As filed with the Securities and Exchange Commission on December 29, 1995
Registration No. 33-37338
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
-----
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 7 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
Amendment No. 9 / X /
(Check appropriate box or boxes)
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
(Exact Name of Registrant as Specified in Charter)
700 Central Avenue
ST. PETERSBURG, FLORIDA 33701
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (813) 823-8712
Thomas M. Mistele, Esq.
.
700 Central Avenue
St. Petersburg, Florida 33701
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check
appropriate box)
Immediately upon filing pursuant to paragraph (b)
X on January 1, 1996 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)
on (date) pursuant to paragraph (a) of Rule 485
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
Registrant elects to register an indefinite number of shares of common
stock pursuant to Rule 24f-2 under the Investment Company Act of 1940. A Rule
24f-2 Notice for the Registrant's fiscal year ended August 31, 1995 was filed
with the Commission on October 30, 1995.
<PAGE>
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
CROSS-REFERENCE SHEET
ITEM NO. CAPTION
PART A
1 Cover Page
2 Expense Table
3 Selected Financial
Information
4 General Description
5 Management of the Fund
5A See Annual Report to
Shareholders
6 General Information
7 How to Buy Shares of the
Fund
8 How to Sell Shares of the
Fund
9 Not Applicable
PART B
10 Cover Page
11 Table of Contents
12 General Information and
History
13 Investment Objective and
Policies
14 Management of the Fund
15 Principal Shareholders
16 Investment Management and
Other Services
17 Brokerage Allocation
18 General Information -
Description of Shares,
Part A
<PAGE>
ITEM NO. CAPTION
PART B
19 Purchase, Redemption and
Pricing of Shares
20 Tax Status
21 Principal Underwriter
22 Performance Information
23 Financial Statements
<PAGE>
TEMPLETON
CAPITAL ACCUMULATION
PLANS
[LOGO OF MAP APPEARS HERE]
PROSPECTUS
-------------------------------------------
JANUARY 1, 1996
<PAGE>
PROSPECTUS
TEMPLETON CAPITAL ACCUMULATION PLANS
Templeton Capital Accumulation Plans (the "Plans") for the accumulation of
shares of Templeton Capital Accumulator Fund, Inc. (the "Fund") are offered by
Franklin Templeton Distributors, Inc., the Sponsor and Principal Underwriter
("FTD" or "Sponsor"). A Plan calls for fixed monthly investments for 15 years
(180 investments), with the Planholder having the option to make additional
monthly investments for up to a total of 25 years (300 investments). The ratio
of Sales and Creation Charges to total investments on 15-year Plans ranges
from 9.00% on $16,875 Plans ($93.75 per month) to .75% on $1,800,000 Plans
($10,000 per month) and the ratio of Sales and Creation Charges to net
investments on 15-year Plans ranges from 9.89% to .76%. On Plans extended to
25 years, the Sales and Creation Charges range from 8.49% (on $16,875 Plans)
to .56% (on $1,800,000 Plans) of the net amount invested.
Investments under a Plan are applied, after authorized deductions, to the
purchase of Fund shares at net asset value. These shares should be considered
a long term investment and are not suitable for investors seeking quick
profits or who might be unable to complete a Plan. The Sales and Creation
Charges for the first year of a Plan can amount to 50% of the total amount
paid during that year. Since a major portion of the entire Sales and Creation
Charge is deducted from the first year's investments, withdrawal or
termination of an investment in the early years of a Plan will probably result
in a loss. For example, on a $16,875 Plan ($93.75 per month), deductions
amount to 9.00% of the investments made if the Plan is completed. However,
even after the application of the refund privilege described on page 8, total
deductions would amount to 15% of total investments if the Plan were
terminated at any time between two months and 18 months. Moreover, if the Plan
were continued for 19 months, total deductions would amount to 33.82% of the
total invested; deductions would amount to 28.04% if the Plan were continued
for two years and then redeemed. A detailed description of all deductions
appears on page 11.
The value of a Plan is subject to fluctuations in the value of the
securities in the Fund's portfolio. A Plan calls for monthly investments at
regular intervals regardless of the price level of the Fund's shares.
Investors should therefore consider their financial ability to continue a
Plan. A Plan offers no assurance against loss in a declining market.
Terminating a Plan at a time when the value of the shares then held is less
than their cost will result in a loss.
SHARES OF THE FUND ARE OFFERED TO THE GENERAL PUBLIC ONLY THROUGH TEMPLETON
CAPITAL ACCUMULATION PLANS. The Fund seeks long-term capital growth through a
flexible policy of investing in stocks and debt obligations of companies and
governments of any nation, developed or underdeveloped. As an operating
policy, which may be changed without shareholder approval, the Fund may not
invest more than 5% of its assets in lower rated debt securities. As a
fundamental policy, which may not be changed without shareholder approval, the
Fund may not invest more than 10% of its assets in illiquid securities,
including defaulted debt securities.
Shares of certain other mutual funds managed or advised by the Fund's
investment manager, Templeton Investment Counsel, Inc. ("TICI" or "Investment
Manager") and its affiliates, which have investment objectives similar in many
respects to those of the Fund, may be acquired with a sales charge for the
minimum initial investment of $100, and subsequent investments of a minimum of
$25 (which may be made automatically by means of pre-authorized bank debits),
and, compared to the earlier years of a Plan, would involve a lesser sales
charge, thereby decreasing the possibility of loss in the event of early
termination.
AN INVESTOR HAS THE RIGHT TO A 45 DAY REFUND OF HIS OR HER INVESTMENT, AS
WELL AS CERTAIN OTHER LIMITED REFUND RIGHTS FOR CERTAIN PERIODS OF TIME AND
UNDER THE CONDITIONS DESCRIBED IN MORE DETAIL UNDER THE HEADING "CANCELLATION
AND REFUND RIGHTS" ON PAGE 8.
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.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT
PROSPECTUS OF TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
INVESTORS SHOULD READ AND RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE.
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Introductory Statement..................................................... 3
Allocation of Investments and Deductions................................... 3
15-Year Plans -- Allocation of Investments and Deductions.................. 4
Total 25-Year Allocations and Deductions When Extended Investment Option is
Used...................................................................... 4
A Typical $100 Monthly Investment Plan..................................... 5
Investment Objective -- What You Seek From Your Plan....................... 5
How a Templeton Capital Accumulation Plan Can Help You Meet Your Objective. 5
How to Start Your Templeton Capital Accumulation Plan...................... 6
Automatic Investment Plan.............................................. 6
Your Rights and Privileges Under the Plan.................................. 6
Dividends and Distributions............................................ 6
How You Can Withdraw or Redeem Some of Your Shares Without Terminating
Your Plan............................................................. 6
You May Transfer or Assign Your Rights in the Plan..................... 8
Cancellation and Refund Rights......................................... 8
You May Terminate Your Plan and Withdraw Your Shares................... 8
Replacement Privilege on Termination................................... 9
You Retain Full Voting Rights in Your Fund Shares...................... 9
You May Make Investments Ahead of Schedule to Complete Your Plan Early. 9
You May Withdraw a Fixed Amount Monthly or Quarterly -- When You Have
Completed Your Plan................................................... 9
You May Continue Investments After Completing a 15-Year Plan --
Extended Investment Option........................................... 10
Individual Retirement Accounts (IRAs)...................................... 10
Sales and Creation Charges................................................. 11
The Custodian -- Templeton Funds Trust Company............................. 12
The Sponsor -- Franklin Templeton Distributors, Inc. ...................... 13
Taxes...................................................................... 14
Substitution of the Underlying Investment.................................. 14
Termination of Your Plan................................................... 14
General.................................................................... 15
Illustration of a Hypothetical $93.75 Monthly Templeton Capital
Accumulation Plan......................................................... 15
Financial Statements:
Templeton Capital Accumulation Plans................................... 17
Franklin Templeton Distributors, Inc. ................................. 22
Templeton Capital Accumulator Fund, Inc. Prospectus........................ P-1
</TABLE>
No salesman, dealer or other person is authorized by the Sponsor, the Plans,
or the Fund, to give any information or make any representation other than
those contained in this Prospectus or in the prospectus and Statement of
Additional Information of Templeton Capital Accumulator Fund, Inc., or in any
other printed or written material issued under the name of Franklin Templeton
Distributors, Inc. or Templeton Capital Accumulator Fund, Inc. No person
should rely upon any information not contained in these materials.
2
<PAGE>
INTRODUCTORY STATEMENT
You should consider the following aspects of the Plans before making an
investment:
1. A Plan represents an agreement between you, the Sponsor, and Templeton
Funds Trust Company ("TFTC" or "Custodian") under which investments (after
deduction of "Sales and Creation Charges") are used to purchase shares of the
Fund. It is not required that the Sponsor notify you or seek your approval
prior to replacing the Custodian. However, the terms of the Custodian
Agreement cannot be amended to adversely affect your rights and privileges
without obtaining your written consent.
2. Investments made through the Plans will not constitute direct ownership
of Fund shares, but rather an interest in a trust which will have direct
ownership of Fund shares. You will have only a beneficial interest in the
underlying Fund shares. This beneficial interest is expressed in the Plan as
"Plan shares"; one Plan share always equals one share of the underlying Fund.
You will, however, retain full voting rights in the underlying Fund shares.
The Custodian will vote the shares held for your account in accordance with
your instructions.
3. Unlike most other plans of this type, the primary issuer--Templeton
Capital Accumulator Fund, Inc.--does not sell its shares directly to the
public. Investments in the Fund may be made only through the arrangements
provided by the Plans.
4. The Plans are available for purchase in conjunction with certain
Individual Retirement Accounts (IRAs) and there is an annual service fee
(currently $10) for maintenance of an individual's IRA.
5. The Plans contain a Sales and Creation Charge which is sometimes called a
"front-end load." The effect of a "front-end load" is that if you terminate
your Plan between the second and eighteenth month, total deductions may amount
to as much as 15% of your total payments made up to that date. Accordingly,
the Plans are not suited for short-term investment. See the tables on page 4,
and the description thereof.
6. A Plan may be terminated by the Custodian or Sponsor if you fail to make
investments under your Plan for a period of 12 months or if Fund shares are
not available and a substitution is not made. See "Termination of Your Plan"
on page 14. Planholders must be notified and approve any substitution of the
Plan's underlying investment. See "Substitution of the Underlying Investment"
on page 14.
7. The dealer firm of record has proprietary rights to all commissions
earned during the duration of your Plan. It is also under no obligation to
transfer your Plan to another dealer firm as long as its dealer agreement with
the Plan Sponsor, Franklin Templeton Distributors, Inc., remains active. If
the dealer firm of record chooses to release your Plan to a new dealer firm,
it must first complete, sign, and signature guarantee a release form that can
be obtained from the Plan Sponsor. This form must be returned to and accepted
by the Custodian, Templeton Funds Trust Company, before any dealer change can
be effected.
ALLOCATION OF INVESTMENTS AND DEDUCTIONS
The following tables show the range of available Plans, the Monthly
Investment Units to be made, total investments to be made and the Sales and
Creation Charges that will be charged as to each Monthly Investment Unit. The
total charges as a percentage of the total amount invested and as a percentage
of the net amount invested are also shown. This information is based solely on
investments made under a Plan and does not reflect any investment experience,
dividend or income of the Fund over the 15-year period of a Plan.
3
<PAGE>
15-YEAR PLANS
ALLOCATION OF INVESTMENTS AND DEDUCTIONS
<TABLE>
<CAPTION>
SALES AND CREATION CHARGES
-------------------------------------------------------
% OF % OF
MONTHLY PER PER CHARGES CHARGES MONTHLY
INVESTMENT TOTAL INVESTMENT INVESTMENT TOTAL TO TOTAL TO NET INVESTMENT
UNIT INVESTMENT 1 THRU 12 13 THRU 180 CHARGES INVESTMENT INVESTMENT UNIT
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 93.75 $ 16,875.00 $ 46.87 $ 5.69 $ 1,518.36 9.00% 9.89% $ 93.75
100.00 18,000.00 50.00 6.07 1,619.76 9.00 9.89 100.00
125.00 22,500.00 62.50 7.58 2,023.44 8.99 9.88 125.00
150.00 27,000.00 75.00 7.50 2,160.00 8.00 8.70 150.00
166.66 29,998.80 83.33 8.15 2,369.16 7.90 8.57 166.66
200.00 36,000.00 100.00 9.46 2,789.28 7.75 8.40 200.00
250.00 45,000.00 125.00 11.42 3,418.56 7.60 8.22 250.00
300.00 54,000.00 150.00 6.96 2,969.28 5.50 5.82 300.00
350.00 63,000.00 175.00 6.92 3,262.56 5.18 5.46 350.00
400.00 72,000.00 200.00 6.62 3,512.16 4.88 5.13 400.00
500.00 90,000.00 225.00 6.96 3,869.28 4.30 4.49 500.00
750.00 135,000.00 300.00 10.31 5,332.08 3.95 4.11 750.00
1,000.00 180,000.00 350.00 13.57 6,479.76 3.60 3.73 1,000.00
1,500.00 270,000.00 375.00 19.82 7,829.76 2.90 2.99 1,500.00
2,000.00 360,000.00 440.00 20.00 8,640.00 2.40 2.46 2,000.00
3,000.00 540,000.00 450.00 28.92 10,258.56 1.90 1.94 3,000.00
5,000.00 900,000.00 500.00 20.53 9,449.04 1.05 1.06 5,000.00
10,000.00 1,800,000.00 750.00 26.78 13,499.04 .75 .76 10,000.00
</TABLE>
TOTAL 25-YEAR ALLOCATIONS AND DEDUCTIONS WHEN
EXTENDED INVESTMENT OPTION IS USED
<TABLE>
<CAPTION>
SALES AND CREATION CHARGES
-------------------------------------------------------
% OF % OF
MONTHLY PER PER CHARGES CHARGES MONTHLY
INVESTMENT TOTAL INVESTMENT INVESTMENT TOTAL TO TOTAL TO NET INVESTMENT
UNIT INVESTMENT 1 THRU 12 13 THRU 300 CHARGES INVESTMENT INVESTMENT UNIT
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 93.75 $ 28,125.00 $ 46.87 $ 5.69 $ 2,201.16 7.83% 8.49% $ 93.75
100.00 30,000.00 50.00 6.07 2,348.16 7.83 8.49 100.00
125.00 37,500.00 62.50 7.58 2,933.04 7.82 8.49 125.00
150.00 45,000.00 75.00 7.50 3,060.00 6.80 7.30 150.00
166.66 49,998.00 83.33 8.15 3,347.16 6.69 7.17 166.66
200.00 60,000.00 100.00 9.46 3,924.48 6.54 7.00 200.00
250.00 75,000.00 125.00 11.42 4,788.96 6.39 6.83 250.00
300.00 90,000.00 150.00 6.96 3,804.48 4.23 4.41 300.00
350.00 105,000.00 175.00 6.92 4,092.96 3.90 4.06 350.00
400.00 120,000.00 200.00 6.62 4,306.56 3.59 3.72 400.00
500.00 150,000.00 225.00 6.96 4,704.48 3.14 3.24 500.00
750.00 225,000.00 300.00 10.31 6,569.28 2.92 3.01 750.00
1,000.00 300,000.00 350.00 13.57 8,108.16 2.70 2.78 1,000.00
1,500.00 450,000.00 375.00 19.82 10,208.16 2.27 2.32 1,500.00
2,000.00 600,000.00 440.00 20.00 11,040.00 1.84 1.87 2,000.00
3,000.00 900,000.00 450.00 28.92 13,728.96 1.53 1.55 3,000.00
5,000.00 1,500,000.00 500.00 20.53 11,912.64 .79 .80 5,000.00
10,000.00 3,000,000.00 750.00 26.78 16,712.64 .56 .56 10,000.00
</TABLE>
4
<PAGE>
A TYPICAL $100 MONTHLY INVESTMENT PLAN
(Assuming that all investments are made in accordance with the terms of the
Plan)
<TABLE>
<CAPTION>
AT THE END OF AT THE END OF AT THE END OF
6 MONTHS 1 YEAR 2 YEARS
AGGREGATE AMOUNT (6 INVESTMENTS) (12 INVESTMENTS) (24 INVESTMENTS)
--------------------- ----------------- ----------------- --------------------
% OF TOTAL % OF TOTAL % OF TOTAL % OF TOTAL
INVEST- INVEST- INVEST- INVEST-
AMOUNT MENTS AMOUNT MENTS AMOUNT MENTS AMOUNT MENTS
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
15 YEARS (180 INVEST-
MENTS)
Total Investments....... $18,000 100% $600 100% $1,200 100% $2,400 100%
Deduct:
Creation and Sales
Charge................ $ 1,619.76 9% $300 50% $ 600 50% $ 672.84 28%
Net Amount Invested Un-
der Plan............... $16,380.24 91% $300 50% $ 600 50% $1,727.16 72%
25 YEARS (300 INVEST-
MENTS)
Total Investments....... $30,000 100% $600 100% $1,200 100% $2,400 100%
Deduct:
Creation and Sales
Charge................ $ 2,348.16 7.8% $300 50% $ 600 50% $ 672.84 28%
Net Amount Invested Un-
der Plan............... $27,651.84 92.2% $300 50% $ 600 50% $1,727.16 72%
</TABLE>
NOTES:
(1) Dividends and distributions received on Fund shares, during the periods
shown, have not been included or reflected in any way in the foregoing
figures.
(2) The 25-year investment schedule reflects the charges applicable to a 15-
year Plan which is continued under the Extended Investment Option.
After the first 12 monthly investments have been made, the Creation and
Sales Charge deducted from any subsequent monthly investment will not exceed
6.1% of the net investment in Fund shares.
INVESTMENT OBJECTIVE--WHAT YOU SEEK FROM YOUR PLAN
As you will see in the attached prospectus, the objective of Templeton
Capital Accumulator Fund, Inc. (the "Fund") is long-term capital growth. The
Fund is an open-end, diversified investment company (usually referred to as
"mutual fund"). The Fund seeks to meet its objective through investment in
common stocks and other classes of securities which management believes will
contribute to the attainment of such investment objective. Accordingly,
selection of securities for the portfolio of the Fund is based almost entirely
of their potential capital growth possibilities. Most of the portfolio
securities will pay little, if any, income. Whatever income may be received
will be entirely incidental to the objective of capital growth. The Fund's
investments are selected and supervised by TICI. Reference is made to the
attached Templeton Capital Accumulator Fund, Inc. prospectus for a description
of the Fund's investment policies and operating expenses, and the business
experience of its management. A Statement of Additional Information about
Templeton Capital Accumulator Fund, Inc., which is incorporated by reference
in the prospectus for the Fund, is available at no charge by writing Franklin
Templeton Distributors, Inc., Dealer Main Office Services, 700 Central Avenue,
St. Petersburg, Florida 33701-3628 or by calling the Shareholder Services
Department at 1-800-632-2301.
HOW A TEMPLETON CAPITAL ACCUMULATION PLAN
CAN HELP YOU MEET YOUR OBJECTIVE
Many people who want to build an investment portfolio find it difficult to
save the money necessary to make periodic stock purchases. Templeton Capital
Accumulation Plans are designed to help such people.
5
<PAGE>
These Plans make it possible to build equity over a period of years by
investing a modest sum each month in mutual fund shares. The mutual fund
principle is an attempt to reduce the risk inherent in any investment by
diversification and professional management.
The value of Plan shares is subject to the fluctuations in the value of the
securities in the Fund's portfolio. A Plan calls for monthly investments at
regular intervals regardless of the price level of the shares. You should
therefore consider your financial ability to continue a Plan. A Plan offers no
assurance against loss in a declining market and does not eliminate the risk
inherent in the ownership of any security. Terminating your Plan at a time
when the value of Plan shares you acquired is less than their cost will result
in a loss.
Other features of a Plan are the services rendered by the Custodian, which
performs certain bookkeeping and administrative services for the Plans. Acting
as your agent, the Custodian assumes the responsibility for many details of
the Plan. A description of the Custodian's services appears on page 12.
HOW TO START YOUR TEMPLETON CAPITAL ACCUMULATION PLAN
To start your Plan, complete the attached application and have your
investment dealer mail it to the Sponsor, together with a check made out to
Templeton Funds Trust Company. After your application is accepted by the
Sponsor, you will receive a confirmation statement showing the number of whole
and fractional shares purchased for your account.
You should then send investments in one or more multiples of the monthly
amount of your Plan directly to the Custodian. Investments, after applicable
deductions, will be applied toward the purchase of the Plan shares at the net
asset value. Investments in partial monthly amounts cannot be accepted, except
as identified in the discussion on Individual Retirement Accounts (page 10).
You may terminate your participation in the Plan, either completely or
partially, as provided on pages 6-8 ("How You Can Withdraw or Redeem Some of
Your Shares Without Terminating Your Plan") and page 8 ("You May Terminate
Your Plan and Withdraw Your Shares"). Any correspondence regarding the Plans
should be addressed to Franklin Templeton Distributors, Inc., Dealer Main
Office Services, 700 Central Avenue, St. Petersburg, Florida 33701-3628.
AUTOMATIC INVESTMENT PLAN
You may accumulate shares regularly each month by means of automatic debits
to your checking account. Forms for this purpose are in the attached
application. Such a plan is voluntary and may be discontinued by written
notice to the Sponsor, which must be received at least 10 days prior to the
collection date, or by the Sponsor upon written notice to you at least 30 days
prior to the collection date.
YOUR RIGHTS AND PRIVILEGES UNDER THE PLAN
DIVIDENDS AND DISTRIBUTIONS
All dividends and distributions will be automatically reinvested on the
payment date in additional Plan shares at net asset value on the ex-dividend
date of the dividend or distribution, unless you elect to receive cash. Net
asset value will be calculated according to the method described in the Fund's
prospectus under the heading "How to Buy Shares of the Fund".
Dividends or distributions received shortly after an investment is made may
be considered a partial return of such an investment. Dividends and capital
gains, if any, will normally be paid by the Fund at least annually and
generally will be taxable to Planholders for income tax purposes. See "Taxes"
on page 14.
The net asset value per share will decrease by the amount of the dividend
payment and capital gains distributions on the ex-dividend date of the
distributions.
HOW YOU CAN WITHDRAW OR REDEEM SOME OF YOUR SHARES WITHOUT TERMINATING YOUR
PLAN
While a redemption of all of your Plan shares will normally terminate your
Plan, you may redeem less than all of your shares without terminating the
Plan.
6
<PAGE>
If you have owned your Plan for at least 45 days, you may withdraw up to 90%
of your shares from your account or you may direct the Custodian, as your
agent, to redeem up to 90% of your shares and pay the proceeds to you. Any
partial redemption must involve at least $100 and cannot exceed 90% of the
value of the shares. Redemption requests that exceed 90% of the net asset
value of the shares and which leave less than $100 in the Plan will
automatically result in a full redemption of the entire balance in the Plan.
After a partial cash withdrawal, you may reinvest an amount equal to or less
than the amount withdrawn. Upon timely exercise of this reinvestment
privilege, your investment will be restored at the then current net asset
value, at no sales charge, as is prescribed by the National Association of
Securities Dealers ("NASD"). Any repayment of a partial redemption cannot be
made before 90 days from the date of redemption except for IRAs, which can be
restored after 45 days. (This allows the return of IRA assets before the 60-
day Internal Revenue Service ("IRS") deadline.) There is no limit to the
number of redemptions that can be made, each of which must be for a minimum of
$100. Full reinstatement of a partial redemption need not be made in one
transaction if the amount redeemed exceeds $500. However, any reinvestment
must be made in increments equal to the amount redeemed or $500, whichever is
less.
Redemption or withdrawal of Plan shares held in an IRA must conform to the
requirements of the IRA and the Plan's withdrawal and redemption requirements.
Distributions from such IRAs are subject to additional requirements under the
Internal Revenue Code of 1986, as amended (the "Code"), and certain documents
(available from the Custodian) must be completed before the distribution may
be made. Distributions from IRAs are subject to withholding requirements under
the Code, and the IRS Form W-4P (available from the Custodian) may be required
to be submitted to the Custodian with the distribution request, or the
distribution will be delayed. The Custodian and the Sponsor assume no
responsibility to determine whether a distribution satisfies the conditions of
applicable tax laws and will not be responsible for any penalties assessed.
All requests for withdrawal must be made in writing and signed by all
registered Planholders. Proceeds of redemptions will be mailed to the address
of record unless instructions to the contrary are received with Planholders'
signatures guaranteed. In the case of a cash withdrawal, the Custodian or the
Sponsor may require additional documentation. Reinvested redemptions will be
applied to the purchase of Plan shares at the next determined net asset value.
No partial withdrawal or redemption shall affect the total number of monthly
investments to be made or the unpaid balance of monthly investments. No charge
will be made for each partial withdrawal, redemption or restoration, but you
will be liable for any transfer taxes that may be required. Replacements of
partial withdrawals must be clearly identified as such in order to distinguish
them from regular monthly investments. A gain or loss for tax purposes may be
realized by the Planholder upon any cash withdrawal. Depending on your
circumstances, the deduction for a loss may be limited.
If the cash withdrawal is more than $50,000, is made payable to an
individual other than the Planholder of record, or is to be sent to an address
other than the address of record, a letter of instruction will be required,
signed by all Planholders with signatures guaranteed by an "eligible
guarantor," including (1) national or state banks, savings associations,
savings and loan associations, trust companies, savings banks, industrial loan
companies and credit unions; (2) national securities exchanges, registered
securities associations and clearing agencies; (3) securities broker-dealers
which are members of a national securities exchange or a clearing agency or
which have minimum net capital of $100,000; or (4) institutions that
participate in the Securities Transfer Agent Medallion Program ("STAMP") or
other recognized signature medallion program. A notarized signature will not
be sufficient for the request to be in proper order. A signature guarantee is
not required for cash withdrawals of $50,000 or less, requested by and payable
to all Planholders of record, to be sent to the address of record for that
account. However, the Sponsor reserves the right to require signature
guarantees on all cash withdrawals. A signature guarantee is required in
connection with any request for transfer of Plan shares. Also, a signature
guarantee is required if the Sponsor or the Custodian believes that a
signature guarantee would protect against potential claims based on the
withdrawal instructions, including, for example, when (a) the current address
of one or more joint owners of an account cannot be confirmed, (b) multiple
owners have a dispute or give inconsistent instructions to the Custodian, (c)
the Custodian has been notified of an adverse claim, (d) the instructions
received by the Custodian are given by an agent, not the actual registered
owner, (e) the Custodian determines that joint owners who are married to each
other are separated or may be the subject of divorce proceedings, or (f) the
authority of a representative of a corporation, partnership, association, or
other entity has not been established to the satisfaction of the Custodian.
All documents must be in proper order before any withdrawals or redemptions
can be executed. The redemption price will be the net asset value next
determined after such documents have been received in good order. Your request
should be sent to Templeton Funds Trust Company, P.O. Box 33030, St.
Petersburg, Florida 33733-8030.
7
<PAGE>
Ordinarily you will receive cash as a result of redeeming your shares under
this or any of the options described below within seven days after your
request is received by the Custodian. However, the Custodian will not mail
redemption proceeds until checks received for the shares purchased have
cleared. The payment period may be extended if the Custodian's right to redeem
shares of the Fund has been suspended or restricted. This will only happen if
the New York Stock Exchange is closed, other than for customary weekends or
holidays, if trading is restricted on the Exchange, or if any emergency is
deemed to exist by the Securities and Exchange Commission.
YOU MAY TRANSFER OR ASSIGN YOUR RIGHTS IN THE PLAN
You may transfer your rights to another person; for example, a relative,
charitable institution, or trust. You can do this in several ways:
(1) You can transfer your right, title and interest to another person whose
only right shall be the privilege of complete and prompt withdrawal from the
Plan.
(2) You can transfer your entire right, title and interest to another
person, trustee or custodian acceptable to the Sponsor, who has made
application to the Sponsor for a similar Plan.
The Custodian will provide you with the appropriate assignment form.
Transfers may be subject to income and other taxes.
CANCELLATION AND REFUND RIGHTS
You have certain rights of cancellation. Within 60 days after you purchase a
Plan (which, for this purpose, is the date appearing on the confirmation
statement you will receive following your initial payment), the Custodian will
send a notice to you regarding your cancellation rights. If you elect to
cancel within 45 days of the mailing date of that notice, you will receive a
cash refund equal to the sum of (1) the total net asset value of the Plan
shares credited to your account on the date that your cancellation request is
received by the Custodian and (2) an amount equal to the difference between
the gross amount invested and the net amount invested in Plan shares.
In addition, you may surrender your Plan at any time within an eighteen-
month period beginning on the purchase date of your Plan and receive from the
Custodian a cash payment equal to the sum of (1) the total net asset value of
the Plan shares credited to your account on the date of the surrender plus (2)
a refund of all sales charges paid to the date of surrender minus 15% of the
gross amount you have invested as of that date. Planholders who execute their
Plans in certain states may have up to twenty-eight months to exercise this
refund right. In order to receive the above payment, your request should be
sent in writing to Templeton Funds Trust Company, P.O. Box 33030, St.
Petersburg, Florida 33733-8030. In addition, a cancellation request involving
more than $50,000 will require a signature guarantee for all registered owners
as described above.
If you surrender your Plan under this cancellation and refund privilege, you
may not reinstate your Plan at net asset value. In addition, under the so-
called "wash sale rule," Federal tax laws presently do not permit the
recognition of a loss when an individual sells and re-acquires the same
securities within a 30-day time period before or after the loss is incurred.
Gains, however, are recognized for tax purposes at the time of redemption.
The Custodian will send you a written notice of your eighteen-month rights
of cancellation if one or the other of the following occur:
(1) If, after fifteen months from the date of establishment, you have missed
three investments or more, or
(2) If you miss one investment or more after the expiration of the fifteen-
month period but prior to the expiration of the eighteen-month period. (If the
Custodian has already sent a notice at 15 months, a second notice will not be
required even if additional investments are missed.)
These notices will inform you of your rights of cancellation as set forth in
the preceding paragraph, of the value of your account at the time the notice
is sent, and of the amount to which you are entitled pursuant to the
provisions of the preceding paragraph.
YOU MAY TERMINATE YOUR PLAN AND WITHDRAW YOUR SHARES
A Plan may be terminated at any time by a written request to the Custodian.
In terminating your Plan, you may request the Custodian to withdraw your
shares, redeem them and send you the proceeds. If the amount of the redemption
is more than $50,000, is made payable to an individual other than the
Planholder of record, or is to be sent to an address other than the address of
record, your request, signed by all registered owners, must be signature
8
<PAGE>
guaranteed as described above. All documents must be in good order before a
redemption can be executed. The redemption price will be the net asset value
next determined after such documents have been received.
If you choose to receive Fund shares instead of cash, the Plan shares may be
exchanged for shares of the Fund and then further exchanged for shares of
certain other funds for which TICI or an affiliate is the investment manager.
The Exchange Privilege is more fully described in the Fund prospectus under
the caption "Exchange Privilege." You should note that if you elect to
exchange your shares of the Fund for shares of other funds in the Franklin
Group of Funds (R) or the Templeton Funds, the shares of such other funds
cannot thereafter be exchanged back into shares of the Fund.
The right of redemption of shares of the Templeton Capital Accumulation Plan
and the underlying Fund may be suspended at times when trading on the New York
Stock Exchange is restricted or such Exchange is closed for other than
weekends and holidays or any emergency is deemed to exist by the Securities
and Exchange Commission. As long as the right of redemption of shares of the
Fund is suspended, no shares may be redeemed, and therefore no cash withdrawal
may be made during that period.
REPLACEMENT PRIVILEGE ON TERMINATION
If you have terminated your Plan, you may exercise a replacement privilege
which allows you to reinvest an amount equal to but not less than 10% of the
net asset value of the redeemed shares without any sales charge in a re-opened
identically registered Templeton Capital Accumulation Plan. Reinvestment is
made at the net asset value per share next determined following the timely
receipt by the Custodian of a replacement order and payment. Replacement must
be made within 60 days following the date of termination of the Plan; however,
while you may be required to recognize a gain on a termination, you may not
recognize a loss for Federal tax purposes to the extent you reinvest the
proceeds in a Templeton Capital Accumulation Plan within 30 days or less.
The replacement privilege is available to you only if you have not
previously exercised the privilege as to your Plan. The replacement privilege
does not abrogate the partial withdrawal without termination privilege
described on pages 6-8. If you have redeemed your Plan shares under the
procedures described under "Cancellation and Refund Rights" on page 8, you may
not reinstate at net asset value the proceeds from such a cancellation or
refund until all refunded Sales and Creation Charges have been deducted from
the amount offered for the reinstatement.
YOU RETAIN FULL VOTING RIGHTS IN YOUR FUND SHARES
You will receive a notice at least 10 days before any matter is submitted to
a vote of the stockholders of the Fund. The Custodian will vote the shares
held for your account in accordance with your instructions. In the absence of
such instructions, the Custodian will vote your shares in the same proportion
as it votes the shares for which it has received instructions from other
Planholders.
If you wish to attend any meetings at which shares may be voted, you may
request the Custodian to furnish you with a proxy or otherwise arrange for you
to exercise your voting rights.
YOU MAY MAKE INVESTMENTS AHEAD OF SCHEDULE TO COMPLETE YOUR PLAN EARLY
You may complete your Templeton Capital Accumulation Plan ahead of schedule
by making investments in advance of their due date, but not more than 24
monthly investments may be made in one calendar year. In addition to such
advance investments, you may also prepay up to 24 monthly units at any time
during the life of your Plan. Monthly investment units may be accrued and paid
in a lump sum. There is no reduction in the Sales and Creation Charge for
advance investments. These prepayment rules shall be waived only to make a
Plan that is in arrears current (as defined in the section titled "You May
Qualify for Reduced Sales Charges" on page 11) or for the transfer or rollover
into an IRA.
In the event of death of the Planholder, these advance investment
restrictions will be waived to allow the Plan to be completed at one time by
survivors of the Planholder or representatives of the estate.
YOU MAY WITHDRAW A FIXED AMOUNT MONTHLY OR QUARTERLY--WHEN YOU HAVE COMPLETED
YOUR PLAN
When you complete all regularly scheduled investments, you may elect a
Systematic Cash Withdrawal Program. Under this Program, the Custodian, as your
agent, will redeem sufficient shares from your account to provide regular cash
withdrawal payments of $50 or more each month or quarter, as you elect.
9
<PAGE>
A Systematic Cash Withdrawal Program may also be elected from an incomplete
Plan if the Plan is part of an IRA and you have reached age 70 1/2. Under this
program, the Custodian, as your agent, will redeem as of the twenty-fifth day
of each month (or the first business date after that date) sufficient shares
from your account to provide a regular cash withdrawal payment of $50 or more
each month or quarter, as you elect.
Except for the $50 minimum, there is no limitation on the size of your
withdrawals. The $50 amount is, however, only a minimum established for
administrative convenience and should not be considered as a recommendation.
You have the right to change the dollar amount of your withdrawal or
discontinue your Systematic Cash Withdrawal Program at any time.
You should realize that withdrawals in excess of dividends and distributions
will be made from principal and may eventually exhaust your account. For this
reason, these withdrawals cannot be considered as income on your investment.
Also, a gain or loss for tax purposes may be realized by you on each
withdrawal payment.
If you purchase two or more Plans, it is ordinarily disadvantageous to
participate in the Systematic Cash Withdrawal Program on a completed Plan
while still making regular payments on the uncompleted Plan. If you are
participating in a Systematic Cash Withdrawal Program, you should not start
another Templeton Capital Accumulation Plan. There are no charges made for any
regular withdrawals under a Systematic Cash Withdrawal Program.
The Plan will remain in full force and effect with all rights and privileges
until all shares have been withdrawn from your account. While the Systematic
Cash Withdrawal Program is in force, you may not elect to receive dividends
and distributions in cash.
While FTD does not contemplate doing so, it reserves the right to
discontinue offering the Systematic Cash Withdrawal Program at any time after
90 days' notification to all Planholders who have not elected to participate
in such program. Those who are already participating will be allowed to
continue.
YOU MAY CONTINUE INVESTMENTS AFTER COMPLETING A 15-YEAR PLAN--EXTENDED
INVESTMENT OPTION
Under the Extended Investment Option, you may continue making monthly
investments after completing all scheduled investments in your 15-year Plan.
Investments under this option are subject to the same sales charges as applied
to your last scheduled investment.
If under this option you fail to make regularly scheduled investments for
six consecutive months, after being credited for any advance made under the
option, you forfeit your right to make such additional investments. All
Extended Investment Options will terminate on the earlier of 25 years after
the date of establishment of the original Plan or the date the 300th monthly
investment is made under your Plan.
INDIVIDUAL RETIREMENT ACCOUNTS (IRAS)
Under current tax laws you may be eligible to establish an IRA. An IRA
Agreement is available through Franklin Templeton Trust Company (FTTC), an
affiliate of TFTC. The Agreement provides for investments in the Plans. It
also provides that FTTC shall furnish custodial services to the participant
for service fees chargeable to the participant. FTTC presently deducts an
annual service fee of $10.00 for maintenance of the account, unless it is paid
separately. FTTC is qualified under IRS regulations to act as an IRA
custodian.
An individual may initiate an account by executing the IRA Application and
by making the initial Plan investment. Under current law, a participant's
maximum annual contribution is limited to the lesser of 100% of compensation
or $2,000. If a second account is established with a non-working spouse the
total contribution for both accounts would be a maximum of $2,250.
Contributions to an IRA by an individual who participates, or whose spouse
participates, in a tax-qualified or government-approved retirement plan may or
may not be deductible depending on their income. Contributions in excess of
these limits, premature distributions, and/or insufficient withdrawals after
age 70 1/2 may result in substantial adverse tax consequences. "Rollover
contributions," as defined in IRS regulations, are also allowed.
10
<PAGE>
In addition to the regular monthly investment schedules, you may once each
year invest an odd amount not equal to the monthly plan amount in order to
complete exact contributions totals authorized by the IRS for the IRA being
used. Such odd amounts should be specifically identified to the Custodian,
when forwarded, in order to prevent rejection. Odd amounts, not in exact
multiples of the monthly investment unit, will be accepted for all rollovers
and transfers into IRAs.
All contributions are invested on the day of receipt by the Custodian. If
revocation of the account is requested in writing within seven days after
payment of an initial contribution, the individual will receive the greater of
the net asset value of his account or the amount contributed (including the
Sales and Creation Charge).
SALES AND CREATION CHARGES
The Sponsor receives a Sales and Creation Charge to compensate it for
creating your Plan and for selling expenses and commissions to dealers, which
is deducted from each investment. For example, on a $100 a month Plan, $50 is
deducted from each of the 12 monthly investment units made during the first
year. After the 12th payment, the charge drops to $6.07 on each subsequent
monthly unit. Deductions decrease proportionately on certain larger plans. See
"Allocation of Investments and Deductions" on page 3.
PURCHASING TWO OR MORE PLANS
The face amounts of two or more Plans purchased at one time by "any person"
may be combined to take advantage of the lower Sales and Creation Charges
available on large purchases.
The term "any person" includes an individual, his or her spouse, their
children under the age of 21 and their grandchildren under age 21 who are
beneficiaries of Uniform Gifts to Minors Act or Uniform Transfers to Minors
Act accounts in which the Planholder serves as custodian, or a trustee or
other fiduciary of a single trust estate or single fiduciary account
(including a pension, profit-sharing or other employee benefit trust created
pursuant to a Plan qualified under Section 401 of the Code). To qualify for
these savings, all of the applications for the Plans involved must be
submitted simultaneously with a covering letter requesting that the face
amount of such Plans be combined for the purpose of determining the applicable
Sales and Creation Charge as shown on page 4.
In the event investments are discontinued on one or more of the Plans which
have been combined under the foregoing provisions, the remaining Sales and
Creation Charge for the Plans that are continued will be changed to reflect
the charges applicable to such Plans.
YOU MAY QUALIFY FOR REDUCED SALES CHARGES
When purchasing any new Plan(s) or increasing the face amount of any
existing Plan(s), "any person" as defined above may qualify for a reduced
sales charge on the new purchase by combining the face amount of any existing
Plan(s) on which investments are current with the face amount of the new
purchase. A new purchase includes the face amount of new Plans and the face
amount of Plans on which an increase in Plan size is requested. For rights of
accumulation, a Plan is considered to be current if: (1) it has been completed
and not redeemed; (2) it has not been completed but has at least as many
investments recorded as there are months since the establishment date or since
a plan size increase date; or (3) it is a tax qualified plan or an IRA.
Further spousal IRA Plans at $93.75 per month and individual IRA Plans at
$166.66 per month may become eligible for lower sales charges if such Plans
are included as part of the basis for reduced sales charges on new Plans or
Plan size increases on existing Plans. In addition, the Sponsor must be
notified by the dealer or the purchaser at the time of the placing of the
order that the purchaser qualifies for the reduced Sales and Creation Charge.
CHANGING THE FACE AMOUNT OF YOUR PLAN
The face amount of your Plan may be changed under the following
circumstances:
(1) The face amount of a Plan may be increased at any time, provided the new
Plan size is a denomination offered.
(2) The face amount of a new Plan may be decreased by 50% within six months
of the commencement of your original Plan or within six months following a
face change increase on an existing Plan. If a decrease is to occur on an
existing Plan, the decrease cannot retreat lower than the original Plan from
which the increase occurred.
11
<PAGE>
Both increases and decreases can be made by a written notice to the Sponsor,
accompanied by a new completed Plan application. The Sales and Creation
Charges already paid on the existing Plan will be recomputed to reflect a new
Plan denomination.
The Sales and Creation Charges already paid on the existing Plan will be
credited to the Sales and Creation Charge applicable to the new denomination.
Excess Sales and Creation Charges will be invested at net asset value on the
day the change occurs while amounts still due will be deducted as an expense
to the new Plan account.
THE CUSTODIAN--TEMPLETON FUNDS TRUST COMPANY
THE PLAN
The organization, management and investment policies of Templeton Capital
Accumulator Fund, Inc. are fully described in the attached Fund prospectus and
a Statement of Additional Information which is available on request from the
Sponsor. If practicable, shares of the Plan are credited to accounts at net
asset value after applicable deductions are made on the date the Custodian
receives Plan investments.
Dividends and distributions received on Fund shares will be reinvested by
the Custodian in additional Plan shares at the then current net asset value,
unless you elect to receive cash.
THE PLAN CUSTODIAN--THE THIRD PARTY WORKING TO RELIEVE YOU OF THE DAY-TO-DAY
DETAILS OF INVESTING
Templeton Funds Trust Company, organized as a trust company under the laws
of the State of Florida, is the Custodian for the Plans under a Custodian
Agreement with the Sponsor dated June 1, 1993 and maintains custody of the
assets of the Plans. The Plan Custodian Agreement is governed by Florida law,
except in the event, and to the extent, that such law is determined to
conflict with the Investment Company Act of 1940.
Investments under your Plan should be payable to and sent to the Custodian.
After making authorized deductions, the Custodian applies the remaining
balance to the purchase of Plan shares. The Custodian holds these shares in
its custody, receiving dividends and distributions which are automatically
reinvested in additional Plan shares at no charge, unless you elect to receive
cash.
The Custodian has assumed only those obligations specifically imposed on it
under its Custodian Agreement with the Sponsor. These obligations do not
include the duties of investment ordinarily imposed upon a trustee. The
Custodian has no responsibility for the choice of the underlying investment,
for the investment policies and practices of Templeton Capital Accumulator
Fund, Inc., or for the acts or omissions of the Sponsor or the Investment
Manager.
The Custodian Agreement cannot be amended to adversely affect the rights and
privileges of the Planholders without their written consent. Neither may the
Custodian resign unless a successor has been designated and has accepted the
Custodianship. Such successor must be a bank or trust company having capital,
surplus and undivided profits totalling at least $2,000,000. The Custodian may
be changed without notice to, or approval of, Planholders. The Custodian may
terminate its obligation to accept new Plans for custodianship if the Sponsor
fails to perform certain activities it is required to perform under the
Custodian Agreement or if the Custodian terminates the Agreement upon 90 days'
notice to the Sponsor. The Custodian Agreement provides that the Sponsor shall
indemnify and hold the Custodian harmless from all liability which may arise
from the failure of the Sponsor to comply with any law, rule, regulation, or
order of the United States, any state, or other jurisdiction relating to the
sale, registration, or qualification of securities.
THE SPONSOR--FRANKLIN TEMPLETON DISTRIBUTORS, INC.
The Sponsor, a New York corporation organized on November 19, 1947, is a
wholly owned subsidiary of Franklin Resources, Inc. It is a broker-dealer
registered under the Securities Exchange Act of 1934 and a member of the NASD.
The Sponsor is the principal underwriter of the investment companies in the
Franklin Group of Funds (R) and the Templeton Family of Funds. The following
sets forth the directors and executive officers of the Sponsor:
12
<PAGE>
Charles B. Johnson, Chairman of the Board, is Director, President and Chief
Executive Officer of Franklin Resources, Inc. ("Franklin Resources") and
Chairman of the Board of Franklin Advisers, Inc. ("Franklin Advisers").
Gregory E. Johnson, President, is Vice President of Franklin Advisers.
Rupert H. Johnson, Jr., Director and Executive Vice President, is Director
and Executive Vice President of Franklin Resources, Director and President of
Franklin Advisers, and Chairman of the Board of Franklin Management, Inc.
