Registration No. 33-37511
As filed with the Securities and Exchange Commission on May 1,
1995
_______________________________________________________________
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 AMERICAN TRUST, INC.
(Exact Name of Registrant as Specified in Charter)
700 Central Avenue, P.O. Box 33030, St. Petersburg, Florida
33733-8030
(Address of Principal Executive Offices)
Registrant's Telephone Number: (813) 823-8712
Thomas M. Mistele, Esq.
Templeton Global Investors, Inc.
500 East Broward Blvd.
Fort Lauderdale, Florida 33394
(Name and Address of Agent for Service)
Copies to:
Jeffrey L. Steele, Esq.
Dechert Price & Rhoads
1500 K Street, N.W.
Washington, D.C. 20005
It is proposed that this filing will become effective (check
appropriate box)
____ Immediately upon filing pursuant to paragraph (b)
X on May 1, 1995 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 period ended December 31, 1994 was filed with the
Commission on February 28, 1995.
TEMPLETON AMERICAN TRUST, INC.
CROSS-REFERENCE SHEET
Part A
Item No. Caption
1 Cover Page
2 Expense Table
3 Financial Highlights
4 General Description;
Investment Techniques
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 Description of Shares; Part A
19 Purchase, Redemption and
Pricing of Shares
20 Tax Status
21 Principal Underwriter
22 Performance Information
23 Financial Statements
<PAGE>
TEMPLETON
AMERICAN TRUST, INC. PROSPECTUS -- MAY 1, 1995
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INVESTMENT Templeton American Trust, Inc. (the "Fund") seeks long-term
OBJECTIVE AND total return through a flexible policy of investing primarily
POLICIES in stocks and debt obligations of U.S. companies. THE FUND
MAY, HOWEVER, INVEST UP TO 35% OF ITS ASSETS IN SECURITIES IN
ANY FOREIGN COUNTRY, DEVELOPED OR DEVELOPING. THE FUND MAY
BORROW MONEY FOR INVESTMENT PURPOSES (LEVERAGING), WHICH MAY
INVOLVE GREATER RISK AND ADDITIONAL COSTS TO THE FUND. SEE
"INVESTMENT TECHNIQUES -- BORROWING." IN ADDITION, THE FUND
MAY INVEST UP TO 10% OF ITS ASSETS IN RESTRICTED SECURITIES,
WHICH MAY INVOLVE GREATER RISK AND INCREASED FUND EXPENSES.
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PURCHASE OF Please complete and return the Shareholder Application. If you
SHARES need assistance in completing this form, please call our
Account Services Department. The Fund offers two classes to
its investors: Templeton American Trust Inc.--Class I ("Class
I") and Templeton American Trust, Inc. Class II ("Class II").
Investors can choose between Class I Shares, which generally
bear a higher front-end sales charge and lower ongoing Rule
12b-1 distribution fees ("Rule 12b-1 fees"), and Class II
Shares, which generally have a lower front-end sales charge
and higher ongoing Rule 12b-1 fees. Investors should consider
the differences between the two classes, including the impact
of sales charges and distribution fees, in choosing the more
suitable class given their anticipated investment amount and
time horizon. See "How to Buy Shares of the Fund--Alternative
Purchase Arrangements." The minimum initial investment is $100
($25 minimum for subsequent investments).
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PROSPECTUS This Prospectus sets forth concisely information about the
INFORMATION Fund that a prospective investor ought to know before
investing. Investors are advised to read and retain this
Prospectus for future reference. A Statement of Additional
Information ("SAI") dated May 1, 1995, has been filed with the
Securities and Exchange Commission ("SEC") 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, St.
Petersburg, Florida 33733-8030 or by calling the Fund
Information Department.
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FUND INFORMATION DEPARTMENT -- 1-800-292-9293
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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
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
EXPENSE TABLE........ 2
FINANCIAL HIGHLIGHTS. 3
GENERAL DESCRIPTION.. 4
Investment Objective
and Policies........ 4
INVESTMENT
TECHNIQUES.......... 5
Debt Securities...... 5
Borrowing............ 5
Loans of Portfolio
Securities.......... 5
Options on Securities
or Indices.......... 5
Forward Foreign
Currency Contracts
and Options on
Foreign Currencies.. 6
Futures Contracts.... 6
Repurchase
Agreements.......... 6
RISK FACTORS......... 6
HOW TO BUY SHARES OF
THE FUND............ 8
Alternative Purchase
Arrangements........ 8
Deciding Which Class
to Purchase......... 9
Offering Price....... 9
Class I.............. 10
Cumulative Quantity
Discount............ 11
Letter of Intent..... 11
Group Purchases...... 11
Class II............. 12
</TABLE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Net Asset Value
Purchases
(Both Classes)....... 12
Description of Special
Net Asset Value
Purchases............ 13
Additional Dealer
Compensation (Both
Classes)............. 14
Purchasing Class I and
Class II Shares...... 14
Automatic Investment
Plan................. 15
Institutional
Accounts............. 15
Account Statements.... 15
Templeton STAR
Service.............. 15
Retirement Plans...... 16
Net Asset Value....... 16
EXCHANGE PRIVILEGE.... 16
Exchanges of Class I
Shares............... 17
Exchanges of Class II
Shares............... 17
Transfers............. 18
Conversion Rights..... 18
Exchanges by Timing
Accounts............. 18
HOW TO SELL SHARES OF
THE FUND............. 18
Systematic Withdrawal
Plan................. 20
Redemptions by
Telephone............ 21
Contingent Deferred
Sales Charge......... 21
TELEPHONE
TRANSACTIONS......... 22
</TABLE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Verification
Procedures.......... 22
Restricted Accounts.. 23
General.............. 23
MANAGEMENT OF THE
FUND................ 23
Investment Manager... 23
Business Manager..... 24
Transfer Agent....... 24
Custodian............ 24
Plans of
Distribution........ 24
Expenses............. 25
Brokerage
Commissions......... 25
GENERAL INFORMATION.. 25
Description of
Shares/Share
Certificates........ 25
Voting Rights........ 25
Meetings of
Shareholders........ 26
Dividends and
Distributions....... 26
Federal Tax
Information......... 26
Inquiries............ 27
Performance
Information......... 27
Statements and
Reports............. 27
WITHHOLDING
INFORMATION......... 28
CORPORATE RESOLUTION. 29
AUTHORIZATION
AGREEMENT........... 30
THE FRANKLIN
TEMPLETON GROUP..... 31
</TABLE>
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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.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>
EXPENSE TABLE
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a Shareholder 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, restated to reflect current sales
charges and Rule 12b-1 fees for each class.
<TABLE>
<CAPTION>
CLASS CLASS
I II
----- -----
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a percentage of
offering price)............................................. 5.75% 1.00%/1/
Deferred Sales Charge........................................ None/2/ 1.00%/3/
Exchange Fee (per transaction)............................... $5.00/4/ $5.00/4/
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE
NET ASSETS)
Management Fees.............................................. .70% .70%
Rule 12b-1 Fees/5/........................................... .35%/4/ 1.00%/4/
Other Expenses (audit, legal, business management, transfer
agent and custodian)........................................ .77 .77
Total Fund Operating Expenses................................ 1.82 2.47
</TABLE>
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/1/ Although Class II has a lower front-end sales charge than Class I, over time
the higher Rule 12b-1 fee for Class II may cause Shareholders to pay more
for Class II Shares than for Class I Shares. Given the maximum front-end
sales charge and the rate of Rule 12b-1 fees for each class, it is estimated
that this would take less than six years for Shareholders who maintain total
Shares valued at less than $50,000 in the Franklin Templeton Funds.
Shareholders with larger investments in the Franklin Templeton Funds will
reach the cross-over point more quickly.
/2/ Class I investments of $1 million or more are not subject to a front-end
sales charge; however, a contingent deferred sales charge of 1%, which has
not been reflected in the Example below, is generally imposed on certain
redemptions within a "contingency period" of 12 months of the calendar month
following such investments. See "How to Sell Shares of the Fund--Contingent
Deferred Sales Charge."
/3/ Class II Shares redeemed within a "contingency period" of 18 months of the
calendar month following such investments are subject to a 1% contingent
deferred sales charge. See "How to Sell Shares of the Fund--Contingent
Deferred Sales Charge."
/4/ $5.00 fee imposed only on Timing Accounts as described under "Exchange
Privilege." All other exchanges are processed without a fee.
/5/ Annual Rule 12b-1 fees may not exceed 0.35% of the Fund's average net assets
attributable to Class I Shares and 1.00% of the Fund's average net assets
attributable to Class II Shares. Consistent with the National Association of
Securities Dealers, Inc.'s rules, it is possible that the combination of
front-end sales charges and Rule 12b-1 fees could cause long-term
Shareholders to pay more than the economic equivalent of the maximum front-
end sales charges permitted under those same rules.
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 Fund. Rather, the table has been provided only to assist
investors in gaining a more complete understanding of fees, charges and
expenses. For a more detailed discussion of these matters, investors should
refer to the appropriate sections of this Prospectus.
EXAMPLE
As required by SEC regulations, the following example illustrates the
expenses, including the maximum front-end sales charge and applicable
contingent deferred sales charge, that apply to a $1,000 investment in the
Fund over various time periods assuming (1) a 5% annual rate of return and (2)
redemption at the end of each time period.
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
Class I......................... $75 $111 $150 $259
Class II........................ $45 $ 86 $140 $288
</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 Fund. (See "Management
of the Fund" for a description of the Fund's expenses.) In addition, federal
securities regulations require the example to assume an annual return of 5%,
but the Fund's actual return may be more or less than 5%.
2
<PAGE>
FINANCIAL HIGHLIGHTS
The following table of selected financial information has been audited by
McGladrey & Pullen, LLP, independent certified public accountants, for the
period indicated in their report which is incorporated by reference and which
appears in the Fund's 1994 Annual Report to Shareholders. This statement
should be read in conjunction with the other financial statements and notes
thereto included in the Fund's 1994 Annual Report to Shareholders, which
contains further information about the Fund's performance, and which is
available to Shareholders upon request and without charge. Shares purchased
during the periods indicated have been designated Class II Shares. Information
regarding Class I Shares will be included in this table after they have been
offered to the public for a reasonable period of time. Information regarding
Class I Shares will be included in this table after they have been offered to
the public for a reasonable period of time.
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED FEBRUARY 7, 1991
DECEMBER 31 (COMMENCEMENT
PER SHARE OPERATING PERFORMANCE ------------------------- OF OPERATIONS) TO
(FOR A SHARE OUTSTANDING 1994 1993 1992 DECEMBER 31, 1991
THROUGHOUT THE PERIOD) ------- ------- ------- -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period........................... $ 13.39 $ 11.77 $ 11.20 $ 10.00
------- ------- ------- -------
Income from investment operations:
Net investment income........... .04 .04 .10 .08
Net realized and unrealized
gain........................... .17 1.82 .83 1.22
------- ------- ------- -------
Total from investment
operations................... .21 1.86 .93 1.30
------- ------- ------- -------
Distributions:
Dividends from net investment
income......................... (.05) (.03) (.11) (.08)
Distributions from net realized
gains.......................... (1.06) (.21) (.09) (.02)
Distributions in excess of
realized gains................. -- -- (.16) --
------- ------- ------- -------
Total distributions........... (1.11) (.24) (.36) (.10)
------- ------- ------- -------
Change in net asset value for the
period........................... (.90) 1.62 .57 1.20
------- ------- ------- -------
Net asset value, end of period.... $ 12.49 $ 13.39 $ 11.77 $ 11.20
======= ======= ======= =======
TOTAL RETURN* 1.63% 15.82% 8.33% 13.05%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)... $37,959 $34,418 $27,485 $13,019
Ratio of expenses to average net
assets........................... 2.47% 2.53% 3.17% 3.94%**
Ratio of expenses, net of
reimbursement to average net
assets........................... 2.47% 2.53% 2.25% 2.25%**
Ratio of net investment income to
average net assets............... 0.34% 0.31% 1.13% 1.64%**
Portfolio turnover rate........... 31.92% 14.10% 27.91% 9.86%
</TABLE>
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*Total return does not reflect sales charges. Not annualized in periods of
less than one year.
**Annualized.
3
<PAGE>
GENERAL DESCRIPTION
Templeton American Trust, Inc. (the "Fund") was incorporated under the laws
of Maryland on October 31, 1990 and is registered under the Investment Company
Act of 1940 (the "1940 Act") as an open-end diversified management investment
company. The Fund offers investors an alternative to direct investment in
stock and debt obligations of U.S. companies, with the benefit of
diversification of portfolio investments, professional portfolio management of
Templeton Investment Counsel, Inc. (the "Investment Manager") and the relative
convenience of investing in and redeeming Fund Shares as opposed to purchasing
and selling individual securities.
The Fund has two classes of Common Shares with a par value of $.01 per
share: Templeton American Trust, Inc.--Class I and Templeton American Trust,
Inc.--Class II. All Fund Shares outstanding before May 1, 1995 have been
redesignated as Class II Shares, and will retain their previous rights and
privileges, except for legally required modifications to Shareholder voting
procedures, as discussed in "General Information--Voting Rights."
Shares of the Fund may be purchased (minimum investment of $100 initially
and $25 thereafter) at the current public Offering Price. The current public
Offering Price of the Class I Shares is equal to the net asset value (see "How
to Buy Shares of the Fund--Net Asset Value"), plus a variable sales charge not
exceeding 5.75% of the Offering Price depending upon the amount invested. The
current public Offering Price of the Class II Shares is equal to the net asset
value, plus a sales charge of 1.0% of the amount invested. (See "How to Buy
Shares of the Fund.")
INVESTMENT OBJECTIVE AND POLICIES. The Fund's investment objective is long-
term total return (capital growth and income), which it seeks to achieve
through a flexible policy of investing in stocks and debt obligations of U.S.
companies. As a fundamental policy, the Fund will invest at least 65% of its
total assets in stocks and debt obligations of U.S. companies (including the
U.S. Government and its agencies). The Fund will invest in common stock,
preferred stock and debt obligations (defined as debt securities, rated or
unrated, convertible bonds and bonds selling at a discount).
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 Investors Service, Inc. ("Moody's") or A or
better by Standard & Poor's Corporation ("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 such securities. In
addition, 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 the Fund adopts a temporary defensive position, the
investment practices described above may not be consistent with the Fund's
stated investment objective.
With respect to 75% of its total assets, 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. In furtherance of its objective of
long-term total return, 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 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 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 not readily marketable.
The Fund may also lend its portfolio securities and borrow money for
investment purposes ( i.e., "leverage" its portfolio). In addition, the Fund
may enter into transactions in options on securities, securities indices and
foreign currencies, forward foreign currency contracts, and futures contracts
and related options, all of which may be classified as derivatives. When
deemed appropriate by the
4
<PAGE>
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 does not intend to emphasize short-term trading profits and usually
expects to have a portfolio turnover rate not exceeding 50%.
The Fund's investment objective, 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.
INVESTMENT TECHNIQUES
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 rating 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.
BORROWING. The Fund may borrow up to 33 1/3% of the value of its total
assets from banks to increase its holdings of portfolio securities. Under the
1940 Act, the Fund is required to maintain continuous asset coverage of 300%
with respect to such borrowings and to sell (within three days) sufficient
portfolio holdings to restore such coverage if it should decline to less than
300% due to market fluctuations or otherwise, even if such liquidations of the
Fund's holdings may be disadvantageous from an investment standpoint.
Leveraging by means of borrowing may exaggerate the effect of any increase or
decrease in the value of portfolio securities on the Fund's net asset value,
and money borrowed will be subject to interest and other costs (which may
include commitment fees and/or the cost of maintaining minimum average
balances) which may or may not exceed the income received from the securities
purchased with borrowed funds.
LOANS OF PORTFOLIO SECURITIES. The Fund may lend to broker-dealers portfolio
securities with an aggregate market value of up to one-third of its total
assets to generate income. Such loans must be secured by collateral
(consisting of any combination of cash, U.S. Government securities or
irrevocable letters of credit) in an amount at least equal (on a daily marked-
to-market basis) to the current market value of the securities loaned. 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.
OPTIONS ON SECURITIES OR INDICES. The Fund may write (i.e., sell) covered
put and call options and purchase put and call options on securities or
securities indices that are traded on United States and foreign exchanges or
in the over-the-counter markets. An option on a security is a contract that
permits the purchaser of the option, in return for the premium paid, the right
to buy a specified security (in the case of a call option) or to sell a
specified security (in the case of a put option) from or to the writer of the
option at a designated price during the term of the option. An option on a
securities index permits the purchaser of the option, in return for the
premium paid, the right to receive from the seller cash equal to the
difference between the closing price of the index and the exercise price of
the option. 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 a
call option, it will own the underlying securities subject to the call, or
hold a call at the same exercise price, for the same exercise period, and on
the same securities as the written call. A put is covered if the Fund
maintains liquid assets with a value equal to the exercise price in a
segregated account, or holds a put on the same underlying securities at an
equal or greater exercise price. The value of the underlying securities on
which options may be written at any one time will not exceed 15% of the total
assets of the Fund. 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.
5
<PAGE>
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 buy and sell
financial futures contracts, stock index futures contracts, foreign currency
futures contracts and options on any of the foregoing. A financial futures
contract is an agreement between two parties to buy or sell a specified debt
security at a set price on a future date. An index futures contract is an
agreement to take or make delivery of an amount of cash based on the
difference between the value of the index at the beginning and at the end of
the contract period. A futures contract on a foreign currency is an agreement
to buy or sell a specified amount of a currency for a set price on a future
date. When the Fund enters into a futures contract, it must make an initial
deposit, known as "initial margin," as a partial guarantee of its performance
under the contract. As the value of the security, index or currency
fluctuates, either party to the contract is required to make additional margin
payments, known as "variation margin," to cover any additional obligation it
may have under the contract. In addition, when the Fund enters into a futures
contract, it will segregate assets or "cover" its position 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
deposits on futures contracts and related options. The value of the underlying
securities on which futures contracts will be written at any one time will not
exceed 25% of the total assets of the Fund.
REPURCHASE AGREEMENTS. For temporary defensive purposes and for cash
management purposes, the Fund may enter into repurchase agreements with U.S.
banks and broker-dealers. Under a repurchase agreement the Fund acquires a
security from a U.S. bank or a registered broker-dealer who simultaneously
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 incur
disposition costs in liquidating the security.
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. 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 the Shares of the Fund. Changes
in currency valuations will also affect the price of the 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.
6
<PAGE>
The Fund may invest up to 35% of its total assets in securities in any
foreign country, developed or developing, if they are listed on a stock
exchange, and has a limited right to purchase such securities if they are
unlisted. Investors should consider carefully the risks associated with
investing in foreign securities, which are in addition to the usual risks
inherent in domestic investments. There is the possibility of expropriation,
nationalization or confiscatory taxation, taxation of income earned in the
foreign nation or other taxes imposed with respect to investments in the
foreign nation, foreign exchange controls (which may include suspension of the
ability to transfer currency from a given country), foreign investment
controls on daily stock market movements, default in foreign government
securities, political or social instability or diplomatic developments which
could affect investments in securities of issuers in foreign nations. Also,
some countries may withhold portions of interest and dividends at the source.
In addition, in many countries there is less publicly available information
about issuers than is available in reports about companies in the United
States. Foreign companies are not generally subject to uniform accounting,
auditing and financial reporting standards, and auditing practices and
requirements may not be comparable to those applicable to United States
companies. The Fund may encounter difficulties or be unable to pursue legal
remedies and obtain judgments in foreign courts. Further, the Fund may
encounter difficulties or be unable to vote proxies, exercise shareholder
rights, pursue legal remedies, and obtain judgments in foreign courts.
Commission rates in foreign countries, which are sometimes fixed rather than
subject to negotiation as in the United States, are likely to be higher.
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 any 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
involve special risks that are described under "Investment Objective and
Policies--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 also have 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 transactions (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 C by S&P, and
between Baa and as low as C by Moody's or, if unrated, are of equivalent
investment quality as determined by the
7
<PAGE>
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 lower than BBB by S&P or Baa
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 (at the time of purchase) in
defaulted debt securities, which may be illiquid.
Leveraging by means of borrowing may exaggerate the effect of any increase
or decrease in the value of portfolio securities on the Fund's net asset
value, and money borrowed will be subject to interest and other costs (which
may include commitment fees and/or the cost of maintaining minimum average
balances) which may or may not exceed the income received from the securities
purchased with borrowed funds.
Successful use of futures contracts and related options is subject to
special risk considerations. A liquid secondary market for any futures or
options contract may not be available when a futures or options position is
sought to be closed. In addition, there may be an imperfect correlation
between movements in the securities or foreign currency on which the futures
or options contract is based and movements in the securities or currency in
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 the securities or foreign currency markets and no assurance can
be given that its judgment will be correct. Successful use of options on
securities or stock indices is subject to similar risk considerations.
There are further risk factors, including possible losses through the
holding of securities in domestic and foreign custodian banks and
depositories, described elsewhere in the Prospectus and in the SAI.
HOW TO BUY SHARES OF THE FUND
Shares of the Fund may be purchased through any broker which has a dealer
agreement with Franklin Templeton Distributors, Inc. ("FTD"), the Principal
Underwriter of the Shares of the Fund, or directly from FTD, upon receipt by
FTD of a completed Shareholder Application and check. The minimum initial
investment is $100, and subsequent investments must be $25 or more. These
minimums may be waived when the Shares are being purchased through retirement
plans providing for regular periodic investments, as described below under
"Retirement Plans."
ALTERNATIVE PURCHASE ARRANGEMENTS. The difference between Class I and Class
II Shares lies primarily in their front-end and contingent deferred sales
charges and Rule 12b-1 fees as described below.
Class I. Class I Shares are generally subject to a variable sales charge
upon purchase and not subject to any sales charge upon redemption. Class I
Shares are subject to Rule 12b-1 fees of up to an annual maximum of 0.35% of
average daily net assets of such Shares. With this multiclass structure, Class
I Shares have higher front-end sales charges than Class II Shares and
comparatively lower Rule 12b-1 fees. Class I Shares may be purchased at
reduced front-end sales charges, or at net asset value if certain conditions
are met. In most circumstances, contingent deferred sales charges will not be
assessed against redemptions of Class I Shares. See "Management of the Fund"
and "How to Sell Shares of the Fund" for more information.
8
<PAGE>
Class II. All Fund Shares outstanding before the implementation of the
multiclass structure have been redesignated as Class II Shares, and will
retain their previous rights and privileges. The current public Offering Price
of Class II Shares is equal to the net asset value, plus a front-end sales
charge of 1.0% of the amount invested. Class II Shares are also subject to a
contingent deferred sales charge of 1.0% if Shares are redeemed within
18 months of the calendar month following purchase. In addition, Class II
Shares are subject to Rule 12b-1 fees of up to a maximum of 1.0% of average
daily net assets of such Shares. Class II Shares have lower front-end sales
charges than Class I Shares and comparatively higher Rule 12b-1 fees. See "How
to Sell Shares of the Fund--Contingent Deferred Sales Charge."
Purchases of Class II Shares are limited to purchases below $1 million. Any
purchases of $1 million or more will automatically be invested in Class I
Shares, since that is more beneficial to investors. Such purchases, however,
may be subject to a contingent deferred sales charge. Investors may exceed $1
million in Class II Shares by cumulative purchases over a period of time.
Investors who intend to make investments exceeding $1 million, however, should
consider purchasing Class I Shares through a Letter of Intent instead of
purchasing Class II Shares.
DECIDING WHICH CLASS TO PURCHASE. Investors should carefully evaluate their
anticipated investment amount and time horizon prior to determining which
class of Shares to purchase. Generally, an investor who expects to invest less
than $50,000 in the Franklin Templeton Funds and who expects to make
substantial redemptions within approximately six years or less of investment
should consider purchasing Class II Shares. However, the higher annual Rule
12b-1 fees on the Class II Shares will result in slightly higher operating
expenses and lower income dividends for Class II Shares, which will accumulate
over time to outweigh the difference in front-end sales charges. For this
reason, Class I Shares may be more attractive to long-term investors even if
no sales charge reductions are available to them.
Investors who qualify to purchase Class I Shares at reduced sales charges
definitely should consider purchasing Class I Shares, especially if they
intend to hold their Shares approximately six years or more. Investors who
qualify to purchase Class I Shares at reduced sales charges but who intend to
hold their Shares less than approximately six years should evaluate whether it
is more economical to purchase Class I Shares through a Letter of Intent or
under Cumulative Quantity Discount rather than purchasing Class II Shares.
INVESTORS INVESTING $1 MILLION OR MORE IN A SINGLE PAYMENT AND OTHER INVESTORS
WHO QUALIFY TO PURCHASE CLASS I SHARES AT NET ASSET VALUE WILL BE PRECLUDED
FROM PURCHASING CLASS II SHARES.
Each class represents the same interest in the investment portfolio of the
Fund and has the same rights, except that each class has a different sales
charge, bears the separate expenses of its Rule 12b-1 distribution plan, and
has exclusive voting rights with respect to such plan. The two classes also
have separate exchange privileges.
In determining which Shares are more appropriate for a Shareholder's
investment objectives and income needs, a Shareholder should also consider
that the higher Rule 12b-1 fees for Class II will generally result in lower
dividends and consequently lower yields for Class II Shares as compared to
Class I Shares.
OFFERING PRICE. Shares of both classes of the Fund are offered at their
respective public Offering Prices, which are determined by adding the net
asset value per share plus a front-end sales charge, next computed (1) after
the Shareholder's securities dealer receives the order which is promptly
transmitted to the Fund or (2) after receipt of an order by mail from the
Shareholder directly in proper form (which generally means a completed
Shareholder Application accompanied by a negotiable check).
9
<PAGE>
CLASS I. The sales charge for Class I Shares is a variable percentage of the
Offering Price depending upon the amount of the sale. A description of the
method of calculating net asset value per share is included under the caption
"Net Asset Value" below.
<TABLE>
<CAPTION>
TOTAL SALES CHARGE
--------------------------------------------
AS A PERCENTAGE OF AS A PERCENTAGE OF PORTION OF TOTAL
AMOUNT OF SALE OFFERING PRICE OF THE NET ASSET VALUE OF THE OFFERING PRICE
AT OFFERING PRICE SHARES PURCHASED SHARES PURCHASED RETAINED BY DEALERS/1/,/3/
- ----------------- --------------------- ---------------------- --------------------------
<S> <C> <C> <C>
Less than $50,000....... 5.75% 6.10% 5.00%
$50,000 but less than
$100,000............... 4.50% 4.71% 3.75%
$100,000 but less than
$250,000............... 3.50% 3.63% 2.80%
$250,000 but less than
$500,000............... 2.50% 2.56% 2.00%
$500,000 but less than
$1,000,000............. 2.00% 2.04% 1.60%
$1,000,000 or more...... none none (see below)/2/
</TABLE>
- -------
/1/ Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages set forth above.
