File No. 33-37479
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
POST-EFFECTIVE
AMENDMENT NO. 4
TO
FORM S-6
For Registration Under the Securities Act of 1933 of Securities
of Unit Investment Trusts Registered on Form N-8B-2
TEMPLETON FOREIGN FUND & U.S. TREASURY SECURITIES TRUST, SERIES 1
(Exact Name of Trust)
NIKE SECURITIES L.P.
(Exact Name of Depositor)
1001 Warrenville Road
Lisle, Illinois 60532
(Complete address of Depositor's principal executive offices)
NIKE SECURITIES L.P. CHAPMAN AND CUTLER
Attn: James A. Bowen Attn: Eric F. Fess
1001 Warrenville Road 111 West Monroe Street
Lisle, Illinois 60532 Chicago, Illinois 60603
(Name and complete address of agents for service)
It is proposed that this filing will become effective (check
appropriate box)
: : immediately upon filing pursuant to paragraph (b)
: x : December 29, 1995
: : 60 days after filing pursuant to paragraph (a)
: : on (date) pursuant to paragraph (a) of rule (485 or 486)
Pursuant to Rule 24f-2 under the Investment Company Act of 1940,
the issuer has registered an indefinite amount of securities. A
24f-2 Notice for the offering was last filed on October 24, 1995.
<PAGE>
TEMPLETON FOREIGN FUND &
U.S. TREASURY SECURITIES TRUST, SERIES 1
25,057,566 UNITS
PROSPECTUS
Part One
Dated December 20, 1995
Note: Part One of this Prospectus may not be distributed unless accompanied by
Part Two.
The Trust
The Templeton Foreign Fund & U.S. Treasury Securities Trust (the "Trust") is a
unit investment trust consisting of a portfolio of "zero coupon" U.S. Treasury
bonds (treasury obligations) and shares of Templeton Foreign Fund
("Templeton"). Templeton is an open-end diversified management investment
company, commonly known as a mutual fund. At November 16, 1995 each Unit
represented a 1/25,057,566 undivided interest in the principal and net income
of the Trust (see "The Trust" in Part Two).
The Units being offered by this Prospectus are issued and outstanding Units
which have been purchased by the Sponsor in the secondary market or from the
Trustee after having been tendered for redemption. The profit or loss
resulting from the sale of Units will accrue to the Sponsor. No proceeds from
the sale of Units will be received by the Trust.
Public Offering Price
The Public Offering Price per 1,000 Units is equal to the aggregate value of
the Securities in the Portfolio of the Trust divided by the number of Units
outstanding, multiplied by 1,000, plus a sales charge of 5.8% of the Public
Offering Price (6.157% of the amount invested). At November 16, 1995, the
Public Offering Price per 1,000 Units was $1,369.13 (see "Public Offering" in
Part Two).
Please retain both parts of this Prospectus for future reference.
______________________________________________________________________________
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.
______________________________________________________________________________
NIKE SECURITIES L.P.
Sponsor
<PAGE>
TEMPLETON FOREIGN FUND &
U.S. TREASURY SECURITIES TRUST, SERIES 1
SUMMARY OF ESSENTIAL INFORMATION AS OF NOVEMBER 16, 1995
Sponsor: Nike Securities L.P.
Evaluator: Securities Evaluation Service, Inc.
Trustee: The Chase Manhattan Bank (National Association)
<TABLE>
<CAPTION>
GENERAL INFORMATION
<S> <C>
Aggregate Maturity Value of Treasury Obligations in the Trust $25,064,000
Aggregate Number of Shares of Templeton in the Trust 1,509,213.886
Number of Units 25,057,566
Fractional Undivided Interest in the Trust per Unit 1/25,057,566
Public Offering Price per 1,000 Units:
Aggregate Value of Securities in the Portfolio $32,317,231
Aggregate Value of Securities per 1,000 Units $1,289.72
Sales Charge 6.157% (5.8% of Public Offering Price) $79.41
Public Offering Price per 1,000 Units $1,369.13
Redemption Price and Sponsor's Repurchase Price per 1,000
Units ($79.41 less than the Public Offering Price per
1,000 Units) $1,289.72
</TABLE>
Date Trust Established November 14, 1990
Mandatory Termination Date February 15, 2001
Evaluator's Annual Fee: $.20 per $1,000 principal amount of Treasury
Obligations outstanding. Evaluations for purposes of sale, purchase or
redemption of Units are made as of the close of trading (4:00 p.m. Eastern
time) on the New York Stock Exchange on each day on which it is open.
Supervisory fee payable to an affiliate Maximum of $.15 per 1,000
of the Sponsor Units outstanding annually
Trustee's Annual Fee: $.85 per 1,000 Units outstanding.
Record Date: The same business day as Templeton's ex-dividend date.
Distribution Date: The same business day as Templeton's distribution date.
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Unit Holders of Templeton Foreign Fund &
U.S. Treasury Securities Trust, Series 1
We have audited the accompanying statement of assets and liabilities,
including the portfolio, of Templeton Foreign Fund & U.S. Treasury Securities
Trust, Series 1 as of August 31, 1995, and the related statements of
operations and changes in net assets for the each of the three years in the
period then ended. These financial statements are the responsibility of the
Trust's Sponsor. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of August 31, 1995, by
correspondence with the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Sponsor, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Templeton Foreign Fund & U.S.
Treasury Securities Trust, Series 1 at August 31, 1995, and the results of its
operations and changes in its net assets for each of the three years in the
period then ended in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
November 10, 1995
<PAGE>
TEMPLETON FOREIGN FUND &
U.S. TREASURY SECURITIES TRUST, SERIES 1
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1995
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Securities, at market value (cost, including
accretion on the treasury obligations,
$27,546,017) (Note 1) $32,930,019
Receivable from investment transactions 15,081
___________
32,945,100
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
<S> <C> <C>
Cash overdraft 148,807
Unit redemptions payable 33,760
Accrued liabilities 647
___________
183,214
___________
Net assets, applicable to 25,360,944 outstanding
units of fractional undivided interest:
Cost of Trust assets, including accretion on
the treasury obligations (Note 1) $27,546,017
Net unrealized appreciation (Note 2) 5,384,002
Distributable funds (deficit) (168,133)
___________
$32,761,886
===========
Net asset value per 1,000 units $1,291.82
===========
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
TEMPLETON FOREIGN FUND &
U.S. TREASURY SECURITIES TRUST, SERIES 1
PORTFOLIO
August 31, 1995
<TABLE>
<CAPTION>
Maturity Market
value Name of Issuer and Title of Security (1) value
<C> <S> <C>
Corpus of a U.S. Treasury Note
(stripped of its interest-paying coupons)
$25,371,000 maturing February 15, 2001 $18,242,983
===========
</TABLE>
<TABLE>
<CAPTION>
Shares
<C> <S> <C>
1,526,719.057 Templeton Foreign Fund, Inc. 14,687,036
============= -----------
Total investments $32,930,019
===========
</TABLE>
(1) The Treasury Obligations have been purchased at a discount from their
par value because there is no stated interest income thereon (such
securities are often referred to as U.S. Treasury zero coupon bonds).
Over the life of the treasury obligations the value increases, so that
upon maturity the holders will receive 100% of the principal amount
thereof.
[FN]
See accompanying notes to financial statements.
<PAGE>
TEMPLETON FOREIGN FUND &
U.S. TREASURY SECURITIES TRUST, SERIES 1
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended Aug. 31,
1995 1994 1993
<S> <C> <C> <C>
Interest income $1,358,260 1,356,476 1,362,840
Dividends:
Ordinary income 496,392 308,864 389,787
Capital gain 505,294 199,271 659,758
___________________________________________
Total investment income 2,359,946 1,864,611 2,412,385
Expenses:
Trustee's fees and related
expenses (37,300) (34,515) (43,755)
Evaluator's fees (5,416) (5,694) (6,425)
Supervisory fees (4,131) (4,358) (4,761)
___________________________________________
Total expenses (46,847) (44,567) (54,941)
___________________________________________
Investment income - net 2,313,099 1,820,044 2,357,444
Net gain (loss) on investments:
Net realized gain (loss) 472,441 495,766 267,977
Change in unrealized
appreciation or
depreciation (324,472) (575,929) 3,427,500
___________________________________________
147,969 (80,163) 3,695,477
___________________________________________
Net increase in net assets
resulting from operations $2,461,068 1,739,881 6,052,921
===========================================
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
TEMPLETON FOREIGN FUND &
U.S. TREASURY SECURITIES TRUST, SERIES 1
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended Aug. 31,
1995 1994 1993
<S> <C> <C> <C>
Net increase in net assets
resulting from operations:
Investment income - net $2,313,099 1,820,044 2,357,444
Net realized gain (loss)
on investments 472,441 495,766 267,977
Change in unrealized
appreciation or depreciation
on investments (324,472) (575,929) 3,427,500
____________________________________________
2,461,068 1,739,881 6,052,921
Units redeemed (2,869,987,
2,409,069 and 2,485,000
in 1995, 1994 and 1993,
respectively) (3,537,061) (2,921,115) (2,664,951)
Distributions to unit holders:
Investment income - net (1,103,744) (441,622) (987,799)
____________________________________________
Total increase (decrease) in
net assets (2,179,737) (1,622,856) 2,400,171
Net assets:
At the beginning of the
year 34,941,623 36,564,479 34,164,308
____________________________________________
At the end of the year
(including distributable
funds (deficit) applicable
to Trust units of $(168,133),
$(2,979)and $(23,890)
at August 31,
1995, 1994 and 1993,
respectively) $32,761,886 34,941,623 36,564,479
============================================
Trust units outstanding at the
end of the year 25,360,944 28,230,931 30,640,000
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
TEMPLETON FOREIGN FUND &
U.S. TREASURY SECURITIES TRUST, SERIES 1
NOTES TO FINANCIAL STATEMENTS
1. Significant accounting policies
Security valuation -
The treasury obligations are stated at values as determined by Securities
Evaluation Service, Inc. (the Evaluator), certain shareholders of which are
officers of the Sponsor. The values are based on (1) current bid prices for
the securities obtained from dealers or brokers who customarily deal in
securities comparable to those held by the Trust, (2) current bid prices for
comparable securities, (3) appraisal or (4) any combination of the above.
Shares of Templeton Foreign Fund (Templeton) are stated at Templeton's
published net asset value as reported by the Evaluator. Net asset value is
determined by dividing the value of Templeton'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.
Investment income -
Dividends from the Templeton shares are recorded on Templeton's ex-dividend
date. Interest income consists of amortization of original issue discount and
market discount or premium on the treasury obligations. Such amortization is
included in the cost of treasury obligations rather than in distributable
funds because it is not currently available for distribution to unit holders.
Security cost -
Cost of the Trust's treasury obligations is based on the offering price of the
treasury obligations on the dates the treasury obligations were deposited in
the Trust, plus amortization of original issue discount and amortization of
market discount or premium. Cost of the Templeton shares is based on the net
asset value of such shares on the dates the shares were deposited in the
Trust. The cost of securities sold is determined on the average cost method.
Sales of securities are recorded on the trade date.
Federal income taxes -
The Trust is not taxable for Federal income tax purposes. Each unit holder is
considered to be the owner of a pro rata portion of the Trust and,
accordingly, no provision has been made for Federal income taxes.
Expenses of the Trust -
The Trust pays a fee for Trustee services to United States Trust Company of
New York, which is based on $.85 per annum per 1,000 units outstanding based
on the largest aggregate number of units outstanding during the calendar year.
Effective September 1, 1995, The Chase Manhattan Bank (National Association)
will succeed United States Trust Company of New York as Trustee; the Trustee
fees will not be affected by the change. The Evaluator will receive an annual
fee based on $.20 per $1,000 principal amount of treasury obligations
outstanding. Additionally, the Trust pays recurring financial reporting costs
and an annual supervisory fee payable to an affiliate of the Sponsor.
<PAGE>
2. Unrealized appreciation and depreciation
An analysis of net unrealized appreciation at August 31, 1995 follows:
<TABLE>
<CAPTION>
Treasury Templeton
obligations shares Total
<S> <C> <C> <C>
Unrealized appreciation $3,339,514 2,044,488 5,384,002
Unrealized depreciation - - -
_____________________________________
$3,339,514 2,044,488 5,384,002
=====================================
</TABLE>
3. Other information
Cost to investors -
The cost to initial investors of units of the Trust was based on the aggregate
offering price of the treasury obligations and the net asset value of the
Templeton shares on the date of an investor's purchase, plus a sales charge of
5.5% of the public offering price which is equivalent to approximately 5.820%
of the net amount invested.
Distributions to unit holders -
Distributions to unit holders are made on Templeton's distribution date.
During the years ended August 31, 1995, 1994 and 1993, the Trust made
distributions totaling $39.53, $14.70 and $30.04 per 1,000 units,
respectively, as described below.
<PAGE>
Selected data per 1,000 units of the Trust outstanding
throughout each year -
<TABLE>
<CAPTION>
Year ended Aug. 31,
1995 1994 1993
<S> <C> <C> <C>
Investment income - interest
and dividends $87.42 63.73 75.52
Expenses (1.73) (1.52) (1.72)
__________________________________________
Investment income - net 85.69 62.21 73.80
Distributions to unit holders:
Investment income - net (39.53) (14.70) (30.04)
Net gain (loss) on investments 7.95 (3.16) 118.22
__________________________________________
Total increase (decrease)
in net assets 54.11 44.35 161.98
Net assets:
Beginning of the year 1,237.71 1,193.36 1,031.38
__________________________________________
End of the year $1,291.82 1,237.71 1,193.36
==========================================
</TABLE>
Investment income - interest and dividends, expenses and investment income -
net per 1,000 units have been calculated based on the weighted average number
of units outstanding during each period (26,994,668, 29,255,821 and 31,943,192
units during the years ended August 31, 1995, 1994 and 1993, respectively).
