of places on the Board, or if the
additional Directors are elected by the existing Directors, prior to the first
meeting of the Stockholders of the Company, then in either of such events the
additional Directors shall be elected or reelected by the Stockholders at their
next annual meeting or at an earlier special meeting called for that purpose.
The number of Directors may also be increased or decreased by vote of the
Stockholders at any regular or special meeting called for that purpose. In the
event the Stockholders should vote a decrease in the number of Directors, they
shall determine by a majority vote at such meeting which of the Directors shall
be removed and which of the then existing vacancies on the Board shall be
eliminated. If the Stockholders vote an increase in the Board they shall by
plurality vote elect Directors to the newly created places as well as fill any
then existing vacancies on the Board.
The Board of Directors may elect, but shall not be required to elect, a Chairman
of the Board who must be Director.
ARTICLE 3.2. VACANCIES. If the office of any Director
or Directors becomes vacant for any reason (other than an increase in the number
of places on the Board as provided in Article 3.1), the Directors in office,
although less than a quorum, shall continue to act and may, by a majority vote,
choose a successor or successors, who shall hold office for the unexpired term
in respect to which such vacancy occurred or until the next election of
Directors (if immediately after filling any such vacancy at least two-thirds of
the Directors then holding office shall have been elected by the Stockholders),
or any vacancy may be filled by the Stockholders at any meeting thereof.
ARTICLE 3.3. MAJORITY TO BE ELECTED BE STOCKHOLDERS. If at any time, less than a
majority of the Directors in office shall consist of Directors elected by
Stockholder, a meeting of the Stockholders shall be called within 60 days for
the purpose of electing Directors to fill any vacancies in the Board of
Directors (unless the Securities and Exchange Commission or any court of
competent jurisdiction shall by order extend such period).
ARTICLE 3.4. REMOVAL. At any meeting of stockholders duly called and at which a
quorum is present, the stockholders may, by the affirmative vote of the holders
of a majority of the votes entitled to be cast thereon, remove any Director or
Directors from office, with or without cause, and may elect a successor or
successors to fill any resulting vacancies for the unexpired terms of the
removed Directors.
ARTICLE 3.5. POWERS OF THE BOARD. The business of this Company shall be managed
under the direction of its Board of Directors, which may exercise or give
authority to exercise all powers of the Company and do all such lawful acts and
things as are not by statute, by the Articles of Incorporation or by these
By-Laws required to be exercised or done by the Stockholders.
ARTICLE 3.6. PLACE OF MEETINGS. The Directors may hold their meetings at the
principal office of the Company or at such other places, either within or
without the State of Maryland, as they may from time to time determine.
ARTICLE 3.7. REGULAR MEETINGS. Regular meetings of the Board may be held at
such date and time as shall from time to time be determined by resolution of
the Board.
ARTICLE 3.8. SPECIAL MEETINGS. Special meetings of the Board may be called by
order of the President on one day's notice given to each Director either in
person or by mail, telephone, telegram, cable or wireless to each Director at
his residence or regular place of business. Special meetings will be called by
the President or Secretary in a like manner on the written request of a majority
of the Directors.
ARTICLE 3.9. QUORUM OF ONE-THIRD. At all meetings of the Board the presence of
one-third of the entire number of Directors then in office (but not less than
two Directors) shall be necessary to constitute a quorum and sufficient for the
transaction of business, and any act of a majority present at a meeting at which
there is a quorum shall be the act of the Board of Directors, except as may be
otherwise specifically provided by statute, by the Articles of Incorporation or
by these By-Laws.
If a quorum shall not be present at any meeting of Directors, the Directors
present thereat may adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present.
ARTICLE 3.10. INFORMAL ACTION BY DIRECTORS AND COMMITTEES. Any action required
or permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may, except as otherwise required by statute, be taken without
a meeting if a written consent to such action is signed by all members of the
Board, or of such committee, as the case may be and filed with the minutes of
the proceedings of the Board or committee. Subject to the Investment Company Act
of 1940, members of the Board of Directors or a committee thereof may
participate in a meeting by means of a conference telephone or similar
communications equipment if all persons participating in the meeting can hear
each other at the same time.
ARTICLE 3.11. EXECUTIVE COMMITTEE. There may be an Executive Committee of two or
more Directors appointed by the Board who may meet at stated times or on notice
to all by any of their own number. The Executive Committee shall consult with
and advise the Officers of the Company in the management of its business and
exercise such powers of the Board of Directors as may be lawfully delegated by
the Board of the Directors. Vacancies shall be filled by the Board of Directors
at any regular or special meeting. The Executive Committee shall keep regular
minutes of its proceedings and report the same to the Board when required.
ARTICLE 3.12. OTHER COMMITTEES. The Board of Directors, by the affirmative vote
of a majority of the entire Board, may appoint other committees which shall in
each case consist of such number of members (not less than two) and shall have
and may exercise, to the extent permitted by law, such powers as the Board may
determine in the resolution appointing them. A majority of all members of any
such committee may determine its action, and fix the time and place of its
meetings, unless the Board of Directors shall otherwise provide. The Board of
Directors shall have power at any time to change the members and, to the extent
permitted by law, the powers of any such committee, to fill vacancies, and to
discharge any such committee. ARTICLE 3.13. ADVISORY BOARD. There may be an
Advisory Board of any number of individuals appointed by the Board of Directors
who may meet at stated times or on notice to all by any of their own number or
by the President. The Advisory Board shall be composed of Stockholders or
representatives of Stockholders. The Advisory Board will have no power to
require the Company to take any specific action. Its purpose shall be solely to
consider matters of general policy and to represent the Stockholders in all
matters except those involving the purchase or sale of specific securities. A
majority of the Advisory Board, if appointed, must consist of Stockholders who
are not otherwise affiliated or interested persons of the Company or of any
affiliate of the Company as those terms are defined in the Investment Company
Act of 1940.
ARTICLE 3.14. COMPENSATION OF DIRECTORS. The Board may, by resolution, determine
what compensation and reimbursement of expenses of attendance at meetings, if
any, shall be paid to Directors in connection with their service on the Board.
Nothing herein contained shall be construed to preclude any Director from
serving the Company in any other capacity or from receiving compensation
therefor.
BY-LAW-FOUR: OFFICERS.
ARTICLE 4.1 OFFICERS. The Officers of the Company shall be fixed by the Board of
Directors and shall include a President, a Vice-President, a Secretary and a
Treasurer. Any two of the aforesaid offices, except those of President and
Vice-President, may be held by the same person.
ARTICLE 4.2. APPOINTMENT OF OFFICERS. The Directors, at their first meeting
after each annual meeting of Stockholders, shall appoint a President and the
other Officers who need not be members of the Board.
ARTICLE 4.3. ADDITIONAL OFFICERS. The Board, at any regular or special meeting,
may appoint such other Officers and agents as it shall deem necessary who shall
exercise such powers and perform such duties as shall be determined from time to
time by the Board.
ARTICLE 4.4. SALARIES OF OFFICERS. The salaries of - all Officers of the
Company shall be fixed by the Board of Directors.
ARTICLE 4.5. TERM, REMOVAL, VACANCIES. The Officers of the Company shall hold
office for one year and until their successors are chosen and qualify in their
stead. Any Officer elected or appointed by the Board of Directors may be removed
at any time by the affirmative vote of a majority of the Directors. If the
office of any Officer becomes vacant for any reason, the vacancy shall be filled
by the Board of Directors.
ARTICLE 4.6. PRESIDENT. The President shall be the chief executive officer of
the Company; he shall, subject to the supervision of the Board of Directors,
have general responsibility for the management of the business of the Company
and shall see that all orders and resolutions of the Board are carried into
effect.
ARTICLE 4.7. VICE-PRESIDENT. The Vice-President (senior in service) in the
absence or disability of the President shall perform the duties and exercise the
powers of the President and shall perform such other duties as the Board of
Directors shall prescribe.
ARTICLE 4.8. TREASURER. The Treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Company and shall deposit all moneys and
other valuable effects in the name and to the credit of the Company in such
depositories as may be designated by the Board of Directors. He shall disburse
the funds of the Company as may be ordered by the Board, taking proper vouchers
for such disbursements, and shall render to the President and Directors at the
regular meetings of the Board, or whenever they may require it, an account of
all his transactions as Treasurer and of the financial condition of the Company.
Any Assistant Treasurer may perform such duties of the Treasurer as the
Treasurer of the Board of Directors may assign, and, in the absence of the
Treasurer, he may perform all the duties of the Treasurer.
ARTICLE 4.9. SECRETARY. The Secretary shall attend meetings of the Board and
meetings of the Stockholders and record all votes and the minutes of all
proceedings in a book to be kept for that purpose, and shall perform like duties
for the Executive Committee of the Board when required. He shall give or cause
to be given notice of all meetings of Stockholders and special meetings of the
Board of Directors and shall perform such other duties as may be prescribed by
the Board of Directors. He shall keep in safe custody the seal of the Company
and affix it to any instrument when authorized by the Board of Directors.
Any Assistant Secretary may perform such duties of the Secretary as the
Secretary or the Board of Directors may assign, and, in the absence of the
Secretary, may perform all the duties of the Secretary.
ARTICLE 4.10. SUBORDINATE OFFICERS. The Board of Directors from time to time may
appoint such other officers or agents as it may deem advisable, each of whom
shall have such title, hold office for such period, have such authority and
perform such duties as the Board of Directors may determine. The Board of
Directors from time to time may delegate to one or more officers or agents the
power to appoint any such subordinate officers or agents and to prescribe their
respective rights, terms of office, authorities and duties.
ARTICLE 4.11. SURETY BONDS. The Board of Directors may require any officer or
agent of the Company to execute a bond (including, without limitation, any bond
required by the Investment Company Act of 1940, as amended, and the rules and
regulations of the Securities and Exchange Commission) to the Company in such
sum and with such surety or sureties as the Board of Directors may determine,
conditioned upon the faithful performance of his duties to the Company,
including responsibility for negligence and for the accounting of any of the
Company's property, funds or securities that may come into his hands.
BY-LAW-FIVE: GENERAL PROVISIONS.
ARTICLE 5.1. WAIVER OF NOTICE. Whenever by statute, the provisions of the
Articles of Incorporation or these ByLaws, the Stockholders or the Board of
Directors are authorized to take any action at any meeting after notice, such
notice may be waived, in writing, before or after the holding of the meeting, by
the person or persons entitled to such notice, or, in the case of a Stockholder,
by his attorney thereunto authorized.
ARTICLE 5.2. INDEMNITY.
(a) The Company shall indemnify, or make advances to,
any present or past Director, Officer, agent or employee of the Company made
or threatened to be made party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
by reason of service in that capacity (or present or past service, at the
request of the Company, as a director, officer, partner, trustee, employee,
or agent of another foreign or domestic corporation, partnership, joint
venture, trust, other enterprise, or employee benefit plan), to the fullest
extent and in the manner provided by Maryland law and the Investment Company Act
of 1940, as they may be amended.
(b) The Company may purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee, or agent of
the Company or who, while a director, officer, employee, or agent of the
Company, is or was serving at the request of the Company as a director, officer,
partner, trustee, employee, or agent of another foreign or domestic corporation,
partnership, joint venture, trust, other enterprise, or employee benefit plan
against any liability asserted against and incurred by such person in any such
capacity or arising out of such person's position; provided, that no insurance
may be purchased which would indemnify any Director or Officer of the Company
against any liability to the Company or to its security holders to which he
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.
ARTICLE 5.3. CHECKS. All checks or demands for money and notes of the Company
shall be signed by such Officer or Officers or such other person or persons as
the Board of Directors may from time to time designate.
ARTICLE 5.4. FISCAL YEAR. The fiscal year of the Company shall be determined by
resolution of the Board of Directors.
ARTICLE 5.5. ACCOUNTANT.
(a) The Company shall employ an independent public
accountant or a firm of independent public accountants as its Accountant to
examine the accounts of the Company and to sign and certify financial
statements filed by the Company. The Accountant's certificates and reports
shall be addressed both to the Board of Directors and
to the Stockholders. The employment of the Accountant shall be conditioned upon
the right of the Company to terminate the employment forthwith without any
penalty by vote of a majority of the outstanding voting securities at any
Stockholders' meeting called for that purpose.
b) A majority of the members of the Board of Directors
who are not interested persons(as such term is defined in the Investment
Company Act of 1940, as amended) of the Company shall select the Accountant at
any meeting held at such time during the Company's fiscal year as is consistent
with the provisions of the Investment Company Act of 1940, as amended, and the
rules and regulations thereunder. Such selection shall be submitted for
ratification or rejection at the next succeeding annual Stockholders'
meeting. If such meeting shall reject such selection, the Accountant
shall be selected by majority vote of the Company's outstanding voting
securities, either at the meeting at which the rejection occurred or at a
subsequent meeting of Stockholders called for that purpose.
(c) Any vacancy occurring between annual meetings, due
to the resignation of the Accountant, may be filled by the vote of a majority
of the members of the Board of Directors who are not interested persons.
BY-LAW-SIX: CERTIFICATES OF STOCK.
ARTICLE 6.1. CERTIFICATE OF STOCK. The interest of each Stockholder of the
Company may be evidenced by certificates for shares of stock in such form as the
Board of Directors may from time to time prescribe. The certificates shall be
numbered and entered in the books of the Company as they are issued. They shall
exhibit the holder's name and the number of shares and no certificate shall be
valid unless it has been signed by the President or a Vice-President and the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary
and BEARS the corporate seal. Such seal may be a facsimile, engraved or printed.
Where any such certificate is signed by a Transfer Agent or by a Registrar, the
signatures of any such Officer may be facsimile, engraved or printed. In case
any of the Officers of the Company whose manual or facsimile signature appears
on any stock certificate delivered to a Transfer Agent of the Company shall
cease to be such Officer prior to the issuance of such certificate, the Transfer
Agent may nevertheless countersign and deliver such certificate as though the
person signing the same or whose facsimile signature appears thereon had not
ceased to be such Officer, unless written instructions of the Company to the
contrary are delivered to the Transfer Agent.
ARTICLE 6.2. LOST, STOLEN OR DESTROYED CERTIFICATES. The Board of Directors, or
the President together with the Treasurer or Secretary, may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Company, alleged to have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed, or by his legal representative. When authorizing such
issue of a new certificate, the Board of Directors, or the President and
Treasurer or Secretary, may, in its or their discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate, or his legal representative, to advertise the same in
such manner as it oz they shall require and/or give the Company a bond in such
sum and with such surety or sureties as it or they may direct as indemnity
against any claim that may be made against the Company with respect to the
certificate alleged to have been lost, stolen or destroyed or such newly issued
certificate.
ARTICLE 6.3. TRANSFER OF STOCK. Shares of the Company shall be transferable on
the books of the Company by the holder thereof in person or by his duly
authorized attorney or legal representative upon surrender and cancellation of a
certificate or certificates for the same number of shares of the same class,
duly endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, with such proof of the authenticity of the signature as
the Company or its agents may reasonably require. The shares of stock of the
Company may be freely transferred, and the Board of Directors may, from time to
time, adopt rules and regulations with reference to the method of transfer of
the shares of stock of the Company.
ARTICLE 6.4. REGISTERED HOLDER. The Company shall be entitled to treat the
holder of record of any share or shares of stock as the holder in fact thereof
and, accordingly, shall not be bound to recognize any equitable or other claim
to or interest in such share or shares on the part of any other person whether
or not it shall have express or other notice thereof, except as expressly
provided by statute.
ARTICLE 6.5. RECORD DATE. The Board of Directors may fix a time not less than 10
nor more than 90 days prior to the date of any meeting of Stockholders or prior
to the last day on which the consent or dissent of Stockholders may be
effectively expressed for any purpose without a meeting, as the time as of which
Stockholders entitled to notice of and to vote at such a meeting or whose
consent or dissent is required or may be expressed for any purpose, as the case
may be, shall be determined; and all persons who were holders of record of
voting stock at such time and no other shall be entitled to notice of and to
vote at such meeting or to express their consent or dissent, as the case may be.
If no record date has been fixed, the record date for the determination of
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be the later of the close of business on the day on which notice of the meeting
is mailed or the thirtieth day before the meeting, or, if notice is waived by
all stockholders, at the close of business on the tenth day next preceding the
day on which the meeting is held. The Board of Directors may also fix a time not
exceeding 90 days preceding the date fixed for the payment of any dividend or
the making of any distribution, or for the delivery of evidences of rights, or
evidences of interests arising out of any change, conversion or exchange of
capital stock, as a record time for the determination of the Stockholder
entitled to receive any such dividend, distribution, rights or interests.
ARTICLE 6.6. STOCK LEDGERS. The stock ledgers of the Company, containing the
names and addresses of the stockholders and the number of shares held by them
respectively, shall be kept at the principal offices of the Corporation or at
the offices of the transfer agent of the Company or at such other location as
may be authorized by the Board of Directors from time to time.
ARTICLE 6.7. TRANSFER AGENTS AND REGISTRARS. The Board of Directors may from
time to time appoint or remove transfer agents and/or registrars of transfers
(if any) of shares of stock of the Company, and it may appoint the same person
as both transfer agent and registrar. Upon any such appointment being made, all
certificates representing shares of capital stock thereafter issued shall be
countersigned by one of such transfer agents or by one of such registrars of
transfers (if any) or by both and shall not be valid unless so countersigned. If
the same person shall be both transfer agent and registrar, only one
countersignature by such person shall be required.
BY-LAW-SEVEN: CAPITAL STOCK.
ARTICLE 7.1. DIVIDENDS. Dividends upon the capital stock of the Company, subject
to any provisions of the Articles of Incorporation relating thereto, may be
declared by the Board of Directors at any regular or special meeting, pursuant
to law.
ARTICLE 7.2. RESERVE BEFORE DIVIDENDS. Before payment of any dividend, there may
be set aside out of the net profits of the Company available for dividends such
sum or sums as the Directors from time to time in their absolute discretion
think proper as a reserve fund to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Company, or for
such other purpose as the Directors shall think conducive to the interests of
the Company, and the Directors may modify or abolish any such reserve in the
manner in which it was created.
ARTICLE 7.3. NO PRE-EMPTIVE RIGHTS. Shares of stock shall not possess
pre-emptive rights to purchase additional shares of stock when offered.