/2/ The following commissions will be paid by FTD to dealers who initiate and
are responsible for purchases of $1 million or more: 1% on sales of up to $2
million, plus 0.80% on sales of $2 million to $3 million, plus 0.50% on
sales of $3 million to $50 million, plus 0.25% on sales of $50 million to
$100 million, plus 0.15% on sales in excess of $100 million.
/3/ At the discretion of FTD, all sales charges may at times be reallowed to
the securities dealer. If 90% or more of the sales commission is allowed,
such securities dealer may be deemed to be an underwriter as that term is
defined in the Securities Act of 1933.
No front-end sales charge applies on investments of $1 million or more, but
a contingent deferred sales charge of 1% is imposed on certain redemptions of
all or a portion of investments of $1 million or more within 12 months of the
calendar month following such investments ("contingency period"). See "How to
Sell Shares of the Fund--Contingent Deferred Sales Charge."
The size of a transaction which determines the applicable sales charge on
the purchase of Class I Shares is determined by adding the amount of the
Shareholder's current purchase plus the cost or current value (whichever is
higher) of a Shareholder's existing investment in one or more of the funds in
the Franklin Group of Funds(R) and the Templeton Family of Funds. Included for
these aggregation purposes are (a) the mutual funds in the Franklin Group of
Funds except Franklin Valuemark Funds and Franklin Government Securities Trust
(the "Franklin Funds"); (b) other investment products underwritten by FTD or
its affiliates (although certain investments may not have the same schedule of
sales charges and/or may not be subject to reduction); and (c) the U.S.-
registered
mutual funds in the Templeton Family of Funds except Templeton Capital
Accumulator Fund, Inc., Templeton Variable Annuity Fund, and Templeton
Variable Products Series Fund (the "Templeton Funds"). (Franklin Funds and
Templeton Funds are collectively referred to as the "Franklin Templeton
Funds.") Sales charge reductions based upon aggregate holdings of (a), (b) and
(c) above ("Franklin Templeton Investments") may be effective only after
notification to FTD that the investment qualifies for a discount.
Other Payments to Securities Dealers. FTD, or one of its affiliates, may
make payments, from its own resources, of up to 1% of the amount purchased to
securities dealers who initiate and are responsible for purchases made at net
asset value by certain designated retirement plans (as defined below)
(excluding IRA and IRA rollovers), certain non-designated plans (as defined
below), certain trust companies and trust departments of banks and certain
retirement plans of organizations with collective retirement plan assets of
$10 million or more. See definitions under "Description of Special Net Asset
Value Purchases" below and as set forth in the SAI.
A sales charge of 4% of the Offering Price (4.17% of the net asset value) is
applicable to all purchases of Shares made for any qualified or non-qualified
employee benefit plan which is a Shareholder in the Fund on or before February
1, 1995. Of the 4% sales charge applicable to such purchases, 3.20% of the
Offering Price will be retained by dealers.
10
<PAGE>
CUMULATIVE QUANTITY DISCOUNT. The schedule of reduced sales charges also may
be applied to qualifying sales of Class I Shares on a cumulative basis. For
this purpose, the dollar amount of the sale is added to the higher of (i) the
value (calculated at the applicable Offering Price) or (ii) the purchase price
of Franklin Templeton Investments. The cumulative quantity discount applies to
Franklin Templeton Investments owned at the time of purchase by the purchaser,
his or her spouse, and their children under age 21. In addition, the aggregate
investments of a trustee or other fiduciary account (for an account under
exclusive investment authority) may be considered in determining whether a
reduced sales charge is available, even though there may be a number of
beneficiaries of the account. For example, if the investor held Class I Shares
valued at $40,000 (or, if valued at less than $40,000, had been purchased for
$40,000) and purchased an additional $20,000 of the Fund's Class I Shares, the
sales charge for the $20,000 purchase would be at the rate of 4.50%. It is
FTD's policy to give investors the best sales charge rate possible; however,
there can be no assurance that an investor will receive the appropriate
discount unless, at the time of placing the purchase order, the investor or
the dealer makes a request for the discount and gives FTD sufficient
information to determine whether the purchase will qualify for the discount.
On telephone orders from dealers for the purchase of Class I Shares to be
registered in "street name," FTD will accept the dealer's instructions with
respect to the applicable sales charge rate to be applied. The cumulative
quantity discount may be amended or terminated at any time.
LETTER OF INTENT. Investors may also reduce sales charges on all investments
in Class I Shares by means of a Letter of Intent ("LOI") which expresses the
investor's intention to invest a certain amount within a 13-month period in
Class I Shares of the Fund or any other Franklin Templeton Fund. See the
Shareholder Application. Except for certain employee benefit plans, the
minimum initial investment under an LOI is 5% of the total LOI amount. Except
for Shares purchased by certain employee benefit plans, Shares purchased with
the first 5% of such amount will be held in escrow to secure payment of the
higher sales charge applicable to the Shares actually purchased if the full
amount indicated is not purchased, and such escrowed Shares will be
involuntarily redeemed to pay the additional sales charge, if necessary. A
purchase not originally made pursuant to an LOI may be included under a
subsequent LOI executed within 90 days of the purchase. Any redemptions made
by the Shareholder, other than by certain employee benefit plans during the
13-month period will be subtracted from the amount of the purchases for
purposes of determining whether the terms of the LOI have been completed. For
a further description of the Letter of Intent, see "Purchase, Redemption and
Pricing of Shares -- Letter of Intent" in the SAI.
GROUP PURCHASES. An individual who is a member of a qualified group may also
purchase Class I Shares of the Fund at the reduced sales charge applicable to
the group as a whole. The sales charge is based upon the aggregate dollar
value of Class I Shares previously purchased and still owned by the group,
plus the amount of the current purchase. For example, if members of the group
had previously invested and still held $80,000 of Class I Shares and now were
investing $25,000, the sales charge would be 3.50%. Information concerning the
current sales charge applicable to a group may be obtained by contacting FTD.
A "qualified group" is one which (i) has been in existence for more than six
months, (ii) has a purpose other than acquiring Fund Shares at a discount, and
(iii) satisfies uniform criteria which enable FTD to realize economies of
scale in its costs of distributing Shares. A qualified group must have more
than 10 members, must be available to arrange for group meetings between
representatives of the Fund or FTD and the members, must agree to include
sales and other materials related to the Fund in its publications and mailings
to members at reduced or no cost to FTD, and must seek to arrange for payroll
deduction or other bulk transmission of investments to the Fund.
If an investor selects a payroll deduction plan, subsequent investments will
be automatic and will continue until such time as the investor notifies the
Fund and the investor's employer to discontinue further investments. Due to
the varying procedures to prepare, process and forward the payroll deduction
information to the Fund, there may be a delay between the time of the payroll
deduction and the time the money reaches the Fund. The investment in the Fund
will be made at the Offering Price per Share determined on the day that both
the check and payroll deduction data are received in required form by the
Fund.
11
<PAGE>
CLASS II. Unlike Class I Shares, the front-end sales charges and dealer
concessions for Class II Shares do not vary depending on the amount of
purchase. The total sales charges or underwriting commissions and dealer
concessions for Class II Shares are set forth below.
<TABLE>
<CAPTION>
TOTAL SALES CHARGE
-------------------------------
AS A AS A
PERCENTAGE OF PERCENTAGE OF PORTION OF
OFFERING PRICE NET ASSET TOTAL OFFERING
AMOUNT OF SALE OF THE SHARES VALUE OF THE PRICE RETAINED
AT OFFERING PRICE PURCHASED SHARES PURCHASED BY DEALERS*
- ----------------- -------------- ---------------- --------------
<S> <C> <C> <C>
any amount....................... 1.00% 1.01% 1.00%
</TABLE>
- -------
* FTD, or one of its affiliates, may make additional payments to securities
dealers, from its own resources, of up to 1.0% of the amount invested.
During the first year following a purchase of Class II Shares, FTD will keep
a portion of the Rule 12b-1 fees assessed on those Shares to partially
recoup fees FTD pays to securities dealers.
Class II Shares redeemed within 18 months of their purchase will be assessed
a contingent deferred sales charge of 1.0% on the lesser of the then-current
net asset value or the net asset value of such Shares at the time of purchase,
unless such charge is waived as described under "How To Sell Shares of the
Fund--Contingent Deferred Sales Charge."
NET ASSET VALUE PURCHASES (BOTH CLASSES). Class I Shares may be purchased
without the imposition of a front-end sales charge ("net asset value") or a
contingent deferred sales charge by (i) officers, trustees, directors, and
full-time employees of the Fund, any of the Franklin Templeton Funds, or of
the Franklin Templeton Group, and their spouses and family members, including
any subsequent payments made by such parties after cessation of employment;
(ii) companies exchanging Shares with or selling assets pursuant to a merger,
acquisition or exchange offer; (iii) insurance company separate accounts for
pension plan contracts; (iv) accounts managed by the Franklin Templeton Group;
(v) shareholders of Templeton Institutional Funds, Inc. reinvesting redemption
proceeds from that fund under an employee benefit plan qualified under Section
401 of the Internal Revenue Code of 1986, as amended (the "Code"), in Shares
of the Fund; (vi) certain unit investment trusts and unit holders of such
trusts reinvesting their distributions from the trusts in the Fund;
(vii) registered securities dealers and their affiliates, for their investment
account only; and (viii) registered personnel and employees of securities
dealers, and their spouses and family members, in accordance with the internal
policies and procedures of the employing securities dealer.
For either Class I or Class II, the same class of Shares of the Fund may be
purchased at net asset value by persons who have redeemed, within the previous
120 days, their Shares of the Fund or another of the Franklin Templeton Funds
which were purchased with a front-end sales charge or assessed a contingent
deferred sales charge on redemption. If a different class of Shares is
purchased, the full front-end sales charge must be paid at the time of
purchase of the new Shares. An investor may reinvest an amount not exceeding
the redemption proceeds. While credit will be given for any contingent
deferred sales charge paid on the Shares redeemed and subsequently
repurchased, a new contingency period will begin. Shares of the Fund redeemed
in connection with an exchange into another fund (see "Exchange Privilege")
are not considered "redeemed" for this privilege. In order to exercise this
privilege, a written order for the purchase of Shares of the Fund must be
received by the Fund or the Fund's Transfer Agent within 120 days after the
redemption. The 120 days, however, do not begin to run on redemption proceeds
placed immediately after redemption in a Franklin Bank Certificate of Deposit
("CD") until the CD (including any rollover) matures. Reinvestment at net
asset value may also be handled by a securities dealer or other financial
institution, who may charge the Shareholder a fee for this service. The
redemption is a taxable transaction but reinvestment without a sales charge
may affect the amount of gain or loss recognized and the tax basis of the
Shares reinvested. If there has been a loss on the redemption, the loss may be
disallowed if a reinvestment in the same fund is made within a 30-day period.
Information regarding the possible tax consequences of such a reinvestment is
included under "General Information--Federal Tax Information" of this
Prospectus and in the SAI.
12
<PAGE>
For either Class I or Class II, the same class of Shares of the Fund or of
another of the Franklin Templeton Funds may be purchased at net asset value
and without a contingent deferred sales charge by persons who have received
dividends and capital gain distributions in cash from investments in that
class of Shares of the Fund within 120 days of the payment date of such
distribution. To exercise this privilege, a written request to reinvest the
distribution must accompany the purchase order. Additional information may be
obtained from Account Services at 1-800-393-3001. See "General Information--
Dividends and Distributions."
Class I Shares may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by investors who have, within
the past 60 days, redeemed an investment in a mutual fund which is not part of
the Franklin Templeton Funds and which charged the investor a contingent
deferred sales charge upon redemption, and which has investment objectives
similar to those of the Fund.
Class I Shares may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by broker-dealers who have
entered into a supplemental agreement with FTD, or by registered investment
advisers affiliated with such broker-dealers, on behalf of their clients who
are participating in a comprehensive fee program (also known as a wrap fee
program).
Class I Shares may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by anyone who has taken a
distribution from an existing retirement plan already invested in the Franklin
Templeton Funds (including former participants of the Franklin Templeton
Profit Sharing 401(k) plan), to the extent of such distribution. In order to
exercise this privilege, a written order for the purchase of Shares of the
Fund must be received by Franklin Templeton Trust Company ("FTTC"), the Fund,
or Franklin Templeton Investor Services, Inc. (the "Transfer Agent") within
120 days after the plan distribution.
Class I Shares may also be purchased at net asset value and without the
imposition of a contingent deferred sales charge by any state, county or city,
or any instrumentality, department, authority or agency thereof which has
determined that the Fund is a legally permissible investment and which is
prohibited by applicable investment laws from paying a sales charge or
commission in connection with the purchase of shares of any registered
management investment company (an "eligible governmental authority"). SUCH
INVESTORS SHOULD CONSULT THEIR OWN LEGAL ADVISERS TO DETERMINE WHETHER AND TO
WHAT EXTENT THE SHARES OF THE FUND CONSTITUTE LEGAL INVESTMENTS FOR THEM.
Municipal investors considering investment of proceeds of bond offerings into
the Fund should consult with expert counsel to determine the effect, if any,
of various payments made by the Fund or its investment manager on arbitrage
rebate calculations. If an investment by an eligible governmental authority at
net asset value is made through a securities dealer who has executed a dealer
agreement with FTD, FTD or one of its affiliates may make a payment, out of
its own resources, to such securities dealer in an amount not to exceed 0.25%
of the amount invested. Contact Franklin Templeton Institutional Services for
additional information.
DESCRIPTION OF SPECIAL NET ASSET VALUE PURCHASES. Class I Shares may also be
purchased at net asset value and without the imposition of a contingent
deferred sales charge by certain designated retirement plans, including
profit-sharing, pension, 401(k) and simplified employee pension plans
("designated plans"), subject to minimum requirements with respect to number
of employees or amount of purchase, which may be established by FTD.
Currently, those criteria require that the employer establishing the plan have
200 or more employees or that the amount invested or to be invested during the
subsequent 13-month period in the Fund or in any of the Franklin Templeton
Investments totals at least $1 million. Employee benefit plans not designated
above or qualified under Section 401 of the Code ("non-designated plans") may
be afforded the same privilege if they meet the above requirements as well as
the uniform criteria for qualified groups previously described under "Group
Purchases," which enable FTD to realize economies of scale in its sales
efforts and sales-related expenses.
Class I Shares may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by trust companies and bank
trust departments for funds over which they exercise exclusive discretionary
investment authority and which are held in a fiduciary, agency, advisory,
custodial or similar capacity. Such purchases are subject to minimum
requirements with respect to
13
<PAGE>
amount of purchase, which may be established by FTD. Currently, those criteria
require that the amount invested or to be invested during the subsequent 13-
month period in the Fund or any of the Franklin Templeton Investments must
total at least $1 million. Orders for such accounts will be accepted by mail
accompanied by a check, or by telephone or other means of electronic data
transfer directly from the bank or trust company, with payment by federal
funds received by the close of business on the next business day following
such order.
Class I Shares may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by trustees or other
fiduciaries purchasing securities for certain retirement plans of
organizations with collective retirement plan assets of $10 million or more,
without regard to where such assets are currently invested.
Refer to the SAI for further information regarding net asset value purchases
of Class I Shares.
ADDITIONAL DEALER COMPENSATION (BOTH CLASSES). FTD, or one of its
affiliates, from its own resources, may also provide additional compensation
to securities dealers in connection with sales of shares of the Franklin
Templeton Funds. Compensation may include financial assistance to securities
dealers in connection with conferences, sales or training programs for their
employees, seminars for the public, advertising, sales campaigns and/or
shareholder services and programs regarding one or more of the Franklin
Templeton Funds and other dealer-sponsored programs or events. In some
instances, this compensation may be made available only to certain securities
dealers whose representatives have sold or are expected to sell significant
amounts of shares of the Franklin Templeton Funds. Compensation may include
payment for travel expenses, including lodging, incurred in connection with
trips taken by invited registered representatives and members of their
families to locations within or outside of the United States for meetings or
seminars of a business nature. Securities dealers may not use sales of the
Fund's Shares to qualify for this compensation to the extent such may be
prohibited by the laws of any state or any self-regulatory agency, such as the
National Association of Securities Dealers, Inc. In addition, FTD or its
affiliates may make ongoing payments to brokerage firms, financial
institutions (including banks) and others to facilitate the administration and
servicing of shareholder accounts. None of the aforementioned additional
compensation is paid for by the Fund or its Shareholders.
Ongoing payments will be made to qualifying dealers at the annual rate of
0.25% of the average daily net asset value of Class I Shares, and 1.00% of the
average daily net asset value of Class II Shares, registered in the name of
that broker-dealer as nominee or held in a Shareholder account that designates
that broker-dealer as dealer of record. These payments are made in order to
promote selling efforts and to compensate dealers for providing certain
services, including processing purchase and redemption transactions,
establishing Shareholder accounts and providing certain information and
assistance with respect to the Fund. For purchases of Class I Shares that are
subject to a contingent deferred sales charge, the dealer will receive ongoing
payments beginning in the thirteenth month after the date of purchase. For
purchases on or after May 1, 1995, of Class II Shares that are subject to a
contingent deferred sales charge, the dealer will receive payments
representing a service fee (0.25% of average daily net asset value of the
Shares) beginning in the first month after the date of the purchase, and will
receive payments representing compensation for distribution (0.75% of average
daily net asset value of the Shares) beginning in the thirteenth month after
the date of the purchase.
PURCHASING CLASS I AND CLASS II SHARES. When placing purchase orders,
investors should clearly indicate which class of Shares they intend to
purchase. A purchase order that fails to specify a class will automatically be
invested in Class I Shares. Purchases of $1 million or more in a single
payment will be invested in Class I Shares. There are no conversion features
attached to either class of Shares.
Investors who qualify to purchase Class I Shares at net asset value should
purchase Class I rather than Class II Shares. See the section "Net Asset Value
Purchases (Both Classes)" and "Description of Special Net Asset Value
Purchases" above for a discussion of when Shares may be purchased at net asset
value.
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As to telephone orders placed with FTD by dealers, the dealer must receive
the investor's order before the close of the New York Stock Exchange ("NYSE")
and transmit it to FTD by 5:00 p.m., New York time, for the investor to
receive that day's Offering Price. Payment for such orders must be by check in
U.S. currency and must be promptly submitted to FTD. Orders mailed to FTD by
dealers or individual investors are effected at the net asset value of the
Fund's Shares next computed after the purchase order accompanied by payment
has been received by FTD. Such payment must be by check in U.S. currency drawn
on a commercial bank in the U.S. and, if over $100,000, may not be deemed to
have been received until the proceeds have been collected unless the check is
certified or issued by such bank. Any subscription may be rejected by FTD or
by the Fund.
The Fund may impose a $10 charge against a Shareholder account in the event
that a check or draft submitted for the purchase of Fund Shares is returned
unpaid to the Fund.
Investors should promptly check the confirmation advice that is mailed after
each purchase (or redemption) order to insure that it has been accurately
recorded in the investor's account.
AUTOMATIC INVESTMENT PLAN. Investors may accumulate Fund Shares regularly
each month by means of automatic debits to their checking accounts ($25
minimum). Forms for this purpose are in the Shareholder Application in this
Prospectus. Such a plan is voluntary and may be discontinued by written notice
to FTD, which must be received at least 10 days prior to the collection date,
or by FTD upon written notice to the investor at least 30 days prior to the
collection date.
INSTITUTIONAL ACCOUNTS. Institutional investors will likely be required to
complete an institutional account application. There may also be additional
methods of opening accounts, purchasing, redeeming or exchanging Shares of the
Fund available for institutional accounts. To obtain an institutional account
application or additional information regarding institutional accounts,
contact Franklin Templeton Institutional Services at 1-800-321-8563.
ACCOUNT STATEMENTS. Shareholder accounts are opened in accordance with the
Shareholder's registration instructions. Transactions in the account, such as
additional investments and dividend reinvestments, will be reflected on
regular confirmation statements from the Transfer Agent.
TEMPLETON STAR SERVICE. From a touch tone phone, Templeton and Franklin
Shareholders may access an automated system (day or night) which offers the
following features.
By calling the Templeton STAR Service, Shareholders may obtain current price
and yield information specific to a Templeton Fund, regardless of class, or
Franklin Class II shares; obtain account information; and request duplicate
confirmation or year-end statements and money fund checks, if applicable.
By calling the Franklin TeleFACTS system, Class I Shareholders may obtain
current price, yield or other performance information specific to a Franklin
Fund; process an exchange into an identically registered Franklin account;
obtain account information; and request duplicate confirmation or year-end
statements, money fund checks, if applicable, and deposit slips.
Share prices and account information specific to Templeton Class I or II
shares and Franklin Class II shares may also be accessed on TeleFACTS by
Franklin Class I and Class II shareholders.
The Templeton STAR Service is accessible by calling 1-800-654-0123. The
TeleFACTS system is accessible by calling 1-800-247-1753. Templeton Class I
and Class II Share codes for the Fund, which will be needed to access system
information, are 100 and 200, respectively. The system's automated operator
will prompt the caller with easy to follow step-by-step instructions from the
main menu. Other features may be added in the future.
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RETIREMENT PLANS. Shares of the Fund may be purchased through various
retirement plans including the following plans for which FTTC or its affiliate
acts as trustee or custodian: IRAs, Simplified Employee Pensions, 403(b)
plans, qualified plans for corporations, self-employed individuals or
partnerships, and 401(k) plans. For further information about any of the
plans, agreements, applications and annual fees, contact Franklin Templeton
Distributors, Inc. To determine which retirement plan is appropriate, an
investor should contact his or her tax adviser.
NET ASSET VALUE. The net asset value per Share of each class of the Fund is
determined as of the scheduled closing time of the NYSE (generally 4:00 p.m.,
New York time) each day that the NYSE is open for trading, by dividing the
value of the Fund's securities plus any cash and other assets (including
accrued interest and dividends receivable) less all liabilities (including
accrued expenses) by the number of Shares outstanding, adjusted to the nearest
whole cent. A security listed or traded on a recognized stock exchange or
NASDAQ is valued at its last sale price on the principal exchange on which the
security is traded. The value of a foreign security is determined in its
national currency as of the close of trading on the foreign exchange on which
it is traded, or as of the scheduled closing time of the NYSE (generally 4:00
p.m., New York time), if that is earlier, and that value is then converted
into its U.S. dollar equivalent at the foreign exchange rate in effect at
noon, New York time, on the day the value of the foreign security is
determined. If no sale is reported at that time, the mean between the current
bid and asked price is used. Occasionally, events which affect the values of
such securities and such exchange rates may occur between the times at which
they are determined and the close of the NYSE, and will therefore not be
reflected in the computation of 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 by the management and approved in good faith by
the Board of Directors.
Each of the Fund's classes will bear, pro-rata, all of the common expenses
of the Fund. The net asset value of all outstanding Shares of each class of
the Fund will be computed on a pro-rata basis for each outstanding Share based
on the proportionate participation in the Fund represented by the value of
Shares of such classes, except that the Class I and Class II Shares will bear
the Rule 12b-1 expenses payable under their respective plans. Due to the
specific distribution expenses and other costs that will be allocable to each
class, the dividends paid to each class of the Fund may vary.
EXCHANGE PRIVILEGE
A Shareholder may exchange Shares for the same class of shares of other
Franklin Templeton Funds which are eligible for sale in the Shareholder's
state of residence and in conformity with such fund's stated eligibility
requirements and investment minimums. Some funds, however, may not offer Class
II shares. Class I Shares may be exchanged for Class I shares of any Franklin
Templeton Funds. Class II Shares may be exchanged for Class II shares of any
Franklin Templeton Funds. No exchanges between different classes of shares
will be allowed. A contingent deferred sales charge will not be imposed on
exchanges. If the exchanged Shares were subject to a contingent deferred sales
charge in the original fund purchased, and Shares are subsequently redeemed
within 12 months (Class I Shares) or 18 months (Class II Shares) of the
calendar month of the original purchase date, a contingent deferred sales
charge will be imposed. The period will be tolled (or stopped) for the period
Class I Shares are exchanged into and held in a Franklin or Templeton money
market fund. See also "How to Sell Shares of the Fund--Contingent Deferred
Sales Charge."
Exchange purchases are subject to the minimum investment requirements of the
fund purchased and no sales charge generally applies. Exchanges of the same
class of shares are made on the basis of the net asset values of the class
involved, except as set forth below. Exchanges of shares of a class which were
originally purchased without a sales charge will be charged a sales charge in
accordance with the terms of the prospectus of the fund and the class of
shares being purchased, unless the original investment on which no sales
charge was paid was transferred in from a fund on which the investor paid a
sales charge. Exchanges of shares from
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the Franklin Templeton Money Funds are subject to applicable sales charges on
the funds being purchased, unless the Franklin Templeton Money Fund shares
were acquired by an exchange from a fund having a sales charge, or by
reinvestment of dividends or capital gain distributions. Exchange of Class I
Shares of the Fund which were purchased with a lower sales charge to a fund
which has a higher sales charge will be charged the difference, unless the
shares were held in the original fund for at least six months prior to
executing the exchange. All exchanges are permitted only after at least 15
days have elapsed from the date of the purchase of the Shares to be exchanged.
A Shareholder may exchange Shares by writing to the Transfer Agent (see "How
to Sell Shares of the Fund"), by contacting his or her investment dealer or--
if the Shareholder Application indicates that the Shareholder has not declined
the option--by telephoning 1-800-393-3001. Telephone exchange instructions
must be received by FTD by the scheduled closing time of the NYSE (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. Please refer to "Telephone
Transactions--Verification Procedures." Forms for declining the telephone
exchange privilege and prospectuses of the other funds in the Franklin
Templeton Group may be obtained from FTD. Exchange redemptions and purchases
are processed simultaneously at the share prices next determined after the
exchange order is received. (See "How to Buy Shares of the Fund--Offering
Price.") A gain or loss for tax purposes generally will be realized upon the
exchange, depending on the tax basis of the Shares redeemed.
The 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 60 days' written notice. A Shareholder who wishes
to make an exchange should first obtain and review a current prospectus of the
fund into which he or she wishes to exchange. Broker-dealers who process
exchange orders on behalf of their customers may charge a fee for their
services. Such fee may be avoided by making requests for exchange directly to
the Transfer Agent.