("Franklin Management").
Harmon E. Burns, Director and Executive Vice President, is Director,
Executive Vice President and Secretary of Franklin Resources and Executive
Vice President of Franklin Advisers.
Kenneth V. Domingues, Senior Vice President, is Senior Vice President of
Franklin Resources and Franklin Advisers.
Kenneth A. Lewis, Treasurer.
William J. Lippman, Senior Vice President, is Senior Vice President of
Franklin Resources, Franklin Advisers, and Franklin Management.
Loretta Fry, Vice President, is Vice President of Franklin Resources and
Franklin Advisers.
Deborah R. Gatzek, Senior Vice President and Assistant Secretary, is Senior
Vice President and Assistant Secretary of Franklin Resources and Vice
President and Assistant Secretary of Franklin Advisers.
Charles E. Johnson, Senior Vice President, is Senior Vice President of
Franklin Resources and Vice President of Franklin Advisers.
Leslie M. Kratter, Secretary, is Vice President and Assistant Secretary of
Franklin Resources and Secretary of Franklin Advisers and Franklin Management.
Richard C. Stoker, Senior Vice President, is Vice President of Franklin
Management.
Philip J. Kearns, Vice President, is Vice President of Franklin Agency, Inc.
Jack Lemein, Vice President, is Senior Vice President of Franklin Advisers
and Vice President of Franklin Management.
Thomas M. Mistele, Vice President, is Senior Vice President of Templeton
Global Investors, Inc. and Secretary of the Templeton Funds.
Harry G. Mumford, Jr., Vice President, is Executive Vice President of
Franklin Institutional Services Corporation.
Vivian J. Palmieri, Vice President, is Vice President of Franklin Advisers.
Other Senior Vice Presidents of the Sponsor include Edward V. McVey.
Other Vice Presidents of the Sponsor include, James K. Blinn, Richard O.
Conboy, Jimmy A. Escobedo, Robert N. Geppner, Mike Hackett, Peter Jones, Ken
Leder, John R. McGee, Kent P. Strazza.
All officers and employees of the Sponsor are covered by a blanket bond in
the amount of $130,000,000.
13
<PAGE>
TAXES
For Federal income tax purposes, Planholders are treated as directly owning
the Fund's shares. Designated capital gain distributions, which are
automatically reinvested in additional shares, are treated as long-term
capital gains. The tax cost of the shares acquired is the amount paid for
those shares, including the Sales and Creation Charge.
As more fully described under "Federal Tax Information" in the prospectus of
the Fund, dividends and distributions are taxable to you individually. Gains
realized on cash withdrawals also generally will be subject to tax; the
ability to deduct losses from such withdrawals may be limited. An appropriate
notice regarding taxes will be sent to you each year.
Any taxes payable with respect to any of the profits realized on sales or
transfers by the Custodian or the Sponsor of Plan shares or other property
credited to your account in accordance with the provisions of your Plan and
any taxes levied or assessed with respect to Plan shares or the income
therefrom shall be borne by you individually and not by the Custodian or the
Sponsor.
SUBSTITUTION OF THE UNDERLYING INVESTMENT
The Sponsor may substitute the shares of one other investment medium as the
underlying investment if it deems such action to be in the best interests of
Planholders. Such substituted shares shall be generally comparable in
character and quality to the present Fund shares, and shall be registered with
the Securities and Exchange Commission under the Securities Act of 1933.
Before any substitution can be effected, the Sponsor must:
(1) obtain an order from the Securities and Exchange Commission approving
such substitution under the provisions of Section 26(b) of the
Investment Company Act of 1940, as amended;
(2) give written notice of the proposed substitution to the Custodian;
(3) give written notice of the proposed substitution to each Planholder,
giving a reasonable description of the new Fund shares, with the advice
that, unless the Plan is surrendered within 30 days of the date of
mailing such notice, the Planholder will be considered to have
consented to the substitution and to have agreed to bear his pro rata
share of expenses and taxes in connection with it; and
(4) provide the Custodian with a signed certificate stating that such
notice has been given to Planholders.
If your Plan account is not surrendered within 30 days from the date of such
notice, the Sponsor shall purchase the new shares for your account with the
proceeds of any Plan payments and any dividends or distributions which may be
reinvested for your account. If the new shares are also to be substituted for
the shares already held, the Sponsor must arrange to have the Custodian
furnished, without payment of a sales charge or fees of any kind, with new
shares having an aggregate value equal to the value of the shares for which
they are to be exchanged. A substitution may be a taxable event for
Planholders.
If the Fund shares are not available for purchase for a period of 120 days
or longer, and the Sponsor fails to substitute other shares, the Custodian
may, but is not required to, select another underlying investment. If the
Custodian selects a substitute investment, it shall first obtain an order from
the Securities and Exchange Commission approving such substitution as
specified above and then shall notify the Planholder, and if, within 30 days
after mailing such notice, the Planholder gives his written approval of the
substitution and agrees to bear his pro rata share of actual expenses,
including tax liability sustained by the Custodian, the Custodian may
thereafter purchase such substituted shares. The Planholder's failure to give
such written approval within the 30-day period shall give the Sponsor the
authority to terminate the Plan.
If the Fund shares are not available for purchase for a period of 120 days
or longer, and neither the Sponsor nor the Custodian substitutes other shares,
the Custodian shall have authority, without further action on its part, to
terminate the Plan.
TERMINATION OF YOUR PLAN
Although your Plan may call for regular investments over a 15-year period,
neither the Sponsor nor the Custodian can elect to terminate your Plan until
300 investments have been made unless it has been in default for more than six
months or unless shares of the Plan are not obtainable and a substitution is
not made.
14
<PAGE>
The period of default will not start until you have been given full credit
for a period equal to the amount of any advance investments you have made.
Under current policies, for all Plans established subsequent to January 1,
1995, only one investment is required during each six month period to prevent
your Plan from being terminated. For Plans in existence prior to January 1,
1995, only one investment is required during each 12-month period to prevent
your Plan from being terminated.
After 300 investments, or if other events justify termination, the Sponsor
or the Custodian has the right to terminate your Plan 60 days after mailing a
written notice to you.
On termination, the Custodian (as your agent) may surrender for liquidation
all of the Plan shares credited to your account, or sufficient Plan shares to
pay all authorized deductions and leave no fractional shares. The shares
and/or cash, after paying all authorized deductions, will be held by the
Custodian for delivery to you against the surrender of your Plan.
No interest will be paid by the Custodian on any such cash balances. If the
Plan is not surrendered within 60 days after the notice of termination, the
Custodian, at its discretion, may at any time thereafter fully discharge its
obligations by mailing the shares or its check, drawn in accordance with the
terms of your account, to the address noted in the account. You will then have
no further rights under the Plan except that if the check or shares are
returned to the Custodian undelivered, the Custodian will continue to hold
these assets for the benefit of your account, subject only to escheat laws.
GENERAL
The Plan is considered to be a unit investment trust under the Investment
Company Act of 1940, and is so registered with the Securities and Exchange
Commission. Such registration does not imply supervision of management or
investment practices or policies by the Commission.
Commissions ranging from 75% to 95% of the total Sales and Creation Charges
will be paid to authorized investment brokers and mutual fund dealers who are
members of the NASD, and who have executed a dealer's agreement with the
Sponsor. The Sponsor, acting as Principal Underwriter, may from time to time
pay a bonus or other incentive to dealers which employ registered
representatives who sell a specified minimum dollar amount of the Plans and/or
of certain other mutual funds managed by the Investment Manager and its
affiliates during a specified period of time. Such bonus or other incentives
may take the form of payment for travel expenses, including lodging, incurred
in connection with trips taken by qualifying registered representatives and
members of their families to places within or without the United States. In no
event will the value of such bonus or incentive paid by the Sponsor to the
dealer exceed the difference between the Sales and Creation Charges and the
amount reallowed to dealers in respect of such amounts sold by the qualifying
registered representative of such dealer. A dealer receiving such bonus or
incentive may be deemed to be an "underwriter" under the Securities Act of
1933. These dealers and investment brokers are independent contractors.
Nothing herein or in other literature and confirmations issued by the Sponsor
or the Custodian, including the words "representative" or "commission," shall
constitute any broker-dealer or investment broker a partner, employee or agent
of the Sponsor or the Custodian. Neither the Sponsor nor the Custodian shall
be liable for any acts or obligations of any such dealer or investment broker.
Plans are offered in all states where it is lawful to do so.
ILLUSTRATION OF A HYPOTHETICAL $93.75 MONTHLY TEMPLETON CAPITAL ACCUMULATION
PLAN
WITH INCOME DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS REINVESTED IN ADDITIONAL
SHARES
The table below covers the period from March 29, 1991 to August 31, 1994
<TABLE>
<CAPTION>
AMOUNT OF PAYMENT AMOUNT INVESTED
FISCAL ------------------------ ------------------------
PERIOD DURING FISCAL SALES DURING FISCAL SHARES SHARES PURCHASED TOTAL SHARES TOTAL VALUE
ENDED PERIOD CUMULATIVE CHARGES(A) PERIOD CUMULATIVE PURCHASED THROUGH REINVESTMENT PURCHASED OF SHARES
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8/31/91(b) $ 562.50 $ 562.50 $281.22 $ 281.28 $ 281.28 27.662 -- 27,662 $ 288.24
8/31/92 1,125.00 1,687.50 315.36 809.64 1,090.92 74.322 0.618 102,602 1,123.49
8/31/93 1,125.00 2,812.50 68.28 1,056.72 2,147.64 89.979 3.123 195,704 2,802.89
8/31/94 1,125.00 3,937.50 68.28 1,056.72 3,204.36 70.372 4.523 270,599 4,386.41
8/31/95
</TABLE>
(a) Under the terms of this Plan, out of an investment of $93.75 made during
the first year of the Plan, $46.87 is deducted as a sales charge.
Thereafter, the sales charge on such amount is reduced to $5.69.
(b) Period from March 29, 1991 (commencement of operations) through August 31,
1991.
15
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors of
Franklin Templeton Distributors, Inc., Sponsor
and the Planholders of Templeton Capital
Accumulation Plans
We have audited the accompanying statement of assets and liabilities of
Templeton Capital Accumulation Plans as of August 31, 1995 and the related
statements of operations and changes in net assets for each of the three years
in the period then ended. These financial statements are the responsibility of
the management of the Plan'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 from the custodian of shares of Templeton
Capital Accumulator Fund, Inc. held for planholders as of August 31, 1995. An
audit also includes assessing the accounting principles used and significant
estimates made by management, 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 Capital
Accumulation Plans as of August 31, 1995, and the results of its operations
and the changes in its net assets for the periods indicated, in conformity
with generally accepted accounting principles.
/s/ McGladrey & Pullen, LLP
New York, New York
September 29, 1995
16
<PAGE>
TEMPLETON CAPITAL ACCUMULATION PLANS
FOR THE ACCUMULATION OF SHARES OF
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1995
<TABLE>
<S> <C>
ASSETS:
Templeton Capital Accumulator Fund, Inc. shares, at value (average
cost, $30,012,846).............................................. $64,558,379
LIABILITIES: --
-----------
NET ASSETS:
Net assets (equivalent to $15.94 per share based on 4,049,832 Plan
shares held for outstanding Plans).............................. $64,558,379
===========
</TABLE>
STATEMENTS OF OPERATIONS
YEARS ENDED AUGUST 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends received on shares of Templeton
Capital Accumulator Fund, Inc.............. $2,015,029 $ 472,194 $ 249,234
Expenses.................................... -- -- --
---------- ---------- ----------
Net investment income..................... $2,015,029 472,194 249,234
---------- ---------- ----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on complete and partial
terminations, including Fund Shares
withdrawn at market value.................. $ 205,940 $ 343,272 $ 48,885
Unrealized appreciation during the period... 217,321 4,284,121 3,159,959
---------- ---------- ----------
Net gain on investments................... $ 423,261 $4,627,393 $3,208,844
---------- ---------- ----------
Net increase in net assets from operations.. $2,438,290 $5,099,587 $3,458,078
========== ========== ==========
</TABLE>
See Notes to Financial Statements.
17
<PAGE>
TEMPLETON CAPITAL ACCUMULATION PLANS
FOR THE ACCUMULATION OF SHARES OF
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED AUGUST 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
Operations:
Net investment income................. $ 2,015,029 $ 472,194 $ 249,234
Net realized gain on investments...... 205,940 343,272 48,885
Unrealized appreciation for the peri-
od................................... 217,321 4,284,121 3,159,959
----------- ----------- -----------
Net increase in net assets from op-
erations........................... 2,438,290 5,099,587 3,458,078
Distributions to planholders.......... (2,015,029) (472,194) (249,234)
Transactions in Fund shares (Note 2).. 26,322,220 15,029,076 6,424,111
----------- ----------- -----------
Net increase in net assets.......... 26,745,481 19,656,469 9,632,955
NET ASSETS:
Beginning of period................... 37,812,898 18,156,429 8,523,474
----------- ----------- -----------
End of period......................... $64,588,379 $37,812,898 $18,156,429
=========== =========== ===========
</TABLE>
See Notes to Financial Statements.
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF ACCOUNTING POLICIES
Templeton Capital Accumulation Plans (the "Plan") is a unit investment trust
registered under the Investment Company Act of 1940. The Plan invests only in
shares of Templeton Capital Accumulator Fund, Inc. (the "Fund"). The following
is a summary of the significant accounting policies followed in the
preparation of its financial statements.
a. VALUATION OF SECURITIES. The Plan's investments in the Fund are valued
at the net asset value of Fund shares held.
b. INCOME TAXES. No provision is made for Federal income taxes. The
Internal Revenue Code provides that the Plan is not treated as a
separate taxable entity; rather the Planholders are treated as directly
owning the Fund's shares accumulated in their accounts.
c. OTHER. Share transactions are recorded on the trade date. Dividend
income and capital gain distributions are recorded on the ex-dividend
date. The cost of the Plan's investment in Fund shares is computed using
the average cost method and gain or loss on redemption of Fund shares is
computed using this method.
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
NOTE 2. TRANSACTIONS IN FUND SHARES
As of August 31, 1995, the Plan held 4,049,832 shares of the Fund.
Transactions in Fund shares for the years ended August 31, 1995, 1994 and 1993
were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---------------------- ---------------------- --------------------
AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
----------- --------- ----------- --------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Planholder payments..... $33,284,142 $19,886,896 $9,966,867
Less-sales charges...... 6,526,442 3,832,783 2,184,173
----------- --------- ----------- ----------
Balance invested in Fund
shares................. 26,757,700 1,748,783 16,054,113 1,072,509 7,782,694 666,832
Distributions reinvested
in Fund shares......... 2,015,029 133,499 472,194 33,224 249,234 23,430
Redemption and
withdrawals in Fund
shares................. (2,450,509) (165,571) (1,497,231) (94,041) (1,607,817) (147,232)
----------- --------- ----------- --------- ---------- --------
$26,322,220 1,716,711 $15,029,076 1,011,692 $6,424,111 543,030
=========== ========= =========== ========= ========== ========
</TABLE>
NOTE 3. SPONSOR AND CUSTODIAN
Franklin Templeton Distributors, Inc., as Sponsor of the Plan (and, prior to
October 30, 1992, Templeton Funds Distributor Inc., the previous Sponsor)
received net sales and creation charges, after commissions paid to authorized
brokers and dealers, of $575,554, $336,780, and $185,919 for the years ended
August 31, 1995, 1994 and 1993, respectively. Templeton Funds Trust Company
("TFTC") serves as Custodian. No other compensation is paid by the Plan to
either the Sponsor or the Custodian except that TFTC receives a $10 annual
service fee from each individual Retirement Account established by
planholders.
NOTE 4. SOURCE OF NET ASSETS
The Plan's net assets as of August 31, 1995 were composed of the following
amounts:
<TABLE>
<S> <C>
Amount paid in by planholders, net of sales and creation charges... $58,960,635
Distributions reinvested........................................... 2,809,514
Payment of redemption proceeds to planholders...................... (5,840,546)
Accumulated gain on sale of Fund shares............................ 611,403
Unrealized appreciation (depreciation) of investments.............. 8,017,373
-----------
Net assets applicable to planholders............................... $64,558,379
===========
</TABLE>
20
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Franklin/Templeton Distributors, Inc.:
We have audited the accompanying statement of financial condition of
Franklin/Templeton Distributors, Inc. (a wholly-owned subsidiary of Franklin
Resources, Inc.) as of September 30, 1995, and the related statements of
income, stockholder's equity, and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit 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. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides 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 Franklin/Templeton
Distributors, Inc. as of September 30, 1995, and the results of its operations
and its cash flows for the year then ended, in conformity with generally
accepted accounting principles.
Coopers & Lybrand L.L.P.
San Francisco, California
October 27, 1995
21
<PAGE>
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
STATEMENT OF FINANCIAL CONDITION
SEPTEMBER 30, 1995
----------------
<TABLE>
<S> <C>
ASSETS
Cash and cash equivalents......................................... $30,589,578
Receivables:
Due from Franklin Templeton Group of Funds...................... 20,382,973
Parent.......................................................... 11,460,749
Prepaid expenses and other........................................ 7,995,919
Premises and equipment, at cost (net of accumulated depreciation
of $2,375,721)................................................... 2,137,216
-----------
Total assets.................................................. $72,566,435
===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Dealer commissions payable...................................... $17,518,961
Trade payables and accrued expenses............................. 2,532,059
Deferred tax liabilities........................................ 1,060,389
-----------
Total liabilities............................................. 21,111,409
-----------
Commitments (Note 3)
Stockholder's equity:
Common stock, $1.00 par value, 20,000 shares authorized; 2,355
shares issued and outstanding.................................. 2,355
Capital in excess of par value.................................. 80,564,072
Accumulated deficit............................................. (29,111,401)
-----------
Total stockholder's equity.................................... 51,455,026
-----------
$72,566,435
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
22
<PAGE>
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
STATEMENT OF INCOME
FOR THE YEAR ENDED SEPTEMBER 30, 1995
----------------
<TABLE>
<S> <C>
OPERATING REVENUES:
Underwriting commissions, net of $365,347,758 paid to dealers... $ 47,725,149
Investment income............................................... 2,184,550
Other........................................................... 224,915
------------
Total operating revenues...................................... 50,134,614
------------
OPERATING EXPENSES:
Selling......................................................... 50,262,458
General and administrative...................................... 71,522,921
Other........................................................... 269,788
------------
Total operating expenses...................................... 122,055,167
------------
Operating loss................................................ (71,920,553)
------------
OTHER INCOME (EXPENSES):
Interest expense................................................ (39,195)
------------
Other expenses net............................................ (39,195)
------------
Loss before taxes............................................... (71,959,748)
Income tax benefit.............................................. 25,153,544
------------
Net loss.......................................................... $(46,806,204)
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
STATEMENT OF STOCKHOLDER'S EQUITY
FOR THE YEAR ENDED SEPTEMBER 30, 1995
----------------
<TABLE>
<CAPTION>
COMMON STOCK CAPITAL IN TOTAL
------------- EXCESS OF RETAINED STOCKHOLDER'S
SHARES AMOUNT PAR VALUE EARNINGS EQUITY
------ ------ ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Balance, October 1, 1994. 2,355 $2,355 $40,564,072 $ 17,695,025 $58,261,452
Parent capital
contribution............ -- -- 40,000,000 -- 40,000,000
Net loss................. -- -- -- (46,806,204) (46,806,204)
Other.................... (222) (222)
----- ------ ----------- ------------ -----------
Balance, September 30,
1995.................... 2,355 $2,355 $80,564,072 $(29,111,401) $51,455,026
===== ====== =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<S> <C>
NET LOSS........................................................ $(46,806,204)
Adjustments to reconcile net loss to net cash used in
operating activities:
Increase in receivables..................................... (6,257,543)
Increase in prepaid expenses and other...................... (4,725,285)
Increase in dealer commissions payable...................... 8,428,461
Decrease in trade payables and accrued expenses............. (938,888)
Depreciation................................................ 337,673
------------
NET CASH USED IN OPERATING ACTIVITIES........................... (49,961,888)
------------
Purchases of premises and equipment........................... (1,331,473)
------------
NET CASH USED IN INVESTING ACTIVITIES........................... (1,331,473)
------------
Decrease in receivables, parent................................. 38,639,590
------------
NET CASH USED IN FINANCING ACTIVITIES........................... 38,639,590
------------
Decrease in cash and cash equivalents........................... (12,653,769)
Cash and cash equivalents, beginning of year.................... 43,243,347
------------
Cash and cash equivalents, end of year.......................... $ 30,589,678
============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest...................................................... $ 39,195
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING AC-
TIVITIES:
The Company received a $40,000,000 capital contribution from its
parent, through a reduction in the intercompany payable to its
parent.
</TABLE>
The accompanying notes are an integral part of these financial statements.
25
<PAGE>
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
NOTES TO FINANCIAL STATEMENTS
----------------
1. NATURE OF BUSINESS:
Franklin/Templeton Distributors, Inc. (FTDI) is a wholly-owned subsidiary of
Franklin Resources, Inc. (Parent). FTDI serves as the principal underwriter
for the Franklin Templeton Group of Funds.
2. SIGNIFICANT ACCOUNTING POLICIES:
Revenue Recognition:
Commissions on mutual fund dividend reinvestments, dividend income and 12b-1
fees are recognized as earned. Commissions on mutual fund share sales are
recognized when the share sales are settled.
Cash and Cash Equivalents:
Cash and cash equivalents consist of amounts held in bank accounts and in a
money market fund for which an affiliated company acts as investment advisor.
Due to the relatively short-term nature of these instruments, the carrying
value approximates fair value.
Allocation of Intercompany Costs:
Certain management, accounting and other administrative costs amounting to
$12,614,868 were allocated to FTDI by its Parent.
Income Tax Benefit:
FTDI is included in the consolidated federal and combined California state
income tax returns of the Parent. The Parent allocates federal and California
state income tax benefits to FTDI using the separate return method.
Deferred income taxes reflect the impact of temporary differences between
amounts of assets and liabilities for financial reporting purposes and such
amounts as measured by tax laws. Deferred tax assets and liabilities are
adjusted to reflect changes in tax rates or other provisions of the tax law in
the period in which a new tax law is enacted.
Premises and Equipment:
Premises and equipment are recorded at cost and are depreciated on the
straight-line basis over their estimated useful lives. Expenditures for
repairs and maintenance are charged to expense when incurred.
3. DEFERRED TAXES:
The major components of the deferral tax liability as of September 30, 1995
are as follows:
<TABLE>
<S> <C>
Prepaid Expenses ............................................ $ 958,218
Depreciation on fixed assets ................................ 102,171
----------
Deferred tax liability .................................... $1,060,389
==========
</TABLE>
4. NET CAPITAL AND RESERVE REQUIREMENTS:
Regulatory provisions require FTDI to maintain minimum net capital. Net
capital and the related net capital ratio may fluctuate on a daily basis. On
September 30, 1995, FTDI was in compliance with Rule 15c3-1(a)(2) of the
Securities Exchange Act of 1934. The net capital requirement on that date was
$1,407,427, and FTDI had net capital of $24,081,617, and an
26
<PAGE>
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
aggregate indebtedness to net capital ratio of .68 to 1. FTDI is exempt from
Rule 15c3-3 of the Securities Exchange Act relating to the determination of
reserve requirements.
5. COMMITMENTS:
The Parent leases computer, automobile and office equipment and office space
under various agreements expiring at various dates through 1997 which are
accounted for as operating leases. FTDI is the direct beneficiary of these
leases and consequently is responsible for payment of the various lease
commitments. Total lease expense for the year amounted to $803,116. At
September 30, 1995, remaining operating lease commitments are as follows:
<TABLE>
<S> <C>
1996............................................................ $152,823
1997............................................................ 145,418
1998............................................................ 39,523
--------
$337,764
========
</TABLE>
27
<PAGE>
TEMPLETON PROSPECTUS -- JANUARY 1, 1996
CAPITAL ACCUMULATOR FUND, INC.
- -------------------------------------------------------------------------------
INVESTMENT Templeton Capital Accumulator Fund, Inc. (the "Fund") seeks
OBJECTIVE AND long-term capital growth through a flexible policy of
POLICIES investing in stocks and debt obligations of companies and
governments of any nation.
- -------------------------------------------------------------------------------
PURCHASE OF Shares of the Fund, which will be sold at net asset value, may
SHARES be initially acquired by investors only by means of an
investment in Templeton Capital Accumulation Plans (the
"Plans" or "Plan"). The charges for the first year of a Plan
can amount to 50% of the amounts paid during that year under
the Plan. Details of the Plans, including the creation and
sales charges, may be found in the attached prospectus for the
Plans, which should be read and retained by the investor for
future reference.
- -------------------------------------------------------------------------------
PROSPECTUS This Prospectus sets forth concisely information about the
INFORMATION Fund that a prospective investor should know about the Fund.
Investors are advised to read and retain this Prospectus for
future reference. A Statement of Additional Information
("SAI") about the Fund, dated January 1, 1996, has been filed
with the Securities and Exchange Commission and is
incorporated in its entirety by reference in and made a part
of this Prospectus. This SAI is available without charge upon
request to: Franklin Templeton Distributors, Inc., P.O. Box
33030, 700 Central Avenue, St. Petersburg, Florida 33733-8030
or by calling the Fund Information Department.
- -------------------------------------------------------------------------------
FUND INFORMATION DEPARTMENT -- 1-800/DIAL BEN
- -------------------------------------------------------------------------------
TEMPLETON "STAR" SERVICE (24 hours, seven days a week access to current
prices, shareholder account balances/values, last transaction and duplicate
account statements) -- 1-800-654-0123
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
EXPENSE TABLE...................... P-2
FINANCIAL HIGHLIGHTS .............. P-3
GENERAL DESCRIPTION................ P-4
Investment Objective and Policies.. P-4
INVESTMENT TECHNIQUES.............. P-5
Loans of Portfolio Securities...... P-5
Debt Securities.................... P-5
Options on Indices................. P-5
Forward Foreign Currency Contracts
and Options on Foreign Currencies. P-5
Futures Contracts.................. P-5
Repurchase Agreements.............. P-6
Depositary Receipts................ P-6
RISK FACTORS....................... P-6
HOW TO BUY SHARES OF THE FUND...... P-7
HOW TO SELL SHARES OF THE FUND..... P-8
Templeton STAR Service............. P-10
EXCHANGE PRIVILEGE................. P-10
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
MANAGEMENT OF THE FUND............. P-10
Investment Manager................. P-10
Business Manager................... P-11
Principal Underwriter.............. P-11
Transfer Agent..................... P-11
Plan Custodian..................... P-11
Custodian.......................... P-11
Expenses........................... P-11
Brokerage Commissions.............. P-12
GENERAL INFORMATION................ P-12
Description of Shares/Share
Certificates...................... P-12
Meetings of Shareholders........... P-12
Dividends and Distributions........ P-12
Federal Tax Information............ P-12
Inquiries.......................... P-12
Performance Information............ P-13
Statements and Reports............. P-13
THE FRANKLIN TEMPLETON GROUP....... P-14
</TABLE>
- -------------------------------------------------------------------------------
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK; FURTHER, SUCH SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY. SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF CAPITAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
P-1
<PAGE>
EXPENSE TABLE
The purpose of this table is to assist an investor in understanding the
various costs and expenses that an investor in the Plans of the Fund will bear
directly or indirectly in connection with an investment in the Fund. The
figures are estimates of the Fund's expenses for the current fiscal year.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases.................................. None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees.......................................................... 0.75%
Other Expenses (audit, legal, business management, transfer agent and
custodian).............................................................. 0.25%
Total Fund Operating Expenses (after expense reimbursement).............. 1.00%
</TABLE>
Investors should be aware that the above table is not intended to reflect in
precise detail the fees and expenses associated with an individual's own
investment in the Plans or the Fund. Rather, the table has been provided only
to assist investors in gaining a more complete understanding of fees, charges
and expenses. The information in this table does not reflect the charge of up
to $15 per transaction if a Shareholder requests that redemption proceeds be
sent by express mail or wired to a commercial bank account. For a more
detailed discussion of these matters, investors should refer to the
appropriate sections of this Prospectus and the accompanying prospectus for
the Plans.
EXAMPLE
As required by SEC regulations, the following example illustrates the
expenses that apply to a $1,000 investment over various time periods assuming
(1) a 6% annual rate of return and (2) redemption at the end of each time
period.
<TABLE>
<CAPTION>
1 YR. 3 YRS. 5 YRS. 10 YRS.
----- ------ ------ -------
<S> <C> <C> <C> <C>
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: $10 $32 $55 $122
</TABLE>
This example is based on the estimated annual operating expenses, including
fees set by contract, shown above and should not be considered a
representation of past or future expenses, which may be more or less than
those shown. The operating expenses are borne by the Fund and only indirectly
by Shareholders as a result of their investment in the Plans. In addition,
federal securities regulations require the example to assume an annual rate of
return of 5%, but the Fund's actual return may be more or less than 5%.
The Fund's Investment Manager, Templeton Investment Counsel, Inc., has
voluntarily agreed to reduce its investment management fee to the extent
necessary to limit the total expenses (excluding interest, taxes, brokerage
commissions and extraordinary expenses) of the Fund to annual rate of 1.00% of
the Fund's average daily net assets. If such fee reduction is insufficient to
so limit the Fund's total expenses, the Fund's Business Manager, Templeton
Global Investors, Inc. has voluntarily agreed to reduce its fee and, to the
extent necessary, assume other Fund expenses, so as to so limit the Fund's
total expenses. If this policy were not in effect, the Fund's Total Fund
Operating Expenses would be 1.34%, and you would pay the following expenses on
a $1,000 investment, assuming 5% annual return and redemption at the end of
each time period: $14 for one year, $42 for three years, $73 for five years
and $161 for ten years. As long as this temporary expense limitation
continues, it will lower the Fund's expenses and increase its return. The
expense limitation may be terminated or revised at any time, at which time the
Fund's expenses will increase and its return will be reduced.
It is important to note that the foregoing table reflects only the expenses
of Templeton Capital Accumulator Fund. A sales and creation charge will be
deducted from a Templeton Capital Accumulation Plan to compensate the sponsor
of the Plans for creating your Plan and for selling expenses and commissions
to dealers. This charge is deducted from each investment and will vary
according to the monthly investment payment units of each Plan. For example,
on a $100 a month Plan, $50 is deducted from each of the 12 monthly investment
units made during the first year. After the first year, the charge drops to
$6.07 on each subsequent monthly unit. For further details concerning creation
and sales charges that will be deducted from a Plan, see the accompanying
prospectus for Templeton Capital Accumulation Plans.
P-2
<PAGE>
FINANCIAL HIGHLIGHTS
The following table of selected financial information has been audited by
McGladrey & Pullen, LLP independent certified public accountants, for the
periods indicated in their report which is incorporated by reference and which
appears in the Fund's 1995 Annual Report to Shareholders. This statement should
be read in conjunction with the other financial statements and notes thereto
included in the Fund's 1995 Annual Report to Shareholders, which contains
further information about the Fund's performance, and which is available to
shareholders upon request and without charge.
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
PER SHARE OPERATING PERFORMANCE -----------------------------------------
(For a share outstanding
throughout the period) 1995 1994 1993 1992 1991+
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period.......................... $ 16.21 $ 13.74 $ 10.95 $10.42 $10.00
- -------------------------------------------------------------------------------
Income from investment operations
Net investment income............ .28 0.19 0.20 0.17 0.15
Net realized and unrealized
gain............................ .23 2.60 2.88 0.55 0.27
------- ------- ------- ------ ------
Total from investment operations. .51 2.79 3.08 0.72 0.42
------- ------- ------- ------ ------
Less distributions
Dividends from net investment
income.......................... (.20) (0.14) (0.20) (0.19) (0.00)
Distributions from net realized
gains........................... (.58) (0.18) (0.09) 0.00 (0.00)
------- ------- ------- ------ ------
Total distributions.............. (.78) (0.32) (0.29) (0.19) (0.00)
------- ------- ------- ------ ------
Change in net asset value for the
period.......................... (.27) 2.47 2.79 0.53 0.42
- -------------------------------------------------------------------------------
Net asset value, end of period... $ 15.94 $ 16.21 $ 13.74 $10.95 $10.42
- -------------------------------------------------------------------------------
TOTAL RETURN**................... 3.40% 20.64% 29.11% 7.01% 4.20%++
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000).. $65,538 $38,323 $18,365 $8,690 $3,635
Ratio to average net assets of:
Expenses....................... 1.34% 1.58% 1.91% 1.84% 3.99%*
Expenses, net of reimbursement. 1.00% 1.00% 1.00% 1.00% 1.00%*
Net investment income.......... 2.37% 1.58% 1.99% 2.06% 3.80%*
Portfolio turnover rate.......... 12.91% 15.25% 14.97% 16.42% 0.00%
- -------------------------------------------------------------------------------
</TABLE>
+ Period from March 1, 1991 (commencement of operations) to August 31, 1991
++Not annualized
* Annualized
**Does not reflect the Plan's Sales and Creation Charges
P-3
<PAGE>
GENERAL DESCRIPTION
Templeton Capital Accumulator Fund, Inc. (the "Fund") was incorporated under
the laws of Maryland on October 26, 1990. The Fund is registered under the
Investment Company Act of 1940 (the "1940 Act") with the Securities and
Exchange Commission as an open-end, diversified management investment company.
The Fund sells its Shares only through Templeton Capital Accumulation Plans, a
unit investment trust. The Fund, through Templeton Capital Accumulation Plans,
offers investors an alternative to direct investment in stock and debt
obligations, with the benefits of diversification of portfolio investments and
the professional portfolio management of Templeton Investment Counsel, Inc.
(the "Investment Manager").
INVESTMENT OBJECTIVE AND POLICIES. The Fund'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. Any income realized will be incidental. There can be no assurance that
the Fund's investment objective will be achieved.
The Fund principally invests in common stocks, but may also invest in
preferred stock and debt obligations (defined as bonds (including convertible
bonds and bonds selling at a discount), notes, debentures, commercial paper,
time deposits and bankers' acceptances), which may be rated or unrated, and
which may include structured investments, as described in the SAI under
"Investment Objectives and Policies--Structured Investments." The Fund may
invest in stocks and debt obligations of companies and debt obligations of
governments of any nation.
The Directors of the Fund have adopted an operating policy, which may be
changed without Shareholder approval, that no more than 5% of the Fund"s
assets will be invested in debt securities rated less than Baa by Moody's
Investors Service, Inc. ("Moody's") or BBB by Standard & Poor's Corporation
("S&P"). Debt securities which are rated Baa by Moody's are considered medium
grade obligations, i.e., they are neither highly protected nor poorly secured.
Such bonds lack outstanding investment characteristics and have speculative
characteristics as well, according to Moody's. Debt securities rated BBB by
S&P are regarded as having adequate capacity to pay interest and repay
principal. According to S&P, while these debt securities normally exhibit
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest
and repay principal. The Fund will not invest in debt securities rated less
than Caa by Moody's or CCC by S&P.
Whenever, in the judgment of the Investment Manager, market or economic
conditions warrant, the Fund may, for temporary defensive purposes, invest
without limit in money market securities, denominated in U.S. dollars or in
the currency of any foreign country, issued by entities organized in the U.S.
or any foreign country, consisting of: short-term (less than 12 months to
maturity) and medium-term (not greater than five years to maturity)
obligations issued or guaranteed by the U.S. Government or the government of a
foreign country, their agencies or instrumentalities; finance company and
corporate commercial paper, and other short-term corporate obligations, in
each case rated Prime-1 by Moody's or A or better by S&P or, if unrated, of
comparable quality as determined by the Investment Manager; and repurchase
agreements with U.S. banks and broker-dealers with respect to Canadian or U.S.
Government securities. In addition, for temporary defensive purposes, the Fund
may invest up to 25% of its total assets in obligations (including
certificates of deposit, time deposits and bankers' acceptances) of U.S. and
foreign banks; provided that the Fund will limit its investment in time
deposits for which there is a penalty for early withdrawal to 10% of its total
assets. In the event that the Fund adopts a temporary defensive position, the
investment practices described above may not be consistent with the Fund's
stated investment objective.
The Fund may invest no more than 5% of its total assets in securities issued
by any one company or government, exclusive of U.S. Government securities.
Although the Fund may invest up to 25% of its assets in a single industry, it
has no present intention of doing so. In furtherance of its objective of
capital growth, the Fund may invest up to 5% of its assets in warrants
(excluding warrants acquired in units or attached to securities). The Fund may
not invest more than 15% of its total assets in securities of all types of
foreign issuers which are not listed on a recognized United States or foreign
securities exchange, and may not invest more than 10% of its total assets in
securities which are illiquid, including securities which are not publicly
traded or which cannot be readily resold because of legal or contractual
restrictions, or which are not otherwise readily marketable (including
repurchase agreements having more than seven days remaining to maturity), and
over-the-counter options purchased by the Fund. Assets used as cover for over-
the-counter options written by the Fund will be considered illiquid. The
Fund's investment objective and the policies described in this paragraph, as
well as certain investment restrictions described in the SAI, cannot be
changed without Shareholder approval. All other investment policies may be
modified by the Fund's Board of Directors.
P-4
<PAGE>
The Fund may lend its portfolio securities, as well as enter into
transactions in options on securities indices and foreign currencies, forward
foreign currency contracts, and futures contracts and related options. When
deemed appropriate by the Investment Manager, the Fund may invest cash
balances in repurchase agreements and other money market investments to
maintain liquidity in an amount to meet expenses or for day-to-day operating
purposes. These investment techniques are described below and under the
heading "Investment Objective and Policies" in the SAI.
The Fund invests for long-term growth of capital and does not intend to
emphasize short-term trading profits. Accordingly, the Fund expects to have an
annual portfolio turnover rate not exceeding 50%.
INVESTMENT TECHNIQUES
The Fund is authorized to use the various investment techniques described
below. Although these strategies are regularly used by some investment
companies and other institutional investors in various markets, some of these
strategies cannot at the present time be used to a significant extent by the
Fund in some of the markets in which the Fund will invest and may not be
available for extensive use in the future.
LOANS OF PORTFOLIO SECURITIES. The Fund may lend to banks and broker-dealers
portfolio securities with an aggregate market value of up to one-third of its
total assets to generate income. Such loans must be secured by collateral
(consisting of any combination of cash, U.S. Government securities or
irrevocable letters of credit) in an amount at least equal (on a daily marked-
to-market basis) to the current market value of the securities loaned. The
Fund may terminate the loans at any time and obtain the return of the
securities loaned within five business days. The Fund will continue to receive
any interest or dividends paid on the loaned securities and will continue to
retain any voting rights with respect to the securities.
DEBT SECURITIES. The Fund may invest in the debt securities of companies and
governments of any nation. Certain debt securities can provide the potential
for capital appreciation based on various factors such as changes in interest
rates, economic and market conditions, improvement in an issuer's ability to
repay principal and pay interest, and ratings upgrades. Additionally,
convertible bonds offer the potential for capital appreciation through the
conversion feature, which enables the holder of the bond to benefit from
increases in the market price of the securities into which they are
convertible.
OPTIONS ON INDICES. The Fund may write (i.e., sell) covered put and call
options and purchase put and call options on securities indices that are
traded on United States and foreign exchanges or in the over-the-counter
markets. An option on a securities index permits the purchaser of the option,
in return for the premium paid, the right to receive from the seller cash
equal to the difference between the closing price of the index and the
exercise price of the option. The Fund may write a call or put option only if
the option is "covered." This means that so long as the Fund is obligated as
the writer of an option, it will 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 options). The Fund will not purchase put or
call options if the aggregate premium paid for such options would exceed 5% of
its total assets at the time of purchase.
FORWARD FOREIGN CURRENCY CONTRACTS AND OPTIONS ON FOREIGN CURRENCIES. The
Fund may enter into forward foreign currency exchange contracts ("forward
contracts") to attempt to minimize the risk to the Fund from adverse changes
in the relationship between the U.S. dollar and foreign currencies. A forward
contract is an obligation to purchase or sell a specific currency for an
agreed price at a future date which is individually negotiated and privately
traded by currency traders and their customers. The Fund may enter into a
forward contract, for example, when it enters into a contract for the purchase
or sale of a security denominated in a foreign currency in order to "lock in"
the U.S. dollar price of the security. The Fund will not enter into forward
foreign currency contracts if, as a result, the Fund will have more than 20%
of its total assets committed to the consummation of such contracts. The Fund
may also purchase and write put and call options on foreign currencies for the
purpose of protecting against declines in the dollar value of foreign
portfolio securities and against increases in the U.S. dollar cost of foreign
securities to be acquired.
FUTURES CONTRACTS. For hedging purposes only, the Fund may purchase and sell
stock index futures contracts, foreign currency futures contracts and options
on any of the foregoing. An index futures contract is an agreement to take or
make delivery of an amount of cash based on the difference between the value
of the index at the beginning and at the end of the contract period. A futures
contract on a foreign currency is an agreement to buy or sell a specified
amount of a currency for a set price on a future date. When the Fund enters
into a futures contract, if must make an initial deposit, known as "initial
margin," as a partial guarantee of its performance under the contract. As the
value of the index or currency fluctuates, either party to the contract is
required to make additional margin payments, known as "variation margin," to
cover any additional obligation it may have under the contract. In addition,
when the Fund enters into a futures contract, it will segregate assets or
"cover" its position
P-5
<PAGE>
in accordance with the 1940 Act. See "Investment Objective and Policies--
Futures Contracts" in the SAI. The Fund may not commit more than 5% of its
total assets to initial margin deposits on futures contracts and related
options.
REPURCHASE AGREEMENTS. For temporary defensive purposes and for cash
management purposes, when the Fund acquires a security from a U.S. bank or a
registered broker-dealer, it may simultaneously enter into a repurchase
agreement, wherein the seller agrees to repurchase the security at a specified
time and price. The repurchase price is in excess of the purchase price by an
amount which reflects an agreed-upon rate of return, which is not tied to the
coupon rate on the underlying security. Under the 1940 Act, repurchase
agreements are considered to be loans collateralized by the underlying
security and therefore will be fully collateralized. However, if the seller
should default on its obligation to repurchase the underlying security, the
Fund may experience delay or difficulty in exercising its rights to realize
upon the security and might incur a loss if the value of the security
declines, as well as disposition costs in liquidating the security.
DEPOSITARY RECEIPTS. The Fund may purchase sponsored or unsponsored American
Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs") and Global
Depositary Receipts ("GDRs") (collectively, "Depositary Receipts"). ADRs are
Depositary Receipts typically issued by a U.S. bank or trust company which
evidence ownership of underlying securities issued by a foreign corporation.
EDRs and GDRs are typically issued by foreign banks or trust companies,
although they also may be issued by U.S. banks or trust companies, and
evidence ownership of underlying securities issued by either a foreign or a
United States corporation. Generally, Depositary Receipts in registered form
are designed for use in the U.S. securities market and Depositary Receipts in
bearer form are designed for use in securities markets outside the United
States. Depositary Receipts may not necessarily be denominated in the same
currency as the underlying securities into which they may be converted.
Depositary Receipts may be issued pursuant to sponsored or unsponsored
programs. In sponsored programs, an issuer has made arrangements to have its
securities traded in the form of Depositary Receipts. In unsponsored programs,
the issuer may not be directly involved in the creation of the program.
Although regulatory requirements with respect to sponsored and unsponsored
programs are generally similar, in some cases it may be easier to obtain
financial information from an issuer that has participated in the creation of
a sponsored program. Accordingly, there may be less information available
regarding issuers of securities underlying unsponsored programs and there may
not be a correlation between such information and the market value of the
Depositary Receipts. Depositary Receipts also involve the risks of other
investments in foreign securities, as discussed below. For purposes of the
Fund's investment policies, the Fund's investments in Depositary Receipts will
be deemed to be investments in the underlying securities.
RISK FACTORS
Shareholders should understand that all investments involve risk and there
can be no guarantee against loss resulting from an investment in the Fund, nor
can there be any assurance that the Fund's investment objective will be
attained. As with any investment in securities, the value of, and income from,
an investment in the Fund can decrease as well as increase, depending on a
variety of factors which may affect the values and income generated by the
Fund's portfolio securities, including general economic conditions and market
factors. In addition to the factors which affect the value of individual
securities, a Shareholder may anticipate that the value of the Shares of the
Fund will fluctuate with movements in the broader equity and bond markets, as
well. A decline in the stock market of any country in which the Fund is
invested may also be reflected in declines in the price of Shares of the Fund.
Changes in currency valuations will also affect the price of Shares of the
Fund. History reflects both decreases and increases in worldwide stock markets
and currency valuations, and these may reoccur unpredictably in the future.
The value of debt securities held by the Fund generally will vary inversely
with changes in prevailing interest rates. Additionally, investment decisions
made by the Investment Manager will not always be profitable or prove to have
been correct. The Fund is not intended as a complete investment program.