Distributions to unit holders of investment income - net per 1,000 units
reflects the Trust's cash distributions of approximately $34.66 per 1,000
unites to 27,971,929 units on November 4, 1994, approximately $4.87 per 1,000
units to 27,563,987 units on December 30, 1994, approximately $11.95 per 1,000
units to 30,090,000 units on October 28, 1993, $2.75 per 1,000 units to
29,835,000 units on December 31, 1993, $27.27 per 1,000 units to 32,910,000
units on October 23, 1992 and $2.77 per 1,000 units to 32,675,000 units on
December 31, 1992.
<PAGE>
TEMPLETON FOREIGN FUND &
U.S. TREASURY SECURITIES TRUST, SERIES 1
PART ONE
Must be Accompanied by Part Two
____________________
P R O S P E C T U S
____________________
SPONSOR: Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
(800) 621-1675
TRUSTEE: The Chase Manhattan Bank
(National Association)
770 Broadway
New York, New York 10003
LEGAL COUNSEL Chapman and Cutler
TO SPONSOR: 111 West Monroe Street
Chicago, Illinois 60603
LEGAL COUNSEL Carter, Ledyard & Milburn
TO TRUSTEE: 2 Wall Street
New York, New York 10005
INDEPENDENT Ernst & Young LLP
AUDITORS: Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606
This Prospectus does not constitute an offer to sell, or a solicitation of an
offer to buy, securities in any jurisdiction to any person to whom it is not
lawful to make such offer in such jurisdiction.
This Prospectus does not contain all the information set forth in the
registration statement and exhibits relating thereto, which the Trust has
filed with the Securities and Exchange Commission, Washington, D.C., under the
Securities Act of 1933 and the Investment Company Act of 1940, and to which
reference is hereby made.
Templeton Growth And Treasury Trust
Templeton Foreign Fund & U.S. Treasury Securities Trust
PROSPECTUS NOTE: THIS PART TWO PROSPECTUS MAY
Part Two ONLY BE USED WITH PART ONE
Dated December 22, 1995
The Trust. Templeton Growth and Treasury Trust and Templeton Foreign
Fund & U.S. Treasury Securities Trust (each a "Trust" and collectively,
the "Fund") are unit investment trusts each consisting of a portfolio
of "zero coupon" U.S. Treasury bonds and shares of Templeton Growth
Fund, Inc. or Templeton Foreign Fund, respectively ("Templeton").
Templeton is an open-end diversified management investment company,
commonly known as a mutual fund.
The objective of the Fund is to protect Unit holders' capital
and provide for potential capital appreciation by investing a
portion of its portfolio in "zero coupon" U.S. Treasury bonds,
such securities being referred to herein as "Treasury Obligations"
and the remainder of the Trust's portfolio in shares of Templeton.
Collectively the Treasury Obligations and the Templeton shares
are referred to herein as the "Securities" (See "Portfolio").
Templeton's objective is to obtain long-term capital growth through
a flexible policy of investing in stocks and debt obligations
of companies and governments of any nation (in the case of Templeton
Growth Fund, Inc.) or companies and governments outside the United
States (in the case of Templeton Foreign Fund). Templeton Growth
and Treasury Trust has a termination date of September 1, 2000
and Templeton Foreign Fund & U.S. Treasury Securities Trust has
a termination date of February 15, 2001. The Treasury Obligations
evidence the right to receive a fixed payment at a future date
from the U.S. Government and are backed by the full faith and
credit of the U.S. Government. The guarantee of the U.S. Government
does not apply to the market value of the Treasury Obligations
or the Units of the Trust, whose net asset value will fluctuate
and, prior to maturity, may be worth more or less than a purchaser's
acquisition cost. There is, of course, no guarantee that the objective
of the Trust will be achieved.
Each Unit of a Trust represents an undivided fractional interest
in all the Securities deposited in the Trust. Each Trust has been
organized so that purchasers of Units should receive, at the termination
of the Trust, an amount per Unit at least equal to $1.00 (which
is equal to the per Unit value upon maturity of the Treasury Obligations),
even if the Trust never paid a dividend and the value of the Templeton
shares were to decrease to zero, which the Sponsor considers highly
unlikely. This feature of each Trust provides Unit holders who
purchase Units at a price of $1.00 or less per Unit with total
principal protection, including any sales charges paid, although
they might forego any earnings on the amount invested. To the
extent that Units are purchased at a price less than $1.00 per
Unit, this feature may also provide a potential for capital appreciation.
The Templeton shares deposited in each Trust's portfolio have
no fixed maturity date and the net asset value of the shares will
fluctuate. The Portfolio, essential information based thereon
and financial statements, including a report of independent auditors
relating to the Trusts offered hereby, are contained in Part One
for each Trust to which reference should be made for such information.
BOTH PARTS OF THE PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Page 1
Public Offering Price. The Public Offering Price per Unit will
be based upon a pro rata share of the bid prices of the Treasury
Obligations and the net asset value of the Templeton shares in
each Trust plus or minus a pro rata share of cash, if any, in
the Principal Account of the Trust plus a maximum sales charge
of 5.8% (equivalent to 6.157% of the net amount invested). The
minimum purchase is $1,000. The sales charge is reduced on a graduated
scale for sales involving at least $100,000. See "How is the Public
Offering Price Determined?"
Dividend and Capital Distributions. Distributions, if any, of
net income, other than amortized discount, will be made at least
annually. Distributions of realized capital gains, if any, received
by the Trusts, will be made whenever Templeton makes such a distribution.
Any distribution of income and/or capital will be net of the expenses
of the Trusts. INCOME WITH RESPECT TO THE ACCRUAL OF ORIGINAL
ISSUE DISCOUNT ON THE TREASURY OBLIGATIONS WILL NOT BE DISTRIBUTED
CURRENTLY, ALTHOUGH UNIT HOLDERS WILL BE SUBJECT TO INCOME TAX
AT ORDINARY INCOME RATES AS IF A DISTRIBUTION HAD OCCURRED. SEE
"WHAT IS THE FEDERAL TAX STATUS OF UNIT HOLDERS?" Additionally,
upon termination of each Trust, the Trustee will distribute, upon
surrender of Units for redemption, to each Unit holder his pro
rata share of the Trust's assets, less expenses, in the manner
set forth under "Rights of Unit Holders-How are Income and Principal
Distributed?"
Reinvestment. Each Unit holder will, unless he elects to receive
cash payments, have distributions of principal (including the
proceeds received upon the maturity of the Treasury Obligations
in the Trust at termination), capital gains, if any, and income
earned by a Trust, automatically invested in shares of Templeton
(if Units are properly registered) in the name of the Unit holder.
Such distributions will be reinvested without a sales charge to
the participant on each applicable distribution date. See "Rights
of Unit Holders-How Can Distributions to Unit Holders be Reinvested?"
Market for Units. While under no obligation to do so, the Sponsor
intends to maintain a market for Units of the Trust and offer
to repurchase such Units at prices which are based on the aggregate
bid side evaluation of the Treasury Obligations and the aggregate
net asset value of Templeton shares in each Trust plus or minus
a pro rata share of cash, if any, in the Principal Account of
the Trust. In the absence of such a market, a Unit holder may
redeem Units through redemption at prices based upon the aggregate
bid price of the Treasury Obligations plus the aggregate net asset
value of the Templeton shares in the Trust plus or minus a pro
rata share of cash, if any, in the Principal Account of the Trust.
See "Rights of Unit Holders-How May Units be Redeemed?"
Page 2
Templeton Growth And Treasury Trust
Templeton Foreign Fund & U.S. Treasury Securities Trust
What are Templeton Growth and Treasury Trust and Templeton Foreign
Fund & U.S. Treasury Securities Trust?
The Fund is a series of trusts of either Templeton Growth and
Treasury Trust or Templeton Foreign Fund & U.S. Treasury Securities
Trust, all of which are generally similar but each of which is
separate and is designated by a different series number (the "Fund").
Each series consists of underlying separate unit investment trusts
(such Trusts being collectively referred to herein as the "Fund")
created under the laws of the State of New York pursuant to a
Trust Agreement (the "Indenture"), dated the Initial Date of Deposit,
with Nike Securities L.P., as Sponsor, The Chase Manhattan Bank
(National Association), as Trustee, Securities Evaluation Service,
Inc., as Evaluator, and First Trust Advisors L.P., as Portfolio
Supervisor.
The objective of the Fund and each Series thereof is to protect
Unit holders' capital and provide for potential long-term capital
appreciation through an investment in "zero coupon" U.S. Treasury
bonds, such securities being referred to herein as the "Treasury
Obligations" and the remainder of the Trust's portfolio is invested
in shares of Templeton Growth Fund, Inc. or Templeton Foreign
Fund, respectively ("Templeton"). The Treasury Obligations evidence
the right to receive a fixed payment at a future date from the
U.S. Government and are backed by the full faith and credit of
the U.S. Government. The guarantee of the U.S. Government does
not apply to the market value of the Treasury Obligations or the
Units of the Trust, whose net asset value will fluctuate and,
prior to maturity, may be more or less than a purchaser's acquisition
cost. Templeton is an open end mutual fund whose objective is
to obtain long-term capital growth through a flexible policy of
investing in stocks and debt obligations of companies and governments
of any nation (in the case of Templeton Growth Fund, Inc.) or
companies and governments outside the United States (in the case
of Templeton Foreign Fund). Collectively, the Treasury Obligations
and Templeton shares in the Trust are referred to herein as the
"Securities." There is, of course, no guarantee that the objective
of the Trust will be achieved.
The Fund has been organized so that purchasers of Units should
receive, at the termination of a Trust, an amount per Unit at
least equal to $1.00 per Unit (which is equal to the per Unit
value upon maturity of the Treasury Obligations), even if the
Templeton shares never paid a dividend and the value of Templeton
shares in the Trust were to decrease to zero, which the Sponsor
considers highly unlikely. To the extent that Units of the Trust
are redeemed, the aggregate value of the Securities in the Trust
will be reduced and the undivided fractional interest represented
by each outstanding Unit of the Trust will increase. See "How
May Units be Redeemed?"
What are the Expenses and Charges?
At no cost to the Fund, the Sponsor has borne all the expenses
of creating and establishing the Fund, including the cost of the
initial preparation, printing and execution of the Indenture and
the certificates for the Units, legal and accounting expenses,
expenses of the Trustee and other out-of-pocket expenses. The
Sponsor will not receive any fees in connection with its activities
relating to the Fund. However, First Trust Advisors L.P., an affiliate
of the Sponsor, will receive an annual supervisory fee, which
is not to exceed the amount set forth in Part One for each Trust,
for providing portfolio supervisory services for each Trust. Such
fee is based on the number of Units outstanding in a Trust on
January 1 of each year except for a trust during the year or years
in which an initial offering period occurs in which case the fee
for a month is based on the number of Units outstanding at the
end of such month. The fee may exceed the actual costs of providing
such supervisory services for a Trust, but at no time will the
total amount received for portfolio supervisory services rendered
to unit investment trusts to which First Trust Advisors L.P. is
the Sponsor in any calendar year exceed the aggregate cost to
First Trust Advisors L.P. of supplying such services in such year.
Page 3
The Evaluator will receive a fee as indicated in Part One for
each Trust. No fee is paid to the Evaluator with respect to the
Templeton shares in the Trust. The Trustee pays certain expenses
of the Trust for which it is reimbursed by the Trust. The Trustee
will receive for its ordinary recurring services to a Trust and
for all normal expenses of the Trustee incurred by or in connection
with its responsibilities under the Indenture, an annual fee computed
at $.85 per annum per 1,000 Units in the Trust outstanding based
upon the largest aggregate number of Units of the Trust outstanding
at any time during the year. For a discussion of the services
performed by the Trustee pursuant to its obligations under the
Indenture, reference is made to the material set forth under "Rights
of Unit Holders."
The Trustee's and Evaluator's fees are payable from the Income
Account of the Trust to the extent funds are available and then
from the Principal Account of the Trust. Since the Trustee has
the use of the funds being held in the Principal and Income Accounts
for payment of expenses and redemptions and since such Accounts
are noninterest-bearing to Unit holders, the Trustee benefits
thereby. Part of the Trustee's compensation for its services to
the Trust is expected to result from the use of these funds. Both
fees may be increased without approval of the Unit holders by
amounts not exceeding proportionate increases under the category
"All Services Less Rent of Shelter" in the Consumer Price Index
published by the United States Department of Labor.
The following additional charges are or may be incurred by the
Trust: all legal and annual auditing expenses of the Trustee incurred
by or in connection with its responsibilities under the Indenture;
the expenses and costs of any action undertaken by the Trustee
to protect the Trust and the rights and interests of the Unit
holders; fees of the Trustee for any extraordinary services performed
under the Indenture; indemnification of the Trustee for any loss,
liability or expense incurred by it without negligence, bad faith
or willful misconduct on its part, arising out of or in connection
with its acceptance or administration of the Trust; indemnification
of the Sponsor for any loss, liability or expense incurred without
gross negligence, bad faith or willful misconduct in acting as
Depositor of the Trust; all taxes and other government charges
imposed upon the Securities or any part of the Trust (no such
taxes or charges are being levied or made or, to the knowledge
of the Sponsor, contemplated). The above expenses and the Trustee's
annual fee, when paid or owing to the Trustee, are secured by
a lien on the Trust. In addition, the Trustee is empowered to
sell Securities in the Trust in order to make funds available
to pay all these amounts if funds are not otherwise available
in the Income and Principal Accounts of the Trust except that
the Trustee shall not sell Treasury Obligations to pay Trust expenses.