EXCHANGES OF CLASS I SHARES. The contingency period of Class I Shares will
be tolled (or stopped) for the period such Shares are exchanged into and held
in a Franklin or Templeton money market fund. If a Class I account has Shares
subject to a contingent deferred sales charge, Class I Shares will be
exchanged into the new account on a "first-in, first-out" basis. See also "How
to Sell Shares of the Fund--Contingent Deferred Sales Charge."
EXCHANGES OF CLASS II SHARES. When an account is composed of Class II Shares
subject to the contingent deferred sales charge, and Shares that are not, the
Shares will be transferred proportionately into the new fund. Shares received
from reinvestment of dividends and capital gains are referred to as "free
Shares," Shares which were originally subject to a contingent deferred sales
charge but to which the contingent deferred sales charge no longer applies are
called "matured Shares," and Shares still subject to the contingent deferred
sales charge are referred to as "CDSC liable Shares." CDSC liable Shares held
for different periods of time are considered different types of CDSC liable
Shares. For instance, if a Shareholder has $1,000 in free Shares, $2,000 in
matured Shares, and $3,000 in CDSC liable Shares, and the Shareholder
exchanges $3,000 into a new fund, $500 will be exchanged from free Shares,
$1,000 from matured Shares, and $1,500 from CDSC liable Shares. Similarly, if
CDSC liable Shares have been purchased at different periods, a proportionate
amount will be taken from Shares held for each period. If, for example, the
Shareholder holds $1,000 in Shares bought three months ago, $1,000 bought six
months ago, and $1,000 bought nine months ago, and the Shareholder exchanges
$1,500 into a new fund, $500 from each of these Shares will be exchanged into
the new fund.
The only money market fund exchange option available to Class II
Shareholders is the Franklin Templeton Money Fund II ("Money Fund II"), a
series of the Franklin Templeton Money Fund Trust. No drafts (checks) may be
written on Money Fund II accounts, nor may Shareholders purchase shares of
Money Fund II directly. Class II Shares exchanged for shares of Money Fund II
will continue to age and a contingent deferred sales charge will be assessed
if CDSC liable Shares are redeemed. No other money market funds are
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available for Class II Shareholders for exchange purposes. Class I Shares may
be exchanged for shares of any of the money market funds in the Franklin
Templeton Funds except Money Fund II. Draft writing privileges and direct
purchases are allowed on these money market funds as described in their
respective prospectuses.
To the extent Shares are exchanged proportionately, as opposed to another
method, such as "first-in, first-out," or free Shares followed by CDSC liable
Shares, the exchanged Shares may, in some instances, be CDSC liable even
though a redemption of such Shares, as discussed elsewhere herein, may no
longer be subject to a CDSC. The proportional method is believed by management
to more closely meet and reflect the expectations of Class II Shareholders in
the event Shares are redeemed during the contingency period. For federal
income tax purposes, the cost basis of Shares redeemed or exchanged is
determined under the Code without regard to the method of transferring Shares
chosen by the Fund for purposes of exchanging or redeeming Shares.
TRANSFERS. Transfers between accounts in the same fund and class are treated
as non-monetary and non-taxable events, and are not subject to a contingent
deferred sales charge. The transferred Shares will continue to age from the
date of original purchase. Like exchanges, Class II Shares will be moved
proportionately from each type of Shares in the original account.
CONVERSION RIGHTS. It is not presently anticipated that Class II Shares will
be converted to Class I Shares. A Shareholder may, however, sell Class II
Shares and use the proceeds to purchase Class I Shares, subject to all
applicable sales charges.
EXCHANGES BY TIMING ACCOUNTS. In the case of market timing or allocation
services ("Timing Accounts"), FTD will deduct an administrative service fee of
$5.00 per exchange. Timing Accounts generally include accounts administered so
as to redeem or purchase Shares based upon certain predetermined market
indicators. In accordance with the terms of their respective prospectuses,
certain funds in the Franklin Templeton Group do not accept or may place
differing limitations than those described below on exchanges by Timing
Accounts.
The Fund reserves the right to temporarily or permanently terminate the
exchange privilege or reject any specific purchase order for any Timing
Account or any person whose transactions seem to follow a timing pattern who:
(i) makes an exchange request out of the Fund within two weeks of an earlier
exchange request out of the Fund, (ii) makes more than two exchanges out of
the Fund per calendar quarters, or (iii) exchanges Shares equal in value to at
least $5 million, or more than 1% of the Fund's net assets. Accounts under
common ownership or control, including accounts administered so as to redeem
to purchase shares based upon certain predetermined market indicators, will be
aggregated for purposes of the exchange limits.
In addition, the Fund reserves the right to refuse the purchase side of
exchange requests by any Timing Account, person, or group if, in the
Investment Manager's judgment, the Fund would be unable to invest effectively
in accordance with its investment objectives and policies, or would otherwise
potentially be adversely affected. A Shareholder's exchanges into the Fund may
be restricted or refused if the Fund receives or anticipates simultaneous
orders affecting significant portions of the Fund's assets. In particular, a
pattern of exchanges that coincides with a "market timing" strategy may be
disruptive to the Fund and therefore may be refused.
Finally, as indicated above, the Fund and FTD reserve the right to refuse
any order for the purchase of Shares.
HOW TO SELL SHARES OF THE FUND
Shares will be redeemed 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. Except as provided below under "Redemptions by Telephone," it must be in
writing, signed by the Shareholder(s) exactly in the manner as the Shares are
registered, and must specify either the number of Shares, or the dollar amount
of Shares, to be redeemed and sent to Franklin Templeton Investor Services,
Inc., P.O. Box 33030, St. Petersburg, Florida 33733-8030;
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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 (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 Fund; (c) the Fund has been notified of an
adverse claim; (d) the instructions received by the Fund are given by an
agent, not the actual registered owner; (e) the Fund 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 Fund;
3. Any outstanding certificates must accompany the request together with a
stock power signed by the Shareholder, 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 in 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 a retirement plan for which 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 such plans are subject to additional requirements under the
Code, and certain documents (available from the Transfer Agent) must be
completed before the distribution may be made. For example, distributions from
retirement plans are subject to withholding requirements under the Code, and
the IRS Form W-4P (available from the Transfer Agent) may be required to be
submitted to the Transfer Agent with the distribution request, or the
distribution will be delayed. Franklin Templeton Investor Services, Inc. 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.
To avoid delay in redemption or transfer, Shareholders having questions
about these requirements should contact the Account Services Department at 1-
800-393-3001 or 813-823-8712.
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Redemptions will be effected at the net asset value of the Shares next
computed after the redemption request in Proper Order is received by the
Transfer Agent. Redemption proceeds will be reduced by the amount of any
applicable contingent deferred sales charge (see below). Payment of the
redemption price ordinarily will be made by check (or by wire at the sole
discretion of the Transfer Agent if wire transfer is requested, including name
and address of the bank and the Shareholder's account number to which payment
of the redemption proceeds is to be wired) within seven days after receipt of
the redemption request in Proper Order. However, if Shares have been purchased
by check, the Fund will make redemption proceeds available when a
Shareholder's check received for the Shares purchased has been cleared for
payment by the Shareholder's bank, which, depending upon the location of the
Shareholder's bank, could take up to 15 days or more. The check will be mailed
by first-class mail to the Shareholder's registered address (or as otherwise
directed). 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.
The Fund, through FTD, also repurchases Shares (whether in certificate or
book-entry form) through securities dealers. The Fund normally will accept
orders to repurchase such Shares by wire or telephone from dealers for their
customers at the net asset value next computed after the dealer has received
the Shareholder's request for repurchase, if the dealer received such request
before closing time of the NYSE on that day. Dealers have the responsibility
of submitting such repurchase requests by calling not later than 5:00 p.m.,
New York time, on such day in order to obtain that day's applicable redemption
price. Repurchase proceeds will be reduced by the amount of any applicable
contingent deferred sales charge (see below). Repurchase of Shares is for the
convenience of Shareholders and does not involve a charge by the Fund;
however, securities dealers may impose a charge on the Shareholder for
transmitting the notice of repurchase to the Fund. The Fund reserves the right
to reject any order for repurchase, which right of rejection might adversely
affect Shareholders seeking redemption through the repurchase procedure.
Ordinarily payment will be made to the securities dealer within seven days
after receipt of a repurchase order and Share certificate (if any) in "Proper
Order" as set forth above. The Fund will also accept, from member firms of the
NYSE, orders to repurchase Shares for which no certificates have been issued
by wire or telephone without a redemption request signed by the Shareholder,
provided the member firm indemnifies the Fund and FTD from any liability
resulting from the absence of the Shareholder's signature. Forms for such
indemnity agreement can be obtained from FTD.
The Fund may involuntarily redeem an investor's Shares if the net asset
value of such Shares is less than $100, provided that involuntary redemptions
will not result from fluctuations in the value of an investor's Shares. In
addition, the Fund may involuntarily redeem the Shares of any investor who has
failed to provide the Fund with a certified taxpayer identification number of
such other tax-related certifications as the Fund may require. A notice of
redemption, sent by first-class mail to the investor's address of record, will
fix a date not less than 30 days after the mailing date, and Shares will be
redeemed at the net asset value at the close of business on that date unless
sufficient additional Shares are purchased to bring the aggregate account
value up to $100 or more, or unless a certified taxpayer identification number
(or such other information as the Fund has requested) has been provided, as
the case may be. A check for the redemption proceeds will be mailed to the
investor at the address of record.
SYSTEMATIC WITHDRAWAL PLAN. A Shareholder may establish a Systematic
Withdrawal Plan ("Plan") and receive periodic payments from the account
provided that the net asset value of the Shares held by the Shareholder is at
least $5,000. There are no service charges for establishing or maintaining a
Plan. The minimum amount which the Shareholder may withdraw is $50 per
withdrawal transaction although this is merely the minimum amount allowed
under the Plan and should not be mistaken for a recommended amount. The Plan
may be established on a monthly, quarterly, semiannual or annual basis. If the
Shareholder establishes a Plan, any capital gain distributions and income
dividends paid by the Fund to the Shareholder's account must be reinvested for
the Shareholder's account in additional Shares at net asset value. Payments
are then made from the liquidation of Shares at net asset value on the day of
the liquidation (which is generally on or about the 25th of the month) to meet
the specified withdrawals. Payments are generally received three to five days
after the date of liquidation. By completing the "Special Payment Instructions
for Distributions" section of the Shareholder Application included with this
Prospectus, a Shareholder may direct the selected withdrawals to another of
the Franklin
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Templeton Funds, to another person or directly to a checking account.
Liquidation of Shares may reduce or possibly exhaust the Shares in the
Shareholder's account, to the extent withdrawals exceed Shares earned through
dividends and distributions, particularly in the event of a market decline. If
the withdrawal amount exceeds the total Plan balance, the account will be
closed and the remaining balance will be sent to the Shareholder. As with
other redemptions, a liquidation to make a withdrawal payment is a sale for
federal income tax purposes. Because the amount withdrawn under the Plan may
be more than the Shareholder's actual yield or income, part of such a Plan
payment may be a return of the Shareholder's investment.
Maintaining a Plan concurrently with purchases of additional Shares of the
Fund would be disadvantageous because of the sales charge on the additional
purchases. Also, redemptions of Class I Shares and Class II Shares may be
subject to a contingent deferred sales charge if the Shares are redeemed
within 12 months (Class I Shares) or 18 months (Class II Shares) of the
calendar month of the original purchase date. The Shareholder should
ordinarily not make additional investments of less than $5,000 or three times
the annual withdrawals under the Plan during the time such a Plan is in
effect.
With respect to Systematic Withdrawal Plans set up on or after May 1, 1995,
the applicable contingent deferred sales charge is waived for Class I and
Class II Share redemptions of up to 1% monthly of an account's net asset value
(12% annually, 6% semiannually, 3% quarterly). For example, if a Class I
account maintained an annual balance of $1,000,000, only $120,000 could be
withdrawn through a once-yearly Systematic Withdrawal Plan free of charge; any
amount over that $120,000 would be assessed a 1% (or applicable) contingent
deferred sales charge. Likewise, if a Class II account maintained an annual
balance of $10,000, only $1,200 could be withdrawn through a once-yearly
Systematic Withdrawal Plan free of charge.
A Plan may be terminated on written notice by the Shareholder or the Fund,
and it will terminate automatically if all Shares are liquidated or withdrawn
from the account, or upon the Fund's receipt of notification of the death or
incapacity of the Shareholder. Shareholders may change the amount (but not
below $50) and schedule of withdrawal payments or suspend one such payment by
giving written notice to the Transfer Agent at least seven business days prior
to the end of the month preceding a scheduled payment. Share certificates may
not be issued while a Plan is in effect.
REDEMPTIONS BY TELEPHONE. Shareholders who file a Telephone Redemption
Authorization Agreement (the "Agreement") (a copy of which is included in this
Prospectus) may redeem Shares of the Fund by telephone, subject to the
Restricted Account exception noted under "Telephone Transactions--Restricted
Accounts." The Fund and the Transfer Agent will employ reasonable procedures
to confirm that instructions given by telephone are genuine. Shareholders,
however, bear the risk of loss in certain cases as described under "Telephone
Transactions--Verification Procedures."
For Shareholder accounts with a completed Agreement on file, redemptions of
uncertificated Shares or Shares which have previously been deposited with the
Fund or the Transfer Agent may be made for up to $50,000 per day per Fund
account. Telephone redemption requests received before the scheduled closing
of the NYSE (generally 4:00 p.m., New York time), on any business day will be
processed that same day. The redemption check will be sent within seven days,
made payable to all the registered owners on the account, and will be sent
only to the address of record. Redemption requests by telephone will not be
accepted within 30 days following an address change by telephone. In that
case, a Shareholder should follow the other redemption procedures set forth in
this Prospectus. Institutional accounts which wish to execute redemptions in
excess of $50,000 must complete an Institutional Telephone Privileges
Agreement which is available from Franklin Templeton Institutional Services by
telephoning 1-800-321-8563.
CONTINGENT DEFERRED SALES CHARGE. Class I. In order to recover commissions
paid to securities dealers on investments of $1 million or more, a contingent
deferred sales charge of 1% applies to redemptions of those investments within
the contingency period of 12 months following the calendar month of their
purchase. The charge is 1% of the lesser of the net asset value of the Shares
redeemed (exclusive of reinvested dividends and capital gain distributions) or
the net asset value of such Shares at the time of purchase,
21
<PAGE>
and is retained by FTD. The contingent deferred sales charge is waived in
certain instances. See "How to Buy Shares of the Fund--Net Asset Value
Purchases (Both Classes)."
Class II. Class II Shares redeemed within the contingency period of 18
months of the calendar month following their purchase will be assessed a
contingent deferred sales charge, unless one of the exceptions described below
applies. The charge is 1% of the lesser of the net asset value of the Shares
redeemed (exclusive of reinvested dividends and capital gain distributions) or
the net asset value at the time of purchase of such Shares, and is retained by
FTD. The contingent deferred sales charge is waived in certain instances.
See below.
Class I and Class II. In determining if a contingent deferred sales charge
applies, Shares not subject to a contingent deferred sales charge are deemed
to be redeemed first, in the following order: (i) Shares representing amounts
attributable to capital appreciation of those Shares held less than the
contingency period (12 months in the case of Class I Shares and 18 months in
the case of Class II Shares); (ii) Shares purchased with reinvested dividends
and capital gain distributions; and (iii) other Shares held longer than the
contingency period, and followed by any Shares held less than the contingency
period, on a "first in, first out" basis. For tax purposes, a contingent
deferred sales charge is treated as either a reduction in redemption proceeds
or an adjustment to the cost basis of the Shares redeemed.
The contingent deferred sales charge on each class of Shares is waived, as
applicable, for: exchanges; any account fees; distributions to participants or
beneficiaries in FTTC individual retirement plan accounts due to death,
disability or attainment of age 59 1/2; tax-free returns of excess
contributions from employee benefit plans; distributions from employee benefit
plans, including those due to plan termination or plan transfer; for
Systematic Withdrawal Plans set up on or after May 1, 1995, redemptions of up
to 1% monthly of an account's net asset value (3% quarterly, 6% semiannually
or 12% annually); redemptions initiated by the Fund due to a Shareholder's
account falling below the minimum specified account size; and redemptions
following the death of the Shareholder.
All investments made during a calendar month, regardless of when during the
month the investment occurred, will age one month on the last day of that
month and each subsequent month.
Requests for redemptions for a SPECIFIED DOLLAR amount, unless otherwise
specified, will result in additional Shares being redeemed to cover any
applicable contingent deferred sales charge, while requests for redemption of
a SPECIFIC NUMBER of Shares will result in the applicable contingent deferred
sales charge being deducted from the total dollar amount redeemed.
TELEPHONE TRANSACTIONS
Shareholders of the Fund and their dealer of record, if any, may be able to
execute various transactions by calling the Transfer Agent at 1-800-393-3001.
All Shareholders will be able to: (i) effect a change in address, (ii) change
a dividend option (see "Restricted Accounts" below), and (iii) transfer Fund
Shares in one account to another identically registered account in the Fund.
In addition, Shareholders who complete and file an Agreement as described
under "How to Sell Shares of the Fund--Redemptions by Telephone" will be able
to redeem Shares of the Fund.
VERIFICATION PROCEDURES. The Fund and the Transfer Agent will employ
reasonable procedures to confirm that instructions communicated by telephone
are genuine. These will include: recording all telephone calls requesting
account activity by telephone, requiring that the caller provide certain
personal and/or account information requested by the telephone service agent
at the time of the call for the purpose of establishing the caller's
identification, and sending a confirmation statement on redemptions to the
address of record each time account activity is initiated by telephone. So
long as the Fund and the Transfer Agent follow instructions
22
<PAGE>
communicated by telephone which were reasonably believed to be genuine at the
time of their receipt, neither they nor their affiliates will be liable for
any loss to the Shareholder caused by an unauthorized transaction. The Fund
and the Transfer Agent may be liable for any losses due to unauthorized or
fraudulent instructions in the event such reasonable procedures are not
followed. Shareholders are, of course, under no obligation to apply for or
accept telephone transaction privileges. In any instance where the Fund or the
Transfer Agent is not reasonably satisfied that instructions received by
telephone are genuine, the requested transaction will not be executed, and
neither the Fund, the Transfer Agent, nor their affiliates will be liable for
any losses which may occur because of a delay in implementing a transaction.
RESTRICTED ACCOUNTS. Telephone redemptions and dividend option changes may
not be accepted on FTTC retirement accounts. To assure compliance with all
applicable regulations, special forms are required for any distribution,
redemption, or dividend payment. Changes to dividend options for these
accounts must be made in writing.
To obtain further information regarding distribution or transfer procedures,
including any required forms, FTTC retirement account shareholders may call
toll free 1-800-527-2020 or 1-800-354-9191 (press "2").
GENERAL. During periods of drastic economic or market changes, it is
possible that the telephone transaction privileges will be difficult to
execute because of heavy telephone volume. In such situations, Shareholders
may wish to contact their registered dealer for assistance, or to send written
instructions to the Fund as detailed elsewhere in this Prospectus.
Neither the Fund nor the Transfer Agent will be liable for any losses
resulting from the inability of a Shareholder to execute a telephone
transaction.
The telephone transaction privilege may be modified or discontinued by the
Fund at any time upon 60 days' written notice to Shareholders.
MANAGEMENT OF THE FUND
The Fund is managed by its Board of Directors and all powers are exercised
by or under authority of the Board. Information relating to the Directors and
Officers is set forth under the heading "Management of the Fund" in the SAI.
The Board has carefully reviewed the multiclass structure to ensure that no
material conflict exists between the two classes of Shares. Although the Board
does not expect to encounter material conflicts in the future, the Board will
continue to monitor the Fund and will take appropriate action to resolve such
conflicts if any should later arise.
In developing the multiclass structure, the Fund has retained the authority
to establish additional classes of Shares. It is the Fund's present intention
to offer only two classes of Shares, but new classes may be offered in the
future.
INVESTMENT MANAGER. Templeton Investment Counsel, Inc., a Florida
corporation located at Broward Financial Centre, Fort Lauderdale, Florida
33394-3091, serves as the Investment Manager of the Fund. The Investment
Manager is an indirect wholly owned subsidiary of Franklin Resources, Inc.
("Franklin"). Through its subsidiaries, Franklin is engaged in various aspects
of the financial services industry. The Investment Manager 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.
23
<PAGE>
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 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 0.70% of its average daily net assets.
Currently, 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. Prior to
joining the Templeton organization, Mr. Motyl 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. James E. Chaney, Vice
President of the Investment Manager, exercises secondary portfolio management
responsibility with respect to the Fund. Prior to joining the Templeton
organization in 1991, Mr. Chaney spent six years with GE Investments, where he
was vice president of international equities. In that capacity he had numerous
research responsibilities and also managed several accounts, including a
mutual fund. He also has another seven years' experience as an international
consulting engineer and project manager for Camp, Dresser & McKee, Inc. and
American British Consultants. 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, preparation of financial reports, monitoring
compliance with regulatory requirements and monitoring tax-deferred retirement
plans. For its services, the Fund pays the Business Manager a monthly fee
equivalent to 0.15% of its average daily net assets during the year, reduced
to 0.135% of such net assets in excess of $200 million, to 0.10% of such net
assets in excess of $700 million and to 0.075% of such net 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.
TRANSFER AGENT. Franklin Templeton Investor Services, Inc. serves as
transfer agent and dividend disbursing agent for the Fund.
CUSTODIAN. The Chase Manhattan Bank, N.A. serves as custodian of the Fund's
assets.
PLANS OF DISTRIBUTION. A separate Plan of Distribution has been approved and
adopted for each class ("Class I Plan" and "Class II Plan," respectively, or
"Plans") pursuant to Rule 12b-1 under the 1940 Act. The Rule 12b-1 fees
charged to each class will be based solely on the distribution and servicing
fees attributable to that particular class. Any portion of fees remaining from
either Plan after distribution to securities dealers up to the maximum amount
permitted under each Plan may be used by the class to reimburse FTD for
routine ongoing promotion and distribution expenses incurred with respect to
such class. Such expenses may include, but are not limited to, the printing of
prospectuses and reports used for sales purposes, expenses of preparing and
distributing sales literature and related expenses, advertisements, and other
distribution-related expenses, including a prorated portion of FTD's overhead
expenses attributable to the distribution of Fund Shares, as well as any
distribution or service fees paid to securities dealers or their firms or
others who have executed a servicing agreement with the Fund, FTD or its
affiliates.
The maximum amount which the Fund may pay to FTD or others under the Class I
Plan for such distribution expenses is 0.35% per annum of Class I's average
daily net assets, payable on a quarterly basis. All expenses of distribution
and marketing in excess of 0.35% per annum will be borne by FTD, or others who
have incurred them, without reimbursement from the Fund. Under the Class I
Plan,
24
<PAGE>
costs and expenses not reimbursed in any one given quarter (including costs
and expenses not reimbursed because they exceed the applicable limit of the
Plan) may be reimbursed in subsequent quarters or years, subject to applicable
law. FTD has informed the Fund that the costs and expenses of Class II Shares
that may be reimbursable in future quarters or years were $880,589 (2.32% of
its net assets) at December 31, 1994.
Under the Class II Plan, the maximum amount which the Fund is permitted to
pay to FTD or others for distribution expenses and related expenses is 0.75%
per annum of Class II's average daily net assets, payable quarterly. All
expenses of distribution, marketing and related services over that amount will
be borne by FTD, or others who have incurred them, without reimbursement by
the Fund. In addition, the Class II Plan provides for an additional payment by
the Fund of up to 0.25% per annum of Class II's average daily net assets as a
servicing fee, payable quarterly. This fee will be used to pay securities
dealers or others for, among other things, assisting in establishing and
maintaining customer accounts and records; assisting with purchase and
redemption requests; receiving and answering correspondence; monitoring
dividend payments from the Fund on behalf of the customers; or similar
activities related to furnishing personal services and/or maintaining
Shareholder accounts.
During the first year after the purchase of Class II Shares, FTD will keep a
portion of the Plan fees assessed on Class II Shares to partially recoup fees
FTD pays to securities dealers. FTD, or its affiliates, may pay, from its own
resources, a commission of up to 1% of the amount invested to securities
dealers who initiate and are responsible for purchases of Class II Shares.
Both Plans also cover any payments to or by the Fund, the Investment
Manager, FTD, or other parties on behalf of the Fund, the Investment Manager
or FTD, to the extent such payments are deemed to be for the financing of any
activity primarily intended to result in the sale of Shares issued by the Fund
within the context of Rule 12b-1. The payments under the Plans are included in
the maximum operating expenses which may be borne each class of the Fund. For
more information, including a discussion of the Board's policies with regard
to the amount of each Plan's fees, please see the SAI.
EXPENSES. For the fiscal year ended December 31, 1994, expenses borne by
Class II Shares of the Fund amounted to 2.47% of the Fund's average net assets
of such class. See the Expense Table for information regarding estimated
expenses for the current fiscal year.
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
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's authorized capital
consists of [200,000,000] Common Shares, par value $0.01 per Share. Each Share
entitles the holder to one vote and to participate equally in dividends,
distributions of capital and net assets of the Fund on liquidation. For a more
detailed description of Fund Shares, see "Description of Shares" in the SAI.
The Fund will not ordinarily issue certificates for Shares purchased. Share
certificates representing whole (not fractional) Shares are issued only upon
the specific request of the Shareholder made in writing to the Transfer Agent.
No charge is made for the issuance of one certificate for all or some of the
Shares purchased in a single order.
VOTING RIGHTS. Shares of each class represent proportionate interests in the
assets of the Fund and have the same voting and other rights and preferences
as the other class of the Fund for matters that affect the Fund as a whole.
For matters that only affect a
25
<PAGE>
certain class of the Fund's Shares, however, only Shareholders of that class
will be entitled to vote. Therefore, each class of Shares will vote separately
on matters (1) affecting only that class, (2) expressly required to be voted
on separately by state law, or (3) required to be voted on separately by the
1940 Act or the rules adopted thereunder. For instance, if a change to the
Rule 12b-1 plan relating to Class I Shares requires Shareholder approval, only
Shareholders of Class I may vote on changes to the Rule 12b-1 plan affecting
that class. Similarly, if a change to the Rule 12b-1 plan relating to Class II
Shares requires Shareholder approval, only Shareholders of Class II may vote
on the change to such plan. On the other hand, if there is a proposed change
to the investment objective of the Fund, this affects all Shareholders,
regardless of which class of Shares they hold, and therefore, each Share has
the same voting rights.