The Fund has the unlimited right to purchase securities in any foreign
country, developed or underdeveloped. Investors should consider carefully the
substantial risks involved in investing in foreign securities, which are in
addition to the usual risks inherent in domestic investments. Such risks
include the possibility of expropriation, nationalization or confiscatory
taxation, taxation of income earned in foreign nations or other taxes imposed
with respect to investments in foreign nations, foreign exchange controls
(which may include suspension of the ability to transfer currency from a given
country), foreign investment controls on daily stock market movements, default
in foreign government securities, political or social instability, or
diplomatic developments which could affect investment in securities of issuers
in those nations. Some countries may withhold portions of interest and
dividends at the source. In addition, in many countries there is less publicly
available information about issuers than
P-6
<PAGE>
is available in reports about companies in the United States. Foreign
companies are not generally subject to uniform accounting, auditing and
financial reporting standards, and auditing practices and requirements may not
be comparable to those applicable to United States companies. Further, the
Fund may encounter difficulties or be unable to pursue legal remedies and
obtain judgments in foreign courts.
Brokerage commissions, custodial services and other costs relating to
investment in foreign countries are generally more expensive than in the
United States.
Foreign securities markets also have different clearance and settlement
procedures, and in certain markets there have been times when settlements have
been unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result in
temporary periods when assets of the Fund are uninvested and no return is
earned thereon. The inability of the Fund to make intended security purchases
due to settlement problems could cause the Fund to miss attractive investment
opportunities. Inability to dispose of portfolio securities due to settlement
problems could result either in losses to the Fund due to subsequent declines
in value of the portfolio security or, if the Fund has entered into a contract
to sell the security, could result in possible liability to the purchaser.
In many foreign countries, there is less government supervision and
regulation of business and industry practices, stock exchanges, brokers and
listed companies than in the United States. There is an increased risk,
therefore, of uninsured loss due to lost, stolen or counterfeit stock
certificates. In addition, the foreign securities markets of many of the
countries in which the Fund may invest may also be smaller, less liquid, and
subject to greater price volatility than those in the United States. As an
operating policy, the Fund may invest no more than 5% of its assets in Eastern
European countries, which involves special risks that are described under
"Risk Factors" in the SAI.
Prior governmental approval of foreign investments may be required under
certain circumstances in some developing countries, and the extent of foreign
investment in domestic companies may be subject to limitation in other
developing countries. Foreign ownership limitations also may be imposed by the
charters of individual companies in developing countries to prevent, among
other concerns, violation of foreign investment limitations.
Repatriation of investment income, capital and proceeds of sales by foreign
investors may require governmental registration and/or approval in some
developing countries. The Fund could be adversely affected by delays in or a
refusal to grant any required governmental registration or approval for such
repatriation.
Further, the economies of developing countries generally are heavily
dependent upon international trade and, accordingly, have been and may
continue to be adversely affected by trade barriers, exchange controls,
managed adjustments in relative currency values and other protectionist
measures imposed or negotiated by the countries with which they trade. These
economies have also been and may continue to be adversely affected by economic
conditions in the countries with which they trade.
The Fund 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 the Fund converts assets from one currency to another.
The Fund 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 S&P,
and between Baa and as low as Caa by 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 without Shareholder
approval, the Fund 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 may
consider a change in this operating policy if, in its judgment, economic
conditions change such that a higher level of investment in high risk, lower
quality debt securities would be consistent with the interests of the Fund 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. The Fund 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. As a
fundamental policy, the Fund will not invest more than 10% of its total assets
in defaulted debt securities, which may be illiquid.
P-7
<PAGE>
Successful use of futures contracts and related options is subject to
special risk considerations. A liquid secondary market for any futures or
options contract may not be available when a futures or options position is
sought to be closed. In addition, there may be an imperfect correlation
between movements in the foreign currency on which the futures or options
contract is based and movements in the currency in the Fund's portfolio.
Successful use of futures or options contracts is further dependent on the
Investment Manager's ability to correctly predict movements in a stock index
or foreign currency market and no assurance can be given that its judgment
will be correct.
The receipt by the Fund of new money solely through the medium of continuing
payments under systematic investment plans may tend to produce a more even
rate of influx than is the case of funds whose shares are sold directly. This
may furnish a base for a gradual and planned accumulation of positions in
individual portfolio securities when such a program is deemed to be
appropriate.
There can be no assurance that the investment objective of the Fund will be
achieved. There are further risk considerations, including possible losses
through the holding of securities in domestic and foreign custodian banks and
depositories, described in the SAI.
HOW TO BUY SHARES OF THE FUND
The Fund has entered into an agreement with Franklin Templeton Distributors,
Inc. (the "Sponsor" or "FTD"), under which the Fund will issue Shares at net
asset value to Templeton Funds Trust Company as Custodian for the Plans.
The net asset value of the Shares 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 the Fund's securities plus any cash and other assets (including
accrued interest and dividends receivable) less all liabilities (including
accrued expenses) by the number of Shares outstanding, adjusted to the nearest
whole cent. A security listed or traded on a recognized stock exchange or
NASDAQ is valued at its last sale price on the principal exchange on which the
security is traded. The value of a foreign security is determined in its
national currency as of the close of trading on the foreign exchange on which
it is traded, or as of the 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 are determined and
the close of the New York Stock Exchange, and will therefore not be reflected
in the computation of the Fund's net asset value. If events materially
affecting the value of such securities occur during such period, then these
securities will be valued at fair value as determined by the management and
approved in good faith by the Board of Directors. All other securities for
which over-the-counter market quotations are readily available are valued at
the mean between the current bid and asked price. Securities for which market
quotations are not readily available and other assets are valued at fair value
as determined in good faith by the management and approved by the Board of
Directors.
The Fund will not offer its Shares publicly except through the Plans. Except
in cases where Planholders have received Fund Shares in distribution as a
result of the liquidation of or partial withdrawal from a Plan (into a non-
contributory voluntary account), it is not generally contemplated that any
person, other than the Custodian for the Plans, will directly hold any Shares
of the Fund. The terms of the offering of the Plans are contained in the
prospectus for the Plans.
No dealer, salesman, or other person has been authorized to give any
information or to make any representations, other than those contained in this
Prospectus and in the SAI, in connection with the offer contained in this
Prospectus, and, if given or made, such other information or representations
must not be relied upon as having been authorized by the Fund, the Investment
Manager, or the Principal Underwriter.
Except for the fact that the Fund's Shares are available only through the
medium of the Plans, the Fund does not represent an investment concept which
is new or different from other investment companies for which Templeton
Investment Counsel, Inc. or its affiliates acts as an investment manager. The
Fund's investment objective of long-term capital growth is similar to the
objective of certain other Templeton Funds. The methods employed by each of
these other funds in attaining the objective vary from each other and from the
Fund. The investment results attained by these other Templeton Funds have
varied from each other in the past and are likely to continue to vary from
each other and from the Fund in the future. Investors could, however, purchase
shares of the other Templeton Funds, which, in the early years of the Plan,
would be at a lesser sales charge.
Investors wishing information on any of these funds may contact Franklin
Templeton Distributors, Inc., 700 Central Avenue, St. Petersburg, Florida
33701-3628.
P-8
<PAGE>
HOW TO SELL SHARES OF THE FUND
Shareholders who have received Shares on liquidation of their Plans or as a
result of exercise of the partial withdrawal privilege under a Plan may
present their Shares to Franklin Templeton Investor Services, Inc. (the
"Transfer Agent") for redemption at net asset value (which may be more or less
than the investor's cost). The redemption price in cash will be the net asset
value next determined after the time when such Shares are tendered for
redemption.
Shares will be redeemed, without charge, on request of the Shareholder in
"Proper Order" to the Transfer Agent. "PROPER ORDER" MEANS THAT THE REQUEST TO
REDEEM MUST MEET ALL OF THE FOLLOWING REQUIREMENTS:
1. It must be in writing, signed by the Shareholder(s) exactly in the manner
as the Shares are registered, and must specify either the number of Shares, or
the dollar amount of Shares, to be redeemed and sent to Templeton Funds Trust
Company, P.O. Box 33030, St. Petersburg, Florida 33733-8030;
2. The signature(s) of the redeeming Shareholder(s) must be guaranteed by an
"eligible guarantor," including (1) national or state banks, savings
associations, savings and loan associations, trust companies, savings banks,
industrial loan companies and credit unions; (2) national securities
exchanges, registered securities associations and clearing agencies; (3)
securities broker-dealers which are members of a national securities exchange
or a clearing agency or which have minimum net capital of $100,000; or (4)
institutions that participate in the Securities Transfer Agent Medallion
Program ("STAMP") or other recognized signature medallion program. A notarized
signature will not be sufficient for the request to be in Proper Order. If the
Shares are registered in more than one name, the signature of each of the
redeeming Shareholders must be guaranteed. A signature guarantee is not
required for redemptions of $50,000 or less, requested by and payable to all
Shareholders of record, to be sent to the address of record for that account.
However, the Fund reserves the right to require signature guarantees on all
redemptions. A signature guarantee is required in connection with any written
request for transfer of Shares. Also, a signature guarantee is required if the
Fund or the Transfer Agent believes that a signature guarantee would protect
against potential claims based on the transfer instructions, including, for
example, when (i) the current address of one or more joint owners of an
account cannot be confirmed; (ii) multiple owners have a dispute or give
inconsistent instructions to the Fund; (iii) the Fund has been notified of an
adverse claim; (iv) the instructions received by the Fund are given by an
agent, not the actual registered owner; (v) the Fund determines that joint
owners who are married to each other are separated or may be the subject of
divorce proceedings; or (vi) the authority of a representative of a
corporation, partnership, association, or other entity has not been
established to the satisfaction of the Fund;
3. Any outstanding certificates must accompany the request together with a
stock power signed by the Shareholder(s), with signature(s) guaranteed as
described in Item 2 above;
4. Liquidation requests of corporate, partnership, trust and custodianship
accounts, and accounts under court jurisdiction, require the following
documentation to be in proper form:
. Corporation--(i) Signature guaranteed letter of instruction from the
authorized officer(s) of the corporation, and (ii) a corporate
resolution in a form satisfactory to the Transfer Agent;
. Partnership--(i) Signature guaranteed letter of instruction from a
general partner and, if necessary, (ii) pertinent pages from the
partnership agreement identifying the general partners or other
documentation in a form satisfactory to the Transfer Agent;
. Trust--(i) Signature guaranteed letter of instruction from the
trustee(s), and (ii) a copy of the pertinent pages of the trust
document listing the trustee(s) or a certificate of incumbency if the
trustee(s) are not listed on the account registration;
. Custodial (other than a retirement account)--Signature guaranteed
letter of instruction from the custodian;
. Accounts under court jurisdiction--Check court documents and the
applicable state law since these accounts have varying requirements,
depending upon the state of residence; and
5. Redemption of Shares held in an IRA for which Franklin Templeton Trust
Company (FTTC) or its affiliate acts as trustee or custodian must conform to
the distribution requirements of the plan and the Fund's redemption
requirements above. Distributions from an IRA are subject to additional
requirements under the Internal Revenue Code of 1986, as amended (the "Code"),
and certain documents (available from the FTTC) must be completed before the
distribution may be made. For example, distributions from IRAs are subject to
withholding requirements under the Code, and the IRS Form W-4P (available from
the FTTC) may be required to be submitted to FTTC with the distribution
request, or the distribution will be delayed. FTTC and its affiliates assume
no responsibility to determine whether a distribution satisfies the conditions
of applicable tax laws and will not be responsible for any penalties assessed.
P-9
<PAGE>
To avoid delay in redemption or transfer, Shareholders having questions
about these requirements should contact the Shareholder Service Department by
calling 1-800-632-2301.
The redemption price will be the net asset value of the Shares next computed
after the redemption request in Proper Order is received by the Transfer
Agent. A gain or loss for tax purposes generally will be realized upon the
redemption, depending on the tax basis of the Shares redeemed. Payment of the
redemption price will be made by check (or by wire at the sole discretion of
the Transfer Agent if wire transfer is requested, including name and address
of the bank and the Shareholder's account number to which payment of the
redemption proceeds is to be wired) within seven days after receipt of the
redemption request in Proper Order. The check will be mailed by first-class
mail to the Shareholder's registered address (or as otherwise directed).
Remittance by wire (to a commercial bank account in the same name(s) as the
Shares are registered) or express mail, if requested, are subject to a
handling charge of up to $15, which will be deducted from the redemption
proceeds.
Upon any redemption of a portion of a Shareholder's Shares leaving a balance
of unredeemed Shares of less than $100 at the current net asset value at the
time of the redemption, the Fund may also redeem such balance of Shares and
add the proceeds thereof to the proceeds of the redemption which the
Shareholder requested.
Templeton Funds Trust Company may also redeem Shares held by it for the
Plans as necessary to carry out liquidation or withdrawal requests.
TEMPLETON STAR SERVICE. Shareholders may check the current prices of Shares,
account balances/values, a description of the last transaction and duplicate
account statements, 24 hours a day, 365 days a year, with Templeton STAR
Service by calling 1-800-654-0123 from a touch-tone telephone. A fund code
(the Fund's code is 750) and the Shareholder's account number are necessary
for accessing information (other than Share prices) from Templeton STAR
Service.
EXCHANGE PRIVILEGE
Shareholders who have received Shares of the Fund on termination of their
Plan or as a result of exercise of the partial withdrawal privilege under a
Plan may exchange those Shares into other funds in the Franklin Group of
Funds (R) and the Templeton Family of Funds (the "Franklin Templeton Group")
(except Templeton Variable Annuity Fund, Templeton Variable Products Series
Fund, Franklin Valuemark Funds and Franklin Government Securities Trust).
Exchange purchases are subject to the minimum investment requirements of the
fund purchased and no sales charge generally applies. In the case of exchanges
into a fund in the Franklin Templeton Group that offers two classes of shares,
a Shareholder would receive Class I shares, which generally bear lower Rule
(a)b-1 distribution fees than Class II shares of the same fund.
A Shareholder may exchange Shares by writing to the Transfer Agent, by
contacting his or her investment dealer or-- if the Shareholder has not
declined the telephone exchange privilege--by telephoning 1-800-632-2301.
Telephone exchange instructions must be received by FTD by the scheduled
closing time of the New York Stock Exchange (generally 4:00 p.m., New York
time). Telephonic exchanges can involve only Shares in non-certificated form.
Shares held in certificate form are not eligible, but may be returned and
qualify for these services. All accounts involved in a telephonic exchange
must have the same registration and dividend option as the account from which
the Shares are being exchanged. The Fund and the Transfer Agent will employ
reasonable procedures to confirm that instructions communicated by telephone
are genuine. Forms for declining the telephone exchange privilege and
prospectuses of the other funds in the Franklin Templeton Group may be
obtained from FTD. Exchange redemptions and purchases are processed
simultaneously at the share prices next determined after the exchange order is
received.
This exchange privilege is available only in states where shares of the fund
being acquired may legally be sold and may be modified, limited or terminated
at any time by the Fund upon sixty (60) days' written notice. A Shareholder
who wishes to make an exchange should first obtain and review a current
prospectus of the fund into which he or she wishes to exchange. Broker-dealers
who process exchange orders on behalf of their customers may charge a fee for
their services. Such fee may be avoided by making requests for exchange
directly to the Transfer Agent. A gain or loss for tax purposes will be
realized upon the exchange, depending on the cost basis of the Shares
redeemed.
MANAGEMENT OF THE FUND
The Fund is managed by its Board of Directors and all powers of the Fund 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 the SAI.
INVESTMENT MANAGER. The Investment Manager of the Fund is Templeton
Investment Counsel, Inc., Broward Financial Centre, Fort Lauderdale, Florida
33394-3091. The Investment Manager manages the investment and reinvestment of
the Fund's assets. The Investment Manager is an indirect wholly owned
subsidiary of Franklin Resources, Inc. ("Franklin"). Through its
P-10
<PAGE>
subsidiaries, Franklin is engaged in various aspects of the financial services
industry. 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 Templeton
organization has been investing globally over the past 52 years and, with its
affiliates, provides investment management and advisory services to a
worldwide client base, including over 4.3 million mutual fund shareholders,
foundations, endowments, employee benefit plans and individuals. The
Investment Manager and its affiliates have approximately 4,100 employees in
the United States, Australia, Scotland, Germany, Hong Kong, Luxembourg,
Bahamas, Singapore, Canada and Russia.
The Investment Manager uses a disciplined, long-term approach to value
oriented global and international investing. It has an extensive global
network of investment research sources. Securities are selected for the Fund's
portfolio on the basis of fundamental company-by-company analysis. Many
different selection methods are used for different funds and clients and these
methods are changed and improved by the Investment Manager's research on
superior selection methods.
The Investment Manager performs similar services for other funds and
accounts and there may be times when the actions taken with respect to the
Fund's portfolio will differ from those taken by the Investment Manager on
behalf of other funds and accounts. Neither the Investment Manager and its
affiliates, its officers, directors or employees, nor the officers and
Directors of the Fund are prohibited from investing in securities held by the
Fund or other funds and accounts which are managed or administered by the
Investment Manager to the extent such transactions comply with the Fund's Code
of Ethics. Please see "Investment Management and Other Services--Investment
Management Agreement" in the SAI for further information on securities
transactions and a summary of the Fund's Coder of Ethics.
The Investment Manager does not furnish any other services or facilities for
the Fund, although such expenses are paid by some investment advisers of other
investment companies. As compensation for its services, the Fund pays the
Investment Manager a fee which, during the most recent fiscal year,
represented 0.75% of its average daily net assets.
The lead portfolio manager for the Fund is Gary P. Motyl, Senior Vice
President of the Investment Manager. Mr. Motyl has been a security analyst and
portfolio manager with the Investment Manager since 1981. He holds a BS in
Finance from Lehigh University and an MBA in Finance from Pace University.
Prior to joining the Templeton organization, he worked from 1974 to 1979 as a
security analyst with Standard & Poor's Corporation. He then worked as a
research analyst and portfolio manager from 1979 to 1981 with Landmark First
National Bank. In this capacity he had responsibility for equity research and
managed several pension and profit sharing plans. Gary Clemons, Vice President
of the Investment Manager and Mark R. Beveridge, Vice President of the
Investment Manager, exercise secondary portfolio management responsibilities
with respect to the Fund. Mr. Clemons hold a BS in Geology from the University
of Nevada and an MBA in Finance from the University of Wisconsin. Prior to
joining the Investment Manager in 1993, he was a research analyst for
Templeton Quantitative Advisors, Inc. in New York were he was also responsible
for management of a small capitalization fund. Mr. Beveridge holds a BBA in
Finance from the University of Miami. Prior to joining the Templeton
organization in 1985 as a security analyst, he was a principal with a
financial accounting software firm based in Miami, Florida. Further
information concerning the Investment Manager is included under the heading
"Investment Management and Other Services" in the SAI.
BUSINESS MANAGER. Templeton Global Investors, Inc. provides certain
administrative facilities and services for the Fund, including payment of
salaries of officers, 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 on an annual basis to
0.15% of the average daily net assets of the Fund, reduced to 0.135% of such
net assets in excess of $200 million, to 0.10% of such assets in excess of
$700 million, and to 0.075% of such assets in excess of $1,200 million. The
combined investment management and business management fees paid by the Fund
are higher than those paid by most other investment companies.
PRINCIPAL UNDERWRITER. Franklin Templeton Distributors, Inc., a wholly owned
subsidiary of Franklin Resources, Inc., serves as the Principal Underwriter of
the Fund's Shares pursuant to a Distribution Agreement with the Fund.
TRANSFER AGENT. Franklin Templeton Investor Services, Inc. serves as
transfer agent and dividend disbursing agent for the Fund.
PLAN CUSTODIAN. Templeton Funds Trust Company acts as Custodian for the
Plans as described in the Plan prospectus.
CUSTODIAN. The Chase Manhattan Bank, N.A. serves as custodian of the Fund's
assets.
EXPENSES. For the fiscal year ended August 31, 1995, expenses (net of
reimbursement by the Business Manager) amounted to 1.00% of the average daily
net assets of the Fund.
P-11
<PAGE>
BROKERAGE COMMISSIONS. The Fund's brokerage policies are described under the
heading "Brokerage Allocation" in the SAI. The Fund's brokerage policies
provide that the receipt of research services from a broker and the sale of
Plans (and thus, indirectly, the sale of Shares) by a broker are factors which
may be taken into account in allocating securities transactions, so long as
the prices and execution provided by the broker equal the best available
within the scope of the Fund's brokerage policies.
GENERAL INFORMATION
DESCRIPTION OF SHARES/SHARE CERTIFICATES. The Fund has authorized capital
stock of 100,000,000 Shares of $.01 par value. All Shares are of one class.
Each Share entitles the holder to one vote.
The Fund will not ordinarily issue certificates for Shares received on
liquidation or withdrawal from a Plan. Share certificates for whole (not
fractional Shares) are issued only on specific written request to the Transfer
Agent, at no charge for one certificate, and $1.00 for each additional
certificate.
MEETINGS OF SHAREHOLDERS. The Fund is not required to hold annual meetings
of Shareholders and may elect not to do so. The Fund will call a special
meeting of Shareholders when requested to do so by Shareholders holding at
least 10% of the Fund's outstanding Shares. In addition, the Fund is required
to assist Shareholder communications in connection with the calling of
Shareholder meetings to consider removal of a Director or Directors.
DIVIDENDS AND DISTRIBUTIONS. Dividends and capital gain distributions (if
any) are usually paid in October and (if necessary) in December representing
all or substantially all of the Fund's net investment income and any net
realized capital gains. Income dividends and capital gain distributions paid
by the Fund, pursuant to the terms of the Plans, are automatically reinvested
on the payment date in whole or fractional Shares of the Fund at net asset
value as of the ex-dividend date, unless a Shareholder elects to receive cash.
The processing date for the reinvestment of dividends may vary from time to
time, and does not affect the amount or value of the Shares acquired.
FEDERAL TAX INFORMATION. The Fund intends to elect to be treated and to
qualify each year as a regulated investment company under Subchapter M of the
Code. See the SAI for a summary of the requirements that must be satisfied to
so qualify. A regulated investment company generally is not subject to Federal
income tax on income and gains distributed in a timely manner to its
shareholders. The Fund intends to distribute to Shareholders substantially all
of its net investment income and net realized capital gains, which will be
taxable income or capital gains in their hands. Distributions declared in
October, November or December to Shareholders of record on a date in such
month and paid during the following January will be treated as having been
received by Shareholders on December 31 in the year such distributions were
declared. All dividends and distributions are taxable to Shareholders, whether
or not reinvested in Shares of the Fund. The Fund will inform Shareholders
each year of the amount and nature of such income or gains. Sales or other
dispositions of Fund Shares generally will give rise to taxable gain or loss.
Investors should note that Planholders generally are considered to be the
Shareholders of the Fund for federal tax purposes. A more detailed description
of tax consequences to Shareholders is contained in the SAI under the heading
"Tax Status."
The Fund may be required to withhold Federal income tax at the rate of 31%
of all taxable distributions (including redemptions) paid to Shareholders who
fail to provide the Fund with their correct taxpayer identification number or
to make required certifications or where the Fund or the Shareholder has been
notified by the Internal Revenue Service that the Shareholder is subject to
backup withholding. Corporate Shareholders and certain other Shareholders
specified in the Code are exempt from backup withholding. Backup withholding
is not an additional tax. Any amounts withheld may be credited against the
Shareholder's Federal income tax liability.
INQUIRIES. Shareholder inquiries will be answered promptly. They should be
addressed to Franklin Templeton Distributors, Inc., Dealer Main Offices
Services, 700 Central Avenue, St. Petersburg, Florida 33701-3628. Transcripts
of Shareholder accounts less than three years old are provided on request
without charge; requests for transcripts going back more than three years from
the date the request is received by the Transfer Agent are subject to a fee of
up to $15 per account.
P-12
<PAGE>
PERFORMANCE INFORMATION. The Fund may include its total return in
advertisements or reports to Shareholders or prospective investors. Quotations
of average annual total return will be expressed in terms of the average
annual compounded rate of return on a hypothetical investment in the Fund over
a period of 1, 5 and 10 years (or up to the life of the Fund), will reflect
the deduction of a proportional share of Fund expenses (on an annual basis),
and will assume that all dividends and distributions are reinvested when paid.
The Fund's total return quotations will not reflect the effect of paying the
sales and creation charges associated with the purchase of Shares of the Fund
through the Plans; of course, total return quotations would be lower if sales
and creation charges were taken into account. Total return may be expressed in
terms of the cumulative value of an investment in the Fund at the end of a
defined period of time. For a description of the methods used to determine
total return for the Fund, see "Performance Information" in the SAI.
STATEMENTS AND REPORTS. The Fund's fiscal year ends on August 31. Annual
reports (containing financial statements audited by independent auditors and
additional information regarding the Fund's performance) and semi-annual
reports (containing unaudited financial statements) are sent to Shareholders
each year. Additional copies may be obtained, without charge, upon request to
the Account Services Department. The Fund also sends to each Shareholder a
confirmation statement after every transaction that affects the Shareholder's
account and a year-end historical confirmation statement.
P-13
<PAGE>
THE FRANKLIN TEMPLETON GROUP
To receive a free brochure and prospectus, which contain more complete
information, including charges and expenses on each of the funds listed below,
call Franklin Fund Information, toll free, at 1-800-DIAL-BEN (1-800-342-5236)
or Templeton Fund Information at 1-800-292-9293. Please read the prospectus
carefully before you invest or send money.
TEMPLETON FUNDS
Franklin Templeton Japan Fund
Templeton American Trust
Templeton Americas
Government Securities Fund
Templeton Developing
Markets Trust
Templeton Foreign Fund
Templeton Global
Infrastructure Fund
Templeton Global
Opportunities Trust
Templeton Global Rising
Dividends Fund
Templeton Growth Fund
Templeton Income Fund
Templeton Money Fund
Templeton Real Estate
Securities Fund
Templeton Smaller
Companies Growth Fund
Templeton World Fund
FRANKLIN GROUP
OF FUNDS (R)
FRANKLIN GLOBAL/
INTERNATIONAL FUNDS
Franklin Global Health Care Fund
Franklin Global Government
Income Fund
Franklin Global Utilities Fund
Franklin International Equity Fund
Franklin Pacific Growth Fund
FUNDS SEEKING CAPITAL GROWTH
Franklin California Growth Fund
Franklin DynaTech Fund
Franklin Equity Fund
Franklin Gold Fund
Franklin Growth Fund
Franklin Rising Dividends Fund
Franklin Small Cap Growth Fund
FUNDS SEEKING GROWTH AND
INCOME
Franklin Balance Sheet
Investment Fund
Franklin Convertible
Securities Fund
Franklin Income Fund
Franklin Equity Income Fund
Franklin Utilities Fund
FUNDS SEEKING HIGH CURRENT
INCOME
Franklin's AGE High Income Fund
Franklin Investment Grade
Income Fund
Franklin Premier Return Fund
Franklin U.S. Government
Securities Fund
FUNDS SEEKING TAX-FREE
INCOME
Franklin Federal Tax-Free
Income Fund
Franklin High Yield Tax-Free
Income Fund
Franklin California High Yield
Municipal Fund
Franklin Alabama Tax-Free
Income Fund
Franklin Arizona Tax-Free
Income Fund
Franklin California Tax-Free
Income Fund
Franklin Colorado Tax-Free
Income Fund
Franklin Connecticut Tax-Free
Income Fund
Franklin Florida Tax-Free
Income Fund
Franklin Georgia Tax-Free
Income Fund
Franklin Hawaii Municipal
Bond Fund
Franklin Indiana Tax-Free
Income Fund
Franklin Kentucky Tax-Free
Income Fund
Franklin Louisiana Tax-Free
Income Fund
Franklin Maryland Tax-Free
Income Fund
Franklin Missouri Tax-Free
Income Fund
Franklin New Jersey Tax-Free
Income Fund
Franklin New York Tax-Free
Income Fund
Franklin North Carolina Tax-Free
Income Fund
Franklin Oregon Tax-Free
Income Fund
Franklin Pennsylvania Tax-Free
Income Fund
Franklin Puerto Rico Tax-Free
Income Fund
Franklin Texas Tax-Free
Income Fund
Franklin Virginia Tax-Free
Income Fund
Franklin Washington Municipal
Bond Fund
FUNDS SEEKING TAX-FREE
INCOME THROUGH INSURED
PORTFOLIOS
Franklin Insured Tax-Free
Income Fund
Franklin Arizona Insured Tax-
Free Income Fund
Franklin California Insured Tax-
Free Income Fund
Franklin Florida Insured Tax-
Free Income Fund
Franklin Massachusetts Insured
Tax-Free Income Fund
Franklin Michigan Insured Tax-
Free Income Fund
Franklin Minnesota Insured Tax-
Free Income Fund
Franklin New York Insured Tax-
Free Income Fund
Franklin Ohio Insured Tax-Free
Income Fund
FUNDS SEEKING HIGH CURRENT
INCOME AND STABILITY OF
PRINCIPAL
Franklin Adjustable Rate
Securities Fund
Franklin Adjustable U.S.
Government Securities Fund
Franklin Short-Intermediate U.S.
Government Securities Fund
FUND SEEKING HIGH AFTER-TAX
INCOME FOR CORPORATIONS
Franklin Corporate Qualified
Dividend Fund
MONEY MARKET FUNDS SEEKING
SAFETY OF PRINCIPAL AND INCOME
Franklin Money Fund
Franklin Federal Money Fund
Franklin Tax-Exempt Money
Fund
Franklin California Tax-Exempt
Money Fund
Franklin New York Tax-Exempt
Money Fund
IFT Franklin U.S. Treasury
Money Market Portfolio
FUNDS FOR
NON-U.S. INVESTORS
FRANKLIN PARTNERS FUNDS(R)
Franklin Tax-Advantaged
High Yield Securities Fund
Franklin Tax-Advantaged
International Bond Fund
Franklin Tax-Advantaged U.S.
Government Securities Fund
P-14
<PAGE>
TEMPLETON CAPITAL ACCUMULATION PLANS
700 Central Avenue
St. Petersburg, Florida 33701-3628
(800) 354-9191
(813) 823-8712
[LOGO OF FRANKLIN TEMPLETON APPEARS HERE]
[RECYCLED PAPER LOGO APPEARS HERE]
PRINCIPAL UNDERWRITER:
FRANKLIN TEMPLETON DISTRIBUTORS, INC.
700 Central Avenue
St. Petersburg, Florida 33701-3628
(800) 237-0738
<PAGE>
[LOGO OF APPLICATION APPEARS HERE]
IN ORDER TO ESTABLISH AN
ACCOUNT SIMPLY COMPLETE THIS
APPLICATION. DETACH AND MAIL IT
WITH YOUR CHECK TO:
FRANKLIN TEMPLETON DISTRIBUTORS, INC.
P.O. Box 33031, St. Petersburg, Florida 33733-8031
<PAGE>
TEMPLETON CAPITAL ACCUMULATION PLANS NEW ACCOUNT APPLICATION.
P.O. Box 33031, St. Petersburg, Florida 33733-8031 For initial investment
only. Do not use for
Templeton Prototype Keogh
or IRA/SEP. Request
separate application.
- --------------------------------------------------------------------------------
New Account #____________________
Monthly Unit $_____________
Total Plan Amount $_____________
Initial Investment $_____________
The objective in purchasing this plan is _______________________________________
Special Pricing Breakpoint
(Dealer Use)
--------------------------
Special pricing applicable? [_] Yes [_] No
--------------------------
List all associated account numbers and monthly amounts.
______________________________________________ $_____________________________
______________________________________________ $_____________________________
______________________________________________ $_____________________________
______________________________________________ $_____________________________
- --------------------------------------------------------------------------------
REGISTRATION--Please Print or Type
Individual Joint Tenant
Gifts/Transfers to Minors
Register Plan as Follows
_____________________________________________________ _______________________
First Name Middle Initial Last Name Social Security Number
_____________________________________________________ _______________________
First Name Middle Initial Last Name Social Security Number
_____________________________________________________
Custodian's Name
_____________________________________________________ _______________________
Minor's Name Social Security Number
under the ____________________________ Uniform Gifts/Transfers to Minors Act
State
- --------------------------------------------------------------------------------
Corporation, Trusts or Other Fiduciaries
-
_____________________________________________________ _____ _________________
Name of Corporation or Trustee(s) Taxpayer Identification
Number
- -
_____________________________________________________ _______ _______ _______
Name of Trust Date of Trust
_____________________________________________________
Name of Beneficiary (if to be included in registration)
- --------------------------------------------------------------------------------
Address, Citizenship & Occupation
______________________________________ ________________________________________
Street or P.O. Box Occupation (If Military, Rank & Service)
___________________ _____ ____________ ________________________________________
City State ZIP Name of Employer
- - - -
_________ ___ ____ ____ ____ _________ ________________________________________
Telephone Birth Date Street or P.O. Box
_________________________ _____ ________
Citizen of the U.S. [_] Yes [_] No City State Zip
______________________________________ ________________________________________
If no, Country of Residence Citizen(s) of
(Please attach form(s) W-8)
- --------------------------------------------------------------------------------
I am an associated person of an NASD member firm. [_] Yes [_] No
If yes, name of NASD member firm _______________________________________________
- --------------------------------------------------------------------------------
The undersigned warrant(s) that I (we) have full authority and, if a natural
person, I (we) am (are) of legal age to purchase shares pursuant to this
application, and have received a current prospectus for the Fund. I (we)
understand the Fund's investment objectives and policies and have determined
that the Plan is a suitable investment based upon my (our) investment needs and
financial situation.
Under Internal Revenue Service (IRS) regulations, I (we) am (are) required to
have the following certification: Under the penalties of perjury, I (we) certify
that:
(1) The number shown above is my (our) correct social security/taxpayer
identification number, and
(2) I (we) am (are) not subject to backup withholding either because:
(a) I (we) am (are) exempt from backup withholding, or (b) I (we)
have not been notified by the IRS that I (we) am (are) subject to
backup withholding as a result of a failure to report all interest
or dividends, or (c) the IRS has notified me (us) that I (we) am
(are) no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have
been notified by IRS that you are currently subject to backup withholding
because of underreporting interest or dividends on your tax return.
Date ______/____/______
Signature of Owner X________________ Signature of Joint Owner X________________
- --------------------------------------------------------------------------------
A Preauthorized Check Application is completed on the reverse [_] Yes [_] No
Monthly payment date [_] 1st [_] 5th [_] 15th [_] 20th
Check box for Government Allotment [_]
Make Checks Payable To: Franklin/Templeton Distributors, Inc.
- --------------------------------------------------------------------------------
MAIL APPLICATION AND INITIAL INVESTMENT TO
Franklin/Templeton Distributors, Inc.
P.O. Box 33031
St. Petersburg, FL 33733-8031
- --------------------------------------------------------------------------------
DEALER INFORMATION
Branch Office (if applicable) ____________________ Dealer Number ______________
Firm Name _____________________________________________________________________
Firm Address __________________________________________________________________
Authorized Signature of Dealer X_______________________________________________
REPRESENTATIVE INFORMATION
Representative's name (print) _________________________________________________
Number
Street_________________________________________________________________________
City__________________________________________ State_________ ZIP______________
Representative's signature X___________________________________________________
- --------------------------------------------------------------------------------
Please see the reverse side for the Automatic Investment Plan option
<PAGE>
- -------------------------------------------------------------------------------
AUTOMATIC INVESTMENT PLAN
- -------------------------------------------------------------------------------
IMPORTANT: Attach an unsigned, voided check (for checking accounts) or a
savings account deposit slip here, and complete the information below.
I would like to establish an Automatic Investment Plan as described in the
Prospectus. I agree to reimburse Templeton Funds Trust Company and/or Franklin
Templeton Distributors, Inc. for any expenses or losses that they may incur in
connection with my plan, including any caused by my bank's failure to act in
accordance with my request. If my bank makes any erroneous payment or fails to
make a payment after shares are purchased on my behalf, any such purchase may
be cancelled and I hereby authorize redemptions and/or deductions from my
account for that purpose.
Debit my bank account monthly $______________ on or about the [_] 1st
[_] 5th [_] 15th or [_] 20th day ("collection date") of ____________________,
(month)
to be invested in (name of fund) __________________ account number
(if known) ___________________
- -------------------------------------------------------------------------------
INSTRUCTIONS TO BANK--AUTOMATIC INVESTMENT PLAN AUTHORIZATION
- -------------------------------------------------------------------------------
To:
----------------------------------------- ---------------------------------
Name of your bank ABA number
-------------------------------------- -------------------- -------- -------
Street address City State Zip
I authorize you to charge my checking/savings account and to make payment to
Franklin Templeton Distributors, Inc. ("FTD"), upon instructions from FTD. I
agree that in making payment for such charges your rights shall be the same as
if each were a charge made and signed personally by me. This authority shall
remain in effect until you receive written notice from me changing its terms
or revoking it. Until you actually receive such notice, I agree that you shall
be fully protected in paying any charge under this authority. I further agree
that if any such charge is not made, whether with or without cause and whether
intentionally or inadvertently, you shall be under no liability whatsoever.
X
- ------------------------------------------------------------------- -----------
Signature(s) EXACTLY as shown on bank records Date
- --------------------------------------------------------- ---------------------
Print name(s) Account number
- --------------------------------------- -------------------- -------- -------
Your street address City State Zip
TCAP APP 1/96
<PAGE>
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
THIS STATEMENT OF ADDITIONAL INFORMATION DATED JANUARY 1, 1996,
IS NOT A PROSPECTUS.
IT SHOULD BE READ IN CONJUNCTION WITH
THE PROSPECTUS OF TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
DATED JANUARY 1, 1996, AS AMENDED FROM TIME TO TIME,
WHICH CAN BE OBTAINED WITHOUT COST UPON
REQUEST TO THE PRINCIPAL UNDERWRITER,
FRANKLIN TEMPLETON DISTRIBUTORS, INC.
700 CENTRAL AVENUE, P.O. BOX 33030
ST. PETERSBURG, FLORIDA 33733-8030
TOLL FREE TELEPHONE: 800/DIAL BEN
TABLE OF CONTENTS
General Information and History.......................1
Investment Objective and Policies.....................1
-Investment Policies.................................1
-Repurchase Agreements...............................2
-Loans of Portfolio Securities.......................2
-Debt Securities.....................................2
-Structured Investments..............................4
-Futures Contracts...................................5
-Stock Index Options.................................7
-Foreign Currency Hedging
Transactions.......................................8
-Investment Restrictions.............................9
-Risk Factors.......................................11
-Trading Policies...................................17
-Personal Securities Transactions...................17
Management of the Fund...............................18
Director Compensation................................23
Principal Shareholders...............................24
Investment Management and Other Services.............24
-Investment Management Agreement....................24
-Management Fees....................................26
-Templeton Investment Counsel, Inc..................26
-Business Manager...................................26
-Custodian and Transfer Agent.......................28
-Legal Counsel......................................28
-Independent Accountants............................28
-Reports to Shareholders............................29
Brokerage Allocation.................................29
Purchase, Redemption and Pricing
of Shares..........................................32
-Ownership and Authority Disputes...................33
-Redemptions in Kind................................33
Tax Status...........................................34
Principal Underwriter................................39
Description of Shares................................40
Performance Information..............................40
Financial Statements.................................44
GENERAL INFORMATION AND HISTORY
Templeton Capital Accumulator Fund, Inc. (the "Fund") was incorporated
in Maryland on October 26, 1990 and is registered under the Investment Company
Act of 1940 (the "1940 Act") as an open-end, diversified management investment
company.
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT POLICIES. The Fund's investment objective and policies are
described in the Prospectus under the heading "General Description -- Investment
Objective and Policies." The Fund may invest for defensive purposes in
commercial paper which, at the date of investment, must be rated A-1 by Standard
& Poor's Corporation ("S&P") or Prime-1 by Moody's Investors Service, Inc.
("Moody's") or, if not rated, be issued by a company which, at the date of
investment, has an outstanding debt issue rated AAA or AA by S&P or Aaa or Aa by
Moody's.
<PAGE>
REPURCHASE AGREEMENTS. Repurchase agreements are contracts under which
the buyer of a security simultaneously commits to resell the security to the
seller at an agreed-upon price and date. Under a repurchase agreement, the
seller is required to maintain the value of the securities subject to the
repurchase agreement at not less than their repurchase price. Templeton
Investment Counsel, Inc. (the "Investment Manager") will monitor the value of
such securities daily to determine that the value equals or exceeds the
repurchase price. Repurchase agreements may involve risks in the event of
default or insolvency of the seller, including possible delays or restrictions
upon the Fund's ability to dispose of the underlying securities. The Fund will
enter into repurchase agreements only with parties who meet creditworthiness
standards approved by the Board of Directors, I.E., banks or broker-dealers
which have been determined by the Investment Manager to present no serious risk
of becoming involved in bankruptcy proceedings within the time frame
contemplated by the repurchase transaction.
LOANS OF PORTFOLIO SECURITIES. The Fund may lend to banks and
broker-dealers portfolio securities with an aggregate market value of up to
one-third of its total assets. Such loans must be secured by collateral
(consisting of any combination of cash, U.S. Government securities or
irrevocable letters of credit) in an amount at least equal (on a daily
marked-to-market basis) to the current market value of the securities loaned.
The Fund retains all or a portion of the interest received on investment of the
cash collateral or receives a fee from the borrower. The Fund may terminate the
loans at any time and obtain the return of the securities loaned within five
business days. The Fund will continue to receive any interest or dividends paid
on the loaned securities and will continue to have voting rights with respect to
the securities. However, as with other extensions of credit, there are risks of
delay in recovery or even loss of rights in collateral should the borrower fail.
DEBT SECURITIES. The Fund may invest in debt securities which are rated
no lower than Caa by Moody's or CCC by S&P or deemed to be of comparable quality
by the Investment Manager. As an operating policy, the Fund will not invest more
than 5% of its assets in debt securities rated lower than Baa by Moody's or BBB
by S&P. The market value of debt securities generally varies in response to
changes in interest rates and the financial condition of each issuer. During
periods of declining interest rates, the value of debt securities generally
increases. Conversely, during periods of rising interest rates, the value of
such securities generally declines. These changes in market value will be
reflected in the Fund's net asset value.
- 2 -
<PAGE>
Higher yielding corporate debt securities are ordinarily unrated or in
the lower rating categories of recognized rating agencies (that is, ratings of
Baa or lower by Moody's or BBB or lower by S&P) and are generally considered to
be predominantly speculative and, therefore, may involve greater volatility of
price and risk of loss of principal and income (including the possibility of
default or bankruptcy of issuers of such securities) than securities in the
higher rating categories. A debt security rated Caa by Moody's is of poor
standing. Such a security may be in default or there may be present elements of
danger with respect to principal and interest. A debt security rated CCC by S&P
is regarded, on balance, as speculative. Such a security will have some quality
and protective characteristics, but these are outweighed by large uncertainties
or major risk exposures to adverse conditions.
Although they may offer higher yields than do higher rated securities,
low rated and unrated debt securities generally involve greater volatility of
price and risk of principal and income, including the possibility of default by,
or bankruptcy of, the issuers of the securities. In addition, the markets in
which low rated and unrated debt securities are traded are more limited than
those in which higher rated securities are traded. The existence of limited
markets for particular securities may diminish the Fund's ability to sell the
securities at fair value either to meet redemption requests or to respond to a
specific economic event such as a deterioration in the creditworthiness of the
issuer. Reduced secondary market liquidity for certain low rated or unrated debt
securities may also make it more difficult for the Fund to obtain accurate
market quotations for the purposes of valuing the Fund's portfolio. Market
quotations are generally available on many low rated or unrated securities only
from a limited number of dealers and may not necessarily represent firm bids of
such dealers or prices for actual sales.
Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the value and liquidity of low rated debt
securities, especially in a thinly traded market. Analysis of the
creditworthiness of issuers of low rated debt securities may be more complex
than for issuers of higher rated securities, and the ability of the Fund to
achieve its investment objective may, to the extent of investment in low rated
debt securities, be more dependent upon such creditworthiness analysis than
would be the case if the Fund were investing in higher rated securities.
Low rated debt securities may be more susceptible to real or perceived
adverse economic and competitive industry conditions than investment grade
securities. The prices of low rated debt securities have been found to be less
sensitive to interest rate
- 3 -
<PAGE>
changes than higher rated investments, but more sensitive to adverse economic
downturns or individual corporate developments. A projection of an economic
downturn or of a period of rising interest rates, for example, could cause a
decline in low rated debt securities prices because the advent of a recession
could lessen the ability of a highly leveraged company to make principal and
interest payments on its debt securities. If the issuer of low rated debt
securities defaults, the Fund may incur additional expenses to seek recovery.
The Fund may accrue and report interest on high yield bonds structured
as zero coupon bonds or pay-in-kind securities as income even though it receives
no cash interest until the security's maturity or payment date. In order to
qualify for beneficial tax treatment, the Fund must distribute substantially all
of its income to Shareholders (see "Tax Status"). Thus, the Fund may have to
dispose of its portfolio securities under disadvantageous circumstances to
generate cash, so that it may satisfy the distribution requirement.
Recent legislation, which requires federally insured savings and loan
associations to divest their investments in low rated debt securities, may have
a material adverse effect on the Fund's net asset value and investment
practices.
STRUCTURED INVESTMENTS. Included among the issuers of debt securities
in which the Fund may invest are entities organized and operated solely for the
purpose of restructuring the investment characteristics of various securities.