The Indenture requires the Trust to be audited on an annual basis
at the expense of the Trust by independent auditors selected by
the Sponsor. So long as the Sponsor is making a market for the
Units, the Sponsor is required to bear the cost of such annual
audits to the extent such cost exceeds $.50 per 1,000 Units. Unit
holders of the Trust covered by an audit may obtain a copy of
the audited financial statements upon request.
What is the Federal Tax Status of Unit Holders?
The following is a general discussion of certain of the federal
income tax consequences of the purchase, ownership and disposition
of the Units. The summary is limited to investors who hold Units
as "Capital Assets" (generally, property held for investment)
within the meaning of Section 1221 of the Internal Revenue Code
of 1986 (the "Code"). Unit holders should consult their tax advisors
in determining the federal, state, local and any other tax consequences
of the purchase, ownership and disposition of Units in a Trust.
In the opinion of Chapman and Cutler, counsel for the Sponsor,
under then existing law:
1. Each Trust is not an association taxable as a corporation
for federal income tax purposes; each Unit holder will be treated
as the owner of a pro rata portion of the assets of each Trust
under the Code; the income of each Trust will be treated as income
of the Unit holders thereof under the Code; and each Unit holder
will be considered to have received his pro rata share of income
derived from each Trust asset when such income is received by a Trust.
2. Each Unit holder will have a taxable event when a Trust disposes
of a Security (whether by sale, exchange, redemption, or payment
at maturity) or upon the sale or redemption of Units by such Unit
Page 4
holder. The price a Unit holder pays for his Units, including
sales charges, is allocated among his pro rata portion of each
Security held by a Trust (in proportion to the fair market values
thereof on the date the Unit holder purchases his Units) in order
to determine his initial cost for his pro rata portion of each
Security held by a Trust. The Treasury Obligations held by the
Trusts are treated as stripped bonds and will in all likelihood
be treated as bonds issued at an original issue discount as of
the date a Unit holder purchases his Units. Because the Treasury
Obligations represent interests in "stripped" U.S. Treasury bonds,
a Unit holder's initial cost for his pro rata portion of each
Treasury Obligation held by the Trusts shall be treated as its
"purchase price" by the Unit holder. Original issue discount is
effectively treated as interest for federal income tax purposes
and the amount of original issue discount in this case is generally
the difference between the bond's purchase price and its stated
redemption price at maturity. A Unit holder will be required to
include in gross income for each taxable year the sum of his daily
portions of original issue discount attributable to the Treasury
Obligations held by the Trusts as such original issue discount
accrues and will, in general, be subject to federal income tax
with respect to the total amount of such original issue discount
that accrues for such year even though the income is not distributed
to the Unit holders during such year to the extent it is not less
than a "de minimis" amount as determined under a Treasury Regulation
issued on December 28, 1992, relating to stripped bonds. To the
extent the amount of such discount is less than the respective
"de minimis" amount, such discount shall be treated as zero. In
general, original issue discount accrues daily under a constant
interest rate method which takes into account the semi-annual
compounding of accrued interest. In the the case of the Treasury
Obligations, this method will generally result in an increasing
amount of income to the Unit holders each year. Unit holders should
consult their tax advisors regarding the federal income tax consequences
and accretion of original issue discount under the stripped bond rules.
3. A Unit holder's portion of gain, if any, upon the sale or
redemption of Units or the disposition of Securities held by a
Trust will generally be considered a capital gain except in the
case of a dealer or a financial institution and will be long-term
if the Unit holder has held his Units for more than one year.
A Unit holder's portion of loss, if any, upon the sale or redemption
of Units or the disposition of Securities held by a Trust will
generally be considered a capital loss except in the case of a
dealer or a financial institution and will be long-term if the
Unit holder has held his Units for more than one year. Unit holders
should consult their tax advisors regarding the recognition of
such capital gains and losses for federal income tax purposes.
4. The Code provides that "miscellaneous itemized deductions"
are allowable only to the extent that they exceed two percent
of an individual taxpayer's adjusted gross income. Miscellaneous
itemized deductions subject to this limitation under present law
include a Unit holder's pro rata share of expenses paid by a Trust,
including fees of the Trustee and the Evaluator but not including
amortizable bond premium on Treasury Obligations held by a Trust
or expenses incurred by Templeton the shares of which are held
by the Trust.
Because Unit holders are deemed to directly own a pro rata portion
of the Templeton shares as discussed above, Unit holders are advised
to read the discussion of tax consequences set forth in the current
prospectus for Templeton. Distributions declared by Templeton
on the Templeton shares in October, November or December that
are held by a Trust and paid during the following January will
be treated as having been received by Unit holders on December
31 in the year such distributions were declared. Long-term capital
gains distributions on the Templeton shares are taxable to the
Unit holders as long-term capital gains regardless of how long
a person has been a Unit holder. If a Unit holder holds his Units
for six months or less or if a Trust holds shares of Templeton
for six months or less, any loss incurred by a Unit holder related
to the disposition of Templeton shares will be treated as a long-term
capital loss to the extent of any long-term capital gains distributions
received (or deemed to have been received) with respect to such
shares. For taxpayers other than corporations, net capital gains
are subject to a maximum stated marginal
Page 5
tax rate of 28 percent. However, it should be noted that legislative
proposals are introduced from time to time that affect tax rates
and could affect relative differences at which ordinary income
and capital gains are taxed.
The "Revenue Reconciliation Act of 1993" (the "Tax Act") raised
tax rates on ordinary income while capital gains remain subject
to a 28% maximum stated rate for taxpayers other than corporations.
Because some or all capital gains are taxed at a comparatively
lower rate under the Tax Act, the Tax Act includes a provision
that recharacterizes capital gains as ordinary income in the case
of certain financial transactions that are "conversion transactions"
effective for transactions entered into after April 30, 1993.
Unit holders and prospective investors should consult with their
tax advisors regarding the potential effect of this provision
on their investment in Units.
Templeton may elect to pass through to its shareholders the foreign
income and similar taxes paid by Templeton in order to enable
such shareholders to take a credit (or deduction) for foreign
income taxes paid by Templeton. If such an election is made, Unit
holders of a Trust, because they are deemed to own a pro rata
portion of the Templeton shares held by the Trust, as described
above, must include in their gross income, for federal income
tax purposes, both their portion of dividends received by the
Trust from Templeton, and also their portion of the amount which
Templeton deems to be the Trust's portion of foreign income taxes
paid with respect to, or withheld from, dividends, interest or
other income of Templeton from its foreign investments. Unit holders
may then subtract from their federal income tax the amount of
such taxes withheld, or else treat such foreign taxes as deductions
from gross income; however, as in the case of investors receiving
income directly from foreign sources, the above described tax
credit or deduction is subject to certain limitations. Unit holders
should consult their tax advisors regarding this election and
its consequences to them.
General. Each Unit holder will be requested to provide the Unit
holder's taxpayer identification number to the Trustee and to
certify that the Unit holder has not been notified that payments
to the Unit holder are subject to back-up withholding. If the
proper taxpayer identification number and appropriate certification
are not provided when requested, distributions by the Trusts to
such Unit holder (including amounts received upon the redemption
of Units) will be subject to back-up withholding. Distributions
by a Trust will generally be subject to United States income taxation
and withholding in the case of Units held by non-resident alien
individuals, foreign corporations or other non-United States persons
(accrual of original issue discount on the Treasury Obligations
may not be subject to taxation or withholding provided certain
requirements are met). Such persons should consult their tax advisors.
Unit holders will be notified annually of the amounts of original
issue discount, income dividends and long-term capital gains distributions
includable in the Unit holder's gross income and amounts of Trust
expenses which may be claimed as itemized deductions.
Dividend income, long-term capital gains and accrual of original
issue discount may also be subject to state and local taxes. Foreign
investors may be subject to different Federal income tax consequences
than those described above. Investors should consult their tax
advisors for specific information on the tax consequences of investing
in the Trusts and of particular types of distributions.
Unit holders desiring to purchase Units for tax-deferred plans
and IRAs should consult their broker for details on establishing
such accounts. Units may also be purchased by persons who already
have self-directed plans established. See "Why are Investments
in the Trust Suitable for Retirement Plans?"
In the opinion of Carter, Ledyard & Milburn, Special Counsel to
the Trusts for New York tax matters, under then existing income
tax laws of the State of New York each Trust is not an association
taxable as a corporation and the income of each Trust will be
treated as the income of the Unit holders thereof.
Why are Investments in the Trust Suitable for Retirement Plans?
Units of a Trust may be well suited for purchase by Individual
Retirement Accounts, Keogh Plans, pension funds and other tax-deferred
retirement plans. Generally, federal income tax relating to capital
gains and income received in each of the foregoing plans is deferred
until distributions are received. Distributions from such plans
are generally treated as ordinary income but may, in some cases,
be eligible for
Page 6
special averaging or tax-deferred rollover treatment. Investors
considering participation in any such plan should review specific
tax laws related thereto and should consult their attorneys or
tax advisors with respect to the establishment and maintenance
of any such plan. Such plans are offered by brokerage firms and
other financial institutions. Fees and charges with respect to
such plans may vary.
PORTFOLIO
What are Zero Coupon Treasuries?
The Treasury Obligations deposited in the Trust consist of U.S.
Treasury bonds which have been stripped of their unmatured interest
coupons. The Treasury Obligations evidence the right to receive
a fixed payment at a future date from the U.S. Government, and
are backed by the full faith and credit of the U.S. Government.
Treasury Obligations are purchased at a deep discount because
the buyer obtains only the right to a fixed payment at a fixed
date in the future and does not receive any periodic interest
payments. The effect of owning deep discount bonds which do not
make current interest payments (such as the Treasury Obligations)
is that a fixed yield is earned not only on the original investment
but also, in effect, on all earnings during the life of the discount
obligation. This implicit reinvestment of earnings at the same
rate eliminates the risk of being unable to reinvest the income
on such obligations at a rate as high as the implicit yield on
the discount obligation, but at the same time eliminates the holder's
ability to reinvest at higher rates in the future. For this reason,
the Treasury Obligations are subject to substantially greater
price fluctuations during periods of changing interest rates than
are securities of comparable quality which make regular interest
payments. The effect of being able to acquire the Treasury Obligations
at a lower price is to permit more of the Trust's portfolio to
be invested in shares of Templeton.
What is Templeton Growth Fund, Inc.?
The portfolio of a Series of the Fund may also contain shares
of Templeton Growth Fund, Inc. Templeton Growth Fund, Inc. is
an open-end diversified management investment company, commonly
known as a mutual fund. Templeton Growth Fund, Inc. is registered
under the Investment Company Act of 1940 as an open-end, diversified
management investment company. Templeton Growth Fund Inc.'s objective
is long-term capital growth through a flexible policy of investing
in stocks and debt obligations of companies and governments of
any nation. The shares of Templeton Growth Fund, Inc. deposited
in a Trust are maintained on the books of Templeton Growth Fund,
Inc.'s transfer agent.
Templeton Growth Fund, Inc. has followed the practice of paying
a distribution at least once annually representing substantially
all of its net investment income and distributing any net realized
capital gains.
The table on the next page shows important financial information
for Templeton Growth Fund, Inc., expressed in terms of one share
outstanding throughout the period. This table is audited by an
independent certified public accountant and appears in Templeton
Growth Fund Inc.'s 1994 Annual Report to Shareholders and its
prospectus dated January 1, 1995. This table should be read in
conjunction with the other financial statements and notes thereto
included in Templeton Growth Fund Inc.'s 1994 Annual Report to
Shareholders, which contains further information about the Fund's
performance. Its 1994 Annual Report to Shareholders and its prospectus
dated January 1, 1995, may be obtained without charge by writing
to Franklin Templeton Distributors, Inc., 700 Central Avenue,
St. Petersburg, Florida 33701-3628.