ARTICLE 7.4. FRACTIONAL SHARES. Fractional shares entitle the holder to the same
voting and other rights and privileges as whole shares on a pro-rata basis.
BY-LAW-EIGHT: AMENDMENTS.
ARTICLE 8.1. BY STOCKHOLDERS. By-Laws may be adopted, amended or repealed, by
vote of the holders of a majority of the Company's stock, as defined by the
Investment Company Act of 1940, at any annual or special meeting of the
Stockholders at which a quorum is present or represented, provided notice of the
proposed amendment shall have been contained in the notice of the meeting.
ARTICLE 8.2. BY DIRECTORS. The Directors may adopt, amend or repeal any By-Law
(which is not inconsistent with any By-Law adopted, amended or repealed by the
Company's stockholders in accordance with Article 8.1) by majority vote of all
of the Directors in office at any regular meeting, or at any special meeting if
notice of the proposed By-Law, amendment or repeal shall have been included in
the notice of such meeting.
BY-LAW-NINE: CUSTODY OF SECURITIES
ARTICLE 9.1. EMPLOYMENT OF A CUSTODIAN. The Company shall place and at all times
maintain in the custody of a Custodian (including any sub-custodian for the
Custodian; which may be a foreign bank which meets applicable requirements of
law) all funds, securities and similar investments owned by the Company. The
Custodian (and any sub-custodian) shall be a bank having not less than
$2,000,000 aggregate capital, surplus and undivided profits and shall be
appointed from time to time by the Directors, who shall fix its remuneration.
ARTICLE 9.2. ACTION UPON TERMINATION OF CUSTODIAN AGREEMENT. Upon termination of
a Custodian Agreement or inability of the Custodian to continue to serve, the
Directors shall promptly appoint a successor custodian, but in the event that no
successor custodian can be found who has the required qualifications and is
willing to serve, the Directors shall call as promptly as possible a special
meeting of the Shareholders to determine whether the Company shall function
without a custodian or shall be liquidated. If so directed by vote of the
holders of a majority of the outstanding voting securities, the Custodian shall
deliver and pay over all funds, securities and similar investments held by it as
specified in such vote.
ARTICLE 9.3. PROVISIONS OF CUSTODIAN AGREEMENT. The
following provisions shall apply to the employment of a Custodian and to any
contract entered into with the Custodian so employed: The Directors shall cause
to be delivered to the Custodian all securities owned by the Company or to which
it may become entitled, and shall order the same to be delivered by the
Custodian only in completion of a sale, exchange, transfer, pledge, loan of
portfolio securities to another person, or other disposition thereof, all as the
Directors may generally or from time to time require or approve or to a
successor Custodian; and the Directors shall cause all funds owned by the
Company or to which it may become entitled to be paid to the Custodian, and
shall order the same disbursed only for investment against delivery of the
securities acquired, or the return of cash held as collateral for loans of
portfolio securities, or in payment of expenses, including management
compensation, and liabilities of the Company, including distributions to
shareholders, or to a successor Custodian. In connection with the Company's
purchase or sale of futures contracts, the Custodian shall transmit, prior to
receipt on behalf of the Company of any securities or other property, funds from
the Company's custodian account in order to furnish to and maintain funds with
brokers as margin to guarantee the performance of the Company's futures
obligations in accordance with the applicable requirements of commodities
exchanges and brokers. BY-LAW-TEN: MISCELLANEOUS
ARTICLE 10.1. MISCELLANEOUS.
(a) Except as hereinafter provided, no officer or Director of the
Company and no partner, officer, director or shareholder of the Investment
Adviser of the Company or of the Distributor of the Company, and no Investment
Adviser or Distributor of the Company, shall take long or short positions in the
securities issued by the Company.
(1) The foregoing provisions shall not prevent the Distributor
from purchasing Shares from the Company if such purchases are limited (except
for reasonable allowances for clerical errors, delays and errors of transmission
and cancellation of orders) to purchases for the purpose of filling orders for
such Shares received by the Distributor, and provided that orders to purchase
from the Company are entered with the Company or the Custodian promptly upon
receipt by the Distributor of purchase orders for such Shares, unless the
Distributor is otherwise instructed by its customer.
(2) The foregoing provision shall not prevent the Distributor
from purchasing Shares of the Company as agent for the account of the Company.
(3) The foregoing provision shall not prevent the purchase
from the Company or from the Distributor of Shares issued by the Company, by any
officer, or Director of the Company or by any partner, officer, director or
shareholder of the Investment Adviser of the Company or of the Distributor of
the Company at the price available to the public generally at the moment of such
purchase, or as described in the then currently effective Prospectus of the
Company.
(4) The foregoing shall not prevent the Distributor, or any
affiliate thereof, of the Company from purchasing Shares prior to the
effectiveness of the first registration statement relating to the Shares under
the Securities Act of 1933. (b) The Company shall not lend assets of the Company
to any officer or Director of the Company, or to any partner, officer, director
or shareholder of, or person financially interested in, the Investment Adviser
of the Company, or the Distributor of the Company, or to the Investment Adviser
of the Company or to the Distributor of the Company.
(c) The Company shall not impose any restrictions upon the transfer of
the Shares of the Company except as provided in the Articles of Incorporation,
but this requirement shall not prevent the charging of customary transfer agent
fees.
(d) The Company shall not permit any officer or Director of the
Company, or any partner, officer or director of the Investment Adviser or
Distributor of the Company, to deal for or on behalf of the Company with himself
as principal or agent, or with any partnership, association or corporation in
which he has a financial interest; provided that the foregoing provisions shall
not prevent (a) officers and Directors of the Company or partners, officers or
directors of the Investment Adviser or Distributor of the Company from buying,
holding or selling Shares in the Company, or from being partners, officers or
directors or otherwise financially interested in the Investment Adviser or
Distributor of the Company; (b) purchases or sales of securities or other
property by the Company from or to an affiliated person or to the Investment
Adviser or Distributor of the Company if such transaction is exempt from the
applicable provisions of the 1940 Act; (c) purchases of investments for the
portfolio of the Company or sales of investments owned by the Company through a
security dealer who is, or one or more of whose partners, shareholders, officers
or directors is, an officer or Director of the Company, or a partner, officer or
director of the Investment Adviser or Distributor of the Company, if such
transactions are handled in the capacity of broker only and commissions charged
do not exceed customary brokerage charges for such services; (d) employment of
legal counsel, registrar, Transfer Agent, dividend disbursing agent or Custodian
who is, or has a partner, shareholder, officer, or director who is, an officer
or Director of the Company, or a partner, officer or director of the Investment
Adviser or Distributor of the Company, if only customary fees are charged for
services to the Company; (e) sharing statistical research, legal and management
expenses and office hire and expenses with any other investment company in which
an officer or Director of the Company, or a partner, officer or director of the
Investment Adviser or Distributor of the Company, is an officer or director or
otherwise financially interested.
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT dated as of the 3rd day of May, 1993, amended and
restated the 25th day of February, 1994 and the 25th day of May, 1995, between
TEMPLETON INSTITUTIONAL FUNDS, INC. (hereinafter referred to as the "Company")
on behalf of Foreign Equity Series, (hereinafter referred to as the "Fund"), and
TEMPLETON INVESTMENT COUNSEL, INC. (hereinafter referred to as the "Investment
Manager").
In consideration of the mutual agreements herein made, the
Company and the Investment Manager understand and agree as follows:
(1) The Investment Manager shall manage the investment and
reinvestment of the Fund's assets consistent with the provisions of the Fund's
Agreement and Articles of Incorporation and the investment policies adopted and
declared by the Fund's Board of Directors. In pursuance of the foregoing, the
Investment Manager shall make all determinations with respect to the investment
of the Fund's assets and the purchase and sale of its investment securities, and
shall take all such steps as may be necessary to implement those determinations.
Such determinations and services shall include determining the manner in which
any voting rights, rights to consent to corporate action and any other rights
pertaining to the Fund's investment securities shall be exercised, subject to
the guidelines adopted by the Board of Directors.
(2) The Investment Manager is not required to furnish any
personnel, overhead items or facilities for the Company, including trading desk
facilities or daily pricing of the Fund's portfolio.
(3) The Investment Manager shall be responsible for selecting
members of securities exchanges, brokers and dealers (such members, brokers and
dealers being hereinafter referred to as "brokers") for the execution of the
Fund's portfolio transactions consistent with the Fund's brokerage policies and,
when applicable, the negotiation of commissions in connection therewith.
All decisions and placements shall be made in accordance with
the following principles:
A. Purchase and sale orders will usually be placed
with brokers which are selected by the
Investment Manager as able to achieve "best
execution" of such orders. "Best execution" shall
mean prompt and reliable execution at the most
favorable security price, taking into account the
other provisions hereinafter set forth. The
determination of what may constitute best execution
and price in the execution of a securities
transaction by a broker involves a number of
considerations, including, without limitation, the
overall direct net economic result to the Fund
(involving both price paid or received and any
commissions and other costs paid), the efficiency
with which the transaction is effected, the ability
to effect the transaction at all where a large block
is involved, availability of the broker to stand
ready to execute possibly difficult transactions in
the future, and the financial strength and stability
of the broker. Such considerations are judgmental and
are weighed by the Investment Manager in determining
the overall reasonableness of brokerage commissions.
B. In selecting brokers for portfolio transactions, the
Investment Manager shall take into account its past
experience as to brokers qualified to achieve "best
execution," including brokers who specialize in any
foreign securities held by the Fund.
C. The Investment Manager is authorized to allocate
brokerage business to brokers who have provided
brokerage and research services, as such services
are defined in Section 28(e) of the Securities
Exchange Act of 1934 (the "1934 Act"), for the Fund
and/or other accounts, if any, for which the
Investment Manager exercises investment discretion
(as defined in Section 3(a)(35) of the 1934 Act)
and, as to transactions for which fixed minimum
commission rates are not applicable, to cause the
Fund to pay a commission for effecting a securities
transaction in excess of the amount another broker
would have charged for effecting that transaction,
if the Investment Manager determines in good faith
that such amount of commission is reasonable in
relation to the value of the brokerage and research
services provided by such broker, viewed in terms of
either that particular transaction or the Investment
Manager's overall responsibilities with respect to
the Fund and the other accounts, if any, as to which
it exercises investment discretion. In reaching
such determination, the Investment Manager will not
be required to place or attempt to place a specific
dollar value on the research or execution services
of a broker or on the portion of any commission
reflecting either of said services. In demonstrating
that such determinations were made in good faith,
the Investment Manager shall be prepared to show
that all commissions were allocated and paid for
purposes contemplated by the Fund's brokerage
policy; that the research services provide lawful
and appropriate assistance to the Investment Manager
in the performance of its investment decision-making
responsibilities; and that the commissions paid were
within a reasonable range. Whether commissions were
within a reasonable range shall be based on any
available information as to the level of commission
known to be charged by other brokers on comparable
transactions, but there shall be taken into account
the Fund's policies that (i) obtaining a low
commission is deemed secondary to obtaining a
favorable securities price, since it is recognized
that usually it is more beneficial to the Fund to
obtain a favorable price than to pay the lowest
commission; and (ii) the quality, comprehensiveness
and frequency of research studies that are provided
for the Investment Manager are useful to the
Investment Manager in performing its advisory
services under this Agreement. Research services
provided by brokers to the Investment Manager are
considered to be in addition to, and not in lieu of,
services required to be performed by the Investment
Manager under this Agreement. Research furnished by
brokers through which the Fund effects securities
transactions may be used by the Investment Manager
for any of its accounts, and not all research may be
used by the Investment Manager for the Fund. When
execution of portfolio transactions is allocated to
brokers trading on exchanges with fixed brokerage
commission rates, account may be taken of various
services provided by the broker.
D. Purchases and sales of portfolio securities within
the United States other than on a securities exchange
shall be executed with primary market makers acting
as principal, except where, in the judgment of the
Investment Manager, better prices and execution may
be obtained on a commission basis or from other
sources.
E. Sales of the Fund's shares (which shall be deemed to
include also shares of other registered investment
companies which have either the same adviser or an
investment adviser affiliated with the Investment
Manager) by a broker are one factor among others to
be taken into account in deciding to allocate
portfolio transactions (including agency
transactions, principal transactions, purchases in
underwritings or tenders in response to tender
offers) for the account of the Fund to that broker;
provided that the broker shall furnish "best
execution," as defined in subparagraph A above, and
that such allocation shall be within the scope of
the Fund's policies as stated above; provided
further, that in every allocation made to a broker
in which the sale of the Fund's shares is taken into
account, there shall be no increase in the amount of
the commissions or other compensation paid to such
broker beyond a reasonable commission or other
compensation determined, as set forth in subparagraph
C above, on the basis of best execution alone or
best execution plus research services, without taking
account of or placing any value upon such sale of the
Fund's shares.
(4) The Company agrees to pay to the Investment Manager a
monthly fee in dollars at an annual rate of 0.70% of the Fund's average daily
net assets, payable at the end of each calendar month. The Investment Manager
may waive all or a portion of its fees provided for hereunder and such waiver
shall be treated as a reduction in purchase price of its services. The
Investment Manager shall be contractually bound hereunder by the terms of any
publicly announced waiver of its fee, or any limitation of the Fund's expenses,
as if such waiver or limitation were fully set forth herein.
Notwithstanding the foregoing, if the total expenses of the
Fund (including the fee to the Investment Manager) in any fiscal year exceed any
expense limitation imposed by applicable State law, the Investment Manager shall
reimburse the Fund for such excess in the manner and to the extent required by
applicable State law. The term "total expenses," as used in this paragraph, does
not include interest, taxes, litigation expenses, distribution expenses,
brokerage commissions or other costs of acquiring or disposing of any of the
Fund's portfolio securities or any costs or expenses incurred or arising other
than in the ordinary and necessary course of the Fund's business. When the
accrued amount of such expenses exceeds this limit, the monthly payment of the
Investment Manager's fee will be reduced by the amount of such excess, subject
to adjustment month by month during the balance of that Fund's fiscal year if
accrued expenses thereafter fall below the limit.
(5) This Agreement shall continue in effect until April 30,
1996. If not sooner terminated, this Agreement shall continue in effect for
successive periods of 12 months each thereafter, provided that each such
continuance shall be specifically approved annually by the vote of a majority of
the Company's Board of Directors who are not parties to this Agreement or
"interested persons" (as defined in Investment Company Act of 1940 (the "1940
Act")) of any such party, cast in person at a meeting called for the purpose of
voting on such approval and either the vote of (a) a majority of the outstanding
voting securities of the Fund, as defined in the 1940 Act, or (b) a majority of
the Company's Board of Directors as a whole.
(6) Notwithstanding the foregoing, this Agreement may be
terminated by either party at any time, without the payment of any penalty, on
sixty (60) days' written notice to the other party, provided that termination by
the Company is approved by vote of a majority of the Company's Board of
Directors in office at the time or by vote of a majority of the outstanding
voting securities of the Fund (as defined by the 1940 Act).
(7) This Agreement will terminate automatically and
immediately in the event of its assignment (as defined in the 1940 Act).
(8) In the event this Agreement is terminated and the
Investment Manager no longer acts as Investment Manager to the Fund, the
Investment Manager reserves the right to withdraw from the Fund the use of the
name "Templeton" or any name misleadingly implying a continuing relationship
between the Fund and the Investment Manager or any of its affiliates.
(9) Except as may otherwise be provided by the 1940 Act,
neither the Investment Manager nor its officers, directors, employees or agents
shall be subject to any liability for any error of judgment, mistake of law, or
any loss arising out of any investment or other act or omission in the
performance by the Investment Manager of its duties under the Agreement or for
any loss or damage resulting from the imposition by any government of exchange
control restrictions which might affect the liquidity of the Fund's assets, or
from acts or omissions of custodians, or securities depositories, or from any
war or political act of any foreign government to which such assets might be
exposed, or for failure, on the part of the custodian or otherwise, timely to
collect payments, except for any liability, loss or damage resulting from
willful misfeasance, bad faith or gross negligence on the Investment Manager's
part or by reason of reckless disregard of the Investment Manager's duties under
this Agreement.
(10) It is understood that the services of the Investment Manager
are not deemed to be exclusive, and nothing in this Agreement shall prevent the
Investment Manager, or any affiliate thereof, from providing similar services to
other investment companies and other clients, including clients which may invest
in the same types of securities as the Fund, or, in providing such services,
from using information furnished by others. When the Investment Manager
determines to buy or sell the same security for the Fund that the Investment
Manager or one or more of its affiliates has selected for clients of the
Investment Manager or its affiliates, the orders for all such security
transactions shall be placed for execution by methods determined by the
Investment Manager, with approval by the Company's Board of Directors, to be
impartial and fair.
(11) This Agreement shall be construed in accordance with the laws
of the State of Maryland, provided that nothing herein shall be construed as
being inconsistent with applicable Federal and state securities laws and any
rules, regulations and orders thereunder.
(12) If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby and, to this extent, the provisions of
this Agreement shall be deemed to be severable.
(13) Nothing herein shall be construed as constituting the
Investment Manager an agent of the Company or of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their duly authorized officers and their
respective corporate seals to be hereunto duly affixed and attested.
TEMPLETON INSTITUTIONAL FUNDS, INC.
By: /s/JOHN R. KAY
TEMPLETON INVESTMENT COUNSEL, INC.
By: /s/CHARLES E. JOHNSON
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT dated as of the 3rd day of May, 1993, and amended
and restated as of the 25th day of February, 1994 and the 25th day of May, 1995,
between TEMPLETON INSTITUTIONAL FUNDS, INC. (hereinafter referred to as the
"Company") on behalf of Growth Series, (hereinafter referred to as the "Fund"),
and TEMPLETON INVESTMENT COUNSEL, INC. (hereinafter referred to as the
"Investment Manager").
In consideration of the mutual agreements herein made, the
Company and the Investment Manager understand and agree as follows:
(1) The Investment Manager shall manage the investment and
reinvestment of the Fund's assets consistent with the provisions of the Fund's
Agreement and Articles of Incorporation and the investment policies adopted and
declared by the Fund's Board of Directors. In pursuance of the foregoing, the
Investment Manager shall make all determinations with respect to the investment
of the Fund's assets and the purchase and sale of its investment securities, and
shall take all such steps as may be necessary to implement those determinations.