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. The Fund intends to pay a dividend at least
annually representing substantially all of its net investment income and any
net realized capital gains. According to the requirements of the Code,
dividends and capital gains will be calculated and distributed in the same
manner for Class I and Class II Shares. The per share amount of any income
dividends will generally differ only to the extent that each class is subject
to different Rule 12b-1 fees. Unless otherwise requested, income dividends and
capital gain distributions paid by the Fund, other than on those Shares whose
owners keep them registered in the name of a broker-dealer, are automatically
reinvested on the payable date in whole or fractional Shares at net asset
value as of the ex-dividend date, unless a Shareholder makes a written or
telephonic request for payments in cash. Dividend and capital gain
distributions are only eligible for reinvestment at net asset value in the
same class of Shares of the Fund or the same class of another of the Franklin
Templeton Funds. The processing date for the reinvestment of dividends may
vary from month to month, and does not affect the amount or value of the
Shares acquired. Income dividends and capital gain distributions will be paid
in cash on Shares during the time that their owners keep them registered in
the name of a broker-dealer, unless the broker-dealer has made arrangements
with the Transfer Agent for reinvestment.
Prior to purchasing Shares of the Fund, the impact of dividends or capital
gain distributions which have been declared but not yet paid should be
carefully considered. Any dividend or capital gain distribution paid shortly
after a purchase by a Shareholder prior to the record date will have the
effect of reducing the per Share net asset value of the Shares by the amount
of the dividend or distribution. All or a portion of such dividend or
distribution, although in effect a return of capital, generally will be
subject to tax.
Checks are forwarded by first-class mail to the address of record. The
proceeds of any such checks which are not accepted by the addressee and
returned to the Fund will be reinvested in the Shareholder's account in whole
or fractional Shares at net asset value next computed after the check has been
received by the Transfer Agent. Subsequent distributions automatically will be
reinvested at net asset value as of the ex-dividend date in additional whole
or fractional Shares.
FEDERAL TAX INFORMATION. The Fund intends to elect to be treated and to
qualify each year as a regulated investment company under Subchapter M of the
Code. A regulated investment company generally is not subject to federal
income tax on income and gains distributed in a timely manner to its
shareholders. The Fund intends to distribute substantially all of its net
investment income and net realized capital gains to Shareholders, which
generally will be taxable dividends or capital gains in their hands,
regardless of whether received in cash or reinvested in additional Shares of
the Fund. Distributions declared in October, November or December to
Shareholders of record on a date in such a 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. The Fund will inform
Shareholders each year of the amount and nature of such distributions or
gains. 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. The preceding discussion relates only to
federal income tax; the consequences under other tax laws may differ. A more
detailed description of tax consequences to Shareholders is contained in the
SAI under the heading "Tax Status."
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<PAGE>
INQUIRIES. Shareholder inquiries will be answered promptly. They should be
addressed to Franklin Templeton Investor Services, Inc., 700 Central Avenue,
P.O. Box 33030, St. Petersburg, Florida 33733-8030--telephone 1-800-393-3001
or 813-823-8712. 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.
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 one, five and ten years (or up to the life of the Fund), will
reflect the deduction of the maximum contingent deferred sales charge and
deduction of a proportional share of Fund expenses (on an annual basis), and
will assume that all dividends and distributions are reinvested when paid.
Total return may be expressed in terms of the cumulative value of an
investment in 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.
Because Class I Shares were not offered prior to May 1, 1995, no performance
data is available for these Shares. After a sufficient period of time has
passed, Class I performance data will be available.
STATEMENTS AND REPORTS. The Fund's fiscal year ends on December 31. Annual
reports (containing financial statements audited by independent auditors and
additional information regarding the Fund's performance) and semiannual
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.
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<PAGE>
INSTRUCTIONS AND IMPORTANT NOTICE
SUBSTITUTE W-9 INSTRUCTIONS INFORMATION
GENERAL. Backup withholding is not an additional tax. Rather, the tax
liability of persons subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the Internal Revenue Service ("IRS").
OBTAINING A NUMBER. If you do not have a Social Security Number/Taxpayer
Identification Number ("SSN/TIN"), you must obtain Form SS-5 or Form SS-4 from
your local Social Security or IRS office and apply for one. If you have
checked the "Awaiting TIN" box and signed the certification, withholding will
apply to payments relating to your account unless you provide a certified TIN
within 60 days.
WHAT SSN/TIN TO GIVE. Please refer to the following guidelines:
<TABLE>
<CAPTION>
ACCOUNT TYPE GIVE SSN OF ACCOUNT TYPE GIVE TAXPAYER ID # OF
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
. Individual Individual . Trust, Estate, or Trust, Estate, or
Pension Plan Trust Pension Plan Trust
- -----------------------------------------------------------------------------------
. Joint Actual owner of . Corporation, Corporation,
Individual account, or if Partnership, or other Partnership, or other
combined funds, the organization organization
first-named
individual
- -----------------------------------------------------------------------------------
. Unif. Minor . Broker nominee Broker nominee
Gift/Transfer
to Minor
- -----------------------------------------------------------------------------------
. Sole Owner of business
Proprietor
- -----------------------------------------------------------------------------------
. Legal Ward, Minor, or
Guardian Incompetent
- -----------------------------------------------------------------------------------
</TABLE>
EXEMPT RECIPIENTS. Please provide your TIN and check the "Exempt Recipient"
box if you are an exempt recipient. Exempt recipients generally include:
A corporation A real estate investment trust
A common trust fund operated by a bank
A financial institution under section 584(a)
An entity registered at all times
An organization exempt from tax under the Investment Company
under section 501(a), or an Act of 1940
individual retirement plan
A registered dealer in securities or
commodities registered in the U.S.
or a U.S. possession
IRS PENALTIES. If you do not supply us with your SSN/TIN, you will be subject
to an IRS $50 penalty unless your failure is due to reasonable cause and not
willful neglect. If you fail to report certain income on your Federal income
tax return, you will be treated as negligent and subject to an IRS 20% penalty
on any underpayment of tax attributable to such negligence, unless there was
reasonable cause for the resulting underpayment and you acted in good faith.
If you falsify information on this form or make any other false statement
resulting in no backup withholding on an account which should be subject to
backup withholding, you may be subject to an IRS $500 penalty and certain
criminal penalties including fines and imprisonment.
SUBSTITUTE W-8 INSTRUCTIONS INFORMATION
EXEMPT FOREIGN PERSON. Check the "Exempt Foreign Person" box if you qualify as
a non-resident alien or foreign entity that is not subject to certain U.S.
information return reporting or to backup withholding rules. Dividends paid to
your account may be subject to withholding of up to 30%. Generally, you are an
"Exempt Foreign Person" if you are not (1) a citizen or resident of the U.S.,
or (2) a U.S. corporation, partnership, estate, or trust. In the case of an
individual, an "Exempt Foreign Person" is one who has been physically present
in the U.S. for less than 31 days during the current calendar year. An
individual who is physically present in the U.S. for at least 31 days during
the current calendar year will still be treated as an "Exempt Foreign Person,"
provided that the total number of days physically present in the current
calendar year and the two preceding calendar years does not equal or exceed
183 days (counting all of the days in the current calendar year, only one-
third of the days in the first preceding calendar year and only one-sixth of
the days in the second preceding calendar year). In addition, lawful permanent
residents or green card holders may not be treated as "Exempt Foreign
Persons." If you are an individual or an entity, you must not now be, or at
this time expect to be, engaged in a U.S. trade or business with respect to
which any gain derived from transactions effected by the Fund/Payer during the
calendar year is effectively connected to the U.S.
PERMANENT ADDRESS. The Shareholder Application must contain your permanent
address if you are an "Exempt Foreign Person." If you are an individual,
provide your permanent address. If you are a partnership or corporation,
provide the address of your principal office. If you are an estate or trust,
provide the address of your permanent residence or the principal office of any
fiduciary.
NOTICE OF CHANGE IN STATUS. If you become a U.S. citizen or resident after you
have provided certification of your foreign status, or if you cease to be an
"Exempt Foreign Person," you must notify the Fund/Payer within 30 days of your
change in status. Reporting will then begin on the account(s) listed, and
backup withholding may also begin unless you certify to the Fund/Payer that
(1) the tax payer identification number you have given is correct, and (2) the
IRS has not notified you that you are subject to backup withholding because
you failed to report certain interest or dividend income. You may use Form W-
9, "Payer's Request for Taxpayer Identification Number and Certification," to
make these certifications. If an account is no longer active, you do not have
to notify a Fund/Payer or broker of your change in status unless you also have
another account with the same Fund/Payer that is still active. If you receive
interest from more than one Fund/Payer or have dealings with more than one
broker or barter exchange, file a certificate with each. If you have more than
one account with the same Fund/Payer, the Fund/Payer may require you to file a
separate certificate for each account.
WHEN TO FILE. File these certifications with the Fund before a payment is made
to you, unless you have already done this in either of the two preceding
calendar years. Only certifications that are in proper order will be treated
as having been filed with the Fund.
HOW OFTEN YOU MUST FILE. This certificate generally remains in effect for
three calendar years. A Fund/Payer or broker, however, may require that a new
certificate be filed each time a payment is made. On joint accounts for which
each joint owner is a foreign person, each must provide a certification of
foreign status.
1/94
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<PAGE>
FOR CORPORATE SHAREHOLDERS--FORM OF RESOLUTION
It will be necessary for corporate shareholders to provide a certified copy of
a resolution or other certificate of authority to authorize the purchase as
well as sale (redemption) of shares and withdrawals by checks or drafts. You
may use the following form of resolution or you may prefer to use your own. It
is understood that the Fund, Franklin Templeton Distributors, Inc., Franklin
Templeton Investor Services, Inc., the custodian bank and their affiliates may
rely upon these authorizations until revoked or amended by written notice
delivered by registered or certified mail to the Fund.
CERTIFIED COPY OF RESOLUTION (Corporation or Association)
The undersigned hereby certifies and affirms that he/she is the duly
elected _________________________________ of __________________________________
TITLE CORPORATE NAME
a __________________________ organized under the laws of the State of _________
TYPE OF ORGANIZATION STATE
and that the following is a true and correct copy of a resolution adopted by
the Board of Directors at a meeting duly called and held on ___________________
DATE
RESOLVED, that the _________________________________________________ of this
OFFICERS' TITLES
Corporation or Association are authorized to open an account in the name of
the Corporation or Association with one or more of the Franklin Group of
Funds (R) or Templeton Family of Funds (collectively, the "Funds") and to
deposit such funds of this Corporation or Association in this account as
they deem necessary or desirable; that the persons authorized below may
endorse checks and other instruments for deposit to said account or
accounts; and
FURTHER RESOLVED,that any of the following ___________________ officers are
NUMBER
authorized to sign any share assignment on behalf of this Corporation or
Association and to take any other actions as may be necessary to sell or
redeem its shares in the Funds or to sign checks or drafts withdrawing funds
from the account; and
FURTHER RESOLVED, that this Corporation or Association shall hold harmless,
indemnify, and defend the Funds, their custodian bank, Franklin Templeton
Distributors, Inc., Franklin Templeton Investor Services, Inc., and their
affiliates, from any claim, loss or liability resulting in whole or in
part, directly or indirectly, from their reliance from time to time upon
any certifications by the secretary or any assistant secretary of this
Corporation or Association as to the names of the individuals occupying
such offices and their acting in reliance upon these resolutions until
actual receipt by them of a certified copy of a resolution of the Board of
Directors of the Corporation or Association modifying or revoking any or
all such resolutions.
The undersigned further certifies that the below named persons, whose
signatures appear opposite their names and office titles, are duly elected
officers of the Corporation or Association. (Attach additional list if
necessary.)
- -------------------------------------- ---------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- ---------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- ---------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- ---------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- ---------------------------------------
NAME OF CORPORATION OR ASSOCIATION DATE
Certified from minutes ________________________________________________________
NAME AND TITLE
CORPORATE SEAL (if appropriate)
29
<PAGE>
THE FRANKLIN TEMPLETON TELEPHONE REDEMPTION AUTHORIZATION AGREEMENT
You may use Franklin Templeton's telephone redemption privilege to redeem
uncertificated Franklin Templeton Fund shares for up to $50,000 (or your
Shareholder account balance, whichever is less) per day, per fund account in
accordance with the terms of the Fund's Prospectus.
The telephone redemption privilege is available only to Shareholders who
specifically request it. If you would like to add this redemption privilege to
the other telephone transaction privileges automatically available to Franklin
Templeton Fund shareholders, please sign and return this authorization to
Franklin Templeton Investor Services, Inc. ("Services"), transfer agent and
shareholder servicing agent for the Franklin Templeton Funds.
SHAREHOLDER AUTHORIZATION: I/We request the telephone redemption privilege
under the terms described below and in the prospectus for each investment
company in the Franklin Templeton Group of Funds (a "Franklin Templeton Fund"
or a "Fund"), now opened or opened at a later date, holding shares registered
as follows:
- ------------------------------------- ---------------------------------------
PRINT NAME(S) AS SHOWN IN YOUR ACCOUNT REGISTRATION ("SHAREHOLDER")
- ------------------------------------- ---------------------------------------
ACCOUNT NUMBER(S)
I/We authorize each Fund and Services to honor and act upon telephone requests
given as provided in this agreement to redeem shares from any
Shareholder account:
- ------------------------------------- ---------------------------------------
SIGNATURE(S) AND DATE
- ------------------------------------- ---------------------------------------
PRINT NAME(S) (AND TITLE/CAPACITY, IF APPLICABLE)
VERIFICATION PROCEDURES: I/We understand and agree that: (1) each Fund and
Services will employ reasonable procedures to confirm that redemption
instructions communicated by telephone are genuine and that if these
confirmation procedures are not followed, the Fund or Services may be liable
for any losses due to unauthorized or fraudulent telephone instructions; (2)
the confirmation procedures will include the recording of telephone calls
requesting redemptions, requiring that the caller provide certain personal
and/or account information requested by the telephone service agent at the
time of the call for the purpose of establishing the caller's identification,
and the sending of confirmation statements to the address of record each time
a redemption is initiated by telephone; and (3) so long as the Fund and
Services follow the confirmation procedures in acting on instructions
communicated by telephone which were reasonably believed to be genuine at the
time of receipt, neither they, nor their parent or affiliates, will be liable
for any loss, damages or expenses caused by an unauthorized or fraudulent
redemption request.
JOINTLY OWNED/CO-TRUSTEE ACCOUNTS: Each of us signing this agreement as either
joint owners or co-trustees authorizes each Fund and Services to honor
telephone redemption requests given by ANY ONE of the signers, or our
investment representative of record, if any, ACTING ALONE.
APPOINTMENT OF ATTORNEY-IN-FACT: In order to issue telephone redemption
requests acting alone, each of us individually makes the following
appointment: I hereby appoint the other joint owner(s)/co-trustee(s) as my
agent(s) (attorney[s]-in-fact) with full power and authority to individually
act for me in any lawful way with respect to the issuance of instructions to a
Fund or Services in accordance with the telephone redemption privilege we have
requested by signing this agreement. This appointment shall not be affected by
my subsequent disability or incompetency and shall remain in effect until it
is revoked by either written notice from any one of us delivered to a Fund or
Services by registered mail, return receipt requested or by a Fund or Services
upon receipt of any information that causes a Fund or Services to believe in
good faith that there is or that there may be a dispute among any of us with
respect to the Franklin Templeton Fund account(s) covered by this agreement.
Each of us agrees to notify the Fund or Services immediately upon the death of
any of the signers.
CORPORATE/PARTNERSHIP/TRUST/RETIREMENT ACCOUNTS: The Shareholder and each of
us signing this agreement on behalf of the Shareholder represent and warrant
to each Franklin Templeton Fund and Services that the Shareholder has the
authority to enter into this agreement and that each of us is duly authorized
to execute this agreement on behalf of the Shareholder. The Shareholder agrees
that its election of the telephone redemption privilege means that a Fund or
Services may honor a telephone redemption request given by ANY
officer/partner/member/administrator/or agent of the Shareholder ACTING ALONE.
RESTRICTED ACCOUNTS: Telephone redemptions may not be accepted on Franklin
Templeton Trust Company retirement accounts.
PLEASE RETURN THIS FORM TO:
FRANKLIN TEMPLETON INVESTOR SERVICES, INC., ATTN.: TELEPHONE REDEMPTIONS
DEPT., 700 CENTRAL AVENUE, ST. PETERSBURG, FLORIDA 33701-3628.
30
<PAGE>
The Franklin Templeton Group
Literature Request -- Call today for a free descriptive brochure and
prospectus on any of the funds listed below. The prospectus contains more
complete information, including fees, charges and expenses, and should be read
carefully before investing or sending money.
TEMPLETON FUNDS
American Trust
American Government Securities Fund
Developing Markets Trust
Foreign Fund
Global Infrastructure Fund
Global Opportunities Trust
Global Rising Dividends Fund
Growth Fund
Income Fund
Japan Fund
Money Fund
Real Estate Securities Fund
Smaller Companies Growth Fund
World Fund
FRANKLIN FUNDS
SEEKING TAX-FREE INCOME
Federal Intermediate Term
Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund***
Puerto Rico Tax-Free Income Fund
FRANKLIN STATE-SPECIFIC FUNDS
SEEKING TAX-FREE INCOME
Alabama
Arizona*
Arkansas**
California*
Colorado
Connecticut
Florida*
Georgia
Hawaii**
Indiana
Kentucky
Louisiana
Maryland
Massachusetts***
Michigan***
Minnesota***
Missouri
New Jersey
New York*
North Carolina
Ohio***
Oregon
Pennsylvania
Tennessee**
Texas
Virginia
Washington**
FRANKLIN FUNDS
SEEKING CAPITAL GROWTH
California Growth Fund
DynaTech Fund
Equity Fund
Global Health Care Fund
Gold Fund
Growth Fund
International Equity Fund
Pacific Growth Fund
Real Estate Securities Fund
Small Cap Growth Fund
FRANKLIN FUNDS SEEKING
GROWTH AND INCOME
Balance Sheet Investment Fund
Convertible Securities Fund
Equity Income Fund
Global Utilities Fund
Income Fund
Premier Return Fund
Rising Dividends Fund
Strategic Income Fund
Utilities Fund
FRANKLIN FUNDS SEEKING
HIGH CURRENT INCOME
AGE High Income Fund
German Government Bond Fund
Global Government Income Fund
Investment Grade Income Fund
U.S. Government Securities Fund
FRANKLIN FUNDS SEEKING HIGH CURRENT
INCOME AND STABILITY OF PRINCIPAL
Adjustable Rate Securities Fund
Adjustable U.S. Government Securities Fund
Short-Intermediate U.S. Government Securities Fund
FRANKLIN FUNDS FOR NON-U.S. INVESTORS
Tax-Advantaged High Yield Securities Fund
Tax-Advantaged International Bond Fund
Tax-Advantaged U.S. Government Securities Fund
FRANKLIN TEMPLETON INTERNATIONAL
CURRENCY FUNDS
Global Currency Fund
Hard Currency Fund
High Income Currency Fund
FRANKLIN MONEY MARKET FUNDS
California Tax-Exempt Money Fund
Federal Money Fund
IFT U.S. Treasury Money Market Portfolio
Money Fund
New York Tax-Exempt Money Fund
Tax-Exempt Money Fund
FRANKLIN FUND FOR CORPORATIONS
Corporate Qualified Dividend Fund
FRANKLIN TEMPLETON VARIABLE ANNUITIES
Franklin Valuemark
Franklin Templeton Valuemark Income
Plus (an intermediate annuity)
Toll-free 1-800/DIAL BEN (1-800/342-5236)
* Two or more fund options available: Long-term portfolio, intermediate-term
portfolio, a portfolio of municipal securities, and a high yield portfolio
(CA).
** The fund may invest up to 100% of its assets in bonds that pay interest
subject to the federal alternative minimum tax.
*** Portfolio of insured municipal securities.
31
<PAGE>
- --------------------------
TEMPLETON AMERICAN
TRUST, INC.
PRINCIPAL UNDERWRITER:
Franklin Templeton
Distributors, Inc.
700 Central Avenue
St. Petersburg,
Florida 33701-3628
Account Services
1-800-393-3001
Fund Information
1-800-292-9293
Institutional Services
1-800-321-8563
This Prospectus is not
an offering of the
securities herein
described in any state
in which the offering
is not authorized. No
sales representative,
dealer, or other person
is authorized to give
any information or make
any representations
other than those
contained in this
Prospectus. Further
information may be
obtained from the
Principal Underwriter.
- --------------------------
[RECYCLED LOGO APPEARS HERE]
TL00 P95 05/95
TEMPLETON
AMERICAN
TRUST, INC.
Prospectus
May 1, 1995
[LOGO OF FRANKLIN TEMPLETON APPEARS HERE]
<PAGE>
[LOGO OF FRANKLIN TEMPLETON APPEARS HERE]
Mail to: FRANKLIN TEMPLETON DISTRIBUTORS, INC.
P.O. Box 33031 St. Petersburg, Florida 33733-8031 (800) 393-3001
Please do not use this form for any Retirement Plan for which Franklin Templeton
Trust Company or its affiliate serves as custodian or trustee, or for any of the
following Templeton Funds: Templeton Money Fund, Templeton Institutional Funds
or Templeton Capital Accumulator Fund. Please request separate Applications
and/or Prospectuses.
- --------------------------------------------------------------------------------
SHAREHOLDER APPLICATION OR REVISION
[_] Please check the box if this is a revision and see Section 8
- --------------------------------------------------------------------------------
Please check Class I or Class II, if applicable, next to your Fund selection.
Class I and Class II shares have different sales charges and operating expenses,
among other differences, as described in each Fund's prospectus.
Date __________________
<TABLE>
<CAPTION>
CLASS CLASS
I II I II
<S> <C> <C> <C>
[_] [_] AMERICAN TRUST $______ [_] [_] GLOBAL INFRASTRUCTURE FUND $______
[_] AMERICAS GOVERNMENT SECURITIES FUND ______ [_] [_] GLOBAL OPPORTUNITIES TRUST ______
[_] [_] DEVELOPING MARKETS TRUST ______ [_] [_] GLOBAL RISING DIVIDENDS FUND ______
[_] [_] FOREIGN FUND ______ [_] [_] GROWTH FUND ______
<CAPTION>
CLASS CLASS
I II I II
<S> <C> <C> <C>
[_] [_] INCOME FUND $______ [_] [_] WORLD FUND $______
[_] JAPAN FUND ______ [_] [_] OTHER: ______
[_] [_] REAL ESTATE SECURITIES FUND ______ ____________________
[_] [_] SMALLER COMPANIES GROWTH FUND ______
</TABLE>
- --------------------------------------------------------------------------------
1 ACCOUNT REGISTRATION (PLEASE PRINT)
- --------------------------------------------------------------------------------
[_] INDIVIDUAL OR JOINT ACCOUNT
__________________________________________________ ________-________-__________
First Name Middle Initial Last Name Social Security Number (SSN)
__________________________________________________ ________-________-__________
Joint Owner(s) (Joint ownership means "Joint Social Security Number (SSN)
Tenants With Rights of Survivorship unless
otherwise specified) All owners must sign Section 4.
- --------------------------------------------------------------------------------
[_] GIFT/TRANSFER TO A MINOR
_______________________________ As Custodian For________________________________
Name of Custodian (one only) Minor's Name (one only)
_____________Uniform Gifts/Transfers to Minors Act________-________-____________
State of Residence Minor's Social Security Number
Please Note: Custodian's Signature, not Minor's, is required in Section 4.
- --------------------------------------------------------------------------------
[_] TRUST, CORPORATION, PARTNERSHIP, RETIREMENT PLAN, OR OTHER ENTITY
__________________________________________ ____________-_______________________
Name Taxpayer Identification Number (TIN)
___________________________________________ ___________________________________
Name of Beneficiary (if to be included in Date of Trust Document (must be
the Registration) completed for registration)
________________________________________________________________________________
Name of Each Trustee (if to be included in the Registration)
- --------------------------------------------------------------------------------
2 ADDRESS
- --------------------------------------------------------------------------------
___________________________________________ Daytime Phone (___)________________
Street Address Area Code
____________________________________-______ Evening Phone (___)________________
City State Zip Code Area Code
I am a Citizen of: [_] U.S. [_]______________________________
Country of Residence
- --------------------------------------------------------------------------------
3 INITIAL INVESTMENT ($100 minimum initial investment)
- --------------------------------------------------------------------------------
Check(s) enclosed for $___________________ . (Payable to Franklin Templeton
Distributors, Inc. or the Fund(s)
indicated above.)
- --------------------------------------------------------------------------------
4 SIGNATURE AND TAX CERTIFICATIONS
(All registered owners must sign application)
- --------------------------------------------------------------------------------
The Fund reserves the right to refuse to open an account without either a
certified Taxpayer Identification Number ("TIN") or a certification of foreign
status. Failure to provide tax certifications in this section may result in
backup withholding on payments relating to your account and/or in your inability
to qualify for treaty withholding rates.
I am(We are) not subject to backup withholding because I(we) have not been
notified by the IRS that I am(we are) subject to backup withholding as a result
of a failure to report all interest or dividends or because the IRS has notified
me(us) that I am(we are) no longer subject to backup withholding. (If you are
currently subject to backup withholding as a result of a failure to report all
interest or dividends, please cross out the preceding statement.)
[_] The number shown above is my(our) correct TIN, or that of the Minor named in
Section 1.
[_] AWAITING TIN. I am(We are) waiting for a number to be issued to me(us).
I(We) understand that if I(we) do not provide a TIN to the Fund within 60
days, the Fund is required to commence 31% backup withholding until I(we)
provide a certified TIN.
[_] EXEMPT RECIPIENT. Individuals cannot be exempt. Check this box only after
reading the instructions to see whether you qualify as an exempt recipient.
(You should still provide a TIN.)
[_] EXEMPT FOREIGN PERSON. Check this box only if the following statement
applies: "I am(we are) neither a citizen nor a resident of the United
States. I(we) certify to the best of my(our) knowledge and belief, I(we)
qualify as an exempt foreign person and/or entity as described in the
instructions."
Permanent address for tax purposes:
________________________________________________________________________________
Street Address City State Country Personal Code
PLEASE NOTE: The IRS only allows one TIN to be listed on an account. On joint
accounts, it is preferred that the primary account owner (or person listed first
on the account) list his/her number as requested above.