Page 7
<TABLE>
<CAPTION>
Templeton Growth Fund, Inc.
per Share Operating Performance
(for a Share Outstanding
throughout the Period)
Eight Months Ended
Year Ended August 31 Aug. 31 Dec. 31 Year Ended
Pro April 30
Forma (1) Pro Forma (1)
_____________________________________________________________________________________________________
1994 1993 1992 1991 1990 1989 1988 1987 1986 1986 1985
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
__________________________________________________________________________________________________________________________________
Net asset value at
beginning of period $17.47 $ 15.81 $16.14 $ 15.23 $ 16.62 $ 13.65 $ 17.13 $12.87 $ 13.33 $10.19 $ 9.56
__________________________________________________________________________________________________________________________________
Income from investment
operations
Net investment income 0.29 0.32 0.41 0.45 0.57 0.58 0.45 0.29 0.14 0.19 0.23
Net realized and unrealized
gain (loss) 2.58 2.97 0.92 1.68 (0.87) 3.12 (2.41) 3.97 0.28 3.72 0.83
_______ ______ _____ _____ _____ _____ _____ _____ _____ _____ ______
Total from investment
operations 2.87 3.29 1.33 2.13 (0.30) 3.70 (1.96) 4.26 0.42 3.91 1.06
_______ ______ _____ _____ _____ _____ _____ _____ _____ _____ ______
Less distributions
Dividends from net
investment income (0.27) (0.36) (0.44) (0.54) (0.62) (0.48) (0.44) 0.00 (0.40) (0.24) (0.19)
Distributions from net
realized gains (1.12) (1.27) (1.22) (0.68) (0.47) (0.25) (1.08) 0.00 (0.48) (0.48) (0.29)
_______ ______ _____ _____ _____ _____ _____ _____ _____ _____ ______
Total distributions (1.39) (1.63) (1.66) (1.22) (1.09) (0.73) (1.52) 0.00 (0.88) (0.72) (0.48)
_______ ______ _____ _____ _____ _____ _____ _____ _____ _____ ______
Change in net asset
value for the year 1.48 1.66 (0.33) 0.91 (1.39) 2.97 (3.48) 4.26 (0.46) 3.19 0.58
___________________________________________________________________________________________________________________________________
Net asset value at
end of period $ 18.95 $ 17.47 $ 15.81 $ 16.14 $15.23 $ 16.62 $ 13.65 $ 17.13 $ 12.87 $ 13.33 $ 10.14
___________________________________________________________________________________________________________________________________
Total Return [[ 17.47% 23.49% 9.22% 15.95% (2.01)% 28.38% (9.86)% 33.10% 3.32% 40.92% 11.89%
Ratios/Supplemental data
Net Assets, end of
year (in millions) $5,611.6 $4,033.9 $3,268.6 $2,895.7 $2,466.7 $2,355.3 $1,572.1 $1,633.9 $1,132.6 $2,397.9 $1,402.3
Ratio to average net
assets of:
Expenses 1.10% 1.03% 0.88% 0.75% 0.67% 0.66% 0.69% 0.66%[ 2.40%[ 2.50% 2.97%
Net investment income 1.76% 2.10% 2.62% 3.09% 3.70% 4.20% 3.50% 2.99%[ 1.76%[ 2.11% 2.66%
Portfolio turnover rate 27.35% 28.89% 29.46% 30.28% 18.47% 11.55% 11.44% 17.55% 9.50% 23.00% 20.41%
</TABLE>
[FN]
(1) Templeton Growth Fund, Inc. commenced operations on December
31, 1986 as successor in interest to 58% of Templeton Growth Fund,
Ltd. (the "Canadian Fund") which reorganized into two funds on
that date. In accordance with the terms of the reorganization,
the Canadian shareholders, representing 42% of the shares outstanding,
remained shareholders of the Canadian Fund and the non-Canadian
shareholders, representing 58% of the shares outstanding, became
shareholders of Templeton. The per share table is presented as
if the reorganization took place as of the inception of the Canadian
Fund, 58% of the net assets and shares outstanding were allocated
to Templeton Growth Fund, Inc. and Templeton Growth Fund, Inc.
continued to operate in Canada subject to Canadian federal and
provincial taxes until December 31, 1986. No other pro forma adjustments
have been made for any changes in operating costs had the reorganization
taken place at that date. Since the table is on the basis of a
single share outstanding throughout the period, the results illustrated,
except for the number of shares outstanding at the end of each
year, are the same as those shown for the Canadian Fund.
[ Annualized.
[[ Does not reflect sales commissions.
Page 8
The following expense table lists the costs and expenses that
an investor will incur either directly or indirectly as a shareholder
of Templeton Growth Fund, Inc. based upon the maximum sales charge
that may be incurred at the time of purchase and Templeton Growth
Fund, Inc.'s operating expenses for its most recent fiscal year.
<TABLE>
<CAPTION>
<S> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of Offering Price) 5.75%*
Annual Templeton Growth Fund, Inc. Operating Expenses
(As a percentage of average net assets)
Management Fees 0.62%
12b-1 Fees 0.22%**
Other Expenses (audit, legal, business management, transfer agent
and custodian) 0.26%
Total Templeton Growth Fund, Inc. Operating Expenses 1.10%
</TABLE>
* There is no sales charge payable on the Templeton Growth Fund,
Inc. shares deposited in a Trust. However, the maximum sales charge
on the Units, and therefore indirectly on the Templeton Growth
Fund, Inc. shares is 5.8% in the secondary market.
** These expenses may not exceed 0.25% of Templeton Growth Fund,
Inc. average net assets annually. After a substantial period,
these expenses, together with the initial sales charge, may total
more than the maximum sales expense that would have been permissible
if imposed entirely as an initial sales charge. Effectively, there
are no 12b-1 fees on Templeton Growth Fund, Inc. shares held in
a Trust. However, Unit holders who acquire shares of Templeton
Growth Fund, Inc. through reinvestment of dividends or other distributions
or through reinvestment at a Trust's termination will begin to
incur 12b-1 fees at such time as shares are acquired.
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:
1 Year 3 Years 5 Years 10 Years
________ ________ ________ ________
$68 $90 $115 $184
The information in the above table is an estimate based on Templeton
Growth Fund, Inc.'s expenses as of the end of the most recent
fiscal year. The table is provided for purposes of assisting current
and prospective investors in understanding the various costs and
expenses that an investor in Templeton Growth Fund, Inc. will
bear, directly or indirectly. The information in the table does
not reflect the charge of up to $15 per transaction if an investor
requests that redemption proceeds be sent by express mail or wired
to a commercial bank account or an administrative service fee
of $5.00 per exchange for market timing or allocation service
accounts. The 5% annual return and annual expenses should not
be considered a representation of actual or expected Templeton
Growth Fund, Inc. performance or expenses, both of which may vary.
Templeton Growth Fund, Inc. was incorporated in Maryland on November
10, 1986 and commenced operations on December 31, 1986. Templeton
Growth Fund, Inc. is the successor in interest to approximately
58% of Templeton Growth Fund Ltd., a Canadian corporation organized
on September 1, 1954 (the "Canadian Fund"), which was reorganized
on December 31, 1986 into two mutual funds. Under the reorganization,
58% of the portfolio and other assets of the Canadian Fund were
transferred to Templeton and the non-Canadian shareholders of
the Canadian Fund, representing 58% of the shares outstanding,
became shareholders of Templeton.
Page 9
Dividends from investment income were paid commencing in 1964
and distributions of capital gains were paid commencing in 1972.
Prior to those years net income and realized capital gains were
retained by the Canadian Fund.
Templeton Growth Fund, Inc. may include its total return in advertisements
or reports to its 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 Templeton Growth Fund, Inc. over a period of 1, 5 and 10 years
(or up to the life of Templeton Growth Fund, Inc.), will reflect
the deduction of the maximum initial sales charge and deduction
of a proportional share of Templeton Growth Fund, Inc. 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 Templeton Growth Fund,
Inc. at the end of a defined period of time. For a description
of the methods used to determine total return for Templeton Growth
Fund, Inc., see Templeton Growth Fund, Inc.'s Statement of Additional
Information.
What is Templeton Foreign Fund?
The portfolio of a Series of the Fund may also contains shares
of Templeton Foreign Fund. Templeton Foreign Fund is an open-end
diversified management investment company, commonly known as a
mutual fund. Templeton Foreign Fund is registered under the Investment
Company Act of 1940 as an open-end, diversified management investment
company. Templeton Foreign Fund's objective is long-term capital
growth through a flexible policy of investing in stocks and debt
obligations of companies and governments outside the United States.
The shares of Templeton Foreign Fund deposited in a Trust are
maintained on the books of Templeton Foreign Fund's transfer agent.
Templeton Foreign Fund has followed the practice of paying a distribution
at least once annually representing substantially all of its net
investment income and distributing any net realized capital gains.
The table on the next page shows important financial information
for Templeton Foreign Fund, expressed in terms of one share outstanding
throughout the period. This table is audited by an independent
certified public accountant and appears in Templeton Foreign Fund's
1994 Annual Report to Shareholders and its prospectus dated January
1, 1995. This table should be read in conjunction with the other
financial statements and notes thereto included in Templeton Foreign
Fund's 1994 Annual Report to Shareholders, which contains further
information about the Fund's performance. Its 1994 Annual Report
to Shareholders and its prospectus dated January 1, 1995, may
be obtained without charge by writing to Franklin Templeton Distributors,
Inc., 700 Central Avenue, St. Petersburg, Florida 33701-3628.
Page 10
Templeton Foreign Fund per Share
Operating Performance for a Share
Outstanding Throughout the Period*
<TABLE>
<CAPTION>
Year Ended August 31
1994 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
_______________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.74 $ 7.92 $ 7.91 $ 8.19 $ 7.60 $6.37 $ 7.73 $5.34 $ 4.10 $ 3.64
_______________________________________________________________________________________________________________________________
Income from investment operations
Net investment income 0.14 0.14 0.20 0.25 0.25 0.22 0.21 0.16 0.12 0.11
Net realized and unrealized gain 1.39 1.21 0.43 0.03 0.92 1.60 (0.97) 2.71 1.25 0.46
______ ______ _______ _____ _____ _____ _____ ______ ______ _____
Total from investment operations 1.53 1.35 0.63 0.28 1.17 1.82 (0.76) 2.87 1.37 0.57
______ ______ _______ _____ _____ _____ _____ ______ ______ _____
Less distributions
Dividends from net investment income (0.13) (0.19) (0.23) (0.26) (0.25) (0.21) (0.19) (0.13) (0.12) (0.08)
Distributions from net realized gains (0.13) (0.34) (0.39) (0.30) (0.33) (0.38) (0.41) (0.35) (0.01) (0.03)
______ ______ _______ _____ _____ _____ _____ ______ ______ _____
Total distributions (0.26) (0.53) (0.62) (0.56) (0.58) (0.59) (0.60) (0.48) (0.13) (0.11)
______ ______ _______ _____ _____ _____ _____ ______ ______ _____
Change in net asset value
for the period 1.27 0.82 0.01 (0.28) 0.59 1.23 (1.36) 2.39 1.24 0.46
_______________________________________________________________________________________________________________________________
Net asset value, end of period $ 10.01 $ 8.74 $ 7.92 $ 7.91 $ 8.19 $ 7.60 $ 6.37 $ 7.73 $5.34 $4.10
_______________________________________________________________________________________________________________________________
Total return[ 17.94% 18.65% 8.52% 4.17% 16.35% 30.99% (8.78)% 59.23% 34.39% 16.39%
Ratios/supplemental data
Net assets, end of year (in millions) $5,014.4 $2,667.8 $1,672.2 $1,211.5 $ 933.0 $438.6 $292.7 $319.6 $185.8 $ 94.1
Ratio to average net assets of:
Expenses 1.14% 1.12% 0.94% 0.80% 0.77% 0.81% 0.81% 0.77% 0.79% 0.90%
Net investment income 1.84% 2.11% 2.92% 3.59% 3.95% 3.65% 3.29% 2.89% 2.99% 3.32%
Portfolio turnover rate 38.75% 21.29% 22.00% 19.24% 11.49% 16.62% 20.37% 14.49% 20.97% 3.81%
</TABLE>
[FN]
________________
[ Does not reflect sales commissions or service charges.
* Per share amounts for years ended prior to August 31, 1994,
have been restated to reflect a 3-for-1 stock split effective
February 25, 1994.
Page 11
The following expense table lists the costs and expenses that
an investor will incur either directly or indirectly as a shareholder
of Templeton Foreign Fund, based upon the maximum sales charge
that may be incurred at the time of purchase and Templeton Foreign
Fund's operating expenses for its most recent fiscal year.
<TABLE>
<CAPTION>
Shareholder Transaction Expenses
<S> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of Offering Price) 5.75%*
Annual Templeton Foreign Fund Operating Expenses
(As a percentage of average net assets)
Management Fees 0.63%
12b-1 Fees 0.24%**
Other Expenses (audit, legal, business management, transfer agent
and custodian) 0.27%
Total Templeton Foreign Fund Operating Expenses 1.14%
</TABLE>
* There is no sales charge payable on the Templeton Foreign Fund
shares deposited in the Trust. However, the maximum sales charge
on the Units, and therefore indirectly on the Templeton Foreign
Fund shares, is 5.8% in the secondary market.
** These expenses may not exceed 0.25% of Templeton Foreign Fund's
average net assets annually. After a substantial period, these
expenses, together with the initial sales charge, may total more
than the maximum sales expense that would have been permissible
if imposed entirely as an initial sales charge.
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:
1 Year 3 Years 5 Years 10 Years
________ ________ ________ ________
$68 $92 $117 $188
The information in the table above is an estimate based on Templeton
Foreign Fund's expenses as of the end of the most recent fiscal
year and has been restated to reflect current fees. The table
is provided for purposes of assisting current and prospective
investors in understanding the various costs and expenses that
an investor in Templeton Foreign Fund will bear, directly or indirectly.
The information in the table does not reflect the charge of up
to $15 per transaction if an investor requests that redemption
proceeds be sent by express mail or wired to a commercial bank
account or an administrative service fee of $5.00 per exchange
for market timing or allocation service accounts. The 5% annual
return and annual expenses should not be considered a representation
of actual or expected Templeton Foreign Fund performance or expenses,
both of which may vary.
After incorporating under the laws of Maryland as Templeton World
Fund, Inc. and registering under the Investment Company Act of
1940, Templeton World Fund, Inc. commenced business as an investment
company on January 17, 1978. On October 1, 1982 the company`s
name was changed to Templeton Funds, Inc. and it became a series
investment company with two separate classes of shares, constituting,
respectively, Templeton World Fund and Templeton Foreign Fund.
As such, the holder of the shares issued for one fund has an interest
only in the portfolio, assets and liabilities of that fund.
What is Templeton's Investment Objective and Policy?
Templeton's investment objective is long-term capital growth,
which it seeks to achieve through a flexible policy of investing
in stocks and debt obligations of companies and governments of
any nation (in the case of Templeton Growth Fund, Inc.) or in
stocks and debt obligations of companies and governments outside
the United States (in the case of Templeton Foreign Fund). Any
income realized will be incidental.