Such determinations and services shall include determining the manner in which
any voting rights, rights to consent to corporate action and any other rights
pertaining to the Fund's investment securities shall be exercised, subject to
the guidelines adopted by the Board of Directors.
(2) The Investment Manager is not required to furnish any
personnel, overhead items or facilities for the Company, including trading desk
facilities or daily pricing of the Fund's portfolio.
(3) The Investment Manager shall be responsible for selecting
members of securities exchanges, brokers and dealers (such members, brokers and
dealers being hereinafter referred to as "brokers") for the execution of the
Fund's portfolio transactions consistent with the Fund's brokerage policies and,
when applicable, the negotiation of commissions in connection therewith.
All decisions and placements shall be made in accordance with
the following principles:
A. Purchase and sale orders will usually be placed with
brokers which are selected by the Investment Manager
as able to achieve "best execution" of such
orders. "Best execution" shall mean prompt and
reliable execution at the most favorable
security price, taking into account the
other provisions hereinafter set forth. The
determination of what may constitute best execution
and price in the execution of a securities
transaction by a broker involves a number of
considerations, including, without limitation, the
overall direct net economic result to the Fund
(involving both price paid or received and any
commissions and other costs paid), the efficiency
with which the transaction is effected, the ability
to effect the transaction at all where a large block
is involved, availability of the broker to stand
ready to execute possibly difficult transactions in
the future, and the financial strength and stability
of the broker. Such considerations are judgmental and
are weighed by the Investment Manager in determining
the overall reasonableness of brokerage commissions.
B. In selecting brokers for portfolio transactions, the
Investment Manager shall take into account its past
experience as to brokers qualified to achieve "best
execution," including brokers who specialize in any
foreign securities held by the Fund.
C. The Investment Manager is authorized to allocate
brokerage business to brokers who have provided
brokerage and research services, as such services
are defined in Section 28(e) of the Securities
Exchange Act of 1934 (the "1934 Act"), for the Fund
and/or other accounts, if any, for which the
Investment Manager exercises investment discretion
(as defined in Section 3(a)(35) of the 1934 Act) and,
as to transactions for which fixed minimum commission
rates are not applicable, to cause the Fund to pay
a commission for effecting a securities transaction
in excess of the amount another broker would have
charged for effecting that transaction, if the
Investment Manager determines in good faith that such
amount of commission is reasonable in relation to
the value of the brokerage and research services
provided by such broker, viewed in terms of either
that particular transaction or the Investment
Manager's overall responsibilities with respect to
the Fund and the other accounts, if any, as to which
it exercises investment discretion. In reaching such
determination, the Investment Manager will not be
required to place or attempt to place a specific
dollar value on the research or execution services
of a broker or on the portion of any commission
reflecting either of said services. In demonstrating
that such determinations were made in good faith, the
Investment Manager shall be prepared to show that all
commissions were allocated and paid for purposes
contemplated by the Fund's brokerage policy; that
the research services provide lawful and appropriate
assistance to the Investment Manager in the
performance of its investment decision-making
responsibilities; and that the commissions paid were
within a reasonable range. Whether commissions were
within a reasonable range shall be based on any
available information as to the level of commission
known to be charged by other brokers on comparable
transactions, but there shall be taken into account
the Fund's policies that (i) obtaining a low
commission is deemed secondary to obtaining a
favorable securities price, since it is recognized
that usually it is more beneficial to the Fund to
obtain a favorable price than to pay the lowest
commission; and (ii) the quality, comprehensiveness
and frequency of research studies that are provided
for the Investment Manager are useful to the
Investment Manager in performing its advisory
services under this Agreement. Research services
provided by brokers to the Investment Manager are
considered to be in addition to, and not in lieu of,
services required to be performed by the Investment
Manager under this Agreement. Research furnished by
brokers through which the Fund effects securities
transactions may be used by the Investment Manager
for any of its accounts, and not all research may be
used by the Investment Manager for the Fund. When
execution of portfolio transactions is allocated to
brokers trading on exchanges with fixed brokerage
commission rates, account may be taken of various
services provided by the broker.
D. Purchases and sales of portfolio securities within
the United States other than on a securities exchange
shall be executed with primary market makers acting
as principal, except where, in the judgment of the
Investment Manager, better prices and execution may
be obtained on a commission basis or from other
sources.
E. Sales of the Fund's shares (which shall be deemed to
include also shares of other registered investment
companies which have either the same adviser or an
investment adviser affiliated with the Investment
Manager) by a broker are one factor among others to
be taken into account in deciding to allocate
portfolio transactions (including agency
transactions, principal transactions, purchases in
underwritings or tenders in response to tender
offers) for the account of the Fund to that broker;
provided that the broker shall furnish "best
execution," as defined in subparagraph A above, and
that such allocation shall be within the scope of
the Fund's policies as stated above; provided
further, that in every allocation made to a broker
in which the sale of the Fund's shares is taken into
account, there shall be no increase in the amount of
the commissions or other compensation paid to such
broker beyond a reasonable commission or other
compensation determined, as set forth in subparagraph
C above, on the basis of best execution alone or
best execution plus research services, without taking
account of or placing any value upon such sale of the
Fund's shares.
(4) The Company agrees to pay to the Investment Manager a
monthly fee in dollars at an annual rate of 0.70% of the Fund's average daily
net assets, payable at the end of each calendar month. The Investment Manager
may waive all or a portion of its fees provided for hereunder and such waiver
shall be treated as a reduction in purchase price of its services. The
Investment Manager shall be contractually bound hereunder by the terms of any
publicly announced waiver of its fee, or any limitation of the Fund's expenses,
as if such waiver or limitation were fully set forth herein.
Notwithstanding the foregoing, if the total expenses of the
Fund (including the fee to the Investment Manager) in any fiscal year exceed any
expense limitation imposed by applicable State law, the Investment Manager shall
reimburse the Fund for such excess in the manner and to the extent required by
applicable State law. The term "total expenses," as used in this paragraph, does
not include interest, taxes, litigation expenses, distribution expenses,
brokerage commissions or other costs of acquiring or disposing of any of the
Fund's portfolio securities or any costs or expenses incurred or arising other
than in the ordinary and necessary course of the Fund's business. When the
accrued amount of such expenses exceeds this limit, the monthly payment of the
Investment Manager's fee will be reduced by the amount of such excess, subject
to adjustment month by month during the balance of the Fund's fiscal year if
accrued expenses thereafter fall below the limit.
(5) This Agreement shall continue in effect until April 30,
1996. If not sooner terminated, this Agreement shall continue in effect for
successive periods of 12 months each thereafter, provided that each such
continuance shall be specifically approved annually by the vote of a majority of
the Company's Board of Directors who are not parties to this Agreement or
"interested persons" (as defined in Investment Company Act of 1940 (the "1940
Act")) of any such party, cast in person at a meeting called for the purpose of
voting on such approval and either the vote of (a) a majority of the outstanding
voting securities of the Fund, as defined in the 1940 Act, or (b) a majority of
the Company's Board of Directors as a whole.
(6) Notwithstanding the foregoing, this Agreement may be
terminated by either party at any time, without the payment of any penalty, on
sixty (60) days' written notice to the other party, provided that termination by
the Company is approved by vote of a majority of the Company's Board of
Directors in office at the time or by vote of a majority of the outstanding
voting securities of the Fund (as defined by the 1940 Act).
(7) This Agreement will terminate automatically and
immediately in the event of its assignment (as defined in the 1940 Act).
(8) In the event this Agreement is terminated and the
Investment Manager no longer acts as Investment Manager to the Fund, the
Investment Manager reserves the right to withdraw from the Fund the use of the
name "Templeton" or any name misleadingly implying a continuing relationship
between the Fund and the Investment Manager or any of its affiliates.
(9) Except as may otherwise be provided by the 1940 Act,
neither the Investment Manager nor its officers, directors, employees or agents
shall be subject to any liability for any error of judgment, mistake of law, or
any loss arising out of any investment or other act or omission in the
performance by the Investment Manager of its duties under the Agreement or for
any loss or damage resulting from the imposition by any government of exchange
control restrictions which might affect the liquidity of the Fund's assets, or
from acts or omissions of custodians, or securities depositories, or from any
war or political act of any foreign government to which such assets might be
exposed, or for failure, on the part of the custodian or otherwise, timely to
collect payments, except for any liability, loss or damage resulting from
willful misfeasance, bad faith or gross negligence on the Investment Manager's
part or by reason of reckless disregard of the Investment Manager's duties under
this Agreement.
(10) It is understood that the services of the Investment Manager
are not deemed to be exclusive, and nothing in this Agreement shall prevent the
Investment Manager, or any affiliate thereof, from providing similar services to
other investment companies and other clients, including clients which may invest
in the same types of securities as the Fund, or, in providing such services,
from using information furnished by others. When the Investment Manager
determines to buy or sell the same security for the Fund that the Investment
Manager or one or more of its affiliates has selected for clients of the
Investment Manager or its affiliates, the orders for all such security
transactions shall be placed for execution by methods determined by the
Investment Manager, with approval by the Company's Board of Directors, to be
impartial and fair.
(11) This Agreement shall be construed in accordance with the laws
of the State of Maryland, provided that nothing herein shall be construed as
being inconsistent with applicable Federal and state securities laws and any
rules, regulations and orders thereunder.
(12) If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby and, to this extent, the provisions of
this Agreement shall be deemed to be severable.
(13) Nothing herein shall be construed as constituting the
Investment Manager an agent of the Company or of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their duly authorized officers and their
respective corporate seals to be hereunto duly affixed and attested.
TEMPLETON INSTITUTIONAL FUNDS, INC.
By: /s/JOHN R. KAY
TEMPLETON INVESTMENT COUNSEL, INC.
By: /s/CHARLES E. JOHNSON
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of the 3rd day of May, 1993 and amended and
restated as of the 25th day of February, 1994, the 25th day of May, 1995 and the
23rd day of November, 1995, between TEMPLETON INSTITUTIONAL FUNDS, INC.
(hereinafter referred to as the "Company") on behalf of Emerging Markets Series
(hereinafter referred to as the "Fund"), and TEMPLETON ASSET MANAGEMENT LTD.
(hereinafter referred to as the "Investment Manager").
In consideration of the mutual agreements herein made, the
Company and the Investment Manager understand and agree as follows:
(1) The Investment Manager shall manage the investment and
reinvestment of the Fund's assets consistent with the provisions of the Fund's
Agreement and Articles of Incorporation and the investment policies adopted and
declared by the Fund's Board of Directors. In pursuance of the foregoing, the
Investment Manager shall make all determinations with respect to the investment
of the Fund's assets and the purchase and sale of its investment securities, and
shall take all such steps as may be necessary to implement those determinations.
Such determinations and services shall include determining the manner in which
any voting rights, rights to consent to corporate action and any other rights
pertaining to the Fund's investment securities shall be exercised, subject to
the guidelines adopted by the Board of Directors.
(2) The Investment Manager is not required to furnish any
personnel, overhead items or facilities for the Company, including trading desk
facilities or daily pricing of the Fund's portfolio.
(3) The Investment Manager shall be responsible for selecting
members of securities exchanges, brokers and dealers (such members, brokers and
dealers being hereinafter referred to as "brokers") for the execution of the
Fund's portfolio transactions consistent with the Fund's brokerage policies and,
when applicable, the negotiation of commissions in connection therewith.
All decisions and placements shall be made in accordance with
the following principles:
A. Purchase and sale orders will usually be placed with
brokers which are selected by the Investment
Manager as able to achieve "best execution"
of such orders. "Best execution" shall mean
prompt and reliable execution at the most
favorable security price, taking into account the
other provisions hereinafter set forth. The
determination of what may constitute best execution
and price in the execution of a securities
transaction by a broker involves a number of
considerations, including, without limitation, the
overall direct net economic result to the Fund
(involving both price paid or received and any
commissions and other costs paid), the efficiency
with which the transaction is effected, the ability
to effect the transaction at all where a large block
is involved, availability of the broker to stand
ready to execute possibly difficult transactions in
the future, and the financial strength and stability
of the broker. Such considerations are judgmental and
are weighed by the Investment Manager in determining
the overall reasonableness of brokerage commissions.
B. In selecting brokers for portfolio transactions, the
Investment Manager shall take into account its past
experience as to brokers qualified to achieve "best
execution," including brokers who specialize in any
foreign securities held by the Fund.
C. The Investment Manager is authorized to allocate
brokerage business to brokers who have provided
brokerage and research services, as such services
are defined in Section 28(e) of the Securities
Exchange Act of 1934 (the "1934 Act"), for the Fund
and/or other accounts, if any, for which the
Investment Manager exercises investment discretion
(as defined in Section 3(a)(35) of the 1934 Act)
and, as to transactions for which fixed minimum
commission rates are not applicable, to cause the
Fund to pay a commission for effecting a securities
transaction in excess of the amount another broker
would have charged for effecting that transaction,
if the Investment Manager determines in good faith
that such amount of commission is reasonable in
relation to the value of the brokerage and research
services provided by such broker, viewed in terms
of either that particular transaction or the
Investment Manager's overall responsibilities with
respect to the Fund and the other accounts, if any,
as to which it exercises investment discretion. In
reaching such determination, the Investment
Manager will not be required to place or attempt to
place a specific dollar value on the research or
execution services of a broker or on the portion of
any commission reflecting either of said services.
In demonstrating that such determinations were
made in good faith, the Investment Manager shall be
prepared to show that all commissions were allocated
and paid for purposes contemplated by the Fund's
brokerage policy; that the research services provide
lawful and appropriate assistance to the Investment
Manager in the performance of its investment
decision-making responsibilities; and that the
commissions paid were within a reasonable range.
Whether commissions were within a reasonable range
shall be based on any available information as to
the level of commission known to be charged by other
brokers on comparable transactions, but there shall
be taken into account the Fund's policies that (i)
obtaining a low commission is deemed secondary to
obtaining a favorable securities price, since it is
recognized that usually it is more beneficial to the
Fund to obtain a favorable price than to pay the
lowest commission; and (ii) the quality,
comprehensiveness and frequency of research studies
that are provided for the Investment Manager are
useful to the Investment Manager in performing its
advisory services under this Agreement. Research
services provided by brokers to the Investment
Manager are considered to be in addition to, and not
in lieu of, services required to be performed by the
Investment Manager under this Agreement. Research
furnished by brokers through which the Fund effects
securities transactions may be used by the Investment
Manager for any of its accounts, and not all research
may be used by the Investment Manager for the Fund.
When execution of portfolio transactions is allocated
to brokers trading on exchanges with fixed brokerage
commission rates, account may be taken of various
services provided by the broker.
D. Purchases and sales of portfolio securities within
the United States other than on a securities exchange
shall be executed with primary market makers acting
as principal, except where, in the judgment of the
Investment Manager, better prices and execution may
be obtained on a commission basis or from other
sources.
E. Sales of the Fund's shares (which shall be deemed to
include also shares of other registered investment
companies which have either the same adviser or an
investment adviser affiliated with the Investment
Manager) by a broker are one factor among others to
be taken into account in deciding to allocate
portfolio transactions (including agency
transactions, principal transactions, purchases in
underwritings or tenders in response to tender
offers) for the account of the Fund to that broker;
provided that the broker shall furnish "best
execution," as defined in subparagraph A above, and
that such allocation shall be within the scope of
the Fund's policies as stated above; provided
further, that in every allocation made to a broker
in which the sale of Fund shares is taken into
account, there shall be no increase in the amount of
the commissions or other compensation paid to such
broker beyond a reasonable commission or other
compensation determined, as set forth in subparagraph
C above, on the basis of best execution alone or best
execution plus research services, without taking
account of or placing any value upon such sale of
the Fund's shares.
(4) The Company agrees to pay to the Investment Manager a
monthly fee in dollars at an annual rate of 1.25% of the Fund's average daily
net assets, payable at the end of each calendar month. The Investment Manager
may waive all or a portion of its fees provided for hereunder and such waiver
shall be treated as a reduction in purchase price of its services. The
Investment Manager shall be contractually bound hereunder by the terms of any
publicly announced waiver of its fee, or any limitation of the Fund's expenses,
as if such waiver or limitation were fully set forth herein.
Notwithstanding the foregoing, if the total expenses of the
Fund (including the fee to the Investment Manager) in any fiscal year of the
Fund exceed any expense limitation imposed by applicable State law, the
Investment Manager shall reimburse the Fund for such excess in the manner and to
the extent required by applicable State law. The term "total expenses," as used
in this paragraph, does not include interest, taxes, litigation expenses,
distribution expenses, brokerage commissions or other costs of acquiring or
disposing of any of the Fund's portfolio securities or any costs or expenses
incurred or arising other than in the ordinary and necessary course of the
Fund's business. When the accrued amount of such expenses exceeds this limit,
the monthly payment of the Investment Manager's fee will be reduced by the
amount of such excess, subject to adjustment month by month during the balance
of the Fund's fiscal year if accrued expenses thereafter fall below the limit.
(5) This Agreement is amended and restated as of the 23rd day
of November, 1995 and shall continue in effect until April 30, 1996. If not
sooner terminated, this Agreement shall continue in effect for successive
periods of 12 months each thereafter, provided that each such continuance shall
be specifically approved annually by the vote of a majority of the Company's
Board of Directors who are not parties to this Agreement or "interested persons"
(as defined in Investment Company Act of 1940 (the "1940 Act")) of any such
party, cast in person at a meeting called for the purpose of voting on such
approval and either the vote of (a) a majority of the outstanding voting
securities of the Fund, as defined in the 1940 Act, or (b) a majority of the
Company's Board of Directors as a whole.
(6) Notwithstanding the foregoing, this Agreement may be
terminated by either party at any time, without the payment of any penalty, on
sixty (60) days' written notice to the other party, provided that termination by
the Company is approved by vote of a majority of the Company's Board of
Directors in office at the time or by vote of a majority of the outstanding
voting securities of the Fund (as defined by the 1940 Act).
(7) This Agreement will terminate automatically and
immediately in the event of its assignment (as defined in the 1940 Act).