These entities are typically organized by investment banking firms which receive
fees in connection with establishing each entity and arranging for the placement
of its securities. This type of restructuring involves the deposit with or
purchases by an entity, such as a corporation or trust, of specified instruments
and the issuance by that entity of one or more classes of securities
("Structured Investments") backed by, or representing interests in, the
underlying instruments. The cash flow on the underlying instruments may be
apportioned among the newly issued Structured Investments to create securities
with different investment characteristics such as varying maturities, payment
priorities or interest rate provisions; the extent of the payments made with
respect to Structured Investments is dependent on the extent of the cash flow on
the underlying instruments. Because Structured Investments of the type in which
the Fund anticipates investing typically involve no credit enhancement, their
credit risk will generally be equivalent to that of the underlying instruments.
The Fund is permitted to invest in a class of Structured
Investments that is either subordinated or unsubordinated to the
right of payment of another class. Subordinated Structured
- 4 -
<PAGE>
Investments typically have higher yields and present greater risks than
unsubordinated Structured Investments. Although the Fund's purchase of
subordinated Structured Investments would have a similar economic effect to that
of borrowing against the underlying securities, the purchase will not be deemed
to be leverage for purposes of the limitations placed on the extent of the
Fund's assets that may be used for borrowing activities.
Certain issuers of Structured Investments may be deemed to be
"investment companies" as defined in the 1940 Act. As a result, the Fund's
investment in these Structured Investments may be limited by the restrictions
contained in the 1940 Act. Structured Investments are typically sold in private
placement transactions, and there currently is no active trading market for
Structured Investments. To the extent such investments are illiquid, they will
be subject to the Fund's restrictions on investments in illiquid securities.
FUTURES CONTRACTS. The Fund's investment policies also 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 Fund's total assets 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.
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. For
example, the Standard & Poor's 500 Stock Index (the "S&P 500 Index") is composed
of 500 selected common stocks, most of which are listed on the New York Stock
Exchange ("NYSE"). The S&P 500 Index assigns relative weightings to the value of
one share of each of these 500 common stocks included in the index, and the
index fluctuates with changes in the market values of the shares of those common
stocks. In the case of the S&P 500 Index, contracts are to buy or sell 500
units. Thus, if the value of the S&P 500 Index were $150, one contract would be
worth $75,000 (500 units x $150). 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. For example,
if the Fund enters into a futures contract to buy 500 units of the S&P 500 Index
at a
- 5 -
<PAGE>
specified future date at a contract price of $150 and the S&P 500 Index is at
$154 on that future date, the Fund will gain $2,000 (500 units x gain of $4). If
the Fund enters into a futures contract to sell 500 units of the S&P 500 Index
at a specified future date at a contract price of $150 and the S&P 500 Index is
at $154 on that future date, the Fund will lose $2,000 (500 units x loss of $4).
During or in anticipation of a period of market appreciation, the Fund
may enter into a "long hedge" of common stock which it proposes to add to its
portfolio by purchasing stock index futures for the purpose of reducing the
effective purchase price of such common stock. To the extent that the securities
which the Fund proposes to purchase change in value in correlation with the
stock index contracted for, the purchase of futures contracts on that index
would result in gains to the Fund which could be offset against rising prices of
such common stock.
During or in anticipation of a period of market decline, the Fund may
"hedge" common stock in its portfolio by selling stock index futures for the
purpose of limiting the exposure of its portfolio to such decline. To the extent
that the Fund's portfolio of securities changes in value in correlation with a
given stock index, the sale of futures contracts on that index could
substantially reduce the risk to the portfolio of a market decline and, by so
doing, provide an alternative to the liquidation of securities positions in the
portfolio with resultant transaction costs.
Parties to an index futures contract must make initial margin deposits
to secure performance of the contract, which currently range from 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.
At the time the Fund 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 Fund's custodian. When selling a stock index futures
contract, the Fund will maintain with its custodian liquid assets that, when
added to the amounts deposited with a futures commission merchant or broker as
margin, are equal to the market value of the instruments underlying the
contract. Alternatively, the Fund may "cover" its position by owning a portfolio
with a volatility substantially similar to that of the index on which the
futures contract is based, or holding a call option permitting the Fund to
purchase the same futures contract at a price no higher than
- 6 -
<PAGE>
the price of the contract written by the Fund (or at a higher price if the
difference is maintained in liquid assets with the Fund's custodian).
STOCK INDEX OPTIONS. The Fund may purchase and sell put and call
options on securities indices in standardized contracts traded on national
securities exchanges, boards of trade, or similar entities, or quoted on NASDAQ.
An option on a securities index is a contract that gives the purchaser of the
option, in return for the premium paid, the right to receive from the writer of
the option, cash equal to the difference between the closing price of the index
and the exercise price of the option, expressed in dollars, times a specified
multiplier for the index option. An index is designed to reflect specified
facets of a particular financial or securities market, a specific group of
financial instruments or securities, or certain indicators.
The Fund may write call options and put options only if they are
"covered." A call option on an index is covered if the Fund maintains with its
custodian cash or cash equivalents equal to the contract value. A call option is
also covered if the Fund holds a call on the same index as the call written
where the exercise price of the call held is (1) equal to or less than the
exercise price of the call written, or (2) greater than the exercise price of
the call written, provided the difference is maintained by the Fund in cash or
cash equivalents in a segregated account with its custodian. A put option on an
index is covered if the Fund maintains cash or cash equivalents equal to the
exercise price in a segregated account with its custodian. A put option is also
covered if the Fund holds a put on the same index as the put written where the
exercise price of the put held is (1) equal to or greater than the exercise
price of the put written, or (2) less than the exercise price of the put
written, provided the difference is maintained by the Fund in cash or cash
equivalents in a segregated account with its custodian.
If an option written by the Fund expires, the Fund will realize a
capital gain equal to the premium received at the time the option was written.
If an option purchased by the Fund expires unexercised, the Fund will realize a
capital loss equal to the premium paid.
Prior to the earlier of exercise or expiration, an option may be closed
out by an offsetting purchase or sale of an option of the same series (type,
exchange, index, exercise price, and expiration). There can be no assurance,
however, that a closing purchase or sale transaction can be effected when the
Fund desires.
- 7 -
<PAGE>
FOREIGN CURRENCY HEDGING TRANSACTIONS. In order to hedge against
foreign currency exchange rate risks, the Fund may enter into forward foreign
currency exchange contracts and foreign currency futures contracts, as well as
purchase put or call options on foreign currencies, as described below. The Fund
may also conduct its foreign currency exchange transactions on a spot (I.E.,
cash) basis at the spot rate prevailing in the foreign currency exchange market.
The Fund may enter into forward foreign currency exchange contracts
("forward contracts") to attempt to minimize the risk to the Fund from adverse
changes in the relationship between the U.S. dollar and foreign currencies. A
forward contract is an obligation to purchase or sell a specific currency for an
agreed price at a future date which is individually negotiated and privately
traded by currency traders and their customers. The Fund may enter into a
forward contract, for example, when it enters into a contract for the purchase
or sale of a security denominated in a foreign currency in order to "lock in"
the U.S. dollar price of the security. In addition, for example, when the Fund
believes that a foreign currency may suffer or enjoy a substantial movement
against another currency, it may enter into a forward contract to sell an amount
of that foreign currency approximating the value of some or all of the Fund's
portfolio securities denominated in such foreign currency. This second
investment practice is generally referred to as "cross-hedging." Because in
connection with the Fund's forward foreign currency transactions an amount of
the Fund's assets equal to the amount of the purchase will be held aside or
segregated to be used to pay for the commitment, the Fund will always have cash,
cash equivalents or high quality debt securities available sufficient to cover
any commitments under these contracts or to limit any potential risk. The
segregated account will be marked-to-market on a daily basis. While these
contracts are not presently regulated by the Commodity Futures Trading
Commission ("CFTC"), the CFTC may in the future assert authority to regulate
forward contracts. In such event, the Fund's ability to utilize forward
contracts in the manner set forth above may be restricted. Forward contracts may
limit potential gain from a positive change in the relationship between the U.S.
dollar and foreign currencies. Unanticipated changes in currency prices may
result in poorer overall performance for the Fund than if it had not engaged in
such contracts.
The Fund may purchase and write put and call options on foreign
currencies for the purpose of protecting against declines in the dollar value of
foreign portfolio securities and against increases in the dollar cost of foreign
securities to be acquired. As is the case with other kinds of options, however,
the writing of an option on foreign currency will constitute only a partial
hedge, up to the amount of the premium received, and
- 8 -
<PAGE>
the Fund could be required to purchase or sell foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The purchase of an
option on foreign currency may constitute an effective hedge against fluctuation
in exchange rates, although, in the event of rate movements adverse to the
Fund's position, the Fund may forfeit the entire amount of the premium plus
related transaction costs. Options on foreign currencies to be written or
purchased by the Fund will be traded on U.S. and foreign exchanges or
over-the-counter.
The Fund may enter into exchange-traded contracts for the purchase or
sale for future delivery of foreign currencies ("foreign currency futures").
This investment technique will be used only to hedge against anticipated future
changes in exchange rates which otherwise might adversely affect the value of
the Fund's portfolio securities or adversely affect the prices of securities
that the Fund intends to purchase at a later date. The successful use of foreign
currency futures will usually depend on the Investment Manager's ability to
forecast currency exchange rate movements correctly. Should exchange rates move
in an unexpected manner, the Fund may not achieve the anticipated benefits of
foreign currency futures or may realize losses.
INVESTMENT RESTRICTIONS. The Fund has imposed upon itself certain
investment restrictions, which together with the investment objective, are
fundamental policies. No changes in the Fund's investment objective or
investment restrictions can be made without approval of the Shareholders. For
this purpose, the provisions of the 1940 Act require the affirmative vote of the
lesser of either (1) 67% or more of the Shares present at a Shareholders'
meeting at which more than 50% of the outstanding Shares are present or
represented by proxy or (2) more than 50% of the outstanding Shares of the Fund.
In accordance with these restrictions, the Fund will not:
1. Invest in real estate or mortgages on real estate
(although the Fund may invest in marketable securities
secured by real estate or interests therein or issued
by companies or investment trusts which invest in real
estate or interests therein); invest in interests
(other than debentures or equity stock interests) in
oil, gas or other mineral exploration or development
programs; purchase or sell commodity contracts (except
forward contracts and futures contracts as described in
the Fund's Prospectus); or invest in other open-end
investment companies.
- 9 -
<PAGE>
2. Purchase or retain securities of any company in which
Directors or Officers of the Fund or of its Investment
Manager, individually owning more than 1/2 of 1% of the
securities of such company, in the aggregate own more than 5%
of the securities of such company.
3. Invest more than 5% of its total assets in the
securities of any one issuer (exclusive of U.S.
Government securities).
4. Purchase more than 10% of any class of securities of any one
company, including more than 10% of its outstanding voting
securities, or invest in any company for the purpose of
exercising control or management.
5. Act as an underwriter; issue senior securities; purchase on
margin or sell short; write, buy or sell puts, calls,
straddles or spreads (but the Fund may make margin payments in
connection with futures contracts, forward contracts and
options on securities indices and foreign currencies).
6. Loan money, apart from the purchase of a portion of an issue
of publicly distributed bonds, debentures, notes and other
evidences of indebtedness, although the Fund may enter into
repurchase agreements and lend its portfolio securities.
7. Borrow money for any purpose other than redeeming its
Shares or purchasing its Shares for cancellation, and
then only as a temporary measure up to an amount not
exceeding 5% of the value of its total assets; or
pledge, mortgage, or hypothecate its assets for any
purpose other than to secure such borrowings, and then
only up to such extent not exceeding 10% of the value
of its total assets as the Board of Directors may by
resolution approve.1 (For the purposes of this
investment restriction, collateral arrangements with
respect to margin for a futures contract or a forward
contract are not deemed to be a pledge of assets.)
8. Invest more than 5% of the value of the Fund's total assets in
securities of issuers which have been in continuous operation
less than three years.
- --------
1 As an operating policy approved by the Board of
Directors, the Fund will not pledge, mortgage or
hypothecate its assets to the extent that at any time
the percentage of pledged assets plus the sales
commission will exceed 10% of the Offering Price of
the Shares of the Fund.
- 10 -
<PAGE>
9. Invest more than 5% of the Fund's total assets in
warrants, whether or not listed on the New York or
American Stock Exchanges, including no more than 2% of
its total assets which may be invested in warrants that
are not listed on those exchanges. Warrants acquired
by the Fund in units or attached to securities are not
included in this investment restriction. This
investment restriction does not apply to options on
securities indices.
10. Invest more than 15% of the Fund's total assets in
securities of foreign issuers that are not listed on a
recognized United States or foreign securities
exchange, including no more than 10% of its total
assets in restricted securities, securities that are
not readily marketable, repurchase agreements having
more than seven days to maturity, and over-the-counter
options purchased by the Fund. Assets used as cover
for over-the-counter options written by the Fund are
considered not readily marketable.
11. Invest more than 25% of the Fund's total assets in a
single industry.
12. Invest in "letter stocks" or securities on which there
are any sales restrictions under a purchase agreement.
13. Participate on a joint or a joint and several basis in any
trading account in securities. (See "Investment Objective and
Policies -- Trading Policies" as to transactions in the same
securities for the Fund and other mutual funds with the same
or affiliated advisers.)
Whenever any investment policy or investment restriction states a
maximum percentage of the Fund's assets which may be invested in any security or
other property, it is intended that such maximum percentage limitation be
determined immediately after and as a result of the Fund's acquisition of such
security or property. Assets are calculated as described in the Prospectus under
the heading "How to Buy Shares of the Fund." Nothing in the investment policies
or investment restrictions (except Investment Restrictions 10 and 11) shall be
deemed to prohibit the Fund from purchasing securities pursuant to subscription
rights distributed to the Fund by any issuer of securities held at the time in
its portfolio (as long as such purchase is not contrary to the Fund's status as
a diversified investment company under the 1940 Act).
RISK FACTORS. The Fund has an unlimited right to purchase
securities in any foreign country, developed or developing, if
they are listed on a stock exchange, as well as a limited right
- 11 -
<PAGE>
to purchase such securities if they are unlisted. Investors should consider
carefully the substantial risks involved in securities of companies and
governments of foreign nations, which are in addition to the usual risks
inherent in domestic investments.
There may be less publicly available information about foreign
companies comparable to the reports and ratings published about companies in the
United States. Foreign companies are not generally subject to uniform
accounting, auditing and financial reporting standards, and auditing practices
and requirements may not be comparable to those applicable to United States
companies. The Fund, therefore, may encounter difficulty in obtaining market
quotations for purposes of valuing its portfolio and calculating its net asset
value. Foreign markets have substantially less volume than the NYSE and
securities of some foreign companies are less liquid and more volatile than
securities of comparable United States companies. Investments in unlisted
foreign securities raise liquidity concerns, and the Board of Directors of the
Fund (or the Investment Manager under the supervision of the Board of Directors)
will monitor, on a continuing basis, the status of the Fund's positions (and any
anticipated positions) in these securities in light of the Fund's restriction
against investments in illiquid securities exceeding 10% of its total net
assets. Commission rates in foreign countries, which are generally fixed rather
than subject to negotiation as in the United States, are likely to be higher. In
many foreign countries there is less government supervision and regulation of
stock exchanges, brokers, and listed companies than in the United States.
Investments in companies domiciled in developing countries may be
subject to potentially higher risks than investments in developed countries.
These risks include (1) less social, political and economic stability; (2) the
small current size of the markets for such securities and the currently low or
nonexistent volume of trading, which result in a lack of liquidity and in
greater price volatility; (3) certain national policies which may restrict the
Fund's investment opportunities, including restrictions on investment in issuers
or industries deemed sensitive to national interests; (4) the absence of
developed legal structures governing private or foreign investment or allowing
for judicial redress for injury to private property; (5) the absence, until
recently in certain Eastern European countries, of a capital market structure or
market-oriented economy; and (6) the possibility that recent favorable economic
developments in Eastern Europe may be slowed or reversed by unanticipated
political or social events in such countries.
- 12 -
<PAGE>
In addition, many countries in which the Fund may invest have
experienced substantial, and in some periods extremely high, rates of inflation
for many years. Inflation and rapid fluctuations in inflation rates have had and
may continue to have negative effects on the economies and securities markets of
certain countries. Moreover, the economies of some developing countries may
differ favorably or unfavorably from the United States economy in such respects
as growth of gross domestic product, rate of inflation, currency depreciation,
capital reinvestment, resource self-sufficiency and balance of payments
position.
Investments in Eastern European countries may involve risks of
nationalization, expropriation and confiscatory taxation. The Communist
governments of a number of Eastern European countries expropriated large amounts
of private property in the past, in many cases without adequate compensation,
and there can be no assurance that such expropriation will not occur in the
future. In the event of such expropriation, the Fund could lose a substantial
portion of any investments it has made in the affected countries. Further, no
accounting standards exist in Eastern European countries. Finally, even though
certain Eastern European currencies may be convertible into United States
dollars, the conversion rates may be artificial to the actual market values and
may be adverse to Fund Shareholders.
Investing in Russian companies involves a high degree of risk and
special considerations not typically associated with investing in the United
States securities markets, and should be considered highly speculative. Such
risks include: (1) delays in settling portfolio transactions and risk of loss
arising out of Russia's system of share registration and custody; (2) the risk
that it may be impossible or more difficult than in other countries to obtain
and/or enforce a judgment; (3) pervasiveness of corruption and crime in the
Russian economic system; (4) currency exchange rate volatility and the lack of
available currency hedging instruments; (5) higher rates of inflation (including
the risk of social unrest associated with periods of hyper-inflation); (6)
controls on foreign investment and local practices disfavoring foreign investors
and limitations on repatriation of invested capital, profits and dividends, and
on the Fund's ability to exchange local currencies for U.S. dollars; (7) the
risk that the government of Russia or other executive or legislative bodies may
decide not to continue to support the economic reform programs implemented since
the dissolution of the Soviet Union and could follow radically different
political and/or economic policies to the detriment of investors, including
non-market-oriented policies such as the support of certain industries at the
expense of other sectors or investors, or a return to the centrally planned
economy that existed prior to the
- 13 -
<PAGE>
dissolution of the Soviet Union; (8) the financial condition of Russian
companies, including large amounts of inter-company debt which may create a
payments crisis on a national scale; (9) dependency on exports and the
corresponding importance of international trade; (10) the risk that the Russian
tax system will not be reformed to prevent inconsistent, retroactive and/or
exorbitant taxation; and (11) possible difficulty in identifying a purchaser of
securities held by the Fund due to the underdeveloped nature of the securities
markets.
There is little historical data on Russian securities markets because
they are relatively new and a substantial proportion of securities transactions
in Russia are privately negotiated outside of stock exchanges. Because of the
recent formation of the securities markets as well as the underdeveloped state
of the banking and telecommunications systems, settlement, clearing and
registration of securities transactions are subject to significant risks.
Ownership of shares (except where shares are held through depositories that meet
the requirements of the 1940 Act) is defined according to entries in the
company's share register and normally evidenced by extracts from the register or
by formal share certificates. However, there is no central registration system
for shareholders and these services are carried out by the companies themselves
or by registrars located throughout Russia. These registrars are not necessarily
subject to effective state supervision and it is possible for the Fund to lose
its registration through fraud, negligence or even mere oversight. While the
Fund will endeavor to ensure that its interest continues to be appropriately
recorded either itself or through a custodian or other agent inspecting the
share register and by obtaining extracts of share registers through regular
confirmations, these extracts have no legal enforceability and it is possible
that subsequent illegal amendment or other fraudulent act may deprive the Fund
of its ownership rights or improperly dilute its interests. In addition, while
applicable Russian regulations impose liability on registrars for losses
resulting from their errors, it may be difficult for the Fund to enforce any
rights it may have against the registrar or issuer of the securities in the
event of loss of share registration. Furthermore, although a Russian public
enterprise with more than 1,000 shareholders is required by law to contract out
the maintenance of its shareholder register to an independent entity that meets
certain criteria, in practice this regulation has not always been strictly
enforced. Because of this lack of independence, management of a company may be
able to exert considerable influence over who can purchase and sell the
company's shares by illegally instructing the registrar to refuse to record
transactions in the share register. This practice may prevent the Fund from
investing in the securities of certain Russian companies deemed suitable by the
Investment Manager.
- 14 -
<PAGE>
Further, this also could cause a delay in the sale of Russian company securities
by the Fund if a potential purchaser is deemed unsuitable, which may expose the
Fund to potential loss on the investment.
The Fund endeavors to buy and sell foreign currencies on as favorable a
basis as practicable. Some price spread in currency exchange (to cover service
charges) may be incurred, particularly when the Fund changes investments from
one country to another or when proceeds of the sale of Shares in U.S. dollars
are used for the purchase of securities in foreign countries. Also, some
countries may adopt policies which would prevent the Fund from transferring cash
out of the country or withhold portions of interest and dividends at the source.
There is the possibility of cessation of trading on national exchanges,
expropriation, nationalization or confiscatory taxation, foreign exchange
controls (which may include suspension of the ability to transfer currency from
a given country), default in foreign government securities, political or social
instability, or diplomatic developments that could affect investments in
securities of issuers in those nations.
The Fund may be affected either unfavorably or favorably by
fluctuations in the relative rates of exchange between the currencies of
different nations, by exchange control regulations and by indigenous economic
and political developments. Some countries in which the Fund may invest may also
have fixed or managed currencies that are not free-floating against the U.S.
dollar. Further, certain currencies have experienced a steady devaluation
relative to the U.S. dollar. Any devaluations in the currencies in which the
Fund's portfolio securities are denominated may have a detrimental impact
on the Fund. Through the Fund's flexible policy, the Investment
Manager endeavors to avoid unfavorable consequences and to take
advantage of favorable developments in particular nations where from time to
time it places the Fund's investments.
The exercise of this flexible policy may include decisions to purchase
securities with substantial risk characteristics and other decisions such as
changing the emphasis on investments from one nation to another and from one
type of security to another. Some of these decisions may later prove profitable
and others may not. No assurance can be given that profits, if any, will exceed
losses.
The Directors consider at least annually the likelihood of the
imposition by any foreign government of exchange control restrictions which
would affect the liquidity of the Fund's assets maintained with custodians in
foreign countries, as well as the degree of risk from political acts of foreign
governments to which such assets may be exposed. The Directors also consider
- 15 -
<PAGE>
the degree of risk involved through the holding of portfolio securities in
domestic and foreign securities depositories (see "Investment Management and
Other Services -- Custodian and Transfer Agent"). However, in the absence of
willful misfeasance, bad faith or gross negligence on the part of the Investment
Manager, any losses resulting from the holding of the Fund's portfolio
securities in foreign countries and/or with securities depositories will be at
the risk of the Shareholders. No assurance can be given that the Directors'
appraisal of the risks will always be correct or that such exchange control
restrictions or political acts of foreign governments might not occur.
There are additional risks involved in stock index futures
transactions. These risks relate to the Fund's ability to reduce or eliminate
its futures positions, which will depend upon the liquidity of the secondary
markets for such futures. The Fund 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 the Fund 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 the Fund seeks to
close out an option position. If the Fund were unable to close out an option
that it had purchased on a securities index, it would have to exercise the
option in order to realize any profit or the option may expire worthless. If
trading were suspended in an option purchased by the Fund, it would not be able
to close out the option. If restrictions on exercise were imposed, the Fund
might be unable to exercise an option it has purchased. Except to the extent
that a call option on an index written by the Fund is covered by an option on
the same index purchased by the Fund, movements in the index may result in a
loss to the
- 16 -
<PAGE>
Fund; however, such losses may be mitigated by changes in the value of the
Fund's securities during the period the option was outstanding.
TRADING POLICIES. The Investment Manager and its affiliated companies
serve as investment manager to other investment companies and private clients.
Accordingly, the respective portfolios of certain of these funds and clients may
contain many or some of the same securities. When certain funds or clients are
engaged simultaneously in the purchase or sale of the same security, the trades
may be aggregated for execution and then allocated in a manner designed to be
equitable to each party. The larger size of the transaction may affect the price
of the security and/or the quantity which may be bought or sold for each party.
If the transaction is large enough, brokerage commissions may be negotiated
below those otherwise chargeable.
Sale or purchase of securities, without payment of brokerage
commissions, fees (except customary transfer fees) or other remuneration in
connection therewith, may be effected between any of these funds, or between
funds and private clients, under procedures adopted pursuant to Rule 17a-7 under
the 1940 Act.
PERSONAL SECURITIES TRANSACTIONS. Access persons of the Franklin
Templeton Group, as defined in SEC Rule 17(j) under the 1940 Act, who are
employees of Franklin Resources, Inc. or their subsidiaries, are permitted to
engage in personal securities transactions subject to the following general
restrictions and procedures: (1) The trade must receive advance clearance from a
Compliance Officer and must be completed within 24 hours after this clearance;
(2) Copies of all brokerage confirmations must be sent to the Compliance Officer
and within 10 days after the end of each calendar quarter, a report of all
securities transactions must be provided to the Compliance Officer; (3) In
addition to items (1) and (2), access persons involved in preparing and making
investment decisions must file annual reports of their securities holdings each
January and also inform the Compliance Officer (or other designated personnel)
if they own a security that is being considered for a fund or other client
transaction or if they are recommending a security in which they have an
ownership interest for purchase or sale by a fund or other client.
MANAGEMENT OF THE FUND
The name, address, principal occupation during the past five years and
other information with respect to each of the Directors and Principal Executive
Officers of the Fund are as follows:
- 17 -
<PAGE>
NAME, ADDRESS AND PRINCIPAL OCCUPATION
OFFICES WITH FUND DURING PAST FIVE YEARS
HARRIS J. ASHTON
Metro Center
1 Station Place
Stamford, Connecticut
Director
Chairman of the Board, president and
chief executive officer of General Host
Corporation (nursery and craft centers);
and a director of RBC Holdings (U.S.A.)
Inc. (a bank holding company) and Bar-S
Foods. Age 63.
NICHOLAS F. BRADY*
The Bullitt House
102 East Dover Street
Easton, Maryland
Director
Chairman of Templeton Emerging Markets Investment Trust PLC; chairman of
Templeton Latin America Investment Trust PLC; chairman of Darby Overseas
Investments, Ltd. (an investment firm), (1994-present); director of the Amerada
Hess Corporation, Capital Cities/ABC, Inc., Christiana Companies, and the H.J.
Heinz Company; Secretary of the United States Department of the Treasury (1988-
January 1993); and chairman of the board of Dillion, Read & Co. Inc. (investment
banking) prior thereto. Age 65.
F. BRUCE CLARKE
19 Vista View Blvd.
Thornhill, Ontario
Director
Retired; formerly, credit adviser for
National Bank of Canada, Toronto. Age
85.
HASSO-G VON DIERGARDT-
NAGLO
R.R. 3
Stouffville, Ontario
Director
Farmer; and president of Clairhaven
Investments, Ltd. and other private
investment companies. Age 79.
S. JOSEPH FORTUNATO
200 Campus Drive
Florham Park, New Jersey
Director
Member of the law firm of Pitney, Hardin, Kipp & Szuch; and a director of
General Host Corporation. Age 63.
- 18 -
<PAGE>
JOHN Wm. GALBRAITH
360 Central Avenue
Suite 1300
St. Petersburg, Florida
Director
President of Galbraith Properties, Inc.
(personal investment company); director
of Gulfwest Banks, Inc. (bank holding
company) (1995-present) and Mercantile
Bank (1991-present); vice chairman of
Templeton, Galbraith & Hansberger Ltd.
(1986-1992); and chairman of Templeton
Funds Management, Inc. (1974-1991). Age
74.
ANDREW H. HINES, JR.
150 2nd Avenue N.
St. Petersburg, Florida
Director
Consultant for the Triangle Consulting Group; chairman of the board and chief
executive officer of Florida Progress Corporation (1982-February 1990) and
director of various of its subsidiaries; chairman and director of Precise Power
Corporation; executive-in-residence of Eckerd College (1991-present); and a
director of Checkers Drive-In Restaurants, Inc. Age 72.
CHARLES B. JOHNSON*
777 Mariners Island Blvd.
San Mateo, California
Chairman of the Board
and Vice President
President, chief executive officer, and director of Franklin Resources, Inc.;
chairman of the board and director of Franklin Advisers, Inc. and Franklin
Templeton Distributors, Inc.; director of Franklin Administrative Services,
Inc., General Host Corporation, and Templeton Global Investors, Inc.; and
officer and director, trustee or managing general partner, as the case may be,
of most other subsidiaries of Franklin and of 55 of the investment companies in
the Franklin Templeton Group. Age 62.
CHARLES E. JOHNSON*
500 East Broward Blvd.
Fort Lauderdale, Florida
Director
Senior vice president and director of Franklin Resources, Inc.; senior vice
president of Franklin Templeton Distributors, Inc.; president and director of
Franklin Institutional Service Corporation and Templeton Worldwide, Inc.;
chairman of the board of Templeton Investment Counsel, Inc.; vice president
and/or director, as the case may be, for some of the subsidiaries of Franklin
Resources, Inc.; and an officer and/or director or trustee, as the case may be,
of 24 the investment companies in the Franklin Templeton Group. Age 39.
BETTY P. KRAHMER
2201 Kentmere Parkway
Wilmington, Delaware
Director
Director or trustee of various civic
associations; formerly, economic
analyst, U.S. Government. Age 66.
GORDON S. MACKLIN
8212 Burning Tree Road
Bethesda, Maryland
Director
Chairman of White River Corporation (information services); director of Fund
America Enterprises Holdings, Inc., Lockheed Martin Corporation, MCI
Communications Corporation, Fusion Systems Corporation, Infovest Corporation,
and Medimmune, Inc.; and formerly held the following positions: chairman of
Hambrecht and Quist Group; director of H&Q Healthcare Investors;
NAME, ADDRESS AND PRINCIPAL OCCUPATION
OFFICES WITH FUND DURING PAST FIVE YEARS
and president of the National
Association of Securities Dealers, Inc.
Age 67.
FRED R. MILLSAPS
2665 NE 37th Drive
Fort Lauderdale, Florida
Director
Manager of personal investments (1978- present); chairman and chief executive
officer of Landmark Banking Corporation (1969-1978); financial vice president of
Florida Power and Light (1965-1969); vice president of The Federal Reserve Bank
of Atlanta (1958-1965); and a director of various other business and nonprofit
organizations. Age 66.
- 19 -
<PAGE>
NAME, ADDRESS AND PRINCIPAL OCCUPATION
OFFICES WITH FUND DURING PAST FIVE YEARS
GARY P. MOTYL
500 East Broward Blvd.
Fort Lauderdale, Florida
President
Senior vice president and director of Templeton Investment Counsel, Inc.;
director of Templeton Global Investors, Inc.; and president or vice president of
other Templeton Funds. Age 43.
MARK G. HOLOWESKO
Lyford Cay
Nassau, Bahamas
Vice President
President and director of Templeton,
Galbraith & Hansberger Ltd.; director of
global equity research for Templeton
Worldwide, Inc.; president or vice
president of the Templeton Funds;
formerly, investment administrator, Roy
West Trust Corporation (Bahamas) (1984-
1985). Age 35.
MARTIN L. FLANAGAN
777 Mariners Island
Blvd.
San Mateo, California
Vice President Senior vice president, treasurer and chief financial officer of
Franklin Resources, Inc.; director and executive vice president of Templeton
Investment Counsel, Inc.; director, president and chief executive officer of
Templeton Global Investors, Inc.; director or trustee, president or vice
president of various Templeton Funds; accountant, Arthur Andersen & Company
(1982-1983); and a member of the International Society of Financial Analysts and
the American Institute of Certified Public Accountants. Age 35.
JOHN R. KAY
500 East Broward Blvd.
Fort Lauderdale, Florida
Vice President
Vice president of the Templeton Funds; vice president and treasurer of Templeton
Global Investors, Inc. and Templeton Worldwide, Inc.; assistant vice president
of Franklin Templeton Distributors, Inc.; formerly, vice president and
controller, the Keystone Group, Inc. Age 55.
- 20 -
<PAGE>
THOMAS M. MISTELE
700 Central Avenue
St. Petersburg, Florida
Secretary
Senior vice president of Templeton Global Investors, Inc.; vice president of
Franklin Templeton Distributors, Inc.; secretary of the Templeton Funds;
formerly, attorney, Dechert Price & Rhoads (1985-1988) and Freehill, Hollingdale
& Page (1988); and judicial clerk, U.S. District Court (Eastern District of
Virginia) (1984-1985). Age 42.
JAMES R. BAIO
500 East Broward Blvd.
Fort Lauderdale, Florida
Treasurer
Certified public accountant; treasurer of the Templeton Funds; senior vice
president of Templeton Worldwide, Inc., Templeton Global Investors, Inc., and
Templeton Funds Trust Company; formerly, senior tax manager, Ernst & Young
(certified public accountants) (1977- 1989). Age 41.
JEFFREY L. STEELE
1500 K Street, N.W.
Washington, D.C.
Assistant Secretary
Partner, Dechert Price & Rhoads. Age 50.
* These are Directors who are "interested persons" of the Fund
as that term is defined in the 1940 Act. Mr. Brady and
Franklin Resources, Inc. are limited partners of Darby
Overseas Partners, L.P. ("Darby Overseas"). Mr. Brady
established Darby Overseas in February, 1994, and is
Chairman and a shareholder of the corporate general partner
of Darby Overseas. In addition, Darby Overseas and
- 21 -
<PAGE>
Templeton, Galbraith & Hansberger, Ltd. are limited partners
of Darby Emerging Markets Fund, L.P.
There are no family relationships between any of the
Directors, except that Mr. Charles B. Johnson is the father of
Mr. Charles E. Johnson.
DIRECTOR COMPENSATION
All of the Fund's Officers and Directors also hold positions with other
investment companies in the Franklin Templeton Group. No compensation is paid by
the Fund to any officer or Director who is an officer, trustee or employee of
the Investment Manager or its affiliates. Each Templeton Fund pays its
independent directors and trustees and Mr. Brady an annual retainer and/or fees
for attendance at Board and Committee meetings, the amount of which is based on
the level of assets in each fund. Accordingly, the Fund currently pays the
independent Directors and Mr. Brady an annual retainer of $1,000 and a fee of
$100 per meeting attended of the Board and its Committees. The independent
Directors and Mr. Brady are reimbursed for any expenses incurred in attending
meetings, paid pro rata by each Franklin Templeton Fund in which they serve. No
pension or retirement benefits are accrued as part of Fund expenses.
The following table shows the total compensation paid to the Directors
by the Fund and by all investment companies in the Franklin Templeton Group:
<TABLE>
<CAPTION>
Number of Total Compensation
Aggregate Franklin Templeton from ll Funds in
Name of Compensation Fund Boards on which Franklin Templeton
DIRECTOR FROM THE FUND* DIRECTOR SERVES GROUP**
<S> <C> <C> <C>
Harris J. Ashton $ 900 57 $327,925
Nicholas F. Brady $ 900 24 $ 98,225
F. Bruce Clarke $1,400 20 $ 83,350
Hasso-G von Diergardt-Naglo $ 900 20 $ 77,350
S. Joseph Fortunato $ 900 59 $344,745
John Wm. Galbraith $ 350 23 $ 70,100
Andrew H. Hines, Jr. $1,400 24 $106,325
Betty P. Krahmer $ 900 24 $ 93,475
Gordon S. Macklin $ 900 54 $321,525
Fred R. Millsaps $1,400 24 $104,325
- 22 -
<PAGE>
</TABLE>
- ---------------
* For the fiscal year ended August 31, 1995.
** For the calendar year ended December 31, 1995.
PRINCIPAL SHAREHOLDERS
As of December 1, 1995 there were 4,591,146 Shares of the Fund
outstanding. As of that date, no Shares were owned beneficially by any Directors
or Officers of the Fund. As of December 1, 1995, to the knowledge of management,
no person owned beneficially or of record 5% or more of the Fund's outstanding
Shares.
INVESTMENT MANAGEMENT AND OTHER SERVICES
INVESTMENT MANAGEMENT AGREEMENT. The Investment Manager of the Fund is
Templeton Investment Counsel, Inc. a Florida corporation with offices in Fort
Lauderdale, Florida. On October 30, 1992, the Investment Manager assumed the
investment management duties of Templeton, Galbraith & Hansberger Ltd. ("TGH"),
a Cayman Islands corporation, with respect to the Fund in connection with the
merger of the business of TGH with that of Franklin Resources, Inc.
("Franklin"). The Investment Management Agreement, dated October 30, 1992,
amended and restated December 6, 1994 and May 25, 1995 was approved by
Shareholders of the Fund on October 30, 1992, was last approved by the Board of
Directors, including a majority of the Directors who were not parties to the
Agreement or interested persons of any such party, at a meeting on December 5,
1995, and will continue through December 31, 1996. The Investment Management
Agreement continues from year to year, subject to approval annually by the Board
of Directors or by vote of the holders of a majority of the outstanding Shares
of the Fund (as defined in the 1940 Act) and also, in either event, with the
approval of a majority of those Directors who are not parties to the Investment
Management Agreement or interested persons of any such party in person at a
meeting called for the purpose of voting on such approval.
The Investment Management Agreement requires the Investment Manager to
manage the investment and reinvestment of the Fund's assets. The Investment
Manager is not required to furnish any personnel, overhead items or facilities
for the Fund, including daily pricing or trading desk facilities, although such
expenses are paid by investment advisers of some other investment companies.
The Investment Management Agreement provides that the Investment
Manager will select brokers and dealers for execution of the Fund's portfolio
transactions consistent with the Fund's brokerage policy (see "Brokerage
Allocation"). Although the services provided by broker-dealers in accordance
with the brokerage policy incidentally may help reduce the expenses of, or
- 23 -
<PAGE>
otherwise benefit, the Investment Manager and other investment advisory clients
of the Investment Manager and of its affiliates, as well as the Fund, the value
of such services is indeterminable and the Investment Manager's fee is not
reduced by any offset arrangement by reason thereof.
When the Investment Manager determines to buy or sell the same
securities for the Fund that the Investment Manager or certain of its affiliates
have selected for one or more of the Investment Manager's other clients or for
clients of its affiliates, the orders for all such securities trades may be
placed for execution by methods determined by the Investment Manager, with
approval by the Fund's Board of Directors, to be impartial and fair, in order to
seek good results for all parties (see "Investment Objective and Policies --
Trading Policies"). Records of securities transactions of persons who know when
orders are placed by the Fund are available for inspection at least four times
annually by the Compliance Officer of the Fund so that the non-interested
Directors (as defined in the 1940 Act) can be satisfied that the procedures are
generally fair and equitable for all parties.
The Investment Manager also provides management services to numerous
other investment companies or funds and accounts pursuant to management
agreements with each fund or account. The Investment Manager may give advice and
take action with respect to any of the other funds and accounts its manages, or
for its own account, which may differ from action taken by the Investment
Manager on behalf of the Fund. Similarly, with respect to the Fund, the
Investment Manager is not obligated to recommend, purchase or sell, or to
refrain from recommending, purchasing or selling any security that the
Investment Manager and access persons, as defined by the 1940 Act, may purchase
and sell for its or their own account or for the accounts of any other fund or
account. Furthermore, the Investment Manager is not obligated to refrain from
investing in securities held by the Fund or other funds or accounts which it
manages or administers. Any transactions for the accounts of the Investment
Manager and other access persons will be made in compliance with the Fund's Code
of Ethics as described in the section "Investment Objectives and
Policies--Personal Securities Transactions."
The Investment Management Agreement further provides that the
Investment Manager shall have no liability to the Fund or any Shareholder of the
Fund for any error of judgment, mistake of law, or any loss arising out of any
investment or other act or omission in the performance by the Investment Manager
of its duties under the Investment Management Agreement, or for any loss or
damage resulting from the imposition by any government of exchange control
restrictions which might affect the liquidity of
- 24 -
<PAGE>
the Fund's assets, or from acts or omissions of custodians or securities
depositories, or from any wars or political acts of any foreign governments to
which such assets might be exposed, except for any liability, loss or damage
resulting from willful misfeasance, bad faith or gross negligence on the
Investment Manager's part or reckless disregard of its duties under the
Investment Management Agreement. The Investment Management Agreement will
terminate automatically in the event of its assignment, and may be terminated by
the Fund at any time without payment of any penalty on 60 days' written notice,
with the approval of a majority of the Directors of the Fund in office at the
time or by vote of a majority of the outstanding Shares of the Fund (as defined
in the 1940 Act).
MANAGEMENT FEES. For its services, the Fund pays the Investment Manager
a monthly fee equal on an annual basis to 0.75% of its average daily net assets
during the year. During the fiscal years ended August 31, 1995, 1994 and 1993
the Investment Manager received from the Fund under the Investment Management
Agreement fees of $378,859, $208,441, and $92,387, respectively. The Investment
Manager will comply with any applicable state regulations which may require the
Investment Manager to make reimbursements to the Fund in the event that the
Fund's aggregate operating expenses, including the management fee, but generally
excluding interest, taxes, brokerage commissions and extraordinary expenses, are
in excess of specific applicable limitations. The strictest rule currently
applicable to the Fund is 2.5% of the first $30,000,000 of net assets, 2% of the
next $70,000,000 of net assets and 1.5% of the remainder.
TEMPLETON INVESTMENT COUNSEL, INC. The Investment Manager
is an indirect wholly owned subsidiary of Franklin, a publicly
traded company whose shares are listed on the NYSE. Charles B.
Johnson (a Director and officer of the Fund) and Rupert H.
Johnson, Jr. are principal shareholders of Franklin and own,
respectively, approximately 20% and 16% of its outstanding
shares. Messrs. Charles B. Johnson and Rupert H. Johnson, Jr.
are brothers.
BUSINESS MANAGER. Templeton Global Investors, Inc.,
performs certain administrative functions for the Fund including:
o providing office space, telephone, office equipment and
supplies for the Fund;
o paying compensation of the Fund's officers for services
rendered as such;
o authorizing expenditures and approving bills for
payment on behalf of the Fund;
- 25 -
<PAGE>
o supervising preparation of annual and semiannual reports to
Shareholders, notices of dividends, capital gain distributions
and tax credits, and attending to correspondence and other
communications with individual Shareholders;
o supervising publication of daily quotations of the bid
and asked prices of the Fund's Shares, earnings reports
and other financial data;
o daily pricing of the Fund's investment portfolio and
preparing and monitoring relationships with
organizations serving the Fund, including the Custodian
and printers;
o providing trading desk facilities for the Fund;
o supervising compliance by the Fund with record-keeping
requirements under the 1940 Act, regulations thereunder and
with state regulatory requirements; maintaining books and
records for the Fund (other than those maintained by the
Custodian and Transfer Agent); and preparing and filing tax
reports other than the Fund's income tax returns; and
o providing executive, clerical and secretarial help
needed to carry out these responsibilities.
For its services, the Business Manager receives a monthly fee equal on
an annual basis to 0.15% of the first $200,000,000 of the Fund's average daily
net assets, reduced to 0.135% annually of the Fund's net assets in excess of
$200,000,000, further reduced to 0.1% annually of such net assets in excess of
$700,000,000, and further reduced to a fee of 0.075% annually of such net assets
in excess of $1,200,000,000. Since the Business Manager's fee covers services
often provided by investment advisers to other funds, the Fund's combined
expenses for advisory and administrative services may be higher than those of
other investment companies.
During the fiscal years ended August 31, 1995, 1994, and 1993, the
Business Manager (and, prior to April 1, 1993, Templeton Funds Management, Inc.,
the previous business manager) received business management fees of $75,773,
$41,690, and $18,477, respectively. The Business Manager has voluntarily agreed
to temporarily waive all or a portion of its Business Management fee and
reimburse the Fund for other operating expenses such that the Fund's operating
expenses will not exceed 1.00%.
- 26 -
<PAGE>
The Business Manager is relieved of liability to the Fund for any act
or omission in the course of its performance under the Business Management
Agreement in the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of its duties and obligations under the Agreement. The
Business Management Agreement may be terminated by the Fund at any time on 60
days' written notice without payment of penalty provided that such termination
by the Fund shall be directed or approved by vote of a majority of the Directors
of the Fund in office at the time or by vote of the holders of a majority of the
outstanding voting securities of the Fund (as defined by the 1940 Act), and
shall terminate automatically and immediately in the event of its assignment.
Templeton Global Investors, Inc. is an indirect wholly owned
subsidiary of Franklin.
CUSTODIAN AND TRANSFER AGENT. The Chase Manhattan Bank, N.A. serves as
Custodian of the Fund's assets, which are maintained at the custodian's
principal office, MetroTech Center, Brooklyn, New York 11245, and at the offices
of its branches and agencies throughout the world. The Custodian has entered
into agreements with foreign sub-custodians approved by the Directors pursuant
to Rule 17f-5 under the 1940 Act. The Custodian, its branches and sub-custodians
generally domestically, and frequently abroad, do not actually hold certificates
for the securities in their custody, but instead have book records with domestic
and foreign securities depositories, which in turn have book records with the
transfer agents of the issuers of the securities. Compensation for the services
of the Custodian is based on a schedule of charges agreed on from time to time.
Franklin Templeton Investor Services, Inc. serves as the Fund's
Transfer Agent. Services performed by the Transfer Agent include processing
purchase and redemption orders; making dividend payments, capital gain
distributions and reinvestments; and handling all routine communications with
Shareholders. The Transfer Agent receives from the Fund an annual fee of $13.74
per Shareholder account plus out-of-pocket expenses. These fees are adjusted
each year to reflect changes in the Department of Labor Consumer Price Index.