Although Templeton generally invests in common stock, it may also
invest in preferred stocks and certain debt securities, rated
or unrated, such as convertible bonds and bonds selling at a discount.
Whenever, in the judgment of the Investment Manager, as defined
herein, market or economic conditions warrant,
Page 12
Templeton may, for temporary defensive purposes, invest without
limit in U.S. Government securities, bank time deposits in the
currency of any major nation and commercial paper meeting the
quality ratings set forth under "Investment Objective and Policies"
in the Statement of Additional Information of Templeton, and
purchase from banks or broker-dealers Canadian or U.S. Government
securities with a simultaneous agreement by the seller to repurchase
them within no more than seven days at the original purchase price
plus accrued interest.
Templeton 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 Templeton may invest up to 25% of its assets
in a single industry, it has no present intention of doing so.
Templeton 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 assets in securities with a limited trading
market. The Investment Objective and Policies described above,
as well as most of the investment restrictions described in Templeton's
Statement of Additional Information, cannot be changed without
shareholder approval. Templeton invests for long-term growth of
capital and does not intend to place emphasis upon short-term
trading profits. Accordingly, Templeton expects to have a portfolio
turnover rate of less than 50%.
Templeton's investment policies permit it to buy and sell stock
index futures contracts with respect to any stock index traded
on a recognized stock exchange or board of trade, to an aggregate
amount not exceeding 20% of the total net assets of either Templeton
Growth Fund, Inc. or Templeton Foreign Fund at the time when such
contracts are entered into. Successful use of stock index futures
is subject to the Investment Manager's ability to predict correctly
movements in the direction of the stock markets. No assurance
can be given that the Investment Manager's judgment in this respect
will be correct. See "Who is the Investment Manager of Templeton?"
A stock index futures contract is a contract to buy or sell units
of a stock index at a specified future date at a price agreed
upon when the contract is made. The value of a unit is the current
value of the stock index. 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.
Parties to an index futures contract must make initial margin
deposits to secure performance of the contract, which currently
range from 1-1/2% to 5% of the contract amount. Initial margin
requirements are determined by the respective exchanges on which
the futures contracts are traded. There also are requirements
to make variation margin deposits as the value of the futures
contract fluctuates. See "Investment Objective and Policies-Stock
Index Futures Contracts" in the Statement of Additional Information
for Templeton Growth Fund, Inc. or Templeton Foreign Fund.
At the time Templeton purchases a stock index futures contract,
an amount of cash, U.S. Government securities or other highly
liquid debt securities equal to the market value of the contract
will be deposited in a segregated account with the custodian of
Templeton Growth Fund, Inc. and/or Templeton Foreign Fund. When
selling a stock index futures contract, Templeton will maintain
with a 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, Templeton may "cover" its position by
owning 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 Templeton to purchase the same futures
contract at a price no higher than the price of the contract written
by Templeton Growth Fund, Inc. and/or Templeton Foreign Fund (or
at a higher price if the difference is maintained in liquid assets
with a custodian).
Templeton also may purchase and sell put and call options on securities
indices in standardized contracts traded on national or foreign
securities exchanges or quoted on NASDAQ. 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. Templeton sells only "covered" options, which means
that Templeton must maintain with its custodian cash or cash equivalents
equal to the contract value (in the case of call options) or exercise
price (in the case of put
Page 13
options). Templeton will not purchase put or call options if the
appropriate premium paid for such options would exceed 5% of its
total assets at the time of purchase.
There are risks involved in stock index futures transactions.
These risks relate to Templeton Growth Fund, Inc.'s and/or Templeton
Foreign Fund's ability to reduce or eliminate its futures positions,
which will depend upon the liquidity of the secondary markets
for such futures. Templeton intends to purchase or sell futures
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 for hedging may
involve risks because of imperfect correlations between movements
in the prices of the stock index futures on the one hand and movements
in the prices of the securities being hedged or of the underlying
stock index on the other. Successful use of stock index futures
by Templeton for hedging purposes also depends upon the Investment
Manager's ability to predict correctly movements in the direction
of the market, as to which no assurance can be given.
There are several risks associated with transactions in options
on securities indices. For example, there are significant differences
between the securities and options markets that could result in
an imperfect correlation between these markets, causing a given
transaction not to achieve its objectives. A decision as to whether,
when and how to use options involves the exercise of skill and
judgment, and even a well-conceived transaction may be unsuccessful
to some degree because of market behavior or unexpected events.
There can be no assurance that a liquid market will exist when
Templeton seeks to close out an option position. If Templeton
were unable to close out an option that it had purchased on a
securities index, it would have to exercise the option in order
to realize any profit or the option may expire worthless. If trading
were suspended in an option purchased by Templeton, it would not
be able to close out the option. If restrictions on exercise were
imposed, Templeton might be unable to exercise an option it has
purchased. Except to the extent that a call option on an index
written by Templeton Growth Fund, Inc. and/or Templeton Foreign
Fund is covered by an option on the same index purchased by such
Fund, movements in the index may result in a loss to such Fund;
however, such losses may be mitigated by changes in the value
of the Fund's securities during the period the option was outstanding.
Templeton has the unlimited right to purchase securities in any
foreign country, developed or underdeveloped, if they are listed
on a stock exchange, as well as a limited right to purchase such
securities if they are unlisted. Unit holders should consider
carefully the substantial risks involved in investing in securities
issued by companies and governments of foreign nations, which
are in addition to the usual risks inherent in domestic investments.
Templeton's management endeavors to buy and sell foreign currencies
on as favorable a basis as practicable. Some price spread on currency
exchange (to cover service charges) may be incurred, particularly
when Templeton changes investments from one country to another
or when proceeds of the sale of Shares of Templeton in U.S. dollars
are used for the purchase of securities in foreign countries.
Also, some countries may adopt policies which would prevent Templeton
from transferring cash out of the country or withhold portions
of interest and dividends at the source.
There is the possibility of 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
investment in securities of issuers in those nations. In addition,
in many countries there is less publicly available information
about issuers than is available in reports about companies in
the United States. Foreign companies are not generally subject
to uniform accounting, auditing and financial reporting standards,
and auditing practices and requirements may not be comparable
to those applicable to United States companies. Further, Templeton
may encounter difficulties or be unable to pursue legal remedies
and obtain judgments in foreign courts. Commission rates in foreign
countries, which are generally fixed rather than subject to negotiation
as in the United States, are likely to be higher. Further, the
settlement period of securities transactions in foreign markets
may be longer than in domestic markets. In many foreign countries,
there is less government supervision and regulation of stock
Page 14
exchanges, brokers and listed companies than in the United States.
Foreign securities transactions may be subject to higher brokerage
costs than domestic securities transactions. In addition, the
foreign securities markets of many of the countries in which Templeton
may invest may also be smaller, less liquid, and subject to greater
price volatility than those in the United States. Templeton may
invest in developing countries or Eastern European countries,
which involves special risks that are described under "Risk Factors"
in Templeton's Statement of Additional Information.
Templeton is authorized to invest in medium quality or high risk,
lower quality debt securities that are rated between BBB and as
low as CCC by Standard & Poor's Corporation ("S & P") and between
Baa and as low as Caa by Moody's Investors Service, Inc. ("Moody's")
or, if unrated, are of equivalent investment quality as determined
by the Investment Manager. As an operating policy, which may be
changed by the Board of Directors of Templeton without shareholder
approval, Templeton will not invest more than 5% of its total
assets in debt securities rated BBB or lower by S & P or Baa or
lower by Moody's. The Board of Directors of Templeton 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 Templeton and its shareholders. 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 the Investment Manager to insure, to the extent possible, that
the planned investment is sound. Templeton may, from time to time,
purchase defaulted debt securities if, in the opinion of the Investment
Manager, the issuer may resume interest payments in the near future.
Templeton will not invest more than 10% of its total assets in
defaulted debt securities, which may be illiquid.
Templeton usually effects 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 Templeton converts
assets from one currency to another. Further, Templeton 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. Also, some countries may withhold
portions of interest and dividends at the source. There are further
risk considerations, including possible losses through the holding
of securities in domestic and foreign custodian banks and depositories,
described in Templeton's Statement of Additional Information.
Unit holders should understand that all investments involve risk
and there can be no guarantee against loss resulting from an investment
in Templeton, nor can there be any assurance that Templeton's
investment objective will be attained. Templeton is designed for
investors seeking international diversification.
How is Net Asset Value of Templeton Determined?
The net asset value of shares of Templeton is computed as of the
close of trading on each day the New York Stock Exchange is open
for trading, by dividing the value of Templeton's securities plus
any cash and other assets (including accrued interest and dividends
receivable) less all liabilities (including accrued expenses)
by the number of shares outstanding, adjusted to the nearest whole
cent. A security listed or traded on a recognized stock exchange
or NASDAQ is valued at its last sale price on the principal exchange
on which the security is traded. The value of a foreign security
is determined in its national currency as of the close of trading
on the foreign exchange on which it is traded, or as of the close
of trading on the New York Stock Exchange, if that is earlier,
and that value is then converted into its U.S. dollar equivalent
at the foreign exchange rate in effect at noon New York time on
the day the value of the foreign security is determined. If no
sale is reported at that time, the mean between the current bid
and asked price is used. Occasionally, events which affect the
values of such securities and such exchange rates may occur between
the times at which they
Page 15
are determined and the close of the New York Stock Exchange, and
will therefore not be reflected in the computation of Templeton's
net asset value. If events materially affecting the value of such
securities occur during such period, then these securities will
be valued at fair value as determined by Templeton's management
and approved in good faith by Templeton's 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 of Templeton.
Who is the Investment Manager of Templeton?
The Investment Manager of Templeton is Templeton, Galbraith &
Hansberger Ltd., Nassau, Bahamas (the "Investment Manager"), an
indirect wholly owned subsidiary of Franklin Resources, Inc. ("Franklin").
Through its subsidiaries, Franklin is engaged in various aspects
of the financial services industry.
The Investment Manager manages the investment and reinvestment
of the assets of Templeton Growth Fund, Inc. and Templeton Foreign
Fund. The Investment Manager does not furnish any overhead items
or facilities for Templeton, although such expenses are paid by
some investment advisers of other investment companies. As compensation
for its services, Templeton pays the Investment Manager a fee
which, during the most recent fiscal year, represented 0.63% of
its average daily net assets for the Templeton Foreign Fund and
0.62% of its average daily net assets for the Templeton Growth Fund, Inc.
The Investment Manager and its affiliates serve as advisers for
a wide variety of public investment mutual funds and private clients
in many nations. The Investment Manager and its predecessors have
been investing globally over the past 51 years and, with affiliates,
provide investment management and advisory services to a worldwide
client base, including over 3.0 million mutual fund shareholders,
foundations and endowments, employee benefit plans and individuals.
The Investment Manager and its affiliates have approximately 3,200
employees in ten different countries. The Investment Manager has
a global network of over 50 investment research sources. Many
different selection methods are used for different funds and clients
and these methods are changed and improved by the Investment Manager's
research on superior selection methods. The Investment Manager
uses a disciplined, long-term approach to value-oriented global
and international investing. Securities are selected for Templeton's
portfolio on the basis of fundamental company-by-company analysis.
Templeton Global Investors, Inc. provides certain administrative
facilities and services for Templeton including payment of salaries
of Officers of Templeton, preparation and maintenance of books
and records, preparation of tax returns and financial reports,
monitoring compliance with regulatory requirements and monitoring
tax deferred retirement plans. For its services, the Business
Manager receives a fee equivalent to 0.15% of the average daily
net assets of Templeton during the year, reduced to 0.135% of
such net assets in excess of $200,000,000, to 0.10% of such assets
in excess of $700,000,000, and to 0.075% of such assets in excess
of $1,200,000,000.
Templeton is managed by its Board of Directors and all powers
are exercised by or under authority of the Board. Information
relating to the Directors and Executive Officers is set forth
under the heading "Management of the Fund" in Templeton's Statement
of Additional Information.
Templeton may allocate some portfolio transactions to Raymond
James & Associates, Inc., an officer of which is a Director of
Templeton. The prices and execution of all securities transactions
by this firm for Templeton will be, in the good faith judgment
of Templeton's management, equal to the best available within
the scope of Templeton's brokerage policies, which are described
under the heading "Brokerage Allocation" in Templeton's Statement
of Additional Information. Templeton'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 Templeton's brokerage policies.
Page 16
Franklin Templeton Distributors, Inc. ("FTD"), is the Principal
Underwriter of Templeton's shares. In exchange for its assistance
in distributing the Trust, the Sponsor, out of its profits, will
pay FTD a distribution fee which is based on the size of the Trust.
Templeton has a plan of distribution or "12b-1 Plan" under which
it may reimburse FTD for its costs and expenses for activities
primarily intended to result in the sale of shares of Templeton.
Expenditures by Templeton under the plan may not exceed 0.25%
annually of Templeton's average daily net assets. Under the plan,
costs and expenses not reimbursed in any one given month (including
costs and expenses not reimbursed because they exceeded the limit
of 0.25% per annum of Templeton's average daily net assets) may
be reimbursed in subsequent months or years, subject to applicable law.
More detailed information on Templeton is included in Templeton's
Statement of Additional Information. However, Unit holders should
be aware that, since they own their shares of Templeton through
the Trust, such shares will not be eligible to participate in
Templeton's other features, such as exchange privileges, letter
of intent, etc. These special features are, however, available
with respect to shares in reinvestment accounts and are described
in Templeton's current prospectus.
Risk Factors
Investors should be aware of certain other considerations before
making a decision to invest in the Trust described herein.