(8) In the event this Agreement is terminated and the
Investment Manager no longer acts as Investment Manager to the Fund, the
Investment Manager reserves the right to withdraw from the Fund the use of the
name "Templeton" or any name misleadingly implying a continuing relationship
between the Fund and the Investment Manager or any of its affiliates.
(9) Except as may otherwise be provided by the 1940 Act,
neither the Investment Manager nor its officers, directors, employees or agents
shall be subject to any liability for any error of judgment, mistake of law, or
any loss arising out of any investment or other act or omission in the
performance by the Investment Manager of its duties under the Agreement or for
any loss or damage resulting from the imposition by any government of exchange
control restrictions which might affect the liquidity of the Fund's assets, or
from acts or omissions of custodians, or securities depositories, or from any
war or political act of any foreign government to which such assets might be
exposed, or for failure, on the part of the custodian or otherwise, timely to
collect payments, except for any liability, loss or damage resulting from
willful misfeasance, bad faith or gross negligence on the Investment Manager's
part or by reason of reckless disregard of the Investment Manager's duties under
this Agreement.
(10) It is understood that the services of the Investment
Manager are not deemed to be exclusive, and nothing in this Agreement shall
prevent the Investment Manager, or any affiliate thereof, from providing similar
services to other investment companies and other clients, including clients
which may invest in the same types of securities as the Fund, or, in providing
such services, from using information furnished by others. When the Investment
Manager determines to buy or sell the same security for the Fund that the
Investment Manager or one or more of its affiliates has selected for clients of
the Investment Manager or its affiliates, the orders for all such security
transactions shall be placed for execution by methods determined by the
Investment Manager, with approval by the Company's Board of Directors, to be
impartial and fair.
(11) This Agreement shall be construed in accordance with the
laws of the State of Maryland, provided that nothing herein shall be construed
as being inconsistent with applicable Federal and state securities laws and any
rules, regulations and orders thereunder.
(12) If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby and, to this extent, the provisions of
this Agreement shall be deemed to be severable.
(13) Nothing herein shall be construed as constituting
the Investment Manager an agent of the Company or of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their duly authorized officers and their
respective corporate seals to be hereunto duly affixed and attested.
TEMPLETON INSTITUTIONAL FUNDS, INC.
By: /s/JOHN R. KAY
John R. Kay
Vice President
TEMPLETON ASSET MANAGEMENT LTD.
By: /s/CHARLES E. JOHNSON
Charles E. Johnson
Director
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT dated as of the 3rd day of May, 1993, and amended
and restated as of the 25th day of February, 1994, and the 25th day of May, 1995
between TEMPLETON INSTITUTIONAL FUNDS, INC. (hereinafter referred to as the
"Company") on behalf of Global Fixed Income Series (hereinafter referred to as
the "Fund"), and TEMPLETON INVESTMENT COUNSEL, INC., through its TEMPLETON
GLOBAL BOND MANAGERS division (hereinafter referred to as the "Investment
Manager").
In consideration of the mutual agreements herein made, the
Company and the Investment Manager understand and agree as follows:
(1) The Investment Manager shall manage the investment and
reinvestment of the Fund's assets consistent with the provisions of the Fund's
Agreement and Articles of Incorporation and the investment policies adopted and
declared by the Fund's Board of Directors. In pursuance of the foregoing, the
Investment Manager shall make all determinations with respect to the investment
of the Fund's assets and the purchase and sale of its investment securities, and
shall take all such steps as may be necessary to implement those determinations.
Such determinations and services shall include determining the manner in which
any voting rights, rights to consent to corporate action and any other rights
pertaining to the Fund's investment securities shall be exercised, subject to
the guidelines adopted by the Board of Directors.
(2) The Investment Manager is not required to furnish any
personnel, overhead items or facilities for the Company, including trading desk
facilities or daily pricing of the Fund's portfolio.
(3) The Investment Manager shall be responsible for selecting
members of securities exchanges, brokers and dealers (such members, brokers and
dealers being hereinafter referred to as "brokers") for the execution of the
Fund's portfolio transactions consistent with the Fund's brokerage policies and,
when applicable, the negotiation of commissions in connection therewith.
All decisions and placements shall be made in accordance with the following
principles:
A. Purchase and sale orders will usually be placed with
brokers which are selected by the Investment
Manager as able to achieve "best execution"
of such orders. "Best execution" shall
mean prompt and reliable execution at the most
favorable security price, taking into account the
other provisions hereinafter set forth. The
determination of what may constitute best execution
and price in the execution of a securities
transaction by a broker involves a number of
considerations, including, without limitation, the
overall direct net economic result to the Fund
(involving both price paid or received and any
commissions and other costs paid), the efficiency
with which the transaction is effected, the ability
to effect the transaction at all where a large block
is involved, availability of the broker to stand
ready to execute possibly difficult transactions in
the future, and the financial strength and stability
of the broker. Such considerations are judgmental and
are weighed by the Investment Manager in determining
the overall reasonableness of brokerage commissions.
B. In selecting brokers for portfolio transactions, the
Investment Manager shall take into account its past
experience as to brokers qualified to achieve "best
execution," including brokers who specialize in any
foreign securities held by the Fund.
C. The Investment Manager is authorized to allocate
brokerage business to brokers who have provided
brokerage and research services, as such services are
defined in Section 28(e) of the Securities Exchange
Act of 1934 (the "1934 Act"), for the Fund and/or
other accounts, if any, for which the Investment
Manager exercises investment discretion (as defined
in Section 3(a)(35) of the 1934 Act) and, as to
transactions for which fixed minimum commission
rates are not applicable, to cause the Fund to pay
a commission for effecting a securities transaction
in excess of the amount another broker would have
charged for effecting that transaction, if the
Investment Manager determines in good faith that such
amount of commission is reasonable in relation to
the value of the brokerage and research services
provided by such broker, viewed in terms of either
that particular transaction or the Investment
Manager's overall responsibilities with respect to
the Fund and the other accounts, if any, as to which
it exercises investment discretion. In reaching
such determination, the Investment Manager will not
be required to place or attempt to place a specific
dollar value on the research or execution services of
a broker or on the portion of any commission
reflecting either of said services. In demonstrating
that such determinations were made in good faith, the
Investment Manager shall be prepared to show that all
commissions were allocated and paid for purposes
contemplated by the Fund's brokerage policy; that the
research services provide lawful and appropriate
assistance to the Investment Manager in the
performance of its investment decision-making
responsibilities; and that the commissions paid were
within a reasonable range. Whether commissions were
within a reasonable range shall be based on any
available information as to the level of commission
known to be charged by other brokers on comparable
transactions, but there shall be taken into account
the Fund's policies that (i) obtaining a low
commission is deemed secondary to obtaining a
favorable securities price, since it is recognized
that usually it is more beneficial to the Fund to
obtain a favorable price than to pay the lowest
commission; and (ii) the quality, comprehensiveness
and frequency of research studies that are provided
for the Investment Manager are useful to the
Investment Manager in performing its advisory
services under this Agreement. Research services
provided by brokers to the Investment Manager are
considered to be in addition to, and not in lieu of,
services required to be performed by the Investment
Manager under this Agreement. Research furnished by
brokers through which the Fund effects securities
transactions may be used by the Investment Manager
for any of its accounts, and not all research may be
used by the Investment Manager for the Fund. When
execution of portfolio transactions is allocated to
brokers trading on exchanges with fixed brokerage
commission rates, account may be taken of various
services provided by the broker.
D. Purchases and sales of portfolio securities within
the United States other than on a securities exchange
shall be executed with primary market makers acting
as principal, except where, in the judgment of the
Investment Manager, better prices and execution may
be obtained on a commission basis or from other
sources.
E. Sales of the Fund's shares (which shall be deemed to
include also shares of other registered investment
companies which have either the same adviser or an
investment adviser affiliated with the Investment
Manager) by a broker are one factor among others to
be taken into account in deciding to allocate
portfolio transactions (including agency
transactions, principal transactions, purchases in
underwritings or tenders in response to tender
offers) for the account of the Fund to that broker;
provided that the broker shall furnish "best
execution," as defined in subparagraph A above, and
that such allocation shall be within the scope of the
Fund's policies as stated above; provided further,
that in every allocation made to a broker in which
the sale of Fund shares is taken into account, there
shall be no increase in the amount of the commissions
or other compensation paid to such broker beyond a
reasonable commission or other compensation
determined, as set forth in subparagraph C above, on
the basis of best execution alone or best execution
plus research services, without taking account of or
placing any value upon such sale of the Fund's
shares.
(4) The Company agrees to pay to the Investment Manager a
monthly fee in dollars at an annual rate of 0.55% of the Fund's average daily
net assets, payable at the end of each calendar month. The Investment Manager
may waive all or a portion of its fees provided for hereunder and such waiver
shall be treated as a reduction in purchase price of its services. The
Investment Manager shall be contractually bound hereunder by the terms of any
publicly announced waiver of its fee, or any limitation of the Fund's expenses,
as if such waiver or limitation were fully set forth herein.
Notwithstanding the foregoing, if the total expenses of the
Fund (including the fee to the Investment Manager) in any fiscal year of the
Fund exceed any expense limitation imposed by applicable State law, the
Investment Manager shall reimburse the Fund for such excess in the manner and to
the extent required by applicable State law. The term "total expenses," as used
in this paragraph, does not include interest, taxes, litigation expenses,
distribution expenses, brokerage commissions or other costs of acquiring or
disposing of any of the Fund's portfolio securities or any costs or expenses
incurred or arising other than in the ordinary and necessary course of the
Fund's business. When the accrued amount of such expenses exceeds this limit,
the monthly payment of the Investment Manager's fee will be reduced by the
amount of such excess, subject to adjustment month by month during the balance
of the Fund's fiscal year if accrued expenses thereafter fall below the limit.
(5) This Agreement shall continue in effect until April 30,
1996. If not sooner terminated, this Agreement shall continue in effect for
successive periods of 12 months each thereafter, provided that each such
continuance shall be specifically approved annually by the vote of a majority of
the Company's Board of Directors who are not parties to this Agreement or
"interested persons" (as defined in Investment Company Act of 1940 (the "1940
Act")) of any such party, cast in person at a meeting called for the purpose of
voting on such approval and either the vote of (a) a majority of the outstanding
voting securities of the Fund, as defined in the 1940 Act, or (b) a majority of
the Company's Board of Directors as a whole.
(6) Notwithstanding the foregoing, this Agreement may be
terminated by either party at any time, without the payment of any penalty, on
sixty (60) days' written notice to the other party, provided that termination by
the Company is approved by vote of a majority of the Company's Board of
Directors in office at the time or by vote of a majority of the outstanding
voting securities of the Fund (as defined by the 1940 Act).
(7) This Agreement will terminate automatically and
immediately in the event of its assignment (as defined in the 1940 Act).
(8) In the event this Agreement is terminated and the
Investment Manager no longer acts as Investment Manager to the Fund, the
Investment Manager reserves the right to withdraw from the Fund the use of the
name "Templeton" or any name misleadingly implying a continuing relationship
between the Fund and the Investment Manager or any of its affiliates.
(9) Except as may otherwise be provided by the 1940 Act,
neither the Investment Manager nor its officers, directors, employees or agents
shall be subject to any liability for any error of judgment, mistake of law, or
any loss arising out of any investment or other act or omission in the
performance by the Investment Manager of its duties under the Agreement or for
any loss or damage resulting from the imposition by any government of exchange
control restrictions which might affect the liquidity of the Fund's assets, or
from acts or omissions of custodians, or securities depositories, or from any
war or political act of any foreign government to which such assets might be
exposed, or for failure, on the part of the custodian or otherwise, timely to
collect payments, except for any liability, loss or damage resulting from
willful misfeasance, bad faith or gross negligence on the Investment Manager's
part or by reason of reckless disregard of the Investment Manager's duties under
this Agreement.
(10) It is understood that the services of the Investment Manager
are not deemed to be exclusive, and nothing in this Agreement shall prevent the
Investment Manager, or any affiliate thereof, from providing similar services to
other investment companies and other clients, including clients which may invest
in the same types of securities as the Fund, or, in providing such services,
from using information furnished by others. When the Investment Manager
determines to buy or sell the same security for the Fund that the Investment
Manager or one or more of its affiliates has selected for clients of the
Investment Manager or its affiliates, the orders for all such security
transactions shall be placed for execution by methods determined by the
Investment Manager, with approval by the Company's Board of Directors, to be
impartial and fair.
(11) This Agreement shall be construed in accordance with the laws
of the State of Maryland, provided that nothing herein shall be construed as
being inconsistent with applicable Federal and state securities laws and any
rules, regulations and orders thereunder.
(12) If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby and, to this extent, the provisions of
this Agreement shall be deemed to be severable.
(13) Nothing herein shall be construed as constituting the
Investment Manager an agent of the Company or of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their duly authorized officers and their
respective corporate seals to be hereunto duly affixed and attested.
TEMPLETON INSTITUTIONAL FUNDS, INC.
By: /s/JOHN R. KAY
John R. Kay
TEMPLETON INVESTMENT COUNSEL, INC.
By: /s/CHARLES E. JOHNSON
Charles E. Johnson
TEMPLETON INSTITUTIONAL FUNDS, INC.
700 Central Avenue
St. Petersburg, Florida 33701-3628
Franklin Templeton Distributors, Inc.
700 Central Avenue
St. Petersburg, Florida 33701-3628
Re: Amended and Restated Distribution Agreement
Gentlemen:
We, TEMPLETON INSTITUTIONAL FUNDS, INC. (the "Company"), comprised of five
series (Templeton Foreign Equity Series, Templeton Growth Series, Templeton
Emerging Markets Series, Templeton Global Fixed Income Series and Templeton
Foreign Equity (South Africa Free) Series) (referred to herein as a "Fund" or
collectively as the "Funds") are a Maryland corporation operating as an open-end
management investment company or "mutual fund", which is registered under the
Investment Company Act of 1940 (the "1940 Act") and whose shares are registered
under the Securities Act of 1933 (the "1933 Act"). We desire to issue one or
more series or classes of our authorized but unissued shares of capital stock or
beneficial interest (the "Shares") to authorized persons in accordance with
applicable Federal and State securities laws. The Funds' Shares may be made
available in one or more separate series, each of which may have one or more
classes.
You have informed us that your company is registered as a broker-dealer under
the provisions of the Securities Exchange Act of 1934 and that your company is a
member of the National Association of Securities Dealers, Inc. You have
indicated your desire to act as the exclusive selling agent and distributor for
the Shares. We have been authorized to execute and deliver this Distribution
Agreement ("Agreement") to you by a resolution of our Board of Directors
("Board") passed at a meeting at which a majority of Board members, including a
majority who are not otherwise interested persons of the Company and who are not
interested persons of our investment adviser, its related organizations or with
you or your related organizations, were present and voted in favor of the said
resolution approving this Agreement.
1. Appointment of Underwriter. Upon the execution of this Agreement and
in consideration of the agreements on your part herein expressed and upon the
terms and conditions set forth herein, we hereby appoint you as the exclusive
sales agent for our Shares and agree that we will deliver such Shares as you may
sell. You agree to use your best efforts to promote the sale of Shares, but are
not obligated to sell any specific number of Shares.
However, the Fund and each series retain the right to make direct sales
of its Shares without sales charges consistent with the terms of the then
current prospectus and applicable law, and to engage in other legally authorized
transactions in its Shares which do not involve the sale of Shares to the
general public. Such other transactions may include, without limitation,
transactions between the Fund or any series or class and its shareholders only,
transactions involving the reorganization of the Fund or any series, and
transactions involving the merger or combination of the Fund or any series with
another corporation or trust.
2. Independent Contractor. You will undertake and discharge your
obligations hereunder as an independent contractor and shall have no authority
or power to obligate or bind us by your actions, conduct or contracts except
that you are authorized to promote the sale of Shares. You may appoint
sub-agents or distribute through dealers or otherwise as you may determine from
time to time, but this Agreement shall not be construed as authorizing any
dealer or other person to accept orders for sale or repurchase on our behalf or
otherwise act as our agent for any purpose.
3. Offering Price. Shares shall be offered for sale at a price
equivalent to the net asset value per share of that series and class plus any
applicable percentage of the public offering price as sales commission or as
otherwise set forth in our then current prospectus. On each business day on
which the New York Stock Exchange is open for business, we will furnish you with
the net asset value of the Shares of each available series and class which shall
be determined in accordance with our then effective prospectus. All Shares will
be sold in the manner set forth in our then effective prospectus and statement
of additional information, and in compliance with applicable law.
4. Compensation.
A. Sales Commission. You shall be entitled to charge a sales
commission on the sale or redemption, as appropriate, of each series and class
of each Fund's Shares in the amount of any initial, deferred or contingent
deferred sales charge as set forth in our then effective prospectus. You may
allow any sub-agents or dealers such commissions or discounts from and not
exceeding the total sales commission as you shall deem advisable, so long as any
such commissions or discounts are set forth in our current prospectus to the
extent required by the applicable Federal and State securities laws. You may
also make payments to sub-agents or dealers from your own resources, subject to
the following conditions: (a) any such payments shall not create any obligation
for or recourse against the Fund or any series or class, and (b) the terms and
conditions of any such payments are consistent with our prospectus and
applicable federal and state securities laws and are disclosed in our prospectus
or statement of additional information to the extent such laws may require.
B. Distribution Plans. You shall also be entitled
to compensation for your services as provided in any Distribution Plan adopted
as to any series and class of any Fund's Shares pursuant to Rule 12b-1 under
the 1940 Act.
5. Terms and Conditions of Sales. Shares shall be offered for sale only
in those jurisdictions where they have been properly registered or are exempt
from registration, and only to those groups of people which the Board may from
time to time determine to be eligible to purchase such shares.
6. Orders and Payment for Shares. Orders for Shares shall be directed
to the Funds' shareholder services agent, for acceptance on behalf of the Funds.
At or prior to the time of delivery of any of our Shares you will pay or cause
to be paid to the custodian of the Funds' assets, for our account, an amount in
cash equal to the net asset value of such Shares. Sales of Shares shall be
deemed to be made when and where accepted by the Funds' shareholder services
agent. The Funds' custodian and shareholder services agent shall be identified
in its prospectus.