LEGAL COUNSEL. Dechert Price & Rhoads, 1500 K Street, N.W.,
Washington, D.C. 20005, is legal counsel for the Fund.
INDEPENDENT ACCOUNTANTS. McGladrey & Pullen, LLP, 555 Fifth
Avenue, New York, New York 10017, serve as independent
accountants for the Fund. Their audit services comprise
examination of the Fund's financial statements and review of the
- 27 -
<PAGE>
Fund's filings with the Securities and Exchange Commission ("SEC") and the
Internal Revenue Service ("IRS").
REPORTS TO SHAREHOLDERS. The Fund's fiscal year ends on August 31.
Shareholders are provided at least semiannually with reports showing the Fund's
portfolio and other information, including an annual report with financial
statements audited by independent accountants. Shareholders who would like
receive an interim quarterly report may phone the Fund Information Department at
1-800/DIAL BEN.
BROKERAGE ALLOCATION
The Investment Management Agreement provides that the Investment
Manager is responsible for selecting members of securities exchanges, brokers
and dealers (such members, brokers and dealers being hereinafter referred to as
"brokers") for the execution of the Fund's portfolio transactions and, when
applicable, the negotiation of commissions in connection therewith. It is not
the duty of the Investment Manager, nor does it have any obligation, to provide
a trading desk for the Fund's portfolio transactions.
All decisions and placements are made in accordance with the following
principles:
1. Purchase and sale orders will usually be placed with
brokers who are selected by the Investment Manager as
able to achieve "best execution" of such orders. "Best
execution" means prompt and reliable execution at the
most favorable securities price, taking into account
the other provisions hereinafter set forth. The
determination of what may constitute best execution and
price in the execution of a securities transaction by a
broker involves a number of considerations, including,
without limitation, the overall direct net economic
result to the Fund (involving both price paid or
received and any commissions and other costs paid), the
efficiency with which the transaction is effected, the
ability to effect the transaction at all where a large
block is involved, availability of the broker to stand
ready to execute possibly difficult transactions in the
future, and the financial strength and stability of the
broker. Such considerations are judgmental and are
weighed by the Investment Manager and the Fund in
determining the overall reasonableness of brokerage
commissions.
2. In selecting brokers for portfolio transactions, the
Investment Manager takes into account their past
- 28 -
<PAGE>
experience as to brokers qualified to achieve "best
execution," including brokers who specialize in any foreign
securities held by the Fund.
3. The Investment Manager is authorized to allocate
brokerage business to brokers who have provided
brokerage and research services, as such services are
defined in Section 28(e) of the Securities Exchange Act
of 1934 (the "1934 Act"), for the Fund and/or other
accounts, if any, for which the Investment Manager
exercises investment discretion (as defined in Section
3(a)(35) of the 1934 Act), and, as to transactions as
to which fixed minimum commission rates are not
applicable, to cause the Fund to pay a commission for
effecting a securities transaction in excess of the
amount another broker would have charged for effecting
that transaction, if the Investment Manager determines
in good faith that such amount of commission is
reasonable in relation to the value of the brokerage
and research services provided by such broker, viewed
in terms of either that particular transaction or the
Investment Manager's overall responsibilities with
respect to the Fund and the other accounts, if any, as
to which it exercises investment discretion. In
reaching such determination, the Investment Manager is
not required to place or attempt to place a specific
dollar value on the research or execution services of a
broker or on the portion of any commission reflecting
either of said services. In demonstrating that such
determinations were made in good faith, the Investment
Manager shall be prepared to show that all commissions
were allocated and paid for purposes contemplated by
the Fund's brokerage policy; that commissions were
recommended or paid only for products or services which
provide lawful and appropriate assistance to the
Investment Manager in the performance of its investment
decision-making responsibilities; and that the
commissions paid were within a reasonable range. The
determination that commissions were within a reasonable
range shall be based on any available information as to
the level of commissions known to be charged by other
brokers on comparable transactions, but there shall be
taken into account the Fund's policies that (a)
obtaining a low commission is deemed secondary to
obtaining a favorable securities price, since it is
recognized that usually it is more beneficial to the
Fund to obtain a favorable price than to pay the lowest
commission; and (b) the quality, comprehensiveness and
frequency of research studies which are provided for
the Fund and the Investment Manager are useful to the
- 29 -
<PAGE>
Investment Manager in performing its advisory services under
its Investment Management Agreement with the Fund. Research
services provided by brokers to the Investment Manager are
considered to be in addition to, and not in lieu of, services
required to be performed by the Investment Manager under its
Investment Management Agreement. Research furnished by brokers
through whom the Fund effects securities transactions may be
used by the Investment Manager for any of its accounts, and
not all such research may be used by the Investment Manager
for the Fund. When execution of portfolio transactions is
allocated to brokers trading on exchanges with fixed brokerage
commission rates, account may be taken of various services
provided by the broker, including quotations outside the
United States for daily pricing of foreign securities held in
the Fund's portfolio.
4. Purchases and sales of portfolio securities within the United
States other than on a securities exchange shall be executed
with primary market makers acting as principal, except where,
in the judgment of the Investment Manager, better prices and
execution may be obtained on a commission basis or from other
sources.
5. Sales of Templeton Capital Accumulation Plans (the
"Plans"), and thus sales of Fund Shares (which shall be
deemed to also include shares of other investment
companies registered under the 1940 Act which have
either the same investment manager or an investment
manager affiliated with the Fund's Investment Manager),
made by a broker are one factor among others to be
taken into account in recommending and in deciding to
allocate portfolio transactions (including agency
transactions, principal transactions, purchases in
underwritings or tenders in response to tender offers)
for the account of the Fund to that broker; provided
that the broker shall furnish "best execution" as
defined in paragraph 1 above, and that such allocation
shall be within the scope of the Fund's policies as
stated above; and provided further, that in every
allocation made to a broker in which the sale of Shares
is taken into account there shall be no increase in the
amount of the commissions or other compensation paid to
such broker beyond a reasonable commission or other
compensation determined, as set forth in paragraph 3
above, on the basis of best execution alone or best
execution plus research services, without taking
account of or placing any value upon such sale of
Shares.
- 30 -
<PAGE>
Insofar as known to management, no Director or officer of the Fund, nor
the Investment Manager or Principal Underwriter or any person affiliated with
either of them, has any material direct or indirect interest in any broker
employed by or on behalf of the Fund. Franklin Templeton Distributors, Inc., the
Principal Underwriter for the Fund, is a registered broker-dealer but has never
executed any purchase or sale transactions for the Fund's portfolio or
participated in commissions on any such transactions, and it has no intention of
doing so in the future. During the fiscal years ended August 31, 1995, 1994, and
1993, the Fund paid a total of $124,082, $62,000, and $46,000, respectively, in
brokerage commissions. All portfolio transactions are allocated to
broker-dealers only when their prices and execution, in the good faith judgment
of the Investment Manager, are equal to the best available within the scope of
the Fund's policies. There is no fixed method used in determining which
broker-dealers receive which order or how many orders.
PURCHASE, REDEMPTION AND PRICING OF SHARES
The Fund has entered into an agreement with Franklin Templeton
Distributors, Inc. ("FTD"), under which the Fund will issue Shares at net asset
value to Templeton Funds Trust Company ("TFTC") as custodian for the unit
investment trust entitled "Templeton Capital Accumulation Plans." The Fund will
not offer its Shares publicly except through the Plans. Except in cases where
Planholders have liquidated their Plans and received Fund Shares in distribution
as a result of the liquidation privilege under a Plan, it is not generally
contemplated that any person, other than TFTC, as custodian, will directly hold
any Shares of the Fund. The terms of the offering of the Plans are contained in
the prospectus for the Plans.
Other funds advised by the Investment Manager, including those having
capital growth as an objective, are currently being offered with a sales charge
that, when compared to the early years of a Plan, would be less than the sales
and creation charges for the Plans. Investors wishing information on any of
these funds may contact FTD at the address shown on the cover.
The Prospectus describes the manner in which the Fund's Shares may be
redeemed by investors who hold Shares directly.
See "How to Sell Shares of the Fund."
Shares of the Fund are sold to the Plans at net asset value and
delivered directly to the Plans' custodian. Net asset value per Share is
determined as of the scheduled closing of the NYSE (generally 4:00 p.m., New
York time), every Monday through Friday (exclusive of national business
holidays). The Fund's offices
- 31 -
<PAGE>
will be closed, and net asset value will not be calculated, on those days on
which the NYSE is closed, which currently are: New Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
Trading in securities on European and Far Eastern securities exchanges
and over-the-counter markets is normally completed well before the close of
business in New York on each day on which the NYSE is open. Trading of European
or Far Eastern securities generally, or in a particular country or countries,
may not take place on every New York business day. Furthermore, trading takes
place in various foreign markets on days which are not business days in New York
and on which the Fund's net asset value is not calculated. The Fund calculates
net asset value per Share, and therefore effects sales and redemptions of its
Shares, as of the close of the NYSE once on each day on which that Exchange is
open. Such calculation does not take place contemporaneously with the
determination of the prices of many of the portfolio securities used in such
calculation and, if events occur which materially affect the value of those
foreign securities, they will be valued at fair market value as determined by
the management and approved in good faith by the Board of Directors.
The Board of Directors may establish procedures under which the Fund
may suspend the determination of net asset value for the whole or any part of
any period during which (1) the NYSE is closed other than for customary weekend
and holiday closings, (2) trading on the NYSE is restricted, (3) an emergency
exists as a result of which disposal of securities owned by the Fund is not
reasonably practicable or it is not reasonably practicable for the Fund fairly
to determine the value of its net assets, or (4) for such other period as the
SEC may by order permit for the protection of the holders of the Fund's Shares.
OWNERSHIP AND AUTHORITY DISPUTES. In the event of disputes involving
multiple claims of ownership or authority to control a Shareholder's account,
the Fund has the right (but has no obligation) to: (1) freeze the account and
require the written agreement of all persons deemed by the Fund to have a
potential property interest in the account, prior to executing instructions
regarding the account; or (2) interplead disputed funds or accounts with a court
of competent jurisdiction. Moreover, the Fund may surrender ownership of all or
a portion of an account to the IRS in response to a Notice of Levy.
REDEMPTIONS IN KIND. Redemption proceeds are normally paid in cash,
however, the Fund may pay the redemption price in whole or in part by a
distribution in kind of securities from the portfolio of the Fund, in lieu of
cash, in conformity with rules of the SEC. In such circumstances, the securities
distributed
- 32 -
<PAGE>
would be valued at the price used to compute the Fund's net assets value. If
Shares are redeemed in kind, the redeeming Shareholder might incur brokerage
costs in converting the assets into cash. A Fund is obligated to redeem Shares
solely in cash up to the lesser of $250,000 or 1% of its net assets during any
90-day period for any one Shareholder.
TAX STATUS
The Fund intends normally to pay a dividend at least once annually
representing substantially all of its net investment income and to distribute at
least annually any realized net capital gains. By so doing and meeting certain
diversification of assets and other requirements of the Internal Revenue Code of
1986, as amended (the "Code"), the Fund intends to qualify as a regulated
investment company under the Code. The status of the Fund as a regulated
investment company does not involve government supervision of management or of
its investment practices or policies. As a regulated investment company, the
Fund generally will be relieved of liability for United States Federal income
tax on that portion of its net investment income and net realized capital gains
which it distributes to its Shareholders. Amounts not distributed on a timely
basis in accordance with a calendar year distribution requirement are subject to
a nondeductible 4% excise tax. To prevent application of the excise tax, the
Fund intends to make distributions in accordance with the calendar year
distribution requirement.
For Federal tax purposes, Planholders will be regarded as Shareholders
of the Fund. Frequently, state and local taxes follow Federal tax laws;
accordingly, Planholders in such states and localities will likewise be taxable
under state and local tax laws as if they were Shareholders of the Fund.
However, since state and local tax laws may vary, Planholders should consult
their tax advisers about questions relating to their tax treatment as
participants in the Plans.
Dividends representing net investment income and net short-term capital
gains (the excess of net short-term capital gains over net long-term capital
losses) are taxable to Shareholders as ordinary income. Distributions of net
investment income may be eligible for the corporate dividends-received deduction
to the extent attributable to the Fund's qualifying dividend income. However,
the alternative minimum tax applicable to corporations may reduce the benefit of
the dividends-received deduction. Distributions from net capital gains (the
excess of net long-term capital gains over net short-term capital losses)
designated by the Fund as capital gain dividends are taxable to Shareholders as
long-term capital gains, regardless of the length of time the Fund's Shares have
been held
- 33 -
<PAGE>
by a Shareholder, and are not eligible for the dividends-received deduction.
Generally, dividends and distributions are taxable to Shareholders, whether
received in cash or reinvested in Shares of the Fund. Any distributions that are
not from the Fund's investment company taxable income or net capital gain may be
characterized as a return of capital to Shareholders or, in some cases, as
capital gain. Shareholders will be notified annually as to the Federal tax
status of dividends and distributions they receive and any tax withheld thereon.
Income received by the Fund from sources within foreign countries may
be subject to withholding and other income or similar taxes imposed by such
countries. If, at the close of any fiscal year, more than 50% of the value of
the Fund's total assets are invested in securities of foreign corporations (as
to which no assurance can be given), the Fund may elect pursuant to section 853
of the Code to pass through to its Shareholders the foreign income and similar
taxes paid by the Fund in order to enable the Shareholders to take a credit (or
deduction) for foreign income taxes paid by the Fund. In that case, a
Shareholder must include in his gross income on his Federal income tax return
both dividends received by him from the Fund and also the amount which the Fund
advises him is his pro rata portion of foreign income taxes paid with respect
to, or withheld from, dividends on other income of the Fund from its foreign
investments. The Shareholder may then subtract from his Federal income tax the
amount of such taxes withheld, or else treat such foreign taxes as a deduction
from his gross income; however, as in the case of investors receiving income
directly from foreign sources, the above-described tax credit or tax deduction
is subject to certain limitations.
Certain options, futures, and forward contracts in which the Fund may
invest are "section 1256 contracts." Gains or losses on section 1256 contracts
generally are considered 60% long-term and 40% short-term capital gains or
losses ("60/40"); however, foreign currency gains or losses (as discussed below)
arising from certain section 1256 contracts may be treated as ordinary income or
loss. Also, section 1256 contracts held by the Fund at the end of each taxable
year (and on certain other dates as prescribed under the Code) are
"marked-to-market" with the result that unrealized gains or losses are treated
as though they were realized.
Generally, the hedging transactions undertaken by the Fund may result
in "straddles" for U.S. Federal income tax purposes. The straddle rules may
affect the character of gains (or losses) realized by the Fund. In addition,
losses realized by a Fund on positions that are part of the straddle may be
deferred under the straddle rules, rather than being taken into account in
- 34 -
<PAGE>
calculating the taxable income for the taxable year in which the losses are
realized. Because only a few regulations implementing the straddle rules have
been promulgated, the tax consequences to the Fund of hedging transactions are
not entirely clear. The hedging transactions may increase the amount of
short-term capital gain realized by a Fund which is taxed as ordinary income
when distributed to Shareholders.
The Fund may make one or more of the elections available under the Code
which are applicable to straddles. If the Fund makes any of the elections, the
amount, character, and timing of the recognition of gains or losses from the
affected straddle positions will be determined under rules that vary according
to the election(s) made. The rules applicable under certain of the elections may
operate to accelerate the recognition of gains or losses from the affected
straddle positions.
Because application of the straddle rules may affect the character of
gains or losses, defer losses and/or accelerate the recognition of gains or
losses from the affected straddle positions, the amount which must be
distributed to Shareholders and which will be taxed to Shareholders as ordinary
income or long-term capital gain may be increased or decreased as compared to a
fund that did not engage in such hedging transactions.
Requirements relating to the Fund's tax status as a regulated
investment company may limit the extent to which the Fund will be able to engage
in transactions in options, forward contracts and futures contracts.
Under the Code, gains or losses attributable to fluctuations in
exchange rates which occur between the time the Fund accrues income or other
receivables or accrues expenses or other liabilities denominated in a foreign
currency and the time the Fund actually collects such receivables or pays such
liabilities generally are treated as ordinary income or ordinary loss.
Similarly, on disposition of debt securities denominated in a foreign currency
and on disposition of certain futures, forward contracts and options, gains or
losses attributable to fluctuations in the value of foreign currency between the
date of acquisition of the security or contract and the date of disposition also
are treated as ordinary gain or loss. These gains and losses, referred to under
the Code as "section 988" gains and losses, may increase or decrease the amount
of the Fund's net investment income to be distributed to its Shareholders as
ordinary income. For example, fluctuations in exchange rates may increase the
amount of income that a Fund must distribute in order to qualify for treatment
as a regulated investment company and to prevent application of an excise tax on
undistributed income. Alternatively, fluctuations in exchange
- 35 -
<PAGE>
rates may decrease or eliminate income available for distribution. If foreign
exchange losses exceed other net investment income during a taxable year, the
Fund would not be able to make ordinary dividend distributions, or distributions
made before the losses were realized would be recharacterized as a return of
capital to Shareholders for Federal income tax purposes, rather than as an
ordinary dividend, reducing each Shareholder's basis in his Fund Shares.
The Fund may invest in stocks of foreign companies that are classified
under the Code as passive foreign investment companies ("PFICs"). In general, a
foreign company is classified as a PFIC if at least one-half of its assets
constitute investment-type assets or 75% or more of its gross income is
investment-type income. Under the PFIC rules, an "excess distribution" received
with respect to PFIC stock is treated as having been realized ratably over the
period during which the Fund held the PFIC stock. A Fund itself will be subject
to tax on the portion, if any, of the excess distribution that is allocated to
the Fund's holding period in prior taxable years (and an interest factor will be
added to the tax, as if the tax had actually been payable in such prior taxable
years) even though the Fund distributes the corresponding income to
Shareholders. Excess distributions include any gain from the sale of PFIC stock
as well as certain distributions from a PFIC. All excess distributions are
taxable as ordinary income.
The Fund may be able to elect alternative tax treatment with respect to
PFIC shares. Under an election that currently may be available, the Fund
generally would be required to include in its gross income its share of the
earnings of a PFIC on a current basis, regardless of whether any distributions
are received from the PFIC. If this election is made, the special rules,
discussed above, relating to the taxation of excess distributions, would not
apply. In addition, another election may be available that would involve marking
to market the Fund's PFIC shares at the end of each taxable year (and on certain
other dates prescribed in the Code), with the result that unrealized gains are
treated as though they were realized. If this election were made, tax at the
fund level under the PFIC rules would generally be eliminated, but the Fund
could, in limited circumstances, incur nondeductible interest charges. The
Fund's intention to qualify annually as a regulated investment company may limit
its elections with respect to PFIC shares.
Because the application of the PFIC rules may affect, among other
things, the character of gains, the amount of gain or loss and the timing of the
recognition of income with respect to PFIC shares, as well as subject the Fund
itself to tax on certain income from PFIC shares, the amount that must be
distributed to
- 36 -
<PAGE>
Shareholders, and which will be taxed to Shareholders as ordinary income or
long-term capital gain, may be increased or decreased substantially as compared
to a fund that did not invest in PFIC shares.
Certain of the debt securities acquired by the Fund may be treated as
debt securities that were originally issued at a discount. Original issue
discount can generally be defined as the difference between the price at which a
security was issued and its stated redemption price at maturity. Although no
cash income is actually received by the Fund, original issue discount on a
taxable debt security earned in a given year generally is treated for Federal
income tax purposes as interest and, therefore, such income would be subject to
the distribution requirements of the Code.
Some of the debt securities may be purchased by the Fund at a discount
which exceeds the original issue discount on such debt securities, if any. This
additional discount represents market discount for Federal income tax purposes.
The gain realized on the disposition of any taxable debt security having market
discount will be treated as ordinary income to the extent it does not exceed the
accrued market discount on such debt security. Generally, market discount
accrues on a daily basis for each day the debt security is held by the Fund at a
constant rate over the time remaining to the debt security's maturity or, at the
election of the Fund, at a constant yield to maturity which takes into account
the semiannual compounding of interest.
Upon the sale or exchange of his Shares, a Shareholder generally will
realize a taxable gain or loss depending upon the basis in the Shares. Such gain
or loss will be treated as capital gain or loss if the Shares are capital assets
in the Shareholder's hands, and will be long-term if the Shareholder's holding
period for the Shares is more than one year and generally otherwise will be
short-term. Any loss realized on a sale or exchange will be disallowed to the
extent that the Shares disposed of are replaced (including replacement through
the reinvesting of dividends and capital gain distributions in the Fund) within
a period of 61 days beginning 30 days before and ending 30 days after the
disposition of the Shares. In such a case, the basis of the Shares acquired will
be adjusted to reflect the disallowed loss. Any loss realized by a Shareholder
on the sale of Fund Shares held by the Shareholder for six months or less will
be treated for Federal income tax purposes as a long-term capital loss to the
extent of any distributions of long-term capital gains designated by the Fund as
capital gain dividends received by the Shareholder with respect to such Shares.
- 37 -
<PAGE>
In some cases, Shareholders will not be permitted to take sales charges
into account for purposes of determining the amount of gain or loss realized on
the disposition of their Shares. This prohibition generally applies where (1)
the Shareholder incurs a sales charge in acquiring the stock of a regulated
investment company, (2) the stock is disposed of before the 91st day after the
date on which it was acquired, and (3) the Shareholder subsequently acquires
shares of the same or another regulated investment company and the otherwise
applicable sales charge is reduced under a "reinvestment right" received upon
the initial purchase of shares of stock. Sales charges affected by this rule are
treated as if they were incurred with respect to the stock acquired under the
reinvestment right. This provision may be applied to successive acquisitions of
shares of stock.
The Fund generally will be required to withhold Federal income tax at a
rate of 31% ("backup withholding") from dividends paid, capital gain
distributions, and redemption proceeds to Shareholders if (1) the Shareholder
fails to furnish the Fund with the Shareholder's correct taxpayer identification
number or social security number and to make such certification as the Fund may
require, (2) the IRS notifies the Shareholders, the Custodian, or the Fund that
the Shareholder has failed to report properly certain interest and dividend
income to the IRS and to respond to notices to that effect, or (3) when required
to do so, the Shareholder fails to certify that he is not subject to backup
withholding. Any amounts withheld may be credited against the Shareholder's
Federal income tax liability.
Ordinary dividends and capital gain distributions declared in October,
November or December with a record date in such month and paid during the
following January will be treated as having been paid by the Fund and received
by Shareholders on December 31 of the calendar year in which declared, rather
than the calendar year in which the dividends are actually received.
As indicated, distributions also may be subject to state, local, and
other taxes. U.S. tax rules applicable to foreign investors may differ
significantly from those outlined above. Shareholders are advised to consult
their tax advisers for details with respect to the particular tax consequences
to them of an investment in the Fund.
PRINCIPAL UNDERWRITER
Franklin Templeton Distributors, Inc. ("FTD" or the
"Principal Underwriter"), P.O. Box 33030, St. Petersburg, Florida
33733-8030 -- toll free telephone (800) 237-0738, is the
Principal Underwriter of the Fund's Shares. FTD is a wholly
owned subsidiary of Franklin.
- 38 -
<PAGE>
The Distribution Agreement provides that the Fund shall pay the costs
and expenses incident to registering and qualifying its Shares for sale under
the Securities Act of 1933 and under the applicable securities laws of the
jurisdictions in which the Principal Underwriter desires to distribute the
Shares, and for preparing, printing and distributing prospectuses and reports to
Shareholders. The Principal Underwriter is responsible for the cost of printing
additional copies of prospectuses and reports to Shareholders used for selling
purposes. (The Fund pays costs of preparation, set-up and initial supply of the
Fund's Prospectus for existing Shareholders.)
The Distribution Agreement is subject to renewal from year to year in
accordance with the provisions of the 1940 Act and terminates automatically in
the event of its assignment. The Distribution Agreement may be terminated
without penalty by either party on 60 days' written notice to the other,
provided termination by the Fund shall be approved by the Board of Directors or
a majority (as defined in the 1940 Act) of the Shareholders. The Principal
Underwriter is relieved of liability for any act or omission in the course of
its performance of the Distribution Agreement, in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations.
During the fiscal years ended August 31, 1995, 1994, and 1993, the
Principal Underwriter, as sponsor of the Plans, retained $575,554, $336,780, and
$185,919, or approximately 8.7% 8.8%, and 8.6% of the gross sales commissions,
respectively, attributable to sales of the Plans.
FTD is the principal underwriter for the other Templeton Funds.
DESCRIPTION OF SHARES
The Shares have non-cumulative voting rights so that the holders of a
plurality of the Shares voting for the election of Directors at a meeting at
which 50% of the outstanding Shares are present can elect all the Directors and,
in such event, the holders of the remaining Shares voting for the election of
Directors will not be able to elect any person or persons to the Board of
Directors.
PERFORMANCE INFORMATION
The Fund may, from time to time, include its total return in
advertisements or reports to Shareholders or prospective investors. Quotations
of average annual total return for the Fund will be expressed in terms of the
average annual compounded
- 39 -
<PAGE>
rate of return for periods in excess of one year or the total return for periods
less than one year of a hypothetical investment in the Fund over periods of one,
five and ten years, calculated pursuant to the following formula: P(1 + T)n =
ERV (where P = a hypothetical initial payment of $1,000, T = the average annual
total return for periods of one year or more or the total return for periods of
less than one year, n = the number of years, and ERV = the ending redeemable
value of a hypothetical $1,000 payment made at the beginning of the period). All
total return figures reflect the deduction of a proportional share of Fund
expenses on an annual basis, and assume that all dividends and distributions are
reinvested when paid. The Fund's total returns will not include the effect of
paying the sales and creation charges associated with the purchase of Shares of
the Fund through the Plans; of course, total returns would be lower if the sales
and creation charges were taken into account. The Fund's average annualized
total return for the fiscal year ended August 31, 1995 and the period from March
1, 1991 (commencement of operations) to August 31, 1995 was 3.4% and 13.75%,
respectively.
Performance information for the Fund may be compared in reports and
promotional literature to: (1) the S&P 500 Index, Dow Jones Industrial Average,
or other unmanaged indices so that investors may compare the Fund's results with
those of a group of unmanaged securities widely regarded by investors as
representative of the securities market in general; (2) other groups of mutual
funds tracked by Lipper Analytical Services, a widely used independent research
firm which ranks mutual funds by overall performance, investment objectives and
assets, or tracked by other services, companies, publications, or persons who
rank mutual funds on overall performance or other criteria; and (3) the Consumer
Price Index (measure for inflation) to assess the real rate of return from an
investment in the Fund. Unmanaged indices may assume the reinvestment of
dividends but generally do not reflect deductions for administrative and
management costs and expenses.
Performance information for the Fund reflects only the performance of a
hypothetical investment in the Fund during the particular time period on which
the calculations are based. Performance information should be considered in
light of the Fund's investment objective and policies, characteristics and
quality of the portfolio and the market conditions during the given time period,
and should not be considered as a representation of what may be achieved in the
future.
From time to time, the Fund and the Investment Manager may also refer
to the following information:
- 40 -
<PAGE>
(1) The Investment Manager's and its affiliates' market share of
international equities managed in mutual funds prepared or
published by Strategic Insight or a similar statistical
organization.
(2) The performance of U.S. equity and debt markets
relative to foreign markets prepared or published by
Morgan Stanley Capital International or a similar
financial organization.
(3) The capitalization of U.S. and foreign stock markets as
prepared or published by the International Finance
Corporation, Morgan Stanley Capital International or a similar
financial organization.
(4) The geographic and industry distribution of the Fund's
portfolio and the Fund's top ten holdings.
(5) The gross national product and populations, including
age characteristics, literacy rates, foreign investment
improvements due to a liberalization of securities laws
and a reduction of foreign exchange controls, and
improving communication technology, of various
countries as published by various statistical
organizations.
(6) To assist investors in understanding the different
returns and risk characteristics of various
investments, the Fund may show historical returns of
various investments and published indices (E.G.,
Ibbotson Associates, Inc. Charts and Morgan Stanley
EAFE - Index).
(7) The major industries located in various jurisdictions
as published by the Morgan Stanley Index.
(8) Rankings by DALBAR Surveys, Inc. with respect to mutual
fund shareholder services.
(9) Allegorical stories illustrating the importance of
persistent long-term investing.
(10) The Fund's portfolio turnover rate and its ranking
relative to industry standards as published by Lipper
Analytical Services, Inc. or Morningstar, Inc.
(11) A description of the Templeton organization's
investment management philosophy and approach,
including its worldwide search for undervalued or
"bargain" securities and its diversification by
- 41 -
<PAGE>
industry, nation and type of stocks or other
securities.
(12) Quotations from the Templeton organization's founder, Sir John
Templeton,* advocating the virtues of diversification and
long-term investing, including the following:
o "Never follow the crowd. Superior performance is
possible only if you invest differently from the
crowd."
o "Diversify by company, by industry and by
country."
o "Always maintain a long-term perspective."
o "Invest for maximum total real return."
o "Invest - don't trade or speculate."
o "Remain flexible and open-minded about types of
investment."
o "Buy low."
o "When buying stocks, search for bargains among
quality stocks."
o "Buy value, not market trends or the economic
outlook."
o "Diversify. In stocks and bonds, as in much else,
there is safety in numbers."
o "Do your homework or hire wise experts to help
you."
o "Aggressively monitor your investments."
o "Don't panic."
o "Learn from your mistakes."
o "Outperforming the market is a difficult task."
- --------
* Sir John Templeton sold the Templeton organization
to Franklin Resources, Inc. in October, 1992 and
resigned from the Fund's Board on April 16, 1995.
He is no longer involved with the investment
management process.
- 42 -
<PAGE>
o "An investor who has all the answers doesn't even
understand all the questions."
o "There's no free lunch."
o "And now the last principle: Do not be fearful or
negative too often."
In addition, the Fund and the Investment Manager may also refer to the
number of Shareholders in the Fund or the aggregate number of shareholders of
the Franklin Templeton Funds or the dollar amount of fund and private account
assets under management in advertising materials.
FINANCIAL STATEMENTS
The financial statements contained in the Fund's Annual Report to
Shareholders dated August 31, 1995 are incorporated herein by reference.
<PAGE>
TLCAP STMT 01/96
- 44 -
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS
Incorporated by reference to Registrant's 1995 Annual
Report:
Independent Auditors' Report
Investment Portfolio as of August 31, 1995
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets for the years ended
August 31, 1995 and 1994
Notes to Financial Statements
(b) EXHIBITS:
(1) Articles of Incorporation
(2) By-Laws
(3) Not applicable
(4) Specimen certificate for Common Stock*
(5) Form of Investment Management Agreement
(6) Distribution Agreement
(7) Not applicable
(8) Custody Agreement
- -------------------------
* Previously filed with Pre-Effective Amendment No. 2 on February
28, 1991.
C-1
<PAGE>
(9) (A) Business Management Agreement
(B) Form of Transfer Agent Agreement
(10) Opinion and consent of counsel (previously
filed with 24f-2 Notice)
(11) Consent of independent public accountants
(12) Not applicable
(13) Initial capital agreement*
(14) Not applicable
(15) Not applicable
(16) Schedule showing computation of performance
quotations provided in response to Item 22
(unaudited)
(17) Assistant Secretary's Certificate pursuant
to Rule 483(b)
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 26. NUMBER OF RECORD HOLDERS.
Shares of common stock, par value $0.01 per Share: 18,769
record holders as of November 30, 1995
ITEM 27. INDEMNIFICATION.
Article 5.2 of the Registrant's By-Laws filed as Exhibit 2,
the Investment Management Agreement filed as Exhibit 5 and the
Distribution Agreement filed as Exhibit 6 to this Registration
Statement provide for indemnification.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the Registrant by the Registrant
pursuant to the By-Laws or otherwise, the Registrant is aware
that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in
the Act and, therefore, is unenforceable. In the event that a
claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by
directors, officers or controlling persons of the Registrant
in
C-2
<PAGE>
connection with the successful defense of any action, suit or
proceeding) is asserted by such directors, officers or
controlling persons in connection with the shares being
registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issues.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT MANAGER AND ITS
OFFICERS AND DIRECTORS.
The business and other connections of Registrant's investment
manager, Templeton Investment Counsel, Inc., are described in
Parts A and B.
For information relating to the investment manager's officers
and directors, reference is made to Form ADV filed under the
Investment Advisers Act of 1940 by Templeton Investment
Counsel, Inc.
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) Franklin Templeton Distributors, Inc. also acts as
principal underwriter of shares of:
Templeton Growth Fund, Inc.
Templeton Funds, Inc.
Templeton Smaller Companies Growth Fund, Inc.
Templeton Income Trust
Templeton Real Estate Securities Fund
Templeton Developing Markets Trust
Templeton American Trust, Inc.
Templeton Institutional Funds, Inc.
Templeton Global Opportunities Trust
Templeton Variable Products Series Fund
Templeton Global Investment Trust
Templeton Variable Annuity Fund
AGE High Income Fund, Inc.
Franklin Balance Sheet Investment Fund
Franklin California Tax Free Income Fund, Inc.
Franklin California Tax Free Trust
Franklin Custodian Funds, Inc.
Franklin Equity Fund
Franklin Federal Money Fund
Franklin Federal Tax-Free Income Fund
Franklin Gold Fund
Franklin International Trust
Franklin Investors Securities Trust
Franklin Managed Trust
Franklin Money Fund
Franklin Municipal Securities Trust
C-3
<PAGE>
Franklin New York Tax-Free Income Fund Franklin New
York Tax-Free Trust Franklin Premier Return Fund
Franklin Real Estate Securities Fund Franklin
Strategic Series Franklin Tax-Advantaged High Yield
Securities Fund Franklin Tax-Advantaged International
Bond Fund Franklin Tax-Advantaged U.S. Government
Securities Fund Franklin Tax Exempt Money Fund
Franklin Tax-Free Trust Franklin Value Investors
Trust Franklin Templeton Global Trust Franklin
Templeton Money Fund Trust Franklin Templeton Japan
Fund Institutional Fiduciary Trust.
(b) The directors and officers of FTD are identified
below. Except as otherwise indicated, the address of
each director and officer is 777 Mariners Island
Blvd., San Mateo, CA 94404:
<TABLE>
<CAPTION>
Positions and Offices Positions and Offices
NAME WITH UNDERWRITER WITH REGISTRANT
<S> <C> <C>
Charles B. Johnson Chairman of the Board Chairman of the Board
and Vice President
Gregory E. Johnson President None
Rupert H. Johnson, Jr. Executive Vice President None
and Director
Harmon E. Burns Executive Vice President None
and Director
Edward V. McVey Senior Vice President None
Kenneth V. Domingues Senior Vice President None
Kenneth A. Lewis Treasurer None
William J. Lippman Senior Vice President None
Richard C. Stoker Senior Vice President None
Charles E. Johnson Senior Vice President Director
500 East Broward Blvd.
Ft. Lauderdale, Florida
Deborah R. Gatzek Senior Vice President and None
Assistant Secretary
James K. Blinn Vice President None
C-4
<PAGE>
Richard O. Conboy Vice President None
James A. Escobedo Vice President None
Loretta Fry Vice President None
Mike Hackett Vice President None
Ken Leder Vice President None
Peter Jones Vice President None
700 Central Avenue
St. Petersburg, Florida
Philip J. Kearns Vice President None
Jack Lemein Vice President None
John R. McGee Vice President None
Thomas M. Mistele Vice President Secretary
700 Central Avenue
St. Petersburg, Florida
Harry G. Mumford Vice President None
Vivian J. Palmieri Vice President None
Kent P. Strazza Vice President None
John R. Kay Assistant Vice President Vice President
500 East Broward Blvd.
Ft. Lauderdale, Florida
Leslie M. Kratter Secretary None
Karen DeBellis Assistant Treasurer None
700 Central Avenue
St. Petersburg, Florida
Philip A. Scatena Assistant Treasurer None
</TABLE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
Originals of all accounts, books and other documents required
to be maintained by the Registrant pursuant to Section 31(a)
of the Investment Company Act of 1940, as amended, and rules
promulgated thereunder, are maintained at the office of
Templeton Global Investors, Inc., 500 East Broward Blvd., Fort
Lauderdale, Florida
33394.
ITEM 31. MANAGEMENT SERVICES.
C-5
<PAGE>
Not applicable.
ITEM 32. UNDERTAKINGS.
(a) Not applicable.
(b) Not applicable.
(c) Registrant undertakes to furnish to each person to
whom a Prospectus is provided a copy of its latest
Annual Report, upon request and without charge.
(d) Registrant undertakes to call a meeting of the
shareholders, if requested to do so by the holders of
at least 10% of the Registrant's outstanding shares,
for the purpose of voting upon the question of
removal of a director or directors, and will assist
communications among shareholders as set forth within
Section 16(c) of the 1940 Act.
C-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant certifies that it meets all
the requirements for effectiveness of the Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this Amendment
to its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of St.
Petersburg, Florida on this 29th day of December, 1995.
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
(Registrant)
By: Gary P. Motyl*
President
*By: /s/THOMAS M. MISTELE
Thomas M. Mistele
attorney-in-fact**
Pursuant to the requirements of the Securities Act of 1933,
this Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
Gary P. Motyl* President (Chief December 29, 1995
Executive Officer)
F. Bruce Clarke* Director December 29, 1995
Betty P. Krahmer* Director December 29, 1995
Hasso-G von Diergardt* Director December 29, 1995
C-7
<PAGE>
Charles B. Johnson* Director December 29, 1995
Fred R. Millsaps* Director December 29, 1995
John Wm. Galbraith* Director December 29, 1995
Charles E. Johnson* Director December 29, 1995
Harris J. Ashton* Director December 29, 1995
S. Joseph Fortunato* Director December 29, 1995
Andrew H. Hines, Jr.* Director December 29, 1995
Gordon S. Macklin* Director December 29, 1995
Nicholas F. Brady* Director December 29, 1995
James R. Baio* Treasurer (Chief December 29, 1995
Financial and
Accounting Officer)
</TABLE>
C-8
<PAGE>
*By: /s/THOMAS M. MISTELE
Thomas M. Mistele
attorney-in-fact**
- -------------------
** Powers of Attorney are contained in Post-Effective Amendment No. 3 to
this Registration Statement filed on October 30, 1992, Post-Effective
Amendment No. 4 to this Registration Statement filed on November 2,
1993, Post-Effective Amendment No. 5 to this Registration Statement
filed on December 23, 1993, Post-Effective Amendment No. 6 to this
registration statement filed on December 30, 1994, and filed herewith.
C-9
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, being a duly
elected Director of Templeton Capital Accumulator Fund, Inc. (the "Fund"),
constitutes and appoints Allan S. Mostoff, Jeffrey L. Steele, William J.
Kotapish and Thomas M. Mistele, and each of them, his true and lawful
attorney-in-fact and agents with full power of substitution and resubstitution
for him in his name, place and stead, in any and all capacities, to sign the
Fund's registration statement and any and all amendments thereto, and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and act and thing requisite and necessary to be done,as fully
to all intents and purposes as he might or could do in person, hereby ratifying
and conforming all that said attorneys-in-fact and agents, or any of the, or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Dated: August 31, 1995
/s/JOHN WM. GALBRAITH
John Wm. Galbraith
C-10
<PAGE>
EXHIBIT LIST
EXHIBIT NUMBER NAME OF EXHIBIT
(1) Articles of Incorporation
(2) By-Laws
(5) Form of Investment Management Agreement
(6) Distribution Agreement
(8) Custody Agreement
(9) (A) Business Management Agreement
(B) Form of Transfer Agent Agreement
(11) Consent of Independent Public
Accountants
(16) Schedule 16
(17) Assistant Secretary's Certificate
pursuant to Rule 483(b)
(27) Financial Data Schedules
C-11
<PAGE>
ARTICLES OF INCORPORATION
OF
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
FIRST: The undersigned, KEITH W. VANDIVORT, whose post office
address is 1500 K Street, N.W., Washington, D.C. 20005, being of full legal age,
under and by virtue of the General Laws of the State of Maryland authorizing the
formation of corporations, is acting as sole incorporator with the intention of
forming a corporation.
SECOND: The name of the Corporation is TEMPLETON
CAPITAL ACCUMULATOR FUND, INC.
THIRD: The purposes for which the Corporation is
formed are as follows:
(1) To hold, invest and reinvest its funds, and in
connection therewith to hold part or all of its funds
in cash, and to purchase, subscribe for or otherwise
acquire, hold for investment or other-wise, to trade
and deal in, write, sell, assign, negotiate,
transfer, exchange, lend, pledge or otherwise dispose
of or turn to account or realize upon, securities
(which term "securities" shall for the purposes of
these Articles of Incorporation, without limitation
of the generality thereof, be deemed to include any
stocks, shares, bonds, debentures, bills, notes,
mortgages or other obligations or evidences of
indebtedness, and any options, certificates,
<PAGE>
receipts, warrants, futures contracts or other
instruments representing rights to receive, purchase
or subscribe for the same, or evidencing or
representing any other rights or interests therein or
in any property or assets; and any negotiable or
non-negotiable instruments and money market
instruments, including bank certificates of deposit,
finance paper, commercial paper, bankers' acceptances
and all kinds of repurchase or reverse repurchase
agreements) created or issued by any United States or
foreign issuer (which term "issuer" shall, for the
purposes of these Articles of Incorporation, without
limiting the generality thereof, be deemed to include
any persons, firms, associations, partnerships,
corporations, syndi-cates, combinations,
organizations, governments or subdivisions, agencies
or instrumentalities of any government); and to
exercise, as owner or holder of any securities, all
rights, powers and privi-leges in respect thereof;
and to do any and all acts and things for the
preservation, protection, improvement and enhancement
in value of any and all such securities.
(2) To acquire all or any part of the goodwill,
rights, property and business of any person, firm,
association or corporation heretofore or hereafter
- 2 -
<PAGE>
engaged in any business similar to any business which
the Corporation has the power to conduct, and to
hold, utilize, enjoy and in any manner dispose of the
whole or any part of the rights, property and
business so acquired, and to assume in connection
therewith any liabilities of any such person, firm,
association or corporation.
(3) To apply for, obtain, purchase or otherwise acquire,
any patents, copyrights, licenses, trademarks, trade
names and the like, which may seem capable of being
used for any of the purposes of the Corporation; and
to use, exercise, develop, grant licenses in respect
of, sell and otherwise turn to account, the same.
(4) To issue and sell shares of its own capital stock and
securities convertible into such capital stock in
such amounts and on such terms and conditions, for
such purposes and for such amount or kind of
consideration (including without limitation thereto,
securities) now or hereafter permitted by the laws of
Maryland, by the Investment Company Act of 1940 and
by these Articles of Incorporation, as its Board of
Directors may determine.
(5) To purchase or otherwise acquire, hold, dispose
of, resell, transfer, reissue or cancel (all
- 3 -
<PAGE>
without the vote or consent of the stockholders of
the Corporation) shares of its capital stock in any
manner and to the extent now or hereafter permitted
by the laws of Maryland, by the Investment Company
Act of 1940 and by these Articles of Incorporation.
(6) To conduct its business in all its branches at one or
more offices in Maryland and elsewhere in any part of
the world, without restriction or limit as to extent.
(7) To exercise and enjoy, in Maryland and in any other
states, territories, districts and United States
dependencies and in foreign countries, all of the
powers, rights and privileges granted to, or
conferred upon, corporations by the General Laws of
the State of Maryland now or hereafter in force, and
the enumeration of the foregoing powers shall not be
deemed to exclude any powers, rights or privileges so
granted or conferred.
(8) In general to carry on any other business in
connection with or incidental to its corporate
purposes, to do everything necessary, suitable or
proper for the accomplishment of such purposes or for
the attainment of any object or the further-ance of
any power hereinbefore set forth, either alone or in
association with others, to do every
- 4 -
<PAGE>
other act or thing incidental or appurtenant to or
growing out of or connected with its business or
purposes, objects or powers, and, subject to the
foregoing, to have and exercise all the powers,
rights and privileges conferred upon corporations by
the laws of the State of Maryland as in force from
time to time.
The foregoing objects and purposes shall, except as otherwise expressly
provided, be in no way limited or restricted by reference to, or inference from,
the terms of any other clause of this or any other Article of these Articles of
Incorporation, and shall each be regarded as independent and construed as a
power as well as an object and a purpose, and the enumeration of specific
purposes, objects and powers shall not be construed to limit or restrict in any
manner the meaning of general terms or the general powers of the Corporation now
or hereafter conferred by the laws of Maryland, nor shall the expression of one
thing be deemed to exclude another though it be of like nature, not expressed;
provided however, that the Corporation shall not have power to carry on within
the State of Maryland any business whatsoever the carrying on of which would
preclude it from being classified as an ordinary business corporation under the
laws of said State; nor shall it carry on any business, or exercise any powers,
in any other state, territory, district or country except to the extent that the
same may lawfully be carried on or exer-cised under the laws thereof.
- 5 -
<PAGE>
Incident to meeting the purposes specified above, the Corporation also
shall have the power:
(1) To acquire (by purchase, lease or otherwise) and to
hold, use, maintain, develop and dispose (by sale or
otherwise) of any property, real or personal, and any
interest therein.
(2) To borrow money and, in this connection, issue
notes or other evidence of indebtedness.