CERTIFICATION - Under the penalties of perjury, I(we) certify that (1) the
information provided on this application is true, correct and complete, (2)
I(we) have read the prospectus(es) for the Fund(s) in which I am(we are)
investing and agree to the terms thereof, and (3) I am(we are) of legal age or
an emancipated minor. I (we) acknowledge that Shares of the Fund(s) are not
insured or guaranteed by any agency or institution and that an investment in the
Shares involves risks, including the possible loss of principal.
X X
- ---------------------------------------- ---------------------------------------
Signature Signature
X X
- ---------------------------------------- ---------------------------------------
Signature Signature
Please make a photocopy of this application for your records.
- --------------------------------------------------------------------------------
5 BROKER/DEALER USE ONLY (PLEASE PRINT)
- --------------------------------------------------------------------------------
-----------------------
We hereby submit this application for the purchase of Templeton Dealer Number
shares of the Fund indicated above in accordance with
the terms of our selling agreement with Franklin -----------------------
Templeton Distributors, Inc. ("FTD"), and with the
Prospectus for the Fund. We agree to notify FTD of any
Purchases of Class I shares which may be eligible for
reduced or eliminated sales charges.
-----------------------------------------------------------------------------
WIRE ORDER ONLY: The attached check for $_______ should be applied against
Wire Order
Confirmation Number ___________ Dated___________ For__________ Shares
-----------------------------------------------------------------------------
Securities Dealer Name__________________________________________________________
Main Office Address________________ Main Office Telephone Number (___)__________
Branch Number________ Representative Number ________ Representative Name________
Branch Address_________________________ Branch Telephone Number (___)___________
Authorized Signature, Securities Dealer______________________ Title_____________
- --------------------------------------------------------------------------------
ACCEPTED: Franklin Templeton Distributors, Inc. By___________ Date______________
- --------------------------------------------------------------------------------
Please see reverse side for Shareholder Account Privileges:
[_] Distribution Options [_] Special Instructions for Distributions
[_] Systematic Withdrawal Plan [_] Automatic Investment Plan
[_] Telephone Exchange Service [_] Letter of Intent
[_] Cumulative Quantity Discount
This application must be preceded or accompanied by a prospectus for
the Fund(s) being purchased.
<PAGE>
- --------------------------------------------------------------------------------
6 DISTRIBUTION OPTIONS (Check one)
- --------------------------------------------------------------------------------
Check one - if no box is checked, all dividends and capital gains will be
reinvested in additional shares of the Fund.
[_] Reinvest all dividends [_] Pay all dividends in cash
and capital gains. and reinvest capital gains.
[_] Pay capital gains in cash [_] Pay all dividends and
and reinvest dividends. capital gains in cash.
- --------------------------------------------------------------------------------
7 OPTIONAL SHAREHOLDER PRIVILEGES
- --------------------------------------------------------------------------------
A. SPECIAL PAYMENT INSTRUCTIONS FOR DISTRIBUTIONS (Check one box)
[_] Pay Distributions, as noted in Section 6, to another Franklin or Templeton
Fund.
Fund Name______________________ Existing Account Number___________________
[_] Send my Distributions to the person, named below, instead of as registered
in Section 1.
Name___________________________ Street Address____________________________
City___________________________ State____________________Zip Code_________
- --------------------------------------------------------------------------------
B. SYSTEMATIC WITHDRAWAL PLAN
Please withdraw from my Franklin Templeton account $_____($50 minimum)
[_]Monthly [_]Quarterly [_]Semi-Annually or [_]Annually as set forth in the
Prospectus, starting in ______________(Month). The net asset value of the
shares held must be at least $5,000 at the time the plan is established.
Additional restrictions may apply to Class II or other shares subject to
contingent deferred sales charge, as described in the prospectus. Send the
proceeds to: [_]Address of Record OR [_]the Franklin Templeton Fund or person
specified in Section 7(A) - Special Payment Instructions for Distributions.
- --------------------------------------------------------------------------------
C. TELEPHONE TRANSACTIONS
TELEPHONE EXCHANGE PRIVILEGE: If the Fund does not receive specific
instructions from the shareholder, either in writing or by telephone, the
Telephone Exchange Privilege (see the prospectus) is automatically extended
to each account. The shareholder should understand, however, that the Fund
and Franklin Templeton Investor Services, Inc. ("FTI") or Templeton Funds
Trust Company and their agents will not be liable for any loss, injury,
damage or expense as a result of acting upon instructions communicated by
telephone reasonably believed to be genuine. The shareholder agrees to hold
the Fund and its agents harmless from any loss, claims, or liability arising
from its or their compliance with such instructions. The shareholder
understands that this option is subject to the terms and conditions set forth
in the prospectus of the fund to be acquired.
[_]No, I do NOT wish to participate in the Telephone Exchange Privilege or
authorize the Fund or its agents, including FTI or Templeton Funds Trust
Company, to act upon instructions received by telephone to exchange shares
for shares of any other account(s) within the Franklin Templeton Group of
Funds.
Telephone Redemption Privilege: This is available to shareholders who
specifically request it and who complete the Franklin Templeton Telephone
Redemption Authorization Agreement in the back of the Fund's prospectus.
- --------------------------------------------------------------------------------
D. 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(We)
would like to establish an Automatic Investment Plan (the"Plan") as described
in the Prospectus. I(We) agree to reimburse FTI and/or FTD for any expenses
or losses that they may incur in connection with my(our) plan, including any
caused by my(our) bank's failure to act in accordance with my(our) request.
If my(our) bank makes any erroneous payment or fails to make a payment after
shares are purchased on my(our) behalf, any such purchase may be cancelled
and I(we) hereby authorize redemptions and/or deductions from my(our) account
for that purpose.
Debit my(our) bank account monthly for $__________($25 minimum) on or about
the [_]1st [_]5th [_]15th or [_]20th day starting_______(month), to be
invested in (name of Fund)___________________Account Number (if known)_______
- --------------------------------------------------------------------------------
E. INSTRUCTIONS TO BANK - AUTOMATIC INVESTMENT PLAN AUTHORIZATION
To:__________________________________ ______________________________________
Name of Your Bank ABA Number
___________________________ _________________ ____________ ______________
Street Address City State Zip Code
I(We) authorize you to charge my(our) Checking/Savings Account and to make
payment to FTD, upon instructions from FTD. I(We) 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(us). This authority shall remain in effect until you
receive written notice from me(us) changing its terms or revoking it. Until you
actually receive such notice, I(we) agree that you shall be fully protected in
paying any charge under this authority. I(we) 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 your bank records Date
______________________________________ _______________________________________
Print Name(s) Account Number
______________________________ _________________ ____________ ______________
Street Address City State Zip Code
- --------------------------------------------------------------------------------
F. LETTER OF INTENT (LOI) -- APPLICABLE TO CLASS I SHARES ONLY
[_]I(We) agree to the terms of the LOI and provisions for reservations of
Shares and grant FTD the security interest set forth in the Prospectus.
Although I am(we are) not obligated to do so, it is my(our) intention to
invest over a 13 month period in shares of one or more Franklin or Templeton
Funds (including all Money Market Funds in the Franklin Templeton Group) an
aggregate amount at least equal to that which is checked below:
<TABLE>
<S> <C> <C> <C> <C>
[_]$50,000-99,999 (except for Income Fund) [_]$100,000-249,999 [_]$250,000-499,999 [_]$500,000-999,999 [_]$1,000,0000 or more
</TABLE>
Purchases made within the last 90 days will be included as part of your LOI.
Please write in your Account Number(s)____________ ____________ ____________
- --------------------------------------------------------------------------------
G. CUMULATIVE QUANTITY DISCOUNT -- APPLICABLE TO CLASS I SHARES ONLY
Shares may be purchased at the Offering Price applicable to the dollar amount
of the sale added to the higher of (1) the value (calculated at the
applicable Offering Price) or (2) the purchase price, of any other Shares of
the Fund and/or other Funds in the Franklin Templeton Group owned at that
time by the purchaser, his or her spouse, and their children under age 21,
including all Money Market Funds in the Franklin Templeton Group as stated in
the Prospectus. in order for this Cumulative Quantity Discount to be made
available, the Shareholder or his or her Securities Dealer must notify FTI or
FTD of the total holdings in the Franklin Templeton Group each time an order
is placed.
[_]I(We) own shares of more than one Fund in the Franklin Templeton Group and
qualify for the Cumulative Quantity Discount described above and in the
Prospectus.
My(Our) other Account Number(s) are ___________ ___________ _______________
- --------------------------------------------------------------------------------
8 ACCOUNT REVISION (If Applicable)
- --------------------------------------------------------------------------------
If you are using this application to revise your Account Registration, or wish
to have Distributions sent to an address other than the address on your existing
Account's Registration, a Signature Guarantee is required. Signatures of all
registered owners must be guaranteed by an "eligible guarantor" as defined in
the "How to Sell Shares of the Fund" section in the Fund's Prospectus. A Notary
Public is not an acceptable guarantor.
X________________________________________ ____________________________________
Signature(s) of Registered Account Owners Account Number(s)
X________________________________________ ____________________________________
X________________________________________
X________________________________________ ____________________________________
Signature Guarantee Stamp
NOTE: For any change in registration, please send us any outstanding
Certificates by Registered Mail.
- --------------------------------------------------------------------------------
TLGOF APP 05/95
<PAGE>
TEMPLETON AMERICAN TRUST, INC.
THIS STATEMENT OF ADDITIONAL INFORMATION DATED
MAY 1, 1995 IS NOT A PROSPECTUS. IT SHOULD BE READ
IN CONJUNCTION WITH THE PROSPECTUS OF
TEMPLETON AMERICAN TRUST, INC. DATED
MAY 1, 1995, WHICH MAY BE OBTAINED WITHOUT CHARGE
UPON REQUEST TO THE PRINCIPAL UNDERWRITER,
FRANKLIN TEMPLETON DISTRIBUTORS, INC.,
700 CENTRAL AVENUE, P.O. BOX 33030,
ST. PETERSBURG, FLORIDA 33733-8030
TOLL FREE TELEPHONE: (800) 237-0738
TABLE OF CONTENTS
General Information and -Investment Management
History Agreement
Investment Objective and -Management Fees
Policies -The Investment Manager
-Investment Policies -Business Manager
-Repurchase Agreements -Custodian and Transfer Agent
-Debt Securities -Legal Counsel
-Futures Contracts -Independent Accountants
-Options on Securities or -Reports to Shareholders
Indices Brokerage Allocation
-Foreign Currency Hedging Purchase, Redemption and
Transactions Pricing of Shares
-Investment Restrictions -Ownership and Authority Disputes
-Risk Factors -Tax Deferred Retirement Plans
-Trading Policies -Letter of Intent
-Personal Securities -Special Net Asset Value Purchases
Transactions Tax Status
Management of the Fund Principal Underwriter
Director Compensation Description of Shares
Principal Shareholders Performance Information
Investment Management and Financial Statements
Other Services
GENERAL INFORMATION AND HISTORY
Templeton American Trust, Inc. (the "Fund") was organized as
a Maryland corporation on October 31, 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.
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.
Debt Securities. The Fund may invest in debt securities
which are rated at least C by Moody's or C by S&P or deemed to be
of comparable quality by the Investment Manager. As an operating
policy, the Fund will invest no more than 5% of its assets in
debt securities rated lower than Baa by Moody's or BBB by S&P.1
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.
_______________
1 In the event that the Board of Directors should raise the
percentage limitation on investment in lower rated securities,
investors will receive 30 days' notice prior to the investment in
lower rated securities rising above the current 5% limit.
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 values and
liquidity of low rated debt securities, especially in a thinly
traded market. Analysis of the creditworthiness of issuers of
low rated debt securities may be more complex than for issuers of
higher rated securities, and the ability of the Fund to achieve
its investment objective may, to the extent of investment in low
rated debt securities, be more dependent upon such creditworthi-
ness analysis than would be the case if the Fund were investing
in higher rated securities.
Low rated debt securities may be more susceptible to real or
perceived adverse economic and competitive industry conditions
than investment grade securities. The prices of low rated debt
securities have been found to be less sensitive to interest rate
changes than higher rated investments, but more sensitive to
adverse economic downturns or individual corporate developments.
A projection of an economic downturn or of a period of rising
interest rates, for example, could cause a decline in low rated
debt securities prices because the advent of a recession could
lessen the ability of a highly leveraged company to make
principal and interest payments on its debt securities. If the
issuer of low rated debt securities defaults, the Fund may incur
additional expenses to seek recovery.
The Fund may recognize income currently for Federal income
tax purposes in the amount of the unpaid, accrued interest with
respect to high yield bonds structured as zero coupon bonds or
pay-in-kind securities, 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
or leverage itself by borrowing 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.
Futures Contracts. The Fund may purchase and sell financial
futures contracts. Although some financial futures contracts
call for making or taking delivery of the underlying securities,
in most cases these obligations are closed out before the
settlement date. The closing of a contractual obligation is
accomplished by purchasing or selling an identical offsetting
futures contract. Other financial futures contracts by their
terms call for cash settlements.
The Fund may also buy and sell index futures contracts with
respect to any stock index traded on a recognized stock exchange
or board of trade. An index futures contract is a contract to
buy or sell units of an index at a specified future date at a
price agreed upon when the contract is made. The stock index
futures contract specifies that no delivery of the actual stocks
making up the index will take place. Instead, settlement in cash
must occur upon the termination of the contract, with the
settlement being the difference between the contract price and
the actual level of the stock index at the expiration of the
contract.
At the time the Fund purchases a futures contract, an amount
of cash, U.S. Government securities, or other highly liquid debt
securities equal to the market value of the futures contract will
be deposited in a segregated account with the Fund's custodian.
When writing a futures contract, the Fund will maintain with its
custodian liquid assets that, when added to the amounts deposited
with a futures commission merchant or broker as margin, are equal
to the market value of the instruments underlying the contract.
Alternatively, the Fund may "cover" its position by owning the
instruments underlying the contract (or, in the case of an index
futures contract, a portfolio with a volatility substantially
similar to that of the index on which the futures contract is
based), or holding a call option permitting the Fund to purchase
the same futures contract at a price no higher than the price of
the contract written by the Fund (or at a higher price if the
difference is maintained in liquid assets with the Fund's
custodian).
Options on Securities or Indices. The Fund may write
covered call and put options and purchase call and put options on
securities or stock indices that are traded on United States and
foreign exchanges and in the over-the-counter markets.2
________________
2 All option transactions entered into by the Fund will be
traded on a recognized exchange, or will be cleared through a
recognized formal clearing arrangement.
An option on a security is a contract that gives the
purchaser of the option, in return for the premium paid, the
right to buy a specified security (in the case of a call option)
or to sell a specified security (in the case of a put option)
from or to the writer of the option at a designated price during
the term of the option. An option on a securities index gives
the purchaser of the option, in return for the premium paid, the
right to receive from the seller cash equal to the difference
between the closing price of the index and the exercise price of
the option.
The Fund may write a call or put option only if the option
is "covered." A call option on a security written by the Fund is
"covered" if the Fund owns the underlying security covered by the
call or has an absolute and immediate right to acquire that
security without additional cash consideration (or for additional
cash consideration held in a segregated account by its custodian)
upon conversion or exchange of other securities held in its
portfolio. A call option on a security is also "covered" if the
Fund holds a call on the same security and in the same principal
amount as the call written where the exercise price of the call
held (1) is equal to or less than the exercise price of the call
written or (2) is greater than the exercise price of the call
written if the difference is maintained by the Fund in cash or
high grade U.S. Government securities in a segregated account
with its custodian. A put option on a security written by the
Fund is "covered" if the Fund maintains cash or fixed income
securities with a value equal to the exercise price in a
segregated account with its custodian, or else holds a put on the
same security and in the same principal amount as the put written
where the exercise price of the put held is equal to or greater
than the exercise price of the put written.
The Fund will cover call options on stock indices that it
writes by owning securities whose price changes, in the opinion
of the Investment Manager, are expected to be similar to those of
the index, or in such other manner as may be in accordance with
the rules of the exchange on which the option is traded and
applicable laws and regulations. Nevertheless, where the Fund
covers a call option on a stock index through ownership of
securities, such securities may not match the composition of the
index. In that event, the Fund will not be fully covered and
could be subject to risk of loss in the event of adverse changes
in the value of the index. The Fund will cover put options on
stock indices that it writes by segregating assets equal to the
option's exercise price, or in such other manner as may be in
accordance with the rules of the exchange on which the option is
traded and applicable laws and regulations.
The Fund will receive a premium from writing a put or call
option, which increases the Fund's gross income in the event the
option expires unexercised or is closed out at a profit. If the
value of a security or an index on which the Fund has written a
call option falls or remains the same, the Fund will realize a
profit in the form of the premium received (less transaction
costs) that could offset all or a portion of any decline in the
value of the portfolio securities being hedged. If the value of
the underlying security or index rises, however, the Fund will
realize a loss in its call option position, which will reduce the
benefit of any unrealized appreciation in the Fund's investments.
By writing a put option, the Fund assumes the risk of a decline
in the underlying security or index. To the extent that the
price changes of the portfolio securities being hedged correlate
with changes in the value of the underlying security or index,
writing covered put options on indices or securities will
increase the Fund's losses in the event of a market decline,
although such losses will be offset in part by the premium
received for writing the option.
The Fund may also purchase put options to hedge its
investments against a decline in value. By purchasing a put
option, the Fund will seek to offset a decline in the value of
the portfolio securities being hedged through appreciation of the
put option. If the value of the Fund's investments does not
decline as anticipated, or if the value of the option does not
increase, the Fund's loss will be limited to the premium paid for
the option plus related transaction costs. The success of this
strategy will depend, in part, on the accuracy of the correlation
between the changes in value of the underlying security or index
and the changes in value of the Fund's security holdings being
hedged.
The Fund may purchase call options on individual securities
to hedge against an increase in the price of securities that the
Fund anticipates purchasing in the future. Similarly, the Fund
may purchase call options on a securities index to attempt to
reduce the risk of missing a broad market advance, or an advance
in an industry or market segment, at a time when the Fund holds
uninvested cash or short-term debt securities awaiting
investment. When purchasing call options, the Fund will bear the
risk of losing all or a portion of the premium paid if the value
of the underlying security or index does not rise.
There can be no assurance that a liquid market will exist
when the Fund seeks to close out an option position. Trading
could be interrupted, for example, because of supply and demand
imbalances arising from a lack of either buyers or sellers, or
the options exchange could suspend trading after the price has
risen or fallen more than the maximum specified by the exchange.
Although the Fund may be able to offset to some extent any
adverse effects of being unable to liquidate an option position,
the Fund may experience losses in some cases as a result of such
inability.
Foreign Currency Hedging Transactions. In order to hedge
against foreign currency exchange rate risks, the Fund may enter
into forward foreign currency exchange contracts and foreign
currency futures contracts, as well as 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 a substantial
decline against the U.S. dollar, it may enter into a forward
contract to sell an amount of that foreign currency approximating
the value of some or all of the Fund's portfolio securities
denominated in such foreign currency, or when the Fund believes
that the U.S. dollar may suffer a substantial decline against a
foreign currency, it may enter into a forward contract to buy
that foreign currency for a fixed dollar amount. This second
investment practice is generally referred to as "cross-hedging."
Because in connection with 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
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 its
Investment Objective, are fundamental policies except as
otherwise indicated. No changes in the Fund's Investment
Objective or these Investment Restrictions can be made without
the approval of the Fund's Shareholders. For this purpose, the
provisions of the 1940 Act require the affirmative vote of the
lesser of either (1) 67% or more of the Shares of the Fund
present at a Shareholder's 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.
The Fund will not:
1. Invest in real estate, unlisted real estate limited
partnerships, or mortgages on real estate (although the
Fund may invest in readily marketable securities
secured by real estate or interests therein or issued
by companies or investment trusts which invest in real
estate or interests therein); invest in other open-end
investment companies except as permitted by the 1940
Act; invest in interests (other than debentures or
equity stock interests) in oil, gas or other mineral
leases, exploration or development programs; or
purchase or sell commodity contracts (except futures
contracts as described in the Fund's Prospectus).
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. With respect to 75% of its total assets, purchase more
than 5% of any class of securities of any one company,
including more than 10% of its outstanding voting
securities,3 or invest in any company for the purpose
of exercising control or management.
_______________
3 As a non-fundamental policy, with respect to 100% of its
total assets, the Fund will not purchase more than 10% of any
company's outstanding voting securities. In addition, with
respect to 75% of its total assets, the Fund will not invest more
than 5% of its total assets in securities issued by any one
company or government, exclusive of U.S. government securities.
4. Act as an underwriter; issue senior securities except
as set forth in Investment Restriction 6 below; or
purchase on margin or sell short (but the Fund may make
margin payments in connection with options on
securities or securities indices, and foreign
currencies; futures contracts and related options; and
forward contracts and related options).
5. Loan money apart from the purchase of a portion of an
issue of publicly distributed bonds, debentures, notes
and other evidences of indebtedness, although the Fund
may buy from a bank or broker-dealer U.S. Government
obligations with a simultaneous agreement by the seller
to repurchase them within no more than seven days at
the original purchase price plus accrued interest and
may loan its portfolio securities.
6. Borrow money, except that the Fund may borrow money
from banks in an amount not exceeding 33-1/3% of the
value of its total assets (including the amount
borrowed).
7. Invest more than 5% of the value of its total assets in
securities of issuers which have been in continuous
operation less than three years.
8. Invest more than 5% of its total assets in warrants,
whether or not listed on the New York or American Stock
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.
9. Invest more than 25% of its total assets in a single
industry.
10. Participate on a joint or a joint and several basis in
any trading account in securities. (See "Investment
Objective and Policies -- Trading Policies" as to
transactions in the same securities for the Fund and/or
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." If
the Fund receives from an issuer of securities held by the Fund
subscription rights to purchase securities of that issuer, and if
the Fund exercises such subscription rights at a time when the
Fund's portfolio holdings of securities of that issuer would
otherwise exceed the limits set forth in investment restrictions
3 or 9 above, it will not constitute a violation if, prior to
receipt of securities upon exercise of such rights, and after
announcement of such rights, the Fund has sold at least as many
securities of the same class and value as it would receive on
exercise of such rights.
Risk Factors. The Fund may invest up to 35% of its total
assets in securities in any foreign country, developed or
underdeveloped, if they are listed on a stock exchange, as well
as a limited right to purchase such securities if they are
unlisted. 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 New York Stock Exchange, and securities of some
foreign companies are less liquid and more volatile than
securities of comparable United States companies. Although the
Fund may not invest more than 15% of its total assets in unlisted
foreign securities, including not more than 10% of its total
assets in securities with a limited trading market, in the
opinion of the Investment Manager such securities with a limited
trading market do not present a significant liquidity problem.
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.
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.
Despite the recent dissolution of the Soviet Union, the
Communist Party may continue to exercise a significant or, in
some countries, dominant role in certain Eastern European
countries. To the extent of the Communist Party's influence,
investments in such countries will 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 U.S. dollars, the
conversion rates may be artificial to the actual market values
and may be adverse to Fund Shareholders.
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) will be incurred,
particularly when the Fund changes investments from one country
to another or when proceeds of the sale of Shares in U.S. dollars
are used for the purchase of securities in foreign countries.
Also, some countries may adopt policies which would prevent the
Fund from transferring cash out of the country or withhold
portions of interest and dividends at the source. There is the
possibility of cessation of trading on national exchanges,
expropriation, nationalization or confiscatory taxation,
withholding and other foreign taxes on income or other amounts,
foreign exchange controls (which may include suspension of the
ability to transfer currency from a given country), default in
foreign government securities, political or social instability or
diplomatic developments which could affect investments in
securities of issuers in foreign nations.
The Fund may be affected either unfavorably or favorably by
fluctuations in the relative rates of exchange between the
currencies of different nations, by exchange control regulations
and by indigenous economic and political developments. Some
countries in which the Fund may invest may also have fixed or
managed currencies that are not free-floating against the U.S.
dollar. Further, certain currencies have experienced a steady
devaluation relative to the U.S. dollar. Any devaluations in the
currencies in which a Fund's portfolio securities are denominated
may have a detrimental impact on the Fund. Through the flexible
policy of the Fund, 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 investments of the Fund.
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. They also consider the
degree of risk involved through the holding of portfolio
securities in domestic and foreign securities depositories (see
"Investment Management and Other Services -- Custodian and
Transfer Agent"). However, in the absence of willful
misfeasance, bad faith or gross negligence on the part of 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.
The Fund's ability to reduce or eliminate its futures and
related options positions will depend upon the liquidity of the
secondary markets for such futures and options. The Fund intends
to purchase or sell futures and related options only on exchanges
or boards of trade where there appears to be an active secondary
market, but there is no assurance that a liquid secondary market
will exist for any particular contract or at any particular time.
Use of stock index futures and related options for hedging may
involve risks because of imperfect correlations between movements
in the prices of the futures or related options and movements in
the prices of the securities being hedged. Successful use of
futures and related options by the Fund for hedging purposes also
depends upon the Investment Manager's ability to predict
movements in the direction of the market correctly, as to which
no assurance can be given.
Trading Policies. The Investment Manager and its affiliated
companies serve as investment adviser to other investment
companies and private clients. Accordingly, the respective
portfolios of these funds and clients may contain many or some of
the same securities. When any two or more of these funds or
clients are engaged simultaneously in the purchase or sale of the
same security, the transactions are placed for execution in a
manner designed to be equitable to each party. The larger size
of the transaction may affect the price of the security and/or
the quantity which may be bought or sold for each party. If the
transaction is large enough, brokerage commissions in certain
countries may be negotiated below those otherwise chargeable.
Sale or purchase of securities, without payment of brokerage
commissions, fees (except customary transfer fees) or other
remuneration in connection therewith, may be effected between any
of these funds, or between funds and private clients, under
procedures adopted by the Fund's Board of Directors pursuant to
Rule 17a-7 under the 1940 Act.
Personal Securities Transactions. Access persons of the
Franklin Templeton Group, as defined in SEC Rule 17(j) under the
1940 Act, who are employees of Franklin Resources, Inc. or their
subsidiaries, are permitted to engage in personal securities
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:
Name, Address and Principal Occupation
Offices with Fund During Past Five Years
HARMON E. BURNS* Executive vice president,
777 Mariners Island Blvd. secretary, and director of
San Mateo, California Franklin Resources, Inc.;
Director executive vice president and
director of Franklin
Templeton Distributors, Inc.;
executive vice president of
Franklin Advisers, Inc.;
officer and/or director, as
the case may be, of other
subsidiaries of Franklin
Resources, Inc.; and officer
and/or director, trustee or
general partner, as the case
may be, for various
investment companies in the
Franklin Templeton Group.