The predecessor to the Sponsor obtained an exemptive order of
the Securities and Exchange Commission to enable it to deposit
Templeton shares purchased for deposit in the Trust. Under the
terms of the exemptive order, the Sponsor will take certain steps
to ensure that investment in Templeton shares is equitable to
all parties and particularly that the interests of the Unit holders
are protected. Templeton has agreed to waive any sales charge
on shares sold to the Trust. Furthermore, Securities Evaluation
Service, Inc. has agreed to waive its usual fee for acting as
Evaluator of the Trust's portfolio with respect to that portion
of the portfolio comprised of Templeton shares, since information
with respect to the price of Templeton's shares is readily available
to it. In addition, the Indenture requires the Trustee to vote
all shares of Templeton held in the Trust in the same manner and
ratio on all proposals as the vote of owners of Templeton shares
not held by the Trust.
The value of Templeton's shares, like the value of the Treasury
Obligations, will fluctuate over the life of the Trust and may
be more or less than the price at which they were deposited in
the Trust. Templeton's shares may appreciate or depreciate in
value (or pay dividends) depending on the full range of economic
and market influences affecting the securities in which it is
invested and the success of Templeton's management in anticipating
or taking advantage of such opportunities as they may occur. However,
the Sponsor believes that, upon termination of the Trust, even
if the Templeton shares deposited in the Trust are worthless,
an event which the Sponsor considers highly unlikely, the Treasury
Obligations will provide sufficient principal to at least equal
$1.00 per Unit (which is equal to the per Unit value upon maturity
of the Treasury Obligations) for those individuals purchasing
on any date when the value of the Units is $1.00 or less. This
feature of the Trust provides Unit holders with principal protection,
although they might forego any earnings on the amount invested.
To the extent that Units are purchased at a price less than $1.00
per Unit, this feature may also provide a potential for capital
appreciation.
Unless a Unit holder purchases Units of the Trust on a date when
the value of the Units is $1.00 or less, total distributions,
including distributions made upon termination of the Trust, may
be less than the amount paid for a Unit.
The Trust consists of the Securities listed in Part One attached
hereto as may continue to be held from time to time in the Trust
and any additional Securities acquired and held by the Trust pursuant
to the provisions of the Indenture.
The Trustee will have no power to vary the investments of the
Trust, i.e., the Trustee will have no managerial power to take
advantage of market variations to improve a Unit holder's investment
but may dispose
Page 17
of Securities only under limited circumstances. Of course, the
portfolio of Templeton included in the Trust will be changing
as the Investment Manager attempts to achieve Templeton's objective.
To the best of the Sponsor's knowledge, there is no litigation
pending as of the date of this Prospectus in respect of any Security
which might reasonably be expected to have a material adverse
effect on the Trust. At any time after the date of this Prospectus,
litigation may be instituted on a variety of grounds with respect
to the Securities. The Sponsor is unable to predict whether any
such litigation will be instituted, or if instituted, whether
such litigation might have a material adverse effect on the Trust.
PUBLIC OFFERING
How is the Public Offering Price Determined?
Units are offered at the Public Offering Price as indicated in
Part One attached hereto. The Public Offering Price per 1,000
units is based on the aggregate bid side evaluation of the Treasury
Obligations and the net asset value of the Templeton shares in
the Trust, plus or minus cash, if any, in the Principal Account
held or owned by the Trust, plus a maximum sales charge of 5.8%
of the Public Offering Price (equivalent to 6.157% of the net
amount invested) divided by the number of outstanding Units of
the Trust multiplied by 1,000. The minimum purchase of the Trust
is $1,000. The applicable sales charge is reduced by a discount
as indicated below for volume purchases:
<TABLE>
<CAPTION>
Percent of Percent of
Offering Net Amount
Number of Units Price Invested
___________________ __________ ________
<S> <C> <C>
100,000 but less than 500,000 0.60% 0.6036%
500,000 but less than 1,000,000 1.30% 1.3171%
1,000,000 or more 2.10% 2.1450%
</TABLE>
Any such reduced sales charge shall be the responsibility of the
selling Underwriter or dealer. The Sponsor will pay Managing Underwriters
and Senior Underwriters an additional concession of .10% for volume
purchases of $100,000 or more. The Sponsor will also pay Underwriters
an additional concession of .40% on volume purchases of $1,000,000
or more. The reduced sales charge structure will apply on all
purchases of Units in the Trust by the same person on any one
day from any one Underwriter or dealer. Additionally, Units purchased
in the name of the spouse of a purchaser or in the name of a child
of such purchaser under 21 years of age will be deemed, for the
purposes of calculating the applicable sales charge, to be additional
purchases by the purchaser. The reduced sales charges will also
be applicable to a trustee or other fiduciary purchasing securities
for a single trust estate or single fiduciary account. With respect
to the employees, officers and directors (including their immediate
families and trustees, custodians or a fiduciary for the benefit
of such person) of Nike Securities L.P. and its subsidiaries,
the sales charge is reduced by 2% of the Public Offering Price
for purchases of Units.
The Public Offering Price will be equal to the bid price per Unit
of the Treasury Obligations and the net asset value of the Templeton
shares therein plus or minus a pro rata share of cash, if any,
in the Principal Account of the Trust plus the applicable sales
charge. The offering price of the Treasury Obligations in the
Trust may be expected to be greater than the bid price of the
Treasury Obligations by less than 2%. The Public Offering Price
of Units on the date of this Prospectus may vary in accordance
with fluctuations in the prices of the underlying Securities.
Although payment is normally made three business days following
the order for purchase, payment may be made prior thereto. Cash,
if any, made available to the Sponsor prior to the date of settlement
for the purchase of Units may be used in the Sponsor's business
and may be deemed to be a benefit to the Sponsor, subject to the
limitations of the Securities Exchange Act of 1934. Delivery of
Certificates representing Units so ordered will be made five business
days following such order or shortly thereafter. See "Rights of
Unit Holders-How May Units be Redeemed?" for information regarding
the ability to redeem Units ordered for purchase.
Page 18
How are Units Distributed?
Sales may be made to dealers and others at prices which represent
a concession or agency commission of 4.0% of the Public Offering
Price. The Sponsor reserves the right to change the amount of
the concession or agency commission from time to time. Certain
commercial banks are making Units of the Trust available to their
customers on an agency basis. A portion of the sales charge paid
by these customers is retained by or remitted to the banks in
the amounts indicated in the third preceding sentence. Under the
Glass-Steagall Act, banks are prohibited from underwriting Trust
Units; however, the Glass-Steagall Act does permit certain agency
transactions and the banking regulators have not indicated that
these particular agency transactions are not permitted under such
Act. In Texas and in certain other states, any banks making Units
available must be registered as broker/dealers under state law.
What are the Sponsor's Profits?
The Underwriters of the Trust, including the Sponsor, will receive
a gross sales commission equal to 5.8% of the Public Offering
Price of the Units (equivalent to 6.157% of the net amount invested)
less any reduced sales charge for quantity purchases as described
under "Public Offering-How is the Public Offering Price Determined?"
See "Underwriting" for information regarding the receipt of the
excess gross sales commissions by the Sponsor from the other Underwriters
and additional concessions available to the Underwriters, dealers
and others.
In maintaining a market for the Units, the Sponsor will also realize
profits or sustain losses in the amount of any difference between
the price at which Units are purchased and the price at which
Units are resold (which price includes a sales charge of 5.8%) or redeemed.
Will There be a Secondary Market?
Although it is not obligated to do so, the Sponsor intends to
maintain a market for the Units and continuously to offer to purchase
Units at prices, subject to change at any time, based upon the
aggregate bid price of the Treasury Obligations in the portfolio
of the Trust and the net asset value of the Templeton shares in
the Trust plus or minus cash, if any, in the Principal Account
of the Trust. All expenses incurred in maintaining a secondary
market, other than the fees of the Evaluator, the supervisory
and audit expenses and the costs of the Trustee in transferring
and recording the ownership of Units, will be borne by the Sponsor.
If the supply of Units exceeds demand, or for some other business
reason, the Sponsor may discontinue purchases of Units at such
prices. IF A UNIT HOLDER WISHES TO DISPOSE OF HIS UNITS, HE SHOULD
INQUIRE OF THE SPONSOR AS TO CURRENT MARKET PRICES PRIOR TO MAKING
A TENDER FOR REDEMPTION TO THE TRUSTEE. Prospectuses relating
to certain other unit investment trusts indicate an intention,
subject to change, on the part of the respective sponsors of such
funds to repurchase units of those funds on the basis of a price
higher than the bid prices of the securities in the funds. Consequently,
depending upon the prices actually paid, the repurchase price
of other sponsors for units of their funds may be computed on
a somewhat more favorable basis than the repurchase price offered
by the Sponsor for Units of the Trust in secondary market transactions.
As in this Trust, the purchase price per unit of such funds will
depend primarily on the value of the securities in the portfolio
of the fund.
From time to time the Sponsor may implement programs under which
Underwriters and dealers of the Trust may receive nominal awards
from the Sponsor for each of their registered representatives
who have sold a minimum number of UIT Units during a specified
time period. In addition, at various times the Sponsor may implement
other programs under which the sales force of an Underwriter or
dealer may be eligible to win other nominal awards for certain
sales efforts, or under which the Sponsor will reallow to any
such Underwriter or dealer that sponsors sales contests or recognition
programs conforming to criteria established by the Sponsor, or
participates in sales programs sponsored by the Sponsor, an amount
not exceeding the total applicable sales charges on the sales
generated by such person at the public offering price during such
programs. Also, the Sponsor in its discretion may from time to
time pursuant to objective criteria established by the Sponsor
pay fees to qualifying Underwriters or dealers for certain services
or activities which are primarily intended to result in sales
of Units of the Trusts. Such payments are made by the
Page 19
Sponsor out of its own assets, and not out of the assets of the
Trusts. These programs will not change the price Unit holders
pay for their Units or the amount that the Trusts will receive
from the Units sold.
RIGHTS OF UNIT HOLDERS
How is Evidence of Ownership Issued and Transferred?
The Trustee is authorized to treat as the record owner of Units
that person who is registered as such owner on the books of the
Trustee. Ownership of Units may be evidenced by registered certificates
executed by the Trustee and the Sponsor. Delivery of certificates
representing Units ordered for purchase is normally made five
business days following such order or shortly thereafter. Certificates
are transferable by presentation and surrender to the Trustee
properly endorsed or accompanied by a written instrument or instruments
of transfer. Certificates to be redeemed must be properly endorsed
or accompanied by a written instrument or instruments of transfer.
A Unit holder must sign exactly as his name appears on the face
of the certificate with the signature guaranteed by a participant
in the Securities Transfer Agents Medallion Program ("STAMP")
or such other signature guaranty program in addition to, or in
substitution for, STAMP as may be accepted by the Trustee. In
certain instances the Trustee may require additional documents
such as, but not limited to, trust instruments, certificates of
death, appointments as executor or administrator or certificates
of corporate authority. Record ownership may occur before settlement.
Certificates will be issued in fully registered form, transferable
only on the books of the Trustee in denominations of one Unit
or any multiple thereof, numbered serially for purposes of identification.
Unit holders may elect to hold their Units in uncertificated form.
The Trustee will maintain an account for each such Unit holder
and will credit each such account with the number of Units purchased
by that Unit holder. Within two business days of the issuance
or transfer of Units held in uncertificated form, the Trustee
will send to the registered owner of Units a written initial transaction
statement containing a description of the Trust; the number of
Units issued or transferred; the name, address and taxpayer identification
number, if any, of the new registered owner; a notation of any
liens and restrictions of the issuer and any adverse claims to
which such Units are or may be subject or a statement that there
are no such liens, restrictions or adverse claims; and the date
the transfer was registered. Uncertificated Units are transferable
through the same procedures applicable to Units evidenced by certificates
(described above), except that no certificate need be presented
to the Trustee and no certificate will be issued upon the transfer
unless requested by the Unit holder. A Unit holder may at any
time request the Trustee to issue certificates for Units.
Although no such charge is now made or contemplated, a Unit holder
may be required to pay $2.00 to the Trustee per certificate reissued
or transferred and to pay any governmental charge that may be
imposed in connection with each such transfer or exchange. For
new certificates issued to replace destroyed, stolen or lost certificates,
the Unit holder may be required to furnish indemnity satisfactory
to the Trustee and pay such expenses as the Trustee may incur.
Mutilated certificates must be surrendered to the Trustee for replacement.
How are Income and Principal Distributed?
The Trustee will distribute any net income (other than accreted
interest) received with respect to any of the Securities in the
Trust on or about the Distribution Dates to Unit holders of record
on the preceding Record Date. See Part One for each Trust. Proceeds
received on the sale of any Securities in the Trust, to the extent
not used to meet redemptions of Units or pay expenses, will be
distributed annually on the Distribution Date to Unit holders
of record on the preceding Record Date. INCOME WITH RESPECT TO
THE ORIGINAL ISSUE DISCOUNT ON THE TREASURY OBLIGATIONS IN THE
TRUST, WILL NOT BE DISTRIBUTED CURRENTLY, ALTHOUGH UNIT HOLDERS
WILL BE SUBJECT TO FEDERAL INCOME TAX AS IF A DISTRIBUTION HAD
OCCURRED. SEE "WHAT IS THE FEDERAL TAX STATUS OF UNIT HOLDERS?"
The Record Dates and Distribution Dates were established so as
to occur shortly after the record date and on the payment dates
of Templeton. Templeton normally pays a dividend in October of
each year representing substantially all of its net investment
income and net realized capital gains, if any. Pursuant to current
Page 20
Internal Revenue Service regulations, Templeton pays a second
dividend and distribution in December of each year.