7. Purchases for Your Own Account. You shall not purchase our Shares
for your own account for purposes of resale to the public, but you may purchase
Shares for your own investment account upon your written assurance that the
purchase is for investment purposes and that the Shares will not be resold
except through redemption by us.
8. Sale of Shares to Affiliates. You may sell our Shares at net asset
value to certain of your and our affiliated persons pursuant to the applicable
provisions of the federal securities statutes and rules or regulations
thereunder (the "Rules and Regulations"), including Rule 22d-1 under the 1940
Act, as amended from time to time.
9. Allocation of Expenses. We will pay the expenses:
(a) Of the preparation of the audited and certified
financial statements of our company to be included in
any Post-Effective Amendments ("Amendments") to our
Registration Statement under the 1933 Act or 1940
Act, including the prospectus and statement of
additional information included therein;
(b) Of the preparation, including legal fees, and
printing of all Amendments or supplements filed with
the Securities and Exchange Commission, including the
copies of the prospectuses included in the Amendments
and the first 10 copies of the definitive
prospectuses or supplements thereto, other than those
necessitated by your (including your "Parent's")
activities or Rules and Regulations related to your
activities where such Amendments or supplements
result in expenses which we would not otherwise have
incurred;
(c) Of the preparation, printing and distribution of any
reports or communications which we send to our
existing shareholders; and
(d) Of filing and other fees to Federal and State
securities regulatory authorities necessary to
continue offering our Shares.
You will pay the expenses:
(a) Of printing the copies of the prospectuses and any
supplements thereto and statements of additional
information which are necessary to continue to offer
our Shares;
(b) Of the preparation, excluding legal fees, and
printing of all Amendments and supplements to our
prospectuses and statements of additional information
if the Amendment or supplement arises from your
(including your "Parent's") activities or Rules and
Regulations related to your activities and those
expenses would not otherwise have been incurred by
us;
(c) Of printing additional copies, for use by you as
sales literature, of reports or other communications
which we have prepared for distribution to our
existing shareholders; and
(d) Incurred by you in advertising, promoting and selling
our Shares.
10. Furnishing of Information. We will furnish to you such information
with respect to each series and class of Shares, in such form and signed by such
of our officers as you may reasonably request, and we warrant that the
statements therein contained, when so signed, will be true and correct. We will
also furnish you with such information and will take such action as you may
reasonably request in order to qualify our Shares for sale to the public under
the Blue Sky Laws of jurisdictions in which you may wish to offer them. We will
furnish you with annual audited financial statements of our books and accounts
certified by independent public accountants, with semi-annual financial
statements prepared by us, with registration statements and, from time to time,
with such additional information regarding our financial condition as you may
reasonably request.
11. Conduct of Business. Other than our currently effective prospectus,
you will not issue any sales material or statements except literature or
advertising which conforms to the requirements of Federal and State securities
laws and regulations and which have been filed, where necessary, with the
appropriate regulatory authorities. You will furnish us with copies of all such
materials prior to their use and no such material shall be published if we shall
reasonably and promptly object.
You shall comply with the applicable Federal and State laws
and regulations where our Shares are offered for sale and conduct your affairs
with us and with dealers, brokers or investors in accordance with the Rules of
Fair Practice of the National Association of Securities Dealers, Inc.
12. Redemption or Repurchase Within Seven Days. If Shares are tendered
to us for redemption or repurchase by us within seven business days after your
acceptance of the original purchase order for such Shares, you will immediately
refund to us the full sales commission (net of allowances to dealers or brokers)
allowed to you on the original sale, and will promptly, upon receipt thereof,
pay to us any refunds from dealers or brokers of the balance of sales
commissions reallowed by you. We shall notify you of such tender for redemption
within 10 days of the day on which notice of such tender for redemption is
received by us.
13. Other Activities. Your services pursuant to this Agreement
shall not be deemed to be exclusive, and you may render similar services and act
as an underwriter, distributor or dealer for other investment companies in the
offering of their shares.
14. Term of Agreement. This Agreement shall become effective on the
date of its execution, and shall remain in effect for a period of two (2) years.
The Agreement is renewable annually thereafter, with respect to the Fund or, if
the Fund has more than one series, with respect to each series, for successive
periods not to exceed one year (i) by a vote of (a) a majority of the
outstanding voting securities of the Fund or, if the Fund has more than one
series, of each series, or (b) by a vote of the Board, and (ii) by a vote of a
majority of the members of the Board who are not parties to the Agreement or
interested persons of any parties to the Agreement (other than as members of the
Board), cast in person at a meeting called for the purpose of voting on the
Agreement.
This Agreement may at any time be terminated by the Fund or by
any series without the payment of any penalty, (i) either by vote of the Board
or by vote of a majority of the outstanding voting securities of the Fund or any
series on 90 days' written notice to you; or (ii) by you on 90 days' written
notice to the Fund; and shall immediately terminate with respect to the Fund and
each series in the event of its assignment.
15. Suspension of Sales. We reserve the right at all times to
suspend or limit the public offering of Shares upon two days' written notice to
you.
16. Miscellaneous. This Agreement shall be subject to the laws of the
State of California and shall be interpreted and construed to further promote
the operation of the Fund as an open-end investment company. This Agreement
shall supersede all Distribution Agreements and Amendments previously in effect
between the parties. As used herein, the terms "Net Asset Value," "Offering
Price," "Investment Company," "Open-End Investment Company," "Assignment,"
"Principal Underwriter," "Interested Person," "Parent," "Affiliated Person," and
"Majority of the Outstanding Voting Securities" shall have the meanings set
forth in the 1933 Act or the 1940 Act and the Rules and Regulations thereunder.
Nothing herein shall be deemed to protect you against any liability to us or to
our securities holders to which you would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of your
duties hereunder, or by reason of your reckless disregard of your obligations
and duties hereunder.
If the foregoing meets with your approval, please acknowledge your acceptance by
signing each of the enclosed copies, whereupon this will become a binding
agreement as of the date set forth below.
Very truly yours,
Templeton Institutional Funds, Inc.
By: /s/THOMAS M. MISTELE
Accepted:
Franklin Templeton Distributors, Inc.
By: /s/PETER D. JONES
DATED: May 1, 1995
CUSTODY AGREEMENT
AGREEMENT dated as of May 3, 1993, between THE CHASE MANHATTAN
BANK, N.A. ("Chase"), having its principal place of business at 1 Chase
Manhattan Plaza, New York, New York 10081, and TEMPLETON INSTITUTIONAL FUNDS,
INC. (the "Company"), an investment company registered under the Investment
Company Act of 1940 ("Act of 1940"), having its principal place of business at
700 Central Avenue, St. Petersburg, Florida 33701, on behalf of Growth Series,
Foreign Equity Series, Smaller Companies Series, Emerging Markets Series, Global
Fixed Income Series, and Foreign Equity (South Africa Free) Series (the
"Funds"), series of shares issued by the Company.
WHEREAS, the Company wishes to appoint Chase as custodian to
the securities and assets of the Funds and Chase is willing to act as custodian
under the terms and conditions hereinafter set forth;
NOW, THEREFORE, the Company and its successors and assigns and
Chase and its successors and assigns, hereby agree as follows:
1. APPOINTMENT AS CUSTODIAN. Chase agrees to act as custodian
for the Funds, as provided herein, in connection with (a) cash ("Cash") received
from time to time from, or for the account of, a Fund for credit to the Fund's
deposit account or accounts administered by Chase, Chase Branches and Domestic
Securities Depositories (as hereinafter defined), and/or Foreign Banks and
Foreign Securities Depositories (as hereinafter defined) ("Deposit Account");
(b) all stocks, shares, bonds, debentures, notes, mortgages, or other
obligations for the payment of money and any certificates, receipts, warrants,
or other instruments representing rights to receive, purchase, or subscribe for
the same or evidencing or representing any other rights or interests therein and
other similar property ("Securities") from time to time received by Chase and/or
any Chase Branch, Domestic Securities Depository, Foreign Bank or Foreign
Securities Depository for the account of a Fund ("Custody Account"); and (c)
original margin and variation margin payments in a segregated account for
futures contracts ("Segregated Account").
All Cash held in a Deposit Account or in a Segregated Account
in connection with which Chase agrees to act as custodian is hereby denominated
as a special deposit which shall be held in trust for the benefit of the
relevant Fund and to which Chase, Chase Branches and Domestic Securities
Depositories and/or Foreign Banks and Foreign Securities Depositories shall have
no ownership rights, and Chase will so indicate on its books and records
pertaining to the Deposit Account and the Segregated Account. All cash held in
auxiliary accounts that may be carried for a Fund with Chase (including a Money
Market Account, Redemption Account, Distribution Account and Imprest Account) is
not so denominated as a special deposit and title thereto is held by Chase
subject to the claims of creditors.
2. AUTHORIZATION TO USE BOOK-ENTRY SYSTEM, DOMESTIC
SECURITIES DEPOSITORIES, BRANCH OFFICES, FOREIGN BANKS AND FOREIGN SECURITIES
DEPOSITORIES. Chase is hereby authorized to appoint and utilize, subject to
the provisions of Sections 4 and 5 hereof:
A. The Book Entry System and The Depository
Trust Fund; and also such other Domestic Securities
Depositories selected by Chase and as to which Chase has
received a certified copy of a resolution of the Company's
Board of Directors authorizing deposits therein;
B. Chase's foreign branch offices in the
United Kingdom, Hong Kong, Singapore, and Tokyo, and such
other foreign branch offices of Chase located in countries
approved by the Board of Directors of the Company as to which
Chase shall have given prior notice to the Company;
C. Foreign Banks which Chase shall
have selected, which are located in countries approved by the Board of Directors
of the Company, and as to which banks Chase shall have given prior notice to the
Company; and
D. Foreign Securities Depositories
which Chase shall have selected and as to which Chase has received a certified
copy of a resolution of the Company's Board of Directors authorizing deposits
therein; to hold Securities and Cash at any time owned by the Funds, it being
understood that no such appointment or utilization shall in any way relieve
Chase of its responsibilities as provided for in this Agreement. Foreign
branch offices of Chase appointed and utilized by Chase are herein
referred to as "Chase Branches." Unless otherwise agreed to in writing,
(a) each Chase Branch, each Foreign Bank and each Foreign Securities
Depository shall be selected by Chase to hold only Securities as to which the
principal trading market or principal location as to which such Securities
are to be presented for payment is located outside the United States; and
(b) Chase and each Chase Branch, Foreign Bank and Foreign Securities
Depository will promptly transfer or cause to be transferred to Chase, to be
held in the United States, Securities and/or Cash that are then being held
outside the United States upon request of the Company and/or of the Securities
and Exchange Commission. Utilization by Chase of Chase Branches, Domestic
Securities Depositories, Foreign Banks and Foreign Securities
Depositories shall be in accordance with provisions as from time to time
amended, of an operating agreement to be entered into between Chase and the
Company (the "Operating Agreement").
3. DEFINITIONS. As used in this Agreement, the
following terms shall have the following meanings:
(a) "Authorized Persons of the Company" shall mean
such officers or employees of the Company or any other person
or persons as shall have been designated by a resolution of
the Board of Directors of the Company, a certified copy of
which has been filed with Chase, to act as Authorized Persons
hereunder. Such persons shall continue to be Authorized
Persons of the Company, authorized to act either singly or
together with one or more other of such persons as provided in
such resolution, until such time as the Company shall have
filed with Chase a written notice of the Company
supplementing, amending, or revoking the authority of such
persons.
(b) "Book-Entry system" shall mean the Federal
Reserve/Treasury book-entry system for United States and
federal agency securities, its successor or successors and its
nominee or nominees.
(c) "Domestic Securities Depository" shall mean The
Depository Trust Fund, a clearing agency registered with the
Securities and Exchange Commission, its successor or
successors and its nominee or nominees; and (subject to the
receipt by Chase of a certified copy of a resolution of the
Company's Board of Directors specifically approving deposits
therein as provided in Section 2(a) of this Agreement) any
other person authorized to act as a depository under the Act
of 1940, its successor or successors and its nominee or
nominees.
(d) "Foreign Bank" shall mean any banking institution
organized under the laws of a jurisdiction other than the
United States or of any state thereof.
(e) A "Foreign Securities Depository" shall mean any
system for the central handling of securities abroad where all
securities of any particular class or series of any issuer
deposited within the system are treated as fungible and may be
transferred or pledged by bookkeeping without physical
delivery of the securities by any Chase Branch or Foreign
Bank.
(f) "Written Instructions" shall mean
instructions in writing signed by Authorized Persons of the Company giving such
instructions, and/or such other forms of communications as from time to time
shall be agreed upon in writing between the Company and Chase.
4. SELECTION OF COUNTRIES IN WHICH SECURITIES
MAY BE HELD. Chase shall not cause Securities and Cash to be held in any
country outside the United States until the Company has directed the holding of
the Funds' assets in such country. Chase will be provided with a copy of a
resolution of the Company's Board of Directors authorizing such custody in
any country outside of the United States, which resolution shall be based
upon, among other factors, the following:
(a) comparative operational efficiencies of custody;
(b) clearance and settlement and the costs thereof; and
(c) political and other risks, other than those risks
specifically assumed by Chase.
5. RESPONSIBILITY OF CHASE TO SELECT CUSTODIANS IN INDIVIDUAL
FOREIGN COUNTRIES. The responsibility for selecting the Chase Branch, Foreign
Bank or Foreign Securities Depository to hold the Funds' Securities and Cash in
individual countries authorized by the Company shall be that of Chase. Chase
generally shall utilize Chase Branches where available. In locations where there
are no Chase Branches providing custodial services, Chase shall select as its
agent a Foreign Bank, which may be an affiliate or subsidiary of Chase. To
facilitate the clearance and settlement of securities transactions, Chase
represents that, subject to the approval of the Company, it may deposit
Securities in a Foreign Securities Depository in which Chase is a participant.
In situations in which Chase is not a participant in a Foreign Securities
Depository, Chase may, subject to the approval of the Company, authorize a
Foreign Bank acting as its subcustodian to deposit the Securities in a Foreign
Securities Depository in which the Foreign Bank is a participant.
Notwithstanding the foregoing, such selection by Chase of a Foreign Bank or
Foreign Securities Depository shall not become effective until Chase has been
advised by the Company that a majority of its Board of Directors:
(a) Has approved Chase's selection of the particular
Foreign Bank or Foreign Securities Depository, as the case may
be, as consistent with the best interests of the Funds and
their Shareholders; and
(b) Has approved as consistent with the best
interests of the Funds and their Shareholders a written
contract prepared by Chase which will govern the manner in
which such Foreign Bank will maintain the Funds' assets.
6. CONDITIONS ON SELECTION OF FOREIGN BANK OR FOREIGN
SECURITIES DEPOSITORY. Chase shall authorize the holding of Securities and Cash
by a Chase Branch, Foreign Bank or Foreign Securities Depository only:
(a) to the extent that the Securities and Cash are
not subject to any right, charge, security interest, lien or
claim of any kind in favor of any such Foreign Bank or Foreign
Securities Depository, except for their safe custody or
administration; and
(b) to the extent that the beneficial ownership
of Securities is freely transferable without the payment of money or value
other than for safe custody or administration.
7. CHASE BRANCHES AND FOREIGN BANKS NOT AGENTS OF THE
COMPANY OR FUNDS. Chase Branches, Foreign Banks and Foreign Securities
Depositories shall be subject to the instructions of Chase and/or the
Foreign Bank, and not to those of the Company or the Funds. Chase warrants and
represents that all such instructions shall afford protection to the Funds
at least equal to that afforded for Securities held directly by Chase. Any
Chase Branch, Foreign Bank or Foreign Securities Depository shall act solely
as agent of Chase or of such Foreign Bank.
8. CUSTODY ACCOUNT. Securities held in a Custody Account shall
be physically segregated at all times from those of any other person or persons
except that (a) with respect to Securities held by Chase Branches, such
Securities may be placed in an omnibus account for the customers of Chase, and
Chase shall maintain separate book entry records for each such omnibus account,
and such Securities shall be deemed for the purpose of this Agreement to be held
by Chase in the Custody Account; (b) with respect to Securities deposited by
Chase with a Foreign Bank, a Domestic Securities Depository or a Foreign
Securities Depository, Chase shall identify on its books as belonging to the
relevant Fund the Securities shown on Chase's account on the books of the
Foreign Bank, Domestic Securities Depository or Foreign Securities Depository;
and (c) with respect to Securities deposited by a Foreign Bank with a Foreign
Securities Depository, Chase shall cause the Foreign Bank to identify on its
books as belonging to Chase, as agent, the Securities shown on the Foreign
Bank's account on the books of the Foreign Securities Depository. All Securities
of the Funds maintained by Chase pursuant to this Agreement shall be subject
only to the instructions of Chase, Chase Branches or their agents. Chase shall
only deposit Securities with a Foreign Bank in accounts that include only assets
held by Chase for its customers.
8a. SEGREGATED ACCOUNT FOR FUTURES CONTRACTS. With
respect to every futures contract purchased, sold or cleared for a Custody
Account, Chase agrees, pursuant to Written Instructions, to:
(a) deposit original margin and variation margin
payments in a segregated account maintained by Chase; and
(b) perform all other obligations attendant to
transactions or positions in such futures contracts, as such payments or
performance may be required by law or the executing broker.
8b. SEGREGATED ACCOUNT FOR REPURCHASE AGREEMENTS.
With respect to purchases for a Custody Account from banks (including Chase) or
broker-dealers, of United States or foreign government obligations subject to
repurchase agreements, Chase agrees, pursuant to Written Instructions, to:
(a) deposit such securities and repurchase
agreements in a segregated account maintained by Chase; and
(b) promptly show on Chase's records that such
securities and repurchase agreements are being held on behalf
of the relevant Fund and deliver to the Company a written
confirmation to that effect.
8c. SEGREGATED ACCOUNTS FOR DEPOSITS OF COLLATERAL.
Chase agrees, with respect to (i) cash or high quality debt
securities to secure a Fund's commitments to purchase new
issues of debt obligations offered on a when-issued basis;
(ii) cash, U.S. government securities, or irrevocable letters
of credit of borrowers of a Fund's portfolio securities to
secure the loan to them of such securities; and/or (iii) cash,
securities or any other property delivered to secure
any other obligations; (all of such items being hereinafter
referred to as "collateral"), pursuant to Written
Instructions, to:
(a) deposit the collateral for each such
obligation in a separate segregated account maintained by
Chase; and
(b) promptly to show on Chase's records that
such collateral is being held on behalf of the relevant Fund
and deliver to the Company a written confirmation to that
effect.