CONSTANTINE DEAN TSERETOPOULOS Physician, Lyford Cay
Lyford Cay Hospital Hospital (1987-present);
P.O. Box N-7776 cardiology fellow, University
Nassau, Bahamas of Maryland (1985-1987);
Director Internal Medicine Intern,
Greater Baltimore Medical
Center (July 1982-July 1985);
a director or trustee of
other Templeton Funds.
FRANK J. CROTHERS President, Atlantic Equipment
P.O. Box N-3238 & Power Ltd; a director or
Nassau, Bahamas trustee of other Templeton
Director Funds.
HARRIS J. ASHTON Chairman of the board,
Metro Center, 1 Station Place president and chief executive
Stamford, Connecticut officer of General Host
Director Corporation (nursery and
craft centers); director of
RBC Holdings Inc. (a bank
holding company) and Bar-S
Foods; director or trustee of
other Templeton Funds; and
director, trustee or managing
general partner, as the case
may be, for most of the
investment companies in the
Franklin Group of Funds.
S. JOSEPH FORTUNATO Member of the law firm of
200 Campus Drive Pitney, Hardin, Kipp & Szuch;
Florham Park, New Jersey director of General Host
Director Corporation; director or
trustee of other Templeton
Funds; and director, trustee
or managing general partner,
as the case may be, for most
of the investment companies
in the Franklin Group of
Funds.
FRED R. MILLSAPS A director or trustee of
2665 N.E. 37th Drive other Templeton Funds;
Fort Lauderdale, Florida manager of personal
Director 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 Federal Reserve Bank of
Atlanta (1958-1965); and
director of various business
and nonprofit organizations.
ANDREW H. HINES, JR. Consultant, Triangle
150 2nd Avenue N. Consulting Group; chairman of
St. Petersburg, Florida the board and chief executive
Director 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); director of
Checkers Drive-In
Restaurants, Inc.; a director
or trustee of other Templeton
Funds.
JOHN G. BENNETT, JR. A director or trustee of
3 Radnor Corporate Center other Templeton Funds;
Suite 150 founder, chairman of the
100 Matsonford Road board and president of the
Radnor, Pennsylvania Foundation for New Era
Director Philanthropy; president and
chairman of the boards of
Evelyn M. Bennett Memorial
Foundation and NEP
International Trust; chairman
of the board and chief
executive officer of The
Bennett Group International,
LTD; chairman of the boards
of Human Service Systems,
Inc. and Multi-Media
Communicators, Inc.; a
director or trustee of many
national and international
organizations, universities,
and grant-making foundations
serving in various executive
board capacities; member of
the Public Policy Committee
of the Advertising Council.
GORDON S. MACKLIN Chairman of White River
8212 Burning Tree Road Corporation (information
Bethesda, Maryland services); director of
Director Infovest Corporation, Fund
America Enterprise Holdings,
Inc., Martin Marietta
Corporation, MCI
Communications Corporation
and Medimmune, Inc.; director
or trustee of other Templeton
Funds; director, trustee, or
managing general partner, as
the case may be, of most of
the investment companies in
the Franklin Group of Funds;
formerly: chairman of
Hambrecht and Quist Group;
director of H&Q Healthcare
Investors; and president of
the National Association of
Securities Dealers, Inc.
NICHOLAS F. BRADY* A director or trustee of
The Bullitt House other Templeton Funds;
102 East Dover Street chairman of Templeton
Easton, Maryland Emerging Markets Investment
Director Trust PLC; chairman and
president of Darby Advisors,
Inc. (an investment firm)
(1993-present); director of
the H. J. Heinz Company,
Capital Cities/ABC, Inc. and
the Christiana Companies;
Secretary of the United
States Department of the
Treasury (1988- January
1993); chairman of the board
of Dillon, Read & Co. Inc.
(investment banking) prior
thereto.
BETTY P. KRAHMER Director or trustee of
2201 Kentmere Parkway various civic associations;
Wilmington, Delaware former economic analyst, U.S.
Director Government.
GARY P. MOTYL Senior vice president and
500 East Broward Blvd. director of Templeton
Fort Lauderdale, Florida Investment Counsel, Inc.;
President director of Templeton Global
Investors, Inc.; president or
vice president of other
Templeton Funds.
CHARLES B. JOHNSON President, chief executive
777 Mariners Island Blvd. officer and director of
San Mateo, California Franklin Resources, Inc.;
Vice President chairman of the board,
Franklin Templeton
Distributors, Inc.; chairman
of the board and/or director
of Franklin Advisers, Inc.,
Franklin Templeton
Distributors, Inc. and
General Host Corporation;
director of Templeton Global
Investors, Inc.; and officer
and director, trustee or
managing general partner, as
the case may be, of most
other subsidiaries of
Franklin Resources, Inc. and
of most of the investment
companies in the Franklin
Templeton Group.
MARTIN L. FLANAGAN Senior vice president,
777 Mariners Island Blvd. treasurer and chief financial
San Mateo, California officer of Franklin
Vice President Resources, Inc.; director and
executive vice president of
Templeton Investment Counsel,
Inc.; chairman, president and
chief executive officer of
Templeton Global Investors,
Inc.; president or vice
president of the Templeton
Funds; accountant, Arthur
Andersen & Company (1982-
1983); member of the
International Society of
Financial Analysts and the
American Institute of
Certified Public Accountants.
MARK G. HOLOWESKO President, chief executive
Lyford Cay officer and director of
Nassau, Bahamas Templeton, Galbraith &
Vice President Hansberger Ltd. ("TGH");
director of global equity
research for TGH; president
or vice president of the
Templeton Funds; investment
administrator with Roy West
Trust Corporation (Bahamas)
Limited (1984-1985).
JOHN R. KAY Vice president of the
500 East Broward Blvd. Templeton Funds; vice
Fort Lauderdale, Florida president and treasurer of
Vice President Templeton Global Investors,
Inc. and Templeton Worldwide,
Inc.; formerly, vice
president and controller of
the Keystone Group, Inc.
THOMAS M. MISTELE Senior vice president of
700 Central Avenue Templeton Global Investors,
St. Petersburg, Florida Inc.; vice president of
Secretary Franklin Templeton
Distributors, Inc.; secretary
of the Templeton Funds;
attorney, Dechert Price &
Rhoads (1985-1988) and
Freehill, Hollingdale & Page
(1988); judicial clerk, U.S.
District Court (Eastern
District of Virginia) (1984-
1985).
JAMES R. BAIO Certified public accountant;
500 East Broward Blvd. treasurer of the Templeton
Fort Lauderdale, Florida Funds; senior vice president
Treasurer of Templeton Worldwide, Inc.,
Templeton Global Investors,
Inc., and Templeton Funds
Trust Company; formerly,
senior tax manager of Ernst &
Young (certified public
accountants)(1977-1989).
JACK L. COLLINS Assistant treasurer of
700 Central Avenue Templeton Funds Trust
St. Petersburg, Florida Company; former partner of
Assistant Treasurer Grant Thornton, independent
public accountants.
JEFFREY L. STEELE Partner, Dechert Price &
1500 K Street, N.W. Rhoads.
Washington, D.C.
Assistant Secretary
____________________
* Messrs. Templeton, Burns and Brady are Directors who are
"interested persons" of the Fund as that term is defined in the
1940 Act. Messrs. Boyd, Crothers, Tseretopoulos, Ashton,
Fortunato, Millsaps, Macklin, Hines, and Bennett are Directors
who are not "interested persons" of the Fund. Mr. Brady and
Franklin Resources, Inc. are limited partners of Darby Overseas
Partners, L.P. ("Darby Overseas"). Mr. Brady established Darby
Overseas in February, 1994, and is Chairman and a shareholder of
the corporate general partner of Darby Overseas. In addition,
Darby Overseas and Templeton, Galbraith & Hansberger Ltd. are
limited partners of Darby Emerging Markets Fund, L.P.
TRUSTEE 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, based upon the assets of the Fund as of December 31,
1994, the Trust will pay the independent Directors and Mr. Brady
an annual retainer of $_______ and a fee of $_________ 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 for the fiscal year ended December 31,
1994:
Number of
Franklin Total
Aggregate Templeton Fund Compensation
Compensation Boards on from All Funds
from the Which Director in Franklin
Name of Director Fund Serves Templeton Group
Harris J. Ashton $ 54 $319,925
John G. Bennett, Jr. 23 105,625
Nicholas F. Brady 23 86,125
Frank J. Crothers 4 12,850
S. Joseph Fortunato 56 336,065
Andrew H. Hines, Jr. 23 106,125
Betty P. Krahmer 19 75,275
Gordon S. Macklin 51 303,685
Fred R. Millsaps 23 106,125
Constantine Dean 4 12,850
Tseretopoulos
PRINCIPAL SHAREHOLDERS
As of January 20, 1995, there were 3,049,063 Shares of the
Fund outstanding, of which 3,013 Shares (less than 1%) were owned
beneficially by all the Directors and Officers of the Fund as a
group. As of that date, to the knowledge of management, no
person owned beneficially or of record 5% or more of the Fund's
outstanding Shares, except Merrill Lynch, Pierce, Fenner & Smith
Inc., P.O. Box 45286, Jacksonville, Florida 32232-5286 owned of
record 296,361 Shares (representing 9.7% of the outstanding
Shares) and Anne T. Zimmerman, 2361 Trojan Drive, Casper, Wyoming
82609-3605 owned 176,536 Shares (representing 5.7% of the
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. The
Investment Management Agreement dated October 30, 1992 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 ____________________,
and will continue through April 30, 1996. The Investment
Management Agreement will continue from year to year thereafter,
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.
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
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 indetermina-
ble, 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 one
or more of its affiliates has selected for one or more of its
other clients or for clients of its affiliates, the orders for
all such securities transactions are placed for execution by
methods determined by the Investment Manager, with approval by
the Board of Directors, to be impartial and fair, in order to
seek good results for all parties (see "Investment 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 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
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 by the 1940 Act).
Management Fees. For its services, the Fund pays the
Investment Manager a monthly fee equal on an annual basis to
0.70% of its average daily net assets during the year. Each
class of Shares pays a portion of the fee, determined by the
proportion of the Fund that it represents. During the fiscal
years ended December 31, 1994, 1993 and 1992, the Investment
Manager (and, prior to October 30, 1992, TGH, the Fund's previous
Investment Manager) received from the Fund fees of $________,
$223,035, and $139,914, 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.
The Investment Manager. The Investment Manager is an
indirect wholly owned subsidiary of Franklin Resources, Inc.
("Franklin"), a publicly traded company whose shares are listed
on the New York Stock Exchange. Charles B. Johnson (an officer
of the Fund), Rupert H. Johnson, Jr., and R. Martin Wiskemann are
principal shareholders of Franklin and own, respectively,
approximately 20%, 16% and 9.2% 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:
- providing office space, telephone, office equipment and
supplies for the Fund;
- paying all compensation of the Fund's officers;
- authorizing expenditures and approving bills for
payment on behalf of the Fund;
- supervising preparation of annual and semiannual
reports to Shareholders, notices of dividends, capital
gains distributions and tax credits, and attending to
correspondence and other communications with individual
Shareholders;
- daily pricing of the Fund's investment portfolio 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;
- providing trading desk facilities for the Fund;
- monitoring relationships with organizations serving the
Fund, including the custodian and printers;
- supervising compliance by the Fund with recordkeeping
requirements under the 1940 Act and 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;
- monitoring the qualifications of the Templeton Tax
Deferred Retirement Plans offered by the Fund; and
- 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 0.075% annually of such net
assets in excess of $1,200,000,000. Each class of Shares pays a
portion of the fee, determined by the proportion of the Fund that
it represents. 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 are
higher than those of most other investment companies. During the
fiscal years ended December 31, 1994, 1993 and 1992, the Fund
paid business management fees of $_________, $47,794 and $29,983,
respectively.
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 or gross negligence. 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 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 do not hold certificates
for the securities in their custody, but instead have book
records with domestic and foreign securities depositories, which
in turn have book records with the transfer agents of the issuers
of the securities. Compensation for the services of the
custodian is based on a schedule of charges agreed on from time
to time.
Franklin Templeton Investor Services, Inc. serves as the
Fund's transfer agent. Services performed by the transfer agent
include processing purchase, transfer and redemption orders;
making dividend payments, capital gain distributions and
reinvestments; and handling 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, such fee to be 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. The firm of McGladrey & Pullen,
555 Fifth Avenue, New York, New York 10017, serves as independent
accountants for the Fund. In addition to reporting annually on
the financial statements of the Fund, the Fund's accountants
review certain filings of the Fund with the Securities and
Exchange Commission and prepare the Fund's Federal and state
corporation tax returns.
Reports to Shareholders. The Fund's fiscal year ends on
December 31. Shareholders will be provided at least semiannually
with reports showing the portfolio of the Fund and other
information, including an annual report with financial statements
audited by independent accountants.
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 in determining the
overall reasonableness of brokerage commissions.
2. In selecting brokers for portfolio transactions, the
Investment Manager takes into account its past
experience as to brokers qualified to achieve "best
execution," including brokers who specialize in any
foreign securities held by the Fund.
3. The Investment 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 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 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 the Fund's Shares (which shall be deemed to
include also shares of other investment companies
registered under the 1940 Act which have either the
same investment adviser or an investment adviser
affiliated with the Fund's Investment Manager) made by
a broker are one factor among others to be taken into
account in deciding to allocate portfolio transactions
(including agency transactions, principal transactions,
purchases in underwritings or tenders in response to
tender offers) for the account of 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.
Insofar as known to management, no Director or officer of
the Fund, nor the Investment Manager or the Principal Underwriter
or any person affiliated with any of them, has any material
direct or indirect interest in any broker employed by or on
behalf of 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 has no intention of doing so in the
future. During the fiscal years ended December 31, 1994, 1993
and 1992, the Fund paid brokerage commissions of $______________,
$20,620 and $42,000, respectively. 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 Prospectus describes the manner in which the Fund's
Shares may be purchased and redeemed. See "How to Buy Shares of
the Fund" and "How to Sell Shares of the Fund."
Net asset value per Share is determined as of the scheduled
closing of the New York Stock Exchange (generally 4:00 p.m., New
York time) every Monday through Friday (exclusive of national
business holidays). The Fund's offices will be closed, and net
asset value will not be calculated, on those days on which the
New York Stock Exchange 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
New York Stock Exchange 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,
redemptions and repurchases of its Shares, as of the close of the
New York Stock Exchange 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 New York
Stock Exchange is closed other than for customary weekend and
holiday closings, (2) trading on the New York Stock Exchange 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
Securities and Exchange Commission 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: (a) freeze the account and require the written
agreement of all persons deemed by the Fund to have a potential
property interest in the account, prior to executing instructions
regarding the account; or (b) interplead disputed funds or
accounts with a court of competent jurisdiction. Moreover, the
Fund may surrender ownership of all or a portion of an account to
the Internal Revenue Service in response to a Notice of Levy.
In addition to the special purchase plans described in the
Prospectus, other special purchase plans also are available:
Tax Deferred Retirement Plans. The Fund offers its
Shareholders the opportunity to participate in the following
types of retirement plans:
- For individuals, whether or not covered by other
qualified plans;
- For simplified employee pensions;
- For employees of tax-exempt organizations;
- For corporations, self-employed individuals and
partnerships.
Capital gains and income received by the foregoing plans
generally are exempt from taxation until distribution from the
plans. Investors considering participation in any such plan
should review specific tax laws relating thereto and should
consult their attorneys or tax advisers with respect to the
establishment and maintenance of any such plan. Additional
information, including the fees and charges with respect to all
of these plans, is available upon request to the Principal
Underwriter. No distribution under a retirement plan will be
made until Franklin Templeton Trust Company, the custodian of the
retirement plans, receives the participant's election on IRS Form
W-4P (available on request from Franklin Templeton Trust Company)
and such other documentation as it deems necessary, as to whether
or not U.S. income tax is to be withheld from such distribution.
Individual Retirement Account (IRA). All U.S. individuals
(whether or not covered by qualified private or governmental
retirement plans) may purchase Shares of the Fund pursuant to an
Individual Retirement Account. However, contributions to an IRA
by an individual who is covered by a qualified private or
governmental plan may not be tax-deductible depending on the
individual's income. Custodial services for Individual
Retirement Accounts are available through Franklin Templeton
Trust Company. Disclosure statements summarizing certain aspects
of Individual Retirement Accounts are furnished to all persons
investing in such accounts, in accordance with Internal Revenue
Service regulations.
Simplified Employee Pensions (SEP-IRA). For employers who
wish to establish a simplified form of employee retirement
program investing in Shares of the Fund, there are available
Simplified Employee Pensions invested in IRA plans. Details and
materials relating to these plans will be furnished upon request
to the Principal Underwriter.
Retirement Plan for Employees of Tax-Exempt Organizations
(403(b)). Employees of public school systems and certain types
of charitable organizations may enter into a deferred
compensation arrangement for the purchase of Shares of the Fund
without being taxed currently on the investment. Contributions
which are made by the employer through salary reduction are
excludable from the gross income of the employee. Such deferred
compensation plans, which are intended to qualify under Section
403(b) of the Internal Revenue Code of 1986, as amended (the
"Code"), are available through the Principal Underwriter.
Custodian services are provided by Franklin Templeton Trust
Company.
Qualified Plan for Corporations, Self-Employed Individuals
and Partnerships. For employers who wish to purchase Shares of
the Fund in conjunction with employee retirement plans, there is
a prototype master plan which has been approved by the Internal
Revenue Service. A "Section 401(k) Plan" is also available.
Franklin Templeton Trust Company furnishes custodial services for
these plans. For further details, including custodian fees and
plan administration services, see the master plan and related
material which is available from the Principal Underwriter.
Letter of Intent. Purchasers who intend to invest $50,000
or more in Class I Shares of the Fund or any other fund in the
Franklin Templeton Group within 13 months (whether in one lump
sum or in installments the first of which may not be less than 5%
of the total intended amount and each subsequent installment not
less than $25, including automatic investment and payroll
deduction plans), and to beneficially hold the total amount of
such Class I Shares fully paid for and outstanding simultaneously
for at least one full business day before the expiration of that
period, should execute a Letter of Intent ("LOI") on the form
provided in the Shareholder Application in the Fund's Prospectus.
Payment for not less than 5% of the total intended amount must
accompany the executed LOI. Those Class I Shares purchased with
the first 5% of the intended amount stated in the LOI will be
held as "Escrowed Shares" for as long as the LOI remains
unfulfilled. Although the Escrowed Shares are registered in the
investor's name, his full ownership of them is conditional upon
fulfillment of the LOI. No Escrowed Shares can be redeemed by
the investor for any purpose until the LOI is fulfilled or
terminated. If the LOI is terminated for any reason other than
fulfillment, the Transfer Agent will redeem that portion of the
Escrowed Shares required and apply the proceeds to pay any
adjustment that may be appropriate to the sales commission on all
Class I Shares (including the Escrowed Shares) already purchased
under the LOI and apply any unused balance to the investor's
account. The LOI is not a binding obligation to purchase any
amount of Shares, but its execution will result in the purchaser
paying a lower sales charge at the appropriate quantity purchase
level. A purchase not originally made pursuant to an LOI may be
included under a subsequent LOI executed within 90 days of such
purchase. In this case, an adjustment will be made at the end of
13 months from the effective date of the LOI at the net asset
value per Share then in effect, unless the investor makes an
earlier written request to the Principal Underwriter upon
fulfilling the purchase of Shares under the LOI. In addition,
the aggregate value of any Shares, including Class II Shares,
purchased prior to the 90-day period referred to above may be
applied to purchases under a current LOI in fulfilling the total
intended purchases under the LOI. However, no adjustment of
sales charges previously paid on purchases prior to the 90-day
period will be made.
Special Net Asset Value Purchases. As discussed in the
Prospectus under "How to Buy Shares of the Fund - Description of
Special Net Asset Value Purchases," certain categories of
investors may purchase Class I Shares of a Fund net asset value
(without a front-end or contingent deferred sales charge). FTD
or one of its affiliates may make payments, out of its own
resources, to securities dealers who initiate and are responsible
for such purchases, as indicated below. FTD may make these
payments in the form of contingent advance payments, which may
require reimbursement from the securities dealers with respect to
certain redemptions made within 12 months of the calendar month
following purchase, as well as other conditions, all of which may
be imposed by an agreement between FTD, or its affiliates, and
the securities dealer.
The following amounts will be paid by FTD or one of its
affiliates, out of its own resources, to securities dealers who
initiate and are responsible for (i) purchases of most equity and
fixed-income Franklin Templeton Funds made at net asset value by
certain designated retirement plans (excluding IRA and IRA
rollovers): 1.00% on sales of $1 million but less than $2 millon,
plus 0.80% on sales of $2 million but less than $3 million, plus
0.50% on sales of $3 million but less than $50 million, plus
0.25% on sales of $50 million but less than $100 million, plus
0.15% on sales of $100 million or more; and (ii) purchases of
most fixed-income Franklin Templeton Funds made at net asset
value by non-designated retirement plans: 0.75% on sales of $1
million but less than $2 million, plus 0.60% on sales of $2
million but less than $3 million, plus 0.50% on sales of $3
million but less than $50 million, plus 0.25% on sales of $50
million but less than $100 million, plus 0.15% on sales of $100
million or more. These payment breakpoints are reset every 12
months for purposes of additional purchases. With respect to
purchases made at net asset value by certain trust companies and
trust departments of banks and certain retirement plans of
organizations with collective retirement plan assets of $10
million or more, FTD, or one of its affiliates, out of its own
resources, may pay up to 1% of the amount invested.
TAX STATUS
The Fund intends normally to pay a dividend at least once
annually representing substantially all of its net investment
income (which includes, among other items, dividends and
interest) and any net realized capital gains. By so doing and
meeting certain diversification of assets and other requirements
of the Code, the Fund intends to qualify annually 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 U.S. Federal income tax on that
portion of its net investment income and net realized capital
gains which it distributes to its Shareholders. Amounts not
distributed on a timely basis in accordance with a calendar year
distribution requirement also are subject to a nondeductible 4%
excise tax. To prevent application of the excise tax, the Fund
intends to make distributions in accordance with the calendar
year distribution requirement.
Dividends representing net investment income and 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 representing net investment
income (not including short-term capital gains) may be eligible
for the dividends-received deduction available to corporations 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 of net long-term 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 by a Shareholder, and
are not eligible for the dividends-received deduction. All
dividends and distributions are taxable to Shareholders, whether
or not reinvested in Shares of the Fund. Shareholders will be
notified annually as to the Federal tax status of dividends and
distributions they receive and any tax withheld thereon.
Distributions by the Fund reduce the net asset value of the
Fund Shares. Should a distribution reduce the net asset value
below a Shareholder's cost basis, the distribution nevertheless
would be taxable to the Shareholder as ordinary income or capital
gain as described above, even though, from an investment
standpoint, it may constitute a partial return of capital. In
particular, investors should be careful to consider the tax
implication of buying Shares just prior to a distribution by the
Fund. The price of Shares purchased at that time includes the
amount of the forthcoming distribution, but the distribution will
generally be taxable to them.
Income received by the Fund from sources within foreign
countries may be subject to withholding and other taxes imposed
by such countries. Tax conventions between certain countries and
the United States may reduce or eliminate these taxes. It is
impossible to determine the rate of foreign tax in advance, since
the amount of the Fund's assets to be invested in various
countries is not known.
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, the Fund generally may elect pursuant to
Section 853 of the Code to pass through to its Shareholders the
foreign income and similar taxes paid by the Fund in order to
enable such Shareholders to take a credit (or deduction) for
foreign income and similar taxes paid by the Fund. In that case,
a Shareholder must include in his gross income on his Federal
income tax return both dividends received by him from the Fund
and the amount which the Fund advises him is his pro rata portion
of foreign income and similar taxes paid with respect to, or
withheld from, dividends, interest, or other income of the Fund
from its foreign investments. The Shareholder may then subtract
from his Federal income tax the amount of such taxes, or else
treat such foreign taxes as an itemized deduction in computing
taxable income; however, the above-described tax credit or
deduction is subject to certain limitations which may reduce
significantly the value of a credit or deduction. Foreign taxes
generally may not be deducted by a Shareholder that is an
individual in computing alternative taxable income and may at
most offset (as a credit) 90% of the alternative minimum tax.
The foregoing is only a general description of the foreign
tax credit. Because application of the credit depends on the
particular circumstances of each Shareholder, Shareholders are
advised to contact their own tax advisers.
Since the Fund currently anticipates that its investments in
foreign securities will be limited, the Fund does not expect to
be eligible to make this election. If the Fund is ineligible to
do so, the foreign income and similar taxes incurred by it
generally will reduce the Fund's income that is distributable to
Shareholders.
The Fund may invest in shares of foreign corporations which
may be classified under the Code as passive foreign investment
companies ("PFICs"). In general, a foreign corporation is
classified as a PFIC if at least one-half of its assets
constitute investment-type assets or 75% or more of its gross
income is investment-type income. If the Fund receives a so-
called "excess distribution" with respect to PFIC stock, the Fund
itself may be subject to a tax on a portion of the excess
distribution, whether or not the corresponding income is
distributed by the Fund to Shareholders. In general, under the
PFIC rules, an excess distribution is treated as having been
realized ratably over the period during which the Fund held the
PFIC shares. The Fund itself will be subject to tax on the
portion, if any, of an excess distribution that is so allocated
to prior Fund taxable years and an interest factor will be added
to the tax, as if the tax had been payable in such prior taxable
years. Certain distributions from a PFIC as well as gain from
the sale of PFIC shares are treated as excess distributions.
Excess distributions are characterized as ordinary income even
though, absent application of the PFIC rules, certain excess
distributions might have been classified as capital gain.
The Fund may be eligible to elect alternative tax treatment
with respect to PFIC shares. Under an election that currently is
available in some circumstances, 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 distributions
are received from the PFIC in a given year. If this election
were made, the special rules, discussed above, relating to the
taxation of excess distributions, would not apply. In addition,
another election may be available that would involve marking to
market 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
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.
Under the Code, gains or losses attributable to fluctuations
in foreign currency 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 forward
contracts, futures 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 the Fund
must distribute in order to qualify for treatment as a regulated
investment company and to prevent application of an excise tax on
undistributed income. Alternatively, fluctuations in exchange
rates may decrease or eliminate income available for distribu-
tion. If section 988 losses exceed other net investment income
during a taxable year, the Fund generally would not be able to
make ordinary dividend distributions, or distributions made
before the losses were realized would be recharacterized as
return of capital to Shareholders for Federal income tax
purposes, rather than as an ordinary dividend, reducing each
Shareholder's basis in his Fund Shares.