Under regulations issued by the Internal Revenue Service, the
Trustee is required to withhold a specified percentage of any
distribution made by the Trust if the Trustee has not been furnished
the Unit holder's tax identification number in the manner required
by such regulations. Any amount so withheld is transmitted to
the Internal Revenue Service and may be recovered by the Unit
holder under certain circumstances by contacting the Trustee,
otherwise the amount may be recoverable only when filing a tax
return. Under normal circumstances the Trustee obtains the Unit
holder's tax identification number from the selling broker. However,
a Unit holder should examine his or her statements from the Trustee
to make sure that the Trustee has been provided a certified tax
identification number in order to avoid this possible "back-up
withholding." In the event the Trustee has not been previously
provided such number, one should be provided as soon as possible.
Within a reasonable time after the Trust is terminated, each Unit
holder will, upon surrender of his Units for redemption, receive:
(i) the number of shares of Templeton attributable to his Units,
which will be distributed "in-kind" directly to his account, rather
than redeemed, (ii) a pro rata share of the amounts realized upon
the disposition of the Treasury Obligations and (iii) a pro rata
share of any other assets of the Trust, less expenses of the Trust,
subject to the limitation that Treasury Obligations may not be
sold to pay for Trust expenses. Not less than 60 days prior to
the termination of the Trust, Unit holders will be offered the
option of having the proceeds from the disposition of the Treasury
Obligations in the Trust invested, at the net asset value on the
date such proceeds become available to the Trust, in additional
shares of Templeton at net asset value. Unless a Unit holder indicates
that he wishes to reinvest such amounts, they will be paid in
cash, as indicated above. A Unit holder may, of course, at any
time after the shares are distributed to his account, instruct
Templeton to redeem all or a portion of the shares in his account.
Shares of Templeton, as more fully described in its prospectus,
will be redeemed at the then current net asset value. If within
180 days of the termination of the Trust a registered owner of
Units has not surrendered the Units, the Trustee shall liquidate
the shares of Templeton held for such owner and hold the funds
to which such owner is entitled until such Units are surrendered.
The Trustee will credit to the Income Account of the Trust any
dividends or distributions received on the Templeton shares therein.
All other receipts (e.g. return of principal, capital gains, etc.)
are credited to the Principal Account of the Trust.
The Trustee may establish reserves (the "Reserve Account") within
the Trust for state and local taxes, if any, and any governmental
charges payable out of the Trust.
How Can Distributions to Unit Holders be Reinvested?
Each Unit holder of the Trust will have distributions of principal,
capital gains, if any, or income automatically invested in Templeton
shares deposited at such share's net asset value next computed,
unless he indicates at the time of purchase, or subsequently notifies
the Trustee in writing, that he wishes to receive cash payments.
Reinvestment by the Trust in Templeton shares will normally be
made as of the ex-dividend date for Templeton after the Trustee
deducts therefrom the expenses of the Trust. The Rule 12b-1 fees
imposed on shares held in the Trust are rebated to the Trust and
are used to reduce expenses of the Trust resulting in increased
distributions to Unit holders. Unit holders who acquire shares
of Templeton through reinvestment of dividends or other distributions
or through reinvestment at the Trust's termination will begin
to incur Rule 12b-1 fees at such time as shares are acquired.
Additional information with respect to the investment objective
and the management of Templeton is contained in its prospectus,
which can be obtained from the Sponsor or any broker/dealer with
a currently effective sales agreement with Franklin Templeton
Distributors, Inc.
Unit holders who are receiving distributions in cash may elect
to participate in the automatic reinvestment feature by filing
with the Trustee an election to have such distributions reinvested
without a sales charge. Such election must be received by the
Trustee at least ten days prior to the Record Date applicable
Page 21
to any distribution in order to be in effect for such Record Date.
Any such election shall remain in effect until a subsequent notice
is received by the Trustee.
Exchange Privilege. Subject to the following limitations, shares
held in a Unit holder's reinvestment account may be exchanged
for shares of other Templeton funds, without sales charge, on
the basis of their relative net asset values per share at the
time of exchange. THE EXCHANGE PRIVILEGE DOES NOT APPLY TO TEMPLETON
SHARES IN THE TRUST'S PORTFOLIO, ONLY TO A UNIT HOLDER'S REINVESTMENT
ACCOUNT. The exchange privilege is not a right and may be suspended,
terminated or modified at any time.
EXCHANGE PURCHASES ARE SUBJECT TO THE MINIMUM INVESTMENT REQUIREMENTS
OF THE FUND PURCHASED. EXCHANGES ARE PERMITTED ONLY AFTER AT LEAST
15 DAYS HAVE ELAPSED FROM THE DATE OF THE PURCHASE OF THE TEMPLETON
SHARES TO BE EXCHANGED.
Exchange instructions may be given in writing or by telephone.
Telephone exchange privileges automatically apply to each Unit
holder's reinvestment account as shareholder of record unless
and until the Transfer Agent of Templeton receives written instructions
from the shareholder(s) of record canceling such privileges.
Telephonic exchanges can involve only Templeton shares in non-certificated
form. Templeton 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 Templeton shares
are being exchanged. If all telephone exchange lines are busy
(which might occur, for example, during periods of substantial
market fluctuations), shareholders of Templeton might not be able
to request telephone exchanges and would have to submit written
exchange requests.
Unless a shareholder of Templeton elects to decline the telephone
exchange privilege, the shareholder constitutes and appoints the
Transfer Agent of Templeton as the true and lawful attorney to
surrender for redemption or exchange any and all unissued Templeton
shares held by it in an account with any eligible Templeton fund,
and authorizes and directs the Transfer Agent of Templeton to
act upon any instruction from any person. The Transfer Agent of
Templeton will accept instructions by telephone to exchange Templeton
shares held in any account for shares of any other eligible Templeton
fund, provided the registration and mailing address of the Templeton
shares to be purchased are identical to those of the Templeton
shares to be redeemed. Further, a shareholder(s) agrees that neither
the Transfer Agent of Templeton, any of its affiliates nor Templeton
will be liable for any loss, damages, expense or cost arising
out of any requests effected in accordance with an authorization,
including requests effected by impostors or persons otherwise
unauthorized to act on behalf of the account. If the shareholder
is an entity other than an individual, such entity may be required
to certify the persons that have been duly elected and are now
legally holding the titles given and that the said entity is duly
organized and existing and has the power to take action called
for by this continuing authorization.
Neither Templeton nor the Transfer Agent of Templeton will be
responsible for acting upon any instructions believed by them
to be genuine. Forms for declining the telephone exchange privilege
and prospectuses of the other Templeton funds may be obtained
from Templeton Funds Distributors, Inc. A gain or loss for tax
purposes will be realized upon the exchange, depending on the
cost basis of the Templeton shares redeemed.
This exchange privilege is available only in states where shares
of the fund being acquired legally may be sold and may be modified,
limited or terminated at any time by Templeton upon 60 days written
notice. A Unit holder 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. All exchanges shall be governed
by Templeton's then current prospectus. 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 of Templeton.
What Reports Will Unit Holders Receive?
The Trustee shall furnish Unit holders in connection with each
distribution a statement of the amount of income, if any, and
the amount of other receipts, if any, which are being distributed,
expressed in each case as
Page 22
a dollar amount per 1,000 Units. Within a reasonable time after
the end of each calendar year, the Trustee will furnish to each
person who at any time during the calendar year was a Unit holder
of the Trust the following information in reasonable detail: (1)
a summary of transactions in the Trust for such year; (2) any
Securities sold during the year and the Securities held at the
end of such year by the Trust; (3) the redemption price per 1,000
Units based upon a computation thereof on the 31st day of December
of such year (or the last business day prior thereto); and (4)
amounts of income and capital gains distributed during such year.
How May Units be Redeemed?
A Unit holder may redeem all or a portion of his Units by tender
to the Trustee at its corporate trust office in the City of New
York of the certificates representing the Units to be redeemed,
or in the case of uncertificated Units, delivery of a request
for redemption, duly endorsed or accompanied by proper instruments
of transfer with signature guaranteed as explained above (or by
providing satisfactory indemnity, as in connection with lost,
stolen or destroyed certificates), and payment of applicable governmental
charges, if any. No redemption fee will be charged. On the third
business day following such tender, the Unit holder will be entitled
to receive in cash an amount for each Unit equal to the Redemption
Price per 1,000 Units next computed after receipt by the Trustee
of such tender of Units. The "date of tender" is deemed to be
the date on which Units are received by the Trustee, except that
as regards Units received after 4:00 p.m. Eastern time, the date
of tender is the next day on which the New York Stock Exchange
is open for trading and such Units will be deemed to have been
tendered to the Trustee on such day for redemption at the redemption
price computed on that day. Units so redeemed shall be cancelled.
Under regulations issued by the Internal Revenue Service, the
Trustee is required to withhold a specified percentage of the
principal amount of a Unit redemption if the Trustee has not been
furnished the redeeming Unit holder's tax identification number
in the manner required by such regulations. Any amount so withheld
is transmitted to the Internal Revenue Service and may be recovered
by the Unit holder only when filing a tax return. Under normal
circumstances the Trustee obtains the Unit holder's tax identification
number from the selling broker. However, any time a Unit holder
elects to tender Units for redemption, such Unit holder should
make sure that the Trustee has been provided a certified tax identification
number in order to avoid this possible "back-up withholding."
In the event the Trustee has not been previously provided such
number, one must be provided at the time redemption is requested.
Any amounts paid on redemption representing income shall be withdrawn
from the Income Account of the Trust to the extent that funds
are available for such purpose. All other amounts paid on redemption
shall be withdrawn from the Principal Account of the Trust.
The Trustee is empowered to sell Securities of the Trust in order
to make funds available for redemption. To the extent that Securities
are sold, the size and diversity of the Trust will be reduced.
Such sales may be required at a time when Securities would not
otherwise be sold and might result in lower prices than might
otherwise be realized. Shares of Templeton will be sold to meet
redemptions of Units before Treasury Obligations, although Treasury
Obligations may be sold if the Trust is assured of retaining a
sufficient principal amount of Treasury Obligations to provide
funds upon maturity of the Trust at least equal to $1.00 per Unit.
The Redemption Price per Unit (as well as the secondary market
Public Offering Price) will be determined on the basis of the
bid price of the Treasury Obligations and the net asset value
of the Templeton shares in the Trust plus or minus cash, if any,
in the Principal Account of the Trust as of the close of trading
on the New York Stock Exchange on the date any such determination
is made. The Redemption Price per 1,000 Units is the pro rata
share of each Unit determined by the Trustee by adding: (1) the
cash on hand in the Trust other than cash deposited in the Trust
to purchase Securities not applied to the purchase of such Securities;
(2) the aggregate value of the Securities (including "when issued"
contracts, if any) held in the Trust, as determined by the Evaluator
on the basis of bid prices of the Treasury Obligations and the
net asset value of the Templeton shares next computed; and (3)
dividends receivable on Templeton shares trading ex-dividend as
of the date of computation; and deducting therefrom: (1) amounts
representing any applicable
Page 23
taxes or governmental charges payable out of the Trust; (2) an
amount representing estimated accrued expenses of the Trust, including
but not limited to fees and expenses of the Trustee (including
legal and auditing fees), the Evaluator, the Supervisor and counsel
fees, if any; (3) cash held for distribution to Unit holders of
record of the Trust as of the business day prior to the evaluation
being made; and (4) other liabilities incurred by the Trust; and
finally dividing the results of such computation by the number
of Units of the Trust outstanding as of the date thereof.
The right of redemption may be suspended and payment postponed
for any period during which the New York Stock Exchange is closed
(other than for customary weekend and holiday closings) or during
which the Securities and Exchange Commission determines that trading
on that Exchange is restricted or any emergency exists, as a result
of which disposal or evaluation of the Securities is not reasonably
practicable, or for such other periods as the Securities and Exchange
Commission may by order permit. Under certain extreme circumstances,
the Sponsor may apply to the Securities and Exchange Commission
for an order permitting a full or partial suspension of the right
of Unit holders to redeem their Units. The Trustee is not liable
to any person in any way for any loss or damage which may result
from any such suspension or postponement.
How May Units be Purchased by the Sponsor?
The Trustee shall notify the Sponsor of any tender of Units for
redemption. If the Sponsor's bid in the secondary market at that
time equals or exceeds the Redemption Price per Unit, it may purchase
such Units by notifying the Trustee on the same business day and
by making payment therefor to the Unit holder not later than the
day on which the Units would otherwise have been redeemed by the
Trustee. Units held by the Sponsor may be tendered to the Trustee
for redemption as any other Units. In the event the Sponsor does
not purchase Units, the Trustee may sell Units tendered for redemption
in the over-the-counter market, if any, as long as the amount
to be received by the Unit holder is equal to the amount he would
have received on redemption of the Units. Any profit or loss resulting
from the resale or redemption of Units acquired by the Sponsor
will belong to the Sponsor.
How May Securities be Removed from the Trust?
The portfolio of the Trust is not "managed" by the Sponsor or
the Trustee; their activities described herein are governed solely
by the provisions of the Indenture. The Indenture provides that
the Sponsor may (but need not) direct the Trustee to dispose of
a Security in the unlikely event that an issuer of a Security
defaults in the payment of dividends or interest or there exist
certain other materially adverse conditions described in the Indenture.
The Trustee may also sell Securities designated by the Sponsor,
or if not so directed, in its own discretion, for the purpose
of redeeming Units of the Trust tendered for redemption and the
payment of expenses; provided, however, that in the case of Securities
sold to meet redemption requests, Treasury Obligations may only
be sold if the Trust is assured of retaining a sufficient principal
amount of Treasury Obligations to provide funds upon maturity
of the Trust at least equal to $1.00 per Unit. Treasury Obligations
may not be sold to meet Trust expenses.