9. DEPOSIT ACCOUNT. Subject to the provisions of this
Agreement, the Company authorizes Chase to establish and maintain in each
country or other jurisdiction in which the principal trading market for
any Securities is located or in which any Securities are to be presented for
payment, an account or accounts, which may include nostro accounts with
Chase Branches and omnibus accounts of Chase at Foreign Banks, for receipt of
cash in a Deposit Account, in such currencies as directed by Written
Instructions. For purposes of this Agreement, cash so held in any such account
shall be evidenced by separate book entries maintained by Chase at its office
in London and shall be deemed to be Cash held by Chase in a Deposit Account.
Unless Chase receives Written Instructions to the contrary, cash received or
credited by Chase or any other Chase Branch, Foreign Bank or Foreign
Securities Depository for a Deposit Account in a currency other than United
States dollars shall be converted promptly into United States dollars
whenever it is practicable to do so through customary banking channels
(including without limitation the effecting of such conversions at Chase's
preferred rates through Chase, its affiliates or Chase Branches), and shall be
automatically transmitted back to Chase in the United States.
10. SETTLEMENT PROCEDURES. Settlement procedures for
transactions in Securities delivered to, held in, or to be delivered from a
Custody Account in Chase Branches, Domestic Securities Depositories, Foreign
Banks and Foreign Securities Depositories, including receipts and payments of
cash held in any nostro account or omnibus account for a Deposit Account as
described in Section 9, shall be carried out in accordance with the provisions
of the Operating Agreement. It is understood that such settlement procedures may
vary, as provided in the Operating Agreement, from securities market to
securities market, to reflect particular settlement practices in such markets.
Chase shall make or cause the appropriate Chase Branch or
Foreign Bank to move payments of Cash held in a Deposit Account only:
(a) in connection with the purchase of Securities for
the account of a Fund and only against the receipt of such
Securities by Chase or by another appropriate Chase Branch,
Domestic Securities Depository, Foreign Bank or Foreign
Securities Depository, or otherwise as provided in the
Operating Agreement, each such payment to be made at prices
confirmed by Written Instructions, or
(b) in connection with any dividend, interim
dividend or other distribution declared by the Company, or
(c) as directed by the Company by Written
Instructions setting forth the name and address of the person
to whom the payment is to be made and the purpose for which
the payment is to be made.
Upon the receipt by Chase of Written Instructions specifying
the Securities to be so transferred or delivered, which instructions shall name
the person or persons to whom transfers or deliveries of such Securities shall
be made and shall indicate the time(s) for such transfers or deliveries,
Securities held in a Custody Account shall be transferred, exchanged, or
delivered by Chase, any Chase Branch, Domestic Securities Depository, Foreign
Bank, or Foreign Securities Depository, as the case may be, against payment in
Cash or Securities, or otherwise as provided in the Operating Agreement, only:
(a) upon sale of such Securities for the account of
the relevant Fund and receipt of such payment in the amount
shown in a broker's confirmation of sale of the Securities or
other proper authorization received by Chase before such
payment is made, as confirmed by Written Instructions;
(b) in exchange for or upon conversion into other
Securities alone or other Securities and Cash pursuant to any
plan of merger, consolidation, reorganization,
recapitalization, readjustment, or tender offer;
(c) upon exercise of conversion, subscription,
purchase, or other similar rights represented by such
Securities; or
(d) otherwise as directed by the Company by
Written Instructions which shall set forth the amount and
purpose of such transfer or delivery. Until Chase receives
Written Instructions to the contrary, Chase shall, and shall
cause each Chase Branch, Domestic Securities Depository,
Foreign Bank and Foreign Securities Depository holding
Securities or Cash to, take the following actions in
accordance with procedures established in the Operating
Agreement:
(a) collect and timely deposit in the Deposit Account
all income due or payable with respect to any Securities and
take any action which may be necessary and proper in
connection with the collection and receipt of such income;
(b) present timely for payment all Securities in a
Custody Account which are called, redeemed or retired or
otherwise become payable and all coupons and other income
items which call for payment upon presentation and to receive
and credit to the appropriate Deposit Account Cash so paid for
the account of a Fund except that, if such Securities are
convertible, such Securities shall not be presented for
payment until two business days preceding the date on which
such conversion rights would expire unless Chase previously
shall have received Written Instructions with respect thereto;
(c) present for exchange all Securities in a
Custody Account converted pursuant to their terms into other
Securities;
(d) in respect of securities in a Custody Account,
execute in the name of the relevant Fund such ownership and
other certificates as may be required to obtain payments in
respect thereto, provided that Chase shall have requested and
the Company shall have furnished to Chase any information
necessary in connection with such certificates;
(e) exchange interim receipts or temporary
Securities in a Custody Account for definitive Securities; and
(f) receive and hold in a Custody Account all
Securities received as a distribution on Securities held in
that Custody Account as a result of a stock dividend, share
split-up or reorganization, recapitalization, readjustment or
other rearrangement or distribution of rights or similar
Securities issued with respect to any Securities held in the
Custody Account.
11. RECORDS. Chase hereby agrees that Chase and any
Chase Branch or Foreign Bank shall create, maintain, and
retain all records relating to their activities and
obligations as custodian for the Funds under this Agreement
in such manner as will meet the obligations of the Funds
under the Act of 1940, particularly Section 31 thereof and
Rules 31a-1 and 31a-2 thereunder, and Federal, state and
foreign tax laws and other legal or administrative rules or
procedures, in each case as currently in effect and
applicable to the Funds. All records so maintained in
connection with the performance of its duties under this
Agreement shall, in the event of termination of this
Agreement, be preserved and maintained by Chase as required
by regulation, and shall be made available to the Company
or its agent upon request, in accordance with the
provisions of Section 19.
Chase hereby agrees, subject to restrictions under applicable
laws, that the books and records of Chase and any Chase Branch pertaining to
their actions under this Agreement shall be open to the physical, on-premises
inspection and audit at reasonable times by the independent accountants
("Accountants") employed by, or other representatives of, the Company. Chase
hereby agrees that, subject to restrictions under applicable laws, access shall
be afforded to the Accountants to such of the books and records of any Foreign
Bank, Domestic Securities Depository or Foreign Securities Depository with
respect to Securities and Cash as shall be required by the Accountants in
connection with their examination of the books and records pertaining to the
affairs of the Funds. Chase also agrees that as the Company may reasonably
request from time to time, Chase shall provide the Accountants with information
with respect to Chase's and Chase Branches' systems of internal accounting
controls as they relate to the services provided under this Agreement, and Chase
shall use its best efforts to obtain and furnish similar information with
respect to each Domestic Securities Depository, Foreign Bank and Foreign
Securities Depository holding Securities and Cash.
12. REPORTS. Chase shall supply periodically, upon the
reasonable request of the Company, such statements, reports, and advices with
respect to Cash in the Deposit Accounts and the Securities in the Custody
Accounts and transactions in Securities from time to time received and/or
delivered for or from the Custody Accounts, as the case may be, as the Funds
shall require. Such statements, reports and advices shall include an
identification of the Chase Branch, Domestic Securities Depository, Foreign Bank
and Foreign Securities Depository having custody of the Securities and Cash, and
descriptions thereof.
13. REGISTRATION OF SECURITIES. Securities in a Custody
Account which are issued or issuable only in bearer form (except such securities
as are held in the Book-Entry System) shall be held by Chase, Chase Branches,
Domestic Securities Depositories, Foreign Banks or Foreign Securities
Depositories in that form. All other Securities in a Custody Account shall be
held in registered form in the name of Chase, or any Chase Branch, the
Book-Entry System, Domestic Securities Depository, Foreign Bank or Foreign
Securities Depository and their nominees, as custodian or nominee.
14. STANDARD OF CARE.
(a) GENERAL. Chase shall assume entire responsibility
for all Securities held in the Custody Accounts, Cash held in
the Deposit Accounts, Cash or Securities held in the
Segregated Accounts and any of the Securities and Cash while
in the possession of Chase or any Chase Branch, Domestic
Securities Depository, Foreign Bank or Foreign Securities
Depository, or in the possession or control of any employees,
agents or other personnel of Chase or any Chase Branch,
Domestic Securities Depository, Foreign Bank or Foreign
Securities Depository; and shall be liable to the relevant
Fund for any loss to the Fund occasioned by any destruction of
the Securities or Cash so held or while in such possession, by
any robbery, burglary, larceny, theft or embezzlement by any
employees, agents or personnel of Chase or any Chase Branch,
Domestic Securities Depository, Foreign Bank or Foreign
Securities Depository, and/or by virtue of the disappearance
of any of the Securities or Cash so held or while in such
possession, with or without any fault attributable to Chase
("fault attributable to Chase" for the purposes of this
Agreement being deemed to mean any negligent act or omission,
robbery, burglary, larceny, theft or embezzlement by any
employees or agents of Chase or any Chase Branch, Domestic
Securities Depository, Foreign Bank or Foreign Securities
Depository). In the event of Chase's discovery or notification
of any such loss of Securities or Cash, Chase shall promptly
notify the Company and shall reimburse the relevant Fund to
the extent of the market value of the missing Securities or
Cash as at the date of the discovery of such loss. The Company
shall not be obligated to establish any negligence,
misfeasance or malfeasance on Chase's part from which such
loss resulted, but Chase shall be obligated hereunder to make
such reimbursement to a Fund after the discovery or notice of
such loss, destruction or theft of such Securities or Cash.
Chase may at its option insure itself against loss from any
cause but shall be under no obligation to insure for the
benefit of the Funds.
(b) COLLECTIONS. All collections of funds or other
property paid or distributed in respect of Securities held in
a Custody Account shall be made at the risk of the relevant
Fund. Chase shall have no liability for any loss occasioned by
delay in the actual receipt of notice by Chase (or by any
Chase Branch or Foreign Bank in the case of Securities or Cash
held outside of the United States) of any payment, redemption
or other transaction regarding Securities held in a Custody
Account or Cash held in a Deposit Account in respect of which
Chase has agreed to take action in the absence of Written
Instructions to the contrary as provided in Section 10 of this
Agreement, which does not appear in any of the publications
referred to in Section 16 of this Agreement.
(c) EXCLUSIONS. Notwithstanding any other provision
in this Agreement to the contrary, Chase shall not be
responsible for (i) losses resulting from war or from the
imposition of exchange control restrictions, confiscation,
expropriation, or nationalization of any securities or assets
of the issuer of such securities, or (ii) losses resulting
from any negligent act or omission of the Company or any of
its affiliates, or any robbery, theft, embezzlement or
fraudulent act by any employee or agent of the Company or any
of its affiliates. Chase shall not be liable for any action
taken in good faith upon Written Instructions of Authorized
Persons of the Company or upon any certified copy of any
resolution of the Board of Directors of the Company, and may
rely on the genuineness of any such documents which it may in
good faith believe to be validly executed.
(d) LIMITATION ON LIABILITY UNDER SECTION 14(A).
Notwithstanding any other provision in this Agreement to the
contrary, it is agreed that Chase's sole responsibility with
respect to losses under Section 14(a) shall be to pay a Fund
the amount of any such loss as provided in Section 14(a)
(subject to the limitation provided in Section 14(e) of this
Agreement). This limitation does not apply to any liability of
Chase under Section 14(f) of this Agreement.
(e) ANNUAL ADJUSTMENT OF LIMITATION OF LIABILITY. As
soon as practicable after June 1 of every year, the Company
shall provide Chase with the amount of each Fund's total net
assets as of the close of business on such date (or if the New
York Stock Exchange is closed on such date, then in that event
as of the close of business on the next day on which the New
York Stock Exchange is open for business).
It is understood by the parties to this Agreement (1)
that Chase has entered into substantially similar custody
agreements with other Templeton funds, all of which funds have
as their investment adviser either one of the Investment
Managers of the Funds or companies which are affiliated with
the Investment Managers; and (2) that Chase may enter into
substantially similar custody agreements with additional
mutual funds under Templeton management which may hereafter be
organized. Each of such custody agreements with each of such
other Templeton funds contains (or will contain) a "Standard
of Care" section similar to this Section 14, except that the
limit of Chase's liability is (or will be) in varying amounts
for each fund, with the aggregate limits of liability in all
of such agreements, including this Agreement, amounting to
$150,000,000.
On each June 1, Chase will total the net assets
reported by each one of the Templeton funds, and will
calculate the percentage of the aggregate net assets of all
the Templeton funds that is represented by the net asset value
of the Funds. Thereupon Chase shall allocate to this Agreement
with the Company that proportion of the Funds' total of
$150,000,000 responsibility undertaking which is substantially
equal to the proportion which the Funds' net assets bears to
the total net assets of all such Templeton funds subject to
adjustments for claims paid as follows: all claims previously
paid to the Funds shall first be deducted from their
proportionate allocable share of the $150,000,000 Chase
responsibility, and if the claims paid to the Funds amount to
more than their allocable share of the Chase responsibility,
then the excess of such claims paid to the Funds shall
diminish the balance of the $150,000,000 Chase responsibility
available for the proportionate shares of all of the other
Templeton funds having similar custody agreements with Chase.
Based on such calculation, and on such adjustment for claims
paid, if any, Chase thereupon shall notify the Company of such
limit of liability under this Section 14 which will be
available to the Funds with respect to (1) losses in excess of
payment allocations for previous years and (2) losses
discovered during the next year this Agreement remains in
effect and until a new determination of such limit of
responsibility is made on the next succeeding June 1.
(f) OTHER LIABILITY. Independently of Chase's
liability to the Funds as provided in Section 14(a) above (it
being understood that the limitations in Sections 14(d) and
14(e) do not apply to the provisions of this Section 14(f)),
Chase shall be responsible for the performance of only such
duties as are set forth in this Agreement or contained in
express instructions given to Chase which are not contrary to
the provisions of this Agreement. Chase will use and require
the same care with respect to the safekeeping of all
Securities held in the Custody Accounts, Cash held in the
Deposit Accounts, and Securities or Cash held in the
Segregated Accounts as it uses in respect of its own similar
property, but it need not maintain any insurance for the
benefit of the Funds. With respect to Securities and Cash held
outside of the United States, Chase will be liable to a Fund
for any loss to the Fund resulting from any disappearance or
destruction of such Securities or Cash while in the possession
of Chase or any Chase Branch, Foreign Bank or Foreign
Securities Depository, to the same extent it would be liable
to the Funds if Chase had retained physical possession of such
Securities and Cash in New York. It is specifically agreed
that Chase's liability under this Section 14(f) is entirely
independent of Chase's liability under Section 14(a).
Notwithstanding any other provision in this Agreement to the
contrary, in the event of any loss giving rise to liability
under this Section 14(f) that would also give rise to
liability under Section 14(a), the amount of such liability
shall not be charged against the amount of the limitation on
liability provided in Section 14(d).
(g) COUNSEL; LEGAL EXPENSES. Chase shall be entitled
to the advice of counsel (who may be counsel for the Company)
at the expense of the Company, in connection with carrying out
Chase's duties hereunder and in no event shall Chase be liable
for any action taken or omitted to be taken by it in good
faith pursuant to advice of such counsel. If, in the absence
of fault attributable to Chase and in the course of or in
connection with carrying out its duties and obligations
hereunder, any claims or legal proceedings are instituted
against Chase or any Chase Branch by third parties, the
Company will hold Chase harmless against any claims,
liabilities, costs, damages or expenses incurred in connection
therewith and, if the Company so elects, the Company may
assume the defense thereof with counsel satisfactory to Chase,
and thereafter shall not be responsible for any further legal
fees that may be incurred by Chase, provided, however, that
all of the foregoing is conditioned upon the Company's receipt
from Chase of prompt and due notice of any such claim or
proceeding. 15. EXPROPRIATION INSURANCE. Chase represents that
it does not intend to obtain any insurance for the benefit of
the Funds which protects against the imposition of exchange control
restrictions on the transfer from any foreign jurisdiction of
the proceeds of sale of any Securities or against confiscation, expropriation or
nationalization of any securities or the assets of the issuer of such securities
by a government of any foreign country in which the issuer of such securities is
organized or in which securities are held for safekeeping either by Chase, or
any Chase Branch, Foreign Bank or Foreign Securities Depository in such country.
Chase has discussed the availability of expropriation insurance with the
Company, and has advised the Company as to its understanding of the position of
the staff of the Securities and Exchange Commission that any investment company
investing in securities of foreign issuers has the responsibility for reviewing
the possibility of the imposition of exchange control restrictions which would
affect the liquidity of such investment company's assets and the possibility of
exposure to political risk, including the appropriateness of insuring against
such risk. The Company has acknowledged that it has the responsibility to review
the possibility of such risks and what, if any, action should be taken.
16. PROXY, NOTICES, REPORTS, ETC. Chase shall watch for the
dates of expiration of (a) all purchase or sale rights (including warrants,
puts, calls and the like) attached to or inherent in any of the Securities held
in a Custody Account and (b) conversion rights and conversion price changes for
each convertible Security held in a Custody Account as published in Telstat
Services, Inc., Standard & Poor's Financial Inc. and/or any other publications
listed in the Operating Agreement (it being understood that Chase may give
notice to the Company as provided in Section 21 as to any change, addition
and/or omission in the publications watched by Chase for these purposes). If
Chase or any Chase Branch, Foreign Bank or Foreign Securities Depository shall
receive any proxies, notices, reports, or other communications relative to any
of the Securities held in the Custody Account, Chase shall, on its behalf or on
behalf of a Chase Branch, Foreign Bank or Foreign Securities Depository,
promptly transmit in writing any such communication to the Company. In addition,
Chase shall notify the Company by person-to-person collect telephone concerning
any such notices relating to any matters specified in the first sentence of this
Section 16.
As specifically requested by the Company, Chase shall execute
or deliver or shall cause the nominee in whose name Securities are registered to
execute and deliver to such person as may be designated by the Company proxies,
consents, authorizations and any other instruments whereby the authority of a
Fund as owner of any Securities in the Custody Account registered in the name of
Chase or such nominee, as the case may be, may be exercised. Chase shall vote
Securities in accordance with Written Instructions timely received by Chase, or
such other person or persons as designated in or pursuant to the Operating
Agreement.