(3) Subject to any applicable provisions of law, to
buy, hold, sell, and otherwise deal in and with
foreign exchange.
FOURTH: The post office address of the principal office of the
Corporation in the State of Maryland is c/o The Corporation Trust Incorporated,
32 South Street, Baltimore, Maryland 21202. The name of the resident agent of
the Corporation is The Corporation Trust Incorporated, a corporation of the
State of Maryland, and the post office address of the resident agent is 32 South
Street, Baltimore, Maryland 21202.
FIFTH:
(1) The total number of shares of stock which the
Corporation shall have the authority to issue is ONE
HUNDRED MILLION (100,000,000) Common Shares of the
par value of ONE CENT ($0.01) each and of the
aggregate par value of ONE MILLION DOLLARS
($1,000,000).
- 6 -
<PAGE>
(2) At all meetings of stockholders, each stock-holder of
the Corporation shall be entitled to one vote for
each share of stock standing in his name on the books
of the Corporation on the date fixed in accordance
with the Bylaws for determination of stockholders
entitled to vote at such meeting. Any fractional
share shall carry proportionately all the rights of a
whole share, including the right to vote and the
right to receive dividends and distributions.
(3) Each holder of the capital stock of the Corpora-
tion upon proper written request (including
signature guarantees if required by the Board of
Directors) to the Corporation accompanied, when
stock certificates representing such shares are
outstanding, by surrender of the appropriate stock
certificate or certificates in proper form for
transfer (or such other form as the Board of
Directors may provide) shall be entitled to
require the Corporation to redeem all or any part
of the shares of capital stock standing in the
name of such holder on the books of the Corpora-
tion, at the net asset value of such shares, less
any redemption fee fixed by the Board of Directors
and payable to the Corporation not exceeding 1% of
the net asset value of the shares redeemed. Any
- 7 -
<PAGE>
such redemption fee may be applied in such cases as
may be determined by the Board. The method of
computing such net asset value, the time as of which
such net asset value shall be computed and the time
within which the Corporation shall make payment
therefore, shall be determined as herein-after
provided in Article SEVENTH of these Articles of
Incorporation. Notwithstanding the foregoing, the
Board of Directors of the Corpora-tion may suspend
the right of the holders of the capital stock of the
Corporation to require the Corporation to redeem
shares of such capital stock when permitted or
required to do so by the Investment Company Act of
1940, as from time to time amended and any rule,
regulation or order thereunder.
(4) All shares of the capital stock of the Corporation
now or hereafter authorized shall be subject to
redemption and are redeemable at the option of the
stockholder, in the sense used in the General Laws of
the State of Maryland authorizing the formation of
corporations, at the redemption price for any such
shares, determined in the manner set out in these
Articles of Incorporation or in any amend-ment
thereto. In the absence of any specification as to
the purposes for which shares of the capital
- 8 -
<PAGE>
stock of the Corporation are redeemed or repur-chased
by it, all shares so redeemed or repur-chased shall
be deemed to be acquired for retire-ment in the sense
contemplated by the laws of the State of Maryland and
the number of the authorized shares of the capital
stock of the Corporation shall not be reduced by the
number of any shares redeemed or repurchased by it.
(5) Notwithstanding any provision of law requiring any
action to be taken or authorized by the affirma-tive
vote of the holders of a majority, or other
designated proportion of the shares, or to be
otherwise taken or authorized by a vote of the
stockholders, such action shall be effective and
valid if taken or authorized by the affirmative vote
of the holders of a majority of the total number of
shares outstanding and entitled to vote thereon
pursuant to the provisions of these Articles of
Incorporation.
(6) No holder of stock of the Corporation shall, as such
holder, have any right to purchase or sub-scribe for
any shares of the capital stock of the Corporation of
any class or any other security of the Corporation
which it may issue or sell (whether out of the number
of shares authorized by these Articles of
Incorporation, or out of any
- 9 -
<PAGE>
shares of the capital stock of the Corporation
acquired by it after the issue thereof, or
other-wise) other than such right, if any, as the
Board of Directors, in its discretion, may determine.
(7) All persons who shall acquire stock in the
Corporation shall acquire the same subject to the
provisions of these Articles of Incorporation.
SIXTH: The number of Directors of the Corporation
shall be fixed by the Bylaws and shall initially be two. The
names of the persons who shall act as such until their successors
are duly chosen and qualified are
DANIEL CALABRIA
THOMAS M. MISTELE.
The Bylaws of the Corporation may fix the number of Directors
at a number other than that named in these Articles of Incorporation and may
authorize the Board of Directors, by the vote of a majority of the entire Board
of Directors, to increase or decrease the number of Directors fixed by these
Articles of Incorporation or in the Bylaws, within the limits specified in the
Bylaws, provided that at no time during which the Corporation has stock
outstanding shall the number of Directors be less than three, and to fill the
vacancies created by any such increase in the number of Directors. Unless
otherwise provided by the Bylaws of the Corporation, the Directors of the
Corporation need not be stockholders therein.
SEVENTH: The following provisions are hereby
- 10 -
<PAGE>
adopted for the purpose of defining, limiting and regulating the
powers of the Corporation and the Directors and stockholders.
(1) The Bylaws of the Corporation may divide the
Directors of the Corporation into classes and
prescribe the tenure of office of the several
classes, but no class shall be elected for a period
shorter than that from the time of the election
following the division into classes until the next
annual meeting and thereafter for a period shorter
than the interval between annual meetings or for a
period longer than five years, and the term of office
of at least one class shall expire each year.
Notwithstanding the foregoing, no such division into
classes shall be made prior to the first annual
meeting of stockholders of the Corporation.
(2) The holders of shares of the capital stock of the
Corporation shall have only such rights to inspect
the records, documents, accounts and books of the
Corporation as are provided by the laws of Maryland,
subject to reasonable regulations of the Board of
Directors, not contrary to the laws of Maryland, as
to whether and to what extent, and at what times and
places, and under what conditions and regulations,
such rights shall be exercised.
- 11 -
<PAGE>
(3) Any Director, or any officer elected or appointed by
the Board of Directors or by any committee of said
Board or by the stockholders or otherwise, may be
removed at any time, with or without cause, in such
lawful manner as may be provided in the Bylaws of the
Corporation.
(4) If the Bylaws so provide, both the stockholders and
the Board of Directors of the Corporation shall have
power to hold their meetings, to have an office or
offices and, subject to the provi-sions of the laws
of Maryland, to keep the books of the Corporation
outside of said State at such places as may from time
to time be designated by them.
(5) The Board of Directors shall have power from time to
time to authorize payment of compensation to the
Directors for services to the Corporation, as
provided in the Bylaws, including fees for attendance
at meetings of the Board of Directors and of
Committees.
(6) In addition to the powers and authority herein-before
or by statute expressly conferred upon them, the
Board of Directors may exercise all such powers and
do all such acts and things as may be exercised or
done by the Corporation, subject, nevertheless, to
the express provisions of the
- 12 -
<PAGE>
laws of Maryland, of these Articles of Incorpora-
tion and of the Bylaws of the Corporation.
(7) Shares of stock in other corporations shall be voted
in person or by proxy by the President or a
Vice-President, or such officer or officers of the
Corporation as the Board of Directors shall designate
for the purpose, or by a proxy or proxies thereunto
duly authorized by the Board of Directors, except as
otherwise ordered by vote of the holders of a
majority of the shares of the capital stock of the
Corporation outstanding and entitled to vote in
respect thereto.
(8) Subject to the provisions of the Investment Company
Act of 1940, any director, officer or employee
individually, or any partnership of which any
director, officer or employee may be a member, or any
corporation or association of which any director,
officer or employee may be an officer, director,
trustee, employee or stockholder, may be a party to,
or may be pecuniarily or otherwise interested in, any
contract or transaction of the Corporation, and in
the absence of fraud no contract or other transaction
shall be thereby affected or invalidated; provided
that in case a director, or a partnership,
corporation or associ-ation of which a director is a
member, officer,
- 13 -
<PAGE>
director, trustee, employee or stockholder is so
interested, such fact shall be disclosed or shall
have been known to the Board of Directors or a
majority thereof; and any director of the
Corpora-tion who is so interested, or who is also a
director, officer, trustee, employee or stock-holder
of such other corporation or association or a member
of such partnership which is so interested, may be
counted in determining the existence of a quorum at
any meeting of the Board of Directors of the
Corporation which shall authorize any such contract
or transaction, and may vote thereat on any such
contract or trans-action, with like force and effect
as if he were not such director, officer, trustee,
employee or stockholder of such other corporation or
associa-tion or not so interested or a member of a
partnership so interested.
(9) The computation of the net asset value of each share
of capital stock referred to in these Articles of
Incorporation shall be determined as required by the
Investment Company Act of 1940 and, except as so
required, shall be computed in accordance with the
following rules: (a) The net asset value of each
share of capital
stock of the Corporation duly surrendered to the
- 14 -
<PAGE>
Corporation for redemption pursuant to the provisions of
paragraph (3) of Article FIFTH of these Articles of
Incorporation shall be determined as of the close of business
on the New York Stock Exchange next succeeding the time when
such capital stock is so surrendered.
(b) The net asset value of each share of the capital
stock of the Corporation for the purpose of the issue of such
capital stock shall be determined as of the close of business
on the New York Stock Exchange next succeeding the receipt of
an order to purchase such share.
(c) Unless and until otherwise determined by the
Board of Directors, the net asset value of the shares shall be
computed as of the close of trading on each day the New York
Stock Exchange is open for trading, by dividing the value of
the Corporation's securities plus any cash and other assets
(including accrued dividends and interest) less all
liabilities (including accrued expenses) by the number of
shares outstanding, the result being adjusted to the nearest
whole cent.
(d) The Board of Directors is empowered, in its
absolute discretion, to establish other bases or times, or
both, for determining the net asset value of each share of
stock of the Corporation in accordance with the Investment
Company Act of 1940 and to authorize the voluntary purchase by
the Corporation, either directly
- 15 -
<PAGE>
or through an agent, of shares of capital stock of the
Corporation upon such terms and conditions and for such
consideration as the Board of Directors shall deem advisable
in accordance with the Investment Company Act of 1940.
(e) Except as otherwise permitted by the Investment
Company Act of 1940, payment of the net asset value of shares
of capital stock of the Corporation properly surrendered to it
for redemption (less any redemption fee) shall be made by the
Corporation within seven days after tender of such stock to
the Corporation for such purpose plus any period of time
during which the right of the holders of the shares of capital
stock of the Corporation to require the Corporation to redeem
such capital stock has been suspended. Any such payment may be
made in portfolio securities of the Corporation and/or in
cash, as the Board of Directors shall deem advisable, and no
shareholder shall have a right, other than as determined by
the Board of Directors, to have his shares redeemed in kind.
(f) The Board of Directors is empowered to cause the
redemption of the shares held in any account if the aggregate
net asset value of such shares (taken at cost or value, as
determined by the Board) is less than such amount as the Board
may fix, and the holder of such
- 16 -
<PAGE>
account, upon notice, does not comply with such other terms
and conditions as may be fixed by the Board of Directors.
(g) Whenever any action is taken under this paragraph
(9) of this Article SEVENTH of these Articles of Incorporation
under any authorization to take action which is permitted by
the Investment Company Act of 1940, such action shall be
deemed to have been properly taken if such action is in
accordance with the construction of that Act then in effect as
expressed in "no-action" letters of the staff of the
Securities and Exchange Commission or any release, rule,
regulation or order under that Act or any decision of a court
of competent jurisdiction notwithstanding that any of the
foregoing shall later be found to be invalid or other-wise
reversed or modified by any of the foregoing.
(h) Any action which may be taken by the Board of
Directors of the Corporation under this paragraph (9) of this
Article SEVENTH of these Articles of Incorporation may be
taken by the description thereof in the then effective
prospectus relating to the Corporation's shares under the
Securities Act of 1933 rather than by formal resolution of the
Board.
(i) Whenever under this paragraph (9) of this
Article SEVENTH of these Articles of Incorporation the
Board of Directors of the Corporation is permitted or
- 17 -
<PAGE>
required to place a value on assets of the Corporation, such
action may be delegated by the Board, and/or determined in
accordance with a formula determined by the Board, to the
extent permitted by the Investment Company Act of 1940.
(10) In the event that any person advances the
organizational expenses of the Corporation, such
advances shall become an obligation of the
Corporation, subject to such terms and conditions as
may be fixed by, and on a date fixed by, or
determined in accordance with criteria fixed by the
Board of Directors, to be amortized over a period or
periods to be fixed by the Board.
EIGHTH: The duration of the Corporation shall be
perpetual.
NINTH: From time to time any of the provisions of these
Articles of Incorporation may be amended, altered or repealed, upon the vote of
the holders of a majority of the shares of capital stock of the Corporation at
the time outstand-ing and entitled to vote, and other provisions which might
under the statutes of the State of Maryland at the time in force be lawfully
contained in these Articles of Incorporation may be added or inserted upon the
vote of the holders of a majority of the shares of capital stock of the
Corporation at the time outstanding and entitled to vote, and all rights at any
time conferred upon the stockholders of the Corporation by these
- 18 -
<PAGE>
Articles of Incorporation are granted subject to the provisions of this Article
NINTH.
The term "these Articles of Incorporation" as used herein and in the
Bylaws of the Corporation shall be deemed to mean these Articles of
Incorporation as from time to time amended and restated.
- 19 -
<PAGE>
IN WITNESS WHEREOF, the undersigned incorporator of TEMPLETON
CAPITAL ACCUMULATOR FUND, INC. who executed the foregoing Articles of
Incorporation hereby acknowledges the same to be his act and further
acknowledges that to the best of his knowledge, information and belief the
matters and facts set forth therein are true in all material respects under the
penalties of perjury.
Dated this __th day of October, 1990.
/s/KEITH W. VANDIVORT
Keith W. Vandivort
WITNESS:
- ----------------------
(DISTRICT OF COLUMBIA)
SS:
This is to certify on this __th day of October, 1990, before
me, the subscriber, a Notary Public of the District of Columbia, personally
appeared KEITH W. VANDIVORT and acknowledged the foregoing Articles of
Incorporation to be his act.
Witness my hand and Notarial Seal the day and year last above
written.
-----------------------------
NOTARY PUBLIC
- 20 -
BY-LAWS
-of-
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
(As amended and restated March 1, 1991)
ARTICLE I
NAME OF COMPANY, LOCATION OF OFFICES AND SEAL.
SECTION 1. NAME. The name of the Company is Templeton
Capital Accumulator Fund, Inc.
SECTION 2. PRINCIPAL OFFICES. The principal office of the
Company in the State of Maryland shall be located in Baltimore, Maryland. The
Company may, in addition, establish and maintain such other offices and places
of business within or outside the State of Maryland as the Board of Directors
may from time to time determine.
SECTION 3. SEAL. The corporate seal of the Company shall be
circular in form and shall bear the name of the Company, the year of its
incorporation and the words "Corporate Seal, Maryland." The form of the seal
shall be subject to alteration by the Board of Directors and the seal may be
used by causing it or a facsimile to be impressed or affixed or printed or
otherwise reproduced. Any officer or Director of the Company shall have
authority to affix the corporate seal of the Corporation to any document
requiring the same.
<PAGE>
ARTICLE II
STOCKHOLDERS
SECTION 1. PLACE OF MEETINGS. All meetings of the Stockholders
shall be held at such place within the United States, whether within or outside
the State of Maryland as the Board of Directors shall determine, which shall be
stated in the notice of the meeting or in a duly executed waiver of notice
thereof.
SECTION 2. ANNUAL MEETINGS. The Company shall not be required
to hold an annual meeting of Stockholders in any year in which the election of
Directors is not required to be acted upon under the Investment Company Act of
1940. Otherwise, annual meetings of Stockholders for the election of Directors
and the transaction of such other business as may properly come before the
meeting shall be held at such time and place within the United States as the
Board of Directors shall select.
SECTION 3. SPECIAL MEETINGS. Special meetings of the
Stockholders for any purpose or purposes, unless otherwise prescribed by statute
or by the Articles of Incorporation, may be called by resolution of the Board of
Directors or by the President, and shall be called by the President or Secretary
at the request in writing of a majority of the Board of Directors or at the
request in writing by Stockholders owning 10% in amount of the entire capital
stock of the Company issued and outstanding at
- 2 -
<PAGE>
the time of the call, provided that (1) such request shall state the purpose of
such meeting and the matters proposed to be acted on, and (2) the Stockholders
requesting such meeting shall have paid to the Company the reasonably estimated
cost of preparing and mailing the notice thereof, which the Secretary shall
determine and specify to such Stockholders. No special meeting shall be called
upon the request of Stockholders to consider any matter which is substantially
the same as a matter voted upon at any special meeting of the Stockholders held
during the preceding 12 months, unless requested by the holders of a majority of
all shares entitled to be voted at such meeting.
SECTION 4. NOTICE. Written notice of every meeting of
Stockholders, stating the purpose or purposes for which the meeting is called,
the time when and the place where it is to be held, shall be served, either
personally or by mail, not less than ten nor more than ninety days before the
meeting, upon each Stockholder as of the record date fixed for the meeting and
who is entitled to vote at such meeting. If mailed (1) such notice shall be
directed to a Stockholder at his address as it shall appear on the books of the
Company (unless he shall have filed with the Transfer Agent of the Company a
written request that notices intended for him be mailed to some other address,
in which case it shall be mailed to the address designated in such request) and
(2) such notice shall be deemed to have been given as of the date when it is
deposited in the United States mail
- 3 -
<PAGE>
with first class postage thereon prepaid. Irregularities in the notice or in the
giving thereof, as well as the accidental omission to give notice of any meeting
to, or the non-receipt of any such notice by, any of the Stockholders shall not
invalidate any action otherwise properly taken by or at any such meeting. Notice
of any Stockholders' meeting need not be given to any Stockholder who shall sign
a written waiver of such notice either before or after the time of such meeting,
which waiver shall be filed with the records of such meeting, or to any
Stockholder who is present at such meeting in person or by proxy.
SECTION 5. QUORUM, ADJOURNMENT OF MEETINGS. The presence at
any Stockholders' meeting, in person or by proxy, of Stockholders entitled to
cast a majority of the votes entitled to be cast shall be necessary and
sufficient to constitute a quorum for the transaction of business. The holders
of a majority of shares entitled to vote at the meeting and present in person or
by proxy, whether or not sufficient to constitute a quorum, or, any officer
present entitled to preside or act as Secretary of such meeting may adjourn the
meeting without determining the date of the new meeting or from time to time
without further notice to a date not more than 120 days after the original
record date. Any business that might have been transacted at the meeting
originally called may be transacted at such adjourned meeting at which a quorum
is present.
- 4 -
<PAGE>
SECTION 6. VOTE OF THE MEETING. When a quorum is present or
represented at any meeting, the vote of the holders of a majority of the stock
entitled to vote thereat present in person or represented by proxy shall decide
any question brought before such meeting, unless the question is one upon which
by express provisions of applicable statutes, of the Articles of Incorporation,
or of these By-Laws, a different vote is required, in which case such express
provisions shall govern and control the decision of such question.
SECTION 7. VOTING RIGHTS OF STOCKHOLDERS. Each Stockholder of
record having the right to vote shall be entitled at every meeting of the
Stockholders of the Company to one vote for each share of stock having voting
power standing in the name of such Stockholder on the books of the Company on
the record date fixed in accordance with Section 5 of Article VII of these
By-Laws, with pro-rata voting rights for any fractional shares, and such votes
may be cast either in person or by written proxy.
SECTION 8. PROXIES. Every proxy must be executed in writing by
the Stockholder or by his duly authorized attorney-in-fact. No proxy shall be
valid after the expiration of eleven months from the date of its execution
unless it shall have specified therein its duration. Every proxy shall be
revocable at the pleasure of the person executing it or of his personal
representatives or assigns. Proxies shall be delivered prior to the meeting to
the Secretary of the Company or to the person
- 5 -
<PAGE>
acting as Secretary of the meeting before being voted. A proxy with respect to
stock held in the name of two or more persons shall be valid if executed by one
of them unless at or prior to exercise of such proxy the Company receives a
specific written notice to the contrary from any one of them. A proxy purporting
to be executed by or on behalf of a Stockholder shall be deemed valid unless
challenged at or prior to its exercise.
SECTION 9. STOCK LEDGER AND LIST OF STOCKHOLDERS. It shall be
the duty of the Secretary or Assistant Secretary of the Company to cause an
original or duplicate stock ledger to be maintained at the office of the
Company's transfer agent.
SECTION 10. ACTION WITHOUT MEETING. Any action to be taken by
Stockholders may be taken without a meeting if (1) all Stockholders entitled to
vote on the matter consent to the action in writing, (2) all Stockholders
entitled to notice of the meeting but not entitled to vote at it sign a written
waiver of any right to dissent and (3) said consents and waivers are filed with
the records of the meetings of Stockholders. Such consent shall be treated for
all purposes as a vote of the meeting.
ARTICLE III
DIRECTORS
SECTION 1. BOARD OF 3 TO 15 DIRECTORS. The Board of
Directors shall consist of not less than three (3) nor more than
- 6 -
<PAGE>
fifteen (15) Directors, all of whom shall be of full age and at least 40% of
whom shall be persons who are not interested persons of the Company as defined
in the Investment Company Act of 1940, provided that prior to the issuance of
stock by the Company, the Board of Directors may consist of less than three (3)
Directors, subject to the provisions of Maryland law. Directors shall be elected
at the annual meeting of the Stockholders, if held, and each Director shall be
elected to serve for one year and until his successor shall be elected and shall
qualify or until his earlier death, resignation or removal. Directors need not
be Stockholders. The Directors shall have power from time to time, and at any
time when the Stockholders as such are not assembled in a meeting, regular or
special, to increase or decrease their own number. If the number of Directors be
increased, the additional Directors may be elected by a majority of the
Directors in office at the time of the increase. If such additional Directors
are not so elected by the Directors in office at the time they increase the
number of places on the Board, or if the additional Directors are elected by the
existing Directors, prior to the first meeting of the Stockholders of the
Company, then in either of such events the additional Directors shall be elected
or reelected by the Stockholders at their next annual meeting or at an earlier
special meeting called for that purpose.
- 7 -
<PAGE>
The number of Directors may also be increased or decreased by
vote of the Stockholders at any regular or special meeting called for that
purpose. In the event the Stockholders should vote a decrease in the number of
Directors, they shall determine by a majority vote at such meeting which of the
Directors shall be removed and which of the then existing vacancies on the Board
shall be eliminated. If the Stockholders vote an increase in the Board they
shall by plurality vote elect Directors to the newly created places as well as
fill any then existing vacancies on the Board.
The Board of Directors may elect, but shall not be required to
elect, a Chairman of the Board who must be Director.
SECTION 2. VACANCIES. If the office of any Director or
Directors becomes vacant for any reason (other than an increase in the number of
places on the Board as provided in Section 1 of Article III), the Directors in
office, although less than a quorum, shall continue to act and may, by a
majority vote, choose a successor or successors, who shall hold office for the
unexpired term in respect to which such vacancy occurred or until the next
election of Directors (if immediately after filling any such vacancy at least
two-thirds of the Directors then holding office shall have been elected by the
Stockholders), or any vacancy may be filled by the Stockholders at any meeting
thereof.
SECTION 3. MAJORITY TO BE ELECTED BY STOCKHOLDERS. If
at any time, less than a majority of the Directors in office
- 8 -
<PAGE>
shall consist of Directors elected by Stockholder, a meeting of the Stockholders
shall be called within 60 days for the purpose of electing Directors to fill any
vacancies in the Board of Directors (unless the Securities and Exchange
Commission or any court of competent jurisdiction shall by order extend such
period).
SECTION 4. REMOVAL. At any meeting of Stockholders duly called
and at which a quorum is present, the Stockholders may, by the affirmative vote
of the holders of a majority of the votes entitled to be cast thereon, remove
any Director or Directors from office, with or without cause, and may elect a
successor or successors to fill any resulting vacancies for the unexpired terms
of the removed Directors.
SECTION 5. POWERS OF THE BOARD. The business of this Company
shall be managed under the direction of its Board of Directors, which may
exercise or give authority to exercise all powers of the Company and do all such
lawful acts and things as are not by statute, by the Articles of Incorporation
or by these By-Laws required to be exercised or done by the Stockholders.
SECTION 6. PLACE OF MEETINGS. The Directors may hold their
meetings at the principal office of the Company or at such other places, either
within or without the State of Maryland, as they may from time to time
determine.
- 9 -
<PAGE>
SECTION 7. REGULAR MEETINGS. Regular meetings of the
Board may be held at such date and time as shall from time to
time be determined by resolution of the Board.
SECTION 8. SPECIAL MEETINGS. Special meetings of the Board may
be called by order of the President on one day's notice given to each Director
either in person or by mail, telephone, telegram, telefax, telex, cable or
wireless to each Director at his residence or regular place of business. Special
meetings will be called by the President or Secretary in a like manner on the
written request of a majority of the Directors.
SECTION 9. WAIVER OF NOTICE. No notice of any meting of the
Board of Directors or a committee of the Board need be given to any Director who
is present at the meeting or who waives notice of such meeting in writing (which
waiver shall be filed with the records of such meeting), either before or after
the time of the meeting.
SECTION 10. QUORUM OF ONE-THIRD. At all meetings of the Board
the presence of one-third of the entire number of Directors then in office (but
not less than two Directors) shall be necessary to constitute a quorum and
sufficient for the transaction of business, and any act of a majority present at
a meeting at which there is a quorum shall be the act of the Board of Directors,
except as may be otherwise specifically provided by statute, by the Articles of
Incorporation or by these By-Laws. If a quorum shall not be present at any
meeting of Directors, the
- 10 -
<PAGE>
Directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
SECTION 11. INFORMAL ACTION BY DIRECTORS AND COMMITTEES. Any
action required or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof may, except as otherwise required by
statute, be taken without a meeting if a written consent to such action is
signed by all members of the Board, or of such committee, as the case may be and
filed with the minutes of the proceedings of the Board or committee. Subject to
the Investment Company Act of 1940, members of the Board of Directors or a
committee thereof may participate in a meeting by means of a conference
telephone or similar communications equipment if all persons participating in
the meeting can hear each other at the same time.
SECTION 12. EXECUTIVE COMMITTEE. There may be an
Executive Committee of two or more Directors appointed by the
Board who may meet at stated times or on notice to all by any of
their own number. The Executive Committee shall consult with and
advise the Officers of the Company in the management of its
business and exercise such powers of the Board of Directors as
may be lawfully delegated by the Board of the Directors.
Vacancies shall be filled by the Board of Directors at any
regular or special meeting. The Executive Committee shall keep
- 11 -
<PAGE>
regular minutes of its proceedings and report the same to the
Board when required.
SECTION 13. OTHER COMMITTEES. The Board of Directors, by the
affirmative vote of a majority of the entire Board, may appoint other committees
which shall in each case consist of such number of members (not less than two)
and shall have and may exercise, to the extent permitted by law, such powers as
the Board may determine in the resolution appointing them. A majority of all
members of any such committee may determine its action, and fix the time and
place of its meetings, unless the Board of Directors shall otherwise provide.
The Board of Directors shall have power at any time to change the members and,
to the extent permitted by law, the powers of any such committee, to fill
vacancies, and to discharge any such committee.
SECTION 14. ADVISORY BOARD. There may be an Advisory Board of
any number of individuals appointed by the Board of Directors who may meet at
stated times or on notice to all by any of their own number or by the President.
The Advisory Board shall be composed of Stockholders or representatives of
Stockholders. The Advisory Board will have no power to require the Company to
take any specific action. Its purpose shall be solely to consider matters of
general policy and to represent the Stockholders in all matters except those
involving the purchase or sale of specific securities. A majority of the
Advisory Board, if appointed, must consist of Stockholders who are not
- 12 -
<PAGE>
otherwise affiliated or interested persons of the Company or of any affiliate of
the Company as those terms are defined in the Investment Company Act of 1940.
SECTION 15. COMPENSATION OF DIRECTORS. The Board may, by
resolution, determine what compensation and reimbursement of expenses of
attendance at meetings, if any, shall be paid to Directors in connection with
their service on the Board. Nothing herein contained shall be construed to
preclude any Director from serving the Company in any other capacity or from
receiving compensation therefor.
ARTICLE IV
OFFICERS
SECTION 1. OFFICERS. The Officers of the Company shall be
fixed by the Board of Directors and shall include a President, a Vice-President,
a Secretary and a Treasurer. Any two of the aforesaid offices, except those of
President and Vice President, may be held by the same person.
SECTION 2. APPOINTMENT OF OFFICERS. The Directors, at their
first meeting after each annual meeting of Stockholders, shall appoint a
President and the other Officers who need not be members of the Board.
SECTION 3. ADDITIONAL OFFICERS. The Board, at any
regular or special meeting, may appoint such other Officers and
- 13 -
<PAGE>
agents as it shall deem necessary who shall exercise such powers and perform
such duties as shall be determined from time to time by the Board.
SECTION 4. SALARIES OF OFFICERS. The salaries of all
Officers of the Company shall be fixed by the Board of Directors.
SECTION 5. TERM, REMOVAL, VACANCIES. The Officers of the
Company shall hold office for one year and until their successors are chosen and
qualify in their stead. Any Officer elected or appointed by the Board of
Directors may be removed at any time by the affirmative vote of a majority of
the Directors. If the office of any Officer becomes vacant for any reason, the
vacancy shall be filled by the Board of Directors.
SECTION 6. PRESIDENT. The President shall be the chief
executive officer of the Company; he shall, subject to the supervision of the
Board of Directors, have general responsi-bility for the management of the
business of the Company and shall see that all orders and resolutions of the
Board are carried into effect.
SECTION 7. VICE-PRESIDENT. The Vice-President (senior in
service), at the request or in the absence or disability of the President shall
perform the duties and exercise the powers of the President and shall perform
such other duties as the Board of Directors shall prescribe.
SECTION 8. TREASURER. The Treasurer shall have the
custody of the corporate funds and securities and shall keep full
- 14 -
<PAGE>
and accurate accounts of receipts and disbursements in books belonging to the
Company and shall deposit all moneys and other valuable effects in the name and
to the credit of the Company in such depositories as may be designated by the
Board of Directors. He shall disburse the funds of the Company as may be ordered
by the Board, taking proper vouchers for such disbursements, and shall render to
the President and Directors at the regular meetings of the Board, or whenever
they may require it, an account of all his transactions as Treasurer and of the
financial condition of the Company.
Any Assistant Treasurer may perform such duties of the
Treasurer as the Treasurer of the Board of Directors may assign, and, in the
absence of the Treasurer, he may perform all the duties of the Treasurer.
SECTION 9. SECRETARY. The Secretary shall attend meetings of
the Board and meetings of the Stockholders and record all votes and the minutes
of all proceedings in books to be kept for that purpose. He shall give or cause
to be given notice of all meetings of Stockholders and special meetings of the
Board of Directors and shall perform such other duties as may be prescribed by
the Board of Directors. He shall keep in safe custody the seal of the Company
and affix it to any instrument when authorized by the Board of Directors.
Any Assistant Secretary may perform such duties of the
Secretary as the Secretary or the Board of Directors may assign,
- 15 -
<PAGE>
and, in the absence of the Secretary, may perform all the duties
of the Secretary.
SECTION 10. SUBORDINATE OFFICERS. The Board of Directors from
time to time may appoint such other officers or agents as it may deem advisable,
each of whom shall have such title, hold office for such period, have such
authority and perform such duties as the Board of Directors may determine. The
Board of Directors from time to time may delegate to one or more officers or
agents the power to appoint any such subordinate officers or agents and to
prescribe their respective rights, terms of office, authorities and duties.
SECTION 11. SURETY BONDS. The Board of Directors may require
any officer or agent of the Company to execute a bond (including, without
limitation, any bond required by the Investment Company Act of 1940, as amended,
and the rules and regulations of the Securities and Exchange Commission) to the
Company in such sum and with such surety or sureties as the Board of Directors
may determine, conditioned upon the faithful performance of his duties to the
Company, including responsibility for negligence and for the accounting of any
of the Company's property, funds or securities that may come into his hands.
- 16 -
<PAGE>
ARTICLE V
INDEMNIFICATION
SECTION 1. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The
Company shall indemnify its Directors to the fullest extent that indemnification
of directors is permitted by the Maryland General Corporation Law. The Company
shall indemnify its Officers to the same extent as its Directors and to such
further extent as is consistent with law. The Company shall indemnify its
Directors and Officers who while serving as Directors or Officers also serve at
the request of the Company as a director, officer, partner, trustee, employee,
agent or fiduciary of another corporation, partnership, joint venture, trust,
other enterprise or employee benefit plan to the fullest extent consistent with
law. The indemnification and other rights provided by this Article shall
continue as to a person who has ceased to be a director or officer and shall
inure to the benefit of the heirs, executors and administrators of such a
person. This Article shall not protect any such person against any liability to
the Company or any Stockholder thereof to which such person would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office
("disabling conduct").
- 17 -
<PAGE>
SECTION 2. ADVANCES. Any current or former director or officer
of the Company seeking indemnification within the scope of this Article shall be
entitled to advances from the Company for payment of the reasonable expenses
incurred by him in connection with the matter as to which he is seeking
indemnification in the manner and to the fullest extent permissible under the
Maryland General Corporation Law. The person seeking indemnification shall
provide to the Company a written affirmation of his good faith belief that the
standard of conduct necessary for indemnification by the Company has been met
and a written undertaking to repay any such advance if it should ultimately be
determined that the standard of conduct has not been met. In addition, at least
one of the following additional conditions shall be met: (a) the person seeking
indemnification shall provide a security in form and amount acceptable to the
Company for his undertaking; (b) the Company is insured against losses arising
by reason of the advance; or (c) a majority of a quorum of Directors of the
Company who are neither interested persons as defined in the Investment Company
Act of 1940, nor parties to the proceeding ("disinterested non-party
Directors"), or independent legal counsel, in a written opinion, shall have
determined, based on a review of facts readily available to the Company at the
time the advance is proposed to be made, that there is reason to believe that
the person seeking
- 18 -
<PAGE>
indemnification will ultimately be found to be entitled to
indemnification.
SECTION 3. PROCEDURE. At the request of any person claiming
indemnification under this Article, the Board of Directors shall determine, or
cause to be determined, in a manner consistent with the Maryland General
Corporation Law, whether the standards required by this Article have been met.
Indemnification shall be made only following: (a) a final decision on the merits
by a court or other body before whom the proceeding was brought that the person
to be indemnified was not liable by reason of disabling conduct or (b) in the
absence of such a decision, a reasonable determination, based upon a review of
the facts, that the person to be indemnified was not liable by reason of
disabling conduct by (i) the vote of a majority of a quorum of disinterested
non-party Directors or (ii) an independent legal counsel in a written opinion.
SECTION 4. INDEMNIFICATION OF EMPLOYEES AND AGENTS. Employees
and agents who are not Officers or Directors of the Company may be indemnified,
and reasonable expenses may be advanced to such employees or agents, as may be
provided by action of the Board of Directors or by contract, subject to any
limitations imposed by the Investment Company Act of 1940.
SECTION 5. OTHER RIGHTS. The Board of Directors may
make further provision consistent with law for indemnification
and advance of expenses to Directors, Officers, employees and
- 19 -
<PAGE>
agents by resolution, agreement or otherwise. The indemnification provided by
this Article shall not be deemed exclusive of any other right, with respect to
indemnification or otherwise, to which those seeking indemnification may be
entitled under any insurance or other agreement or resolution of Stockholders or
disinterested Directors or otherwise. The rights provided to any person by this
Article shall be enforceable against the Company by such person who shall be
presumed to have relied upon it in serving or continuing to serve as a director,
officer, employee, or agent as provided above.
SECTION 6. AMENDMENTS. References in this Article are to the
Maryland General Corporation Law and to the Investment Company Act of 1940 as
from time to time amended. No amendment of these By-laws shall effect any right
of any person under this Article based on any event, omission or proceeding
prior to the amendment.
SECTION 7. INSURANCE. The Company may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee,
or agent of the Company or who, while a director, officer, employee, or agent of
the Company, is or was serving at the request of the Company as a director,
officer, partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, other enterprise, or employee
benefit plan against any liability asserted against and incurred by such person
in any such capacity
- 20 -
<PAGE>
or arising out of such person's position; provided, that no insurance may be
purchased which would indemnify any Director or Officer of the Company against
any liability to the Company or to its security holders to which he would
otherwise be subject by reason of disabling conduct.
ARTICLE VI
GENERAL PROVISIONS
SECTION 1. WAIVER OF NOTICE. Whenever by statute, the
provisions of the Articles of Incorporation or these ByLaws, the Stockholders or
the Board of Directors are authorized to take any action at any meeting after
notice, such notice may be waived, in writing, before or after the holding of
the meeting, by the person or persons entitled to such notice, or, in the case
of a Stockholder, by his attorney thereunto authorized.
SECTION 2. CHECKS. All checks or demands for money and notes
of the Company shall be signed by such Officer or Officers or such other person
or persons as the Board of Directors may from time to time designate.
SECTION 3. FISCAL YEAR. The fiscal year of the
Company shall be determined by resolution of the Board of
Directors.
- 21 -
<PAGE>
SECTION 4. ACCOUNTANT. The Company shall employ an independent
public accountant or a firm of independent public accountants as its Accountant
to examine the accounts of the Company and to sign and certify financial
statements filed by the Company. The employment of the Accountant shall be
conditioned upon the right of the Company to terminate the employment forthwith
without any penalty by vote of a majority of the outstanding voting securities
at any Stockholders' meeting called for that purpose.
ARTICLE VII
CAPITAL STOCK
SECTION 1. CERTIFICATE OF STOCK. The interest of each
Stockholder of the Company may be evidenced by certificates for shares of stock
in such form as the Board of Directors may from time to time prescribe. The
certificates shall be numbered and entered in the books of the Company as they
are issued. They shall exhibit the holder's name and the number of shares and no
certificate shall be valid unless it has been signed by the President or a
Vice-President and the Treasurer or an Assistant Treasurer or the Secretary or
an Assistant Secretary and bears the corporate seal. Such seal may be a
facsimile, engraved or printed. Where any such certificate is signed by a
Transfer Agent or by a Registrar, the signatures of any such Officer may
- 22 -
<PAGE>
be facsimile, engraved or printed. In case any of the Officers of the Company
whose manual or facsimile signature appears on any stock certificate delivered
to a Transfer Agent of the Company shall cease to be such Officer prior to the
issuance of such certificate, the Transfer Agent may nevertheless countersign
and deliver such certificate as though the person signing the same or whose
facsimile signature appears thereon had not ceased to be such Officer, unless
written instructions of the Company to the contrary are delivered to the
Transfer Agent.
SECTION 2. LOST, STOLEN OR DESTROYED CERTIFICATES. The Board
of Directors, or the President together with the Treasurer or Secretary, may
direct a new certificate to be issued in place of any certificate theretofore
issued by the Company, alleged to have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming the certificate of
stock to be lost, stolen or destroyed, or by his legal representative. When
authorizing such issue of a new certificate, the Board of Directors, or the
President and Treasurer or Secretary, may, in its or their discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed certificate, or his legal representative, to advertise the
same in such manner as it or they shall require and/or give the Company a bond
in such sum and with such surety or sureties as it or they may direct as
indemnity against any claim that may be made against the Company
- 23 -
<PAGE>
with respect to the certificate alleged to have been lost, stolen or destroyed
or such newly issued certificate.
SECTION 3. TRANSFER OF STOCK. Shares of the Company shall be
transferable on the books of the Company by the holder thereof in person or by
his duly authorized attorney or legal representative upon surrender and
cancellation of a certificate or certificates for the same number of shares of
the same class, duly endorsed or accompanied by proper evidence of succession,
assignment or authority to transfer, with such proof of the authenticity of the
signature as the Company or its agents may reasonably require. The Board of
Directors may, from time to time, adopt rules and regulations with reference to
the method of transfer of the shares of stock of the Company.
SECTION 4. REGISTERED HOLDER. The Company shall be entitled to
treat the holder of record of any share or shares of stock as the holder in fact
thereof and, accordingly, shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any other person
whether or not it shall have express or other notice thereof, except as
expressly provided by statute.
SECTION 5. RECORD DATE. The Board of Directors may fix a time
not less than 10 nor more than 90 days prior to the date of any meeting of
Stockholders or prior to the last day on which the consent or dissent of
Stockholders may be effectively expressed for any purpose without a meeting, as
the time as of
- 24 -
<PAGE>
which Stockholders entitled to notice of and to vote at such a meeting or whose
consent or dissent is required or may be expressed for any purpose, as the case
may be, shall be determined; and all persons who were holders of record of
voting stock at such time and no other shall be entitled to notice of and to
vote at such meeting or to express their consent or dissent, as the case may be.
If no record date has been fixed, the record date for the determination of
Stockholders entitled to notice of or to vote at a meeting of Stockholders shall
be the later of the close of business on the day on which notice of the meeting
is mailed or the thirtieth day before the meeting, or, if notice is waived by
all Stockholders, at the close of business on the tenth day next preceding the
day on which the meeting is held. The Board of Directors may also fix a time not
exceeding 90 days preceding the date fixed for the payment of any dividend or
the making of any distribution, or for the delivery of evidences of rights, or
evidences of interests arising out of any change, conversion or exchange of
capital stock, as a record time for the determination of the Stockholder
entitled to receive any such dividend, distribution, rights or interests.
SECTION 6. STOCK LEDGERS. The stock ledgers of the
Company, containing the names and addresses of the Stockholders
and the number of shares held by them respectively, shall be kept
at the principal offices of the Company or at the offices of the
- 25 -
<PAGE>
transfer agent of the Company or at such other location as may be authorized by
the Board of Directors from time to time.
SECTION 7. TRANSFER AGENTS AND REGISTRARS. The Board of
Directors may from time to time appoint or remove transfer agents and/or
registrars of transfers (if any) of shares of stock of the Company, and it may
appoint the same person as both transfer agent and registrar. Upon any such
appointment being made, all certificates representing shares of capital stock
thereafter issued shall be countersigned by one of such transfer agents or by
one of such registrars of transfers (if any) or by both and shall not be valid
unless so countersigned. If the same person shall be both transfer agent and
registrar, only one countersignature by such person shall be required.
SECTION 8. DIVIDENDS. Dividends upon the capital stock of the
Company, subject to any provisions of the Articles of Incorporation relating
thereto, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law.
SECTION 9. RESERVE BEFORE DIVIDENDS. Before payment of any
dividend, there may be set aside out of the net profits of the Company available
for dividends such sum or sums as the Directors from time to time in their
absolute discretion think proper as a reserve fund to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
Company, or for such other purpose as the Directors shall think conducive to the
interests of the Company, and the Directors may
- 26 -
<PAGE>
modify or abolish any such reserve in the manner in which it was
created.
SECTION 10. NO PRE-EMPTIVE RIGHTS. Shares of stock
shall not possess pre-emptive rights to purchase additional
shares of stock when offered.
SECTION 11. FRACTIONAL SHARES. Fractional shares
entitle the holder to the same voting and other rights and
privileges as whole shares on a pro-rata basis.
ARTICLE VIII
AMENDMENTS
SECTION 1. BY STOCKHOLDERS. By-Laws may be adopted, amended or
repealed, by vote of the holders of a majority of the Company's stock, as
defined by the Investment Company Act of 1940, at any annual or special meeting
of the Stockholders at which a quorum is present or represented, provided notice
of the proposed amendment shall have been contained in the notice of the
meeting.
SECTION 2. BY DIRECTORS. The Directors may adopt, amend or
repeal any By-Law (which is not inconsistent with any By-Law adopted, amended or
repealed by the Company's Stockholders in accordance with Section 1 of this
Article VIII) by majority vote of all of the Directors in office at any regular
meeting, or
- 27 -
<PAGE>
at any special meeting, in accordance with the requirements of
applicable law.
ARTICLE IX
CUSTODY OF SECURITIES
SECTION 1. EMPLOYMENT OF A CUSTODIAN. The Company shall place
and at all times maintain in the custody of a Custodian (including any
sub-custodian for the Custodian, which may be a foreign bank which meets
applicable requirements of law) all funds, securities and similar investments
owned by the Company. The Custodian (and any sub-custodian) shall be a bank
having not less than $2,000,000 aggregate capital, surplus and undivided profits
or such other financial institution as shall be permitted by rule or order of
the United States Securities and Exchange Commission. The Custodian shall be
appointed from time to time by the Directors, who shall fix its remuneration.
SECTION 2. ACTION UPON TERMINATION OF CUSTODIAN AGREEMENT.
Upon termination of a Custodian Agreement or inability of the Custodian to
continue to serve, the Directors shall promptly appoint a successor custodian,
but in the event that no successor custodian can be found who has the required
qualifications and is willing to serve, the Directors shall call as promptly as
possible a special meeting of the Shareholders to determine whether the Company
shall function without a custodian
- 28 -
<PAGE>
or shall be liquidated. If so directed by vote of the holders of a majority of
the outstanding voting securities, the Custodian shall deliver and pay over all
funds, securities and similar investments held by it as specified in such vote.