Certain of the options, futures contracts, and forward
contracts in which the Fund may invest may be "section 1256
contracts." With certain exceptions, gains or losses on section
1256 contracts generally are considered 60% long-term and 40%
short-term capital gains or losses ("60/40"). Also, section 1256
contracts held by the Fund at the end of each taxable year (and
on certain other dates prescribed by the Code) are "marked-to-
market" with the result that unrealized gains or losses are
treated as though they were realized and the resulting gain or
loss treated as 60/40 gain or loss.
The hedging transactions undertaken by the Fund may result
in "straddles" for Federal income tax purposes. The straddle
rules may affect the character of gains (or losses) realized by
the Fund. In addition, losses realized by the Fund on positions
that are part of a straddle may be deferred under the straddle
rules, rather than being taken into account in calculating the
taxable income for the taxable year in which such losses are
realized. Because only a few regulations implementing the
straddle rules have been promulgated, the tax consequences to the
Fund of hedging transactions are not entirely clear. The hedging
transactions may increase the amount of short-term capital gain
realized by the 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 elections(s) made. The rules applicable under certain of the
elections may operate to accelerate the recognition of gains or
losses from the affected straddle positions.
Because application of the straddle rules may affect the
character of gains or losses, defer losses and/or accelerate the
recognition of gains or losses from the affected straddle
positions, the amount which must be distributed to Shareholders,
and which will be taxed to Shareholders as ordinary income or
long-term capital gain may be increased or decreased
substantially as compared to a Fund that did not engage in such
hedging transactions.
Certain requirements that must be met under the Code in
order for the Fund to qualify as a regulated investment company
may limit the extent to which the Fund will be able to engage in
transactions in options, futures, and forward contracts.
Some of the debt securities that may be acquired by the Fund
may be treated as debt securities that are issued originally 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 at maturity. Generally, the amount of
the original issue discount ("OID") is treated as interest income
and is included in income over the term of the debt security,
even though payment of that amount is not received until a later
time, usually when the debt security matures. A portion of the
OID includable in income with respect to certain high-yield
corporate debt securities may be treated as a dividend for
Federal income tax purposes.
Some of the debt securities (with a fixed maturity date of
more than one year from the date of issuance) that may be
acquired by the Fund in the secondary market may be treated as
having market discount. Generally, any gain recognized on the
disposition of, and any partial payment of principal on, a debt
security having market discount is treated as ordinary income to
the extent the gain does not exceed the "accrued market discount"
on such debt security. In addition, the deduction of any
interest expenses attributable to debt securities having market
discount may be deferred. Market discount generally accrues in
equal daily installments. The Fund may make one or more of the
elections applicable to debt securities having market discount,
which could affect the character and timing of recognition of
income.
Some debt securities (with a fixed maturity date of one year
or less from the date of issuance) that may be acquired by the
Fund may be treated as having acquisition discount, or OID in the
case of certain types of debt securities. Generally, the Fund
will be required to include the acquisition discount, or OID, in
income over the term of the debt security, even though payment of
that amount is not received until a later time, usually when the
debt security matures. The Fund may make one or more of the
elections application to debt securities having acquisition
discount, or OID, which could affect the character and timing of
recognition of income.
The Fund generally will be required to distribute dividends
to Shareholders representing discount on debt securities that is
currently includable in income, even though cash representing
such income may not have been received by the Fund. Cash to pay
such dividends may be obtained from sales proceeds of securities
held by the Fund.
Upon the sale or exchange (including a redemption) of
Shares, a Shareholder 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. Any loss realized on a sale will be disallowed to the
extent that the Shares disposed of are replaced (including
replacement through the reinvesting of dividends and capital
gains 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 received by the
Shareholder with respect to such Shares.
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 or eliminated under a "reinvestment right"
received upon the initial purchase of Shares of stock. In that
case, the gain or loss recognized will be determined by excluding
from the tax basis of the Shares exchanged all or a portion of
the sales charge incurred in acquiring those Shares. This
exclusion applies to the extent that the otherwise applicable
sales charge with respect to the newly acquired Shares is reduced
as a result of having incurred a sales charge initially. 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 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 certifications as the
Fund may require, (2) the Internal Revenue Service notifies the
Shareholder or the Fund that the Shareholder has failed to report
properly certain interest and dividend income to the Internal
Revenue Service 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. Corporate Shareholders
and certain other Shareholders specified in the Code generally
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.
Ordinary dividends and capital gains distributions declared
by the Fund in October, November or December with a record date
in such a 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.
Distributions from the Fund and dispositions of Fund Shares
also may be subject to state, local and foreign taxes. Non-U.S.
Shareholders may be subject to U.S. tax rules that differ
significantly from those summarized above.
Shareholders are advised to consult their own tax advisers
for details with respect to the particular tax consequences to
them of an investment in the 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.
The Fund, pursuant to Rule 12b-1 under the 1940 Act, has
adopted a Distribution Plan with respect to each class of shares
(the "Plans"). Under the Plan adopted with respect to Class I
Shares, the Fund may reimburse FTD or others quarterly (subject
to a limit of a 0.35% per annum of the Fund's average daily net
assets attributable to Class I Shares) for costs and expenses
incurred by FTD or others in connection with any activity that is
primarily intended to result in the sale of Fund Shares. Under
the Plan adopted with respect to Class II Shares, the Fund may
reimburse FTD or others quarterly (subject to a limit of 1.00%
per annum of the Fund's average daily net assets of which up to
0.25% of such net assets may be paid to dealers for personal
service and/or the maintenance of Shareholder accounts) for costs
and expenses incurred by FTD or others in connection with any
activity which is primarily intended to result in the sale of
Fund Shares. Payments to FTD or others could be for various
types of activities, including (1) payments to broker-dealers who
provide certain services of value to the Fund's Shareholders
(sometimes referred to as a "trail fee") and advances of
commissions on sales of Fund Shares, and interest or carrying
charges in connection therewith; (2) expenses relating to selling
and servicing efforts; (3) expenses of organizing and conducting
sales seminars; (4) payments to employees or agents of FTD who
engage in or support distribution of Shares; (5) the costs of
preparing, printing and distributing prospectuses and reports to
prospective investors; (6) printing and advertising expenses; and
(7) such other similar services as the Fund's Board of Directors
determines to be reasonably calculated to result in the sale of
Shares. Under the Plan, the costs and expenses not reimbursed in
any one given quarter (including costs and expenses not
reimbursed because they exceeded the percentage limit applicable
to either class of Shares) may be reimbursed in subsequent
quarters or years.
During the fiscal year ended December 31, 1994, FTD
incurred costs and expenses (including advanced commissions) of
$_________ in connection with distribution of Class II Shares
(Class I Shares were not offered during this period). During the
same period, the Fund made payments of $_______ under the Plan
applicable to Class II Shares. As indicated above, unreimbursed
expenses, which amounted to $_______ as of December 31, 1994, may
be reimbursed by the Fund during the fiscal year ending December
31, 1994 or in subsequent years. During the fiscal year ended
December 31, 1994, FTD spent, pursuant to the Plan, the following
amounts on: compensation to dealers, $_______; costs and
expenses, $______; and printing, $______.
The Distribution Agreement provides that the Principal
Underwriter will use its best efforts to maintain a broad and
continuous distribution of the Fund's Shares among bona fide
investors and may sign selling contracts with responsible
dealers, as well as sell to individual investors. The Principal
Underwriter in all cases buys Shares from the Fund acting as
principal for its own account. Dealers generally act as
principal for their own account in buying Shares from the
Principal Underwriter. No agency relationship exists between any
dealer and the Fund or the Principal Underwriter.
During the fiscal years ended December 31, 1994, 1993 and
1992, FTD received $_______, $60,701, and $118,958, respectively,
from contingent deferred sales charges on Class II Shares.
The Distribution Agreement provides that the Fund shall pay
the costs and expenses incident to registering and qualifying the
Fund's Shares for sale under the Securities Act of 1933 and under
the applicable Blue Sky laws of the jurisdictions in which the
Principal Underwriter desires to distribute such Shares, and for
preparing, printing and distributing prospectuses and reports to
Shareholders. The Principal Underwriter pays the cost of
printing additional copies of prospectuses and reports to
Shareholders used for selling purposes. (The Fund pays costs of
preparation, set-up and initial supply of the Fund's Prospectus
for existing Shareholders.) The Distribution Plan is briefly
described in the Prospectus.
The Distribution Agreement is subject to renewal from year
to year in accordance with the provisions of the 1940 Act and
terminates automatically in the event of its assignment. The
Distribution Agreement may be terminated without penalty by
either party upon 60 days' written notice to the other, provided
termination by the 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.
FTD is the Principal Underwriter for the other Templeton
Funds.
DESCRIPTION OF SHARES
The Shares have non-cumulative voting rights so that the
holders of a plurality of the Shares voting for the election of
Directors at a meeting at which 50% of the outstanding Shares are
present can elect all the Directors, and in such event, the
holders of the remaining Shares voting for the election of
Directors will not be able to elect any person or persons to the
Board of Directors.
The Fund's Bylaws provide that the President or Secretary of
the Fund will call a special meeting of Shareholders at the
request in writing by Shareholders owning 25% of the capital
stock of the Fund issued and outstanding at the time of the call.
The Directors are required to call a meeting for the purpose of
considering the removal of a person serving as Director if
requested in writing to do so by the holders of not less than 10%
of the outstanding Shares of the Fund. In addition, the Fund is
required to assist Shareholder communication in connection with
the calling of Shareholder meetings to consider removal of a
Director.
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
rate of return for periods in excess of one year or total return
for periods of less than one year of a hypothetical investment in
the Fund over periods of 1, 5 or 10 years (up to the life of the
Fund) calculated pursuant to the following formula: P (1 + T)n =
ERV (where P = a hypothetical initial payment of $1,000, T = the
average annual total return for periods of one year or more or
the total return for periods of less than one year, n = the
number of years, and ERV = the ending redeemable value of a
hypothetical $1,000 payment made at the beginning of the period).
All total return figures reflect the deduction of the maximum
contingent deferred sales charge and 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
average annual total return for the one-year period ended
December 31, 1994 and for the period from February 27, 1991
(commencement of operations) to December 31, 1994 was _____% and
_____%, respectively.
Performance information for the Fund may be compared, in
reports and promotional literature, to: (1) the Standard & Poor's
500 Stock 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, Inc., 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:
(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
Corp., Morgan Stanley Capital International or a
similar financial organization.
(4) The geographic distribution of the Fund's portfolio.
(5) The gross national product and populations, including
age characteristics, 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
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:
_______________
* Sir John Templeton is not involved in investment decisions,
which are made by the Fund's Investment Manager.
- "Never follow the crowd. superior performance is
possible only if you invest differently from the
crowd."
- "Diversify by company, by industry and by
country."
- "Always maintain a long-term perspective."
- "Invest for maximum total real return."
- "Invest - don't trade or speculate."
- "Remain flexible and open-minded about types of
investment."
- "Buy low."
- "When buying stocks, search for bargains among
quality stocks."
- "Buy value, not market trends or the economic
outlook."
- "Diversify. In stocks and bonds, as in much else,
there is safety in numbers."
- "Do your homework or hire wise experts to help
you."
- "Aggressively monitor your investments."
- "Don't panic."
- "Learn from your mistakes."
- "Outperforming the market is a difficult task.$'
- "An investor who has all the answers doesn't even
understand all the questions."
- "There's no free lunch."
- "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 in the Franklin Templeton Group 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 December 31, 1994 are incorporated
herein by reference.
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements: Incorporated by reference
from Registrant's 1994 Annual Report:
Independent Auditor's Report
Investment Portfolio as of December 31, 1994
Statement of Assets and Liabilities as of
December 31, 1994
Statement of Operations for the fiscal period
ended December 31, 1994
Statement of Changes in Net Assets
Notes to Financial Statements
(b) Exhibits
(1) (a) Articles of Incorporation1
(b) Articles of Amendment2
(c) Articles Supplementary
(d) Articles of Amendment
(2) By-Laws3
(3) Not Applicable
(4) Specimen Security3
(5) Amended and Restated Investment Management
Agreement
(6) Distribution Agreement5
(7) Not Applicable
(8) Custody Agreement2
(9) (a) Transfer Agent Agreement4
(b) Business Management Agreement5
(c) Shareholder Sub-Accounting Services
Agreement4
(d) Sub-Transfer Agent Services Agreement4
_______________
1 Filed with Registration Statement No. 33-37511 on October
31, 1990.
2 Filed with Pre-Effective Amendment No. 1 on December 18,
1990.
3 Filed with Pre-Effective Amendment No. 2 on February 26,
1991.
4 Filed with Post-Effective Amendment No. 3 on March 2, 1993.
5 Filed with Post-Effective Amendment No. 4 on March 2, 1994.
(10) Opinion and consent of Counsel (filed with
Rule 24f-2 Notice)
(11) Consent of Independent Public Accountants
(12) Not Applicable
(13) (a) Letter concerning initial capital3
(13) (b) Investment Letter
(14) Not Applicable
(15) (a) Distribution Plan -- Class I Shares
(b) Distribution Plan -- Class II Shares
(16) Schedule showing computation of performance
quotations provided in response to Item 22
(unaudited)
(18) Form of Multiclass Plan
(27) Financial Data Schedule
Item 25. Persons Controlled by or Under Common Control with
Registrant
Not applicable.
Item 26. Number of Record Holders
Shares of Common Stock, par value $0.01 per share:
2,929
Shareholders as of February 28, 1995.
Item 27. Indemnification.
Reference is made to Articles Eight and Eleven of the
Registrant's Articles of Incorporation, which is
incorporated herein by reference.
Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the
Registrant by the Registrant pursuant to the Articles
of Incorporation or otherwise, the Registrant is aware
that in the opinion of the Securities and Exchange
Commission, such indemnification is against public
policy as expressed in the Act and, therefore, is
unenforceable. In the event that a claim for
indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or
paid by directors, officers or controlling persons of
the Registrant in connection with the successful
defense of any act, suit or proceeding) is asserted by
such directors, officers or controlling persons in
connection with the shares being registered, the
Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against
public policy as expressed in the Act and will be
governed by the final adjudication of such issues.
Item 28. Business and Other Connections of Investment Adviser
and its Officers and Directors
The business and other connections of Registrant's
Investment Manager are described in Part B of this
Registration Statement.
For information relating to the directors and officers
of the Investment Manager, reference is made to the
Form ADV filed with the Commission under the Investment
Advisers Act of 1940 by Templeton Investment Counsel,
Inc., which is incorporated herein by reference.
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
Capital Accumulator Fund, Inc., Templeton Developing
Markets Trust, 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, 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-Advantage
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 Templeton Japan
Fund, and Institutional Fiduciary Trust.
(b) The directors and officers of FTD, located at 700
Central Avenue, P.O. Box 33030, St. Petersburg, Florida
33733, are as follows:
Position with Position with
Name Underwriter the Registrant
Charles B. Johnson Chairman of the Vice President
Board and Director
Gregory E. Johnson President None
Rupert H. Johnson, Executive Vice None
Jr. President and
Director
Harmon E. Burns Executive Vice None
President and
Director
Edward V. McVey Senior Vice None
President
Kenneth V. Domingues Senior Vice None
President
Martin L. Flanagan Senior Vice Vice President
President and
Treasurer
William J. Lippman Senior Vice None
President
Deborah R. Gatzek Senior Vice None
President and
Assistant
Secretary
Richard C. Stoker Senior Vice None
President
Charles E. Johnson Senior Vice None
President
Peter Black Vice President None
James K. Blinn Vice President None
Bernie Buckley Vice President None
Joel Burns Vice President None
Debra Carter Vice President None
Richard O. Conboy Vice President None
Joe Cronin Vice President None
James F. Duryea Vice President None
James A. Escobedo Vice President None
Loretta Fry Vice President None
Richard N. Geppner Vice President None
John Gould Vice President None
Sheppard G. Griswold Vice President None
Mike Hackett Vice President None
Brad N. Hansen Vice President None
Carolyn L. Hennion Vice President None
Andrew Jennings Vice President None
Peter Jones Vice President None
Philip J. Kearns Vice President None
John Leach Vice President None
Ken Leder Vice President None
Jack Lemein Vice President None
John R. McGee Vice President None
Thomas M. Mistele Vice President Secretary
Harry G. Mumford Vice President None
Mike Nardone Vice President None
Thomas H. O'Connor Vice President None
Vivian J. Palmieri Vice President None
Roger Pearson Vice President None
Richard S. Petrell Vice President None
John Phillips Vice President None
Darrell Plocher Vice President None
Dennis Shannon Vice President None
Robert E. Silvani Vice President None
Kent P. Strazza Vice President None
Susan Tallarico Vice President None
Leslie M. Kratter Secretary None
(c) Not Applicable (Information on unaffiliated
underwriters).
Item 30. Location of Accounts and Records
The accounts, books, and other documents required to be
maintained by Registrant pursuant to Section 31(a) of
the Investment Company Act of 1940 and rules
promulgated thereunder are in the possession of
Templeton Global Investors, Inc., 500 East Broward
Blvd., Fort Lauderdale, Florida 33394.
Item 31. Management Services
Not Applicable.
Item 32. Undertakings.
(a) Not Applicable.
(b) Not Applicable.
(c) Registrant undertakes to call a meeting of
Shareholders for the purpose of voting upon the
question of removal of a Director or Directors
when requested to do so by the holders of at least
10% of the Registrant's outstanding shares of
common stock and in connection with such meeting
to comply with the shareholders communications
provisions of Section 16(c) of the Investment
Company Act of 1940.
(d) Registrant undertakes to furnish to each person to
whom a Prospectus for the Registrant is provided a
copy of Registrant's latest Annual Report, upon
request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant certifies
that it has met the 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 the 26th day of April, 1995.
TEMPLETON AMERICAN TRUST, INC.
(REGISTRANT)
By: _________________________
Gary P. Motyl, President*
*By: /s/ Jeffrey L. Steele
Jeffrey L. Steele, Attorney-in-fact**
Pursuant to the requirements of the Securities Act of 1933,
this Amendment to the Registration Statement has been signed
below by the following persons in the capacities and on the date
indicated:
Signature Title Date
____________________ President (Chief April 26, 1995
Gary P. Motyl* Executive Officer)
____________________ Director April 26, 1995
Harmon E. Burns*
____________________ Director April 26, 1995
Betty P. Krahmer
____________________ Director April 26, 1995
Constantine Dean Tseretopoulos*
____________________ Director April 26, 1995
Frank Crothers*
____________________ Director April 26, 1995
Fred R. Millsaps*
____________________ Director April 26, 1995
Harris J. Ashton*
____________________ Director April 26, 1995
S. Joseph Fortunato*
____________________ Director April 26, 1995
Andrew H. Hines, Jr.*
____________________ Director April 26, 1995
John G. Bennett, Jr.*
____________________ Director April 26, 1995
Gordon S. Macklin*
____________________ Director April 26, 1995
Nicholas F. Brady*
____________________ Treasurer April 26, 1995
James R. Baio* (Chief Financial
and Accounting
Officer)
*By: /s/ Jeffrey L. Steele
Jeffrey L. Steele, Attorney-in-fact**
____________________
** Powers of Attorney previously filed with Post-Effective
Amendment No. 3, filed March 3, 1993, Post-Effective Amendment
No. 4, filed March 2, 1994 and Post-Effective Amendment No. 5,
filed January 27, 1995.
EXHIBIT INDEX
Exhibit Number Name of Exhibit
(1)(c) Articles Supplementary
(1)(d) Articles of Amendment
(5) Amended and Restated
Investment Management
Agreement
(11) Consent of Independent Public
Accountants
(13)(b) Investment Letter
(15)(a) Distribution Plan -- Class I
Shares
(15)(b) Distribution Plan -- Class II
Shares
(16) Schedule Showing Computation
of Performance Quotations
Provided in Response to Item
22 (Unaudited)
(18) Form of Multiclass Plan
(27) Financial Data Schedule
McGLADREY & PULLEN, LLP
Certified Public Accountants and Consultants
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use of our report dated February 3,
1995, on the financial statements of Templeton American Trust,
Inc. referred to therein, which appears in the 1994 Annual Report
to Shareholders and which is incorporated herein by reference, in
Post-Effective Amendment No. 6 to the Registration Statement on
Form N-1A, File No. 33-37511 as filed with the Securities and
Exchange Commission.
We also consent to the reference to our firm in the
Statement of Additional Information under the caption
"Independent Accountants" and in the Prospectus under the caption
"Financial Highlights."
McGladrey & Pullen, LLP
New York, New York
April 26, 1995
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT dated as of the 30th day of October, 1992,
and amended and restated the 25th day of February, 1994, between
TEMPLETON AMERICAN TRUST, 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.
(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 trans-
actions consistent with the Fund's brokerage policies and, when
applicable, the negotiation of commissions in connection
therewith.
All decisions and placements shall be made in
accordance with the following principles:
A. Purchase and sale orders will usually be placed
with brokers which are selected by the Investment
Manager as able to achieve "best execution" of
such orders. "Best execution" shall mean prompt
and reliable execution at the most favorable
security price, taking into account the other
provisions hereinafter set forth. The
determination of what may constitute best
execution and price in the execution of a
securities transaction by a broker involves a
number of considerations, including, without
limitation, the overall direct net economic result
to the Fund (involving both price paid or received
and any commissions and other costs paid), the
efficiency with which the transaction is effected,
the ability to effect the transaction at all where
a large block is involved, availability of the
broker to stand ready to execute possibly
difficult transactions in the future, and the
financial strength and stability of the broker.
Such considerations are judgmental and are weighed
by the Investment Manager in determining the
overall reasonableness of brokerage commissions.
B. In selecting brokers for portfolio transactions,
the Investment Manager shall take into account its
past experience as to brokers qualified to achieve
"best execution," including brokers who specialize
in any foreign securities held by the Fund.
C. The Investment Manager is authorized to allocate
brokerage business to brokers who have provided
brokerage and research services, as such services
are defined in Section 28(e) of the Securities
Exchange Act of 1934 (the "1934 Act"), for the
Fund and/or other accounts, if any, for which the
Investment Manager exercises investment discretion
(as defined in Section 3(a)(35) of the 1934 Act)
and, as to transactions for which fixed minimum
commission rates are not applicable, to cause the
Fund to pay a commission for effecting a
securities transaction in excess of the amount
another broker would have charged for effecting
that transaction, if the Investment Manager
determines in good faith that such amount of
commission is reasonable in relation to the value
of the brokerage and research services provided by
such broker, viewed in terms of either that
particular transaction or the Investment Manager's
overall responsibilities with respect to the Fund
and the other accounts, if any, as to which it
exercises investment discretion. In reaching such
determination, the Investment Manager will not be
required to place or attempt to place a specific
dollar value on the research or execution services
of a broker or on the portion of any commission
reflecting either of said services. In
demonstrating that such determinations were made
in good faith, the Investment Manager shall be
prepared to show that all commissions were
allocated and paid for purposes contemplated by
the Fund's brokerage policy; that the research
services provide lawful and appropriate assistance
to the Investment Manager in the performance of
its investment decision-making responsibilities;
and that the commissions paid were within a
reasonable range. Whether commissions were within
a reasonable range shall be based on any available
information as to the level of commission known to
be charged by other brokers on comparable
transactions, but there shall be taken into
account the Fund's policies that (i) obtaining a
low commission is deemed secondary to obtaining a
favorable securities price, since it is recognized
that usually it is more beneficial to the Fund to
obtain a favorable price than to pay the lowest
commission; and (ii) the quality,
comprehensiveness and frequency of research
studies that are provided for the Investment
Manager are useful to the Investment Manager in
performing its advisory services under this
Agreement. Research services provided by brokers
to the Investment Manager are considered to be in
addition to, and not in lieu of, services required
to be performed by the Investment Manager under
this Agreement. Research furnished by brokers
through which the Fund effects securities
transactions may be used by the Investment Manager
for any of its accounts, and not all research may
be used by the Investment Manager for the Fund.
When execution of portfolio transactions is
allocated to brokers trading on exchanges with
fixed brokerage commission rates, account may be
taken of various services provided by the broker.
D. Purchases and sales of portfolio securities within
the United States other than on a securities
exchange shall be executed with primary market
makers acting as principal, except where, in the
judgment of the Investment Manager, better prices
and execution may be obtained on a commission
basis or from other sources.
E. Sales of the Fund's shares (which shall be deemed
to include also shares of other registered
investment companies which have either the same
adviser or an investment adviser affiliated with
the Investment Manager) by a broker are one factor
among others to be taken into account in deciding
to allocate portfolio transactions (including
agency transactions, principal transactions,
purchases in underwritings or tenders in response
to tender offers) for the account of the Fund to
that broker; provided that the broker shall
furnish "best execution," as defined in
subparagraph A above, and that such allocation
shall be within the scope of the Fund's policies
as stated above; provided further, that in every
allocation made to a broker in which the sale of
Fund shares is taken into account, there shall be
no increase in the amount of the commissions or
other compensation paid to such broker beyond a
reasonable commission or other compensation
determined, as set forth in subparagraph C above,
on the basis of best execution alone or best
execution plus research services, without taking
account of or placing any value upon such sale of
the Fund's shares.
(4) The Fund agrees to pay to the Investment Manager a
monthly fee in dollars at an annual rate of 0.70% of the Fund's
average daily net assets, payable at the end of each calendar
month.
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 become effective on October
30, 1992 and shall continue in effect through
April 30, 1994. 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.
(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
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.
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 AMERICAN TRUST, INC.
By:________________________________
John R. Kay
Vice President
TEMPLETON INVESTMENT COUNSEL, INC.
By:_________________________________
DISTRIBUTION PLAN
WHEREAS, Templeton American Trust, Inc. (the "Fund") is
registered as an open-end diversified management investment
company under the Investment Company Act of 1940 (the "1940
Act"); and
WHEREAS, the Fund and Franklin Templeton Distributors,
Inc. (the "Selling Company"), a wholly owned subsidiary of
Franklin Resources, Inc. and a broker-dealer registered under the
Securities Exchange Act of 1934, have entered into a Distribution
Agreement pursuant to which the Selling Company will act as
principal underwriter of the Class I Shares of the Fund for sale
to the public; and
WHEREAS, shares of common stock of the Fund are divided
into classes of shares, one of which is designated Class I;
WHEREAS, the Board of Directors of the Fund has
determined to adopt this Distribution Plan (the "Plan"), in
accordance with the requirements of the 1940 Act and has
determined that there is a reasonable likelihood that the Plan
will benefit the Fund and the holders of Class I Shares.