Chase and any Chase Branch shall have no liability for any
loss or liability occasioned by delay in the actual receipt by them or any
Foreign Bank or Foreign Securities Depository of notice of any payment or
redemption which does not appear in any of the publications referred to in the
first sentence of this Section 16.
17. COMPENSATION. The Company agrees to pay to Chase from time
to time such compensation for its services pursuant to this Agreement as may be
mutually agreed upon in writing from time to time and Chase's out-of-pocket or
incidental expenses, as from time to time shall be mutually agreed upon by Chase
and the Company. The Company shall have no responsibility for the payment of
services provided by any Domestic Securities Depository, such fees being paid
directly by Chase. In the event of any advance of Cash for any purpose made by
Chase pursuant to any Written Instruction, or in the event that Chase or any
nominee of Chase shall incur or be assessed any taxes in connection with the
performance of this Agreement, the Company shall indemnify and reimburse Chase
therefor, except such assessment of taxes as results from the negligence, fraud,
or willful misconduct of Chase, any Domestic Securities Depository, Chase
Branch, Foreign Bank or Foreign Securities Depository, or as constitutes a tax
on income, gross receipts or the like of any one or more of them. Chase shall
have a lien on Securities in a Custody Account and on Cash in a Deposit Account
for any amount owing to Chase from time to time under this Agreement upon due
notice to the Company.
18. AGREEMENT SUBJECT TO APPROVAL OF THE COMPANY. It is
understood that this Agreement and any amendments shall be subject to the
approval of the Company.
19. TERM. This Agreement shall remain in effect until
terminated by either party upon 60 days' written notice to the other, sent by
registered mail. Notwithstanding the preceding sentence, however, if at any time
after the execution of this Agreement Chase shall provide written notice to the
Company, by registered mail, of the amount needed to meet a substantial increase
in the cost of maintaining its present type and level of bonding and insurance
coverage in connection with Chase's undertakings in Section 14(a), (d) and (e)
of this Agreement, said Section 14(a), (d) and (e) of this Agreement shall cease
to apply 60 days after the providing of such notice by Chase, unless prior to
the expiration of such 60 days the Company agrees in writing to assume the
amount needed for such purpose. Chase, upon the date this Agreement terminates
pursuant to notice which has been given in a timely fashion, shall, and/or shall
cause each Domestic Securities Depository to, deliver the Securities in a
Custody Account, pay the Cash in a Deposit Account, and deliver and pay
Securities and Cash in a Segregated Account to the Company unless Chase has
received from the Company 60 days prior to the date on which this Agreement is
to be terminated Written Instructions specifying the name(s) of the person(s) to
whom the Securities in a Custody Account shall be delivered, the Cash in a
Deposit Account shall be paid, and Securities and Cash in a Segregated Account
shall be delivered and paid. Concurrently with the delivery of such Securities,
Chase shall deliver to the Company, or such other person as the Company shall
instruct, the records referred to in Section 11 which are in the possession or
control of Chase, any Chase Branch, or any Domestic Securities Depository, or
any Foreign Bank or Foreign Securities Depository, or in the event that Chase is
unable to obtain such records in their original form Chase shall deliver true
copies of such records.
20. AUTHORIZATION OF CHASE TO EXECUTE NECESSARY DOCUMENTS. In
connection with the performance of its duties hereunder, the Company hereby
authorizes and directs Chase and each Chase Branch acting on behalf of Chase,
and Chase hereby agrees, to execute and deliver in the name of a Fund, or cause
such other Chase Branch to execute and deliver in the name of a Fund, such
certificates, instruments, and other documents as shall be reasonably necessary
in connection with such performance, provided that the Company shall have
furnished to Chase any information necessary in connection therewith.
21. NOTICES. Any notice or other communication
authorized or required by this Agreement to be given to the parties shall be
sufficiently given (except to the extent otherwise specifically provided) if
addressed and mailed postage prepaid or delivered to it at its office at the
address set forth below:
If to the Company, then to
Templeton Institutional Funds, Inc.
700 Central Avenue, P.O. Box 33030
St. Petersburg, Florida 33733
Attention: Thomas M. Mistele, Secretary
If to Chase, then to
The Chase Manhattan Bank, N.A.
1211 Avenue of the Americas
33rd Floor
New York, New York 10036
Attention: Global Custody Division Executive
or such other person or such other address as any
party shall have furnished to the other party
in writing.
22. NON-ASSIGNABILITY OF AGREEMENT. This Agreement shall
not be assignable by either party hereto; provided, however, that any
corporation into which a Fund, the Company or Chase, as the case may be, may
be merged or converted or with which it may be consolidated, or any
corporation succeeding to all or substantially all of the trust business of
Chase, shall succeed to the respective rights and shall assume the respective
duties of the Company or of Chase, as the case may be, hereunder.
23. GOVERNING LAW. This Agreement shall be governed by
the laws of the State of New York.
THE CHASE MANHATTAN BANK, N.A.
By: /S/RICHARD SAMUELS
Richard Samuels
Vice President
TEMPLETON INSTITUTIONAL FUNDS, INC.
By: /s/HAROLD F. MCELRAFT
Harold F. McElraft
Vice President
TRANSFER AGENT AGREEMENT BETWEEN
TEMPLETON INSTITUTIONAL FUNDS, INC. AND
FRANKLIN TEMPLETON INVESTOR SERVICES, INC.
AGREEMENT dated as of September 1, 1993, and amended and restated as of
August 10, 1995, between TEMPLETON INSTITUTIONAL FUNDS, INC., a registered
open-end investment company with offices at 700 Central Avenue, St. Petersburg,
Florida 33701 (the "Company"), comprising Growth Series, Foreign Equity Series,
Smaller Companies Series, Emerging Markets Series, Global Fixed Income Series,
Foreign Equity (South Africa Free) Series, and any additional series that may be
established in the future (the "Funds") and FRANKLIN TEMPLETON INVESTOR
SERVICES, INC., a registered transfer agent with offices at 700 Central Avenue,
St. Petersburg, Florida 33701 ("FTIS").
W I T N E S S E T H:
That for and in consideration of the mutual promises hereinafter set
forth, the Company and FTIS agree as follows:
1. DEFINITIONS. Whenever used in this Agreement, the following
words and phrases, unless the context otherwise requires, shall have the
following meanings:
(a) "Articles of Incorporation" shall mean the Articles
of Incorporation of the Company as the same may be amended from time to time;
(b) "Authorized Person" shall be deemed to include any person,
whether or not such person is an officer or employee of the Company, duly
authorized to give Oral Instructions or Written Instructions on behalf of the
Company as indicated in a certificate furnished to FTIS pursuant to Section 4(c)
hereof as may be received by FTIS from time to time;
(c) "Custodian" refers to the custodian and any sub-custodian
of all securities and other property which the Funds may from time to time
deposit, or cause to be deposited or held under the name or account of such
custodian pursuant to the Custody Agreement;
(d) "Oral Instructions" shall mean instructions, other than
written instructions, actually received by FTIS from a person reasonably
believed by FTIS to be an Authorized Person;
(e) "Shares" refers to shares of common stock, par value
$.01 per share, of the Funds; and
(f) "Written Instructions" shall mean a written communication
signed by a person reasonably believed by FTIS to be an Authorized Person and
actually received by FTIS.
2. APPOINTMENT OF FTIS. The Company hereby appoints and constitutes
FTIS as transfer agent for Shares of the Company and as shareholder servicing
agent for the Company, and FTIS accepts such appointment and agrees to perform
the duties hereinafter set forth.
3. COMPENSATION.
(a) The Company will compensate or cause FTIS to be
compensated for the performance of its obligations hereunder in accordance with
the fees set forth in the written schedule of fees annexed hereto as Schedule A
and incorporated herein. Schedule A does not include out-of-pocket disbursements
of FTIS for which FTIS shall be entitled to bill the Company separately. FTIS
will bill the Company as soon as practicable after the end of each calendar
month, and said billings will be detailed in accordance with Schedule A. The
Company will promptly pay to FTIS the amount of such billing.
Out-of-pocket disbursements shall include, but shall not be
limited to, the items specified in the written schedule of out-of-pocket
expenses annexed hereto as Schedule B and incorporated herein. Schedule B may be
modified by FTIS upon not less than 30 days' prior written notice to the
Company. Unspecified out-of-pocket expenses shall be limited to those
out-of-pocket expenses reasonably incurred by FTIS in the performance of its
obligations hereunder. Reimbursement by the Company for expenses incurred by
FTIS in any month shall be made as soon as practicable after the receipt of an
itemized bill from FTIS.
(b) Any compensation agreed to hereunder may be adjusted from
time to time by attaching to Schedule A of this Agreement a revised Fee
Schedule.
4. DOCUMENTS. In connection with the appointment of FTIS, the Company
shall, on or before the date this Agreement goes into effect, but in any case,
within a reasonable period of time for FTIS to prepare to perform its duties
hereunder, deliver or cause to be delivered to FTIS the following documents:
(a) If applicable, specimens of the certificates for
Shares of the Funds;
(b) All account application forms and other documents
relating to Shareholder accounts or to any plan, program or service offered by
the Funds;
(c) A certificate identifying the Authorized Persons and
specimen signatures of Authorized Persons who will sign Written Instructions;
and
(d) All documents and papers necessary under the laws of
Florida, under the Company's Articles of Incorporation, and as may be required
for the due performance of FTIS's duties under this Agreement or for the due
performance of additional duties as may from time to time be agreed upon between
the Company and FTIS.
5. DISTRIBUTIONS PAYABLE IN SHARES. In the event that the Board of
Trustees of the Trust shall declare a distribution payable in Shares, the Trust
shall deliver or cause to be delivered to FTIS written notice of such
declaration signed on behalf of the Trust by an officer thereof, upon which FTIS
shall be entitled to rely for all purposes, certifying (i) the number of Shares
involved, and (ii) that all appropriate action has been taken.
6. DUTIES OF THE TRANSFER AGENT. FTIS shall be responsible for
administering and/or performing transfer agent functions; for acting as service
agent in connection with dividend and distribution functions; and for performing
shareholder account and administrative agent functions in connection with the
issuance, transfer and redemption or repurchase (including coordination with the
Custodian) of Shares. The operating standards and procedures to be followed
shall be determined from time to time by agreement between the Company and FTIS.
Without limiting the generality of the foregoing, FTIS agrees to perform the
specific duties listed on Schedule C.
7. RECORDKEEPING AND OTHER INFORMATION. FTIS shall create and
maintain all necessary records in accordance with all applicable laws, rules
and regulations.
8. OTHER DUTIES. In addition, FTIS shall perform such other duties and
functions, and shall be paid such amounts therefor, as may from time to time be
agreed upon in writing between the Company and FTIS. Such other duties and
functions shall be reflected in a written amendment to Schedule C, and the
compensation for such other duties and functions shall be reflected in a written
amendment to Schedule A.
9. RELIANCE BY TRANSFER AGENT; INSTRUCTIONS.
(a) FTIS will be protected in acting upon Written or Oral
Instructions reasonably believed to have been executed or orally communicated by
an Authorized Person and will not be held to have any notice of any change of
authority of any person until receipt of a Written Instruction thereof from an
officer of the Company. FTIS will also be protected in processing Share
certificates which it reasonably believes to bear the proper manual or facsimile
signatures of the officers of the Company and the proper countersignature of
FTIS.
(b) At any time FTIS may apply to any Authorized Person of the
Company for Written Instructions and may seek advice at the Company's expense
from legal counsel for the Company or from its own legal counsel, with respect
to any matter arising in connection with this Agreement, and it shall not be
liable for any action taken or not taken or suffered by it in good faith in
accordance with such Written Instructions or in accordance with the opinion of
counsel for the Company or for FTIS. Written Instructions requested by FTIS will
be provided by the Company within a reasonable period of time. In addition,
FTIS, or its officers, agents or employees, shall accept Oral Instructions or
Written Instructions given to them by any person representing or acting on
behalf of the Company only if said representative is known by FTIS, or its
officers, agents or employees, to be an Authorized Person.
10. ACTS OF GOD, ETC. FTIS will not be liable or responsible for delays
or errors by reason of circumstances beyond its control, including acts of civil
or military authority, national emergencies, labor difficulties, fire,
mechanical breakdown beyond its control, flood or catastrophe, acts of God,
insurrection, war, riots or failure beyond its control of transportation,
communication or power supply.
11. DUTY OF CARE AND INDEMNIFICATION. The Company will indemnify FTIS
against and hold it harmless from any and all losses, claims, damages,
liabilities or expenses (including reasonable counsel fees and expenses)
resulting from any claim, demand, action or suit not resulting from willful
misfeasance, bad faith or gross negligence on the part of FTIS, and arising out
of, or in connection with, its duties hereunder. In addition, the Company will
indemnify FTIS against and hold it harmless from any and all losses, claims,
damages, liabilities or expenses (including reasonable counsel fees and
expenses) resulting from any claim, demand, action or suit as a result of: (i)
any action taken in accordance with Written or Oral Instructions, or any other
instructions or Share certificates reasonably believed by FTIS to be genuine and
to be signed, countersigned or executed, or orally communicated by an Authorized
Person; (ii) any action taken in accordance with written or oral advice
reasonably believed by FTIS to have been given by counsel for the Company or by
its own counsel; (iii) any action taken as a result of any error or omission in
any record (including but not limited to magnetic tapes, computer printouts,
hard copies and microfilm copies) delivered, or caused to be delivered by the
Company to FTIS in connection with this Agreement; or (iv) any action taken in
accordance with Oral Instructions given under the Telephone Exchange and
Redemption Privileges, as described in the applicable Fund's current prospectus,
when believed by FTIS to be genuine.
In any case in which the Company may be asked to indemnify or hold FTIS
harmless, the Company shall be advised of all pertinent facts concerning the
situation in question and FTIS will use reasonable care to identify and notify
the Company promptly concerning any situation which presents or appears likely
to present a claim for indemnification against the Company. The Company shall
have the option to defend FTIS against any claim which may be the subject of
this indemnification, and, in the event that the Company so elects, such defense
shall be conducted by counsel chosen by the Company and satisfactory to FTIS,
and thereupon, the Company shall take over complete defense of the claim and
FTIS shall sustain no further legal or other expenses in such situation for
which it seeks indemnification under this Section 11. FTIS will not confess any
claim or make any compromise in any case in which the Company will be asked to
provide indemnification, except with the Company's prior written consent. The
obligations of the parties hereto under this Section shall survive the
termination of this Agreement.
12. TERM AND TERMINATION.
(a) This Agreement shall be effective as of the date first
written above and shall continue through April 30, 1994 and thereafter shall
continue automatically for successive annual periods ending on April 30 of each
year, provided such continuance is specifically approved at least annually by
(i) the Company's Board of Directors or (ii) a vote of a "majority" (as defined
in the Investment Company Act of 1940 (the "1940 Act")) of the Company's
outstanding voting securities, provided that in either event the continuance is
also approved by a majority of the Board of Directors who are not "interested
persons" (as defined in the 1940 Act) of any party to this Agreement, by vote
cast in person at a meeting called for the purpose of voting such approval.
(b) Either party hereto may terminate this Agreement by giving
to the other party a notice in writing specifying the date of such termination,
which shall be not less than 60 days after the date of receipt of such notice.
In the event such notice is given by the Company, it shall be accompanied by a
resolution of the Board of Directors of the Company, certified by the Secretary
of the Company, designating a successor transfer agent or transfer agents. Upon
such termination and at the expense of the Company, FTIS will deliver to such
successor a certified list of Shareholders of the Company (with names and
addresses), an historical record of the account of each Shareholder and the
status thereof, and all other relevant books, records, correspondence, and other
data established or maintained by FTIS under this Agreement in a form reasonably
acceptable to the Company, and will cooperate in the transfer of such duties and
responsibilities, including provisions for assistance from FTIS's personnel in
the establishment of books, records and other data by such successor or
successors.
13. AMENDMENT. This Agreement may not be amended or modified in
any manner except by a written agreement executed by both parties.
14. SUBCONTRACTING. The Company agrees that FTIS may, in its
discretion, subcontract for certain of the services described under this
Agreement or the Schedules hereto; provided that the appointment of any such
agent shall not relieve FTIS of its responsibilities hereunder.
15. MISCELLANEOUS.
(a) Any notice or other instrument authorized or required by
this Agreement to be given in writing to the Company or FTIS shall be
sufficiently given if addressed to that party and received by it at its office
set forth below or at such other place as it may from time to time designate in
writing.
To the Company:
Templeton Institutional Funds, Inc.
700 Central Avenue
St. Petersburg, Florida 33701
To FTIS:
Franklin Templeton Investor Services, Inc.
700 Central Avenue
St. Petersburg, Florida 33701
(b) This Agreement shall extend to and shall be binding upon
the parties hereto, and their respective successors and assigns; provided,
however, that this Agreement shall not be assignable without the written consent
of the other party.
(c) This Agreement shall be construed in accordance with
the laws of the State of California.
(d) This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original; but such
counterparts shall, together, constitute only one instrument.
(e) The captions of this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective corporate officers thereunder duly authorized as of
the day and year first above written.
TEMPLETON INSTITUTIONAL FUNDS, INC.
BY: /s/JOHN R. KAY
John R. Kay
Vice President
FRANKLIN TEMPLETON INVESTOR SERVICES, INC.
BY: /s/THOMAS M. MISTELE
Thomas M. Mistele
Vice President
A-1
Schedule A
FEES
Shareholder account maintenance (per annum, $14.08 for Foreign Equity
Series, Growth Series and prorated payable monthly) Emerging Markets Series
and $15.14 for Global Fixed
Income Series,
adjusted as of
February 1 of
each year to
reflect changes
in the Department
of Labor Consumer
Price Index.