SECTION 3. PROVISIONS OF CUSTODIAN AGREEMENT. The
following provisions shall apply to the employment of a Custodian
and to any contract entered into with the Custodian so employed:
The Directors shall cause to be delivered to the Custodian all
securities owned by the Company or to which it may become
entitled, and shall order the same to be delivered by the
Custodian only in completion of a sale, exchange, transfer,
pledge, loan of portfolio securities to another person, or
other disposition thereof, all as the Directors may generally
or from time to time require or approve or to a successor
Custodian; and the Directors shall cause all funds owned by
the Company or to which it may become entitled to be paid to
the Custodian, and shall order the same disbursed only for
investment against delivery of the securities acquired, or the
return of cash held as collateral for loans of portfolio
securities, or in payment of expenses, including management
compensation, and liabilities of the Company, including
distributions to shareholders, or to a successor Custodian. In
connection with the Company's purchase or sale of
- 29 -
<PAGE>
futures contracts, the Custodian shall transmit, prior to
receipt on behalf of the Company of any securities or other
property, funds from the Company's custodian account in order
to furnish to and maintain funds with brokers as margin to
guarantee the performance of the Company's futures obligations
in accordance with the applicable requirements of commodities
exchanges and brokers.
ARTICLE X
MISCELLANEOUS
SECTION 1. MISCELLANEOUS.
(a) Except as hereinafter provided, no Officer or Director of
the Company and no partner, officer, director or shareholder of the Investment
Adviser of the Company or of the Distributor of the Company, and no Investment
Adviser or Distributor of the Company, shall take long or short positions in the
securities issued by the Company.
(1) The foregoing provisions shall not prevent
the Distributor from purchasing Shares from the Company if such purchases are
limited (except for reasonable allowances for clerical errors, delays and errors
of transmission and cancellation of orders) to purchases for the purpose of
filling orders for such Shares received by the Distributor, and provided
- 30 -
<PAGE>
that orders to purchase from the Company are entered with the Company or the
Custodian promptly upon receipt by the Distributor of purchase orders for such
Shares, unless the Distributor is otherwise instructed by its customer.
(2) The foregoing provision shall not prevent
the Distributor from purchasing Shares of the Company as agent for the account
of the Company.
(3) The foregoing provision shall not prevent
the purchase from the Company or from the Distributor of Shares issued
by the Company, by any officer, or Director of the Company or by any partner,
officer, director or shareholder of the Investment Adviser of the Company
or of the Distributor of the Company at the price available to the public
generally at the moment of such purchase, or as described in the then
currently effective Prospectus of the Company.
(4) The foregoing shall not prevent the
Distributor, or any affiliate thereof, of the Company from purchasing Shares
prior to the effectiveness of the first registration statement relating to the
Shares under the Securities Act of 1933.
(b) The Company shall not lend assets of the Company to any
officer or Director of the Company, or to any partner, officer, director or
shareholder of, or person financially interested in, the Investment Adviser of
the Company, or the
- 31 -
<PAGE>
Distributor of the Company, or to the Investment Adviser of the Company or to
the Distributor of the Company.
(c) The Company shall not impose any restrictions upon the
transfer of the Shares of the Company except as provided in the Articles of
Incorporation, but this requirement shall not prevent the charging of customary
transfer agent fees.
(d) The Company shall not permit any officer or Director of
the Company, or any partner, officer or director of the Investment Adviser or
Distributor of the Company, to deal for or on behalf of the Company with himself
as principal or agent, or with any partnership, association or corporation in
which he has a financial interest; provided that the foregoing provisions shall
not prevent (a) Officers and Directors of the Company or partners, officers or
directors of the Investment Adviser or Distributor of the Company from buying,
holding or selling Shares in the Company, or from being partners, officers or
directors or otherwise financially interested in the Investment Adviser or
Distributor of the Company; (b) purchases or sales of securities or other
property by the Company from or to an affiliated person or to the Investment
Adviser or Distributor of the Company if such transaction is exempt from the
applicable provisions of the 1940 Act; (c) purchases of investments for the
portfolio of the Company or sales of investments owned by the Company through a
security dealer who is, or one or more of whose partners, share-holders,
officers or directors is, an Officer or Director of the
- 32 -
<PAGE>
Company, or a partner, officer or director of the Investment Adviser or
Distributor of the Company, if such transactions are handled in the capacity of
broker only and commissions charged do not exceed customary brokerage charges
for such services; (d) employment of legal counsel, registrar, Transfer Agent,
dividend disbursing agent or Custodian who is, or has a partner, share-holder,
officer, or director who is, an officer or Director of the Company, or a
partner, officer or director of the Investment Adviser or Distributor of the
Company, if only customary fees are charged for services to the Company; (e)
sharing statistical research, legal and management expenses and office hire and
expenses with any other investment company in which an officer or Director of
the Company, or a partner, officer or director of the Investment Adviser or
Distributor of the Company, is an officer or director or otherwise financially
interested.
- 33 -
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT dated as of the 30th day of October, 1992, and
amended and restated as of the 6th day of December, 1994, and the 25th day of
May, 1995, between TEMPLETON CAPITAL ACCUMULATOR FUND, INC. (hereinafter
referred to as the "Fund") and TEMPLETON INVESTMENT COUNSEL, INC. (hereinafter
referred to as the "Investment Manager").
In consideration of the mutual agreements herein made, the
Fund and the Investment Manager understand and agree as follows:
(1) The Investment Manager agrees, during the life of this
Agreement, to manage the investment and reinvestment of the Fund's assets
consistent with the provisions of the Articles of Incorporation of the Fund and
the investment policies adopted and declared by the Fund's Board of Directors.
In pursuance of the foregoing, the Investment Manager shall make all
determinations with respect to the investment of the Fund's assets and the
purchase and sale of its investment securities, and shall take all such steps as
may be necessary to implement those determinations. Such determinations and
services shall include determining the manner in which any voting rights, rights
to consent to corporate action and any other rights pertaining to the Fund's
investment securities shall be exercised, subject to guidelines adopted by the
Board of Directors.
(2) The Investment Manager is not required to furnish any
personnel, overhead items or facilities for the Fund, including trading desk
facilities or daily pricing of the Fund's portfolio.
(3) The Investment Manager shall be responsible for selecting
members of securities exchanges, brokers and dealers (such members, brokers and
dealers being hereinafter referred to as "brokers") for the execution of the
Fund's portfolio transactions consistent with the Fund's brokerage policies and,
when applicable, the negotiation of commissions in connection therewith.
All decisions and placements shall be made in accordance with the following
principles:
A. Purchase and sale orders will usually be placed with
brokers which are selected by the Investment
Manager as able to achieve "best execution"
of such orders. "Best execution" shall mean
prompt and reliable execution at the most
favorable security price, taking into account the
other provisions hereinafter set forth. The
determination of what may constitute best execution
and price in the execution of a securities
transaction by a broker involves a number of
considerations, including, without limitation, the
overall direct net economic result to the Fund
(involving both price paid or received and any
commissions and other costs paid), the efficiency
with which the transaction is effected, the ability
to effect the transaction at all where a large block
is involved, availability of the broker to stand
ready to execute possibly difficult transactions in
the future, and the financial strength and stability
of the broker. Such considerations are judgmental and
are weighed by the Investment Manager in determining
the overall reasonableness of brokerage commissions.
B. In selecting brokers for portfolio transactions, the
Investment Manager shall take into account its past
experience as to brokers qualified to achieve "best
execution," including brokers who specialize in any
foreign securities held by the Fund.
C. The Investment Manager is authorized to allocate
brokerage business to brokers who have provided
brokerage and research services, as such services
are defined in Section 28(e) of the Securities
Exchange Act of 1934 (the "1934 Act"), for the Fund
and/or other accounts, if any, for which the
Investment Manager exercises investment discretion
(as defined in Section 3(a)(35) of the 1934 Act)
and, as to transactions for which fixed minimum
commission rates are not applicable, to cause the
Fund to pay a commission for effecting a securities
transaction in excess of the amount another broker
would have charged for effecting that transaction,
if the Investment Manager determines in good faith
that such amount of commission is reasonable in
relation to the value of the brokerage and research
services provided by such broker, viewed in terms
terms of either that particular transaction or the
Investment Manager's overall responsibilities with
respect to the Fund and the other accounts, if any,
as to which it exercises investment discretion.
In reaching such determination, the Investment
Manager will not be required to place or attempt to
place a specific dollar value on the research or
execution services of a broker or on the portion of
any commission reflecting either of said services.
In demonstrating that such determinations were
made in good faith, the Investment Manager shall be
prepared to show that all commissions were allocated
and paid for purposes contemplated by the Fund's
brokerage policy; that the research services provide
lawful and appropriate assistance to the Investment
Manager in the performance of its investment
decision-making responsibilities; and that the
commissions paid were within a reasonable range.
Whether commissions were within a reasonable range
shall be based on any available information as to
the level of commission known to be charged by other
brokers on comparable transactions, but there shall
be taken into account the Fund's policies that
(i) obtaining a low commission is deemed secondary to
obtaining a favorable securities price, since it is
recognized that usually it is more beneficial to the
Fund to obtain a favorable price than to pay the
lowest commission; and (ii) the quality,
comprehensiveness and frequency of research studies
that are provided for the Investment Manager are
useful to the Investment Manager in performing its
advisory services under this Agreement. Research
services provided by brokers to the Investment
Manager are considered to be in addition to, and not
in lieu of, services required to be performed by the
Investment Manager under this Agreement. Research
furnished by brokers through which the Fund effects
securities transactions may be used by the Investment
Manager for any of its accounts, and not all
research may be used by the Investment Manager for
the Fund. When execution of portfolio transactions
is allocated to brokers trading on exchanges with
fixed brokerage commission rates, account may be
taken of various services provided by the broker.
D. Purchases and sales of portfolio securities within
the United States other than on a securities exchange
shall be executed with primary market makers acting
as principal, except where, in the judgment of the
Investment Manager, better prices and execution may
be obtained on a commission basis or from other
sources.
E. Sales of the Fund's shares (which shall be deemed to
include also shares of other registered investment
companies which have either the same adviser or an
investment adviser affiliated with the Investment
Manager) by a broker are one factor among others to
be taken into account in deciding to allocate
portfolio transactions (including agency
transactions, principal transactions, purchases in
underwritings or tenders in response to tender
offers) for the account of the Fund to that broker;
provided that the broker shall furnish "best
execution," as defined in subparagraph A
above, and that such allocation shall be within the
scope of the Fund's policies as stated above;
provided further, that in every allocation made to
a broker in which the sale of Fund shares is taken
into account, there shall be no increase in the
amount of the commissions or other compensation paid
to such broker beyond a reasonable commission or
other compensation determined, as set forth in
subparagraph C above, on the basis of best execution
alone or best execution plus research services,
without taking account of or placing any value upon
such sale of the Fund's shares.
(4) The Fund agrees to pay to the Investment Manager a
monthly fee in dollars at an annual rate of 0.75% of the Fund's average
daily net assets, payable at the end of each calendar month. The Investment
Manager may waive all or a portion of its fees provided for hereunder and such
waiver shall be treated as a reduction in purchase price of its services.
The Investment Manager shall be contractually bound hereunder by the
terms of any publicly announced waiver of its fee, or any limitation of the
Trust's expenses, as if such waiver or limitation were fully set forth herein.
Notwithstanding the foregoing, if the total expenses of the
Fund (including the fee to the Investment Manager) in any fiscal year of the
Fund exceed any expense limitation imposed by applicable State law, the
Investment Manager shall reimburse the Fund for such excess in the manner and to
the extent required by applicable State law. The term "total expenses," as used
in this paragraph, does not include interest, taxes, litigation expenses,
distribution expenses, brokerage commissions or other costs of acquiring or
disposing of any of the Fund's portfolio securities or any costs or expenses
incurred or arising other than in the ordinary and necessary course of the
Fund's business. When the accrued amount of such expenses exceeds this limit,
the monthly payment of the Investment Manager's fee will be reduced by the
amount of such excess, subject to adjustment month by month during the balance
of the Fund's fiscal year if accrued expenses thereafter fall below the limit.
(5) This Agreement shall continue in effect through December
31, 1996. If not sooner terminated, this Agreement shall continue in effect for
successive periods of 12 months each thereafter, provided that each such
continuance shall be specifically approved annually by the vote of a majority of
the Fund's Board of Directors who are not parties to this Agreement or
"interested persons" (as defined in Investment Company Act of 1940 (the "1940
Act")) of any such party, cast in person at a meeting called for the purpose of
voting on such approval and either the vote of (a) a majority of the outstanding
voting securities of the Fund, as defined in the 1940 Act, or (b) a majority of
the Fund's Board of Directors as a whole.
(6) Notwithstanding the foregoing, this Agreement may be
terminated by either party at any time, without the payment of any penalty, on
sixty (60) days' written notice to the other party, provided that termination by
the Fund is approved by vote of a majority of the Fund's Board of Directors in
office at the time or by vote of a majority of the outstanding voting securities
of the Fund (as defined by the 1940 Act).
(7) This Agreement will terminate automatically and
immediately in the event of its assignment (as defined in the 1940 Act).
(8) In the event this Agreement is terminated and the
Investment Manager no longer acts as Investment Manager to the Fund, the
Investment Manager reserves the right to withdraw from the Fund the use of the
name "Templeton" or any name misleadingly implying a continuing relationship
between the Fund and the Investment Manager or any of its affiliates.
(9) Except as may otherwise be provided by the 1940 Act,
neither the Investment Manager nor its officers, directors, employees or agents
shall be subject to any liability for any error of judgment, mistake of law, or
any loss arising out of any investment or other act or omission in the
performance by the Investment Manager of its duties under the Agreement or for
any loss or damage resulting from the imposition by any government of exchange
control restrictions which might affect the liquidity of the Fund's assets, or
from acts or omissions of custodians, or securities depositories, or from any
war or political act of any foreign government to which such assets might be
exposed, or for failure, on the part of the custodian or otherwise, timely to
collect payments, except for any liability, loss or damage resulting from
willful misfeasance, bad faith or gross negligence on the Investment Manager's
part or by reason of reckless disregard of the Investment Manager's duties under
this Agreement. It is hereby understood and acknowledged by the Fund that the
value of the investments made for the Fund may increase as well as decrease and
are not guaranteed by the Investment Manager. It is further understood and
acknowledged by the Fund that investment decisions made on behalf of the Fund by
the Investment Manger are subject to a variety of factors which may affect the
values and income generated by the Fund's portfolio securities, including
general economic conditions, market factors and currency exchange rates, and
that investment decisions made by the Investment manager will not always be
profitable or prove to have been correct.
(10) It is understood that the services of the Investment Manager
are not deemed to be exclusive, and nothing in this Agreement shall prevent the
Investment Manager, or any affiliate thereof, from providing similar services to
other investment companies and other clients, including clients which may invest
in the same types of securities as the Fund, or, in providing such services,
from using information furnished by others. When the Investment Manager
determines to buy or sell the same security for the Fund that the Investment
Manager or one or more of its affiliates has selected for clients of the
Investment Manager or its affiliates, the orders for all such security
transactions shall be placed for execution by methods determined by the
Investment Manager, with approval by the Fund's Board of Directors, to be
impartial and fair.
(11) This Agreement shall be construed in accordance with the laws
of the State of Maryland, provided that nothing
<PAGE>
herein shall be construed as being inconsistent with applicable Federal and
state securities laws and any rules, regulations and orders thereunder.
(12) If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby and, to this extent, the provisions of
this Agreement shall be deemed to be severable.
(13) Nothing herein shall be construed as constituting the
Investment Manager an agent of the Fund.
(14) It is understood and expressly stipulated that neither the
holders of shares of the Fund nor any Director, officer, agent or employee of
the Fund shall be personally liable hereunder, nor shall any resort be had
to other private property for the satisfaction of any claim or obligation
hereunder, but the Fund only shall be liable.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their duly authorized officers and their
respective corporate seals to be hereunto duly affixed and attested.
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
/s/JOHN R. KAY
By: John R. Kay
TEMPLETON INVESTMENT COUNSEL, INC.
/s/CHARLES E. JOHNSON
By: Charles E. Johnson
- 11 -
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
700 Central Avenue
St. Petersburg, Florida 33701-3628
Franklin Templeton Distributors, Inc.
700 Central Avenue
St. Petersburg, Florida 33701-3628
Re: Amended and Restated Distribution Agreement
Gentlemen:
We, TEMPLETON CAPITAL ACCUMULATOR FUND, INC. (the "Fund") are a Maryland
corporation operating as an open-end management investment company or "mutual
fund", which is registered under the Investment Company Act of 1940 (the "1940
Act") and whose shares are registered under the Securities Act of 1933 (the
"1933 Act"). We desire to issue one or more series or classes of our authorized
but unissued shares of capital stock or beneficial interest (the "Shares") to
authorized persons in accordance with applicable Federal and State securities
laws. The Fund's Shares may be made available in one or more separate series,
each of which may have one or more classes.
You have informed us that your company is registered as a broker-dealer under
the provisions of the Securities Exchange Act of 1934 and that your company is a
member of the National Association of Securities Dealers, Inc. You have
indicated your desire to act as the exclusive selling agent and distributor for
the Shares. We have been authorized to execute and deliver this Distribution
Agreement ("Agreement") to you by a resolution of our Board of Directors
("Board") passed at a meeting at which a majority of Board members, including a
majority who are not otherwise interested persons of the Fund and who are not
interested persons of our investment adviser, its related organizations or with
you or your related organizations, were present and voted in favor of the said
resolution approving this Agreement.
1. APPOINTMENT OF UNDERWRITER. Upon the execution of this Agreement and
in consideration of the agreements on your part herein expressed and upon the
terms and conditions set forth herein, we hereby appoint you as the exclusive
sales agent for our Shares and agree that we will deliver such Shares as you may
sell. You agree to use your best efforts to promote the sale of Shares, but are
not obligated to sell any specific number of Shares.
However, the Fund and each series retain the right to make direct sales
of its Shares without sales charges consistent with the terms of the then
current prospectus and applicable law, and to engage in other legally authorized
transactions in its Shares which do not involve the sale of Shares to the
general public. Such other transactions may include, without limitation,
transactions between the Fund or any series or class and its shareholders only,
transactions involving the reorganization of the Fund or any series, and
transactions involving the merger or combination of the Fund or any series with
another corporation or trust.
2. INDEPENDENT CONTRACTOR. You will undertake and discharge your
obligations hereunder as an independent contractor and shall have no authority
or power to obligate or bind us by your actions, conduct or contracts except
that you are authorized to promote the sale of Shares. You may appoint
sub-agents or distribute through dealers or otherwise as you may determine from
time to time, but this Agreement shall not be construed as authorizing any
dealer or other person to accept orders for sale or repurchase on our behalf or
otherwise act as our agent for any purpose.
3. OFFERING PRICE. Shares shall be offered for sale at a price
equivalent to the net asset value per share of that series and class plus any
applicable percentage of the public offering price as sales commission or as
otherwise set forth in our then current prospectus. On each business day on
which the New York Stock Exchange is open for business, we will furnish you with
the net asset value of the Shares of each available series and class which shall
be determined in accordance with our then effective prospectus. All Shares will
be sold in the manner set forth in our then effective prospectus and statement
of additional information, and in compliance with applicable law.
4. COMPENSATION.
A. SALES COMMISSION. You shall be entitled to charge a sales
commission on the sale or redemption, as appropriate, of each series and class
of each Fund's Shares in the amount of any initial, deferred or contingent
deferred sales charge as set forth in our then effective prospectus. You may
allow any sub-agents or dealers such commissions or discounts from and not
exceeding the total sales commission as you shall deem advisable, so long as any
such commissions or discounts are set forth in our current prospectus to the
extent required by the applicable Federal and State securities laws. You may
also make payments to sub-agents or dealers from your own resources, subject to
the following conditions: (a) any such payments shall not create any obligation
for or recourse against the Fund or any series or class, and (b) the terms and
conditions of any such payments are consistent with our prospectus and
applicable Federal and State securities laws and are disclosed in our prospectus
or statement of additional information to the extent such laws may require.
B. DISTRIBUTION PLANS. You shall also be entitled
to compensation for your services as provided in any Distribution Plan adopted
as to any series and class of any Fund's Shares pursuant to Rule 12b-1 under
the 1940 Act.
5. TERMS AND CONDITIONS OF SALES. Shares shall be offered for sale only
in those jurisdictions where they have been properly registered or are exempt
from registration, and only to those groups of people which the Board may from
time to time determine to be eligible to purchase such shares.
6. ORDERS AND PAYMENT FOR SHARES. Orders for Shares shall be directed
to the Fund's shareholder services agent, for acceptance on behalf of the Fund.
At or prior to the time of delivery of any of our Shares you will pay or cause
to be paid to the custodian of the Fund's assets, for our account, an amount in
cash equal to the net asset value of such Shares. Sales of Shares shall be
deemed to be made when and where accepted by the Fund's shareholder services
agent. The Fund's custodian and shareholder services agent shall be identified
in its prospectus.
7. PURCHASES FOR YOUR OWN ACCOUNT. You shall not purchase our Shares
for your own account for purposes of resale to the public, but you may purchase
Shares for your own investment account upon your written assurance that the
purchase is for investment purposes and that the Shares will not be resold
except through redemption by us.
8. SALE OF SHARES TO AFFILIATES. You may sell our Shares at net asset
value to certain of your and our affiliated persons pursuant to the applicable
provisions of the Federal securities statutes and rules or regulations
thereunder (the "Rules and Regulations"), including Rule 22d-1 under the 1940
Act, as amended from time to time.
9. ALLOCATION OF EXPENSES. We will pay the expenses:
(a) Of the preparation of the audited and certified
financial statements of our company to be included in
any Post-Effective Amendments ("Amendments") to our
Registration Statement under the 1933 Act or 1940
Act, including the prospectus and statement of
additional information included therein;
(b) Of the preparation, including legal fees, and
printing of all Amendments or supplements filed with
the Securities and Exchange Commission, including the
copies of the prospectuses included in the Amendments
and the first 10 copies of the definitive
prospectuses or supplements thereto, other than those
necessitated by your (including your "Parent's")
activities or Rules and Regulations related to your
activities where such Amendments or supplements
result in expenses which we would not otherwise have
incurred;
(c) Of the preparation, printing and distribution of any
reports or communications which we send to our
existing shareholders; and
(d) Of filing and other fees to Federal and State
securities regulatory authorities necessary to
continue offering our Shares.
You will pay the expenses:
(a) Of printing the copies of the prospectuses and any
supplements thereto and statements of additional
information which are necessary to continue to
offer our Shares;
(b) Of the preparation, excluding legal fees, and
printing of all Amendments and supplements to our
prospectuses and statements of additional information
if the Amendment or supplement arises from your
(including your "Parent's") activities or Rules and
Regulations related to your activities and those
expenses would not otherwise have been incurred by
us;
(c) Of printing additional copies, for use by you as
sales literature, of reports or other communications
which we have prepared for distribution to our
existing shareholders; and
(d) Incurred by you in advertising, promoting and
selling our Shares.
10. FURNISHING OF INFORMATION. We will furnish to you such information
with respect to each series and class of Shares, in such form and signed by such
of our officers as you may reasonably request, and we warrant that the
statements therein contained, when so signed, will be true and correct. We will
also furnish you with such information and will take such action as you may
reasonably request in order to qualify our Shares for sale to the public under
the Blue Sky Laws of jurisdictions in which you may wish to offer them. We will
furnish you with annual audited financial statements of our books and accounts
certified by independent public accountants, with semi-annual financial
statements prepared by us, with registration statements and, from time to time,
with such additional information regarding our financial condition as you may
reasonably request.
11. CONDUCT OF BUSINESS. Other than our currently effective prospectus,
you will not issue any sales material or statements except literature or
advertising which conforms to the requirements of Federal and State securities
laws and regulations and which have been filed, where necessary, with the
appropriate regulatory authorities. You will furnish us with copies of all such
materials prior to their use and no such material shall be published if we shall
reasonably and promptly object.
You shall comply with the applicable Federal and State laws
and regulations where our Shares are offered for sale and conduct your affairs
with us and with dealers, brokers or investors in accordance with the Rules of
Fair Practice of the National Association of Securities Dealers, Inc.
12. REDEMPTION OR REPURCHASE WITHIN SEVEN DAYS. If Shares are tendered
to us for redemption or repurchase by us within seven business days after your
acceptance of the original purchase order for such Shares, you will immediately
refund to us the full sales commission (net of allowances to dealers or brokers)
allowed to you on the original sale, and will promptly, upon receipt thereof,
pay to us any refunds from dealers or brokers of the balance of sales
commissions reallowed by you. We shall notify you of such tender for redemption
within 10 days of the day on which notice of such tender for redemption is
received by us.
13. OTHER ACTIVITIES. Your services pursuant to this Agreement shall
not be deemed to be exclusive, and you may render similar services and act as
an underwriter, distributor or dealer for other investment companies in the
offering of their shares.
14. TERM OF AGREEMENT. This Agreement shall become effective on the
date of its execution, and shall remain in effect for a period of two (2) years.
The Agreement is renewable annually thereafter, with respect to the Fund or, if
the Fund has more than one series, with respect to each series, for successive
periods not to exceed one year (i) by a vote of (a) a majority of the
outstanding voting securities of the Fund or, if the Fund has more than one
series, of each series, or (b) by a vote of the Board, AND (ii) by a vote of a
majority of the members of the Board who are not parties to the Agreement or
interested persons of any parties to the Agreement (other than as members of the
Board), cast in person at a meeting called for the purpose of voting on the
Agreement.
This Agreement may at any time be terminated by the Fund or by
any series without the payment of any penalty, (i) either by vote of the Board
or by vote of a majority of the outstanding voting securities of the Fund or any
series on 90 days' written notice to you; or (ii) by you on 90 days' written
notice to the Fund; and shall immediately terminate with respect to the Fund and
each series in the event of its assignment.
15. SUSPENSION OF SALES. We reserve the right at all times to
suspend or limit the public offering of Shares upon two days' written notice
to you.
16. MISCELLANEOUS. This Agreement shall be subject to the laws of the
State of California and shall be interpreted and construed to further promote
the operation of the Fund as an open-end investment company. This Agreement
shall supersede all Distribution Agreements and Amendments previously in effect
between the parties. As used herein, the terms "Net Asset Value," "Offering
Price," "Investment Company," "Open-End Investment Company," "Assignment,"
"Principal Underwriter," "Interested Person," "Parent," "Affiliated Person," and
"Majority of the Outstanding Voting Securities" shall have the meanings set
forth in the 1933 Act or the 1940 Act and the Rules and Regulations thereunder.
Nothing herein shall be deemed to protect you against any liability to us or to
our securities holders to which you would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of your
duties hereunder, or by reason of your reckless disregard of your obligations
and duties hereunder.
If the foregoing meets with your approval, please acknowledge your acceptance by
signing each of the enclosed copies, whereupon this will become a binding
agreement as of the date set forth below.
Very truly yours,
Templeton Capital Accumulator Fund, Inc.
/s/THOMAS M. MISTELE
By: Thomas M. Mistele
Accepted:
Franklin Templeton Distributors, Inc.
/s/PETER D. JONES
By: Peter D. Jones
DATED: May 1, 1995
CUSTODY AGREEMENT
AGREEMENT dated as of January 14, 1991, between THE CHASE
MANHATTAN BANK, N.A. ("Chase"), having its principal place of business at 1
Chase Manhattan Plaza, New York, New York 10081, and TEMPLETON CAPITAL
ACCUMULATOR FUND, INC. (the "Fund"), an investment company registered under the
Investment Company Act of 1940 ("Act of 1940"), having its principal place of
business at 700 Central Avenue, St. Petersburg, Florida 33701.
WHEREAS, the Fund wishes to appoint Chase as custodian to the
securities and assets of the Fund and Chase is willing to act as custodian under
the terms and conditions hereinafter set forth;
NOW, THEREFORE, the Fund and its successors and assigns and
Chase and its successors and assigns, hereby agree as follows:
1. APPOINTMENT AS CUSTODIAN. Chase agrees to act as custodian
for the Fund, as provided herein, in connection with (a) cash ("Cash") received
from time to time from, or for the account of, the Fund for credit to the Fund's
deposit account or accounts administered by Chase, Chase Branches and Domestic
Securities Depositories (as hereinafter defined), and/or Foreign Banks and
Foreign Securities Depositories (as hereinafter defined) (the "Deposit
Account"); (b) all stocks, shares, bonds, debentures, notes, mortgages, or other
obligations for the payment of money and any certificates, receipts, warrants,
or other instruments representing rights to receive, purchase, or subscribe for
the same or evidencing or representing any other
<PAGE>
rights or interests therein and other similar property ("Securities") from time
to time received by Chase and/or any Chase Branch, Domestic Securities
Depository, Foreign Bank or Foreign Securities Depository for the account of the
Fund (the "Custody Account"); and (c) original margin and variation margin
payments in a segregated account for futures contracts (the "Segregated
Account").
All Cash held in the Deposit Account or in the Segregated
Account in connection with which Chase agrees to act as custodian is hereby
denominated as a special deposit which shall be held in trust for the benefit of
the Fund and to which Chase, Chase Branches and Domestic Securities Depositories
and/or Foreign Banks and Foreign Securities Depositories shall have no ownership
rights, and Chase will so indicate on its books and records pertaining to the
Deposit Account and the Segregated Account. All cash held in auxiliary accounts
that may be carried for the Fund with Chase (including a Money Market Account,
Redemption Account, Distribution Account and Imprest Account) is not so
denominated as a special deposit and title thereto is held by Chase subject to
the claims of creditors.
2. AUTHORIZATION TO USE BOOK-ENTRY SYSTEM, DOMESTIC
SECURITIES DEPOSITORIES, BRANCH OFFICES, FOREIGN BANKS AND
FOREIGN SECURITIES DEPOSITORIES. Chase is hereby authorized to
- 2 -
<PAGE>
appoint and utilize, subject to the provisions of Sections 4 and
5 hereof:
A. The Book Entry System and The Depository Trust
Fund; and also such other Domestic Securities Depositories
selected by Chase and as to which Chase has received a
certified copy of a resolution of the Fund's Board of
Directors authorizing deposits therein;
B. Chase's foreign branch offices in the United
Kingdom, Hong Kong, Singapore, and Tokyo, and such other
foreign branch offices of Chase located in countries approved
by the Board of Directors of the Fund as to which Chase shall
have given prior notice to the Fund;
C. Foreign Banks which Chase shall have
selected, which are located in countries approved by
the Board of Directors of the Fund, and as to which
banks Chase shall have given prior notice to the Fund;
and
D. Foreign Securities Depositories which Chase
shall have selected and as to which Chase has received
a certified copy of a resolution of the Fund's Board of
Directors authorizing deposits therein;
to hold Securities and Cash at any time owned by the Fund, it being understood
that no such appointment or utilization shall in any way relieve Chase of its
responsibilities as provided for in
- 3 -
<PAGE>
this Agreement. Foreign branch offices of Chase appointed and utilized by Chase
are herein referred to as "Chase Branches." Unless otherwise agreed to in
writing, (a) each Chase Branch, each Foreign Bank and each Foreign Securities
Depository shall be selected by Chase to hold only Securities as to which the
principal trading market or principal location as to which such Securities are
to be presented for payment is located outside the United States; and (b) Chase
and each Chase Branch, Foreign Bank and Foreign Securities Depository will
promptly transfer or cause to be transferred to Chase, to be held in the United
States, Securities and/or Cash that are then being held outside the United
States upon request of the Fund and/or of the Securities and Exchange
Commission. Utilization by Chase of Chase Branches, Domestic Securities
Depositories, Foreign Banks and Foreign Securities Depositories shall be in
accordance with provisions as from time to time amended, of an operating
agreement to be entered into between Chase and the Fund (the "Operating
Agreement").
3. DEFINITIONS. As used in this Agreement, the
following terms shall have the following meanings:
(a) "Authorized Persons of the Fund" shall mean such
officers or employees of the Fund or any other person or
persons as shall have been designated by a resolution of the
Board of Directors of the Fund, a certified copy of which has
been filed with Chase, to
- 4 -
<PAGE>
act as Authorized Persons hereunder. Such persons shall
continue to be Authorized Persons of the Fund, authorized to
act either singly or together with one or more other of such
persons as provided in such resolution, until such time as the
Fund shall have filed with Chase a written notice of the Fund
supplementing, amending, or revoking the authority of such
persons.
(b) "Book-Entry system" shall mean the Federal
Reserve/Treasury book-entry system for United States and
federal agency securities, its successor or successors and its
nominee or nominees.
(c) "Domestic Securities Depository" shall mean The
Depository Trust Fund, a clearing agency registered with the
Securities and Exchange Commission, its successor or
successors and its nominee or nominees; and (subject to the
receipt by Chase of a certified copy of a resolution of the
Fund's Board of Directors specifically approving deposits
therein as provided in Section 2(a) of this Agreement) any
other person authorized to act as a depository under the Act
of 1940, its successor or successors and its nominee or
nominees.
- 5 -
<PAGE>
(d) "Foreign Bank" shall mean any banking institution
organized under the laws of a jurisdiction other than the
United States or of any state thereof.
(e) A "Foreign Securities Depository" shall mean any
system for the central handling of securities abroad where all
securities of any particular class or series of any issuer
deposited within the system are treated as fungible and may be
transferred or pledged by bookkeeping without physical
delivery of the securities by any Chase Branch or Foreign
Bank.
(f) "Written Instructions" shall mean
instructions in writing signed by Authorized Persons of
the Fund giving such instructions, and/or such other
forms of communications as from time to time shall be
agreed upon in writing between the Fund and Chase.
4. SELECTION OF COUNTRIES IN WHICH SECURITIES MAY BE
HELD. Chase shall not cause Securities and Cash to be held in any country
outside the United States until the Fund has directed the holding of Fund assets
in such country. Chase will be provided with a copy of a resolution of the
Fund's Board of Directors authorizing such custody in any country outside of the
United States, which resolution shall be based upon, among other factors, the
following:
(a) comparative operational efficiencies of
custody;
- 6 -
<PAGE>
(b) clearance and settlement and the costs
thereof; and
(c) political and other risks, other than those
risks specifically assumed by Chase.
5. RESPONSIBILITY OF CHASE TO SELECT CUSTODIANS IN INDIVIDUAL
FOREIGN COUNTRIES. The responsibility for selecting the Chase Branch, Foreign
Bank or Foreign Securities Depository to hold the Fund's Securities and Cash in
individual countries authorized by the Fund shall be that of Chase. Chase
generally shall utilize Chase Branches where available. In locations where there
are no Chase Branches providing custodial services, Chase shall select as its
agent a Foreign Bank, which may be an affiliate or subsidiary of Chase. To
facilitate the clearance and settlement of securities transactions, Chase
represents that, subject to the approval of the Fund, it may deposit Securities
in a Foreign Securities Depository in which Chase is a participant. In
situations in which Chase is not a participant in a Foreign Securities
Depository, Chase may, subject to the approval of the Fund, authorize a Foreign
Bank acting as its subcustodian to deposit the Securities in a Foreign
Securities Depository in which the Foreign Bank is a participant.
Notwithstanding the foregoing, such selection by Chase of a Foreign Bank or
Foreign Securities Depository shall not become effective until Chase has been
advised by the Fund that a majority of its Board of Directors:
- 7 -
<PAGE>
(a) Has approved Chase's selection of the particular
Foreign Bank or Foreign Securities Depository, as the case may
be, as consistent with the best interests of the Fund and its
Shareholders; and
(b) Has approved as consistent with the best
interests of the Fund and its Shareholders a written
contract prepared by Chase which will govern the manner
in which such Foreign Bank will maintain the Fund's
assets.
6. CONDITIONS ON SELECTION OF FOREIGN BANK OR FOREIGN
SECURITIES DEPOSITORY. Chase shall authorize the holding of
Securities and Cash by a Chase Branch, Foreign Bank or Foreign
Securities Depository only:
(a) to the extent that the Securities and Cash are
not subject to any right, charge, security interest, lien or
claim of any kind in favor of any such Foreign Bank or Foreign
Securities Depository, except for their safe custody or
administration; and
(b) to the extent that the beneficial ownership
of Securities is freely transferable without the
payment of money or value other than for safe custody
or administration.
7. CHASE BRANCHES AND FOREIGN BANKS NOT AGENTS OF THE
FUND. Chase Branches, Foreign Banks and Foreign Securities
Depositories shall be subject to the instructions of Chase and/or
- 8 -
<PAGE>
the Foreign Bank, and not to those of the Fund. Chase warrants and represents
that all such instructions shall afford protection to the Fund at least equal to
that afforded for Securities held directly by Chase. Any Chase Branch, Foreign
Bank or Foreign Securities Depository shall act solely as agent of Chase or of
such Foreign Bank.
8. CUSTODY ACCOUNT. Securities held in the Custody
Account shall be physically segregated at all times from those of
any other person or persons except that (a) with respect to
Securities held by Chase Branches, such Securities may be placed
in an omnibus account for the customers of Chase, and Chase shall
maintain separate book entry records for each such omnibus
account, and such Securities shall be deemed for the purpose of
this Agreement to be held by Chase in the Custody Account; (b)
with respect to Securities deposited by Chase with a Foreign
Bank, a Domestic Securities Depository or a Foreign Securities
Depository, Chase shall identify on its books as belonging to the
Fund the Securities shown on Chase's account on the books of the
Foreign Bank, Domestic Securities Depository or Foreign
Securities Depository; and (c) with respect to Securities
deposited by a Foreign Bank with a Foreign Securities Depository,
Chase shall cause the Foreign Bank to identify on its books as
belonging to Chase, as agent, the Securities shown on the Foreign
Bank's account on the books of the Foreign Securities Depository.
All Securities of the Fund maintained by Chase pursuant to this
- 9 -
<PAGE>
Agreement shall be subject only to the instructions of Chase, Chase Branches or
their agents. Chase shall only deposit Securities with a Foreign Bank in
accounts that include only assets held by Chase for its customers.
8a. SEGREGATED ACCOUNT FOR FUTURES CONTRACTS. With
respect to every futures contract purchased, sold or cleared for
the Custody Account, Chase agrees, pursuant to Written
Instructions, to:
(a) deposit original margin and variation margin
payments in a segregated account maintained by Chase;
and
(b) perform all other obligations attendant to
transactions or positions in such futures contracts, as
such payments or performance may be required by law or
the executing broker.
8b. SEGREGATED ACCOUNT FOR REPURCHASE AGREEMENTS.
With respect to purchases for the Custody Account from banks (including Chase)
or broker-dealers, of United States or foreign government obligations subject to
repurchase agreements, Chase agrees, pursuant to Written Instructions, to:
(a) deposit such securities and repurchase
agreements in a segregated account maintained by Chase;
and
(b) promptly show on Chase's records that such
securities and repurchase agreements are being held on
- 10 -
<PAGE>
behalf of the Fund and deliver to the Fund a written
confirmation to that effect.
8c. SEGREGATED ACCOUNTS FOR DEPOSITS OF COLLATERAL.
Chase agrees, with respect to (i) cash or high quality debt securities to secure
the Fund's commitments to purchase new issues of debt obligations offered on a
when-issued basis; (ii) cash, U.S. government securities, or irrevocable letters
of credit of borrowers of the Fund's portfolio securities to secure the loan to
them of such securities; and/or (iii) cash, securities or any other property
delivered to secure any other obligations; (all of such items being hereinafter
referred to as "collateral"), pursuant to Written Instructions, to:
(a) deposit the collateral for each such
obligation in a separate segregated account maintained
by Chase; and
(b) promptly to show on Chase's records that
such collateral is being held on behalf of the Fund and
deliver to the Fund a written confirmation to that
effect.
9. DEPOSIT ACCOUNT. Subject to the provisions of
this Agreement, the Fund authorizes Chase to establish and maintain in each
country or other jurisdiction in which the principal trading market for any
Securities is located or in which any Securities are to be presented for
payment, an account or accounts, which may include nostro accounts with Chase
- 11 -
<PAGE>
Branches and omnibus accounts of Chase at Foreign Banks, for receipt of cash in
the Deposit Account, in such currencies as directed by Written Instructions. For
purposes of this Agreement, cash so held in any such account shall be evidenced
by separate book entries maintained by Chase at its office in London and shall
be deemed to be Cash held by Chase in the Deposit Account. Unless Chase receives
Written Instructions to the contrary, cash received or credited by Chase or any
other Chase Branch, Foreign Bank or Foreign Securities Depository for the
Deposit Account in a currency other than United States dollars shall be
converted promptly into United States dollars whenever it is practicable to do
so through customary banking channels (including without limitation the
effecting of such conversions at Chase's preferred rates through Chase, its
affiliates or Chase Branches), and shall be automatically transmitted back to
Chase in the United States.
10. SETTLEMENT PROCEDURES. Settlement procedures for
transactions in Securities delivered to, held in, or to be
delivered from the Custody Account in Chase Branches, Domestic
Securities Depositories, Foreign Banks and Foreign Securities
Depositories, including receipts and payments of cash held in any
nostro account or omnibus account for the Deposit Account as
described in Section 9, shall be carried out in accordance with
the provisions of the Operating Agreement. It is understood that
such settlement procedures may vary, as provided in the Operating
- 12 -
<PAGE>
Agreement, from securities market to securities market, to reflect particular
settlement practices in such markets.
Chase shall make or cause the appropriate Chase Branch or
Foreign Bank to move payments of Cash held in the Deposit Account only:
(a) in connection with the purchase of Securities for
the account of the Fund and only against the receipt of such
Securities by Chase or by another appropriate Chase Branch,
Domestic Securities Depository, Foreign Bank or Foreign
Securities Depository, or otherwise as provided in the
Operating Agreement, each such payment to be made at prices
confirmed by Written Instructions, or
(b) in connection with any dividend, interim
dividend or other distribution declared by the Fund, or
(c) as directed by the Fund by Written Instructions
setting forth the name and address of the person to whom the
payment is to be made and the purpose for which the payment is
to be made.
Upon the receipt by Chase of Written Instructions specifying
the Securities to be so transferred or delivered, which instructions shall name
the person or persons to whom transfers or deliveries of such Securities shall
be made and shall indicate the time(s) for such transfers or deliveries,
- 13 -
<PAGE>
Securities held in the Custody Account shall be transferred, exchanged, or
delivered by Chase, any Chase Branch, Domestic Securities Depository, Foreign
Bank, or Foreign Securities Depository, as the case may be, against payment in
Cash or Securities, or otherwise as provided in the Operating Agreement, only:
(a) upon sale of such Securities for the account of
the Fund and receipt of such payment in the amount shown in a
broker's confirmation of sale of the Securities or other
proper authorization received by Chase before such payment is
made, as confirmed by Written Instructions;
(b) in exchange for or upon conversion into other
Securities alone or other Securities and Cash pursuant to any
plan of merger, consolidation, reorganization,
recapitalization, readjustment, or tender offer;
(c) upon exercise of conversion, subscription,
purchase, or other similar rights represented by such
Securities; or
(d) otherwise as directed by the Fund by Written
Instructions which shall set forth the amount and
purpose of such transfer or delivery.
Until Chase receives Written Instructions to the
contrary, Chase shall, and shall cause each Chase Branch,
Domestic Securities Depository, Foreign Bank and Foreign
- 14 -
<PAGE>
Securities Depository holding Securities or Cash to, take the following actions
in accordance with procedures established in the Operating Agreement:
(a) collect and timely deposit in the Deposit Account
all income due or payable with respect to any Securities and
take any action which may be necessary and proper in
connection with the collection and receipt of such income;
(b) present timely for payment all Securities in the
Custody Account which are called, redeemed or retired or
otherwise become payable and all coupons and other income
items which call for payment upon presentation and to receive
and credit to the Deposit Account Cash so paid for the account
of the Fund except that, if such Securities are convertible,
such Securities shall not be presented for payment until two
business days preceding the date on which such conversion
rights would expire unless Chase previously shall have
received Written Instructions with respect thereto;
(c) present for exchange all Securities in the
Custody Account converted pursuant to their terms into
other Securities;
(d) in respect of securities in the Custody
Account, execute in the name of the Fund such ownership
- 15 -
<PAGE>
and other certificates as may be required to obtain payments
in respect thereto, provided that Chase shall have requested
and the Fund shall have furnished to Chase any information
necessary in connection with such certificates;
(e) exchange interim receipts or temporary
Securities in the Custody Account for definitive
Securities; and
(f) receive and hold in the Custody Account all
Securities received as a distribution on Securities
held in the Custody Account as a result of a stock
dividend, share split-up or reorganization,
recapitalization, readjustment or other rearrangement
or distribution of rights or similar Securities issued
with respect to any Securities held in the Custody
Account.
11. RECORDS. Chase hereby agrees that Chase and any
Chase Branch or Foreign Bank shall create, maintain, and retain all records
relating to their activities and obligations as custodian for the Fund under
this Agreement in such manner as will meet the obligations of the Fund under the
Act of 1940, particularly Section 31 thereof and Rules 31a-1 and 31a-2
thereunder, and Federal, state and foreign tax laws and other legal or
administrative rules or procedures, in each case as currently in effect and
applicable to the Fund. All records so
- 16 -
<PAGE>
maintained in connection with the performance of its duties under this Agreement
shall, in the event of termination of this Agreement, be preserved and
maintained by Chase as required by regulation, and shall be made available to
the Fund or its agent upon request, in accordance with the provisions of Section
19.