INFORMATION AS TO SPONSOR, TRUSTEE AND EVALUATOR
Who is the Sponsor?
Nike Securities L.P., the Sponsor, specializes in the underwriting,
trading and distribution of unit investment trusts and other securities.
Nike Securities L.P., an Illinois limited partnership formed in
1991, acts as Sponsor for successive series of The First Trust
Combined Series, The First Trust Special Situations Trust, The
First Trust Insured Corporate Trust, The First Trust of Insured
Municipal Bonds, The First Trust GNMA, Templeton Growth and Treasury
Trust, Templeton Foreign Fund & U.S. Treasury Securities Trust
and The Advantage Growth and Treasury Securities Trust. First
Trust introduced the first insured unit investment trust in 1974
and to date more than $7.5 billion in First Trust unit investment
trusts have been deposited. The Sponsor's employees include a
team of professionals with many years of experience in the unit
Page 24
investment trust industry. The Sponsor is a member of the National
Association of Securities Dealers, Inc. and Securities Investor
Protection Corporation and has its principal offices at 1001 Warrenville
Road, Lisle, Illinois 60532; telephone number (708) 241-4141.
As of December 31, 1994, the total partners' capital of Nike Securities
L.P. was $10,863,058 (audited). (This paragraph relates only to
the Sponsor and not to the Trust or to any series thereof or to
any other Underwriter. The information is included herein only
for the purpose of informing investors as to the financial responsibility
of the Sponsor and its ability to carry out its contractual obligations.
More detailed financial information will be made available by
the Sponsor upon request.)
Who is the Trustee?
The Trustee is The Chase Manhattan Bank (National Association),
a national banking association with its principal executive office
located at 1 Chase Manhattan Plaza, New York, New York 10081 and
its unit investment trust office at 770 Broadway, New York, New
York 10003. Unit holders who have questions regarding the Trusts
may call the Customer Service Help Line at 1-800-682-7520. The
Trustee is subject to supervision by the Comptroller of the Currency,
the Federal Deposit Insurance Corporation and the Board of Governors
of the Federal Reserve System.
The Trustee, whose duties are ministerial in nature, has not participated
in the selection of the Securities. For information relating to
the responsibilities of the Trustee under the Indenture, reference
is made to the material set forth under "Rights of Unit Holders."
The Trustee and any successor trustee may resign by executing
an instrument in writing and filing the same with the Sponsor
and mailing a copy of a notice of resignation to all Unit holders.
Upon receipt of such notice, the Sponsor is obligated to appoint
a successor trustee promptly. If the Trustee becomes incapable
of acting or becomes bankrupt or its affairs are taken over by
public authorities, the Sponsor may remove the Trustee and appoint
a successor as provided in the Indenture. If upon resignation
of a trustee no successor has accepted the appointment within
30 days after notification, the retiring trustee may apply to
a court of competent jurisdiction for the appointment of a successor.
The resignation or removal of a trustee becomes effective only
when the successor trustee accepts its appointment as such or
when a court of competent jurisdiction appoints a successor trustee.
Any corporation into which a Trustee may be merged or with which
it may be consolidated, or any corporation resulting from any
merger or consolidation to which a Trustee shall be a party, shall
be the successor Trustee. The Trustee must be a banking corporation
organized under the laws of the United States or any State and
having at all times an aggregate capital, surplus and undivided
profits of not less than $5,000,000.
Limitations on Liabilities of Sponsor and Trustee
The Sponsor and the Trustee shall be under no liability to Unit
holders for taking any action or for refraining from taking any
action in good faith pursuant to the Indenture, or for errors
in judgment, but shall be liable only for their own willful misfeasance,
bad faith, gross negligence (ordinary negligence in the case of
the Trustee) or reckless disregard of their obligations and duties.
The Trustee shall not be liable for depreciation or loss incurred
by reason of the sale by the Trustee of any of the Securities.
In the event of the failure of the Sponsor to act under the Indenture,
the Trustee may act thereunder and shall not be liable for any
action taken by it in good faith under the Indenture.
The Trustee shall not be liable for any taxes or other governmental
charges imposed upon or in respect of the Securities or upon the
interest thereon or upon it as Trustee under the Indenture or
upon or in respect of the Trust which the Trustee may be required
to pay under any present or future law of the United States of
America or of any other taxing authority having jurisdiction.
In addition, the Indenture contains other customary provisions
limiting the liability of the Trustee.
If the Sponsor shall fail to perform any of its duties under the
Indenture or become incapable of acting or become bankrupt or
its affairs are taken over by public authorities, then the Trustee
may (a) appoint a successor Sponsor at rates of compensation deemed
by the Trustee to be reasonable and not exceeding amounts
Page 25
prescribed by the Securities and Exchange Commission, or (b) terminate
the Indenture and liquidate the Trust as provided herein, or (c)
continue to act as Trustee without terminating the Indenture.
Who is the Evaluator?
The Evaluator is Securities Evaluation Service, Inc., 531 East
Roosevelt Road, Suite 200, Wheaton, Illinois 60187. The Evaluator
may resign or may be removed by the Sponsor and the Trustee, in
which event the Sponsor and the Trustee are to use their best
efforts to appoint a satisfactory successor. Such resignation
or removal shall become effective upon the acceptance of appointment
by the successor Evaluator. If upon resignation of the Evaluator
no successor has accepted appointment within 30 days after notice
of resignation, the Evaluator may apply to a court of competent
jurisdiction for the appointment of a successor.
The Trustee, Sponsor and Unit holders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for
the accuracy thereof. Determinations by the Evaluator under the
Indenture shall be made in good faith upon the basis of the best
information available to it, provided, however, that the Evaluator
shall be under no liability to the Trustee, Sponsor or Unit holders
for errors in judgment. This provision shall not protect the Evaluator
in any case of willful misfeasance, bad faith, gross negligence
or reckless disregard of its obligations and duties.
OTHER INFORMATION
How May the Indenture be Amended or Terminated?
The Sponsor and the Trustee have the power to amend the Indenture
without the consent of any of the Unit holders when such an amendment
is (1) to cure any ambiguity or to correct or supplement any provision
of the Indenture which may be defective or inconsistent with any
other provision contained therein, or (2) to make such other provisions
as shall not adversely affect the interest of the Unit holders
(as determined in good faith by the Sponsor and the Trustee).
The Indenture provides that the Trust shall terminate upon the
maturity, redemption or other disposition of the last of the Treasury
Obligations held in the Trust but in no event beyond the Mandatory
Termination Date as set forth in Part One for each Trust. The
Trust may be liquidated at any time by consent of 100% of the
Unit holders of the Trust or by the Trustee in the event that
Units of the Trust not yet sold aggregating more than 60% of the
Units of the Trust are tendered for redemption by the Underwriters,
including the Sponsor. If the Trust is liquidated because of the
redemption of unsold Units of the Trust by the Underwriters, the
Sponsor will refund to each purchaser of Units of the Trust the
entire sales charge paid by such purchaser. In the event of termination,
written notice thereof will be sent by the Trustee to all Unit
holders of the Trust. Within a reasonable period after termination,
the Trustee will follow the procedures set forth under "How are
Income and Principal Distributed?"
Legal Opinions
The legality of the Units offered hereby and certain matters relating
to federal tax law have been passed upon by Chapman and Cutler,
111 West Monroe Street, Chicago, Illinois 60603, as counsel for
the Sponsor. Carter, Ledyard & Milburn will act as counsel for
the Trustee and as special New York tax counsel for the Trust.
Experts
The statement of net assets, including the portfolio, of each
Trust contained in Part One of this Prospectus has been audited
by Ernst & Young LLP, independent auditors, as set forth in their
report thereon appearing therein, and is included in reliance
upon such report given upon the authority of such firm as experts
in accounting and auditing.
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Page 27
CONTENTS:
Templeton Growth and Treasury Trust
Templeton Foreign Fund & U.S. Treasury Securities Trust:
What are Templeton Growth and Treasury Trust
and Templeton Foreign Fund &
U.S. Treasury Securities Trust? 3
What are the Expenses and Charges? 3
What is the Federal Tax Status of Unit Holders? 4
Why are Investments in the Trust Suitable for
Retirement Plans? 6
Portfolio:
What are Zero Coupon Treasuries? 7
What is Templeton Growth Fund, Inc.? 7
What is Templeton Foreign Fund? 10
What is Templeton's Investment Objective
and Policy? 12
How is Net Asset Value of Templeton Determined? 15
Who is the Investment Manager of Templeton? 16
Risk Factors 17
Public Offering:
How is the Public Offering Price Determined? 18
How are Units Distributed? 19
What Are the Sponsor's Profits? 19
Will There be a Secondary Market? 19
Rights of Unit Holders:
How is Evidence of Ownership Issued and
Transferred? 20
How are Income and Principal Distributed? 20
How Can Distributions to Unit Holders be
Reinvested? 21
What Reports Will Unit Holders Receive? 22
How May Units be Redeemed? 23
How May Units be Purchased by the Sponsor? 24
How May Securities be Removed from the Trust? 24
Information as to Sponsor, Trustee and Evaluator:
Who is the Sponsor? 24
Who is the Trustee? 25
Limitations on Liabilities of Sponsor and Trustee 25
Who is the Evaluator? 26
Other Information:
How May the Indenture be Amended or
Terminated? 26
Legal Opinions 26
Experts 26
______________
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY, SECURITIES IN ANY JURISDICTION
TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION.
THIS PROSPECTUS DOES NOT CONTAIN ALL THE INFORMATION SET
FORTH IN THE REGISTRATION STATEMENTS AND EXHIBITS RELATING THERETO,
WHICH THE TRUST HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION,
WASHINGTON, D.C. UNDER THE SECURITIES ACT OF 1933 AND THE INVESTMENT
COMPANY ACT OF 1940, AND TO WHICH REFERENCE IS HEREBY MADE.
TEMPLETON GROWTH AND
TREASURY TRUST
TEMPLETON FOREIGN FUND &
U.S. TREASURY SECURITIES
TRUST
Prospectus
Part Two
December 22, 1995
First Trust (registered trademark)
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532
1-708-241-4141
Trustee:
The Chase Manhattan Bank
(National Association)
770 Broadway
New York, New York 10003
1-800-682-7520
THIS PART TWO MUST BE
ACCOMPANIED BY PART ONE.
PLEASE RETAIN THIS PROSPECTUS
FOR FUTURE REFERENCE
Page 28
CONTENTS OF POST-EFFECTIVE AMENDMENT
OF REGISTRATION STATEMENT
This Post-Effective Amendment of Registration Statement
comprises the following papers and documents:
The facing sheet
The prospectus
The signatures
The Consent of Independent Auditors
Financial Data Schedule
S-1
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant, Templeton Foreign Fund & U.S. Treasury Securities
Trust, certifies that it meets all of the requirements for
effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment of its Registration Statement to be
signed on its behalf by the undersigned thereunto duly authorized
in the Village of Lisle and State of Illinois on December 29,
1995.
TEMPLETON FOREIGN FUND & U.S.
TREASURY SECURITIES TRUST
(Registrant)
By NIKE SECURITIES L.P.
(Depositor)
By Carlos E. Nardo
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933,
this Post-Effective Amendment of Registration Statement has been
signed below by the following person in the capacity and on the
date indicated:
Signature Title* Date
Robert D. Van Kampen Sole Director of )
Nike Securities )
Corporation, ) December 29, 1995
the General Partner )
of Nike Securities L.P. )
)
) Carlos E. Nardo
) Attorney-in-Fact**
*The title of the person named herein represents his capacity in
and relationship to Nike Securities L.P., Depositor.
**An executed copy of the related power of attorney was filed wi
th the Securities and Exchange Commission in connection with
the Amendment No. 1 to Form S-6 of The First Trust Special
Situations Trust, Series 18 (File No. 33-42683) and the same
is hereby incorporated herein by this reference.
S-2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Experts" and to the use of our report dated November 10, 1995 in
this Post-Effective Amendment to the Registration Statement and
related Prospectus of Templeton Foreign Fund & U.S. Treasury
Securities Trust dated December 20, 1995.
ERNST & YOUNG
Chicago, Illinois
December 19, 1995
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from Post
Effective Amendment to form S-6 and is qualified in its entirety by reference to
such Post Effective Amendment to form S-6.
</LEGEND>
<SERIES>
<NUMBER> 001
<NAME> TEMPLETON FOREIGN G&T
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-START> SEP-1-1994
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 27,546,017
<INVESTMENTS-AT-VALUE> 32,930,019
<RECEIVABLES> 15,081
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 32,945,100
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 183,214
<TOTAL-LIABILITIES> 183,214
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 27,546,017
<SHARES-COMMON-STOCK> 25,360,944
<SHARES-COMMON-PRIOR> 28,230,931
<ACCUMULATED-NII-CURRENT> (168,133)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,384,002
<NET-ASSETS> 32,761,886
<DIVIDEND-INCOME> 1,001,686
<INTEREST-INCOME> 1,358,260
<OTHER-INCOME> 0
<EXPENSES-NET> 46,847
<NET-INVESTMENT-INCOME> 2,313,099
<REALIZED-GAINS-CURRENT> 472,441
<APPREC-INCREASE-CURRENT> (324,472)
<NET-CHANGE-FROM-OPS> 2,461,068
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,103,744
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 2,869,987
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (2,179,737)
<ACCUMULATED-NII-PRIOR> (2,979)
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