February 1, 1996
B-1
Schedule B
OUT-OF-POCKET EXPENSES
The Company shall reimburse FTIS monthly for the following
out-of-pocket expenses:
o postage and mailing
o forms
o outgoing wire charges
o telephone
o Federal Reserve charges for check clearance
o if applicable, magnetic tape and freight
o retention of records
o microfilm/microfiche
o stationary
o insurance
o if applicable, terminals, transmitting lines and any expenses
incurred in connection with such terminals and lines
o all other miscellaneous expenses reasonably incurred by FTIS
The Company agrees that postage and mailing expenses will be paid on
the day of or prior to mailing as agreed with FTIS. In addition, the Company
will promptly reimburse FTIS for any other expenses incurred by FTIS as to which
the Company and FTIS mutually agree that such expenses are not otherwise
properly borne by FTIS as part of its duties and obligations under the
Agreement.
C-4
C-1
Schedule C
DUTIES
AS TRANSFER AGENT FOR INVESTORS IN THE COMPANY, FTIS WILL:
o Record in its transfer record, countersign as transfer agent,
and deliver certificates signed manually or by facsimile, by
the President or a Vice-President and by the Secretary or the
Assistant Secretary of the Company, in such names and for such
number of authorized but hitherto unissued Shares of the Funds
as to which FTIS shall receive instructions; and
o Transfer on its records from time to time, when presented to
it for that purpose, certificates of said Shares, whether now
outstanding or hereafter issued, when countersigned by a duly
authorized transfer agent, and upon the cancellation of the
old certificates, record and countersign new certificates for
a corresponding aggregate number of Shares and deliver said
new certificates.
AS SHAREHOLDER SERVICE AGENT FOR INVESTORS IN THE COMPANY, FTIS WILL:
o Receive from the Company, from the Company's Principal
Underwriter or from a Shareholder, on a form acceptable to
FTIS, information necessary to record sales and redemptions
and to generate sale and/or redemption confirmations;
o Mail sale and/or redemption confirmations using standard
forms;
o Accept and process cash payments from investors, and clear
checks which represent payments for the purchase of Shares;
o Requisition Shares in accordance with instructions of the
Principal Underwriter of the Shares
of the Company;
o Produce periodic reports reflecting the accounts receivable
and the paid pending (free stock) items;
o Open, maintain and close Shareholder accounts;
o Establish registration of ownership of Shares in accordance
with generally accepted form;
o Maintain monthly records of (i) issued Shares and (ii) number
of Shareholders and their aggregate Shareholdings classified
according to their residence in each State of the United
States or foreign country;
o Accept and process telephone exchanges and redemptions for
Shares in accordance with a Company's Telephone Exchange and
Redemption Privileges as described in the Funds' current
prospectus;
o Maintain and safeguard records for each Shareholder showing
name(s), address, number of any certificates issued, and
number of Shares registered in such name(s), together with
continuous proof of the outstanding Shares, and dealer
identification, and reflecting all current changes; on
request, provide information as to an investor's qualification
for Cumulative Quantity Discount; and provide all accounts
with confirmation statements reflecting the most recent
transactions, and also provide year-end historical
confirmation statements;
o Provide on request a duplicate set of records for file
maintenance in the Company's office in St. Petersburg,
Florida;
o Pay to the Company's Custodian Account with the Custodian, the
net asset value per Share and pay to the Principal Underwriter
its commission out of money received in payment for Shares
sales;
o Redeem Shares and prepare and mail (or wire) liquidation
proceeds;
o Pass upon the adequacy of documents submitted by a Shareholder
or his legal representative to substantiate the transfer of
ownership of Shares from the registered owner to transferees;
o From time to time, make transfers upon the books of the
Company in accordance with properly executed transfer
instructions furnished to FTIS and make transfers of
certificates for such Shares as may be surrendered for
transfer properly endorsed, and countersign new certificates
issued in lieu thereof;
o Upon receipt of proper documentation, place stop transfers,
obtain necessary insurance forms, and reissue replacement
certificates against lost, stolen or destroyed Share
certificates;
o Check surrendered certificates for stop transfer restrictions.
Although FTIS cannot insure the genuineness of certificates
surrendered for cancellation, it will employ all due
reasonable care in deciding the genuineness of such
certificates and the guarantor of the signature(s) thereon;
o Cancel surrendered certificates and record and countersign
new certificates;
o Certify outstanding Shares to auditors;
o In connection with any meeting of Shareholders, upon receiving
appropriate detailed instructions and written materials
prepared by the Company and proxy proofs checked by the
Company, print proxy cards; deliver to Shareholders all
reports, prospectuses, proxy cards and related proxy materials
of suitable design for enclosing; receive and tabulate
executed proxies; and furnish a list of Shareholders for the
meeting;
o Answer routine correspondence and telephone inquiries about
individual accounts; prepare monthly reports for
correspondence volume and correspondence data necessary for
the Company's Semi-Annual Report on Form N-SAR;
o Prepare and mail dealer commission statements and checks;
o Maintain and furnish the Company and its Shareholders with
such information as the Company may reasonably request for the
purpose of compliance by the Company with the applicable tax
and securities laws of applicable jurisdictions;
o Mail confirmations of transactions to investors and dealers
in a timely fashion;
o Pay or reinvest income dividends and/or capital gains
distributions to Shareholders of record, in accordance with
the Company's and/or Shareholder's instructions, provided
that:
(a) The Company shall notify FTIS in writing
promptly upon declaration of any such
dividend and/or distribution, and in any
event at least forty-eight (48) hours before
the record date;
(b) Such notification shall include the
declaration date, the record date, the
payable date, the rate, and, if applicable,
the reinvestment date and the reinvestment
price to be used; and
(c) Prior to the payable date, the Company shall
furnish FTIS with sufficient fully and
finally collected funds to make such
distribution.
o Prepare and file annual United States information returns of
dividends and capital gains distributions (Form 1099) and mail
payee copies to Shareholders; report and pay United States
income taxes withheld from distributions made to nonresidents
of the United States; and prepare and mail to Shareholders the
notice required by the U.S. Internal Revenue Code as to
realized capital gains distributed and/or retained, and their
proportionate share of any foreign taxes paid by the Company;
o Prepare transfer journals;
o Set up wire order trades on file;
o Receive payment for trades and update the trade file;
o Produce delinquency and other trade file reports;
o Provide dealer commission statements and payments thereof for
the Principal Underwriter;
o Sort and print Shareholder information by state, social code,
price break, etc.; and
o Mail promptly the Statement of Additional Information of the
Funds to each Shareholder who requests it, at no cost to the
Shareholder.
BUSINESS MANAGEMENT AGREEMENT BETWEEN
TEMPLETON INSTITUTIONAL FUNDS, INC. AND
TEMPLETON GLOBAL INVESTORS, INC.
AGREEMENT dated as of April 1, 1993, and amended May 25, 1995,
between Templeton Institutional Funds, Inc., a Maryland corporation which is a
registered open-end investment company (the "Company") comprising Templeton
Foreign Equity Series, Templeton Growth Series, Templeton Emerging Markets
Series, Templeton Global Fixed Income Series, and Templeton Foreign Equity
(South Africa Free) Series and any additional series that may be established in
the future (the "Funds") and Templeton Global Investors, Inc. ("TGII").
In consideration of the mutual promises herein made, the
parties hereby agree as follows:
(1) TGII agrees, during the life of this Agreement, to be
responsible for:
(a) providing office space, telephone, office equipment
and supplies for the Company;
(b) paying compensation of the Company's officers for
services rendered as such;
(c) authorizing expenditures and approving bills for
payment on behalf of the Company;
(d) supervising preparation of annual and semiannual
reports to Shareholders, notices of dividends,
capital gains distributions and tax credits, and
attending to routine correspondence and other
communications with individual Shareholders;
(e) daily pricing of the Funds' investment portfolios and
preparing and supervising publication of daily
quotations of the bid and asked prices of the Funds'
Shares, earnings reports and other financial data;
(f) monitoring relationships with organizations serving
the Company, including custodians, transfer agents
and printers;
(g) providing trading desk facilities for the Funds;
(h) supervising compliance by the Company with
recordkeeping requirements under the Investment
Company Act of 1940 (the "1940 Act") and the rules
and regulations thereunder, with state regulatory
requirements, maintenance of books and records for
the Company (other than those maintained by the
custodian and transfer agent), preparing and filing
of tax reports other than the Company's income tax
returns; and
(i) providing executive, clerical and secretarial
personnel needed to carry out the above
responsibilities.
(2) The Company agrees, during the life of this Agreement, to
pay to TGII as compensation for the foregoing a monthly fee equal on an annual
basis to 0.15% of the first $200 million of the aggregate average daily net
assets of the Funds during the month preceding each payment, reduced as follows:
on such net assets in excess of $200 million up to $700 million, a monthly fee
equal on an annual basis to 0.135%; on such net assets in excess of $700 million
up to $1.2 billion, a monthly fee equal on an annual basis to 0.1%; and on such
net assets in excess of $1.2 billion, a monthly fee equal on an annual basis to
0.075%. TGII may waive all or a portion of its fees provided for hereunder and
such waiver shall be treated as a reduction in purchase price of its services.
TGII shall be contractually bound hereunder by the terms of any publicly
announced waiver of its fees, or any limitation of the Fund's expenses, as if
such waiver or limitation were fully set forth herein.
(3) This Agreement shall remain in full force and effect
through April 30, 1996 and thereafter from year to year to the extent
continuance is approved annually by the Board of Directors of the Company.
(4) This Agreement may be terminated by the Company at any
time on sixty (60) days' written notice without payment of penalty, provided
that such termination by the Company shall be directed or approved by the vote
of a majority of the Directors of the Company in office at the time or by the
vote of a majority of the outstanding voting securities of the Company (as
defined by the 1940 Act); and shall automatically and immediately terminate in
the event of its assignment (as defined by the 1940 Act).
(5) In the absence of willful misfeasance, bad faith or gross
negligence on the part of TGII, or of reckless disregard of its duties and
obligations hereunder, TGII shall not be subject to liability for any act or
omission in the course of, or connected with, rendering services hereunder.
(6) TGII has advanced for the account of the Company all
organizational expenses of the Company, all of which expenses are being deferred
by the Company and amortized ratably over a five-year period commencing on
October 18, 1990; and during the amortization period, the proceeds of any
redemption of the original Shares will be reduced by a pro rata portion of any
then unamortized organizational expenses based on the ratio of the Shares
redeemed to the total initial Shares outstanding immediately prior to the
redemption.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their duly authorized officers and their
respective corporate seals to be hereunto duly affixed and attested.
TEMPLETON INSTITUTIONAL FUNDS, INC.
By: /s/THOMAS M. MISTELE
Thomas M. Mistele
Secretary
TEMPLETON GLOBAL INVESTORS, INC.
By: /s/JOHN R. KAY
John R. Kay
Vice President
MCGLADREY & PULLEN, LLP
Certified Public Accountants and Consultants
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use of our report dated January 31, 1996 on
the financial statements of the Growth Series, the Foreign Equity Series, the
Emerging Markets Series and the Global Fixed Income Series of Templeton
Institutional Funds, Inc. referred to therein, which appears in the 1995 Annual
Report to Shareholders and which is incorporated herein by reference, in
Post-Effective Amendment No. 9 to the Registration Statement on Form N-1A, File
No. 33-35779, as filed with the Securities and Exchange Commission.
We also consent to the reference to our firm in the Prospectus under
the caption "Financial Highlights" and in the Statement of Additional
Information under the caption "Independent Accountants".
/s/MCGLADREY & PULLEN, LLP
New York, New York
April 22, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
TEMPLETON INSTITUTIONAL FUNDS, INC. FOREIGN EQUITY SERIES DECEMBER 31,
1995 ANNUAL REPORT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> FOREIGN EQUITY SERIES
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 1698126383
<INVESTMENTS-AT-VALUE> 1814536183
<RECEIVABLES> 41764911
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 549606
<TOTAL-ASSETS> 1856850700
<PAYABLE-FOR-SECURITIES> 35095917
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3871476
<TOTAL-LIABILITIES> 38967393
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1698346822
<SHARES-COMMON-STOCK> 129496379
<SHARES-COMMON-PRIOR> 85023429
<ACCUMULATED-NII-CURRENT> 756912
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2369773
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 116409800
<NET-ASSETS> 1817883307
<DIVIDEND-INCOME> 38686823
<INTEREST-INCOME> 12077778
<OTHER-INCOME> 0
<EXPENSES-NET> 12514935
<NET-INVESTMENT-INCOME> 38249666
<REALIZED-GAINS-CURRENT> 24407376
<APPREC-INCREASE-CURRENT> 116272586
<NET-CHANGE-FROM-OPS> 178929628
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 37739736
<DISTRIBUTIONS-OF-GAINS> 20589597
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 54841050
<NUMBER-OF-SHARES-REDEEMED> 14047591
<SHARES-REINVESTED> 3679491
<NET-CHANGE-IN-ASSETS> 724656500
<ACCUMULATED-NII-PRIOR> 1866114
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (3067138)
<GROSS-ADVISORY-FEES> 9916869
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 12514935
<AVERAGE-NET-ASSETS> 1417244135
<PER-SHARE-NAV-BEGIN> 12.86
<PER-SHARE-NII> .31
<PER-SHARE-GAIN-APPREC> 1.35
<PER-SHARE-DIVIDEND> (.31)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> (.17)
<PER-SHARE-NAV-END> 14.04
<EXPENSE-RATIO> .88
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
TEMPLETON INSTITUTIONAL FUNDS, INC. DECEMBER 31, 1995 ANNUAL REPORT AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 4
<NAME> GROWTH SERIES
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 199638174
<INVESTMENTS-AT-VALUE> 225316871
<RECEIVABLES> 2053546
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 762860
<TOTAL-ASSETS> 228133277
<PAYABLE-FOR-SECURITIES> 928777
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 241491
<TOTAL-LIABILITIES> 1170268
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 200920800
<SHARES-COMMON-STOCK> 19141240
<SHARES-COMMON-PRIOR> 17740337
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 424933
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 25617276
<NET-ASSETS> 226963009
<DIVIDEND-INCOME> 5621694
<INTEREST-INCOME> 1019620
<OTHER-INCOME> 0
<EXPENSES-NET> 1856268
<NET-INVESTMENT-INCOME> 4785046
<REALIZED-GAINS-CURRENT> 13038929
<APPREC-INCREASE-CURRENT> 15928251
<NET-CHANGE-FROM-OPS> 33752226
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4785045
<DISTRIBUTIONS-OF-GAINS> 12351357
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1479630
<NUMBER-OF-SHARES-REDEEMED> 1521712
<SHARES-REINVESTED> 1442985
<NET-CHANGE-IN-ASSETS> 32904130
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (262640)
<GROSS-ADVISORY-FEES> 1469015
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1856268
<AVERAGE-NET-ASSETS> 209893693
<PER-SHARE-NAV-BEGIN> 10.94
<PER-SHARE-NII> .27
<PER-SHARE-GAIN-APPREC> 1.62
<PER-SHARE-DIVIDEND> (.27)
<PER-SHARE-DISTRIBUTIONS> (.70)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.86
<EXPENSE-RATIO> .88
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
TEMPLETON INSTITUTIONAL FUNDS, INC EMERGING MARKET SERIES INC.
DECEMBER 31, 1995 ANNUAL REPORT AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 2
<NAME> EMERGING MARKET SERIES
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 856426561
<INVESTMENTS-AT-VALUE> 808138564
<RECEIVABLES> 12698316
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 353860
<TOTAL-ASSETS> 821190740
<PAYABLE-FOR-SECURITIES> 20993980
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1681696
<TOTAL-LIABILITIES> 22675676
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 845187050
<SHARES-COMMON-STOCK> 74261758
<SHARES-COMMON-PRIOR> 51997882
<ACCUMULATED-NII-CURRENT> 1138292
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 683366
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (48493644)
<NET-ASSETS> 798515064
<DIVIDEND-INCOME> 15649496
<INTEREST-INCOME> 8285108
<OTHER-INCOME> 0
<EXPENSES-NET> 10341329
<NET-INVESTMENT-INCOME> 13593275
<REALIZED-GAINS-CURRENT> 9381337
<APPREC-INCREASE-CURRENT> (29368581)
<NET-CHANGE-FROM-OPS> (6393969)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 12454983
<DISTRIBUTIONS-OF-GAINS> 9647645
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 25584150
<NUMBER-OF-SHARES-REDEEMED> 5323688
<SHARES-REINVESTED> 2003414
<NET-CHANGE-IN-ASSETS> 215636782
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 949674
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 8488442
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 10341329
<AVERAGE-NET-ASSETS> 679255138
<PER-SHARE-NAV-BEGIN> 11.21
<PER-SHARE-NII> .19
<PER-SHARE-GAIN-APPREC> (.34)
<PER-SHARE-DIVIDEND> (.17)
<PER-SHARE-DISTRIBUTIONS> (.14)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.75
<EXPENSE-RATIO> 1.52
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
TEMPLETON INSTITUTIONAL FUNDS INC. GLOBAL FIXED INCOME DECEMBER 31, 1995
ANNUAL REPORT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 3
<NAME> GLOBAL FIXED INCOME SERIES
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 96477
<INVESTMENTS-AT-VALUE> 95862
<RECEIVABLES> 11150
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 8806
<TOTAL-ASSETS> 115818
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 14804
<TOTAL-LIABILITIES> 98347
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 157556
<SHARES-COMMON-STOCK> 12961
<SHARES-COMMON-PRIOR> 12398
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (54023)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (615)
<NET-ASSETS> 102918
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5352
<OTHER-INCOME> 0
<EXPENSES-NET> 1010
<NET-INVESTMENT-INCOME> 4342
<REALIZED-GAINS-CURRENT> 198
<APPREC-INCREASE-CURRENT> 31
<NET-CHANGE-FROM-OPS> 4571
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4342
<DISTRIBUTIONS-OF-GAINS> 121
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 563
<NET-CHANGE-IN-ASSETS> 4571
<ACCUMULATED-NII-PRIOR> 14033
<ACCUMULATED-GAINS-PRIOR> (69082)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 555
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 41741
<AVERAGE-NET-ASSETS> 100964
<PER-SHARE-NAV-BEGIN> 7.93
<PER-SHARE-NII> .35
<PER-SHARE-GAIN-APPREC> .02
<PER-SHARE-DIVIDEND> (.35)
<PER-SHARE-DISTRIBUTIONS> (.01)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 7.94
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