Chase hereby agrees, subject to restrictions under applicable
laws, that the books and records of Chase and any Chase Branch pertaining to
their actions under this Agreement shall be open to the physical, on-premises
inspection and audit at reasonable times by the independent accountants
("Accountants") employed by, or other representatives of, the Fund. Chase hereby
agrees that, subject to restrictions under applicable laws, access shall be
afforded to the Accountants to such of the books and records of any Foreign
Bank, Domestic Securities Depository or Foreign Securities Depository with
respect to Securities and Cash as shall be required by the Accountants in
connection with their examination of the books and records pertaining to the
affairs of the Fund. Chase also agrees that as the Fund may reasonably request
from time to time, Chase shall provide the Accountants with information with
respect to Chase's and Chase Branches' systems of internal accounting controls
as they relate to the services provided under this Agreement, and Chase shall
use its best efforts to obtain and furnish similar information with respect to
each Domestic
- 17 -
<PAGE>
Securities Depository, Foreign Bank and Foreign Securities
Depository holding Securities and Cash.
12. REPORTS. Chase shall supply periodically, upon the
reasonable request of the Fund, such statements, reports, and advices with
respect to Cash in the Deposit Account and the Securities in the Custody Account
and transactions in Securities from time to time received and/or delivered for
or from the Custody Account, as the case may be, as the Fund shall require. Such
statements, reports and advices shall include an identifi-cation of the Chase
Branch, Domestic Securities Depository, Foreign Bank and Foreign Securities
Depository having custody of the Securities and Cash, and descriptions thereof.
13. REGISTRATION OF SECURITIES. Securities in the Custody
Account which are issued or issuable only in bearer form (except such securities
as are held in the Book-Entry System) shall be held by Chase, Chase Branches,
Domestic Securities Depositories, Foreign Banks or Foreign Securities
Depositories in that form. All other Securities in the Custody Account shall be
held in registered form in the name of Chase, or any Chase Branch, the
Book-Entry System, Domestic Securities Depository, Foreign Bank or Foreign
Securities Depository and their nominees, as custodian or nominee.
14. STANDARD OF CARE.
(a) GENERAL. Chase shall assume entire
responsibility for all Securities held in the Custody
- 18 -
<PAGE>
Account, Cash held in the Deposit Account, Cash or Securities
held in the Segregated Account and any of the Securities and
Cash while in the possession of Chase or any Chase Branch,
Domestic Securities Depository, Foreign Bank or Foreign
Securities Depository, or in the possession or control of any
employees, agents or other personnel of Chase or any Chase
Branch, Domestic Securities Depository, Foreign Bank or
Foreign Securities Depository; and shall be liable to the Fund
for any loss to the Fund occasioned by any destruction of the
Securities or Cash so held or while in such possession, by any
robbery, burglary, larceny, theft or embezzlement by any
employees, agents or personnel of Chase or any Chase Branch,
Domestic Securities Depository, Foreign Bank or Foreign
Securities Depository, and/or by virtue of the disappearance
of any of the Securities or Cash so held or while in such
possession, with or without any fault attributable to Chase
("fault attributable to Chase" for the purposes of this
Agreement being deemed to mean any negligent act or omission,
robbery, burglary, larceny, theft or embezzlement by any
employees or agents of Chase or any Chase Branch, Domestic
Securities Depository, Foreign Bank or Foreign Securities
Depository). In the event of Chase's
- 19 -
<PAGE>
discovery or notification of any such loss of Securities or
Cash, Chase shall promptly notify the Fund and shall reimburse
the Fund to the extent of the market value of the missing
Securities or Cash as at the date of the discovery of such
loss. The Fund shall not be obligated to establish any
negligence, misfeasance or malfeasance on Chase's part from
which such loss resulted, but Chase shall be obligated
hereunder to make such reimbursement to the Fund after the
discovery or notice of such loss, destruction or theft of such
Securities or Cash. Chase may at its option insure itself
against loss from any cause but shall be under no obligation
to insure for the benefit of the Fund.
(b) COLLECTIONS. All collections of funds or other
property paid or distributed in respect of Securities held in
the Custody Account shall be made at the risk of the Fund.
Chase shall have no liability for any loss occasioned by delay
in the actual receipt of notice by Chase (or by any Chase
Branch or Foreign Bank in the case of Securities or Cash held
outside of the United States) of any payment, redemption or
other transaction regarding Securities held in the Custody
Account or Cash held in the Deposit Account in respect of
which Chase has agreed to take action in the absence
- 20 -
<PAGE>
of Written Instructions to the contrary as provided in Section
10 of this Agreement, which does not appear in any of the
publications referred to in Section 16 of this Agreement.
(c) EXCLUSIONS. Notwithstanding any other provision
in this Agreement to the contrary, Chase shall not be
responsible for (i) losses resulting from war or from the
imposition of exchange control restrictions, confiscation,
expropriation, or nationalization of any securities or assets
of the issuer of such securities, or (ii) losses resulting
from any negligent act or omission of the Fund or any of its
affiliates, or any robbery, theft, embezzlement or fraudulent
act by any employee or agent of the Fund or any of its
affiliates. Chase shall not be liable for any action taken in
good faith upon Written Instructions of Authorized Persons of
the Fund or upon any certified copy of any resolution of the
Board of Directors of the Fund, and may rely on the
genuineness of any such documents which it may in good faith
believe to be validly executed.
(d) LIMITATION ON LIABILITY UNDER SECTION 14(A).
Notwithstanding any other provision in this Agreement
to the contrary, it is agreed that Chase's sole
responsibility with respect to losses under Section
- 21 -
<PAGE>
14(a) shall be to pay the Fund the amount of any such loss as
provided in Section 14(a) (subject to the limitation provided
in Section 14(e) of this Agreement). This limitation does not
apply to any liability of Chase under Section 14(f) of this
Agree-ment.
(e) ANNUAL ADJUSTMENT OF LIMITATION OF LIABILITY. As
soon as practicable after June 1 of every year, the Fund shall
provide Chase with the amount of its total net assets as of
the close of business on such date (or if the New York Stock
Exchange is closed on such date, then in that event as of the
close of business on the next day on which the New York Stock
Exchange is open for business).
It is understood by the parties to this Agreement (1)
that Chase has entered into substantially similar custody
agreements with other Templeton Funds, all of which Funds have
as their investment adviser either the Investment Manager of
the Fund or companies which are affiliated with the Investment
Manager; and (2) that Chase may enter into substantially
similar custody agreements with additional mutual funds under
Templeton management which may hereafter be organized. Each of
such custody agreements with each of such other Templeton
Funds contains (or will contain) a "Standard
- 22 -
<PAGE>
of Care" section similar to this Section 14, except that the
limit of Chase's liability is (or will be) in varying amounts
for each Fund, with the aggregate limits of liability in all
of such agreements, including this Agreement, amounting to
$150,000,000.
On each June 1, Chase will total the net assets
reported by each one of the Templeton Funds, and will
calculate the percentage of the aggregate net assets of all
the Templeton Funds that is represented by the net asset value
of this Fund. Thereupon Chase shall allocate to this Agreement
with this Fund that propor-tion of its total of $150,000,000
responsibility undertaking which is substantially equal to the
propor-tion which this Fund's net assets bears to the total
net assets of all such Templeton Funds subject to adjustments
for claims paid as follows: all claims previously paid to this
Fund shall first be deducted from its proportionate allocable
share of the $150,000,000 Chase responsibility, and if the
claims paid to this Fund amount to more than its allocable
share of the Chase responsibility, then the excess of such
claims paid to this Fund shall diminish the balance of the
$150,000,000 Chase responsibility available for the
proportionate shares of all of the other Templeton Funds
having similar custody agreements
- 23 -
<PAGE>
with Chase. Based on such calculation, and on such adjustment
for claims paid, if any, Chase thereupon shall notify the Fund
of such limit of liability under this Section 14 which will be
available to the Fund with respect to (1) losses in excess of
payment alloca-tions for previous years and (2) losses
discovered during the next year this Agreement remains in
effect and until a new determination of such limit of
respon-sibility is made on the next succeeding June 1.
(f) OTHER LIABILITY. Independently of Chase's
liability to the Fund as provided in Section 14(a) above (it
being understood that the limitations in Sections 14(d) and
14(e) do not apply to the provisions of this Section 14(f)),
Chase shall be responsible for the performance of only such
duties as are set forth in this Agreement or contained in
express instructions given to Chase which are not contrary to
the provisions of this Agreement. Chase will use and require
the same care with respect to the safekeeping of all
Securities held in the Custody Account, Cash held in the
Deposit Account, and Securities or Cash held in the Segregated
Account as it uses in respect of its own similar property, but
it need not maintain any insurance for the benefit of the
Fund. With respect to Securities and Cash held outside of the
United States, Chase will
- 24 -
<PAGE>
be liable to the Fund for any loss to the Fund resulting from
any disappearance or destruction of such Securities or Cash
while in the possession of Chase or any Chase Branch, Foreign
Bank or Foreign Securities Depository, to the same extent it
would be liable to the Fund if Chase had retained physical
possession of such Securities and Cash in New York. It is
specifically agreed that Chase's liability under this Section
14(f) is entirely independent of Chase's liability under
Section 14(a). Notwithstanding any other provision in this
Agreement to the contrary, in the event of any loss giving
rise to liability under this Section 14(f) that would also
give rise to liability under Section 14(a), the amount of such
liability shall not be charged against the amount of the
limitation on liability provided in Section 14(d).
(g) COUNSEL; LEGAL EXPENSES. Chase shall be entitled
to the advice of counsel (who may be counsel for the Fund) at
the expense of the Fund, in connection with carrying out
Chase's duties hereunder and in no event shall Chase be liable
for any action taken or omitted to be taken by it in good
faith pursuant to advice of such counsel. If, in the absence
of fault attributable to Chase and in the course of or in
connection with carrying out its duties and obligations
- 25 -
<PAGE>
hereunder, any claims or legal proceedings are insti-
tuted against Chase or any Chase Branch by third
parties, the Fund will hold Chase harmless against any
claims, liabilities, costs, damages or expenses
incurred in connection therewith and, if the Fund so
elects, the Fund may assume the defense thereof with
counsel satisfactory to Chase, and thereafter shall not
be responsible for any further legal fees that may be
incurred by Chase, provided, however, that all of the
foregoing is conditioned upon the Fund's receipt from
Chase of prompt and due notice of any such claim or
proceeding.
15. EXPROPRIATION INSURANCE. Chase represents that it
does not intend to obtain any insurance for the benefit of the Fund which
protects against the imposition of exchange control restrictions on the transfer
from any foreign jurisdiction of the proceeds of sale of any Securities or
against confiscation, expropriation or nationalization of any securities or the
assets of the issuer of such securities by a government of any foreign country
in which the issuer of such securities is organized or in which securities are
held for safekeeping either by Chase, or any Chase Branch, Foreign Bank or
Foreign Securities Depository in such country. Chase has discussed the
availability of expropriation insurance with the Fund, and has advised the Fund
as to its understanding of the position of the staff of the
- 26 -
<PAGE>
Securities and Exchange Commission that any investment company investing in
securities of foreign issuers has the responsibility for reviewing the
possibility of the imposition of exchange control restrictions which would
affect the liquidity of such investment company's assets and the possibility of
exposure to political risk, including the appropriateness of insuring against
such risk. The Fund has acknowledged that it has the responsibility to review
the possibility of such risks and what, if any, action should be taken.
16. PROXY, NOTICES, REPORTS, ETC. Chase shall watch for the
dates of expiration of (a) all purchase or sale rights (including warrants,
puts, calls and the like) attached to or inherent in any of the Securities held
in the Custody Account and (b) conversion rights and conversion price changes
for each convertible Security held in the Custody Account as published in
Telstat Services, Inc., Standard & Poor's Financial Inc. and/or any other
publications listed in the Operating Agreement (it being understood that Chase
may give notice to the Fund as provided in Section 21 as to any change, addition
and/or omission in the publications watched by Chase for these purposes). If
Chase or any Chase Branch, Foreign Bank or Foreign Securities Depository shall
receive any proxies, notices, reports, or other communications relative to any
of the Securities held in the Custody Account, Chase shall, on its behalf or on
behalf of a Chase Branch, Foreign Bank or Foreign Securities Depository,
- 27 -
<PAGE>
promptly transmit in writing any such communication to the Fund. In addition,
Chase shall notify the Fund by person-to-person collect telephone concerning any
such notices relating to any matters specified in the first sentence of this
Section 16.
As specifically requested by the Fund, Chase shall execute or
deliver or shall cause the nominee in whose name Securities are registered to
execute and deliver to such person as may be designated by the Fund proxies,
consents, authoriza-tions and any other instruments whereby the authority of the
Fund as owner of any Securities in the Custody Account registered in the name of
Chase or such nominee, as the case may be, may be exercised. Chase shall vote
Securities in accordance with Written Instructions timely received by Chase, or
such other person or persons as designated in or pursuant to the Operating
Agreement.
Chase and any Chase Branch shall have no liability for any
loss or liability occasioned by delay in the actual receipt by them or any
Foreign Bank or Foreign Securities Depository of notice of any payment or
redemption which does not appear in any of the publications referred to in the
first sentence of this Section 16.
17. COMPENSATION. The Fund agrees to pay to Chase
from time to time such compensation for its services pursuant to
this Agreement as may be mutually agreed upon in writing from
time to time and Chase's out-of-pocket or incidental expenses, as
- 28 -
<PAGE>
from time to time shall be mutually agreed upon by Chase and the Fund. The Fund
shall have no responsibility for the payment of services provided by any
Domestic Securities Depository, such fees being paid directly by Chase. In the
event of any advance of Cash for any purpose made by Chase pursuant to any
Written Instruction, or in the event that Chase or any nominee of Chase shall
incur or be assessed any taxes in connection with the performance of this
Agreement, the Fund shall indemnify and reimburse Chase therefor, except such
assessment of taxes as results from the negligence, fraud, or willful misconduct
of Chase, any Domestic Securities Depository, Chase Branch, Foreign Bank or
Foreign Securities Depository, or as constitutes a tax on income, gross receipts
or the like of any one or more of them. Chase shall have a lien on Securities in
the Custody Account and on Cash in the Deposit Account for any amount owing to
Chase from time to time under this Agreement upon due notice to the Fund.
18. AGREEMENT SUBJECT TO APPROVAL OF THE FUND. It is
understood that this Agreement and any amendments shall be
subject to the approval of the Fund.
19. TERM. This Agreement shall remain in effect until
terminated by either party upon 60 days' written notice to the
other, sent by registered mail. Notwithstanding the preceding
sentence, however, if at any time after the execution of this
Agreement Chase shall provide written notice to the Fund, by
registered mail, of the amount needed to meet a substantial
- 29 -
<PAGE>
increase in the cost of maintaining its present type and level of bonding and
insurance coverage in connection with Chase's under-takings in Section 14(a),
(d) and (e) of this Agreement, said Section 14(a), (d) and (e) of this Agreement
shall cease to apply 60 days after the providing of such notice by Chase, unless
prior to the expiration of such 60 days the Fund agrees in writing to assume the
amount needed for such purpose. Chase, upon the date this Agreement terminates
pursuant to notice which has been given in a timely fashion, shall, and/or shall
cause each Domestic Securities Depository to, deliver the Securities in the
Custody Account, pay the Cash in the Deposit Account, and deliver and pay
Securities and Cash in the Segregated Account to the Fund unless Chase has
received from the Fund 60 days prior to the date on which this Agreement is to
be terminated Written Instructions specifying the name(s) of the person(s) to
whom the Securities in the Custody Account shall be delivered, the Cash in the
Deposit Account shall be paid, and Securities and Cash in the Segregated Account
shall be delivered and paid. Concurrently with the delivery of such Securities,
Chase shall deliver to the Fund, or such other person as the Fund shall
instruct, the records referred to in Section 11 which are in the possession or
control of Chase, any Chase Branch, or any Domestic Securities Deposi-tory, or
any Foreign Bank or Foreign Securities Depository, or in the event that Chase is
unable to obtain such records in their original form Chase shall deliver true
copies of such records.
- 30 -
<PAGE>
20. AUTHORIZATION OF CHASE TO EXECUTE NECESSARY DOCUMENTS. In
connection with the performance of its duties hereunder, the Fund hereby
authorizes and directs Chase and each Chase Branch acting on behalf of Chase,
and Chase hereby agrees, to execute and deliver in the name of the Fund, or
cause such other Chase Branch to execute and deliver in the name of the Fund,
such certificates, instruments, and other documents as shall be reasonably
necessary in connection with such performance, provided that the Fund shall have
furnished to Chase any information necessary in connection therewith.
21. NOTICES. Any notice or other communication
authorized or required by this Agreement to be given to the
parties shall be sufficiently given (except to the extent
otherwise specifically provided) if addressed and mailed postage
prepaid or delivered to it at its office at the address set forth
below:
If to the Fund, then to
Templeton Capital Accumulator Fund, Inc.
700 Central Avenue, P.O. Box 33030
St. Petersburg, Florida 33733
Attention: Thomas M. Mistele, Secretary
If to Chase, then to
The Chase Manhattan Bank, N.A.
1211 Avenue of the Americas
33rd Floor
New York, New York 10036
Attention: Global Custody Division Executive
or such other person or such other address as any party shall have furnished to
the other party in writing.
- 31 -
<PAGE>
22. NON-ASSIGNABILITY OF AGREEMENT. This Agreement shall not
be assignable by either party hereto; provided, however, that any corporation
into which the Fund, the Fund or Chase, as the case may be, may be merged or
converted or with which it may be consolidated, or any corporation succeeding to
all or substantially all of the trust business of Chase, shall succeed to the
respective rights and shall assume the respective duties of the Fund or of
Chase, as the case may be, hereunder.
23. GOVERNING LAW. This Agreement shall be governed
by the laws of the State of New York.
THE CHASE MANHATTAN BANK, N.A.
By:__________________________________
Vice President
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
By: /s/DANIEL CALABRIA
Daniel Calabria
Vice President
- 32 -
BUSINESS MANAGEMENT AGREEMENT BETWEEN
TEMPLETON CAPITAL ACCUMULATOR FUND, INC. AND
TEMPLETON GLOBAL INVESTORS, INC.
AGREEMENT dated as of April 1, 1993, and amended May 25, 1995,
between Templeton Capital Accumulator Fund, Inc., a Maryland corporation which
is a registered open-end investment company (the "Fund") and Templeton Global
Investors, Inc. ("TGII").
In consideration of the mutual promises herein made, the
parties hereby agree as follows:
(1) TGII agrees, during the life of this Agreement, to
be responsible for:
(a) providing office space, telephone, office equipment
and supplies for the Company;
(b) paying compensation of the Fund's officers for
services rendered as such;
(c) authorizing expenditures and approving bills for
payment on behalf of the Fund;
(d) supervising preparation of annual and semiannual
reports to Shareholders, notices of dividends,
capital gains distributions and tax credits, and
attending to routine correspondence and other
communications with individual Shareholders;
(e) daily pricing of the Fund's investment portfolios and
preparing and supervising publication of daily
quotations of the bid and asked prices of the Fund's
Shares, earnings reports and other financial data;
(f) monitoring relationships with organizations serving
the Fund, including custodians, transfer agents and
printers;
(g) providing trading desk facilities for the Fund;
(h) supervising compliance by the Fund with recordkeeping
requirements under the Investment Company Act of 1940
(the "1940 Act") and the rules and regulations
thereunder, with state regulatory requirements,
maintenance of books and records for the Fund (other
than those maintained by the custodian and transfer
agent), preparing and filing of tax reports other
than the Fund's income tax returns; and
(i) providing executive, clerical and secretarial
personnel needed to carry out the above
responsibilities.
(2) The Fund agrees, during the life of this Agreement, to pay
to TGII as compensation for the foregoing a monthly fee equal on an annual basis
to 0.15% of the first $200 million of the aggregate average daily net assets of
the Fund during the month preceding each payment, reduced as follows: on such
net assets in excess of $200 million up to $700 million, a monthly fee equal on
an annual basis to 0.135%; on such net assets in excess of $700 million up to
$1.2 billion, a monthly fee equal on an annual basis to 0.1%; and on such net
assets in excess of $1.2 billion, a monthly fee equal on an annual basis to
0.075%. TGII may waive all or a portion of its fees provided for hereunder and
such waiver shall be treated as a reduction in purchase price of its services.
TGII shall be contractually bound hereunder by the terms of any publicly
announced waiver of its fees, or any limitation of the Fund's expenses, as if
such waiver or limitation were fully set forth herein.
(3) This Agreement shall remain in full force and effect
through December 31, 1996 and thereafter from year to year to the extent
continuance is approved annually by the Board of Directors of the Fund.
(4) This Agreement may be terminated by the Fund at any time
on sixty (60) days' written notice without payment of penalty, provided that
such termination by the Fund shall be directed or approved by the vote of a
majority of the Directors of the Fund in office at the time or by the vote of a
majority of the outstanding voting securities of the Fund (as defined by the
1940 Act); and shall automatically and immediately terminate in the event of its
assignment (as defined by the 1940 Act).
(5) In the absence of willful misfeasance, bad faith or gross
negligence on the part of TGII, or of reckless disregard of its duties and
obligations hereunder, TGII shall not be subject to liability for any act or
omission in the course of, or connected with, rendering services hereunder.
(6) TGII has advanced for the account of the Fund all
organizational expenses of the Fund, all of which expenses are being deferred by
the Fund and amortized ratably over a five-year period commencing on January 14,
1991; and during the amortization period, the proceeds of any redemption of the
original Shares will be reduced by a pro rata portion of any then unamortized
organizational expenses based on the ratio of the Shares redeemed to the total
initial Shares outstanding immediately prior to the redemption.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their duly authorized officers and their
respective corporate seals to be hereunto duly affixed and attested.
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
/s/THOMAS M. MISTELE
By: Thomas M. Mistele
Secretary
TEMPLETON GLOBAL INVESTORS, INC.
/s/JOHN R. KAY
By: John R. Kay
Vice President
7
TRANSFER AGENT AGREEMENT BETWEEN
TEMPLETON CAPITAL ACCUMULATOR FUND, INC. AND
FRANKLIN TEMPLETON INVESTOR SERVICES, INC.
AGREEMENT dated as of September 1, 1993, and amended and restated as of
August 10, 1995, between TEMPLETON CAPITAL ACCUMULATOR FUND, INC., a registered
open-end investment company with offices at 700 Central Avenue, St. Petersburg,
Florida 33701 (the "Fund"), and FRANKLIN TEMPLETON INVESTOR SERVICES, INC., a
registered transfer agent with offices at 700 Central Avenue, St. Petersburg,
Florida 33701 ("FTIS").
W I T N E S S E T H:
That for and in consideration of the mutual promises hereinafter set
forth, the Fund and FTIS agree as follows:
1. DEFINITIONS. Whenever used in this Agreement, the following
words and phrases, unless the context otherwise requires, shall have the
following meanings:
(a) "Articles of Incorporation" shall mean the Articles
of Incorporation of the Fund as the same may be amended from time to time;
(b) "Authorized Person" shall be deemed to include any person,
whether or not such person is an officer or employee of the Fund, duly
authorized to give Oral Instructions or Written Instructions on behalf of the
Fund as indicated in a certificate furnished to FTIS pursuant to Section 4(c)
hereof as may be received by FTIS from time to time;
(c) "Custodian" refers to the custodian and any sub-custodian
of all securities and other property which the Fund may from time to time
deposit, or cause to be deposited or held under the name or account of such
custodian pursuant to the Custody Agreement;
(d) "Oral Instructions" shall mean instructions, other than
written instructions, actually received by FTIS from a person reasonably
believed by FTIS to be an Authorized Person;
(e) "Shares" refers to shares of common stock, par value
$.01 per share, of the Fund; and
(f) "Written Instructions" shall mean a written communication
signed by a person reasonably believed by FTIS to be an Authorized Person and
actually received by FTIS.
2. APPOINTMENT OF FTIS. The Fund hereby appoints and constitutes FTIS
as transfer agent for Shares of the Fund and as shareholder servicing agent for
the Fund, and FTIS accepts such appointment and agrees to perform the duties
hereinafter set forth.
3. COMPENSATION.
(a) The Fund will compensate or cause FTIS to be compensated
for the performance of its obligations hereunder in accordance with the fees set
forth in the written schedule of fees annexed hereto as Schedule A and
incorporated herein. Schedule A does not include out-of-pocket disbursements of
FTIS for which FTIS shall be entitled to bill the Fund separately. FTIS will
bill the Fund as soon as practicable after the end of each calendar month, and
said billings will be detailed in accordance with Schedule A. The Fund will
promptly pay to FTIS the amount of such billing.
Out-of-pocket disbursements shall include, but shall not be
limited to, the items specified in the written schedule of out-of-pocket
expenses annexed hereto as Schedule B and incorporated herein. Schedule B may be
modified by FTIS upon not less than 30 days' prior written notice to the Fund.
Unspecified out-of-pocket expenses shall be limited to those out-of-pocket
expenses reasonably incurred by FTIS in the performance of its obligations
hereunder. Reimbursement by the Fund for expenses incurred by FTIS in any month
shall be made as soon as practicable after the receipt of an itemized bill from
FTIS.
(b) Any compensation agreed to hereunder may be adjusted from
time to time by attaching to Schedule A of this Agreement a revised Fee
Schedule.
4. DOCUMENTS. In connection with the appointment of FTIS, the Fund
shall, on or before the date this Agreement goes into effect, but in any case,
within a reasonable period of time for FTIS to prepare to perform its duties
hereunder, deliver or cause to be delivered to FTIS the following documents:
(a) If applicable, specimens of the certificates for
Shares of the Fund;
(b) All account application forms and other documents
relating to Shareholder accounts or to any plan, program or service offered
by the Fund;
(c) A certificate identifying the Authorized Persons and
specimen signatures of Authorized Persons who will sign Written Instructions;
and
(d) All documents and papers necessary under the laws of
Florida, under the Fund's Articles of Incorporation, and as may be required for
the due performance of FTIS's duties under this Agreement or for the due
performance of additional duties as may from time to time be agreed upon between
the Fund and FTIS.
5. DISTRIBUTIONS PAYABLE IN SHARES. In the event that the Board of
Trustees of the Trust shall declare a distribution payable in Shares, the Trust
shall deliver or cause to be delivered to FTIS written notice of such
declaration signed on behalf of the Trust by an officer thereof, upon which FTIS
shall be entitled to rely for all purposes, certifying (i) the number of Shares
involved, and (ii) that all appropriate action has been taken.
6. DUTIES OF THE TRANSFER AGENT. FTIS shall be responsible for
administering and/or performing transfer agent functions; for acting as service
agent in connection with dividend and distribution functions; and for performing
shareholder account and administrative agent functions in connection with the
issuance, transfer and redemption or repurchase (including coordination with the
Custodian) of Shares. The operating standards and procedures to be followed
shall be determined from time to time by agreement between the Fund and FTIS.
Without limiting the generality of the foregoing, FTIS agrees to perform the
specific duties listed on Schedule C.
7. RECORDKEEPING AND OTHER INFORMATION. FTIS shall create and
maintain all necessary records in accordance with all applicable laws, rules
and regulations.
8. OTHER DUTIES. In addition, FTIS shall perform such other duties and
functions, and shall be paid such amounts therefor, as may from time to time be
agreed upon in writing between the Fund and FTIS. Such other duties and
functions shall be reflected in a written amendment to Schedule C, and the
compensation for such other duties and functions shall be reflected in a written
amendment to Schedule A.
9. RELIANCE BY TRANSFER AGENT; INSTRUCTIONS.
(a) FTIS will be protected in acting upon Written or Oral
Instructions reasonably believed to have been executed or orally communicated by
an Authorized Person and will not be held to have any notice of any change of
authority of any person until receipt of a Written Instruction thereof from an
officer of the Fund. FTIS will also be protected in processing Share
certificates which it reasonably believes to bear the proper manual or facsimile
signatures of the officers of the Fund and the proper countersignature of FTIS.
(b) At any time FTIS may apply to any Authorized Person of the
Fund for Written Instructions and may seek advice at the Fund's expense from
legal counsel for the Fund or from its own legal counsel, with respect to any
matter arising in connection with this Agreement, and it shall not be liable for
any action taken or not taken or suffered by it in good faith in accordance with
such Written Instructions or in accordance with the opinion of counsel for the
Fund or for FTIS. Written Instructions requested by FTIS will be provided by the
Fund within a reasonable period of time. In addition, FTIS, or its officers,
agents or employees, shall accept Oral Instructions or Written Instructions
given to them by any person representing or acting on behalf of the Fund only if
said representative is known by FTIS, or its officers, agents or employees, to
be an Authorized Person.
10. ACTS OF GOD, ETC. FTIS will not be liable or responsible for delays
or errors by reason of circumstances beyond its control, including acts of civil
or military authority, national emergencies, labor difficulties, fire,
mechanical breakdown beyond its control, flood or catastrophe, acts of God,
insurrection, war, riots or failure beyond its control of transportation,
communication or power supply.
11. DUTY OF CARE AND INDEMNIFICATION. The Fund will indemnify FTIS
against and hold it harmless from any and all losses, claims, damages,
liabilities or expenses (including reasonable counsel fees and expenses)
resulting from any claim, demand, action or suit not resulting from willful
misfeasance, bad faith or gross negligence on the part of FTIS, and arising out
of, or in connection with, its duties hereunder. In addition, the Fund will
indemnify FTIS against and hold it harmless from any and all losses, claims,
damages, liabilities or expenses (including reasonable counsel fees and
expenses) resulting from any claim, demand, action or suit as a result of: (i)
any action taken in accordance with Written or Oral Instructions, or any other
instructions or Share certificates reasonably believed by FTIS to be genuine and
to be signed, countersigned or executed, or orally communicated by an Authorized
Person; (ii) any action taken in accordance with written or oral advice
reasonably believed by FTIS to have been given by counsel for the Fund or by its
own counsel; (iii) any action taken as a result of any error or omission in any
record (including but not limited to magnetic tapes, computer printouts, hard
copies and microfilm copies) delivered, or caused to be delivered by the Fund to
FTIS in connection with this Agreement; or (iv) any action taken in accordance
with oral instructions given under the Telephone Exchange and Redemption
Privileges, as described in the Fund's current prospectus, when believed by FTIS
to be genuine.
In any case in which the Fund may be asked to indemnify or hold FTIS
harmless, the Fund shall be advised of all pertinent facts concerning the
situation in question and FTIS will use reasonable care to identify and notify
the Fund promptly concerning any situation which presents or appears likely to
present a claim for indemnification against the Fund. The Fund shall have the
option to defend FTIS against any claim which may be the subject of this
indemnification, and, in the event that the Fund so elects, such defense shall
be conducted by counsel chosen by the Fund and satisfactory to FTIS, and
thereupon the Fund shall take over complete defense of the claim and FTIS shall
sustain no further legal or other expenses in such situation for which it seeks
indemnification under this Section 11. FTIS will not confess any claim or make
any compromise in any case in which the Fund will be asked to provide
indemnification, except with the Fund's prior written consent. The obligations
of the parties hereto under this Section shall survive the termination of this
Agreement.
12. TERM AND TERMINATION.
(a) This Agreement shall be effective as of the date first
written above and shall continue through December 31, 1993 and thereafter shall
continue automatically for successive annual periods ending on December 31 of
each year, provided such continuance is specifically approved at least annually
by (i) the Fund's Board of Directors or (ii) a vote of a "majority" (as defined
in the Investment Fund Act of 1940 (the "1940 Act")) of the Fund's outstanding
voting securities, provided that in either event the continuance is also
approved by a majority of the Board of Directors who are not "interested
persons" (as defined in the 1940 Act) of any party to this Agreement, by vote
cast in person at a meeting called for the purpose of voting such approval.
(b) Either party hereto may terminate this Agreement by giving
to the other party a notice in writing specifying the date of such termination,
which shall be not less than 60 days after the date of receipt of such notice.
In the event such notice is given by the Fund, it shall be accompanied by a
resolution of the Board of Directors of the Fund, certified by the Secretary of
the Fund, designating a successor transfer agent or transfer agents. Upon such
termination and at the expense of the Fund, FTIS will deliver to such successor
a certified list of Shareholders of the Fund (with names and addresses), an
historical record of the account of each Shareholder and the status thereof, and
all other relevant books, records, correspondence, and other data established or
maintained by FTIS under this Agreement in a form reasonably acceptable to the
Fund, and will cooperate in the transfer of such duties and responsibilities,
including provisions for assistance from FTIS's personnel in the establishment
of books, records and other data by such successor or successors.
13. AMENDMENT. This Agreement may not be amended or modified in
any manner except by a written agreement executed by both parties.
14. SUBCONTRACTING. The Fund agrees that FTIS may, in its
discretion, subcontract for certain of the services described under this
Agreement or the Schedules hereto; provided that the appointment of any such
agent shall not relieve FTIS of its responsibilities hereunder.
15. MISCELLANEOUS.
(a) Any notice or other instrument authorized or required by
this Agreement to be given in writing to the Fund or FTIS shall be sufficiently
given if addressed to that party and received by it at its office set forth
below or at such other place as it may from time to time designate in writing.
To the Fund:
Templeton Capital Accumulator Fund, Inc.
700 Central Avenue
St. Petersburg, Florida 33701
To FTIS:
Franklin Templeton Investor Services, Inc.
700 Central Avenue
St. Petersburg, Florida 33701
(b) This Agreement shall extend to and shall be binding upon
the parties hereto, and their respective successors and assigns; provided,
however, that this Agreement shall not be assignable without the written consent
of the other party.
(c) This Agreement shall be construed in accordance with
the laws of the State of California.
(d) This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original; but such
counterparts shall, together, constitute only one instrument.
(e) The captions of this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective corporate officers thereunder duly authorized as of
the day and year first above written.
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
/s/JOHN R. KAY
BY: John R. Kay
Vice President
FRANKLIN TEMPLETON INVESTOR SERVICES, INC.
/s/THOMAS M. MISTELE
BY: Thomas M. Mistele
Vice President
<PAGE>
A-1
This Schedule A of the Transfer Agency Agreement is for the following funds:
Templeton American Trust
Templeton Capital Accumulator Fund
Updated 3/21/94
Schedule A
FEES
Shareholder account maintenance $13.74, adjusted as of
(per annum, prorated payable February 1 of each year
monthly) to reflect changes in the
Department of Labor
Consumer Price Index.
Cash withdrawal program No charge to the Fund.
Retirement plans No charge to the Fund.
Wire orders or express $15.00 fee may be charged for each
mailings of redemption wire order and each express
Proceeds mailing.
February 1, 1995
<PAGE>
B-1
Schedule B
OUT-OF-POCKET EXPENSES
The Fund shall reimburse FTIS monthly for the following out-of-pocket
expenses:
o postage and mailing
o forms
o outgoing wire charges
o telephone
o Federal Reserve charges for check clearance
o if applicable, magnetic tape and freight
o retention of records
o microfilm/microfiche
o stationery
o insurance
o if applicable, terminals, transmitting lines and any expenses
incurred in connection with such terminals and lines
o all other miscellaneous expenses reasonably incurred by FTIS
The Fund agrees that postage and mailing expenses will be paid on the
day of or prior to mailing as agreed with FTIS. In addition, the Fund will
promptly reimburse FTIS for any other expenses incurred by FTIS as to which the
Fund and FTIS mutually agree that such expenses are not otherwise properly borne
by FTIS as part of its duties and obligations under the Agreement.
<PAGE>
C-4
C-1
Schedule C
DUTIES
AS TRANSFER AGENT FOR INVESTORS IN THE FUND, FTIS WILL:
o Record in its transfer record, countersign as transfer agent,
and deliver certificates signed manually or by facsimile, by
the President or a Vice-President and by the Secretary or the
Assistant Secretary of the Fund, in such names and for such
number of authorized but hitherto unissued Shares of the Fund
as to which FTIS shall receive instructions; and
o Transfer on its records from time to time, when presented to
it for that purpose, certificates of said Shares, whether now
outstanding or hereafter issued, when countersigned by a duly
authorized transfer agent, and upon the cancellation of the
old certificates, record and countersign new certificates for
a corresponding aggregate number of Shares and deliver said
new certificates.
AS SHAREHOLDER SERVICE AGENT FOR INVESTORS IN THE FUND, FTIS WILL:
o Receive from the Fund, from the Fund's Principal Underwriter
or from a Shareholder, on a form acceptable to FTIS,
information necessary to record sales and redemptions and to
generate sale and/or redemption confirmations;
o Mail sale and/or redemption confirmations using standard
forms;
o Accept and process cash payments from investors, and clear
checks which represent payments for the purchase of Shares;
o Requisition Shares in accordance with instructions of the
Principal Underwriter of the Shares of the Fund;
o Produce periodic reports reflecting the accounts receivable
and the paid pending (free stock) items;
o Open, maintain and close Shareholder accounts;
o Establish registration of ownership of Shares in accordance
with generally accepted form;
o Maintain monthly records of (i) issued Shares and (ii) number
of Shareholders and their aggregate Shareholdings classified
according to their residence in each State of the United
States or foreign country;
o Accept and process telephone exchanges and redemptions for
Shares in accordance with a Fund's Telephone Exchange and
Redemption Privileges as described in the Fund's current
prospectus;
o Maintain and safeguard records for each Shareholder showing
name(s), address, number of any certificates issued, and
number of Shares registered in such name(s), together with
continuous proof of the outstanding Shares, and dealer
identification, and reflecting all current changes; on
request, provide information as to an investor's qualification
for Cumulative Quantity Discount; and provide all accounts
with confirmation statements reflecting the most recent
transactions, and also provide year-end historical
confirmation statements;
o Provide on request a duplicate set of records for file
maintenance in the Fund's office in St. Petersburg, Florida;
o Pay to the Fund's Custodian Account with the Custodian, the
net asset value per Share and pay to the Principal Underwriter
its commission out of money received in payment for Shares
sales;
o Redeem Shares and prepare and mail (or wire) liquidation
proceeds;
o Pass upon the adequacy of documents submitted by a
Shareholder or his legal representative to substantiate the
transfer of ownership of Shares from the registered owner to
transferees;
o From time to time, make transfers upon the books of the Fund
in accordance with properly executed transfer instructions
furnished to FTIS and make transfers of certificates for such
Shares as may be surrendered for transfer properly endorsed,
and countersign new certificates issued in lieu thereof;
o Upon receipt of proper documentation, place stop transfers,
obtain necessary insurance forms, and reissue replacement
certificates against lost, stolen or destroyed Share
certificates;
o Check surrendered certificates for stop transfer restrictions.
Although FTIS cannot insure the genuineness of certificates
surrendered for cancellation, it will employ all due
reasonable care in deciding the genuineness of such
certificates and the guarantor of the signature(s) thereon;
o Cancel surrendered certificates and record and countersign
new certificates;
o Certify outstanding Shares to auditors;
o In connection with any meeting of Shareholders, upon receiving
appropriate detailed instructions and written materials
prepared by the Fund and proxy proofs checked by the Fund,
print proxy cards; deliver to Shareholders all reports,
prospectuses, proxy cards and related proxy materials of
suitable design for enclosing; receive and tabulate executed
proxies; and furnish a list of Shareholders for the meeting;
o Answer routine correspondence and telephone inquiries about
individual accounts; prepare monthly reports for
correspondence volume and correspondence data necessary for
the Fund's Semi-Annual Report on Form N-SAR;
o Prepare and mail dealer commission statements and checks;
o Maintain and furnish the Fund and its Shareholders with such
information as the Fund may reasonably request for the purpose
of compliance by the Fund with the applicable tax and
securities laws of applicable jurisdictions;
o Mail confirmations of transactions to investors and dealers
in a timely fashion;
o Pay or reinvest income dividends and/or capital gains
distributions to Shareholders of record, in accordance with
the Fund's and/or Shareholder's instructions, provided that:
(a) The Fund shall notify FTIS in writing
promptly upon declaration of any such
dividend and/or distribution, and in any
event at least forty-eight (48) hours before
the record date;
(b) Such notification shall include the
declaration date, the record date, the
payable date, the rate, and, if applicable,
the reinvestment date and the reinvestment
price to be used; and
(c) Prior to the payable date, the Fund shall
furnish FTIS with sufficient fully and
finally collected funds to make such
distribution.
o Prepare and file annual United States information returns of
dividends and capital gains distributions (Form 1099) and mail
payee copies to Shareholders; report and pay United States
income taxes withheld from distributions made to nonresidents
of the United States; and prepare and mail to Shareholders the
notice required by the U.S. Internal Revenue Code as to
realized capital gains distributed and/or retained, and their
proportionate share of any foreign taxes paid by the Fund;
o Prepare transfer journals;
o Set up wire order trades on file;
o Receive payment for trades and update the trade file;
o Produce delinquency and other trade file reports;
o Provide dealer commission statements and payments thereof for
the Principal Underwriter;
o Sort and print Shareholder information by state, social code,
price break, etc.; and
o Mail promptly the Statement of Additional Information of a
Fund to each Shareholder who requests it, at no cost to the
Shareholder.
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use of our report dated September 29, 1995 on
the financial statements of Templeton Capital Accumulator Fund, Inc. referred to
therein, which appears in the 1995 Annual Report to Shareholders and which is
incorporated herein by reference, in Post-Effective Amendment No. 7 to the
Registration Statement on Form N-1A, File No. 33-37338, as filed with the
Securities and Exchange Commission.
We also consent to the reference to our firm in the Prospectus under
the caption "Financial Highlights" and in the Statement of Additional
Information under the caption "Independent Accountants."
/s/MCGLADREY & PULLEN, LLP
McGladrey & Pullen, LLP
New York, New York
December 28, 1995
<PAGE>
EXHIBIT 16
COMPUTATION OF PERFORMANCE QUOTATIONS
PROVIDED IN RESPONSE TO ITEM 22
(UNAUDITED)
Templeton Capital Accumulator Fund, Inc.
AVERAGE ANNUAL TOTAL RETURN FOR THE YEAR ENDED 8/31/95
P (1 + T)N = ERV
$1000 (1 + T)1 = $1,034.00
1 + T = 1.0340
T = .0340
T = 3.40%
AVERAGE ANNUAL TOTAL RETURN SINCE INCEPTION ON 3/1/91 - 3.50
YEARS
$1000 (1 + T)4.50 = $1,785.59
(1 + T)4.50 = 1.78559
1 + T = 1.1375
T = .1375
T = 13.75%
<PAGE>
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
ASSISTANT SECRETARY'S CERTIFICATE
The undersigned, being the duly elected Assistant Secretary of
Templeton Capital Accumulator Fund, Inc., a Maryland corporation (the "Fund"),
hereby certifies that the following resolution has been duly adopted by the
Fund's Board of Directors, and that said resolution remains in effect on the
date
hereof.
RESOLVED, that the officers of the Fund be, and they hereby are,
authorized in the name and on behalf of the Fund to execute its
Notification of Registration on Form N-8A under the Investment Company
Act of 1940 and its Registration Statement on Form N-1A under the
Securities Act of 1933 and to execute or grant power of attorney to
execute any amendments thereto in such form as may be approved by such
attorney-in-fact, to file or authorize the filing of such documents
with the Securities and Exchange Commission and to designate agents for
service of process.
Dated: December 29, 1994
/s/JEFFREY L. STEELE
Jeffrey L. Steele
Assistant Secretary
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE ARTICLE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
TEMPLETON CAPITAL ACCUMULATOR FUND, INC. AUGUST 31, 1995 ANNUAL REPORT
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000869313
<NAME> TEMPLETON CAPITAL ACCUMULATOR FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 58026343
<INVESTMENTS-AT-VALUE> 65816140
<RECEIVABLES> 3144415
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 12377
<TOTAL-ASSETS> 68972932
<PAYABLE-FOR-SECURITIES> 3264832
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 170474
<TOTAL-LIABILITIES> 3435306
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 56781810
<SHARES-COMMON-STOCK> 41111171
<SHARES-COMMON-PRIOR> 2364692
<ACCUMULATED-NII-CURRENT> 1017645
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (51626)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7789797
<NET-ASSETS> 65537626
<DIVIDEND-INCOME> 943350
<INTEREST-INCOME> 759930
<OTHER-INCOME> 0
<EXPENSES-NET> 506442
<NET-INVESTMENT-INCOME> 1196838
<REALIZED-GAINS-CURRENT> 411227
<APPREC-INCREASE-CURRENT> 961710
<NET-CHANGE-FROM-OPS> 2569775
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (584857)
<DISTRIBUTIONS-OF-GAINS> (1459126)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1748863
<NUMBER-OF-SHARES-REDEEMED> (137739)
<SHARES-REINVESTED> 135355
<NET-CHANGE-IN-ASSETS> 27215059
<ACCUMULATED-NII-PRIOR> 405664
<ACCUMULATED-GAINS-PRIOR> 996273
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 378859
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 676970
<AVERAGE-NET-ASSETS> 50516373
<PER-SHARE-NAV-BEGIN> 16.21
<PER-SHARE-NII> .28
<PER-SHARE-GAIN-APPREC> .23
<PER-SHARE-DIVIDEND> (.20)
<PER-SHARE-DISTRIBUTIONS> (.58)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.94
<EXPENSE-RATIO> 1.00<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>THE EXPENSE RATIO PER THE TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
ANNUAL REPORT WITHOUT REIMBURSEMENT AT AUGUST 31, 1995 IS 1.34%.
</FN>
</TABLE>