NOW THEREFORE, the Fund hereby adopts, with respect to
its Class I Shares, the Plan on the following terms and
conditions:
1. The Fund will reimburse the Selling Company for
costs and expenses incurred in connection with the distribution
and marketing of the Class I Shares of the Fund. Such
distribution costs and expenses may include: (a) payments to
broker-dealers who provide certain services of value to the
Fund's Class I Shareholders (sometimes referred to as a "trail
fee"); (b) reimbursement of expenses relating to selling and
servicing efforts or of organizing and conducting sales seminars;
(c) payments to employees or agents of the Selling Company who
engage in or support distribution of the Class I Shares; (d)
payment of the costs of preparing, printing and distributing
prospectuses and reports to prospective investors and of printing
and advertising expenses; (e) payment of dealer commissions and
wholesaler compensation in connection with sales of the Fund's
Class I Shares exceeding $1 million (for which the Fund imposes
no sales charge) and interest or carrying charges in connection
therewith; and (f) such other similar services as the Fund's
Board of Directors determines to be reasonably calculated to
result in the sale of Class I Shares.
The Selling Company will be reimbursed for such costs,
expenses or payments on a quarterly basis, subject to a limit of
0.35% per annum of the average daily net assets of the Fund's
Class I Shares. Payments made out of or charged against the
assets of the Class I Shares of the Fund must be in reimbursement
for costs and expenses in connection with any activity which is
primarily intended to result in the sale of the Fund's Class I
Shares. The costs and expenses not reimbursed in any one given
quarter (including costs and expenses not reimbursed because they
exceeded the limit of 0.35% per annum of the average daily net
assets of the Fund's Class I Shares) may be reimbursed in
subsequent quarters or years.
2. The Plan shall not take effect with respect to the
Fund's Class I Shares until it has been approved by a vote of at
least a majority (as defined in the 1940 Act) of the outstanding
voting securities of the Class I Shares of the Fund. With
respect to the submission of the Plan for such a vote, it shall
have been effectively approved with respect to the Fund's Class I
Shares if a majority of the outstanding voting securities of the
Class I Shares of the Fund votes for approval of the Plan.
3. The Plan shall not take effect until it has been
approved, together with any related agreements and supplements,
by votes of a majority of both (a) the Board of Directors of the
Fund, and (b) those Directors of the Fund who are not "interested
persons" (as defined in the 1940 Act) and have no direct or
indirect financial interest in the operation of the Plan or any
agreements related to it (the "Plan Directors"), cast in person
at a meeting (or meetings) called for the purpose of voting on
the Plan and such related agreements.
4. The Plan shall continue in effect so long as such
continuance is specifically approved at least annually in the
manner provided for approval of the Plan in paragraph 3.
5. Any person authorized to direct the disposition of
monies paid or payable by the Class I Shares of the Fund pursuant
to the Plan or any related agreement shall provide to the Fund's
Board of Directors, and the Board shall review, at least
quarterly, a written report of the amounts so expended and the
purposes for which such expenditures were made.
6. Any agreement related to the Plan shall be in
writing and shall provide: (a) that such agreement may be
terminated at any time as to the Fund's Class I Shares, without
payment of any penalty, by vote of a majority of the Plan
Directors or by vote of a majority of the outstanding voting
securities of the Class I Shares of the Fund, on not more than
sixty days' written notice to any other party to the agreement;
and (b) that such agreement shall terminate automatically in the
event of its assignment.
7. The Plan may be terminated at any time, without
payment of any penalty, by vote of a majority of the Plan
Directors, or by vote of a majority of the outstanding Class I
Shares of the Fund.
8. The Plan may be amended at any time by the Fund's
Board of Directors, provided that (a) any amendment to increase
materially the costs which the Class I Shares of the Fund may
bear for distribution pursuant to the Plan shall be effective
only upon approval by a vote of a majority of the Class I Shares
of the Fund, and (b) any material amendments of the terms of the
Plan shall become effective only upon approval as provided in
paragraph 3 hereof.
9. While the Plan is in effect, the selection and
nomination of Directors who are not "interested persons" (as
defined in the 1940 Act) of the Fund shall be committed to the
discretion of the Directors who are not interested persons.
10. The Fund shall preserve copies of the Plan, any
related agreement and any report made pursuant to paragraph 5
hereof, for a period of not less than six years from the date of
the Plan, such agreement or report, as the case may be, the first
two years of which shall be in an easily accessible place.
IN WITNESS WHEREOF, the Fund has executed this
Distribution Plan on this 1st day of May, 1995.
TEMPLETON AMERICAN TRUST, INC.
By:_______________________________
John R. Kay
Vice President
DISTRIBUTION PLAN
WHEREAS, Templeton American Trust, Inc. (the "Fund") is
registered as an open-end diversified management investment
company under the Investment Company Act of 1940 (the "1940
Act"); and
WHEREAS, the Fund and Franklin/Templeton Distributors,
Inc. (the "Selling Company"), a wholly owned subsidiary of
Franklin Resources, Inc. and a broker-dealer registered under the
Securities Exchange Act of 1934, have entered into a Distribution
Agreement pursuant to which the Selling Company will act as
principal underwriter of the Class II Shares of the Fund for sale
to the public; and
WHEREAS, shares of common stock of the Fund are divided
into classes of shares, one of which is designated Class II;
WHEREAS, the Board of Directors of the Fund has
determined to adopt this Distribution Plan (the "Plan"), in
accordance with the requirements of the 1940 Act and has
determined that there is a reasonable likelihood that the Plan
will benefit the Fund and the holders of Class II Shares.
NOW THEREFORE, the Fund hereby adopts, with respect to
its Class II Shares, the Plan on the following terms and
conditions:
1. The Fund will reimburse the Selling Company for
costs and expenses incurred in connection with the distribution
and marketing of the Class II Shares of the Fund. Such
distribution costs and expenses may include: (a) payments to
broker-dealers who provide certain services of value to the
Fund's Class II Shareholders (sometimes referred to as a "trail
fee"); (b) reimbursement of expenses relating to selling and
servicing efforts or of organizing and conducting sales seminars;
(c) payments to employees or agents of the Selling Company who
engage in or support distribution of the Class II Shares; (d)
payment of the costs of preparing, printing and distributing
prospectuses and reports to prospective investors and of printing
and advertising expenses; (e) payment of dealer commissions and
wholesaler compensation in connection with sales of the Fund's
Class II Shares and interest or carrying charges in connection
therewith; and (f) such other similar services as the Fund's
Board of Directors determines to be reasonably calculated to
result in the sale of Class II Shares.
The Selling Company will be reimbursed for such costs,
expenses or payments on a quarterly basis, subject to a limit of
1.00% per annum of the average daily net assets of the Fund's
Class II Shares (of which up to 0.25% of such net assets may be
paid to dealers for personal service and/or the maintenance of
Class II Shareholder accounts (the "Service Fee")) and subject to
any applicable restriction imposed by rules of the National
Association of Securities Dealers, Inc. Payments made out of or
charged against the assets of the Class II Shares of the Fund
must be in reimbursement for costs and expenses in connection
with any activity which is primarily intended to result in the
sale of the Fund's Class II Shares or account maintenance and
personal service to Shareholders.
2. The Plan shall not take effect with respect to the
Fund's Class II Shares until it has been approved by a vote of at
least a majority (as defined in the 1940 Act) of the outstanding
voting securities of the Class II Shares of the Fund. With
respect to the submission of the Plan for such a vote, it shall
have been effectively approved with respect to the Fund's Class
II Shares if a majority of the outstanding voting securities of
the Class II Shares of the Fund votes for approval of the Plan.
3. The Plan shall not take effect until it has been
approved, together with any related agreements and supplements,
by votes of a majority of both (a) the Board of Directors of the
Fund, and (b) those Directors of the Fund who are not "interested
persons" (as defined in the 1940 Act) and have no direct or
indirect financial interest in the operation of the Plan or any
agreements related to it (the "Plan Directors"), cast in person
at a meeting (or meetings) called for the purpose of voting on
the Plan and such related agreements.
4. The Plan shall continue in effect so long as such
continuance is specifically approved at least annually in the
manner provided for approval of the Plan in paragraph 3.
5. Any person authorized to direct the disposition of
monies paid or payable by the Class II Shares of the Fund
pursuant to the Plan or any related agreement shall provide to
the Fund's Board of Directors, and the Board shall review, at
least quarterly, a written report of the amounts so expended and
the purposes for which such expenditures were made.
6. Any agreement related to the Plan shall be in
writing and shall provide: (a) that such agreement may be
terminated at any time as to the Fund's Class II Shares, without
payment of any penalty, by vote of a majority of the Plan
Directors or by vote of a majority of the outstanding voting
securities of the Class II Shares of the Fund, on not more than
sixty days' written notice to any other party to the agreement;
and (b) that such agreement shall terminate automatically in the
event of its assignment.
7. The Plan may be terminated at any time, without
payment of any penalty, by vote of a majority of the Plan
Directors, or by vote of a majority of the outstanding Class II
Shares of the Fund.
8. The Plan may be amended at any time by the Fund's
Board of Directors, provided that (a) any amendment to increase
materially the costs which the Class II Shares of the Fund may
bear for distribution pursuant to the Plan shall be effective
only upon approval by a vote of a majority of the Class II Shares
of the Fund, and (b) any material amendments of the terms of the
Plan shall become effective only upon approval as provided in
paragraph 3 hereof.
9. While the Plan is in effect, the selection and
nomination of Directors who are not "interested persons" (as
defined in the 1940 Act) of the Fund shall be committed to the
discretion of the Directors who are not interested persons.
10. The Fund shall preserve copies of the Plan, any
related agreement and any report made pursuant to paragraph 5
hereof, for a period of not less than six years from the date of
the Plan, such agreement or report, as the case may be, the first
two years of which shall be in an easily accessible place.
IN WITNESS WHEREOF, the Fund has executed this
Distribution Plan on this 1st day of May, 1995.
TEMPLETON AMERICAN TRUST, INC.
By:_______________________________
John R. Kay
Vice President
EXHIBIT 16
COMPUTATION OF PERFORMANCE QUOTATIONS
PROVIDED IN RESPONSE TO ITEM 22
(UNAUDITED)
Templeton American Trust, Inc.
Total Return for One Year Ending 12/31/94
P (1 + T)N = ERV
$1000 (1 + T)1 = 966.3
(1 + T) = .9663
T = (.0337)
T = (3.37%)
Average Annual Total Return Since Inception on
February 27, 1991 - 3.54 Years
P (1 + T)N = ERV
$1000 (1 + T)1 = 1,421.41
1 + T = 1.0959
T = .0959
T = 9.59%
TEMPLETON AMERICAN TRUST, INC.
ARTICLES SUPPLEMENTARY
TEMPLETON AMERICAN TRUST, INC., a Maryland corporation
registered as an open-end investment company under the Investment
Company Act of 1940 and having its principal office in the State
of Maryland in Baltimore City, Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of
Assessments and Taxation of Maryland that:
FIRST: The Board of Directors of the Corporation, at a
meeting duly convened and held on October 22, 1994, adopted a
resolution to establish a multiple class distribution system for
the Corporation, to increase the Corporation's authorized capital
to two hundred million (200,000,000) shares of common stock, par
value $0.01 per share, to change the designation of the one
hundred million (100,000,000) shares previously designated as
Common Stock of the Corporation to "Class II" shares of Common
Stock and to classify one hundred million (100,000,000) shares as
"Class I" shares of Common Stock.
SECOND: Immediately prior to the effectiveness of the
Articles Supplementary of the Corporation as hereinabove set
forth, the Corporation had the authority to issue one hundred
million (100,000,000) Common Shares of the par value of $0.01 per
share and having an aggregate par value of one million dollars
($1,000,000). As amended hereby, the Corporation's Articles of
Incorporation authorize the issuance of two hundred million
(200,000,000) Common Shares of the par value of $0.01 per share
and having an aggregate par value of two million dollars
($2,000,000), of which the Board of Directors has classified one
hundred million (100,000,000) shares as "Class I" shares of
Common Stock, par value $0.01 per share ("Class I Shares") and
classified one hundred million (100,000,000) Shares as "Class II"
shares of Common Stock, par value $0.01 per share ("Class II
Shares").
THIRD: The shares of the Corporation authorized and
classified pursuant to Article First of these Articles
Supplementary have been so authorized and classified by the Board
of Directors under the authority contained in the charter of the
Corporation. The number of Shares of capital stock of the
various classes that the Corporation has authority to issue has
been established by the Board of Directors in accordance with
Section 2-105(c) of the Maryland General Corporation Law. The
Corporation is registered as an open-end, management investment
company under the Investment Company Act of 1940, as amended (the
"1940 Act").
FOURTH: The preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption of the two
classes of shares shall be as set forth in the Corporation's
charter and shall be subject to all provisions of the charter
relating to shares of the Corporation generally, including those
set forth as follows:
(a) The assets of each class shall be invested in the same
investment portfolio of the Corporation.
(b) The dividends and distributions of investment income
and capital gains with respect to each class of shares
shall be in such amounts as may be declared from time
to time by the Board of Directors, and the dividends
and distributions of each class of shares may vary from
the dividends and distributions of the other classes of
shares to reflect differing allocations of the expenses
of the Corporation among the holders of each class and
any resultant differences between the net asset value
per share of each class, to such extent and for such
purposes as the Board of Directors may deem
appropriate. The allocation of investment income or
capital gains and expenses and liabilities of the
Corporation among the classes shall be determined by
the Board of Directors in a manner it deems
appropriate.
(c) Class I shares (including fractional shares) may be
subject to an initial sales charge and service and/or
distribution fee pursuant to the terms of the issuance
of such shares, and the proceeds of the redemption of
Class I shares (including fractional shares) may be
reduced by the amount of any contingent deferred sales
charge payable on such redemption pursuant to the terms
of the issuance of such shares, as set forth in the
Corporation's then-current registration statement on
Form N-1A pursuant to the Securities Act of 1933 and
the 1940 Act (the "Registration Statement") and
determined in accordance with the applicable provisions
of the 1940 Act and the rules and regulations of the
National Association of Securities Dealers, Inc. (the
"NASD").
(d) Class II shares (including fractional shares) may be
subject to an initial sales charge and service and/or
distribution fee pursuant to the terms of the issuance
of such shares, and the proceeds of the redemption of
Class II shares (including fractional shares) may be
reduced by the amount of any contingent deferred sales
charge payable on such redemption pursuant to the terms
of the issuance of such shares, as set forth in the
Registration Statement, and determined in accordance
with the applicable provisions of the 1940 Act and the
rules and regulations of the NASD.
(e) The holders of Class I and Class II shares, as the case
may be, shall have (i) exclusive voting rights with
respect to provisions of any service plan or service
and distribution plan adopted by the Corporation
pursuant to Rule 12b-1 under the 1940 Act (a "Plan")
applicable to the respective class and (ii) no voting
rights with respect to the provisions of any Plan
applicable to another class of shares or with regard to
any other matter submitted to a vote of shareholders
which does not affect holders of that respective class
of shares.
(f) Class II shares (including fractional shares) may be
subject to automatic conversion into Class I shares
pursuant to the terms of the issuance of such shares as
described in the Registration Statement.
IN WITNESS WHEREOF, Templeton American Trust, Inc. has
caused these Articles Supplementary to be signed in its name on
its behalf by its authorized officers who acknowledge that these
Articles Supplementary are the act of the Corporation, that to
the best of their knowledge, information and belief, all matters
and facts set forth herein relating to the authorization and
approval of these Articles Supplementary are true in all material
respects and that this statement is made under the penalties of
perjury.
Date: April 13, 1995 TEMPLETON AMERICAN TRUST, INC.
By:________________________
John R. Kay
Vice President
ATTEST: _____________________
Jeffrey L. Steele
Assistant Secretary
TEMPLETON AMERICAN TRUST, INC.
ARTICLES OF AMENDMENT
CHANGING NAME OF CLASS
PURSUANT TO MGCL SECTION 2-605(B)
Templeton American Trust, Inc., a Maryland corporation,
having its principal office in Baltimore City, Maryland
(hereinafter called the "Corporation"), hereby certifies to the
State Department of Assessments and Taxation of Maryland that:
FIRST: The Charter of the Corporation is hereby amended to
provide as follows:
The name and designation of the capital stock of the
Corporation is hereby changed to be "Templeton American Trust
Class II" capital stock of the Corporation.
SECOND: The amendment does not change the outstanding
capital stock of the corporation or the aggregate par value
thereof.
THIRD: The foregoing amendment to the Charter of the
Corporation has been approved by the Board of Directors and is
limited to a change expressly permitted by Section 2-605 of the
Maryland General Corporation Law.
FOURTH: The Corporation is registered as an open-end
company under the Investment Company Act of 1940.
IN WITNESS WHEREOF, the Corporation has caused these
presents to be signed in its name on its behalf by its Vice
President and witnessed by its Assistant Secretary on this 17th
day of April, 1995.
TEMPLETON AMERICAN TRUST, INC.
By:______________________________
John R. Kay
Vice President
ATTEST:
___________________________
Jeffrey L. Steele
Assistant Secretary
THE UNDERSIGNED, the Vice President of Templeton American
Trust, Inc., who executed on behalf of the Corporation the
foregoing Articles of Amendment of which this certificate is made
a part, hereby acknowledges in the name and on behalf of the
Corporation the foregoing Articles of Amendment to be the
corporate act of the Corporation and hereby certifies to the best
of his knowledge, information and belief the matters and facts
set forth herein with respect to the authorization and approval
thereof are true in all material respects under the penalties of
perjury.
____________________________
John R. Kay
Vice President
Templeton American Trust, Inc.
Multiple Class Plan
This Multiple Class Plan (the "Plan") has been adopted
by a majority of the Board of Directors of Templeton American
Trust, Inc. (the "Fund"). The Board has determined that the Plan
is in the best interests of each class and the Fund as a whole.
The Plan sets forth the provisions relating to the establishment
of multiple classes of shares for the Fund.
1. The Fund shall offer two classes of shares, to be known
as Templeton American Trust, Inc. - Class I and Templeton
American Trust, Inc. - Class II.
2. Class I shares shall carry a front-end sales charge
ranging from 0% - 5.75%, and Class II shares shall carry a front-
end sales charge of 1.00%.
3. Class I shares shall not be subject to a contingent
deferred sales charge ("CDSC") except in the following limited
circumstances. On investments of $1 million or more, a
contingent deferred sales charge of 1.00% of the lesser of the
then-current net asset value or the original net asset value at
the time of purchase applies to redemptions of those investments
within the contingency period of 12 months from the calendar
month following their purchase. The CDSC is waived in certain
circumstances, as described in the Fund's prospectus.
4. Class II shares redeemed within 18 months of their
purchase shall be assessed a CDSC of 1.00% on the lesser of the
then-current net asset value or the original net asset value at
the time of purchase. The CDSC is waived in certain
circumstances as described in the Fund's prospectus.
5. The Rule 12b-1 Plan associated with Class I shares may
be used to reimburse Franklin Templeton Distributors, Inc. (the
"Distributor") or others for expenses incurred in the promotion
and distribution of the shares of Class I. Such expenses
include, but are not limited to, the printing of the prospectuses
and reports used for sales purposes, expenses of preparing and
distributing sales literature and related expenses,
advertisements, and other distribution-related expenses,
including a prorated portion of the Distributor's overhead
expenses attributable to the distribution of Class I shares, as
well as any distribution or service fees paid to securities
dealers or their firms or others who have executed a servicing
agreement with the Fund for the Class, the Distributor or its
affiliates.
The Rule 12b-1 Plan associated with Class II shares has
two components. The first component is a shareholder servicing
fee, to be paid to broker-dealers, banks, trust companies and
others who will provide personal assistance to shareholders in
servicing their accounts. The second component is an asset-based
sales charge to be retained by the Distributor during the first
year after sale of shares, and, in subsequent years, to be paid
to dealers or retained by the Distributor to be used in the
promotion and distribution of Class II shares, in a manner
similar to that described above for Class I shares.
The Plans shall operate in accordance with the Rules of
Fair Practice of the National Association of Securities Dealers,
Inc., Article III, section 26(d).
6. The only difference in expenses as between Class I and
Class II shares shall relate to differences in the Rule 12b-1
plan expenses of each class, as described in each class' Rule
12b-1 Plan.
7. There shall be no conversion features associated with
the Class I and Class II shares.
8. Shares of Class I of the Fund may only be exchanged for
shares of Class I of any other fund in the Franklin Templeton
Group and may not be exchanged into the Franklin Templeton Money
Fund II of the Franklin Templeton Money Fund Trust. Shares of
Class II of the Fund may only be exchanged for shares of Class II
of any other fund in the Franklin Templeton Group and may also be
exchanged into the Franklin Templeton Money Fund II of the
Franklin Templeton Money Fund Trust.
9. Each Class will vote separately with respect to the
Rule 12b-1 Plan related to that Class.
10. On an ongoing basis, the directors, pursuant to their
fiduciary responsibilities under the 1940 Act and otherwise, will
monitor the Fund for the existence of any material conflicts
between the interests of the two classes of shares. The
directors, including a majority of the independent directors,
shall take such action as is reasonably necessary to eliminate
any such conflict that may develop. Templeton Investment
Counsel, Inc. and Franklin Templeton Distributors, Inc. shall be
responsible for alerting the Board of any material conflicts that
arise.
11. All material amendments to this Plan must be approved
by a majority of the directors of the Fund, including a majority
of the directors who are not interested persons of the Fund.
April 28, 1995
To: All Templeton Funds Listed on Schedule A
700 Central Avenue
St. Petersburg, FL 33701
Gentlemen:
We propose to invest $100.00 in the Class II shares (the "Shares") of each of
the Funds listed on the attached Schedule A (the "Funds"), on the business
day immediately preceding the effective date for each Fund's Class II shares,
at a purchase price per share equivalent to the net asset value per share of
each Fund's Class I shares on the date of purchase. We will purchase the
Shares in a private offering prior to the effectiveness of the post-effective
amendment to the Form N-1A registration statement under which each Fund's Class
II shares are initially offered, as filed by the Fund under the Securities Act
of 1933. The Shares are being purchased to serve as the seed money for each
Fund's Class II shares prior to the commencement of the public offering of
Class II shares.
In connection with such purchase, we understand that we, the purchaser,
intend to acquire the Shares for our own account as the sole beneficial owner
thereof and have no present intention of redeeming or reselling the Shares so
acquired.
We consent to the filing of this Investment Letter as an exhibit to the
Form N-1A registration statement of each Fund.
Sincerely,
TEMPLETON GLOBAL INVESTORS, INC.
By: /s/ Thomas M. Mistele
------------------------------------
Thomas M. Mistele
Senior Vice Presidemt
Date: April 28, 1995
<PAGE>
ACTION OF SOLE SHAREHOLDER BY WRITTEN CONSENT
The undersigned, being the sole shareholder of the Class II shares of each of
the Templeton Funds listed on the attached Schedule A (the "Funds"), each of
which is a series of the Investment Companies as indicated on Schedule A (the
"Companies"), does hereby take the following actions and does hereby consent
to the following resolution:
RESOLVED: That the Distribution Plans pursuant to Rule 12b-1 (under
the Investment Company Act of 1940), as agreed to and
accepted by Franklin Templeton Distributors, Inc. and each
of the Companies prior to the date below, be and it
hereby is, approved for each Fund.
By execution hereof, the undersigned shareholder waives prior notice of the
foregoing action by written consent.
TEMPLETON GLOBAL INVESTORS, INC.
Dated: April 28, 1995 By: /s/ Thomas M. Mistele
Title: Senior Vice President
<PAGE>
SCHEDULE A
INVESTMENT COMPANY FUND
Templeton Funds, Inc. Templeton World Fund - Class II
Templeton Foreign Fund - Class II
Templeton Smaller Companies Growth Templeton Smaller Companies
Fund, Inc. Growth Fund, Inc. - Class II
Templeton Growth Fund, Inc. Templeton Growth Fund, Inc. - Class II
Templeton Real Estate Securities Fund Templeton Real Estate Securities Fund -
Class II
Templeton Global Opportunities Trust Templeton Global Opportunities Trust -
Class II
Templeton Developing Markets Trust Templeton Developing Markets Trust -
Class II
Templeton Income Trust Templeton Income Fund - Class II
Templeton American Trust, Inc. Templeton American Trust, Inc. - Class I
Templeton Global Investment Trust Templeton Global Rising Dividends Fund -
Class II
Templeton Global Infrastructure Fund -
Class II
Templeton Latin America Fund - Class II
Templeton Greater European Fund - Class II
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
TEMPLETON AMERICAN TRUST, INC. DECEMBER 31, 1994 ANNUAL REPORT AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000869404
<NAME> AMERICAN TRUST, INC.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 34674415
<INVESTMENTS-AT-VALUE> 37645794
<RECEIVABLES> 560870
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 4386
<TOTAL-ASSETS> 38211050
<PAYABLE-FOR-SECURITIES> 46653
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 205031
<TOTAL-LIABILITIES> 251684
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 34913360
<SHARES-COMMON-STOCK> 3038787
<SHARES-COMMON-PRIOR> 2570360
<ACCUMULATED-NII-CURRENT> 5267<F1>
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 69360<F1>
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2971379
<NET-ASSETS> 37959366
<DIVIDEND-INCOME> 663714
<INTEREST-INCOME> 364423
<OTHER-INCOME> 0
<EXPENSES-NET> 903213
<NET-INVESTMENT-INCOME> 124924
<REALIZED-GAINS-CURRENT> 2849815
<APPREC-INCREASE-CURRENT> (2458034)
<NET-CHANGE-FROM-OPS> 516705
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (137730)
<DISTRIBUTIONS-OF-GAINS> (2952688)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 492348
<NUMBER-OF-SHARES-REDEEMED> (236481)
<SHARES-REINVESTED> 212560
<NET-CHANGE-IN-ASSETS> 3540937
<ACCUMULATED-NII-PRIOR> 23793
<ACCUMULATED-GAINS-PRIOR> 166513
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 255905
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 903213
<AVERAGE-NET-ASSETS> 36559485
<PER-SHARE-NAV-BEGIN> 13.39
<PER-SHARE-NII> .04
<PER-SHARE-GAIN-APPREC> .17
<PER-SHARE-DIVIDEND> (.05)
<PER-SHARE-DISTRIBUTIONS> (1.06)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.49
<EXPENSE-RATIO> 2.47
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1> As a result of differing book and tax treatments for foreign currency
transactions, the Fund reclassified $5,720 from net investment income to
realized gain/loss on investments as of December 31, 1994.
</TABLE>
